The Hon. Justice James Allsop
Introduction - the essential nature of arbitration and its advantages
Arbitration is one method (but only one method) of resolving disputes. It is based on the agreement between the parties to the dispute.
This contractual foundation is essential to the understanding of the character and importance of arbitration. Though arbitration
is founded on contract, it is affected both by national legislation and international convention. It is wise to state at the outset,
and to recall at all times, that sanctity of contract, or pacta sunt servanda, or party autonomy is a basal principle of law and an accepted international legal norm, though not one without appropriate qualification.
It informs the relations of all participants in international commerce.
In its essential form, arbitration involves two or more parties, often from different legal systems, who anticipate the possibility
of disputes about their relationship, agreeing to give a third party their authority to resolve the dispute. They may be merchants
buying and selling goods, parties dealing with the use of a ship or any other agreement dealing with a commercial subject matter.
Disputes are part of commerce. They are immanent within the activity. So how are they to be resolved? There are various possibilities:
First, the stronger commercial party may insist on an outcome favourable to it. Secondly, the parties may abandon the arrangement
at the point of breakdown, leaving the loss to lie where it falls. Thirdly, the parties may seek recourse to their national courts
independently of each other. Fourthly, the parties may agree on one of their national courts. Fifthly, the parties may agree upon
a neutral national court. Sixthly, the parties may agree upon arbitration. Seventhly, the parties may agree to mediate or conciliate
the dispute. There may be other possibilities, including expert determination.
There are obvious disadvantages to various of these alternatives: arbitrary force is antithetical to the free commercial bargain and
the constructive commercial relationship; the abandonment of the commercial enterprise reflects nothing more than failure; national
courts of the parties may have defects, as minor as perceived association with one party and a foreignness to the other, at worst,
they may be perceived (whether or not they are) to be incompetent or corrupt; national courts of a neutral third country may be worthwhile,
but they may represent a form of foreign governmental process outside the control of the parties; mediation and conciliation may
have no final result - they are forms of further agreement. Leaving aside other possibilities, this leaves arbitration.
What is arbitration and what are its perceived advantages?
Arbitration is the process of resolving (by deciding) a dispute by someone to whom the parties have entrusted that task by agreement.
The agreement will therefore need to specify, at the very least, the subject of the resolution (the scope of that which is submitted
to arbitration), who is to hear the dispute and the relevant law and procedure by reference to which the dispute is to be decided.
If there is a means of recognising and enforcing the decision of the arbitrator, a compulsory resolution of a defined range of disputes
between parties can be achieved (the compulsion being derived from earlier free agreement to arbitrate together with the willingness
of courts or other governmental agencies to enforce the bargain).[2]
There are potentially great advantages for the parties in using arbitration. The ability of the parties to choose the identity of
the arbitrator, or the mechanism of choosing the arbitrator, the place of the arbitration, the procedure of the arbitration (including
the degree of confidentiality involved), the law to govern the dispute, the law to govern the procedure of the arbitration and the
court to supervise the arbitration are all important benefits, important commercial benefits, which are, at least intuitively, built into the relationship and the price of the relevant contract.
International acceptance
International commercial arbitration as a recognised institution or process has been cemented by widespread international acceptance
of some of the most successful of international conventions. The most notable, and most relevant for present purposes, are the United
Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention) and the UNCITRAL[3] Model Law on International Commercial Arbitration 1985 (the Model Law).
Arbitration awards made conformably with these conventions are far more widely enforceable than judgments of national courts. For
instance, the New York Convention is recognised by well over 100 countries. Thus, an otherwise valid arbitral award is more easily
enforced worldwide than the judgment of a court. So, an arbitration award can give wider access to a party's assets than does a
court judgment.
An historical perspective and the development of harmonised commercial law
Regimes for dispute resolution cannot be divorced from the activity that gives rise to the need for them - here commerce, commercial
law and maritime law. A striking contemporary phenomenon is the globalisation of commerce brought about by astonishing changes in
communications and the integrated global and regional markets created or fostered thereby.[4] The supranational forces impinging on municipal states have influenced virtually all economies of the world, creating linkages,
dependencies and opportunities quite unrelated to sovereign nation states and their borders. To a degree, however, this is nothing
new. Only new are the tools of communication of bringing about and effectuating commercial intercourse. Commerce and maritime affairs
are universal and timeless activities.
History tells us to expect rules for human commercial and maritime activity that transcend the political structures of the day and
that reflect the timelessness of the activity involved. Important to the development and maintenance of a coherent law merchant
in the past were four elements: a degree of unifying commonality of the laws of the places of exchange, such as market places and
fairs, a degree of unifying commonality in the laws and customs of the sea, a unifying role of specialised courts dealing with commercial
disputes and a unifying role of standard forms of contracts[5]. These elements are recognisable aspects of international commercial life today.
Maritime law has always revealed a striking degree of uniformity. This is hardly surprising. Shipping is a universal activity.
It has a history as long as mankind. It has been known across all littoral and riparian parts of the earth. Ample reference to
maritime activity and attendant commercial law can be found in many sources[6] concerning the conduct of maritime commerce in all parts of the world: the Persian Gulf, the Arabian Sea, the Tigris-Euphrates Basin,
the Mediterranean Sea, Africa and its coast, the Black Sea, India, and the Indian Ocean, South-East Asia, the Pacific, China and
North Asia, the North Sea and the Baltic, the great rivers of Europe and Eurasia, and the Americas. The great commercial centres
of the Middle East - Baghdad , Damascus , Alexandria and others supported a cosmopolitan commercial society from ancient to modern
times. The Indian Ocean has nurtured commercial and maritime activity for millennia. The monsoons enabled trade from the Red Sea
to Asia, with seasonal winds to China , the Philippines and North Asia . Malabar teak, coconut fibre, flax, cotton and metals made
India a flourishing site of shipbuilding. Ibn Battuta, the Tangiers-born lawyer, merchant and geographer of the 14th century described Calicut in South West India as one of the largest harbours in the world visited by merchants and seafarers from
China, Sumatra, Ceylon, the Maldives, Yemen, Persia and "all quarters"; and he described "Zayton"[7] in China as the very largest harbour in the world with hundreds of vessels.
One can see in the past the same forces and elements underpinning international or transnational commercial law today:
- the freedom and mobility of commerce in times of peace
- the international character of commerce and maritime activity
- a degree of uniformity in approach to common and elemental activity - the promise, the bargain, payment, security, insurance, transport
and the role of the agent
- dispute resolution closely suited to, and knowledgeable of, commercial and maritime affairs of the merchants involved
- a degree of uniformity in transactional documents
The 20th century saw the development of attempts at the international harmonisation of commercial and maritime law. In the first half of
that century, the attempts at unification or harmonisation of commercial law were dominated by maritime law and maritime lawyers.
Carriage of goods under bills of lading was an excellent example. The recognition from the 1870s of the fragmentation caused by
national legislation[8] counteracting the abuses produced by unbridled freedom of contract practised by shipowners led to the Brussels Conferences in the
early 1920s and the establishment of a workable compromise of minimum rights and obligations in the carriage of goods by sea under
bills of lading in the Hague Rules. This long and exacting process took over 50 years. At its foundation was the need to qualify
unbridled freedom of contract to bring about a fair balance in bill of lading carriage. It illustrated the recognised need for a
balance to be struck in the (sometimes competing) demands of commerce: certainty, predictability, party autonomy, despatch and fairness.
Attempts at harmonisation have spawned important, private and public bodies.
Until the formation of the Intergovernmental Maritime
Consultative Council (IMCO)[9] later to become the International Maritime Organisation (IMO) and other United Nations bodies whose activities touch on maritime
affairs,[10] the Comité Maritime International (CMI) played the leading role in the development of international conventions and rules concerning
maritime law.[11] After The ' Torey Canyon ' disaster, the IMO began to undertake the primary burden of promulgation of maritime treaties, conventions and standards at least of
a character dealing with safety, the environment and technical matters.[12] The CMI remains significantly influential. Its role has been somewhat redefined to co-operation with intergovernmental organisations
seeking to harmonise maritime law.[13]
The formation and development of UNIDROIT (in 1926) and UNCITRAL (in 1966) have fostered the development of conventions, model codes
and model laws dealing with private law, especially commercial law, generally.
The pace of development of international commercial law has been remarkable in the last 20 to 30 years. There are international restatements,
model laws, principles, conventions, directives and other instruments on many aspects of law related to maritime commerce - contract
law,[14] electronic commerce,[15] international sale of goods,[16] agency and distribution,[17] international credit transfers and bank payment undertakings,[18] international secured transactions,[19] cross-border insolvency,[20] securities settlement and securities collateral,[21] conflict of laws,[22] international civil procedure,[23] and international commercial arbitration.[24]
Some of these instruments are not legally operative, whether at the level of public international law, or municipal law. So, such
model laws or principles are sometimes referred to as "soft" law. Even if they are "soft", they provide rules and principles of
a greater or lesser degree of international acceptance in respect of important elements of commercial life: contracts (and their
formation, interpretation and performance), the sale of goods, payment and credit, arbitration and civil procedure. These can be
used by arbitrators, including maritime arbitrators, as aspects of accepted international approaches to common international transactions,
providing protocols and procedures for the conduct of maritime arbitration as well as a framework of substantive law.
Importantly, these international principles include principles of procedure for the conduct of international litigation. One example
of these is the American Law Institute and UNIDROIT Principles of Transnational Civil Procedure. This was no less than the harmonisation
of the civil law and the common law dispute resolution procedures. The Principles are an attempt to approximate, in a flexible way,
important issues common to the two dominant legal systems. They are available for adoption and adaption by courts and arbitral bodies.
They form a bridge between two very different legal cultures and provide a common and fair basis for hearing international disputes.
Importantly, they provide a procedural foundation that can give confidence to parties in litigation including arbitration who come
from different legal cultures. It was a major achievement.[25]
Harmonisation and its effect on arbitration
The relevance of these kinds of transnational principles as a form non-national law, or lex mercatoria is a matter of some debate.[26] This debate has proceeded between proponents and opponents of the view as to whether a lex mercatoria exists, and if it does, of its perceived advantages or disadvantages.
Most maritime disputes concerning established markets, such as chartering, insurance, shipbuilding, are based in well-known contracts,
with identified law to govern, very often English. So, not surprisingly the strongest opponents of the utility and even the existence
of the lex mercatoria often come from established legal systems.[27] But maritime disputes sometimes arise from circumstances not limited by standard form contracts with London arbitration applying
English law. What cannot be denied is the utility to parties and arbitrators of understanding how the respected authors and proponents
of model laws and principles, and how state parties in coming to agreement in international conventions, have addressed issues of
relevance. For instance, the availability of relevant rules and principles may enable an arbitrator to choose an available body
of rules about substance or procedure when the parties have failed to identify the relevant law. This choice might be made by reference
to available unattached "soft" law, rather than by recourse to conflict rules to choose one particular municipal law.
It is important to recognise that the maritime affairs to which consensually agreed dispute resolution may apply are wide. They arise
from the rich diversity of activity concerning the affairs of the sea: the financing, building, sale and acquisition of ships, the
deployment of ships, the carriage of goods by sea (the primary use of the working commercial vessel), fishing, the insurance of ships,
cargo and other marine adventures and the other ad hoc contractual relationships arising from the use of ships, for example salvage.
Many of the contracts about these subject matters are made between relatively equal commercial partners. Others can be better characterised
as contracts of adhesion. The difference is demonstrated by the different approach the law takes to charterparties and bills of
lading.[28]
In maritime commercial contracts, given the stability of markets such as those for the chartering of working ships and the frequency
of usual transactions, such as shipbuilding or the sale of goods, it is usual to have a definite legal system and proper law governing
the relationship. However, the development of fundamental common legal principles of contract, sale of goods, agency, international
credit, bank undertakings and the like will, in all likelihood, have a harmonising effect on international maritime and commercial
contracts and also provide for the arbitrator a norm of international principles that can guide him or her. Also, internationally
recognised standards of procedure are invaluable to any arbitrator, however experienced he or she may be.
The scale and scope of international commercial arbitration
The last 40 to 50 years, in particular the last 20 to 30 years, have seen changes to dispute resolution that reflect the growth of
international commerce and the transnational principles governing it. There has been a significant shift away from municipal courts
towards commercial arbitration. This is particularly so in the resolution of international commercial and maritime disputes. This
shift, in what might be referred to as the consumption patterns of parties to commercial litigation, and the public policy now recognising
the legitimacy of such choice, has occurred for many reasons, the majority of which have been already mentioned - flexibility, expertise,
party autonomy, control or a sense of control, confidentiality, perceived greater speed, perceived or real lower cost and better
or wider enforcement of the arbitral system. In part, but only in part, the shift is explained by the failures or inadequacies of
court systems. The reality of any advantage in speed, skill and cost of arbitration over courts may, in many cases, be debatable.
Nevertheless, the arbitral process remains significantly dominant.
It is important to recognise that this growth and development of commercial arbitration is no more or less than the setting up, in
the field of international commerce (including maritime commerce) of a world-wide delocalised private (or semi-public) dispute resolution
system (a surrogate worldwide private court-system) made up of a large number of self-created and self-administered, largely non-governmental,
organisations. There are now numerous arbitral institutions worldwide catering for international commercial arbitration, including
maritime arbitration.[29]
In many countries, the legislatures and the courts themselves have recognised the need for efficient skilled commercial and maritime
courts.[30] In some countries, it must be said, the quality of the national legal systems is less than internationally acceptable. Commerce,
however, will not wait for the antecedent development of skilled, unbiased and efficient commercial courts. In countries where the
national courts are not seen as adequate, arbitration is not seen as a better alternative than a local commercial court, but as the
only viable alternative. In such places, the availability of commercial arbitration is essential to underpin investor confidence
and economic development. These issues of quality of dispute resolution raise important policy questions. It is possible that countries
at various levels of development display a disconformity between the skill of participants in commercial arbitration and national
court systems. The two systems are, however, closely related.
The court system can be vital for the health and well being of arbitration in any country. Skill and efficiency of the courts in
supervision, enforcement and collateral assistance to the arbitration process taking place on the territory in question can substantially
assist the arbitration process. In that sense, arbitration and the court system have, to a degree, a symbiotic relationship.
Policy
What does this all mean for policy?
Legislative and government policy
One important policy area concerns the relationship between courts and arbitration, the basis of supervision and the scope for independent
existence of the arbitral process.
As can be seen from the relationship between the arbitral award and national recognition mediated through international agreement
in the New York Convention and the Model Law, arbitration obtains much of its efficacy from national recognition. The New York Convention
and the Model Law require national courts to enforce arbitration clauses in effect by staying their own proceedings if brought in
contravention of the agreement.[31]
The method by which the result of a determination of a dispute under contract is translated into enforcement of a monetary judgment
where a defendant has assets, necessarily relies on the court and governmental systems of different states:
- the state where the arbitration took place if an attack on the arbitration process or award is made
- the states where the awards will be recognised and enforced against the assets of the defendant
The New York Convention and the Model Law set out the circumstances in which states and their courts can operate in these areas.[32] Significant place is given to local public policy.[33]
This control framework of national court systems can act as an enhancement of arbitration by ensuring its fairness and honesty.[34] The use of the court system can also act as a mechanism to disrupt the resolution of the dispute by the arbitral forum. The tendency,
however, of modern national arbitration legislation is to lessen the grounds of available curial supervision. This leads to an increasing
independence or autonomy of the arbitration process itself and the consequent award. Merely because the arbitrator makes an error
of law may not be sufficient to justify redress.
This independence or autonomy of the arbitration process may lead to a lessening or weakening of legal doctrine, if, without appeal,
arbitrators reach conclusions based on the law of X country, but are in part free to make mistakes about that law, or interpret that
law without strict supervision of the courts of X country. If X country wants its law applied in contracts and wants arbitration
business within its borders using its law, there is a tension - keep a light hand on arbitration and risk fraying of the chosen national
law, or tighten supervision to maintain purity of legal doctrine at the risk of overly interfering with the freedom of the parties
to choose their own method of dispute resolution. These are not straightforward issues. To the extent that supervision and control
remain light, one can see the increasing role for the lex mercatoria to supplement or complement any chosen national law, as interpreted by an arbitrator.
These issues involve subtle questions of sovereignty and of the value any particular country may place on maintaining the international
public clarity of its own law. They also involve the subtle questions as to how much control or supervision by courts is best for
the long term stability of, and the world commercial community's confidence in, the process of arbitration, as a transnational institution
or structure.
Issues of national sovereignty can arise from the operation of the contracting autonomy of the parties in other ways. The ability
of a State to resolve or assist in the resolution of disputes that affect its citizens' rights is, or can be seen to be, an important
aspect of government. This is especially so if the so-called free contractual will of the parties can be seen to be manifested in
contracts of adhesion under the control of powerful foreign interests.
For instance, liner bills of lading may contain arbitration clauses requiring any disputed cargo claim (however small) to be resolved
by arbitration or court process in the country of the carrier. This may be thousands of miles from the trade carried on by the carrier
and from the place of out-turn or delivery. The liner trade may well be part of a recognised cartel of carriers, sharing capacity
on a route. In these circumstances, cargo interests may be, effectively, denied a remedy if they have to circle the globe to vindicate
a modest claim. To the contrary, obviously, is the position of the commercial charterer who time charters a vessel agreeing to New
York or London arbitration.
The different considerations that affect, or might affect, national policy about these two circumstances are not difficult to appreciate.
Some of them are considerations of a not dissimilar kind that led to the need for an international convention in the 1920s on bill
of lading, but not charterparty, carriage of goods: the need for a fair balance of interests between those with, and those without,
bargaining power.
An insight into differences of view can be seen in some United States cases as to how foreign jurisdictional and arbitration clauses
in maritime contracts have been viewed. The discussions of the relevant elements in these cases reflects the clear policy issues
involved, though here enunciated in the development of legal doctrine as opposed to legislation or government policy.
In 1971, in The Bremen v Zapata Off-Shore Co[35], the United States Supreme Court discussed forum selection clauses. The contract was an international towage contract for a drilling
rig to be towed from Louisiana to Italy . The contract contained a London jurisdiction clause (the High Court of Justice in London
). The Court discussed forum selection clauses and developed a policy reflecting a mid-way position between the protection of
domestic judicial authority in all cases, on the one hand, and enforcement of contractual autonomy as a matter of policy, on the
other. The approach was based on the prima facie validity of the arbitration clause unless it was shown to be "unreasonable" in
the circumstances.[36] This approach would give to the court power of review over the reasonableness of the circumstances of entry into the contract and,
in particular, it was thought, whether it was a contract of adhesion or a contract freely entered between the parties. It represented
a loosening, but not a complete release, of a mistrustful and parochial view about arbitration that had hitherto prevailed.
Twenty years later, in Carnival Cruise Lines Inc v Shute[37] a contract for a cruise designated the courts of Florida for the resolution of disputes. It was not a negotiated contract. The
Supreme Court refined the Bremen doctrine and rejected the view of the Court of Appeals for the Ninth Circuit that a non-negotiated forum selection clause in a so-called
"form ticket" is never enforceable simply because it was not the subject of bargaining. The considerations as to reasonableness
were diverse and included the interests of both sides to the bargain. It was recognised that there might be good reason for non-negotiated
terms and for channelling litigation into one place.[38]
Four years later, in The 'Sky Reefer',[39] the Supreme Court dealt with foreign arbitration clauses in a bill of lading. A fruit distributor's produce was damaged in transit
from Morocco to Massachusetts aboard a Panamanian owned vessel, chartered to a Japanese carrier. There was a Tokyo arbitration clause.
The argument was that the inconvenience and costs of proceeding in Japan would lessen the liability of the carrier under the United
States Carriage of Goods by Sea Act 1936[40](COGSA) and so the clause, it was said, was void. This was rejected. The majority of the Supreme Court rejected this and expressed
itself in strong terms in favour of international comity and party autonomy. Justice Stevens, in dissent, had a different view about
the width of the relevant provision of COGSA equivalent to Art 3 r 8 of the Hague/Hague-Visby Rules.[41] Justice Stevens made clear his strong view that in practical reality foreign arbitration clauses can provide such a cost barrier
as to deny a remedy to a claimant, and so cut down the claimant's rights under COGSA, thereby being made void by the equivalent of
Art 3 r 8 of the Hague/Hague-Visby Rules.[42]
Neither the Hague or Hague-Visby Rules deal expressly with jurisdiction or dispute resolution of cargo claims. Thus, the topic may
be seen to be left to national law. Though the Rules do not expressly deal with the subject, on one view (and it was that of the
dissenting justice in The 'Sky Reefer', Justice Stevens) Art 3 r 8 of the Hague/Hague-Visby Rules should be read broadly and so can be seen, indirectly, to deal with it.
The Hamburg Rules provide the cargo claimant with a choice of places to sue. Art 21[43] of those Rules provides that the cargo interest may sue at the place of the defendant, where the contract was made, the port of loading
or discharge any other place mentioned in the contract. It may also arrest the ship anywhere else, but only for security.
Article 22 of the Hamburg Rules deals with arbitration.[44] The Rules recognise arbitration, but provide for a regime of arbitration whereby the cargo interest may seek arbitration in the
same places as mentioned in Art 21.
In both regimes provided for by Arts 21 and 22 a choice is given to the cargo claimant, who is not finally constrained by the terms
of the arbitration agreement. Party autonomy is thereby modified.
The national legislation of a number of countries deals with exclusive jurisdiction clauses in bill of lading carriage. An example
is the Australian Carriage of Goods by Sea Act 1991, s 11[45] which strikes down clauses (other than Australian arbitration clauses) which preclude or limit the jurisdiction of Australian Courts.
Similar provisions exist in national legislation in New Zealand , South Africa , the Nordic countries and Canada.[46] These might be said to be a species of "jurisdictional cabotage", but for the kind of reasons that are entirely understandable,
and which were expressed by Justice Stevens in The 'Sky Reefer'. They protect a country's cargo interests by providing a forum where their complaints can be resolved. It might be said that it
is not a hardship on the liner trade involved, which does business carrying goods on a regular basis to a particular country. They
also reflect the recognition in the Hamburg Rules of the need to give cargo claimants a choice. Effectively, they entrench the availability
of the place of delivery as a place for suit.
Such statutes will not, however, necessarily be recognised in other jurisdictions. Recently, in OT Africa Line Ltd v Magic Sportswear[47] the English Courts deployed the tool of the anti-suit injunction to enforce an English arbitration clause in a bill of lading with
an English choice of law clause in circumstances where Canadian legislation gave the claimant a right to sue in Canada. The Australian
provision would probably be treated similarly. Provisions like it in other contexts have been ignored by English Courts.[48]
These issues represent important policy questions involving the weighing up of competing interests, including the weight to be given
to party autonomy, the particular interests in protecting local cargo claimants and their insurers in countries relying on foreign
liner shipping, which might well be undertaken by (legally sanctioned) cartels and the importance of developing local skills in dispute
resolution.
The principle of party autonomy is fundamental to this discussion. It is an underlying norm of any lex mercatoria. It is reflected in one of the basic obligations on parties to the New York Convention, Article II, which provides for the basic recognition
and enforcement of the parties' autonomous bargain. The terms of Article II contain within them the fundamental architectural framework
of the New York Convention: party autonomy, arbitrability and court enforcement.[49]
The notion of "capable of settlement by arbitration" or "arbitrability" found in Art II is also found in Art V dealing with recognition
and enforcement of an award. Likewise, Arts 34 and 36 of the Model Law dealing with setting aside, and recognition and enforcement
of, awards pick up this notion. It is a central balancing conception in the Convention's limiting of the reach of party autonomy.
The decision as to what is "capable of settlement by arbitration" or "arbitrable" has been left by both the New York Convention and
the Model Law to Contracting States. These words are to be understood in both the New York Convention and the Model Law as dealing
with the question whether the dispute is of the type that comes properly within the domain of arbitration (as judged by national
law). Article II of the New York Convention is directed to disputes that are capable of settlement by arbitration. If there is
an award in respect of a dispute that is not capable of settlement by arbitration the award may be set aside or will not be enforced.[50]
The types of disputes which national laws may see as not arbitrable and which were the subject of discussion leading up to both the
Convention and the Model Law are disputes such as those concerning intellectual property, anti-trust and competition disputes, securities
transactions and insolvency. This is not the place to discuss the concept in detail.[51] It is sufficient to say two things at this point. First, the common element to the notion of non-arbitrability is that there is
a sufficient element of legitimate public interest in these subject matters making the enforceable private resolution of disputes
concerning them outside the national court system inappropriate. Secondly, the identification and control of these subjects is the
legitimate domain of national legislatures and courts.
Thus, there are within these conventions dealing with arbitration both a recognition of the common good in promoting international
arbitration and party autonomy, on the one hand, and a recognition of legitimate national interests, on the other. The former is
given effect to by national legislation which provides for a stay of court proceedings commenced in contravention of the arbitration
clause and courts of other jurisdictions, in particular the place where it is agreed that the arbitration would take place, issuing
anti-suit injunctions, restraining a party from commencing or continuing with court proceedings in contravention of the arbitration
clause.
The legitimacy of particular national policy inhibiting arbitration, is encompassed within the notions of arbitrability and public
policy. An example of such national policy in the maritime field is a provision such as s 2C of the Australian International Arbitration Act 1974 which Act incorporates into Australian domestic law Australia's international obligations under the New York Convention and the Model
Law. By s 2C, however, the Act is stated not to affect, amongst other things, s 11 of the Carriage of Goods by Sea Act 1991 to which reference has been made. So, foreign arbitration clauses in bills of lading are ineffective in Australia to prevent cargo
claims being brought in Australia .
The policy questions inherent within these issues are being discussed at an international level at the UNCITRAL Working Group Meetings
on Transport Law and the Draft Convention on the carriage of goods [wholly or partly] [by sea], and on Arbitration.[52]
There are other policy questions for national governments. What priority, if any, in the organisation and development of the national
judiciary should be given to developing judicial skill in maritime law? Should this be left to the courts themselves? Should policy
be developed to encourage the growth of skilled professional arbitration? Such policies may have their roots in educational reform
of the legal profession and judiciary and may extend to encouraging overseas practitioners appearing in local arbitrations (as an
advocate or an arbitrator).
These are questions of policy for the legislative and executive branches of government. They should be addressed not only by reference
to perceived national needs, but also by reference to the recognition of the importance of international arbitration to international
commerce and thus domestic well-being.
Judicial policy
There are also important questions for the judiciary to address. For instance, should, and if so how far, legal doctrine be developed
by courts to reflect the advancement of national public policy? We have already seen in the three United States Supreme Court cases
how the different strands of national interest (differently perceived) affected the US case law. Of course, if legislation requires
that approach it will be obeyed. But what if no such valid legislation exists?
An illustration of the importance of this question can be seen in the questions posed by Justice Stephen in the High Court of Australia
in 1978 in The ' New York Star'.[53] Justice Stephen there asked whether it was in Australia's interests to take a generous approach to enforcing so-called Himalaya clauses, giving the benefit of exemptions in the contract of carriage to non-party actors in the carriage activity, such as stevedores
- that is, whether it was in Australia's interests to permit carriers to widen the protected circle to all its agents and sub-contractors,
when Australia relied on foreign carriers to bring in, and take out, its imports and exports.[54]
In the context of arbitration, this kind of question can also arise for the courts in the choice of an approach to the construction
of the arbitration clauses. Should such clauses be interpreted broadly and liberally, thereby increasing the scope of the dispute
which may be removed to the chosen (perhaps foreign) arbitral forum? If that chosen foreign arbitral forum is overseas and if one
of the contracting parties is local, there may be a temptation upon the local court to allow the local party to litigate before it
as the chosen local forum, in preference to the foreign arbitral forum. This temptation will be heightened if there is a local statute
relevant to the claim which may not be recognised by the foreign arbitral tribunal giving effect to a relevant choice of law rule
governing the arbitration.
There is much to be said for the proposition that the courts should resist both these tendencies and for similar reasons, unless,
of course, the contrary is required by local statute. The first tendency, the desire of courts to intrude national or chauvinistic
public policy into the maritime law, may reflect a failure to understand the essential character of maritime law. Maritime law is
a body of law with its roots in public international law, civil law, international commerce, international agreement and the law
of nations. This international foundation of an otherwise municipal law in each nation was clearly expressed by the United States
Supreme Court in 1875 in The 'Lottawanna' as follows:[55]
...Each state adopts the maritime law, not as a code having any independent or inherent force, proprio vigore, but as its own law, with such modifications and qualifications as it sees fit. Thus adopted and thus qualified in each case, it
becomes the maritime law of the particular nation that adopts it. And without such voluntary adoption it would not be law. And
thus it happens, that, from the general practice of commercial nations in making the same general law the basis and groundwork of
their respective maritime systems, the great mass of maritime law which is thus received by these nations in common, comes to be
the common maritime law of the world.
This account of the maritime law, if correct, plainly shows that in particular matters, especially such as approach a merely municipal
character, the received maritime law may differ in different countries without affecting the general integrity of the system as a
harmonious whole.
Across the Atlantic, in 1946, Lord Justice Scott said in the 'Tolten'[56]:
The language of Lord Watson there echoes many previous judicial opinions that British maritime law derives originally, and continues
to get inspiration from the general law of the sea prevailing amongst maritime nations; e.g., of Lord Mansfield who in 1759 said
in Luke v. Lyde [1759] EngR 18; (1759) 2 Burr. 882, 887 "the maritime" law is not the law of a particular country, but the general "law of nations," meaning that admiralty judges should
still look for inspiration to the parent source.
This recognition of the immanent international character of maritime law (albeit ultimately municipal[57]) is important to remember. It is too often ignored. Naturally, a degree of national diversity is to be expected - it is in the
order of things one might say. However, if maritime law disintegrates into a multitude of conflicting commercial laws no one who
regularly engages in international commerce will ultimately gain. In the end such fragmentation increases costs of transactions,
mistrust and uncertainty, and increase the need for lengthy and costly negotiation of international agreements.
The second tendency, that of courts to give in to the temptation to keep part of the case within the chosen local jurisdiction, fails
to pay sufficient respect to the importance of the efficient disposition of international commerce. The New York Convention and
the Model Law deal with one of the most important aspects of international commerce - the resolution of disputes between commercial
parties in an international or multinational context, where those parties, in the formation of their contract or legal relationship,
have, by their own bargain, chosen arbitration as their agreed method of dispute resolution. The chosen arbitral method or forum
may or may not be the optimally preferred method or forum for each party; but it is the contractually bargained method or forum,
often between parties who come from very different legal systems. An ordered efficient dispute resolution mechanism leading to an
enforceable award or judgment by the adjudicator, is an essential underpinning of commerce. Disputes arising from commercial bargains
are unavoidable. They are part of the activity of commerce itself. Parties therefore often deal with the possibility of their occurrence
in advance by the terms of their bargain. Unreliable or otherwise unsatisfactory decision making, or the fear of such, distorts
commerce and makes markets less efficient, raising the cost of commerce. Similar effects can occur if parties can be forced to submit
to fora of which they may have no or little knowledge, in circumstances where they have agreed to enter the overall bargain on an
entirely different basis of anticipated dispute resolution. It may be of no, or little, comfort for such parties to be assured that
any particular forum is reliable and otherwise satisfactory (as may be the case). It was not what was agreed. If parties can be
forced to submit to fora different to those which they have chosen, a significant unstable variable is introduced into the performance
of the international bargain - the uncertainty as to the legal system and the law to govern an international dispute, including doubts
about venue and departure from what may be familiar procedures, or at least procedures in which they have sufficient confidence to
agree as those to govern the resolution of any dispute. These considerations are especially important in well-understood and stable
markets, such as the chartering of working commercial ships as in the present case. It is another illustration of the importance
of consistency in the working of international commerce illuminated so clearly by Lord Diplock in The 'Maratha Envoy'[58] in his discussion of the role and place of well-known or usual forms of contract in international commerce and the place of courts
in their consistent interpretation. This approach can be seen to be part of the law of international commerce.[59]
The above considerations ground the importance to be given to party autonomy and holding parties to their bargains in international
commerce. Yet, balanced against these considerations are the entirely legitimate considerations of nations for their own citizens
and their own commerce in areas such as bill of lading carriage especially in liner trade.
Within boundaries that are recognised internationally as reasonable, legislatures may legitimately protect national interests in the
way earlier described.
All policy, however, should recognise that commercial law, maritime law and dispute resolution between parties from different countries
require an international perspective based on underlying commonality of principle and approach.
International and regional policy
One particular area of policy that may assist countries to develop their skill and expertise in arbitral dispute resolution, is the
development of regional or multi-national structures to harmonise the arbitral framework. Commerce is de-localised. Commercial
law is becoming de-localised. Arbitration is capable of de-localising the method of resolution. In this context, there is no reason
why countries cannot pool resources to create a virtual or synthetic network of arbitration law and structures, of arbitrators and
of skilled professionals.
On a regional basis, with uniform rules as to the law of the arbitration, as to rules of procedure, with available transnational principles
of contract and contractual interpretation, and with a uniform approach to curial supervision, enforcement and collateral assistance
based on international conventions, a regional or multi-national organisation could call upon the combined maritime skill of a region
or the group of participating countries - arbitral, judicial, scholarly and professional for the resolution of disputes. Hearings
could take place at the most convenient place. Video link facilities could be used. Parties could be given the choice of language
and identity of arbitrator. A uniform approach to the lex arbitri and law of procedure would enable the development of a truly transnational arbitration structure to deal with maritime disputes in
the region. A generous right of appearance could be given to lawyers of the litigants' choice who would not necessarily be admitted
in the place where the arbitration takes place.
Whatever skill was possessed in the various countries it could be harnessed or pooled in the formation of such a regional body. Maritime
scholars and maritime lawyers, arbitrators and judges could be brought together throughout any given region.
The advantage of such a structure would be the harmonisation of the laws and rules of the arbitration, the harmonisation of the place
of courts in support of the arbitration process, the deepening of the available pool of arbitrators for any particular dispute, the
strengthening of the reputation of the region or group of countries in the provision of maritime dispute resolution, the removal
or amelioration of apparent fragmentation of approach by individual countries, the harmonisation of procedural law and the fostering
of the development of a more consistent body of substantive maritime law.
In order to ensure harmony and comity it would be necessary to have a clear regime dealing with the law of the seat of the arbitration[60] and a clear regime of inter-jurisdictional curial supervision.
The topics of dispute resolution, international commercial arbitration and maritime arbitration throw up important questions for national
policy development (legislative, executive and judicial) for all trading countries and countries engaged in maritime affairs. There
are few universal answers. Though, perhaps, one theme should be kept close by - the international character of the general maritime
law and the danger to it of chauvinistic municipal policy, which is not based on considerations reasonably reflected in international
norms and expectations.
A coming challenge for all countries is the development of reliable skilled arbitral structures outside the established centres to
serve a rapidly developing world commercial community and in which all countries feel they have some part to play.
