For the most part, petroleum cargo disputes such as shortages and contamination claims are resolved in one of three fashions, i.e. litigation, arbitration or a compromise by the parties resulting in, at least in theory, a reasonable commercial settlement of all disputes. Of the three means of resolution, the last, which is at times a product of the first two, is by far the most utilized manner in which petroleum cargo claims are ultimately resolved. This is especially true due to the ever increasing costs associated with litigation and arbitration. As a result, the reported legal decisions and arbitration awards, which only represent a meager percentage of all disputes, have an enormous impact, for better or worse, on the proper analysis and successful resolution of the overwhelming majority of controversies that are settled outright with or without the assistance of attorneys. Therefore, the purpose of this discussion is to explain briefly the various procedural and substantive variations associated with the litigation and arbitration forums and how these distinctive features, respectively, can affect the outcome of a petroleum cargo dispute.

Of the three means of resolving petroleum cargo disputes, the litigation process to date has been the least likely manner of ultimately resolving a petroleum cargo dispute. With the widespread use of arbitration clauses in charter-parties, the legal system has produced no more than approximately seven reported decisions which have decided some aspect of a petroleum shortage dispute. The reported cases pertaining to petroleum contaminations are even fewer. In fact, New York arbitration panels will decide more petroleum cargo disputes in any six-month period than all the courts in the United States will decide in a six-year period.

With the increasing litigation costs, time consuming pre-trial procedures particular to cargo actions which normally involve multi-parties, i.e. shippers, consignees, time charterers-disponent carriers and shipowners, plus the normal court delays, litigation of petroleum claims rarely results in a reported legal decision. Generally speaking, the final legal resolution of petroleum cargo disputes results in a commercial settlement, as