14 Feb 2024
An overview of maritime arbitration in Asia needs to begin by acknowledging two seemingly-obvious facts.
First, shipping and trade are by their nature international and multi-jurisdictional. As a result, domestic courts have limited attraction to a claimant who may ultimately need overseas enforcement of its rights. So, the international enforceability enshrined in the New York Convention makes arbitration the dispute resolution method of choice for the shipping industry.
Second, English law is the preferred law of international trade and of shipping. It follows that the leading common law jurisdictions of Asia take centre stage when it comes to maritime arbitration within this hemisphere: Hong Kong and Singapore. The two jurisdictions are the only Asian arbitration venues named in the BIMCO Law and Arbitration Clause 2020 (BIMCO being the world’s largest direct-membership organisation for shipowners, charterers, shipbrokers and agents). For the importance of London and the London Maritime Arbitrators Association (LMAA) to maritime arbitration involving Asian parties, readers are referred to Daniella Horton’s article.
If Hong Kong and Singapore are the logical venues for maritime arbitration in Asia, what then are the types of dispute involved -- what exactly is maritime arbitration?
The answer lies in the fascinating array of different types of contract which make up the world of shipping and international commerce. At the international trade level, there will necessarily be a sale of goods contract, and in the case of commodities it would be usual to find a whole string of sale of goods contracts as the cargo is bought and re-sold until reaching the end-buyer.
That basic movement of goods from one port to another gives rise to an entire ecosystem of maritime contracts. A shipbuilding contract for the construction of the vessel, a finance lease from the lessor to the actual operator, a chain of charterparties flowing down to the particular voyage in question, and a bill of lading for the carriage of the goods. The life-cycle of the ship requires a ship management agreement, a sale and purchase agreement of second-hand tonnage, and then at ‘end of life’ a scrap sale contract leading to the vessel’s demolition. The maritime contracts described will invariably include an arbitration agreement.
Contracts for the sale, financing and construction of vessels can generate disputes for multi-million dollar amounts. And, by way of example, a shipbuilding contract arbitration may involve features that would be familiar to construction lawyers. However, most shipping disputes involve relatively modest sums, and so maritime arbitration procedures focus on economy and efficiency. Arbitrations on documents alone are estimated by the LMAA to account for approximately 80% of maritime arbitrations.
The majority of maritime arbitrations are conducted on an ad hoc, as opposed to administered, basis. The BIMCO Clause, referred to above, provides for Hong Kong arbitration in accordance with the terms of the Hong Kong Maritime Arbitration Group (HKMAG), which by kind permission closely follow the Terms of the LMAA, which constitute the arbitration practices best known to shipping people. The Singapore version of the BIMCO Clause stipulates the Arbitration Rules of the Singapore Chamber of Maritime Arbitration (SCMA).
In 2022, the China Maritime Law Association (CMLA) published its ad hoc Arbitration Rules. The China Maritime Arbitration Commission (CMAC), which also has an arbitration centre in Hong Kong, may serve as the appointing authority under the CMLA Rules, in addition to administering arbitrations under its own CMAC Rules (2021).
Administered arbitrations are encountered in certain sectors of the industry. A striking feature of ship finance over the past decade has been the massive growth of sale and leaseback transactions involving Chinese leasing houses. Most Chinese banks have their own leasing affiliates, and they now dominate the global ship leasing market. Leasing transactions may involve agreements for “quiet enjoyment” or subordination of rights by or in favour of charterers. Such agreements are often made between several different parties, in contrast to a typical, and bilateral, charter. In the case of multi-lateral contracts, the attraction of an independent appointing authority is apparent, and PRC lessors and their overseas counterparties have naturally gravitated towards arbitration under the HKIAC Administered Arbitration Rules. Once one agreement has adopted the Rules, the other contracts within the suite of agreements are likely to do so too for the sake of consistency and efficiency in the event of a need for dispute resolution.
A separate feature, relevant to asset preservation, is the fact that the HKIAC and HKMAG (if the relevant Procedures are adopted) all have the benefit of the “Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the HKSAR”. This means that companies contracting with Mainland Chinese parties can obtain the benefit of, for example, asset-freezing injunctions in aid of their Hong Kong maritime arbitrations.
According to the United Nations Conference on Trade and Development, half of the world fleet is owned by Asian companies, and over 90% of global shipbuilding capacity is to be found in China, Japan and Korea. Further, 59% of Asia’s trade is intra-regional, a statistic of relevance given the geopolitical shifts of recent years.
In a world where over 80% of the volume of international trade in goods is still carried by sea, efficient and cost-effective maritime and trade arbitrations will continue to underpin global commerce.
Bill Amos is an arbitrator with extensive experience in commercial and maritime arbitration. Before becoming an independent full-time arbitrator, Bill was a partner at an international law firm, having over 30 years' experience in arbitration in Hong Kong and London.
Bill is the Vice President of the Hong Kong Maritime Arbitration Group, a supporting member of the LMAA, and a panel arbitrator with leading arbitral institutions. He has been appointed as arbitrator in numerous commercial, international trade and maritime arbitrations.