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19 September 2012
Article 1203 of the Commercial Code establishes the general principle that the resolution of any maritime dispute, including those relating to marine insurance, is subject to arbitration. However, in certain cases, the ordinary civil courts may hear maritime disputes. This includes cases where the parties mutually agree to this - either by including it in the contract from which the dispute originates or by prior written agreement.
Notwithstanding the above, for some time certain lawyers representing cargo interests have attempted to override this principle by filing suit directly before the Chilean ordinary courts. In this respect, the Supreme Court of Justice has recently confirmed the correct interpretation criteria and held that mandatory arbitration applies for shipping disputes.
Local subrogated cargo insurers filed suit before a first instance court in Santiago City against certain liners, for alleged cargo damage in connection to goods lost during transit from Chile to China as a result of a typhoon. The defendants filed a defence based on the court's lack of jurisdiction, as the dispute should have been heard by an arbitrator in light of the rule established by Article 1203 of the Commercial Code. The defence was rejected by the first instance court and the co-defendants appealed. The Santiago Court of Appeal reversed the first instance court decision, confirming that the ordinary courts have no competence over disputes relating to carriage of goods by sea, unless otherwise agreed. The claimants then filed a cassation remedy before the Supreme Court of Justice.
The claimants' main argument was based on an apparent contradiction between Articles 21 and 22 of the Hamburg Rules, certain provisions of the Civil Code relating to law abrogation and Article 1203 of the Commercial Code. Article 21 of the Hamburg Rules allows the plaintiff to institute an action in court which, according to the law of the state in which the court is situated, is competent. Article 22 of the same rules allows the parties to refer disputes to arbitration. In the claimants' view, these provisions prevailed over Article 1203 of the Commercial Code.
The Supreme Court held that there is no contradiction between the Hamburg Rules and Article 1203 of the Commercial Code. According to the court, Chile has given competence to arbitral tribunals in the context of the Hamburg Rules and ordinary courts become competent only when agreed by the parties.
The introduction of the arbitration system for maritime disputes in 1988 was a very positive step. In the absence of specialised maritime courts, local arbitrators have proven to be a pragmatic option for the resolution and fair settlement of local maritime disputes over the years. It is hoped that the Supreme Court decision will prevent further attempts to challenge the competence of arbitration in Chile, which has been duly respected by all local players for a long time.
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