Muddying the Water: Incorporation of Arbitration Clauses in Shipping, Reinsurance and Construction Chain Contracts

Abstract

Incorporation of terms is a highly appealing method for the parties involved in commercial transactions. By virtue of incorporation, the contracting parties can create a contractual relationship without drafting very detailed contracts from scratch. Hence, this particular method facilitates the emergence of contracts, which may be extensively comprehensive in context but at the same time modestly brief in length. Incorporation removing the need to spend more money and time than necessary, is a frequently used method specifically by the contracting parties, who are involved in commercial transactions. Incorporation is widely used in shipping, reinsurance and construction as a method facilitating the alignment of contracts. This is because, these areas of law include chain contracts and aligning these constitute a significant issue as to properly determine the borders of the contractual relationships in a multi-layered contractual structure. Incorporation of arbitration clauses reveals itself as one of the most significant points of this particular contract drafting method. This is because, these clauses by their nature would oust the jurisdiction of the courts and would compel the parties to submit their disputes to arbitration. To be able to be heard by a court being a fundamental human right, compelling a third party to a chain contract to go to arbitration would raise some issues regarding the boundaries of this contract drafting method. Some main questions to be answered would be; ‘how far can the incorporation clause go and take a third party to its scope of application?’ and also, ‘what would be the limit of protecting a third party and their right to be heard by a court and so when the incorporation would not be allowed as to include such a third party?’ This research will evaluate the application of the method of incorporation in the indicated branches of law and will analyse the possibility of finding a common ground for the incorporation of arbitration clauses by providing some ground rules to be adopted dealing with this issue.