JSE-The Japan Shipping Exchange, Inc.

ORDINARY RULES, SIMPLIFIED RULES AND SCAP RULES - one of the world's fastest

Until the beginning of February 1999, TOMAC had two arbitration rules, i.e. (1) the "Rules of Maritime Arbitration" - typically referred to as the "Ordinary Arbitration Rules" and (2) the "Rules of Simplified Arbitration Procedure Supplement to the Rules of Maritime Arbitration" - typically referred to as the "Simplified Arbitration Rules". Under the Ordinary Arbitration Rules it takes on average 9 months for domestic cases and 13 months for international cases to come to a close. Under the Simplified Arbitration Rules introduced in 1985, it normally takes 3 to 5 months for the arbitrators to give their award. Recently there is a demand for a faster and more cost-effective means for the resolution of small claims. Thus TOMAC made (3) the "Rules of the Small Claims Arbitration Procedure by TOMAC" - typically referred to as the "SCAP Rules" in February 1999. These rules are based on nearly 75 years of practical experience, independently smoothing arbitration procedures by filling in the loopholes of Chapter 8 of the Law Concerning Public Notice Procedure and Arbitration Procedure (the Law of Arbitration).

THE NECESSITY OF ARBITRATION CLAUSES OR AGREEMENTS

When attempting to resolve a dispute through arbitration, there first must be agreement between the parties to that effect. The proof of such an agreement takes the form of arbitration contracts or arbitration clauses contained within a transactional contract.

Moreover, when in addition to language such as "all and any disputes arising out of or in connection with this contract" or "all and any disputes arising out of or in connection with the collision on such and such a date occurring between vessel A and vessel B", a specific reference to "the dispute shall be resolved by arbitration by TOMAC (or JSE)" or "the dispute shall be resolved by arbitration in accordance with the rules of arbitration of TOMAC (or JSE)," is included in the arbitration agreement or clause, either party to the dispute may unilaterally apply for arbitration proceedings to TOMAC and the application will be accepted.

So when drafting arbitration agreements or clauses, in order to make certain of arbitration by TOMAC of The Japan Shipping Exchange, Inc., it is highly recommended to include the phrases "by JSE" or "by TOMAC" in addition to "arbitration held in Tokyo."

In any matter where a dispute has arisen regardless of the existence of a contract and there seems to be too little prospect of settlement discussions leading to an amicable settlement, the parties may well agree to arbitrate their dispute. The agreement which is formed as evidence of the parties' intention to arbitrate constitutes the arbitration agreement. It is recommended that the parties adapt the pre-existing form of TOMAC to their circumstances and draft an appropriate agreement on A4 size paper.

ARBITRATION AGREEMENT (sample)

__________19______

It is hereby mutually agreed between___________________________*1 and ___________________________________*1 for the settlement of any and all disputes arising out of or in connection with _________________________________ *2 that :*3

The disputes shall be submitted to the Tokyo Maritime Arbitration Commission (TOMAC) of The Japan Shipping Exchange, Inc. for arbitration in Tokyo.*4
The arbitration proceedings and all other related matters shall be conducted in accordance with the Rules of Maritime Arbitration of The Japan Shipping Exchange, Inc. (the "TOMAC Rules").
The award given by arbitrators appointed in accordance with the TOMAC Rules shall be final and binding upon the parties.
Other arbitration agreements, if any, with regard to such disputes shall become null and void upon the making of this agreement.

SIMPLIFIED ARBITRATION FOR DISPUTES UNDER YEN 20 Million

Simplified Arbitration may only be selected in cases where the amount of claim does not exceed Yen20,000,000. An application for Simplified Arbitration must be made on the Simplified Arbitration Application Form. The duplicate of the Simplified Arbitration Application Form and accompanying documents will be served on the Respondent by TOMAC, and in case the Respondent agrees to Simplified Arbitration, they will be instructed to file their defence on the Simplified Arbitration Defence Form. If the Respondent file the defence without using the Simplified Arbitration Defence Form, or if the Respondent fails to response at all, the case in question will be treated as an Ordinary Arbitration from the date of the first reference.

SCAP ARBITRATION FOR DISPUTES UNDER YEN 5 Million

The SCAP Rules should be used in principle where neither the claim nor any counterclaim exceeds the sum of Five Million Yen (Yen5,000,000) by agreement between both parties. If the parties do not agree to follow these Rules, the dispute should be decided in accordance with the Ordinary Arbitration Rules.

COMPARISON OF THE THREE PROCEDURES

(1) Application and Defence
An applicant for the Small Claims Arbitration Procedure shall file with the Secretariat of the JSE the Statement of Claim in the Small Claims Arbitration Procedure. When TOMAC acknowledges that the application complies with such requirements of the Rules, it shall accept the application.

The Respondent shall be instructed to file with the Secretariat within 15 days from the day after its despatch a Defence in the Small Claims Arbitration Procedure (same under the Simplified Rules), while under the Ordinary Arbitration Rules 21 days are given to the Respondent.

The Ordinary Arbitration Rules stipulate that in the event of any further supplementary statement and documentary evidence being filed, the procedure of filing shall be repeated. Under the SCAP Rules any supplementary statement should, in principle, be submitted orally to the Arbitrator at the hearing. As for the documents, the SCAP Rules give the Arbitrator the power of requiring the parties to submit any document signed by the parties in connection with the dispute and other documents which the Arbitrator deems necessary or appropriate.

(2)Appointment of an Arbitrator
Under the SCAP Rules, a sole Arbitrator, who has no connection with either of the parties or the matter in dispute, shall be appointed by TOMAC from among persons listed on "the Panel of Arbitrators" within 10 days from the day when the Respondent's Defence was filed or should have been filed, whichever is earlier. Under the Simplified Arbitration Rules uneven number of arbitrators or a sole arbitrator shall be appointed within 10 days.

In the case of Ordinary Arbitration TOMAC Arbitrator Selection Subcommittee selects from "the Panel of Arbitrators" arbitrator candidates appropriate to conduct the proceedings within 14 days, based upon the Subcommittee's understanding of the nature of the arbitration in question. The list of candidates will then be disclosed to the parties so that they may express their preferences in the choice. The Subcommittee selects the arbitrators with due respect for the views of the parties.

(3)Hearing
Under the SCAP Rules the Arbitrator shall convene a hearing, in principle, within 15 days from the day of appointment. There must be only one hearing in the absence of exceptional circumstances. And where the parties agree, the Arbitrator may omit the hearing and decide the dispute. Under the Simplified Rules the Arbitrators shall, in principle, organize hearings separately for each party and then conclude the hearings with both parties sitting together at the final hearing. In the case of Ordinary Arbitration Arbitrators may hold the hearings whenever they think appropriate. Usually three to five hearings are held.

(4)Award
The SCAP Rules have unique stipulations concerning grace period and notarial deed as follows:-

In general, the Claimant must gain a judgment for compulsory execution in order to execute the arbitral award under Japanese law. As is often criticized, court proceedings inclusive of a judgment for compulsory execution tend to take a long time. If the parties agreed on the notarial deed, the Notary Public will give it immediately to the Claimant. Then compulsory execution may be done without any delay.

(5)Foreseeability of the Arbitration Costs

Filing Fee
The Claimant shall, when applying for Small Claims Arbitration, pay to the Secretariat a Filing Fee in the amount of Thirty Thousand Yen (Yen30,000), while under the Ordinary Arbitration Rules or the Simplified Arbitration Rules a Filing Fee is One Hundred Thousand Yen (Yen100,000).

Arbitration Fee
The rate of the Small Claims Arbitration Procedure Fees shall be five percent (5%) of the amount of the claim and the counter-claim, if any, but not less than Seventy Thousand Yen (Yen70,000). Under the Ordinary Arbitration Rules the minimum Arbitration Fee is Nine Hundred Thousand Yen (Yen900,000), and under the Simplified Arbitration Rules Six Hundred Thousand Yen (Yen600,000).

The costs of arbitration shall be paid from the Arbitration Fee paid to the Secretariat and the remuneration for the arbitrator shall also be paid out of the Arbitration Fee as is the same under the other two Rules. TOMAC arbitration basically impose no further financial burden on the parties. TOMAC Arbitrators perform their duties as public services to the industries concerned, not as private business.

DOCUMENTARY EVIDENCE TO BE MARKED WITH EXHIBIT NUMBERS

In TOMAC Arbitration, the parties must include serial exhibit numbers on all supporting submissions to TOMAC. This includes argumentative briefs filed by the parties in order to support the application for arbitration, defences and supplementary statements, etc. Where the dispute is over a contract, the first exhibit number should be assigned to the contract in question.

In the case of a dispute which does not involve a contract, such as a claim for damages resulting from a collision of ships, the first exhibit number should be assigned to the documents which prove the collision. In this manner, statements of claim may refer to already numbered evidence and this improves efficiency.

There is no requirement under Japanese law or TOMAC Rules that an attorney at law participates in the arbitration. It may be advisable, however, that in order to facilitate proceedings foreign or distant parties appoint an attorney in Japan.

PRESERVING CREDITOR RIGHTS IN ARBITRATION

Maritime arbitration has a unique method of preserving creditor's rights. The creditor's rights are preserved by the posting of a bond in exchange for the release of the offending vessel which has been attached. Bonds need not only be in cash. A paying party may submit to their bank a payment bond contract, or an insurer may issue a payment order to the creditor on behalf of the debtor.

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