Applying International Alternative Dispute Resolution

in resolving differences within the Philippine Maritime Industry

The maritime industry is one of the oldest industries of mankind. It encompasses all businesses
done by sea; from passenger ships, cargo and logistics and even leisure cruises.
Passenger ships and Cruise lines have been ferrying tourists and passengers by the millions
annually. Sea trade dominates all form of cargo shipment throughout the world. Majority of the things
that we buy and use comes from the global trade. The vastness of the sea trade is can be summed up by
the words UN Secretary General Ban Ki Moon statin: that more than 500 million maritime containers
move around the world each year, accounting for 90 per cent of international trade. 1
The Maritime Industry requires vast amount of resources, these includes but not limited to
financial, structural and manpower resources. The Philippines is one of the major contributors in the
maritime industry. From Manning, Dry Docks, Cargo etc. we are contributing in a large scale.

The Philippine Maritime Industry

The Philippines as an archipelagic country possesses the vast amount of resources it needs to
have a large maritime industry, namely the people, the real estate,infrastructure, investors and the goods.
One of the primary building block of such industry are the people who have the necessary skills in the
maritime industry. The country’s maritime industry is comprised mainly of providing the brains and
brawns of the maritime industry. They are known for their dedication, skills and proficiency in English.
The Department of Labor and Employment (DOLE) have reported that the Filipinos comprised
the “single biggest nationality bloc” of the mariners working all around the world, comprising of more
than 25 percent of the 1.5 million mariners worldwide.2 The mariners have brought in a total of 6 Billion
Dollars of remittances in the country in 2015.3
Statistical data from the POEA shows that in 2015 there are 406,531 seabased Overseas Filipino
Workers4, notwithstanding the other areas that work closely related to the maritime industry.5
The positions they occupy are varied, which includes deck and engine officers and employees,
occupying positions from the Captain up to the messman. The Filipinos are not just limited in the
shipping area, but they also work in the hospitality area of the maritime industry, such as Cooks, Waiters
and Entertainers. Filipinos are found in various areas of the maritime industry and oftentimes encounter a
number of problems and dispute within the industry.

Disputes encountered by the Philippine Maritime Industry.

The Philippine Maritime Industry is one of the top industries with huge potentials both locally
and abroad, but it faces difficulties arising from dispute strains.
As one of the biggest exporter of manpower in the Maritime Industry, the workers have
encountered various problems in numerous areas. There have been disputes arising from agreements or
contracts between the Shipping Company and the Logistics Company and between the Principal6 and the
Manning Agency. But majority of the dispute arises between the seafarers and the Manning Agency.
The most common causes of disputes arises from the contracts between parties, such as breach of
contract (eg. selling of the vessel, repatriation) and differences in the interpretation of contract (eg.

1 https://www.un.org/sg/en/content/sg/statement/2012-11-19/secretary-generals-remarks-security-council-debate-maritime-
piracy
2 William Dipasupil, (2016). Filipino Seafarers top choice. The Manila Times
3 Ibid
4 http://www.poea.gov.ph/ofwstat/compendium/2015.pdf
5 These includes but not limited to Manning Agencies, Logistics Companies and Shipping Lines.
6 Principal is the term used for the shipping company or ship owners.
benefits, whether or not the injury is considered permanent or partial disability). The differences can be
settled through the use of Alternative Dispute Resolution as opposed to litigation. But what is Alternative
Dispute Resolution (ADR)?

Alternative Dispute Resolution (ADR)

ADR is defined as “Any method of resolving disputes without litigation.”7 It is a recognized form
of disputes resolution made by the parties outside the court. It can be with or without the help of an
independent third party.
The Philippines ADR Act of 2004 adopted the UNCITRAL Model Law on Commercial
Arbitration a model law for the coherent and uniform basis for arbitration. In it the Alternative Dispute
Resolution was defined as:
“…any process or procedure used to resolve a dispute or controversy, other than by
adjudication of a presiding judge of a court or an officer of a government agency, as
defined in this Act, in which a neutral third party participates to assist in the resolution
of issues, which includes arbitration, mediation, conciliation, early neutral evaluation,
mini-trial, or any combination thereof”8

The utter lack of knowledge about ADR combined with ambulance chasing practitioners, often
lead Filipinos to litigation. The players within the maritime industry should acknowledge the benefit of
ADR as a way of resolving disputes. So what are the forms of ADR that the Philippine Maritime Industry
may use to resolve disputes?

Common Types of ADR

Experts in the field have enumerated the various ways of ADR, the following but are not limited
to the listed: Negotiation, Inquiry and Fact finding, Mediation, Good Offices, Conciliation and
Arbitration. 9
Negotiation involves the discussion of the parties among themselves of the disputes. A third party
can be included but his function is limited to advisory.
Inquiry and Fact Finding is used when the dispute arises from a difference of opinion on points
of fact. A third party initiates an elucidation of the facts thru an impartial and conscientious
investigation.10
Mediation happens when a third party offers his services to settle the dispute. Meanwhile
Conciliation happens when the parties submits the dispute to a third party to settle the conflict. Both
Mediation and Conciliation are non-binding form of ADR and the third party acts as advisory functions.
Good Offices as a form of ADR exist when there is a severance of the communication channels.
A third party serves as a channel for the disputing parties to talk.
Arbitration happens when the parties submit the dispute to a third party for a binding and final
resolution.

Application of ADR in the Maritime Industry dispute

An enumeration of the common types of dispute settlement have already been given but from the
aforementioned ADR forms we are only focusing on three methods which are highly applicable in settling
the disputes in the Maritime industry namely; Mediation, Conciliation and Arbitration.
The aforementioned three ADR forms are regarded as the most commonly used dispute
settlement mainly due to the adoption of a uniform and accepted framework and the availability of the
institutions to guide them through the process.

7 Definition provided by the Cornell Law School: Legal Information Institute

8 Alternative Dispute Resolution Act of 2004 (Republic Act 9285)
9 Atty. Everrose Higuit Lecture
10 Article 37 of the 1907 Convention for the Pacific Settlement of International Disputes
Mediation and Conciliation
Mediation and Arbitration are voluntary forms of ADR in which a third party either offers their
services or the disputing parties seek a third party to resolve the dispute. Philippine ADR law defines
Mediation as the:
"…voluntary process in which a mediator, selected by the disputing parties, facilitates
communication and negotiation, and assist the parties in reaching a voluntary
agreement regarding a dispute.” 11
Mediation and Conciliation starts with the volunteered or invited third party to initiate a
discussion by the disputing parties. The third party assists the parties in identifying the problem areas,
how to overcome them and assist the disputing parties to reach an acceptable settlement.
Such process is non-binding but possesses persuasive effects. Thus in the event that the disputing
parties have not entered into an acceptable compromise, the law provides that everything that was
discussed and presented in the proceedings cannot be used in litigations. The discussions are guided by
the principle of non-discloure that the proceedings, including the records evidences and arbitral awards,
are considered confidential unless otherwise agreed by the parties. Thus it cannot be published or made to
be known to the public without the consent of the parties.

Arbitration
Arbitration is the best form of ADR in Dispute Settlement. The Philippines have adopted the
UNCITRAL Model Law for International Commercial Arbitration as part of their national law and it
defines arbitration as the:
"…voluntary dispute resolution process in which one or more arbitrators, appointed in
accordance with the agreement of the parties, or rules promulgated pursuant to this
Act, resolve a dispute by rendering an award.” 12
Arbitration starts with the disputing parties consent to undergo arbitration. It can be in the form of
arbitration clause in the contract which states that in the event of a dispute the parties shall submit it to an
arbitral tribunal. The consent may also be in the form of Arbitration Agreement wherein the disputing
parties declare in a written instrument their desire to submit the dispute to an arbitral tribunal.
After giving its consent the parties may choose the arbitration panel based on their stipulations. It
can be composed of any number of arbitrators, but the UNCITRAL Model Law states that in the absence
of such stipulation the default number is three.
The disputing parties then will present their statement of claims (for the claimant) or statement of
defense (for the defendant). The parties are free to pick their representative or they may represent
themselves. Presentation of Evidences and then the panel decides based on merit. The Arbitration Panel
hands down an award. The binding force of the award is best summed up by the 1907 C onvention for
the Pacific Settlement of Disputes which states that:
“Recourse to Arbitration implies an engagement to submit in good faith to the award”.13

ADR as a method for resolving differences has its pros and cons. A better understanding of its benefits
and pitfalls makes the application of ADR more effective. So, what are the advantages and disadvantages
of ADR?
Advantages and Disadvantage of ADR
ADR is based on the principle of Voluntariness, Integrity in the Process (Seeking a Win-win)
Solution and Confidentiality.14 Its aim is to provide an avenue to address the issue without having to

11 Ibid
12 Ibid
13 Ibid
undergo litigation together with corresponding consequence. Identifying its pros and cons helps in
allowing thew person to choose whether or not to undergo ADR or litigation for dispute settlement.

Advantages ADR
The disputes within the Philippine maritime industry have cost a lot in terms of monetary value,
trade relations and employer-employee relations. Reports have been made that there have been
blacklisting of shipping and manning companies in the country and even blacklisting of crews by the
manning agencies.
Applying ADR in disputes in the maritime industry is a speedy and cost effective way of dealing
with these difficulties. The aim is to avoid lengthy litigations which often causes strains in the pocket and
the relations among the parties at dispute.
An example was given by HBR where Chevron, in one instance wherein the ADR saved
them time undergoing litigation in court for at least 3 to 5 years and saving themselves in the
process 3 Million Dollars15.
What is material in ADR is that its principles are observed otherwise it becomes a futile process wherein
one of the parties uses it as an instrument to force their way. An effective use of ADR entails a dispute
resolution that is cost effective, time saving and it saves the relations between the disputing parties.

Disadvantages of ADR
ADR only works when its basic principles are observed. Any violation of the principle ends up
destroying the very essence of ADR and hence it becomes disadvantageous to the parties at dispute.
One of the most common problems of ADR is the dissatisfaction of one party to the end result of
ADR, which ends up in litigation. Such problem arises when one the parties is in bad faith in entering
such process.
Another problem arises when the principles are violated is that the process would just become a
litigation in disguise16. Improper use of ADR often ends in one party having its way instead of being a
fair dispute resolution. Such result ends with ADR being dragging and costly17.
Realistically ADR is prone to abuses by the practitioners but proper knowledge of the process by
the parties ensures that such misuses are prevented from happening.

Future of ADR
“Most lawyers—and hence the companies they serve—still view ADR as the alternative rather than the primary or
preferred method of settling disputes. (Carver, 1994)”18
The main objective of ADR is to save the relations of the disputing parties by seeking an
acceptable settlement between the parties ADR is a dispute resolution with the “Win-Win” solution is
what is in the minds of the parties. Otherwise, if winning is the sole objective of the parties, The main
objective of ADR is to save the relations of the disputing parties by seeking an acceptable settlement
between the parties. Records show that it does not only save the relations between the disputing parties
but it can improve it as well. ADR as a dispute settlement has a huge potential to be used in solving
disputes within the Maritime Industry while helping it to grow.

14
Ibid
15 Todd B. Carver, A. A. (1994 ). Alternative Dispute Resolution: Why It Doesn’t Work and Why It Does. Harvard Business
Review.
16 Ibid
17 Ibid
18
Ibid