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New LMAA Arbitration Clauses

  • 8 March 2019 8 March 2019
  • Marine

The London Maritime Arbitrators Association (LMAA) published two new clauses at the end of November 2018. The first is a revised standard arbitration clause for incorporation into contracts, which is now to be known simply as the "LMAA Arbitration Clause". The second is a new "LMAA Arbitration Notice Clause" which is to be used in conjunction with the main arbitration clause.

New LMAA Arbitration Clauses

LMAA Arbitration Clause

The LMAA has pointed out that, although reference is often made in contracts to the “LMAA Arbitration Clause”, no clause bearing that name has been listed on the LMAA website for some time. However, this has now been addressed with the "LMAA Arbitration Clause". Under this new clause, parties may refer their disputes to English law and London arbitration, with proceedings being conducted strictly on LMAA terms current at the time the proceedings are commenced.

Its provisions do not mark any significant departure from the BIMCO/LMAA Arbitration clause except in:

(i) acknowledging that the seat of the arbitration is England, even in cases where the hearing takes place outside England; and

(ii) allowing parties to choose to conduct the arbitration under the LMAA Intermediate Claims Procedure for claims between US$100,000 and US$400,000, or such other sums as the parties may agree.

Parties should however be aware that by accepting the LMAA Arbitration Clause without amendments, they will be agreeing to the LMAA Small Claims Procedure for claims or counterclaims valued under USD 100,000, a figure that some may consider too large for such a simplified procedure.

LMAA Arbitration Notice Clause

Arbitration under the LMAA Terms is ad hoc. There is no registration or administration by the LMAA.  It is commenced by the claimant sending notice of arbitration to the respondent. In order to address issues which have arisen in relation to notices communicated by email, as illustrated by recent cases which have reached the Commercial Court, the LMAA has introduced a new "LMAA Arbitration Notice Clause" to be used in conjunction with the main arbitration clause. Its purpose is to bring further clarity on notices to commence arbitration proceedings, thereby reducing litigation in this area.

The clause provides that all notices in relation to any arbitration proceedings shall be treated as served if sent by email to addresses designated in the clause. The LMAA recommends that at least one individual, together with their individual email address, be named for service purposes, but adds that a general email address may also be included or used in the alternative. There is liberty to change the designated email addresses and, once legal representatives are instructed, their email addresses are to be used instead.

The LMAA Arbitration Notice Clause was published in response to recent disputes in the English Courts, where parties sought to challenge the validity of service by email on certain individuals.

These cases include Sino Channel Asia Ltd Respondent v Dana Shipping & Trading PTE Singapore (2017) in which the English Court of Appeal was asked to rule on the question of service of a notice of arbitration on a counterparty. The question before the court was whether a notice of arbitration passed to a counterparty’s agent could constitute effective service on that counterparty if the agent was not authorised to receive the notice. The Court of Appeal held that, in the rare circumstances of this case, the agent had both implied actual and ostensible authority to receive the notice of arbitration.

In Glencore Agriculture B.V. v Conqueror Holdings Limited (2017), the Court had no difficulty in finding that notice served by email to the email address of an employee who had left the company, did not constitute proper service. As a result, they allowed the charterer's appeal to set aside the arbitration award. The judge drew a distinction between individual email addresses and group or generic emails, which he said, give rise to a legitimate expectation that it will come to the attention of a person or persons authorised to deal with the issue. It was, according to the judge, illogical for the owner to reasonably believe that their notices were valid as (i) they ignored the internal arrangements between the company and the employee and (ii) it was subjective and contrary to commercial certainty. The owners failed to get any sympathy from the Court as they could have taken positive steps to find alternative email addresses or even send the documentation by post.

The LMAA Arbitration Notice Clause seeks to ensure notices and communications in relation to arbitration proceedings under the charterparty or contract in question are considered legally effective if served by email to at least one previously designated individual's email address and/or a general email account, or alternatively, solicitors or representatives expressly authorised to accept service of notices and communications. Parties may wish to consider amending the clause so that the LMAA Arbitration Clause prevails in the event of conflict with other clauses in agreements including charterparties, particularly a clause dealing specifically with communications.

The text of each clause can be found at the following link.

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