The evolution continues: LMAA Terms 2017

Date published

16/02/2017

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On 7 February 2017, the London Maritime Arbitrators Association (LMAA) advised that it had published a revision to its terms, effective 1 May 2017.
Whilst they do not contain wholesale changes, there are a number of changes worth noting for users of the LMAA Terms.

The LMAA

There are over 2000 arbitrations commenced each year governed by the terms of the London Maritime Arbitrators Association (LMAA), representing a significant proportion of maritime arbitrations worldwide. The terms are a set of ad-hoc rules allowing flexibility and aiming to facilitate the fair resolution of maritime and other disputes, without unnecessary delay or expense.

The LMAA Terms

For arbitrations commenced on or after 1 January 2012, the LMAA Terms 2012 are the governing terms (having been revised prior to that in 2006). Consistent with revisions every five or six years, the LMAA has now published a revised set of rules to be effective for appointments on or after 1 May 2017. Changes have also been introduced to the LMAA Small Claims Procedure (SCP) and, to a lesser extent, the LMAA Intermediate Claims Procedure (ICP).

The committee responsible for revising the terms were faced with the option to revolutionise or evolve the present 2012 terms. They chose to be evolutionary in their approach, adopting the stance of ‘if it ain’t broke don’t fix it’, recognising that wholesale changes could cause more problems than solutions, especially given users’ familiarity in the existing terms. As such, a ‘light touch’” approach was taken.

The 2017 revisions

The revisions, along with all the details and a comparison of the 2017 Terms and procedures with the 2012 Terms and procedures, together with an explanatory note, can be found on the LMAA website.  The new terms have been published well in advance of them coming into effect, so that by 1 May 2017, parties will already have some familiarity with them.

Paragraph 16(b)(i) sees the LMAA take account of concerns about the efficiency of concurrent proceedings, for instance in relation to a chain of charter/sub charter arbitrations. Often in chain arbitrations it can take many months for claim submissions to go all the way down the line and then many months for defence submissions to come back up the line. This is the case even if an intermediate party is simply adopting another party’s submissions with only minor amendments. To address this problem, the 2017 terms provide for an express power that time limits for submissions can be abbreviated or modified where arbitrations are concurrent.

To avoid endless exchanges of submissions, paragraph 5 of Schedule 2 now stipulates that, following service of a reply, or in the case of a counter-claim, a reply to defence to counter-claim, parties must obtain permission from a tribunal in order to serve further submissions.

Paragraph 13 of the second schedule now imposes an express obligation on both parties and tribunals to actively consider ways to make the arbitral process as cost-effective and efficient as possible whilst taking into account the LMAA Checklist.

The LMAA Checklist has been with us for some time but only as guidance, meaning it was often overlooked by users. It is now specifically incorporated into Schedule 4. In light of the fully incorporated checklist, paragraph 19(b) states that the tribunal, when dealing with costs, can take account of unreasonable or inefficient conduct, including non-compliance with the checklist.

As a further note on paragraph 19(b), there is a specific statement that the English High Court regime regarding Part 36 offers does not apply to LMAA arbitration. It has become commonplace to see parties making offers in LMAA arbitrations with phrases such as, “This offer is intended to have the same consequences of a Part 36 offer” hoping that, in the event that the offer did better an award, Part 36 consequences would be applied by the tribunal. Not only does the statement contained in paragraph 19(b) now specifically deal with the position for references commenced on or after 1 May 2017, it also gives a useful insight into how LMAA arbitrators are likely to consider attempts to incorporate the Part 36 rules into LMAA arbitrations under the current terms.

In an attempt to tackle the difficulties which stem from parties delaying in giving notice of appointment of legal or other representatives, paragraph 20 of Schedule 2 now makes a welcome provision for parties to give prompt notice of such developments. Barring exceptional circumstances, late instruction or late change in representation will not be regarded as a valid ground for delaying progress in an arbitration.

Paragraph 21 of Schedule 2 aims to clarify the position in relation to orders agreed by the parties. The terms now provide that the parties must notify the tribunal of such agreements and, unless otherwise ordered by the tribunal, agreed orders or directions shall take effect as if an order or direction of the tribunal. This will now formalise ad-hoc agreements between parties that directions agreed between them without the involvement of the tribunal should be considered an order of the tribunal.

Revision to the Small Claims Procedure

The notable change to the Small Claims Procedure is that the financial limit of small claims is raised from US$50,000 to US$100,000 where a limit has not been agreed by the parties.

The 2017 revisions also attempt to address the problem with the size of submissions in the SCP. Whilst the present SCP 2012 Terms already contain a word limit on submissions, arbitrators still routinely find submissions being served well in excess of the word limit or accompanied by excessive exhibits which can prohibit a speedy resolution.

To combat this:

  • A reply (or reply to defence to counterclaim) can only adduce further evidence or supporting documentation with permission of the tribunal (paragraph 5(d) and (e)). This encourages a claimant to fully set out their case in the Claim Submissions adducing all their evidence. A good reason will be needed if evidence was not included the first time around.
  • The arbitrator can require that submissions be re-formatted to meet the requirements of the 2017 Terms and should a party inadequately or excessively plead claims, they can be punished in costs (paragraph 5(f)).