William Chetwood Partner
The LMAA Terms revised - LMAA Terms 2021
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 arbitrations commenced on or after 1 May 2021. Revised versions of the LMAA Small Claims Procedure (SCP) and the LMAA Intermediate Claims Procedure (ICP) are now also coming into play.
The 2021 Terms were prepared by a committee of experienced arbitrators under the chairmanship of David Owen QC, who also led the 2017 revision, 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, particularly in light of COVID-19, the increased usage of teleconferencing and e-signatures, the new witness evidence rules of the English Court, and the need for gender equality. It is hoped that the revised Terms will further streamline the LMAA procedures currently in place and will have a beneficial effect in proceedings speeding up and costs staying down.
Key changes in the 2021 Terms include the following:
Recognition of virtual and semi-virtual hearings
One of the key modifications to the updated Terms is their express recognition that hearings may take place virtually. This is accounted for in paragraphs 15(c), 15(d) and the Questionnaire in the Third Schedule. A set of Guidelines for the Conduct of Virtual and Semi-Virtual Hearings has been added as a new Sixth Schedule. These Guidelines accommodate and account for many of the idiosyncrasies and pitfalls of virtual communication, emphasising that parties must take proper steps to prepare themselves and their technology in the run-up to any virtual hearing, mooting contingency plans should the technology falter, setting out how documents should be presented, outlining anti-cheating precautions that may be taken, and even reminding users to mitigate against that perennial feature of teleconferencing – the barking dog.
Awards and e-signatures
The updated Terms also permit another stalwart of post-COVID-19 practice; the e-signature. Paragraph 24 provides expressly that awards may be signed electronically, and in counterparts, and may be notified to parties by electronic means. This allows for greater flexibility in the preparation and publication of awards, especially where it may be tricky to obtain handwritten signatures from arbitrators.
The use of e-signatures is not set in stone, and the parties may still agree, or the tribunal may direct, that awards must be signed in handwritten hard copy. Users must bear in mind that not all jurisdictions will accept e-signatures and that enforcement issues might arise. Should this be a concern, the party requiring a manuscript hard copy is responsible for informing the tribunal, in advance of the award being signed, that original handwritten signatures are required.
Paragraph 10 streamlines the process around arbitrator appointment where there is to be more than one arbitrator. Under the 2017 Terms, if the respondent has failed to appoint its own arbitrator and notify the claimant of this within 14 days of receiving the claimant’s notice of appointment, the claimant is obliged to serve further notice on the respondent, giving the respondent an additional grace period. Only after this can the reference default to having a sole arbitrator. This is by virtue of reference to the Arbitration Act 1996 (the Act). The 2021 Terms, however, adopt the procedure in the LMAA Arbitration Clause. It is now open to the claimant to state in their initial appointment notice that it will appoint its arbitrator as sole arbitrator should a respondent fail to appoint and revert in the 14-day window. The message for respondents with a three arbitrator clause, who have received such notice, is clear – slouch at your peril!
The second in this pair of arbitrator appointment amendments is found in the newly added paragraph 12. Formerly, if it became apparent shortly before a hearing that an arbitrator could not conduct the hearing, and the original appointing party was remiss in appointing a substitute, a lengthy court application process beckoned and the possibility of a hearing date being vacated arose. This revision now gives the President of the LMAA the power to appoint a substitute arbitrator. However, the LMAA anticipates that the power will be used rarely.
Where there are to be three arbitrators, the new paragraph 8(v) allows for decisions, orders and awards to be made if, once a third arbitrator has been appointed, one of the three arbitrators can no longer act and the remaining arbitrators are in agreement. This makes the process significantly more efficient and cost-effective in this eventuality.
As expected, arbitration has not been spared from the witness evidence winds of change. Some components of the new English Court procedure have been transposed into the LMAA via paragraph 2 of the Checklist in the Fourth Schedule, which sets out that a statement should:
- be in the witness’s own words;
- only contain evidence as to matters of fact which need to be proved by the evidence of the witness in relation to one or more issues of fact to be decided;
- only contain evidence as to matters of fact of which the witness has personal knowledge or recollection; and
- never be used to argue a case.
This reform is so that witness statements are not abused to serve as additional pleadings and do not become overly-lawyered, Frankenstein’s monsters. Arbitrators will be able to impose costs sanctions if these requirements are ignored. Care should be taken by lawyers and users alike. However, the new rules are not quite as extensive as those in the Court. The new Terms do not provide that the witness must refer to the documents they have reviewed to refresh their memory, nor do they require the new ‘confirmation of compliance’ wording.
A small but significant change to the Questionnaire has been made at paragraph 16, which now requires a more detailed breakdown of a party’s costs to be provided.
No change has been made to the monetary limit to which the ICP will apply. It remains open to the parties to agree a higher or lower limit but by default it is $400,000.
The ICP has mimicked the main Terms in, via its new paragraph 5, shortening the route to the claimant’s appointed arbitrator becoming the sole arbitrator where a respondent fails to appoint their own within the 14-day notice period.
It has also clarified the timing for respondents to serve submissions, at paragraph 12, as well as the tribunal’s discretion, when proceeding after a party has defaulted, to require a non-defaulting party to adduce further material to the tribunal, at paragraph 13.
The wording on costs has also been updated at paragraph 16 to make clear that the cap (i.e. 30% of the claimant’s monetary claim) applicable to the parties’ recoverable costs is to be calculated without including claims for interest and costs.
No change has been made to the monetary limit to which the SCP will apply. It remains open to the parties to agree a higher or lower limit but by default it is $100,000.
Small changes have been made to paragraphs 3(b) and (d). The SCP previously provided that payment of the Small Claims fee within 14 days of agreement being reached on a sole arbitrator was a condition precedent to the pursuit of the proceedings. The wording has been adjusted to remove the reference to 14 days and now expressly provides that proceedings cannot be continued until the fee is paid. Paragraph 3(d) widens the circumstances in which part of this fee can be retained as compensation by the arbitrator, should no award be produced, to include when the arbitration is not pursued, or the arbitrator resigns or is unable to continue with the reference.
Similarly to the ICP, paragraph 5(g) confirms the tribunal’s discretion to require more information from the non-defaulting party if the SCP is proceeding after a party’s default.
Paragraph 7, as amended, confirms that awards under the SCP will be reasoned – there had been a question over whether this was a requirement – unless the parties agree otherwise. To this end, paragraph 9(a) has also been updated to incorporate wording from the main Terms. Equally, the SCP confirms that the exclusion of a right of appeal applies to reasoned awards as it does to unreasoned ones. Provision has also now been made for the correction of awards given under the SCP.
Paragraph 8 has seen its wording updated to provide for any breakdowns or explanations regarding costs (limited to 500 words) to be provided within seven days of service of the last submission under the SCP. This is to reflect that, wherever possible, there should only be one award under the SCP, which deals with both the ruling and costs, rather than there being a secondary award dealing only with costs.
No change has been made to the LMAA Arbitration Clause, and the appointment procedure for a sole arbitrator therein is now reflected in paragraph 10 of the LMAA Terms, as discussed above.
The LMAA Arbitration Notice Clause has seen some minor amendments, with the generic wording now suitable for any form of contract, not just one between owners and charterers. Express provision is also made for the possibility of notice of arbitration being served by effective means other than email. It is the responsibility of the serving party to satisfy themselves of the adequacy of the method of service adopted, for purposes of possible eventual enforcement of any award.
Finally, and importantly, the 2021 Terms, ICP and SCP have all been revised to reflect that arbitrators and users are not always male! “He” is replaced with “he/she” or a gender neutral option throughout. Next stop, a female President of the LMAA. Onwards!