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LMAA brings clarity to arbitration notifications

News / 06-02-2019 / London

In November 2018, the London Maritime Arbitrators Association (LMAA) released a new Arbitration Notice Clause. This new clause, which parties can incorporate into their dispute resolution provisions, provides for the designation of individuals and e-mail addresses for the service of arbitration notices and communications, ensuring that each party identifies those authorised to accept service of legal proceedings on its behalf.

Unlike court proceedings, which have their own specific Civil Procedure Rules that dictate the necessary formalities for starting a claim, arbitrations are usually commenced by serving the relevant notice on the opposition. An ineffective notice of arbitration may render the arbitration proceedings invalid, though any challenge to this may not arise until after a final award has been given by the tribunal. It is, therefore, paramount that any notice is served correctly in order to protect the claimant’s position.

Failure to commence arbitration effectively also means that time does not stop running for the purpose of limitation and contractual time bars. As such, a claimant who fails to properly commence arbitration due to a procedural error in the arbitration notice runs the risk of losing its right to bring the claim altogether, notwithstanding that it has incurred significant legal costs in the pursuit of its claim and may believe it already has an enforceable arbitration award in its favour.

Case law

One case where this happened was Glencore Agriculture B.V. v Conqueror Holdings Limited [2017] EWHC 2893 (Comm). In this case Glencore sought to set aside an arbitration award made against it on the basis that it was unaware of the proceedings until it received the final award by post, some 14 months after Conqueror had sent its initial letter before action.

In order to commence proceedings, Conqueror sent a notice of arbitration to the work email address of a junior employee of Glencore, whose role was purely operational. The notice was neither acknowledged nor replied to, and several further emails from both Conqueror and the arbitrator were also sent to this individual’s email address and went unanswered. Subsequently, the arbitrator made an award in Conqueror’s favour.

Glencore sought relief under section 72 of the Arbitration Act 1996, on the basis that the award had been made without jurisdiction and/or the tribunal had not been properly constituted and/or that no matters of dispute between the parties had been submitted to the arbitration in accordance with the arbitration agreement. Glencore succeeded in setting aside the award on the basis that service of the arbitration notice was not effective.

To resolve the dispute, the court turned to agency principles and concluded, examining the facts objectively, that the employee did not have express, implied or ostensible authority to accept service; given his position, the individual who received the relevant correspondence was not someone who was authorised to accept legal process on behalf of the company.

Another case which looked at the issue of whether arbitration had been commenced effectively, albeit with a different outcome, was Sino Channel Asia Ltd v Dana Shipping and Trading Pte Singapore and Another [2017] EWCA Civ 1703. On the facts of this case, following an appeal, the Court of Appeal held that service had been effective as the recipient of the notice had actual implied authority and/or ostensible authority to accept the notice. However, it also commented that, on the facts, a recurrence of the situation was likely to be rare.

Comment

It is worth noting that section 76(4) of the Arbitration Act permits service of any notice related to an arbitration by post to a company’s registered or principal office. If this is done then any such notices will be treated as effectively served; a point that was made in both cases above as neither claimant in the arbitration chose to serve its notice of arbitration by this method despite the protection it would have afforded them.

These cases demonstrate the potential pitfalls involved with a failure to commence arbitration effectively, and the time and costs that can subsequently be lost in having a further dispute over whether an arbitration award is enforceable. The new LMAA Arbitration Notice Clause, if used and administered correctly, should provide clarity to contractual parties on the steps they need to take to commence arbitration when a dispute seems likely to materialise.

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