Arbitration (LMAA/ SMCA/ SMA/ etc)
By Dr. Arun Kasi
Last Updated 13th August 2021
Dr. Arun Kasi, a member of the LMAA and SCMA, accepts appointment as arbitrator/arbitration counsel under the terms of LMAA/SCMA.
The rules of the London Maritime Arbitrators Association (LMAA) are very popular arbitral rules employed by parties to arbitrate maritime disputes.
LMAA rules are referred to in numerous BIMCO standard form agreements. Other arbitral rules referred to in the recent BIMCO forms include the Singapore Chamber of Maritime Arbitration. Another popular set of rules referred to in BIMCO forms include the Society of Maritime Arbitrators (SMA) New York. In the BIMCO forms, the rules referred to are options for parties to select when the BIMCO form agreement is made.
Insofar as rules LMAA terms are concerned, the most popular set of rules referred to in the BIMCO forms and widely used are LMAA Terms, the latest version of which is LMAA Terms 2021. Any reference to the LMAA Terms automatically means the latest version of the LMAA Terms. This is a set of rules that caters for maritime disputes of any amount and for fully-fledged arbitration that goes up to a full hearing.
Other rules available at LMAA, at present, are Intermediate Claims Procedure (ICP) that caters for disputes worth less than USD400,000 and Small Claims Procedure (SCP) for disputes less than USD100,000. The most popular rules are LMAA Terms. ICP has not gained popularity and is not usually referred to in standard form agreements. SCP is referred to only in recent BIMCO agreements. Only if the SCP option is retained, it is part of the agreement. Merely by agreeing to LMAA Terms, parties do not opt for SCP or ICP. Specific adoption is required if one of these terms is to be opted for. Generally, LMAA Terms is the most popular one under which LMAA arbitration is conducted. Second to that, relatively in a much smaller number, comes SCP. Most of the LMAA arbitration are settled at some point before the award. Only about 15% of the arbitration ends up in a final award.
The default seat of LMAA arbitration is in England, hence the UK Arbitration Act 1996 is applicable. The default law applicable to the arbitration agreement is English law. In the case of LMAA Terms, the default number of arbitrators is three, while the default number under the 1996 Act is one. The default number in SCP is one.
Only in the case of SCP, the fee payable to the arbitral tribunal is fixed, which presently is £4,000. However, the arbitrator may claim any expenses incurred in addition to the fixed fee and in certain circumstances claim more fee. In the case of a counterclaim exceeding the original claim sum, an additional fee of £2,500 must be paid to the tribunal. If the arbitration is settled before a final award, the arbitrator may retain a reasonable fee and must refund the balance. If the counterclaim amount exceeds USD100,000 the same arbitrator will proceed with the arbitration, but the arbitrator may order the proceedings to proceed under the terms of ICP or LMAA Terms, at his discretion. The costs are automatically capped to £5,000 plus the LMAA appointment fee of £350 if paid. The arbitration commences at the time notice is given by the claimant to the respondent and the entire proceeding is shortened and there is ordinarily no hearing.
LMAA is not an arbitral institution and hence the arbitration thereunder is not an institutional arbitration. LMAA does not get involved in or regulate the arbitral proceedings in any way, but:
- When a request to appoint an arbitrator is made to the president of the LMAA, he will appoint the arbitrator, for which a fee of £350.
- In the case of SCP, the LMAA collects in advance the entire fee payable to the arbitral tribunal to pay the same over to the arbitration. Additionally, the LMAA’s appointment fees of £350 must be paid at the same time.
- In the case of ICP and LMAA Terms, appoint the third arbitrators when the two original arbitrators fail to do so and there is a request from any of the original arbitrators or a party to make such appointment. In such case, the fee payable to the LMAA is £350.
In the case of LMAA Terms 2021, the procedure is ordinarily as follows. Each party will appoint its own arbitrator, called the original arbitrator. The claimant will first appoint its original arbitrator and notify the respondent to appoint the respondent’s original arbitrator. The arbitral proceedings commence when this notice is given to the respondent. If the respondent does not appoint its original arbitrator within 14 days, the claimant may declare its original arbitrator as the sole arbitrator.
Where both original arbitrators are appointed, they will jointly appoint a third arbitrator, who will act as the chairman. It is not necessary for the two original arbitrators to immediately appoint the third arbitrator but must do so before any substantive hearing or when the two original arbitrators cannot agree on any matter. All decisions will be made on a majority basis. In the event when is no unanimity or majority on any matter, the chairman decision will prevail. Where the two original arbitrators are not able to concur on the appointment of the third arbitrator, any arbitrator or party may apply to the president of the LMAA to make the appointment for a fee of £350.
Once both the original arbitrators are appointed, the claimant lodges its Claim Submission within 28 days thereafter. Then the respondent lodges its Defence (and Counterclaim) Submission within 14 days thereafter. The Claimant then lodges its Reply Submission within 14 days or Reply and Defence to Counterclaim within 28 days. Then the Respondent lodges its Reply to Defence to Counterclaim Submission within 14 days. Thus, the datelines are 28-28-14/28-14. Front loading is practised, i.e. the supporting documents will be annexed to the Submissions.
There is a disclosure obligation on each party to make disclose all relevant documents, even those adverse to its own case. Applications for security for costs and disclosure are available.
Once submissions are settled, each party must fill in a standard Questionnaire within 14 days. The questionnaire will include the following questions:
- Nature of claim?
- Approximate quantum of claim and counterclaim?
- Any amendments?
- Outstanding disclosure?
- Principal outstanding issues?
- Issues suitable for determination as preliminary issues?
- Preliminary meeting required, if so, at what stage?
- Documents-only or hearing?
- Parties have a duty to consider the suitability of documents-only hearing, failing which cost sanctions may be imposed.
- If documents-only, suggested timetable and closing of documents submissions?
- If hearing, estimated length of hearing?
- Statements of factual evidence – By whom? On what issues? Length limit? Tender as oral or hearsay evidence? Interpreter, if oral evidence?
- Statements (Reports) of expert evidence – When will be exchanged? – What issues? Length limit? When will experts meet (unless parties agree on/tribunal directs no meeting)? When will a record of the meeting be provided? Will the expert give oral evidence or by report only? Interpreter, if oral evidence?
- Fix hearing date now or later?
- Usually, the hearing date will be fixed later only after case preparation has sufficiently advanced.
- Virtual/semi-virtual hearing? – Protocol?
- Estimated costs of each party with breakdown – Up to Questionnaire? Through end? Cost cap?
- Security for Costs (parties’ costs)?
- Any other interlocutories?
After the Questionnaires are lodged, the parties have 21 days to discuss and agree on any matter in the Questionnaire. Thereafter, the tribunal will give its directions on matters in the Questionnaire. The directions will include:
- Exchange of Statements of Factual Evidence.
- To be adduced as hearsay evidence under Civil Evidence Act 1995.
- To stand as evidence in chief when the witness gives evidence before the tribunal.
- Exchange of Statements (Reports) of Expert Evidence.
- Tribunal may rule no expert evidence/no calling of an expert unless permitted by it.
- Tribunal may limit the number of expert witnesses/fields/issues.
- Tribunal may order this and give appropriate directions on time/documents/evidence.
- Preliminary Meeting – to reach agreement, failing that to give directions (LT para 18).
- Usually, will be held in cases of more than 5 days of hearing.
- Usually, not more than 1 preliminary meeting.
- Parties must submit agenda, information sheet, and list of proposed directions.
- Information sheet must tell estimates of readiness for hearing.
- Parties must submit a paginated bundle for the preliminary meeting.
The matter will proceed as per the direction. In the event there will be a hearing, parties will lodge their respective Skeleton Arguments ahead of the hearing.
After the hearing, the tribunal will proceed to award. Once the award is ready, the tribunal will issue the final bill. Upon the tribunal being paid the final bill, the parties may collect the award. The award, being a New York Convention award, is enforceable in about 160 countries. If the award does not include any decision on costs and interests, the tribunal may make a subsequent award for them.
There is no fixed fee for the tribunal, save for a ‘booking fee’ for hearings. The booking fee scale, currently, is as follows:
- £1,250 per day for hearings up to 10 days.
- £1,625 per day for hearings up to 15 days.
- £2,000 per day for hearings up to 20 days.
- £2,000 + agreed rate per day for hearings > 20 days.
- All above per arbitrator/umpire.
- g. hearing of 12 days: £1,250 x 12 days = £19,500 for each arbitrator/umpire.
For all other works, the tribunal will charge on a reasonable basis, usually on an hourly basis. If the hearing is vacated/adjourned for any reason including that the tribunal fee or tribunal’s security for costs were not paid:
- Arbitrators are entitled to a full fee, if a ‘non-refundable’ agreement is in place.
- If vacated/adjourned within 3 months before the start date, then entitled to the full fee.
- If vacated/adjourned ahead of 3 months before the start date, then entitled to half-fee.
To secure the tribunal’s fee:
- The tribunal may require the parties to pay security for the tribunal’s costs (which is different from any security for costs between the parties).
- The tribunal may issue interim bills in intervals of 3 months or more for work down during the interim period.
It must be noted that the booking fee referred to above is different from the fee payable for hiring a room for any hearing or other proceedings. Usually, rooms are booked in International Dispute Resolution Centre (IDRC). An indication of the costs are as follows:
- £795/day for 15 pax room.
- After 7 pm, OT is £115 per hour (or part).
- After midnight, OT is £230 per hour (or part).
- Weekend, OT £115 per hour (min 6 hours charge).
- Virtual hearing facilities are available with an advanced OPUS 2 hearing/document management system.
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Disclaimer: While every effort has been taken to ensure the accuracy of the information freely provided online as of the date they were uploaded, no liability is accepted in the event of any inaccuracy. Readers are to independently ensure both their accuracy and currency. © Dr. Arun Kasi, 2020. All rights reserved