London Maritime Arbitration

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London maritime arbitration

A. Introduction

1.1 Arbitration is a private method of resolving disputes. It is used when parties agree to refer their dispute to an impartial tribunal consisting of one or more arbitrators. Parties normally agree to arbitration by means of an arbitration agreement in a contract made before a dispute has arisen. It can also be agreed after a dispute has arisen. Arbitration differs radically from court proceedings in that it arises out of an agreement and the rules of procedure governing litigation do not apply, thus allowing a flexible and confidential procedure to be adopted to suit the parties’ convenience. Arbitrators are generally appointed by the parties (or by means to which the parties have agreed) and are paid by the parties; they are usually chosen for their familiarity with the commercial, technical or legal aspects of the dispute. The advantages of arbitration are its privacy, its potential as a flexible, speedy means of resolving commercial disputes and the ability to enforce arbitral awards under the New York Convention. However, the efficiency of arbitration depends on the cooperation of the parties (and their lawyers and indeed the arbitrators) in preparing a case and minimising the areas of substantive dispute. The Arbitration Act 1996 places duties on the parties and the arbitrators to ensure the dispute is resolved efficiently. However, in practice it may be difficult to enforce these duties and arbitration can be just as slow and expensive as litigation if the parties will not cooperate and if the arbitrators do not take a firm approach to the proceedings. 1.2 “London maritime arbitration” is a broad term usually applied to arbitration taking place in London where the dispute involves in some way a ship – for instance a dispute under a charterparty, bill of lading, ship sale agreement or shipbuilding contract. There is, however, no strict definition of maritime arbitration which would require the involvement of a ship and any arbitration carried out on terms published by the London Maritime Arbitrators Association (LMAA) might be termed a maritime arbitration. This book aims to provide a practical

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guide to the law and practice of maritime arbitrations in London, particularly arbitrations proceeding under LMAA terms.1 1.3 London maritime arbitration is sometimes treated as if it were distinct from “international commercial arbitration” seated in London, because this term is commonly used to describe commercial arbitrations administered by an institution.2 While there are differences, particularly in the strength of connection between some institutions and London as a seat of arbitration, these should not be overstated since both types of arbitration have much in common. They both relate to international commercial disputes and are subject to the 1996 Act. There is a significant overlap between the arbitrators, practitioners and parties who are involved in both. Further, many more arbitrations are commenced under the LMAA Terms each year than are referred to institutional arbitration in London,3 and the vast majority of appeals to the Commercial Court on points of law arise from shipping cases.4

B. The London Maritime Arbitrators Association (“the LMAA”)

History and aims

1.4 London maritime arbitration traces its origins back at least to the birth of the Baltic Exchange at the Virginia and Baltick Coffee House in 1744, and arguably much earlier.5 Traditionally, maritime arbitrators were members of the shipping trade who found time to act as arbitrators largely on an honorary basis. Maritime arbitration is now much more time-consuming and formal. Most arbitrations are carried out by full-time professional arbitrators, technical experts, or lawyers who charge a professional fee. The LMAA is a professional association which was set up in 1960, originating from a group of brokers at the Baltic Exchange who were listed as available to be appointed as arbitrators.6 The objects of the Association were described at its first Annual General Meeting as, “to see that the machinery of Arbitration is adequately manned and new Arbitrators trained, also to further our aim that London Arbitration shall not only be strictly impartial and economical, but reasonably expeditious so far as consistent with thorough investigation and sound judgment”.7 Its objects today remain very similar, albeit expanded in form.8

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1.5 Unlike the London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC) or certain commodity associations such as the Grain and Feeds Trade Association (GAFTA), the LMAA does not actively supervise or administer arbitrations. However, the LMAA (or more usually, the President of the LMAA for the time being) may appoint arbitrators if the arbitration agreement so specifies or where applicable LMAA terms confer such a power (for example, where two party-appointed arbitrators fail to appoint a third arbitrator or umpire, where the parties have failed to agree upon a sole arbitrator, or where a sole arbitrator retires to avoid delay and the parties fail to agree upon a substitute). 1.6 The LMAA plays a central and supportive role in London maritime arbitration. Its members conduct the vast majority of maritime arbitrations in London. In 2015, there were at least 3160 appointments on LMAA terms and at least 438 awards issued under LMAA terms.9 The LMAA is responsible for drawing up the LMAA Terms (and other rules such as the Small Claims Procedure)10 and laying down standards of conduct for its members.11 It has an informative role: maintaining a website, issuing a handbook, publishing a newsletter and generally keeping members informed of relevant developments, for instance by holding seminars. The LMAA website and handbook are very useful sources of information on practice and individual arbitrators.12 In addition, the LMAA may be called upon to appoint arbitrators in accordance with LMAA terms or an arbitration clause and to give members advice on specific questions. In a wider context it seeks to maintain high professional standards in maritime arbitration and to act as a representative body, for instance by making representations about proposed legislation relevant to its members’ interests.


1.7 The LMAA consists of two main groups of members: full members and supporting members.13 As at January 2017 there are 37 full members who are generally prepared to undertake maritime arbitration of any description or duration. Approximately two thirds of these have a predominantly legal background and the rest have technical or commercial expertise. Many full members arbitrate as a full-time occupation. They would almost certainly be treated as “commercial men” or “engaged in the shipping trade” for the purpose of satisfying such a qualification required in an arbitration clause.14 To become a full member the

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applicant must demonstrate his knowledge of the relevant areas of English law and competence in writing awards. The general rule is that an applicant for full membership must have been engaged for at least 15 years in a position of responsibility within the shipping industry, generally in commercial, technical or legal areas. Applicants must be UK residents or otherwise able to attend London hearings at short notice. A substantial commitment to arbitration will normally be required to ensure that sufficient time can be given to arbitrations and to help secure the impartiality of an independent arbitrator. The LMAA election sub-committee will interview potential full members in meetings. The sub-committee will report on each applicant but election to full membership is ultimately decided by the LMAA Committee.15 The LMAA Committee has powers (which have never needed to be used) to remove a member from the LMAA where his conduct is inconsistent with LMAA membership.16 1.8 The second group of LMAA members consists of around 750 supporting members drawn mainly from the shipping trade, solicitors’ firms, barristers and P&I clubs. Supporting members do not, as a general rule, practise full-time as arbitrators but may from time to time accept appointments and wish to lend their support to the objects of the LMAA. Applicants for supporting membership should be aged at least 28 with suitable commercial or technical experience or be qualified as a lawyer for five years. The application must be supported by one full member or two referees, preferably supporting members.17 The names of supporting members who are willing to accept appointments as an arbitrator are listed on the LMAA website.18 1.9 The supporting members represent “the users” of London maritime arbitration. The Supporting Members Liaison Committee plays an important role in raising matters of interest and liaising with the LMAA, for example in the drafting of LMAA terms. In 2011 a Supporting Members Liaison Committee (Asia Pacific) was established. It is intended to be complementary to the Supporting Members Liaison Committee and to provide a perspective on matters pertaining to London arbitration and the LMAA from the Asia Pacific region. Most significant changes in practice will only be adopted after consultation with these committees. Supporting members also have the opportunity to meet full members throughout the year at seminars, lunches, meetings and the annual dinner. 1.10 In 2010, the LMAA introduced a list of arbitrators who are supporting members and intend to apply for full membership in due course (referred to as “aspiring full members”). Aspiring full members seek further appointments in LMAA arbitrations to enable them to demonstrate the experience criterion for full membership. Selection for the list requires fulfilment of some of the requirements of full membership (including independence from competing commercial activities), but does not imply any endorsement by the LMAA. In January 2017 there were 31 aspiring full members.

C. The LMAA Terms

1.11 The LMAA Terms were first introduced in 1984 and amended versions came into force in 1987, 1991, 1997, 2002, 2006, 2012 and most recently in 2017 ( contains flow

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charts setting out the usual procedure under the 2017 Terms). The Terms are flexible in that the parties and the arbitrators may agree to alter or dispense with any part of them. The combination of clarity, convenience and flexibility found in the LMAA Terms means that they are often chosen to govern arbitrations where the arbitrators are not members of the LMAA, for instance where the sole arbitrator is a practising lawyer. The current version (the LMAA Terms (2017))19 applies to all arbitrations commenced on or after 1 May 2017.20 The current Terms (like the previous LMAA Terms) largely reflect the provisions of the 1996 Act. Paragraph 7(a) provides a general rule (where the seat of the arbitration is in England and Wales) that:

[T]he arbitral proceedings and the rights and obligations of the parties in connection therewith shall be in all respects governed by the [1996] Act save to the extent that the provisions of the Act are varied, modified or supplemented by these Terms.

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