The voluntary nature of Arbitration
process
Charter Party Arbitration is a voluntary process which arises out of an agreement of the
parties named in the Charter Party. All Charter Parties contain a specific clause providing
for arbitration. The Federal Arbitration Act which governs all matters connected with the
maritime arbitration process, as well as state law require that the right to arbitrate must be
expressed in writing. Arbitration therefore can be described as a voluntary process that is
quasi-judicial in nature and it is designed to adjudicate and determine all disputes arising
under a relevant charter party.
Because arbitration arises out of consent, it binds only those parties privy to the contract.
Therefore, when there is a dispute, the arbitration process relates solely to the owners and
charterers under the charter party in question. In addition to the above general rule, there
are others who are permitted to arbitrate e.i. subsidiaries of the named parties to the
charter party such as the shipping subsidiary arm of an oil company,foreign subsidiaries
or parent companies of the named charterers who might have disputes arising out of the
charter party and so on.
Although these parties technically are not members of the charter party, a number of
arbitration panels have held that wholly owned subsidiaries and/or companies under the
same financial control have a right to arbitrate just as they themselves were parties to the
charter party.
An exception to the limitation of arbitration to the named parties is court-ordered,
consolidated arbitration proceedings. Federal courts have ruled that back-to-back charter
parties, may be consolidated into a single proceeding if it is evident to the court that similar
issues of fact and law are involved.
The consolidated arbitration procedure obviously transgresses the basic concept that only
those parties privy to an agreement may be forced to arbitrate as per their agreement.
However the courts have found this to be an effective procedure in disposing issues that
have a common thread running through consecutive charter parties. If parties have agreed
to arbitrate their differences, they are bound to do so. However there are means by which
parties may sidestep their prior agreement and proceed to litigate their disputes.
Obviously a waiver of a party's right to arbitrate produces that effect. Another method is for one of the parties to commence litigation and the other to respond. This has been held by the
courts to constitute a waiver of the right to arbitrate.
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