Fast and low cost arbitration

Further to the article which appeared in the October 1996 edition of “The Intermediary”, we are pleased to announce the successful completion of ITIC's first FALCA; one of the first such decisions to be announced. The dispute concerned a Member who had been requested to arrange stevedoring services with the local port authority for a consignment.

The port authority’s charges were based on weight or volume, depending on the commodity. The agent was asked by his principal to declare the cargo by weight, but the port authority subsequently charged by volume. The principal refused to pay the extra charges and insisted the Member was liable for them. The arbitration dealt with the technical issue of whether the port authority had the right to change from charging by weight to volume, and also whether the Member was liable. The arbitrator found that the port authority was acting within its rights and that the member was not liable for the extra costs.

What is FALCA?

It is essentially a non-aggressive means of solving a dispute where a third party (the arbitrator) is required to give a considered opinion relying only on documents. This arbitration procedure differs from most in that a strict timetable is laid down and each side is only allowed to submit documents. The obvious advantage of a timetable is that it forces the parties to concentrate on the task in hand and does not allow them to use delaying tactics. The award has to be published within 8 months which allows both parties to settle their dispute in a relatively short time.

Why use this method when there are other forums?

It's easy to understand, and is indeed fast and low cost. In times of spiralling legal fees and increasing litigation, it is a wonder that anything connected with the law can be described as low cost.

The procedure is eminently suitable for disputes arising out of agency agreements and for smaller disputes in general which can be settled with reference to documents only. The LMAA (London Maritime Arbitration Association) has a wealth of experience in all fields of shipping and it is therefore not difficult to find a suitable arbitrator to deal with cases.

If Members would like to consider putting a FALCA clause into their contracts, the Club will be pleased to assist.

The FALCA Rules were the brainchild of Thomas Miller Defence, and solicitors, Clyde & Co.