The London Maritime Arbitrators Association (LMAA) recently published a revised version of its terms of procedure.

What has changed?

While there are a number of minor changes, the key changes for end users are as follows:

  • Additional guidance on the preparation and content of witness statements has been provided.
  • Parties must now provide more detailed cost estimates within LMAA Questionnaires.
  • Virtual and semi-virtual hearings are formally recognised.
  • The LMAA president may appoint a substitute arbitrator where it becomes apparent that one of the original arbitrators is incapable of conducting the proceedings or attending the hearing (or there are justifiable doubts as to this point).

When are these changes taking place?

The new suite (including, intermediate claims procedures (ICP) and small claims procedures (SCP)) of updated LMAA Terms came into effect on 1 May 2021. Subject to the terms of the relevant arbitration agreement, these terms will apply for arbitrations commenced on or after 1 May 2021.(1)

Why have the terms been updated?

The last revision took place in 2017. Since then, there have been significant changes in the way in which hearings are conducted (due in part to the COVID-19 pandemic and the move to virtual hearings) and updates to comparable costs and witness statement requirements in English court proceedings.

While the Supreme Court recently commented on the scope of arbitrator disclosure required,(2) the new terms do not include additional provisions regarding the disclosure of connected appointments by an arbitrator. In part, this reflects the specific comments made by the Supreme Court on specialist arbitration formats, such as the LMAA, but parties may choose to consider revisions to their appointment process regardless.

Key changes

The below table summarises the most important changes for end users of the LMAA format.

Provision

Comment

Paragraph 8(b)(v)

New wording at the end of Subparagraph (v) allows for two arbitrators to issue decisions, orders and awards in the event that the third arbitrator resigns or is unable to continue. This dovetails neatly with the new powers of the LMAA president to appoint a replacement arbitrator (discussed below).

Paragraph 10 – Sole Arbitrator

(The arbitral tribunal)

If a party does not appoint its party-appointed arbitrator within 14 days (or such other term as agreed) after receiving due notice to do so from the party referring the dispute to arbitration, the party referring the dispute to arbitration may, without any further notice to the other party, appoint its arbitrator as sole arbitrator.

This is both simpler and speedier than the procedure set out in the Arbitration Act 1996 and adopts the procedure set out in the model LMAA arbitration clause. For lower value cases or cases with a respondent who fails to engage, this is a useful development.

Paragraph 12 – Substitute Arbitrator

(The arbitral tribunal)

This change gives the LMAA president the discretionary power to appoint a substitute arbitrator in circumstances where it is apparent that the original arbitrator is incapable of conducting the proceedings or attending the hearing.

This power is expected to be used sparingly but is a useful addition and potentially a faster avenue than applying to court for a substitute arbitrator (an option which remains in place).

Paragraphs 15(c) and (d) – Virtual Hearings

(Arbitration procedure)

The terms recognise and allow for hearings to take place virtually or semi-virtually. This flexibility is welcomed both for the near future, when virtual hearings will continue to be the norm until international travel is resumed, and in the long term, where the option to reduce the costs associated with all or part of physical hearings can be utilised, where appropriate.

Paragraph 24 – Electronic Signature of Award

(The award)

The terms now confirm that awards may be signed electronically, and in counterparts, and may be notified to parties by electronic means.

Although this has, in reality, been a longstanding practice with some LMAA arbitrators, parties should keep in mind that in some jurisdictions there could be enforcement issues for an electronically signed award. To counter this possible risk, parties (although most likely the claimant) should inform the tribunal that they request a 'wet ink' signature in advance of the award being published.

Third Schedule – Paragraph 15

The LMAA Questionnaire has been updated to include arrangements for virtual, or semi-virtual, hearings.

Third Schedule – Paragraph 16(a)

A short note has been included in Paragraph 16 regarding the breakdowns of costs (including hourly rates of the lawyers and experts involved) which must be provided in the LMAA Questionnaire.

Though short in length, this new obligation could create a significant additional cost-budgeting burden on parties to an LMAA arbitration.

It would be surprising if cost details to be provided in the LMAA Questionnaire were expected to be of a similar level as in London High Court proceedings, which can often require input from specialist costs lawyers. However, on the whole, greater transparency as to the constitution and associated costs of legal and expert teams, rather than (often large opaque) bulk sums, is welcome.

Depending on implementation, this change may also allow end users of LMAA arbitration to budget for the costs of arbitration more effectively (including any possible adverse cost exposure), and at an earlier stage.

Fourth Schedule – Introduction

The checklist (the procedural guidelines set out in Schedule 4) now requires the parties, in the case of virtual or semi-virtual hearings, to follow the guidance in the LMAA guidelines for such hearings.

Fourth Schedule – Paragraph 2(a)

(Factual evidence)

The new wording at Paragraph 2(a) of the Fourth Schedule states that "a witness statement should ideally be in the witness's own words" and that it should contain only evidence as to matters of fact which must be provided by witness evidence and about which the witness "has personal knowledge or recollection". There is also an express prohibition on witness statements being used to argue a case.

This new language addresses a longstanding concern of users of the LMAA format (and litigation generally) that factual witness statements have been used as an extension of the pleadings, arguing legal concepts and addressing points of which the witness has no direct knowledge, rather than being an account of relevant facts from those with direct knowledge thereof. This addition also reflects recent procedural updates in the English courts to address similar concerns.

While this addition is warmly welcomed, the extent to which this new provision is enforced (by way of possible cost sanctions against an offending party) will be a matter for future tribunals.

Sixth Schedule

This is a new schedule which contains the LMAA Guidelines for the Conduct of Virtual/Semi-Virtual Hearings. This guidance may well be revisited more regularly going forward as the experience and the technology available for virtual hearings develops.

If proceeding with a virtual or semi-virtual hearing, some notable new guidance includes as follows:

  • Guidance is provided for IT and practical steps to be taken in advance of a virtual hearing.
  • The claimant must circulate a contact sheet which provides a list of all participants and their time zones and contact details to enable ready contact. Contact details for any IT support should also be provided.
  • A specific regime is provided for who is visible to the tribunal and who will be muted, and the tribunal has the power to terminate the virtual hearing at any time if it deems the virtual hearing as unsatisfactory or unfair.
  • Specific camera provisions and instructions regarding electronic devices for those giving witness evidence are provided.
  • Detailed guidance on the preparation of electronic bundles is provided.

ICP and SCP

While this article primarily addresses the changes made to the 'full' LMAA Terms, as noted above, changes to the LMAA's ICP and SCP also became effective as of 1 May 2021. The main revisions to the ICP include both the arbitrator appointment revision and updated witness statement guidance also found in the full terms. The key revisions to the SCP are as follows:

  • Paragraph 3(b) now makes payment of the SCP fees a condition precedent to moving forward with proceedings.
  • Paragraph 7 now makes clear that the default position is that reasoned awards should be produced.
  • Paragraph 9(c) has been revised to clarify that if the SCP is determined to be inappropriate and not to apply, the existing sole arbitrator will retain jurisdiction over the dispute and may order that it proceed under the LMAA Terms 2021 or ICP 2021, as appropriate.

Endnotes

(1) Section 4, LMAA Terms 2021

(2) Halliburton Company (Appellant) v Chubb Bermuda Insurance Ltd (Formerly known as Ace Bermuda Insurance Ltd) (Respondent) [2020] UKSC 48.