How to Resolve a Maritime Dispute?

Maritime disputes tend to be international and commercial in their nature and often highly complex. Thankfully today court litigation is not the only method for resolving a dispute. There are essentially six modern methods of dispute resolution, as follows:

Negotiation – This is where the parties get together and try to negotiate a settlement of the issues and perhaps claims between them. It can be effective because the dispute will be elevated to a higher level within the firms in question, perhaps taking the dispute out of the hands of the individuals who are at loggerheads. Commercial considerations begin to be more at play and there can be a greater appetite to compromise. It is also the most cost effective method costing nothing, other than perhaps the cost of supporting legal advice or assistance with the negotiation process.

Mediation – Mediation essentially involves the appointment of an individual to go between the parties and see if they can find common ground or tease out settlement terms that would be acceptable to both sides.

Conciliation – Tends to be reserved for employment disputes.

Adjudication – Tends to be reserved for construction disputes. This method is very quick because often there is a strict timetable for submitting evidence and providing an Award. The adjudicator in Construction disputes in the UK must provide a decision within 28 days of the instruction. This has been intentionally designed for construction disputes where daily costs are often being incurred of hundreds of thousands and if a project were to be delayed for a series of months it would cause considerable economic impact. So the parties sacrifice the ability to present their case and analyse it in granular detail for the right to obtain a swift judgment.

Arbitration – This where the parties appoint an arbitrator or a panel of three arbitrators to listen to their case and give a judgment in much the same way that a court would, but without the strict rules of evidence, delays, formality and the need for lawyers. Also, importantly, it can be done and normally is in private. So the media and the public never become aware of the facts or judgment. The parties can go to arbitration by having a standard term in their contract agreeing to do so, or by agreeing to resolve a dispute that has otherwise arisen by arbitration. They may decide on almost every element of how the arbitration should be conducted, but tend to choose a standard form of rules such as the UNCITRAL, CIArb, CII Rules etc., which provide adaptable templates for Arbitration procedures. Arbitration is by far the most common way to resolve maritime disputes and frequently the LMAA (or London Maritime Arbitrators’ Association) Rules are used.

Litigation – If all else fails the parties always have their original recourse to a court of law.

ARTICLE: Legal Costs

Shipping law is one of the most niche areas of the legal system. Whilst there is a huge body of law, which is for the most part very complex, there are very few shipping law cases that result in legal proceedings. There are therefore relatively few firms (especially outside the big cities) who can concentrate their entire practice on an area of shipping law or even shipping law as a whole. For this and other reasons the costs of shipping law disputes tend to be towards the higher end of the spectrum.

Indeed, when a case involving shipping law does go to trial it is often found that there has not been a clarification of the law for some time - in the recent case of Global Process Systems v Syarikat Takaful Malaysia Berhad a question arose as to what constituted 'inherent vice' under a marine insurance policy and it was surprising how many different views appeared on what was one of the fundamental elements of marine insurance. This case was unusual in that the parties had particularly 'deep pockets' and were willing to hold their ground on the legal points. The claim therefore went from first instance decision to Court of Appeal and all the way to the Supreme Court (Judgment link). This is highly unusual for a shipping law case in England and the legal costs for the losing party must have been significant.

ALLOCATION OF COSTS - THE COMPETING REGIMES

THE 'ENGLISH RULE' (the successful party can recover costs from unsuccessful party)

In most parts of the common law world costs are based on what is known as the 'English Rule'; that costs 'follow the event'. In other words the case is concluded and then the legal costs are divided as appropriate, usually meaning that the losing party pays their own costs and the costs for the other side. The logic is that in every dispute one side is at least theoretically wrong and had they amended their position the need for legal proceedings would have been avoided altogether.

This is a general rule and there are many nuances and exceptions to it. For instance in small claims track cases (low value disputes) the winning party normally will either not be able to recover any costs from the other side or only fixed amounts of costs. This is to stop parties with large amounts of funds available spending disproportionate amounts on legal fees in small disputes to 'scare off' the other side. For instance if you did not pay £ 150 on your phone bill because you were billed that amount by mistake. If the company did not listen and took you to court threatening that you would have to agree to pay it or be left owing them approx. £ 35,000 in legal costs.

The costs system in England, and the level of costs generally, is often cited as the main reason for there being relatively little use of the civil courts and a general reluctance to take disputes to legal proceedings in England. Lord Justice Jackson recently conducted a wholesale review of the system which is available here.

THE AMERICAN WAY (the successful party cannot recover costs from unsuccessful party) 

The USA is the best example of the alternative system. In the USA a successful party in litigation generally cannot recover their legal costs from the other side in the dispute. Like small claims in England this gives those people and companies of limited means the ability to use the court system freely, without the threat of incurring enormous unbudgeted defendant's costs. The flip-side of this is that people perhaps lose a natural inhibition to litigate small or needless disputes that exists in England and the level of litigation is quite high.

AN ALTERNATIVE (the successful party can recover a fixed amount of costs from the unsuccessful party)

Lord Justice Jackson, who has conducted a wholesale review of the English costs system (linked to above) has been known to admire the German courts system for attribution of costs. This system is a blend of the English and American systems, where successful parties can recover reasonable costs but only up to a fixed amount.

"NO WIN - NO FEE"

Sometimes referred to in a maritime context as 'no cure, no pay', this is an agreement that the lawyer will only charge legal fees where they are successful in your legal case. This normally means that they obtain compensation from the other side for you (either in court or before going to court). This does not mean no win, no charge. Even where the lawyer is not successful they only waiver their legal fees and they may still charge you disbursements (telephone and travel costs, photocopying expenses, court fees, barrister's fees etc.).

Because lawyers taking on these cases are risking being essentially unpaid for some of the work they do they will normally wish to charge more for the cases that they do win. For this reason in the USA it is common for such lawyers to note that is successful they are entitled to legal fees and / or a share of the compensation. This is known as a 'contingent or contingency fee' and is normally not allowed for family or criminal cases.

Whilst it can seem unfair, if you have a civil claim but no ability to pay for legal representation to enforce it, the  contingency fee option is a real boon. In English law such fees are only allowed in very specific instances, where costs are not generally recoverable from the other side. Normally English solicitors may only use a 'conditional fee' which is a percentage increase on their fees (or a 'success fee') that they get where they are successful. This is normally between 10  and 100 % and is recoverable from the other side in the dispute as long as they are properly informed about its existence.