Initiating an LMAA arbitration is a simple process: it normally requires serving a Notice of Arbitration directly to the opposing side, which includes only skeletal information about the parties, the constitution of the arbitral tribunal, the claims and the relief sought.
We discuss the role of the LMAA in an LMAA arbitration (Section I), the steps for commencing an LMAA arbitration (Section II), as well as the typical LMAA arbitral procedure (Section III) in further detail below.
I. The Role of the LMAA
– The LMAA Is Not an Arbitral Institution
The LMAA, which stands for the “London Maritime Arbitrators Association”, is a leading arbitral association based in London, which facilitates ad hoc arbitrations.
The LMAA does not operate as an arbitral institution, such as the LCIA, for instance, which supervises and administers arbitrations. This means that the LMAA has no involvement in the conduct of an arbitration, except when its President is called, upon the application of a party or a party-appointed arbitrator, to act as the appointing authority for the constitution of the arbitral tribunal (see 2021 LMAA Terms, Articles 2(b), 8(b)(ii), 9(b), 11 and 12).
– The LMAA Arbitration Rules
The newly-updated 2021 LMAA Terms currently in force, comprised of 33 Articles and 6 Schedules, apply to any arbitration commenced on or after 1 May 2021, unless otherwise agreed by the parties (2021 LMAA Terms, Article 4). Their purpose is to offer “fair resolution of maritime and other disputes by an impartial tribunal without unnecessary delay or expense” (2021 LMAA Terms, Article 3; see also the Guidelines on the 2021 LMAA Terms). The previously-applicable version was the 2017 LMAA Terms and the key changes made to it are discussed in Section III below.
In addition to the 2021 LMAA Terms, the LMAA has also formulated the 2021 Intermediate Claims Procedure (the “ICP”) and the 2021 Small Claims Procedure (the “SCP”), which are intended to be simpler and less expensive to resolve disputes than using the standard 2021 LMAA Terms (see also the Guidelines on the 2021 ICP and the Guidelines on the 2021 SCP). The previously applicable versions were the 2017 ICP and the 2017 SCP.
The SCP applies in cases where neither the claim nor any counterclaim exceeds the sum of USD 100,000 (or such other sum as the parties may agree). In turn, the ICP applies in cases where the claim or any counterclaim exceeds the sum agreed for in the SCP and neither the claim nor any counterclaim exceeds the sum of USD 400,000 (or such other sum as the parties may agree).
– The LMAA Pool of Arbitrators
While there is no requirement for a party to appoint arbitrators from the LMAA pool of arbitrators, it is often prudent to do so, given their expertise in LMAA maritime disputes.
In this respect, the LMAA offers a list of Full LMAA Members, approximately half of whom have a predominantly legal background and otherwise technical or commercial expertise.
It also provides a list of Aspiring LMAA Members, i.e., candidates who fulfill certain of the salient criteria for becoming Full Members, including “independence from competing or conflicting commercial activities”, but are deemed to require further appointments in LMAA arbitrations to satisfy the experience criterion needed for full membership.
It also offers a list of Supporting LMAA Members generally prepared to accept appointments as arbitrators.
According to its website, and at the time of writing, the LMAA comprises more than 800 Full and Supporting Members, who handle nearly 1,700 cases resulting in over 500 awards annually (see the annual historical statistics (1996-2020) published by the LMAA).
– The Standard LMAA Arbitration Clause
The LMAA has also published its own Standard LMAA Arbitration Clause that may be adopted by interested parties. This Clause is more detailed as compared to other standard clauses of leading arbitral institutions (see, for example, the ICC Standard Arbitration Clauses).
In brief, the Standard LMAA Arbitration Clause provides that parties shall resolve their disputes via arbitration under the LMAA Terms, the ICP or the SCP depending on the amount in dispute. It also opts for three arbitrators to be appointed under tight deadlines, one by each party and the third (chairman) by the two so appointed. If one party fails to appoint its arbitrator by the specified deadline, the other party may appoint its arbitrator as sole arbitrator. The Clause also provides for England as the seat of arbitration, which means that the 1996 Arbitration Act shall apply, and English law as the governing law of the arbitration clause (see also our note on the different laws applicable to an international arbitration).
Parties may tailor the Standard LMAA Arbitration Clause based on the individual circumstances of their case. For instance, it may be worth considering agreeing on a sole arbitrator in cases involving small amounts and/or simple issues of law to reduce arbitration costs.
II. Initiating an LMAA Arbitration
– Appointment/Nomination of Arbitrators
The starting point for a party seeking to commence an LMAA arbitration (and any arbitration) should be the arbitration clause, which is normally included in the main contract under which a dispute has arisen, and may specify the number of arbitrators and/or the method of constitution of the tribunal.
If the arbitration clause is silent in this respect, the default rule under Article 8 of the 2021 LMAA Terms is that “the agreement shall be deemed to provide for a tribunal of three arbitrators”, one to be appointed by each party and the third, who shall be the chairman, by the two so appointed (or the President of the LMAA, in case of disagreement).
That said, in case of a three-member tribunal where each party appoints an arbitrator, prior to commencing arbitration, a party would need to reach out to the arbitrator it wishes to appoint, who is called the “original arbitrator” under Article 2(d) of the 2021 LMAA Terms, to confirm his/her availability and suitability to be appointed.
If the original arbitrator accepts the appointment, then he/she would normally send to the appointing party an invoice for the fixed Appointment Fee currently set at GBP 350 for the standard arbitration procedure under the 2021 LMAA Terms, which is payable directly to the original arbitrator (see the LMAA Fees valid as of 1 January 2019).
In this respect, the LMAA Notes on London Arbitration specify that the appointment of an original arbitrator requires strict observance of the following formalities in order to be valid:
(i) the arbitrator must have been offered the appointment,
(ii) the arbitrator must have signified his acceptance of the appointment, and then
(iii) the appointment and identity of the arbitrator so appointed must have been communicated to the other party.
In case of a sole arbitrator, and if the parties cannot agree upon the person to be appointed, they may either apply to the President of the LMAA to appoint a sole arbitrator (2021 LMAA Terms, Article 11) or, less commonly, vary the arbitration clause in writing to require three arbitrators (or two arbitrators and an umpire).
– Sending a Notice of Arbitration
The party wishing to initiate an LMAA arbitration shall then send a Notice of Arbitration directly to the opposing party, normally via email, with its original arbitrator, who has been previously contacted and accepted his/her nomination, on copy (the LMAA has no involvement and thus shall not be copied to this correspondence). In case of a sole arbitrator, the party would normally propose a sole arbitrator and thereafter try to reach an agreement with the opposing party on this issue.
Hard copies are not necessarily needed, but they are recommended, especially when the underlying contract is silent on this issue, in order to avoid any unnecessary disputes in terms of whether the Notice of Arbitration was properly served.
In an attempt to provide further clarity on notices to commence LMAA arbitrations and prevent disputes in this respect, the LMAA has introduced a standard LMAA Arbitration Notice Clause, under which “all notices and communications […] (including any communications giving notice of the commencement of such proceedings and/or appointment of an arbitrator) shall be treated as effectively served if sent by e-mail to the e-mail addresses as provided for in this clause”.
Making email correspondence the default means of communication is an environmentally-friendly solution that reflects current practices, while saving time and costs. This Notice Clause may be adopted by the parties in conjunction with the Standard LMAA Arbitration Clause mentioned above.
Under the Notice Clause, each party is also “entitled to change and/or add to the e-mail addresses to which notices and communications may be sent”, for instance, once a party “retains solicitors or representatives with authority to accept service of notices and communications”.
While parties need not necessarily hire a lawyer to represent them in international arbitration, it is generally recommended that they do so, especially when substantial sums or complex points of law are involved.
– Content of Notice of Arbitration
In terms of the content of a Notice of Arbitration, and as is the case under most arbitral rules, it would normally contain only basic information, including the parties’ details, the arbitration agreement, the main contract, details regarding the constitution of the tribunal, i.e., the appointment/nomination of arbitrators, the language and place of arbitration, as well as a summary of the dispute, claims and relief sought (see how to initiate international arbitration).
– Time Limitations
Prior to commencing arbitration, careful consideration shall also be given to any time limitation, be it under the arbitration clause, the main contract and/or under the applicable law on the merits. For instance, under English law, an action “founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued”, which is normally the date of breach of contract, such as the date when payment should have been made (1980 Limitation Act, Article 5).
If the claims are time-barred and there is no applicable exception (for instance, in a case of acknowledgment of debt which restarts the six-year time limit under English law) they may be dismissed on this ground alone, even if they have merit, and the party bringing the claims will often need to bear the arbitration costs.
III. LMAA Arbitration Procedure
In terms of the LMAA arbitral procedure, and in order to “control the spiralling delays and costs that can occur during the course of arbitration references”, the LMAA arbitral tribunal would normally need to adhere to the tight deadlines and procedure laid out in the Second Schedule of the 2021 LMAA Terms, unless the Parties agree otherwise or where there are exceptional circumstances that would justify deviation from such procedure (see the Guidelines on the 2021 LMAA Terms and also the Guidelines on the 2017 LMAA Terms).
A useful diagram of the default arbitral procedure under the LMAA terms is enclosed as Appendix in C. Ambrose et. al., London Maritime Arbitration (2018) and is accessible here. The diagram is in fact based on the previously-applicable 2017 LMAA Terms, but the procedure described therein remained unchanged in the newly-introduced 2021 LMAA Terms.
The LMAA has also published a useful Commentary on the 2021 LMAA Terms, which identifies the key changes made to the previous 2017 version of the Terms. While not highly disruptive, the 2021 amendments are welcome additions geared towards fine-tuning and updating the wording of the Terms “to reflect changing procedures (including the increased use of virtual hearings), and to address specific issues which have arisen in recent years.”
For instance, in response to the recent shift from physical to virtual hearings, triggered by the COVID-19 pandemic, the 2021 LMAA Terms now expressly recognize that hearings may take place virtually (Article 15(c) and (d)), and a final, Sixth Appendix is added to them containing Guidelines for the Conduct of Virtual and Semi‐Virtual Hearings.
An express provision is also added providing that awards may be signed electronically (2021 LMAA Terms, Article 24).
Also, the President of the LMAA is now empowered to appoint a substitute arbitrator where it becomes apparent that the original arbitrator is incapable of conducting the proceedings or attending the hearing (2021 LMAA Terms, Article 12), even though the LMAA itself recognizes in the Commentary that such power is anticipated to be used rarely in practice.
In fact, the most notable change was perhaps introduced by the previously applicable 2017 LMAA Terms, which superseded the 2012 version of the LMAA Terms, as thereafter parties no longer need to apply to the High Court for assistance in constituting the arbitral tribunal in cases of disagreement or default, as the President of the LMAA is designated as the competent appointing authority in this respect, obviating the need for separate court proceedings (see also Explanatory Note on the 2017 LMAA Terms).
In sum, initiating an LMAA arbitration is a simple procedure, normally requiring the service of a Notice of Arbitration directly to the opposing party which contains only skeletal information.
One should also bear in mind that an LMAA arbitration is an ad hoc arbitration, since the LMAA is a professional association of maritime arbitrators and not an arbitral institution. The LMAA facilitates the resolution of maritime disputes via arbitration by offering to interested disputing parties its newly-updated 2021 LMAA Terms (and cost-effective variations for disputes involving small amounts), along with a pool of specialized LMAA arbitrators, from which parties may (but need not necessarily) appoint arbitrators.