When an international dispute arises out of a maritime contract or incident such as a collision, it is necessary to consider at the outset which law applies to the dispute, which tribunal has jurisdiction to determine the dispute on its merits, whether there is any time bar and whether the claimant can obtain security for its claim. Many maritime contracts contain express governing law and jurisdiction clauses.
In order to advise a party on their rights and obligations in any situation it is necessary to establish which law governs those rights and obligations. Whether a contract is governed by one law rather than another may mean the difference between total success by the claimant or total defeat if, for example, one law does not recognise a cause of action or provides the defendant with a complete defence, whereas the other does recognise a cause of action and there is no defence.
The issue of jurisdiction may be of great tactical significance as there may be more than one court which has jurisdiction to determine the dispute and then the claimant must make sure that it commences proceedings in the jurisdiction which is most advantageous to it. In maritime disputes there are a number of reasons why one jurisdiction may be more favourable to one party than the other. For example, different limits of liability for a cargo claim may apply in different jurisdictions depending on whether the Hague, Hague–Visby or Hamburg Rules apply. Also, different tonnage limits may apply depending on which convention on tonnage limitation, if any, applies.
If one jurisdiction is more advantageous to one party, the other party would probably prefer to litigate in the other available jurisdiction and this may create a race between the parties to commence proceedings in the jurisdiction of their choice first.
If the arbitration award or judgment that a party would obtain in one jurisdiction is significantly different from that which the other party would be liable for elsewhere, it may be very difficult to settle the case until the issue of jurisdiction has been resolved.
It is of critical importance to commence proceedings in the correct jurisdiction against the correct party within any time limit. Many maritime disputes are subject to relatively short time limits. For example, the Hague, Hague–Visby or Hamburg Rules may apply to a bill of lading or may be incorporated voluntarily into a charterparty and they have a one- and two- year time bar respectively. If the bill of lading provides for London arbitration and the Hague–Visby Rules apply mandatorily, the cargo receiver must identify the carrier and commence arbitration proceedings in London within the one- year time limit, otherwise the carrier is discharged from all liability.
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