Why Arbitration In New York Under SMA Rules?

New York maritime arbitrators, along with the United States District Court for the Southern District of New York, offer an efficient, practical system for fair disposition of maritime and commercial disputes.


SMA maritime arbitration panels are primarily composed of commercial maritime professionals who call upon their years of firsthand, practical experience, knowledge, and specialized training to help parties resolve disputes. Membership in SMA is limited to persons of good character and demonstrated maritime credentials in such areas as charter parties, vessel and terminal operations, ship sales and purchases, cargo sales and purchases, ship construction and repairs, stevedoring, cargo loss or damage, brokerage, agency, finance, engineering, naval architecture, surveying, towage, marine casualties, including salvage, and general average, collisions, insurance, liner agreements, management agreements, energy, small craft and offshore drilling. Consequently, it is unlikely that the arbitrators chosen to hear and decide the dispute will not already be familiar with or understand the underlying issues.


Departing from what had been established law for nearly twenty years, in 1993 the U.S. Court of Appeals for the Second Circuit (which controls most New York arbitrations) ruled that parties to separate but related contracts could no longer be compelled to consolidate their respective disputes before a single arbitration panel, absent consent. Prior to that decision, the U.S. District Court for the Southern District of New York and the Second Circuit favored consolidation as a means to avoid the extra costs and delay as well as the potential for inconsistent results inherent in conducting two independent arbitrations on the same issue. In order to preserve the benefits of consolidation, Section 2 of the current SMA Rules restores the benefits of consolidation to the maritime community it serves. Thus, provided all of the related contracts include SMA Rules, it remains possible for a head charterer facing claims from its head owner to pass those claims down to its sub-charterer and also pass that sub-charterer’s defenses back up to the head owner, all within the very same proceeding. In case there is no agreement as to the constitution of the panel, Section 2 now provides a mechanism to appoint a three-arbitrator panel in a consolidated proceeding. However, SMA Rules specifically prohibit class action claims to be submitted to arbitration. Parties who do not wish to include this provision in their agreement to arbitrate may do so by simply excluding that section of the Rules from their contracts.


One of the important features of New York maritime arbitration is contained in Section 8 of the Act which permits a claimant to seek a court order to obtain security for its claim by an arrest or attachment of the other party’s vessel or assets. The courts have confirmed the arbitrators’ power to order such security at any stage of the arbitration. Where appropriate, arbitrators may order the posting of security when circumstances indicate that an award may be merely a pyrrhic victory.


The immediate intervention of arbitrators is often required to preserve evidence and assets and/or to provide interim relief from an emerging quarrel that threatens the viability of an ongoing contract. SMA arbitration panels can and have been speedily formed on an emergency basis to address such urgent needs and have rendered the needed declaratory relief within hours. In those special instances where time is of the essence, such rapidly convened panels can be of invaluable assistance.


Arbitrators have extensive equitable powers, including the authority to order specific performance, that permit them to fashion targeted and meaningful relief for the disputants. Arbitrators have the power to subpoena witnesses and documents and to otherwise order discovery in appropriate circumstances. New York maritime arbitration panels consistently award pre-judgment interest at the prevailing prime commercial lending rate and may, at their discretion, set a rate at an amount which exceeds statutory limits for interest on judgment. Under SMA rules, arbitrators are empowered to award attorneys’ fees and party costs irrespective of whether the arbitration clause provides such relief.

Reasoned Awards

Awards rendered by SMA members are always supported by fully reasoned written opinions and, thus, offer instructive insight for future commercial dealings. Although not binding precedent, the body of written awards does provide a degree of predictability regarding the likely outcome of similar disputes.


Another distinctive benefit of New York arbitration is the finality of the award. The award is only subject to judicial vacatur in very limited circumstances. Courts in New York enforce arbitration awards in a simple summary procedure with the resulting judgment being enforceable in the same manner as a court decision.

This finality puts an end to a dispute, frees the disputants from being entangled in years of appellate proceedings and helps contain the expenses of obtaining a final, binding decision.

Enforceability Abroad

Because the United States is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and to the Inter-American Convention on International Commercial Arbitration [Document No. 6], awards in arbitrations held in New York are enforceable in any country which is a signatory to these Conventions.


Justice in New York arbitration is swift and final. Such speed and finality can effectively reduce costs, particularly when compared to court proceedings, because the parties do not have to submit to lengthy, far reaching and expensive discovery. The benefits of New York arbitration to the maritime community are many. After more than fifty years, the Society of Maritime Arbitrators, Inc. continues to provide an essential service for the adjudication of maritime disputes.