The LMAA Terms revised – LMAA Terms 2017
The London Maritime Arbitrators Association (“LMAA”) has recently published a revised version of its terms of procedure that will become effective in respect of all appointments made on or after 1 May 2017. A revised version of the LMAA Small Claims Procedure (“SCP”) and the LMAA Intermediate Claims Procedure (“ICP”) is now also being circulated.
The 2017 Terms were prepared by a sub-committee of experienced arbitrators under the chairmanship of David Owen QC and following extensive consultation with users. The new set of Terms is designed to meet needs that have become apparent since the Terms were last reviewed in 2012. It is hoped that the revised Terms will streamline the LMAA procedures currently in place and will have a beneficial effect in speeding up proceedings and in keeping costs down.
Key changes in the 2017 Terms include the following:
Default appointment and constitution of the Tribunal
- Where the arbitration agreement provides that the Tribunal is to consist of three arbitrators (paragraph 8) or two arbitrators and an umpire (paragraph 9) but one of the parties fails or refuses to appoint an arbitrator, the default appointment procedure set out in S.17 of the Arbitration Act 1996 (“the 1996 Act”) is now expressly incorporated under new paragraph 10 and will apply where there is no other agreed mechanism for default appointment by the parties. So the familiar ability under the 1996 Act to appoint an arbitrator as sole arbitrator in case of default now applies expressly where the new Terms apply.
- A new paragraph 11 has been inserted to fill the gap for default appointment where the arbitration agreement provides for a sole arbitrator. The Terms are now brought in line with a similar provision under the SCP (para 2(b)) and provide for the appointment of a sole arbitrator to be made by the President of the LMAA. This provision replaces the procedure under S.18 of the 1996 Act, which provides that such appointments must be made by the High Court. Although, under the new procedure, there is a fixed appointment fee payable to the LMAA, the overall cost of the appointment will be significantly lower compared to the cost of a court application.
- The sub-committee considered whether provision should be made giving power to the Tribunal to consolidate arbitration proceedings. It decided not to. The question of whether arbitral tribunals should have statutory powers to make orders for consolidated hearings in arbitration has long been controversial. The benefit of such powers would be to avoid inconsistent findings and the unnecessary time and expense involved in holding separate proceedings. On the other hand, giving the Tribunal the power to order the consolidation of arbitration hearings might be seen as negating party autonomy and frustrating the parties’ agreement to have their own tribunal for their own disputes. Taking the decision away from the parties might also result in London arbitration becoming a less attractive option for international commercial arbitration.
First Schedule – Security for the Tribunal’s costs
- The First Schedule remains largely unamended, except for a number of changes introduced in respect of security for the Tribunal’s costs. In particular, under the revised Terms:(a) the Tribunal’s power to request security for its costs can explicitly be exercised at any time it considers appropriate to do so (but no less than 21 days before the start of the hearing) (see paragraph (E)(1)). The inference is that more than one request can be made during the course of an arbitration;(b) if security is not provided by the party directed to provide it within the set time frame, the Tribunal now has power to suspend its work as well as the existing power to vacate hearing dates (paragraph (E )(3));
(c) the Tribunal has discretion to decide which party should provide security for its costs. Previously, the Tribunal’s request for security was addressed to the party requesting a hearing. The Tribunal now has discretion as to whom to ask. The Tribunal enjoys a similar discretion regarding the party to be invoiced for booking fees under Section (D)(1)(a).
d) More importantly, if the parties fail to comply with an order for security for costs, the Tribunal has explicit power to issue a peremptory order. Non-compliance with such an order gives the Tribunal explicit power to dismiss that party’s case (paragraph E(8)). The Tribunal already has this power under the 1996 Act (S.41), but this is now made explicit under the Terms.
- A number of amendments have been made under the Second Schedule which deals with issues of procedure. The most notable changes include the following:(a) Procedural Directions
- New sub-paragraph 21 gives the Tribunal power to make procedural directions in respect of the future conduct of proceedings if the parties fail to reach an agreement on directions within 21 days following the exchange of Questionnaires. This is an important change in respect of the arbitral timetable, which otherwise remains essentially as before.(b) Exclusion of Part 36 procedure
- When dealing with liability for costs, the Tribunal can also take into account the parties’ costs estimates provided in their Questionnaires and any “without prejudice save as to costs” offers (aka sealed offers) (paragraph 19(b)).
However, a clear distinction is now drawn between sealed offers and Part 36 offers. The new Terms clearly state that the English High Court regime applicable to Part 36 offers does not apply to LMAA arbitrations. Parties in London arbitrations often align sealed offers with Part 36 offers, aiming to be awarded increased interest or costs on an indemnity basis. An English arbitral tribunal is often guided by the CPR when exercising its discretion in relation to costs when considering a sealed offer. It appears that this will no longer be the case in light of the new LMAA amendment. However, the amended Terms provide no guidance as to the applicable practice when awarding costs following a sealed offer, leaving costs issues to be dealt with at the discretion of the Tribunal. So it remains to be seen how tribunals will handle sealed offers when it comes to awarding costs.
Fourth Schedule – Checklist
- The Checklist formerly set out as part of Schedule 3 in the 2006 Terms was removed by the 2012 Terms. It was then published on the LMAA website separately in a revised form as an advisory document focusing on the most effective way of presenting a case to the Tribunal. The Checklist is now being reintroduced in the LMAA Terms as Schedule 4. The Checklist offers important guidance as to how to conduct arbitration proceedings more efficiently and cost-effectively. The need was possibly borne out by the fact that, by removing the Checklist from the main body of the Terms, the parties paid little or no attention to the Checklist guidelines. A failure to comply with the Checklist may be penalised in costs (see paragraph 19(c) of Schedule 2).
The Small Claims Procedure (“SCP”)
- One of several important changes in the revised Terms is the introduction of a monetary limit in the recommended limit for the application of the LMAA SCP to US$100,000, in the absence of an agreed limit by the parties. The limit applies separately for claims and counterclaims (paragraph 1(a)). So for the SCP to apply, both the claim and any counterclaim must be US$ 100,000 or less.
- The new SCP Terms give power to the Arbitrator to retain jurisdiction in the following circumstances: (a) where the counterclaim exceeds the small claims limit of US$100,000, and the parties decide that the claim and counterclaim be dealt with either under the standard LMAA procedure or under the ICP (paragraph 1(b)), and (b) if there is a departure from the SCP because of the nature or weight of the case and the dispute proceeds under the LMAA Terms 2017 or under ICP 2017. In the latter scenario, the Arbitrator may also retain the Small Claims Fee as payment on account of his fees for work carried out in relation to the reference (paragraph 9 (b) – (d)).
The Intermediate Claims Procedure (“ICP”)
- The sub-committee has made only minor changes to the ICP, aimed at clarifying and simplifying the procedure. In line with a similar SCP provision, arbitrators are now given power to dismiss the claim in the event that the claimant fails to serve claim submissions in a timely manner (paragraph 12). As regards costs, these will be assessed only on a “commercial” basis. Finally, the provisions regarding concurrent hearings have been brought in line with the standard LMAA procedure (paragraph 18).