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Arbitration in logistics

Logistics contracts are often complex, and to an increasing extent, involve cross-border situations. When disputes arise legal clarifications therefore take up a lot of time - a problem which has been aggravated by the multiple stages of proceedings before national courts and the various legal remedies available (appeals, revisions, objections, etc.).

Arbitration offers an alternative: There is only a single instance here; Arbitration rulings can be contested only to a limited extent. In addition, as far as questions of logistics are concerned an experienced person can be selected as the arbitrator. In national courts matters, would be in the hands of tenured judges, for better or for worse, irrespective of their experience in matters of logistics. Accelerated proceedings and flexibility in the structure of the process, for example through video conferencing, provide for fast decisions. Internationally, arbitration settlements are often easier to enforce than judgments of national legal systems - thanks to the New York Convention on the recognition and enforcement of foreign arbitral awards, to which the most important countries in the world have subscribed. Especially for complex, cross-border logistics contracts the parties concerned should therefore consider the incorporation of an arbitration clause in the contract.

Caution is however recommended even in case of arbitration agreements. If one opts for so-called ad hoc arbitration, one has to give serious consideration to all details of the process: Agreements with the arbitrator(s) on matters such as fees, the course of proceedings etc. - these are questions which smaller companies cannot afford without competent legal advice (which in turn entails its own costs). As an alternative, there is the option of contacting an arbitration institution. In principle, there are no clearly defined jurisdictions: any of the numerous institutions worldwide can be selected. There are exceptions in some communist dominated countries, particularly China. It is also irrelevant where the Arbitration Institution is located, as the negotiations need not necessarily be conducted at its headquarters. Attention should however be paid to the location of the headquarters of the arbitration court, (usually accessible by agreement), though negotiations need not necessarily be conducted there, since the national law of the headquarters is relevant for key issues, in particular the possibility of annulment of the award.

The prominent and leading arbitration institutions such as the #ICC Paris, the American Arbitration Association etc. can generally guarantee competent handling of the procedure - but these institutions are not geared for disputes where the stakes are relatively low. Proceedings where the value of disputes run into several millions cost a lot of money there, and many of the "star arbitrators" on the lists of these institutions, are not interested in such cases. That is why one needs to consider a "second string" arbitration institution in case of lower dispute values. The problem is that these are as numerous as the grains of sand on the seashore and certainly not all such institutions are suitably qualified. Many facilities exist only on paper with the sole purpose of enhancing the prestige of law firms, while others are overloaded with cumbersome procedures or are appropriate only for regional situations. In addition, only a few institutions are familiar with the specific problems of the logistics sector and several of them do not know of suitably qualified arbitrators. Added to this is the fact that SMES procedures have special requirements for arbitration institutions (in this connection see the detailed article by Thorsten Vogl, small and medium-sized enterprises and arbitration, in: 'Jusletter' of 6th February 2017). This is a field which has thus far unfortunately been somewhat neglected in the relevant literature.

GSL Consulting LLC is your dependable partner, always at your side, happy to advise you which arbitration institution is the most suitable in your specific case.

#arbitration #contract #supplychainlaw #icc #logistics #riskmanagement #transportation #legal

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