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The charter arbitration clause

An arbitration clause is part of the MYBA Charter Agreement; we look at why this particular clause is so important, and why those who charter outside of the MYBA agreement should include one.…

“The basic rule about arbitration clauses is that if you think you may be sued you want one in; if you are likely to want to sue you do not want an arbitration clause,” advises Jonathan Coad, partner at commercial law firm Lewis Silkin. Coad specialises in privacy-related issues and reputation management, and spoke at this year’s Monaco Yacht Show about the importance of arbitration clauses for superyacht owners.

An arbitration clause has always existed within the MYBA Charter Agreement, but as superyachts become ever more prevalent in the public eye and media, the value of one particular aspect of an arbitration clause is growing – and quickly.

“The advantages of having such a clause is that legal disputes must then be determined via an arbitration process, which will be discrete and conducted according to a procedure which the parties can craft together in any country that they choose,” explains Coad.

Adelheid Chirco, charter director at Ocean Independence and MYBA board member, seconds the value of this for clients, for whom privacy is so important. “A very good aspect of the arbitration clause is confidentiality. Court litigation is public, and this is the last thing our clients would want to do,” she explains. “With arbitration, nobody would really become aware that there had been a dispute, and what it had been about.”

A very good aspect of the arbitration clause is confidentiality. Court litigation is public, and this is the last thing our clients would want to do.

Yet in Chirco’s 27 years in the industry she hasn’t had to deal with any disputes resulting in arbitration. “It’s very rare. There are some arbitration cases, but I personally have never had one,” admits Chirco. “Normally if there were small discussions about something that might have gone wrong in the charter, we as brokers would find a solution to ensure both sides are happy.”

For those who might not be aware of the value of an arbitration clause, or those operating outside of the MYBA Charter Agreement, Chirco elaborates. “In general, arbitration is quicker and less costly. However this does depend on the case and how big the claim is; it could last longer and therefore become more costly, so to solely choose an arbitration clause because of these reasons might not be the best idea,” Chirco explains.

“But it does have other advantages,” she continues. “Parties can choose an arbitrator, so each party would take somebody with a good knowledge to his industry. If you were to bring a case to court, the judges may not be aware of the yachting industry, which means the whole thing may take more time. Another advantage is flexibility, because you’re not bound to court hours.”

Now that MYBA is also open to US brokers, the chances of charters taking place outside of the MYBA Charter Agreement are becoming less and less, yet understanding the various aspects of the charter agreement is important regardless. And for those who charter without an arbitration clause, it’s certainly worth consideration in the future. 

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MYBA The Worldwide Yachting Association

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