- Understanding Dispute Resolution Under the MYBA Charter Contract
- June 15, 2017 | Author: Stephanie M. Klein
- Law Firm: Robert Allen Law - Miami Office
Many US yacht charter brokers use the MYBA Charter Agreement as a go-to form for charters. Although the agreement is increasingly being used for charters in the Western Hemisphere, it is important to note that the document was developed in Europe, thus making it best suited for use with charters taking place in European waters.
Dispute Resolution Under the MYBA Charter Contract By Stephanie Klein, Robert Allen Law
Many American charter brokers and managers use the MYBA Charter Form (the “MYBA”) as a go-to form for charters. It is important to note, however, that the MYBA was developed in Europe, thus making it best suited for use with charters taking place in European waters. Although the MYBA is increasingly being used for charters in the Western Hemisphere as well. While the MYBA is a good form, some of the standard provisions do not suit the needs of all charter clients, particularly those clients who are American or South American and chartering in the Western Hemisphere. Of primary concern for American charter brokers is the MYBA dispute resolution provision.
An American client chartering in the Caribbean under the MYBA will certainly want to modify the dispute resolution provision to best suit his or her needs. But, how and when should it be modified? This article answers that question by looking at the dispute resolution provision under MYBA, in particular: (1) what the standard provision says, (2) how and when the standard provision can be modified, and (3) the contents of a proper modification.
1. What the Standard Provision Says
Most contracts have, and all contracts should have, a dispute resolution provision that tells the parties how they will resolve disputes that arise out of or relate to the contract. The MYBA is no exception and has a dispute resolution provision in Clause 23, which says, amongst other things, that the agreement is governed by English law and that disputes will be referred to arbitration in London in accordance with the London Maritime Arbitrators Association (the “LMAA”).
What does this mean for an American client chartering in the Caribbean? It means that if a dispute arises, the client must travel to London at least once, if not multiple times, to engage in arbitration. Because the contract is subject to English law, this also means that the client must hire an English lawyer. The result is quite impractical for such a client, and results in an additional and unneeded expense. Wouldn’t it be better if this client could arbitrate in Florida, under Florida law, with American arbitration rules? The meaning of arbitration and the proper way to modify the arbitration provision is discussed in greater detail in Section 3 below.
2. How and When the Standard Provision Can Be Modified
The MYBA is a standard form that is not meant to be modified, with the exception of page one where the parties fill in the specifics of the charter and page two where the parties can fill in special conditions. While pages three through eight of the MYBA appear to be written in stone, it is important to know that they can be changed.page1image23864 page1image24024 page1image24184
Typically, brokers attempt to modify the standard provisions of the MYBA by writing in the special conditions section. But beware—if a broker does not do a thorough, complete, and correct modification, the result could have unintended consequences. For example, a broker may write in the special conditions section something like: “The parties agree that arbitration will take place in Florida.” In this case, the broker modified the place of arbitration, but forgot to modify the governing law and the rules of arbitration. The end result of this improper modification is arbitration taking place in Florida, but still under English law, and still subject to the LMAA rules. The result is equally problematic in that the client still must hire an English lawyer, who now must fly to Florida to engage in arbitration. The components of a proper modification to the arbitration provision are discussed further in Section 3 below.
Instead of jotting in modifications in the special conditions section, the preferred and best way to modify the MYBA is to have a lawyer draft an addendum. The terms of the addendum should be negotiated between the parties before signing the MYBA, and the addendum should be signed before or in conjunction with the signing of the MYBA. The benefit of having an addendum is that the parties can not only modify the dispute resolution provision, but they also have an opportunity to modify other standard clauses of the MYBA.
3. Contents of a Proper Modification
Dispute resolution provisions typically call for either arbitration or litigation. Arbitration is a private alternative to litigating a matter in court where the parties agree ahead of time to have disputes resolved by a neutral third party. The benefits of arbitration include the following: (i) it can be less costly and quicker than litigation, (ii) it is confidential, (iii) the procedure is relaxed, and (iv) the parties choose the arbitrators, which means that they can choose arbitrators who are well versed in the terminology of the industry. The biggest drawback of arbitration is that the decision is final and binding.
If the parties want to stick with arbitration as the method of dispute resolution, and modify it to suit their needs, it is important to consider all parts of an arbitration provision, which include, but may not be limited to, the following: (i) where arbitration will take place, (ii) under which rules it will take place, (iii) the governing law of the contract, and (iv) how many arbitrators there will be and how they will be selected.
An alternative to arbitration is litigation. Litigation means that disputes are decided in a court by a judge or possibly a jury. The drawbacks of litigation include the following: (i) it can be costly, (ii) it can take a long time, (iii) the case is public record, (iv) the procedure is formal, and (v) the parties do not get to choose the judge. The biggest advantage of litigation is that the decision is not final, meaning that if the outcome is not in a party’s favor, the decision can be appealed.
If the parties opt for litigation as their preferred method of dispute resolution under the MYBA, it means that by way of an addendum, they are getting rid of and replacing the entire arbitration provision. It is important to include all of the required parts which include, but may not be limited to, the following: (i) choice of law (which means the law that will govern the contract), (ii) forum selection (which means in which court the case will be heard), (iii) venue (which means where the case will be heard), (iv) submission to jurisdiction (which means that the parties agree to be bound by the court), (v) waiver of venue (which means the parties cannot argue that the place is inconvenient), and (vi) service of process (which states how the parties will serve one another with formal paperwork).
When it comes to deciding between arbitration versus litigation as a method of dispute resolution under the MYBA, it is important to note that one is not necessarily better than the other. It is up to the parties in a contract to decide what is best for them. The takeaway is that one must take care when modifying a dispute resolution provision to not only ensure that it meets the needs of the parties, but also to ensure that the modification is done in the correct way to include all of the relevant parts so that the end result is what was intended.
While the MYBA is a good standard form, it can and should be modified to suit the needs of a client, particularly for American or South American clients chartering in the Western Hemisphere. Charter brokers and managers should be familiar with the standard terms of the MYBA, in particular with the dispute resolution provision, which is frequently modified. It is important to be upfront with a charter client and advise him or her on the options for the dispute resolution provision prior to signing the contract. The best way to amend the MYBA is by drafting an addendum to be signed at the same time the MYBA is signed. One size does not always fit all. After all, every yacht, every client, and every charter is unique—the charter agreement should reflect that.
Stephanie Klein is an Associate in the Yacht Law department of Robert Allen Law, a full-service boutique law firm with a dynamic practice in the yachting industry. For more information about Stephanie and Robert Allen Law, please visit www.robertallenlaw.com.