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Even in cases where a liability is admitted, the very failure to make payment will still constitute a “dispute” which enables arbitrators to decide on a matter and publish an arbitration award. The agreement to arbitrate cannot be avoided by simply admitting liability. The choice of law/jurisdiction clauses in C/Ps invariably stipulate that “any dispute” or “all disputes” under the C/P shall be referred to arbitration (often in either London or New York). This therefore requires that there is in fact a “dispute” between the parties, and in arbitration law this is sometimes referred to as the need for “arbitrability” (i.e. that in order for something to be arbitrated, there must be a dispute). This has, from time to time, resulted in a debtor trying to avoid enforcement by simply acknowledging the debt but, at the same time, going on to say that since the debt is acknowledged there is no “dispute” and therefore no dispute to be arbitrated (leading, in the debtor’s conclusion, to the result that there should then be no arbitration award which can then be enforced against the debtor and most likely forcing the creditor to commence perhaps costly and protracted litigation in a local court). This line of thinking has recently been tested once again ((2006) 692 LMLN 1). This most recent case concerned an owners’ claim for demurrage and following the usual payment demands, the charterers simply responded that they admitted that owners were entitled to the demurrage claimed (and also added that payment could be made in either instalments or in a lump sum at a later date). This did not satisfy owners who appointed an arbitrator (and rejected the payment proposal). The charterers paid a smaller part of the demurrage invoice but leaving an outstanding unpaid amount of approx. USD 130,000, and no further payments were made. The issue which now had to be decided was whether there was “any dispute” between the parties which would enable the arbitrator to have jurisdiction and the
When do you have a “dispute” under a C/P?
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