The LMAA Terms 2021: what's new for the end user?

The updated LMAA Terms came into effect on May 1st 2021, and in this article we will describe the key terms and changes.

The London Maritime Arbitrators Association (LMAA) has recently published a revised version of its terms of procedure that became effective May 1st 2021. The terms will apply to new arbitrations commenced after that date. While this article primarily addresses the changes made to the 'full' LMAA Terms, changes to the LMAA's ICP and SCP have also become effective as of the same date, and will therefore also be discussed in this article where we summarise what we believe to be the most important changes for end-users of the LMAA format.

What has changed?

While there are a number of minor changes, the four key changes for end-users are: (i) additional guidance on the preparation and content of witness statements; (ii) parties are now required to provide more detailed cost estimates within LMAA Questionnaires; (iii) formal recognition of virtual/semi-virtual hearings; and (iv) the ability of the LMAA president to 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 ("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 (Section 4, LMAA Terms 2021).

Why have the terms been updated?

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

While the Supreme Court has recently commented on the scope of arbitrator disclosure required, 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.

We summarise what we believe to be the most important changes for end-users of the LMAA format, through the following table:

Provision Comment
Para 8(b)(v)

New wording at the end of sub-paragraph (v) allows for two arbitrators to issue decisions, orders and awards in the event that the third arbitrator resigns or is no longer able to continue. This dovetails neatly with the new powers of the President of the LMAA (the "President") to appoint a replacement arbitrator, discussed below.

Para 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, then 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 matches the procedure in the model LMAA Arbitration Clause.  For lower value cases or cases with a Respondent who fails to engage, this is a useful development.

Para 12 – substitute arbitrator
(The arbitral Tribunal)

 

This change gives the 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.

We expect that this power will be used sparingly but it is a useful addition and potentially a faster avenue than applying to court for a substitute arbitrator (an option which remains in place).

Para 15 (c) & (d) – Virtual Hearings
(Arbitration Procedure)

The Terms recognise and allow for hearings to take place virtually/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 future where the option to reduce the costs associated with all or part of physical hearings can be utilised, where appropriate.

Para 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.

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

3rd Schedule – para 15

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

3rd Schedule – para 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.

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

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.

4th Schedule – intro

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.

4th Schedule – para 2(a)
– Factual Evidence

The new wording at para 2(a) of the Fourth Schedule, states that 'a witness statement should ideally be in the witness's own words' and that it should only: (i) contain evidence as to matters of fact which need to be provided by witness evidence and (ii) 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 long-standing 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 the witness has no direct knowledge of, rather than being an account of relevant facts from those with direct knowledge of them. This addition also reflects recent procedural updates in the English courts to address similar concerns.

While this addition is warmly welcomed, this 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.

6th Schedule

This is a new schedule which contains the LMAA Guidelines for the Conduct of Virtual/Semi-Virtual Hearings. The authors would expect that 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/semi-virtual hearing, some notable new guidance includes:

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

While this article primarily addresses the changes made to the 'full' LMAA Terms, but as noted above changes to the LMAA's ICP and SCP have also become 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: (i) Para 3(b) payment of the SCP fees is now a condition precedent to moving forward with proceedings; (ii) Para 7 now makes clear that the default position is that reasoned awards should be produced; and (iii) Para 9(c) – the wording has been revised to clarify that if the SCP is determined to be inappropriate and not to apply, then the existing sole arbitrator shall retain jurisdiction over the dispute and they may order that the dispute proceeds under the LMAA Terms 2021 or ICP 2021, as appropriate.