Mass Justice in Maritime Law: A Feasible Utopia?
The author of this post is Kleopatra Koutouzi (Attorney-at-Law / In-house legal Counsel at Aims Shipping Corporation and External Collaborator with the International Labour Organisation (Maritime Unit)).
In my recently published PhD research entitled Mass Claims in Maritime Law and Alternative Methods of Dispute Resolution, I attempted to answer the above question by dealing with an issue more and more debated at a national and an international level: whether a group of people, suffering damage due to a maritime casualty, can defend their rights collectively before an arbitral tribunal, taking into consideration that collective mechanisms facilitate effective judicial protection.
Shipping has been one of the strongest supporters of arbitration for as long as one can find records. However, arbitration clauses are not included anymore only in contracts between equals. Arbitration clauses in passengers’ tickets and crewmembers’ employment contracts are a common phenomenon recently. The example of the cruise industry shows a trend which may become a mainstream in the near future. Therefore, novel dispute resolution devices affect directly the maritime industry, since most of the international trade and activities are carried out by sea. Given also that maritime casualties tend to take nowadays the form of massive catastrophes, the international maritime community should be alerted to deal with mass and often divergent claims in a rather quick and efficient way.
Cross Sectoral and Comparative analysis
Τhe research applies a cross-sectoral approach, i.e. the intersection of maritime law with international commercial arbitration law, the procedural practice of mass collective claims and alternative (out-of-court) dispute resolution (ADR). The study cuts across several legal fields and it does so on a comparative basis with four jurisdictions of reference – United States of America (USA), United Kingdom, France and Greece. For the conduct of this research, the United States jurisdiction is used as a benchmark. US law has long been recognized as one of the most friendly and familiar with methods of collective actions – in the form of the unique worldwide phenomenon of class actions – and the use of alternative methods of dispute resolution – with a great emphasis on arbitration. This turns USA into one of the main destinations for the resolution of large-scale disputes. Moreover, the recent US case law on class action waivers in consumer and employment agreements and the relevant debate generated therefrom as well as a series of court decisions compelling arbitration in seafarers’ injury claims are very pertinent to the current analysis.
Mass Claims
In this study, the term “mass claims” is used in order to describe claims which arise when a number of people, either contractually bound to the shipowner or not, suffer damages resulting from the same historic event, in our case from a maritime casualty or a maritime adventure whether on board the ship or ashore. Therefore, the claims examined arise either simultaneously or at around the same time and present very similar legal and factual issues without however being identical. In relation to the number of claims involved, for convenience purposes, the research adopts the threshold set by the EU Recommendation of 11 June 2013 and considers mass claims any claims brought collectively by two or more natural or legal persons claiming to have been harmed in a maritime casualty or adventure. Therefore, individual accidents fall outside the scope of this work.
Research Questions
The main research questions answered in this book are:
- Is arbitration a legally permissible dispute resolution method for the handling of mass claims in the aftermath of a maritime casualty and how should the silence of the governing instruments be interpreted and handled?
- Is it an appropriate mechanism from a policy point of view, taking into account all the interests involved (private, collective, public)? In such a case, how may a balance be established between procedural efficiency and procedural fairness?
- Would it be possible to propose solutions, building on the common elements found in the annotated jurisdictions?
- Is there any added value of mass arbitrations in maritime fields where specific collective indemnity schemes are already in place and have proved effective, as in the case of oil pollution from ships?
Categories of Claims
To address the above questions the book examines two different categories of claims; a) contract-based ship passengers’ claims, and b) tort-based ship pollution claims. In relation to the first category, reference is made to the specific liability regime governing the sea carriage of passengers, examining the use of arbitration in the relevant disputes (through the lens of consumer protection) as well as the issue of the class action waivers included in many passage contracts. In relation to the second category, reference is made to the specific regime regulating liability and compensation in case of ship pollution with the aim of testing whether arbitration can provide a valid alternative to the jurisdiction of national courts for the resolution of this kind of claims; to that end, the processes activated to address the consequences of the DeepWater Horizon accident provide useful food for thought.
Passenger claims
The analysis deals with international contracts of carriage and therefore cross-border disputes with a particular focus on cruises and package holidays. Cruise passengers can raise their claims based mainly on the contract they had entered into while arranging a specific cruise trip. This contract is actually a special form of consumer contract and therefore the cruise passenger “wears the consumer’s uniform” as well. The discussion in relation to ship-passenger claims revolves around the theory and application of class and collective forms of arbitration in consumer disputes. A wide spectrum of claims are taken into consideration, e.g. claims for loss of or damage to luggage, illness, injury and death, claims for delays and cancellations, loss of enjoyment, inconvenience and distress. Single events and purely domestic cases fall outside the scope of this work.
The analysis concludes that in all four examined jurisdictions, the majority of passengers’ claims are considered arbitrable. The categories of claims still excluded from arbitration are personal injury, illness, and death claims. The arbitrability of passengers’ claims is also supported by the provision for arbitration in the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea which authorizes post-dispute arbitration agreements. The main difference in the approach of the examined fora is their stance towards the form and drafting of the arbitration agreement. While the USA adopt the most extreme, if one can say, approach, by enforcing both arbitration clauses stipulating for mandatory arbitration to the exclusion of state courts and post-dispute arbitration agreements, Europe, influenced by the European Courts of Human Rights jurisprudence and the Unfair Terms Directive, clearly rejects mandatory arbitration clauses, since they are presumed to be abusive. Differently, post-dispute arbitration agreements between the passengers and the carrier do not seem to be a problem in either jurisdiction.
Many passengers fear the time, cost, and energy associated with pursuing an individual arbitration and therefore prefer to proceed on a group basis. However, the analysis reveals that large scale arbitration could work well in case of passengers with relatively low value claims, not justifying a single action. Respondents on the other hand only favor broad resolution of group claims after it becomes clear that the matter will be adjudicated on a large-scale basis. In many cases, respondents believe that their legal liability will be eliminated if they can eliminate the possibility of a group action, since many claimants will be unable or unwilling to proceed on a bilateral basis. Taking into account the above, it seems that the possibility of large-scale arbitration would be more beneficial for the passenger than for the shipowner, while at the same time the latter would still be benefited from the use of arbitration, joining multiple claims into a single neutral forum and enjoying secrecy on matters of wide social significance.
Nevertheless, in theory such arrangements are always easier than in practice. In the USA, even though the use of arbitration in consumer/passenger disputes is much more popular and advertised, large-scale arbitration seems not a feasible alternative at present. The US example of cruise lines is indicative of their approach. Specific and now standardized clauses on cruise ship tickets require passengers to submit most claims to arbitration and prohibit them from uniting similar claims in a class action or class arbitration. They contain the so called “class action waivers”. Even worse, the US Supreme Court, in a series of judgments upheld their validity.
With respect to Europe, while EU law has achieved the goal of uniformity in consumer protection, and the principle of the protection of the weaker party is incorporated in all legislations of the EU Member States, the mechanisms of collective relief are at an infant stage. Moreover, the possible application of the concepts of class actions and class arbitration in the continental law generate still various concerns. It is also true that EU policymakers, even though they have recently attributed a significant role to collective redress, they do not look at the arbitration forum for the resolution of mass claims.
Pollution claims
The discussion in relation to this category of claims revolves around the theory and application of mass forms of arbitration, which are in principle treaty-based. The analysis and arguments drawn have been heavily influenced by the concept of mass arbitration that was first innovatively used in the context of investment arbitration. In contrast to the passengers’ claims, there is no contractual relationship in place between the victims of mass harm and the ship-owner. Also, the claims are usually vast in numbers and the various claimants cannot be easily grouped, since they base their claims on different legal grounds. Their only link is that they have suffered damage due to the same event.
The main factor that triggered the application of this exercise in the field of pollution claims is the need for concentration of these claims in one forum. This derives, on the one hand, from the text of the international conventions and, on the other hand, from the fact that they cannot be handled properly if they are not concentrated in one place.
According to the wording of 1992 CLC, if there is a pollution damage in several countries, claimants can address the courts of all of these countries, irrespective of their nationality or the exact localisation of the damage they bring their claim for. Also, there is no lis pendens rule in the 1992 CLC, according to which the proceedings in one contracting State could be stayed in favour of earlier proceedings in another contracting State. Moreover, the ship-owner has the right to set up the fund in any of the contracting States in which an action is brought, or, if no claim is brought, in any of the contracting States in which a claim could be brought. Nevertheless, only the court of the place where the fund has been constituted is competent to decide on the apportionment and the distribution of the fund, which means that all claims for payments must in the end be addressed to this court. Similar wording is used in the International Convention on Civil Liability for Bunker Oil Pollution Damage (BOPC) and the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea (HNS).
The above coupled with the different kinds of proceedings initiated in the various fora generate the reasonable question of why are there so many alternatives of competent courts since the claims will have to get technically concentrated in the end in one forum? The fact that there is not a single court that has jurisdiction over all the interested parties, creates a huge risk.
Many courts dealing with such cases resolve procedural issues by excluding foreign plaintiffs from the plaintiff group. However, courts that cannot assert jurisdiction over all of the putative parties to a dispute fail to fulfil one of the primary rationales supporting large-scale relief, namely the resolution of mass disputes at a single time, in a single forum. This deprives the parties of certain efficiencies of scale as well as the speedy route to finality that so many defendants desire. Second, it requiring claimants to seek redress in different jurisdictions can lead to different parties having different rights and remedies, despite having suffered identical injuries from the same historic event. Third, forcing cases to go forward in multiple jurisdictions can lead to inconsistent results, since courts in one state are not bound by factual or legal determinations made elsewhere. This can lead to defendants being required to undertake conflicting duties and it can also give rise to inequitable treatment of injured parties, particularly if judgements that are rendered earlier in time exhaust a limited fund.
The instruments regulating compensation for ship-source pollution do not provide for arbitration. The alleged reason is because the whole structure of compensation under the international conventions is based on an entitlement to limit liability. So, in order to claim the benefit of limitation, a shipowner is required to constitute a limitation fund with the court of the contracting state in which the action is brought against him. The conventions therefore envisage litigation rather than arbitration, although the majority of cases are settled by negotiation.
There are two kinds of (parallel) proceedings that can take place in the aftermath of a maritime casualty: proceedings on the merits of the case, if the extent of the liability and/or the extend of the damage are disputed, and limitation proceedings, which are initiated by the shipowner in order to benefit from the limitation of his liability.
The analysis carried out for the research concludes that arbitration is compatible with both proceedings.
Αs to the types of claims that arise, it is clear that all of them can be validly submitted to arbitration except for the personal injury and death claims. But, even these types of claims are clearly arbitrable in the USA and, in part, also in other common law jurisdictions, like the UK. The same applies to the types of damages claimed by the victims. Although the adjudication of damages falls strictly speaking outside the scope of the current analysis, it is worth clarifying that international tribunals are very much familiar and experienced in adjudicating both compensatory (such as actual loss, consequential loss, pure economic loss) and non-compensatory damages (such as moral and punitive damages).
Also, the selection of claims for compensation is not in any way contrary to the function of an arbitral tribunal. One can argue that the courts have better facilities and more staff to support a large volume of claims, but another could counter-argue that an arbitral tribunal constituted for this particular purpose will have more time and expertise to handle this task efficiently and quickly. Also, arbitral tribunals have historically proved that they have the capacity to deal efficiently with large-scale claims which have strong technical characteristics.
Most of the advantages of arbitration benefit both sides involved in environmental disasters. Particularly for the respondent, the possibility to adjudicate mass claims in a single neutral forum and thus to achieve concentration of homogeneous claims in one place would be a highly valued point since it would either facilitate settlements or result in consistent awards. This would be coupled with the preservation of confidentiality of the arbitral proceedings and, thus, the reduced risk of negative publicity. This would make arbitration appear very appealing to potential respondents.
Concluding Remarks
Given the need for efficiency and procedural economy as well as the trend in contemporary European civil procedure for further specialization and privatization of civil justice, arbitration comes up as a viable solution for mass claims in the maritime environment. De lege ferenda solutions, mainly in the form of legislative proposals to existing maritime treaties, are displayed in the conclusions’ chapter of the book.
To conclude, the research carried out reveals that one field which can easily generate mass sea-related pollution claims and which remains unregulated is the field of oil rigs and offshore hydrocarbon platforms. An international Convention regulating their use as well as the dispute resolution methods in case of mass accidents like Deep Water Horizon is a matter of urgent necessity. If adopted, a Convention could offer a fertile ground for the use of arbitration in tabula rasa towards the resolution of mass pollution claims.
Further insight into the results of the research can be found in the book which is available here.