Incorporation by Reference in Maritime Arbitration

Abstract

This paper deals with maritime arbitration in general and in particular, the applicability of arbitration clauses in charterparties incorporated by reference into bills of lading. Following a discussion on the origin of maritime arbitration we see how dispute resolution in the shipping industry had initially been associated with informal procedures involving little or no dependence upon courts and other systems of formal dispute resolution methods, thus bringing about a special nexus between the maritime industry and non-judicial methods of dispute resolution - such as arbitration. One of the key requirements of an arbitration to take place is that the arbitration agreement must be in writing - as a significant departure from common law principles which allow for oral agreements as well. However, we a number of situations where an arbitration clause present in an agreement may be inducted into another by reference. This brings up the unique problem of bills of lading and their nature being that of a negotiable instrument. The question then arises as to whether the incorporation of a charterparty arbitration clause by reference into a bill of lading always reflects the true intentions of the parties to arbitrate. This paper describes how courts in the United Kingdom and the United States have dealt with this issue. In spite of differences in the approach on the two sides of the Atlantic, it is seen that such questions are dealt with on a case to case basis in both jurisdictions. Finally it is argued that in spite of the plethora of precedents, the case-to-case approach is at best, a shot in the dark for disputing parties with an equal chance of success or failure. Suggestions in order to mitigate such uncertainty are also presented.