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The 2017 LMAA Arbitration Rules released

    The London Maritime Arbitrators Association (¡°LMAA¡±) has recently published a revised version of its terms of procedure which will become effective in respect of all appointments made on or after 1st 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 new set of Terms is designed to meet needs that have become apparent since the Terms were last reviewed in 2012. 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. It is hoped that the revised Terms will streamline the LMAA procedures in place and will have a beneficial effect in speeding up proceedings and in keeping costs down. 

    The purpose of this article is to set out the key changes introduced by the new Terms.

    The LMAA Terms 2017 (Standard Procedure)

    S.17 of the Arbitration Act 1996 (¡°the 1996 Act¡±) is now expressly incorporated under new paragraph 10 under which an arbitrator appointed by one party can become a sole arbitrator where the other party has failed to appoint an arbitrator.

    New paragraph 11 deals with the parties¡¯ failure to agree to appoint a sole arbitrator. The Terms are now brought in line with a similar provision under the SCP and provide for the appointment to be effected by the President of the LMAA. 

    With regard to concurrent proceedings, paragraph 16(b)(i) confers on the Tribunal discretion to abbreviate or modify time limits for service of submissions. However, no power is provided to the Tribunal to consolidate arbitration proceedings.

    The First Schedule ? Security for the Tribunal¡¯s Costs

    The First Schedule remains largely unamended, save that pursuant to paragraph (E) it is now open to the Tribunal to request security for costs whenever it considers appropriate to do so but no less than 21 days before the start of the hearing (see paragraph (E)(1)).

    The Tribunal to provide its total estimated costs no later than 28 days before the security is due to be posted (Paragraph (E)(2)). If security is not provided in time, the Tribunal has power to suspend work and vacate hearing dates (or refrain from reading documents/drafting in case of a documents only arbitration (Paragraph (E )(3)).

    Under paragraph E(3) the Tribunal has discretion to decide which party should provide security for the Tribunal¡¯s costs. The Tribunal enjoys a similar discretion regarding the party to be invoiced for booking fees under Section (D)(1)(a).

    The Tribunal may issue a peremptory order in the event of the parties¡¯ failure to comply with an order as to security for costs (paragraph E(8)). Non-compliance with the Tribunal¡¯s peremptory order may lead to dismissal of the Claimant¡¯s claim.

    The Second Schedule ? Arbitration Procedure

    A number of amendments have been made in this Schedule, the most significant of which we summarise below:

    Para (1)(c) now makes it explicit that supporting documentation must be provided to the other parties involved. This does not change the current practice but is now made clearer in the new Terms presumably to serve as an aide-memoire and promote compliance.

    The pleadings stage is considered closed following service of the reply submissions, unless express permission is granted by the Tribunal to serve further submissions. We surmise that this new stipulation under paragraph 5, is designed to avoid an unnecessary proliferation of submissions and to keep the procedure under close control to avoid delays.

    Under paragraph 7, a party may include in his application for costs security a provision for the Tribunal¡¯s costs where these have already been paid to the Tribunal by the party seeking security for costs or in relation to Tribunal costs already secured by the party seeking security.

    The completion of the Questionnaire, after the submissions stage has closed, is dealt with under paragraph 11. New sub-paragraph (b) now contains a notable change to the effect that the Tribunal is given power to make procedural directions in respect of the future conduct of proceedings after allowing the parties a period of 21 days following exchange of Questionnaires to agree on directions. This is a significant change in respect of the arbitral timetable which otherwise remains essentially as before.

    To encourage the parties to become pro-active and adopt a cost-effective and efficient procedure, the sub-committee has introduced, under paragraph 13, an express obligation to that effect and urges the parties to consider LMAA Checklist guidelines (now incorporated as Schedule 4).

    The Tribunal will be entitled to take into account the parties¡¯ unreasonable or inefficient conduct and penalise them on costs for failing to comply with the Checklist. The parties¡¯ costs estimates provided in their respective Questionnaires and their ¡°without prejudice save as to costs¡± offers (aka sealed offers) will also be taken into account (Paragraph 19(b)) by the Tribunal when dealing with costs. However, a clear distinction is now drawn between sealed offers and Part 36 offers by clearly stating that the English High Court regime applicable to Part 36 offers does not apply to LMAA arbitration.

    To prevent undue delays, paragraph 20 now provides for parties to give prompt notice of appointment of their legal or other representative. Such appointments are no longer valid ground for delaying the arbitration process or to obtain an adjournment unless there are exceptional circumstances.

    Where the parties agree that an order or direction agreed between them is deemed to be an order/direction of the Tribunal, they must now take steps to notify the Tribunal of such an agreement (see paragraph 21).

   Finally, the parties are at liberty to apply for directions other than those provided in Schedule 2 but this is subject to making an application to the Tribunal and explaining why a different course should be adopted.

    The Third Schedule ? LMAA Questionnaire

    No major changes have been made to the Questionnaire save that the Questionnaire now requires the parties to identify issues which will be addressed by witness and expert evidence and consider the need to involve an interpreter. The Questionnaire now also incorporates an introductory note emphasising the importance of completing the Questionnaire and guidelines as to how to do so correctly and efficiently.

    The 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 the 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 at all to the Checklist guidelines. A failure to comply with the Checklist may be penalised in costs (see paragraph 19(c) of Schedule 2).

    The Checklist has been revised and includes guidance regarding the preparation of hearing bundles (avoid duplication of emails in bundles, and for core bundles to have the same numbering as the main sequence pages) and witness statements (consider the need to retain an interpreter).

    The Fifth Schedule ? The Reconstitution of the Tribunal

    This remains as before, save that it was previously appended to the Fourth Schedule and has now been moved to the Fifth Schedule.

    The Small Claims Procedure 2017 (¡°SCP¡±)

    One of several important changes in the revised LMAA Terms is an increase 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 (see paragraph 1(a)).

    Where the counterclaim exceeds the small claims limit of US$100,000, it is open to the parties to demand that the claim and counterclaim be dealt with either under the standard LMAA procedure or under the ICP. If the parties agree, the appointed arbitrator under the SCP may retain jurisdiction (see paragraph 1(b)).

    The commencement of arbitration under the SCP interrupts any applicable time limit (paragraph 1(c)).

    On the procedure side, there has been some tidying up regarding letters of submission under paragraph 5:

    As regards the applicable word limit to a letter of defence and counterclaim, the counterclaim must arise independently of the claim; 

    Additional evidence or supporting documents may only be included with a letter of reply or reply to defence to counterclaim; 

    It is open to the Arbitrator to reject letters of submission which are not compliant and request that these be re-submitted in an appropriate form;

    Paragraph 5(g) confers on the arbitrator a discretion whether or not to dismiss a claim where there is failure to serve a letter of claim in time. A decision will now be made on a case by case basis depending on the circumstances.

    Paragraph 9 now gives the Arbitrator power to retain jurisdiction if there is a departure from the SCP or if the dispute proceeds under the LMAA Terms 2017 or under the ICP 2017. However, the arbitrator is expressly entitled to retain the Small Claims fee as payment on account of his fees relating to work carried out in relation to the reference (para 9 (c)).

Intermediate Claims Procedure (¡°ICP¡±)

    The Committee has made only minor changes to the ICP. Perhaps the most significant of those amendments is the deletion of the reference to ¡°summary¡± costs in paragraph 15(a), leaving these to be assessed only on a ¡°commercial¡± basis. 

    As regards the parties¡¯ recoverable costs, the costs cap applies either to the original claim/counterclaim amount (as was the case until now) or the amended amount, if greater, thus giving the parties the opportunity to make a higher costs recovery.

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