Maritime trade is a distinctive field in which parties may be established in different jurisdictions, contractual relationships may be subject to multiple legal systems, and commercial activities frequently have an international dimension. From vessel operations and carriage contracts to freight, demurrage and ship sale transactions, a wide range of legal relationships may give rise to disputes.
Arbitration has long been recognised as an alternative dispute resolution mechanism in maritime commerce. Particularly in international maritime disputes, arbitration may provide parties with the opportunity to resolve their disputes before arbitrators with relevant legal, commercial and industry expertise.
Why Is Arbitration Used in Maritime Trade Disputes?
A significant number of maritime disputes are technical and international in nature. In such disputes, it may be important for the decision-makers to have an understanding of maritime trade practices, the relevant type of contract, industry customs and international commercial relationships.
Arbitration may provide parties with a degree of flexibility in determining the procedural framework of the proceedings and selecting the arbitrators. Depending on the applicable legal framework and the parties’ agreement, the parties may also determine the seat of arbitration, the procedural rules and, where appropriate, the governing law.
Under Article 1 of the Turkish International Arbitration Law No. 4686, the Law may apply to disputes containing a foreign element where Turkey has been selected as the place of arbitration or where the provisions of the Law have been selected by the parties or the arbitral tribunal. The Law also sets out criteria for determining the existence of a foreign element.
Which Maritime Trade Disputes May Be Referred to Arbitration?
Subject to the existence of a valid arbitration agreement and the arbitrability of the dispute, various disputes arising in the maritime sector may be resolved through arbitration.
These may include, in particular:
- Disputes arising from vessel operation agreements;
- Disputes arising under charterparties;
- Disputes arising from carriage and cargo contracts;
- Freight claims;
- Demurrage and detention claims;
- Disputes arising from ship sale and purchase agreements;
- Shipbuilding disputes;
- Ship repair and maintenance disputes;
- Disputes arising from agency and brokerage relationships;
- Commercial receivables arising from maritime activities; and
- Contractual claims arising from maritime casualties, to the extent that such claims are arbitrable.
The fact that a dispute is connected with maritime trade does not, by itself, mean that it can automatically be referred to arbitration. The existence and validity of an arbitration agreement and the arbitrability of the dispute must also be assessed in the circumstances of each individual case.
The Importance of the Arbitration Agreement
The arbitration agreement forms the basis of the arbitration process in maritime disputes.
Parties may include an arbitration clause in their contract providing that certain disputes arising out of or in connection with the contract will be resolved through arbitration. Alternatively, the parties may enter into a separate arbitration agreement after a dispute has arisen.
In international maritime contracts, it is particularly important for the arbitration clause to be drafted clearly and in a manner that allows it to be effectively implemented. Matters such as the seat of arbitration, the arbitral institution or applicable arbitration rules, the number and appointment of arbitrators, and the governing law should be carefully considered at the contractual stage.
A well-drafted arbitration clause should therefore not be treated merely as a standard contractual provision. It should be tailored to the parties’ commercial relationship and the nature of potential disputes.
Arbitration of Maritime Trade Disputes in Türkiye
One of the principal pieces of legislation governing maritime commerce in Türkiye is the Turkish Commercial Code No. 6102, which contains specific provisions concerning maritime commercial activities.
The applicable arbitration framework depends on the nature of the dispute and the circumstances of the case. The Turkish Code of Civil Procedure No. 6100 may be relevant to domestic arbitration, while the Turkish International Arbitration Law No. 4686 may apply to disputes containing a foreign element within the scope of the Law.
The Turkish International Arbitration Law regulates various aspects of international arbitration, including arbitration agreements, the appointment of arbitrators, the seat of arbitration, arbitral proceedings, arbitral awards, actions for setting aside awards and the enforceability of arbitral awards.
Accordingly, in a maritime dispute connected with Türkiye, determining the applicable arbitration regime requires consideration of several factors, including whether the dispute contains a foreign element, the agreed seat of arbitration, the scope of the arbitration agreement and the parties’ contractual arrangements.
Arbitration in International Maritime Trade Disputes
Due to the inherently international nature of maritime commerce, parties to a maritime transaction may be established in different jurisdictions. Shipowners, charterers, carriers, cargo interests, brokers, insurers and other commercial parties may therefore be subject to different legal systems.
In such disputes, the parties may agree on a neutral seat of arbitration and internationally recognised arbitration rules. Such arrangements may contribute to greater procedural predictability and provide a framework adapted to the international nature of the dispute.
The recognition and enforcement of an arbitral award in another jurisdiction may also be an important consideration in international maritime arbitration. Accordingly, when selecting the seat and arbitral institution, parties should consider not only the conduct of the proceedings but also the potential enforceability of the resulting award in the jurisdictions where enforcement may ultimately be required.
The Importance of Sector-Specific Expertise
Maritime disputes may require not only legal analysis but also an understanding of the commercial and technical aspects of the maritime industry.
For example, in a freight or demurrage dispute, the relevant contractual provisions may need to be assessed together with loading and discharge operations, the operational status of the vessel, laytime calculations and the parties’ commercial correspondence.
Similarly, in a charterparty dispute, the interpretation of the contractual terms, the parties’ respective obligations, the conditions governing the use of the vessel and relevant industry practices may all be material to the dispute.
For this reason, effective handling of maritime disputes requires consideration of both their legal and commercial dimensions.
Key Considerations When Drafting an Arbitration Clause
When drafting an arbitration clause in a maritime contract, particular attention should be given to:
- The scope of disputes subject to arbitration;
- The seat of arbitration;
- The arbitral institution or applicable arbitration rules;
- The number of arbitrators and the method of their appointment;
- The language of the arbitration;
- The governing law;
- The scope and validity of the arbitration agreement;
- The availability of interim measures and other forms of provisional relief; and
- The potential recognition and enforcement of the arbitral award in relevant jurisdictions.
An unclear or internally inconsistent arbitration clause may give rise to additional disputes concerning the validity, scope or interpretation of the arbitration agreement once a dispute arises. It is therefore important, particularly in international maritime contracts, to ensure that the arbitration clause is carefully drafted and consistent with the other provisions of the contract.
Conclusion
Maritime trade disputes require careful consideration of the appropriate dispute resolution mechanism due to their international connections, technical characteristics and, in many cases, significant economic value.
Arbitration may provide parties with a flexible mechanism for resolving disputes before arbitrators with relevant expertise and within a procedural framework agreed by the parties. Arbitration clauses are also widely used in maritime commercial contracts and international maritime practice.
Nevertheless, not every maritime dispute is automatically capable of being referred to arbitration. The validity and scope of the arbitration agreement, the arbitrability of the dispute, the applicable law, the seat of arbitration and the relevant procedural rules must be assessed in light of the circumstances of each individual case.
Accordingly, careful drafting of an appropriate arbitration clause at the contractual stage, as well as a detailed assessment of the existing arbitration agreement once a dispute arises, can be important in protecting the parties’ legal and commercial interests.
Manyas & Partners provides legal advice and dispute resolution services in relation to contractual and commercial disputes arising from maritime trade and shipping activities, taking into account the nature of the dispute, the international connections of the parties and the applicable arbitration mechanisms.
