The London Maritime Arbitrators Association (LMAA) recently released the LMAA Terms 2017. Steamship Mutual has notified its members of the terms that will apply to proceedings from May 1st 2017 on. Jeff Cox, Syndicate Associate Eastern Syndicate, provided an article for the club to inform members of the changes since the 2012 review.
The Club noted that revisions had also been made to the LMAA Small Claims Procedure (SCP) with a noteworthy change being an increase to the recommended SCP limit to US$100,000. The LMAA Intermediate Claims Procedure (ICP) has also been refreshed.
Mr Cox observed that the LMAA terms were generally revisited every five or so years and that, when this was done, there was always “a balancing act” between the need to address ongoing concerns over costs and efficiency and the risk of generating adverse effects on what was “demonstrably a popular forum of dispute resolution”.
The LMAA said that when it was reviewing the terms it noted that there was a need to maintain flexibility and autonomy for the parties within the existing procedures to suit a particular case and a recognition of an element of “if it ain’t broke, don’t fix it”. Steamship Mutual observed that, while this could be characterized as a cautious approach, there were a number of key revisions in the new terms.
1) For the constitution of an arbitral tribunal, paragraphs 10 and 11 provide for an arbitrator appointed by a party to become sole arbitrator where the other party fails to appoint, or, where the parties have failed to comply with an arbitration agreement for the appointment of a sole arbitrator, for the appointment by the President of the LMAA. This compares with the 2012 Terms where, in this situation, an application to court for the appointment of an arbitrator would have been necessary, unless otherwise agreed.
2) Disputes involving a number of arbitrations, commonly found with charterparty chains, can bring their own difficulties and parties will still have to rely on the powers of the tribunal in relation to chain arbitrations, unless the parties are able to agree on a suitable mechanism for consolidation.
When arbitration proceedings are run concurrently to avoid inconsistent conclusions, and to deal with the inherent delays where submissions are being passed up and down the line with minimal amendments, paragraph 16(b) (i) now gives an express power to the tribunal to shorten or otherwise modify the usual time limits.
3) For matters proceeding to a hearing, there is enhanced discretion for the tribunal to order security for its own costs, together with a requirement for the tribunal to provide advance notice and transparency of its own fees. There is now also the possibility for interim billing to be adopted to encourage an ongoing focus on costs.
4) To attempt to avoid excessive rounds of pleadings, the Second Schedule of the LMAA Terms 2017 expressly provides that where parties wish to serve submissions beyond the stage of reply (or reply to counterclaim if applicable) they must obtain the tribunal’s permission.
5) Paragraph 11 of the Second Schedule mirrors previous guidance and enables the tribunal to give directions following the exchange of questionnaires if the parties have not been able to reach an agreement between themselves within 21 days.
6) Paragraph 13 underlines best practice in relation to the need for parties and tribunals to consider how to make arbitration as cost-effective as possible, with particular reference the LMAA Checklist as found in the Fourth Schedule.
7) Paragraph 19(b) sets out clearly that in dealing with costs, a tribunal may take account of unreasonable conduct, including failure to comply with the LMAA Checklist. Mr Cox said that this appeared to be a measure aimed at tackling escalating costs and addressing criticism of how parties and their representatives conduct proceedings. The paragraph also expressly confirms that the Part 36 regime, in the sense of the entire machinery for protective costs offers as set out in the Civil Procedure Rules, does not apply to arbitration under LMAA Rules and that the tribunal’s discretion is not to be fettered by the factors set out within paragraph 19(b).
8) Mr Cox observed that, while interlocutory directions and applications played an important part in the progress of an arbitration, at times they can become “fertile ground for aggressive correspondence, additional time being spent by the tribunal in considering the issues with the result that unnecessary costs may be incurred by the parties”. Paragraph 21 clarifies that where the parties agree directions between themselves and wish them to be deemed to take effect as if by an order of the tribunal, the tribunal must then be notified for it to have the desired effect, as per section 41 of the Arbitration Act.
9) The Third Schedule of the LMAA terms 2017 sets out the regime for the LMAA Questionnaire. Previous guidance is now incorporated to underline as far as possible the importance of the LMAA Questionnaire in terms of case management and focusing the attention of parties and their advisors on how the arbitration is to progress.
10) The LMAA Checklist, containing guidelines on the efficient conduct of arbitration, is now to be found incorporated in a Fourth Schedule. This serves to draw attention to its contents and highlights its importance, in terms of good practice, such as how to treat strings of e-mails within bundles, and also to the potential costs consequences of failing to comply.
11) Small Claims Procedure
The financial limit for the SCP 2017 has been raised to US$100,000, unless the parties have otherwise agreed. Mr Cox noted that, even before the introduction of the 2017 terms, “it was not uncommon to see an arbitration agreement with limits set above that figure” . He noted that the level of complexity and number of issues in dispute could test the appropriateness of the SCP framework. There is a mechanism to deal with such complex matters instead under either the LMAA Terms 2017 or ICP 2017 where that would be more appropriate and if that occurs, it is made clear that if the parties agree, the original tribunal would retain its jurisdiction over the dispute.
12) The procedure for submissions – whether served in support of the parties claim or defence or reply submissions – has been clarified. Parties unable to comply may be requested to re-submit letters of submission in a more appropriate form.
13) Intermediate Claims Procedure
The 2017 revision is an opportunity for parties to revisit the suitability of ICP terms for medium-size claims that require a more detailed procedure than the SCP; but where the full LMAA terms may not necessarily be proportionate. The parties are
free to agree the financial limits to apply to this procedure, although the suggested upper limit of US$400,000 remains.
For parties who wish to take advantage of the ICP, it should be noted that this had been removed from the BIMCO London arbitration clause and so amendment to the standard clause would be necessary.
14) Mr Cox concluded that, whilst the majority of these amendments would be unlikely to result in a substantial change in how LMAA arbitrations work in practice, “it is to be hoped the greater guidance on cost control will result in enhanced efficiency and cost-effectiveness whether or not a matter settles, or has to proceed to an award”.
Full details, including notes of the 2017 terms, and a tracked changes comparison with the 2012 terms can be found at http://www.lmaa.london/news-article.aspx https://www.steamshipmutual.com/publications/Articles/2017lmaa.htm