Maritime Arbitration Commission at the Chamber of Commerce and Industry of the Russian Federation

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Publications

S.N. Lebedev
President of the Maritime Arbitration Commission
at the Chamber of Commerce and Industry of the Russian Federation,
Merited Lawyer of Russia, Professor.

Please, explain about the reasons for the establishment of the Maritime Arbitration Commission.

The Maritime Arbitration Commission (MAC) was established at the Chamber of Commerce in 1930 for consideration of disputes arising in connection with the salvaging of vessels and cargos at sea. The emergence of this Commission was essential: in those times because all disputes of this nature were settled by arbitration abroad, mostly in London. It was a common occurrence to apply to a foreign arbitration even when all vessels involved in a case were domestic ones, since our country had no relevant arbitral tribunals. In 2005, the MAC celebrated its 75th anniversary.

Owing to the efforts of those who contributed to the establishment and ensured the functioning of the MAC as a facility having highly qualified specialists in the sphere of merchant shipping, carriage of export-import cargoes, maritime and merchant law, the Commission succeeded to secure its high authority on an international level.

Nowadays, the Maritime Arbitration Commission functions at the Chamber of Commerce and Industry of the Russian Federation in accordance with the Law «On International Commercial Arbitration», Annex II to which is the Statute on the MAC at the Russian CCI.

What types of cases are referred to the Maritime Arbitration Commission? Could you outline any groups among such cases?

The Commission is a permanent and institutional third-party tribunal, specializing on examination of maritime disputes. In accordance with the laws, any civil disputes may be referred to the MAC, including those related to carriage of goods and passengers, charter-parties and contracts relating to salvaging and marine towage of vessels or to maritime fishery trade, marine insurance, operations on international rivers etc.

In addition to the disputes mentioned above other disputes arise, and if they in any event are connected with merchant shipping, they can be considered by the Maritime Arbitration Commission.

The MAC range of competence is very wide: from international cases to purely domestic ones. In most cases one of the parties is a foreign entity — a carrier, insurer, cargo owner, agent etc. The Commission settles disputes arising both between Russian parties and between parties from two foreign countries.

It is difficult to outline any typical cases, which the MAC is considering most of the time. All cases differ from each other, and each case implies its own specific problems. For instance, one of the recent cases was about a vessel, which went aground, because the captain did not have any large-scale map of the region. Consequently the dispute was devoted to defining whether the non-availability of the map was a sufficient reason to find the vessel unseaworthy and whether it was binding for the captain to have such a map at all. In another case, a vessel likewise went aground, however, the situation occurred due to other circumstances and, thus, the problem had to be solved differently.

What reasons caused the emergence of various maritime arbitral tribunals in different countries, and what role does the MAC play in this system?

It is known that to date there are many institutional arbitral tribunals of the same profile — in London, New York, Spain, China, France, Egypt, and in many other countries. The MAC ranks among the world's oldest maritime institutional arbitrations.

The reason for the emergence of such special courts lies in the particularity of this sector, therefore, any disputes arising in the sphere of merchant shipping should be considered by respective competent people, who have specialized knowledge. These are experts and arbitrators who are well informed about nuances of maritime business and who are basically the maritime lawyers practicing maritime law or conducting relevant theoretical research. It is common to invite sea captains and economists to act as arbitrators since questions arising from maritime disputes are frequently connected with the complicated economic computations.

It is also important to remember what influence does an arbitral institution. Evaluating the MAC, I should say that not only in our opinion but also in the opinion of foreign experts and those who apply to our arbitral tribunal, the Maritime Arbitration Commission is a reputable institution having international recognition. The recognition is reflected by the fact that many parties to civil-law relations incidental to merchant shipping business — whether based on a charter-party or a contract connected with rescuing and/or marine towage of vessels or maritime fishery trade, or incidental to collision between seagoing vessels etc. — all agree to refer their disputes to the MAC. The Commission considers the cases with the participation of entities from many countries worldwide.

What are the specifics of the Maritime Arbitration Commission's competence?

Its jurisdiction as that of an arbitral tribunal is optional, i.e. it depends on the agreement between the parties. Unlike an ordinary court wherein a party to a dispute has the right to apply without seeking the consent from the other party, a dispute can be referred to the MAC only upon a preliminary agreement of all parties involved. Thus, it is important that our businessmen dealing with the merchant shipping (I mean not only ship owners and freight carriers but also insureres, cargo owners, other users of sea transport) can understand the benefits of a contractual arbitration clause prescribing the consideration of any dispute, which may arise between them is considered by the Maritime Arbitration Commission.

In the past, there were about 20 large shipping companies functioning in the country and these shipping companies controlled all shipments and all shipping operations. Now, however, some of them have ceased to exist while the others have became foreign businesses.

Due to the introduction of market relations, recognition of private ownership, and the opportunity to establish commercial firms, there has appeared a lot of various enterprises linked to sea business. These include ship owners, which in most cases possess just several ships but yet prefer to act as independent businesses. Unlike the preexistent high capacity and monolithic shipping companies and well set fishery entities which used to maintain their own departments professionally dealing with all legal issues themselves, today many new enterprises do not even know about existence of special maritime arbitral tribunals intended for settling of disputes arising in the field of merchant shipping. The Chamber of Commerce does a lot to inform all these commercial entities about services which can be provided by our Commission. It is obvious for many reasons that for any Russian entities providing or using services of maritime transportation it is much easer to resolve a dispute in Moscow rather than abroad. It is clear, however, that this issue depends on the will of both parties and, eventually, on relevant contract clause?s regulating dispute resolution matters.

Unfortunately, when entering into deals, businessmen due to lack of experience in this area are often concerned only about commercial terms but not about various problems that can arise subsequently and, businessmen forget or fail to take sufficient measures in order to secure their interests. Quite commonly parties to contracts begin to realize the importance of having a dispute resolution clause only after a dispute involving a large amount of money has already arisen. And only when such an event actually occurs does it become clear to the Russian party that a foreign party was more prudent since it took enough care to include in a contract a clause prescribing that any dispute shall be considered through proceedings instituted in the country of such foreign party.

Is it important in some cases to stipulate in a contract the application of foreign law?

Different situations do occur and some circumstances may prompt parties to agree on the application of a foreign law even when legal proceedings on disputes are instituted in Russia. Such matter?s should be agreed upon by the parties at their discretion. In such a case, the parties always have the opportunities first to analyze the validity of their positions, and determine whether it is worth initiating proceedings or it might be more appropriate to settle the case amicably.

Sometimes, parties cannot find a compromise, and don’t stipulate the applicable law in their contract. This being the case the MAC arbitrators have to decide independently as to which law shall apply — Russian or foreign, subject to due regard to appropriate conflict of law rules.

What recommendations could you give to our domestic businessmen?

I think that the most important advise for them is to use a competent legal assistance. In order to properly arrange its work both in international and domestic markets, it is important to provide for maximum legal protection of interests apart from making an analysis of economic and financial aspects of each contract. Relying only on one's own competence is very risky even for an experienced merchant, especially if he is not a lawyer. As it is often the case, the contract may look well-thought-out, with all things considered, and not until a dispute arises does the incompetence of the drafts of the contract become obvious. Sometimes, this happens because of inaction of one of the partners or his failure to oppose the initiatives of the other party, which sometimes does not take any notice of such contract's defects as a result of misapprehension or lack of understanding on its part.

I earnestly recommend that any firm, which does not have legal council of its own, should always consult with legal firms prior to entering into any contract. Such services, of course, require certain expenses but will save large amounts of money in the future.