Arbitration is the most commonly used dispute resolution mechanism in shipping and offshore contracts. However, parties often tend to spend little or no effort reflecting on the type of arbitration solution chosen (ie, ad hoc versus institutional arbitration). This article highlights the benefits of agreeing to arbitration under the rules of the Nordic Offshore and Maritime Arbitration Association (NOMA) versus ad hoc arbitration.
Arbitration in Norway has traditionally been ad hoc, based on the rules of the Norwegian Arbitration Act 2004 (NAA) and similar preceding legislation. Ad hoc arbitration is not administered by an institution, leaving the parties to agree how the proceedings will be conducted to determine the particular dispute. This generally provides greater flexibility to the parties as the NAA is somewhat limited in scope and contains only limited regulations. However, where the parties are unable to agree on procedural aspects of the arbitration, the tribunal has broad discretion as to how the arbitration will be conducted. Therefore, unless the parties agree otherwise, the NAA states that the arbitration will be conducted in such manner (procedurally) as the tribunal considers appropriate. As these characteristics of ad hoc arbitration can sometimes create a lack of transparency and predictability, ad hoc arbitration is often perceived as something of a black box.
The alternative to ad hoc arbitration is institutional arbitration, where the arbitration is administered by and conducted pursuant to pre-established rules and procedures of arbitration institutions such as the International Chamber of Commerce (ICC), the London Maritime Arbitrators Association (LMAA) or NOMA, considered further below. Institutional arbitration generally ensures a high degree of foreseeability in respect of how the arbitration will be conducted, particularly as regards the procedural rules. However, pre-established arbitration rules will limit flexibility, although parties are usually free to vary those rules by agreement, even after a dispute has arisen.
NOMA arbitration – Nordic best practice
NOMA was established on 28 November 2017 as a common Nordic alternative to both the traditional ad hoc and established institutional arbitrations. The lack of transparency and foreseeability in ad hoc arbitration was seen as making international parties reluctant to agree to refer their disputes to arbitration in Norway and the Nordics. Conversely, the rules of traditional arbitration institutions such as ICC and LMAA were perceived to be too rigid and incompatible with the more flexible Nordic legal tradition. Thus, NOMA's ambition was to preserve and codify a Nordic best practice for the conduct of arbitration and to limit as much as possible the institutionalisation of those rules and best practices. The result is the NOMA Rules and NOMA Best Practice Guidelines.
Unlike traditional arbitration institutions, NOMA does not charge administrative fees, offering the use of the NOMA Rules and Best Practice Guidelines free of charge. Further, NOMA does not administer the arbitration proceedings, only stepping in for certain limited matters upon the parties' request. NOMA therefore ensures a certain degree of flexibility and party autonomy, while at the same time promoting transparency and foreseeability in the arbitration process.
Benefits of NOMA versus ad hoc arbitration
It is a general and overarching feature of the NOMA Rules and Best Practice Guidelines that they promote efficiency and simplicity in the arbitration process.
Efficiency (both in cost and time) is achieved in particular through detailed provisions in the NOMA Guidelines on case preparations and procedural rules. For instance, NOMA requires a case management conference (CMC) shortly after constitution of the tribunal. It is explicitly stated in the guidelines that the CMC aims to agree procedural directions to be followed at the outset to ensure a prudent and cost-effective determination of a dispute. A comprehensive CMC matrix setting out detailed particulars of the items to be discussed and agreed at the CMC is included as Annex 1 to the guidelines.
Further, NOMA's procedural timetable and time limits are shorter than those in ad hoc arbitrations based on the rules of the NAA. For instance, the time limit for appointment of arbitrators (provided the parties cannot agree) is reduced from one month to 21 days. The following default time limits for submissions of pleadings are also included:
- 28 days for submission of a statement of claim and statement of defence; and
- 21 days for submission of subsequent pleadings.
There are no similar time limits under the NAA, as these are left to the parties to agree or to be directed by the arbitrators at their discretion. Moreover, under NOMA arbitration rules, oral hearings must take place:
- no later than six months after commencement of the arbitration for hearings of four days or less; and
- within 12 months for hearings of more than four days.
By comparison, there are no time limits for the scheduling of hearings under the NAA.
NOMA is also currently working on a separate set of rules for small claims or fast-track proceedings aimed at streamlining the determination of smaller, low-value claims. These rules, which are expected to be launched shortly, will also seek to further limit costs and reduce applicable time limits.
While the NAA offers limited rules on evidence, NOMA offers detailed rules in that regard. The NOMA Rules on the Taking of Evidence are set out as Annex 2 to the NOMA Guidelines.
NOMA arbitration has many benefits, making it an attractive option for contracting parties. There has been increased uptake in NOMA arbitration both in terms of contracts specifically providing for NOMA as the dispute resolution mechanism and as something which the parties agree to if and when a dispute arises. This is unsurprising as NOMA first and foremost represents a Nordic best practice of conducting arbitration, with greater emphasis on transparency and efficiency.(1)
Endnotes
(1) The current suggested wording for a NOMA arbitration clause is as follows:
Nordic Arbitration Recommended Arbitration Clause
ARBITRATION CLAUSE AND GOVERNING LAW
This agreement shall be governed by and construed in accordance with [insert governing law] law.
Any dispute arising out of or in connection with this agreement, including any disputes regarding the existence, breach, termination or validity thereof, shall be finally settled by arbitration under the rules of arbitration procedure adopted by the Nordic Offshore and Maritime Arbitration Association ("Nordic Arbitration") in force at the time when such arbitration proceedings are commenced. Nordic Arbitration's Best Practice Guidelines shall be taken into account.
The place of arbitration shall be [insert city and country] and the language of the arbitration
shall be [insert Danish, Norwegian, Swedish or English].
The arbitration tribunal shall be composed of three (3) arbitrators.
