In a case which will have a depressing familiarity to many engaged in international commerce, a judge has questioned whether it was wise for parties to a shipping contract dispute to enter into a costly debate about the jurisdiction of arbitrators rather than getting on and settling their differences.
The dispute concerned damage to a consignment of bagged rice shipped between Thailand and Nigeria. The sums at stake were relatively modest and the consignors had commenced arbitration proceedings against the ship owners before a three-man tribunal of the London Maritime Arbitration Association (LMAA).
The ship owners, however, challenged the tribunal’s jurisdiction, arguing that four separate arbitrations should have been commenced, some of them before a single arbitrator under the LMAA’s small claims procedure. The central issue in the case was whether the arbitration clauses in four bills of lading had in certain respects been superseded by a subsequent letter of undertaking.
The judge preferred the consignors’ arguments and opened the way for the three-man arbitration to continue. He commented that, but for the jurisdictional wrangling, the dispute would probably have already been resolved. The tribunal was well qualified to rule on the matter and it was hard to see that the substantial cost of dealing with the jurisdictional issue was money well spent.