studied law at Trinity College, Cambridge before qualifying as a
Barrister in 1979. Keen to obtain experience in the industry he joined
Steamship Mutual, a leading London P & I Club, where he headed up the FD
& D department, providing legal advice to ship-owners and charters
entered with the Club, including many in India. In 1988 he left the Club
to establish Consult Marine Ltd., an independent legal consultancy
providing advice and handling arbitration on behalf of clients in
maritime and commodity matters. At the same time he began to practice as
a Maritime Arbitrator, becoming a Full Member of the London Maritime
Arbitrators Association (LMAA) in 1990. Since than Clive has been
appointed arbitrator in more than 1500 cases and been a Committee Member
of LMAA for six years, overseeing the introduction of new LMAA Terms and
drafting the present LMAA Dispute Resolution Clause. He is also a panel
arbitrator of the China Maritime Arbitrator Commission and the Singapore
Chamber of Maritime Arbitration as well as being a qualified Mediator.
By way of background to this paper the following
facts should be noted:
most major forms of charter party, contract of
affreightment, ship sale and purchase contract and commodity contract
provide for the resolution of disputes by arbitration;
excluding cargo claims, 75 to 80% of those disputes
are referred to arbitration in London, and
80 to 85% of the disputes referred to arbitration
in London take place:-
before arbitrators who are Full Members of the
London Maritime Arbitrators Association ("the LMAA") and
on the terms of LMAA (currently the LMAA Terms
For those participating in international trade or
shipping, therefore, an understanding of arbitration, how it works and the
terms that apply to it is important if fullest possible benefit is to be
gained from this system of dispute resolution.
How did maritime arbitration develop?
Maritime arbitration began in the 17th and 18th centuries at the well known
Baltic Exchange in London. If two parties had a dispute they would agree to
refer that dispute to a Baltic Exchange broker who both parties knew and
trusted and who would have a lot of experience in shipping matters. The
procedure would be very simple. Often the two parties and the broker
(arbitrator) would sit down for a long lunch during which each party would
state their case to the broker. At the end of the meal the arbitrator would
tell them who he thought was right and what should be done. The parties
would have already agreed before lunch that they would be bound by whatever
the arbitrator decided and that would be the end of the dispute. The party
who lost probably paid for the lunch but I do not know this for sure!
What made arbitration attractive?
This way of resolving maritime disputes had many advantages. It was simple,
quick and cheap. It was certainly easier than taking a dispute to the law
courts. Legal cases could be expensive because of the lawyers' fees and take
a very long time to produce a result. Arbitration would be quick and cheap
and did not necessarily have to involve lawyers.
There were several other very important points for shipping people. Firstly,
if they went to court the dispute would be in "open court" which meant that
anybody could come along and listen to the details of the dispute and read
the judgment given by the court. This meant that a ship-owner or charterers'
washing was done in public and their problems became known to everybody,
including their competitors. If they lost a dispute everyone would know.
Arbitration, however, was private and confidential so that nobody would come
to know about the dispute and who won or who lost.
Another advantage of arbitration was that both parties could choose their
arbitrator and therefore knew that the person deciding their dispute had a
lot of relevant knowledge and experience in maritime matters. A judge in the
court on the other hand might never even have seen a ship in his life and
know nothing about the customs of the trade. He was not therefore so well
qualified to decide the dispute and might reach a decision that was not
For these reasons, arbitration became very popular in maritime and
What is the LMAA?
The London Maritime Arbitrators Association is an association of practising
maritime arbitrators that was founded in 1960. When it was established its
arbitrating members were mostly brokers used to having their lunch paid for
by parties in dispute along the lines mentioned above. Nowadays, the
association comprises about 45 Full Members and several hundred Supporting
In general terms, Full Members are the arbitrating members of the
Association whilst the Supporting Members are the users of arbitration
services, including lawyers in London and overseas, P&I Clubs, surveyors,
ship-owners, operators and traders.About one half of the Full Members are
full time arbitrators whilst the other half combine their work as
arbitrators with such other roles as consultants, brokers, surveyors or
What are the LMAA terms?
These are terms that govern the procedures to be adopted in the conduct of
maritime arbitration proceedings in London. The terms extend to all
procedural aspects of the arbitration from the very beginning, when the
arbitrators are appointed, through to the issue of an Award at the end of
the case. A copy of the current terms may be found at the end of this paper
or on the LMAA website at www.lmaa.org.uk.
The need for change
By the early 1990's, many of the advantages of arbitration had been eroded
as the process came to be dominated by lawyers apparently determined to make
arbitration more legalistic and to reflect High Court proceedings. As a
result, arbitration became slower, more expensive and generally less
This was seen as a problem in need of action as owners, charterers and
traders threatened to look elsewhere to have their disputes resolved.
The Small Claims Procedure
One of the first steps taken to deal with this problem was the introduction
at the end of the 1980's of the LMAA Small Claims Procedure. This was
introduced to cover disputes involving relatively modest sums, initially
ones of up to US$25,000 but now up to US$50,000 (and often more), for a
fixed fee payable in advance to the arbitrator. This procedure limited the
number of submissions that could be served to claim submissions, defence
submissions and reply submissions and required the service of these
submissions to take place within a strict timetable. It also limited to a
modest sum (presently £2,000) the level of costs that the successful party
could recover in order to encourage the parties (or more particularly their
lawyers) to keep their arguments to the essential minimum. In this way the
procedure was streamlined and simplified, and in a manner that permitted the
parties themselves, or their overseas lawyers, to handle the case from start
Importantly, the parties agreed to waive any right of appeal from the Award
thereby making the Award truly final. This procedure has proved very popular
and is now included as part of the BIMCO/LMAA Dispute Resolution clause. The
terms of the procedure are regularly reviewed and revised and were most
recently revised earlier this year.
The Arbitration Act 1996
The next major development came with the Arbitration Act of 1996. Before
1996, arbitration in England was governed by the Arbitration Act of 1950
together with various amendments to it made mostly in the 1970's. The 1996
Act was drafted with a view to bringing together in one
statute the various changes made over the years to the 1950 Act as well as
addressing some of the criticisms of the old arbitration system made by
practitioners and users of that system.
The 1996 Act has been the subject of numerous papers over the years and is
not dealt with in any academic sense here. A major feature of the Act,
though, was that it gave the parties a greater say in determining how their
arbitrations should be run and limited the scope of appeal to the courts. It
also widened the arbitrators' powers in a number of ways, most particularly
in giving them the jurisdiction, (i) to determine their own jurisdiction
(i.e. to decide if they have the power to determine a particular dispute
referred to them), (ii) to award compound interest on sums awarded and (iii)
to limit the circumstances in which security for costs may have be posted by
a claimant (a tangible benefit for claimants in India as it meant that funds
need not necessarily be tied up as security for costs whenever they pursued
claims in London arbitration).
While the 1996 Act marked a change in direction in arbitration matters, it
was followed by the far more widely publicised Woolf reforms of High Court
proceedings. These reforms were to a large extent prompted by similar
considerations to those that led to the 1996 Act – delay, excessive cost and
The Woolf reforms did not directly affect arbitration but were limited to
High Court proceedings. Indirectly, though, they did affect arbitration as
users of the arbitration system were able to see the good and bad aspects of
these new ideas in practice and adopt them in the way they dealt with
arbitrations. Also, the Woolf reforms forced many lawyers to change the way
they dealt with cases, in particular by having to provide far more detail of
disputes at an early stage of each case.
This was of benefit to arbitrators because it meant that the lawyers
handling arbitrations became more receptive to positive ideas for the
handling of arbitration. Just as importantly, they became more accustomed to
the fact that the cases could no longer be run on the basis that every
conceivable point or argument should be raised, however speculative, in the
hope that one of these might succeed. As a result, the Woolf reforms
prompted changes in the way in which arbitration in London was conducted.
The LMAA Terms (2002) and (2006)
The main concern behind the latest amendments made to the LMAA Terms, in
2002 and 2006, was the ever increasing volume of interlocutory
correspondence generated during the course of arbitrations. This not only
slowed down the progress of cases but also added to the general volume of
arbitrators' work, increasing costs and diverting arbitrators' attention
away from their primary function of writing Awards and deciding disputes. In
short, the system was being blocked by mostly avoidable correspondence
involving the arbitrators.
In an effort to deal with this the LMAA therefore introduced a set of
Guidelines in 1999 to be applied by arbitrators in references conducted on
LMAA terms. These were introduced on a trial basis for two years and proved
successful in cutting down the volume of unnecessary correspondence in
arbitration proceedings. The Guidelines were then formally adopted as part
of the LMAA Terms (2002) and fine tuned in current the LMAA Terms (2006).
The most noteworthy points are contained in the Second Schedule of the LMAA
Terms (2006), a copy of which is to be found at the end of this paper, in
claims are now in most cases to be served in an
informal style accompanied by relevant supporting documents rather than
the old style formal pleadings that merely set out the bare facts with
little elaboration of the arguments pursued and with documents only
exchanged after pleadings had been completed towards the end of the
mere denials of an opponent's allegations are no
longer acceptable - if an allegation is denied then reasons must be
given for this denial;
there is an increased emphasis on communication
between the parties before any involvement of the arbitrators with the
requirement that no applications may be made to the arbitrators unless
the party making the application first tries to agree those directions
with the other party;
once submissions have been closed the parties are
to complete a questionnaire setting out details of the issues between
them and the information needed to enable the arbitrators to make
appropriate directions facilitating the prompt conclusion of the
reference. This includes a statement of costs incurred to date and
likely to be incurred to the conclusion of the case. The questionnaire
is to be signed by an authorised officer of the parties so that we may
be sure that the parties themselves are aware of the status of the case
and costs involved in pursuing it;
preliminary meetings before the arbitrators are
discreet costs orders may be made against any party
whose actions have caused unnecessary costs to be incurred (even if they
eventually win the case).
The impact of these changes on parties in India
An important objective of these changes has been to make the arbitration
process in London more accessible for parties and lawyers outside the UK. We
know that lawyers in London are not cheap and that a system that requires
the involvement of lawyers there in cases both great and small will quickly
lose its attraction to overseas users.
We also recognise that many overseas parties prefer to work with their local
lawyers when a dispute arises. With these recent changes to the arbitration
procedure this has now become possible in many more cases than before and we
have immediately seen an increasing number of cases where all of the legal
work and submissions are undertaken by lawyers based outside England. This
has made arbitration less costly and considerably more user friendly for
those able to take advantage of these changes It will not now therefore
always be necessary for parties in India to consult lawyers in London
whenever a problem arises and we will be looking in the future to encourage
greater involvement of overseas lawyers in the London arbitration process by
holding seminars and workshops around the world to highlight some of the
more practical aspects of the workings of London arbitration.
Another tangible advantage of the recent changes to the arbitration
procedure in London has emerged, as anticipated, from the requirement that
the parties disclose to each other far more of their case at an early stage.
The effect of this has been to bring forward the point in time at which the
parties are able to seriously, and advisedly, consider the merits of the
dispute and entertain thoughts of settlement, a process that we are keen to
encourage at several different stages of the arbitration process. This is
not mere window dressing as we have added teeth to this process by imposing
the sanction of adverse costs awards where it is felt that a party has acted
unreasonably during the course of the reference, whether by dragging their
heels or by raising patently unmeritorious arguments. In this way we have
seen that more cases are now being settled at an earlier stage than was
previously the case (and when far fewer costs have been incurred), rather
than at the eleventh hour or later.
Another factor that has, and will continue to, benefit users of London
arbitration in India has been the advances made in technology.
Correspondence and submissions are now regularly exchanged by e-mail,
avoiding delays in communication, while the use of video conferencing means
that witnesses need not always come to London if their commitments make it
impossible to attend the hearing. This avoids scheduling delays that might
otherwise occur awaiting convenient dates for the attendance of various
witnesses while also reducing costs.
As a result of these changes I believe that arbitration is now a far less
daunting and more commercially attractive process than it had become, while
at the same time retaining the benefits that made it popular in the first
Other forms of dispute resolution
Arbitration is not, of course, the only form of dispute resolution.
Originally, arbitration was seen as an alternative to High Court proceedings
and the option of having one's dispute determined by the High Court in the
first instance remains. Some lawyers point to the advantage of greater legal
certainty and predictability in the judgments of the High Court and to the
fact that the parties do not pay the judges or court's fees whereas, of
course, in arbitration they do so.
However, experience does not suggest any greater consistency or reliability
of the judgments of the High Court, particularly where the judges may not be
as experienced in commercial matters as arbitrators are. Also, High Court
proceedings are conducted in open court so that the confidentiality enjoyed
by arbitration proceedings does not apply to any High Court actions. This is
often cited as one of the advantages of arbitration over High Court
For some time articles have been written about alternative methods of
resolving disputes and, in particularly, mediation. To date, though,
mediation has not made a significant impact as a means of resolving maritime
disputes although that is not to say that it is without its advantages and
potential for the future.
Put at its simplest, mediation is the intervention of a neutral third party
as an intermediary between two or more parties in dispute with a view to
helping them find an amicable solution to their differences.
In its classic form, mediation requires the personal attendance of the
parties before the mediator (and in the case of commercial disputes the
individuals attending must be decision makers with authority to settle).
This is seen as an important factor in the relatively modest use of
mediation as a means of resolving disputes between companies in different
countries, particularly where the sums involve are not great.
The mediator will normally hold an opening session at which the parties are
present. Each party in turn sets out their case and explains why they
consider that they are right. This session is often the most dramatic as the
tensions that may have built up before the mediation session spill over into
the parties' presentation of their case.
Although this may seem a rather unsophisticated way of dealing with matters,
this opening session is often very helpful because once the parties have
aired their grievances they often tend then to become calmer and more
After the first joint session the mediator will then meet each party on
their own (in caucus), in turn. He will discuss various aspects of their
case with them and try to encourage them to see for themselves the relative
strengths and weaknesses of their case. He will also discuss with them what
evidence or documents in their possession that may be shown to the other
side. Armed with such documents and any particular comments or proposals
that each party may wish him to make, the mediator then moves on to do the
same with the other party. By means of this "shuttle diplomacy" the
intention is for the parties to gradually move together until they reach a
point at which a settlement is in sight.
If the mediator considers that there is no prospect of settlement he will
draw the mediation to a conclusion. Where, however, the parties reach, or
are in sight of, an agreement he will call them back for a further joint
session to see whether a final agreement wording can be reached. If this is
achieved, the agreement will be recorded in writing and signed by the
parties and bind them both.
The entire mediation is conducted without prejudice so that nothing that is
said or done by the parties during the course of the mediation may be
referred to in any later legal proceedings.
Although still not widely used as a means of resolving disputes, mediation
does have certain advantages and may be of benefit in the following
The LMAA Mediation Terms (2002) may be found on the
LMAA website at www.lmaa.org.uk.
There are also a number of other forms of dispute resolution that may be
suited to particular types of problem, such as arb/med where an arbitrator
is appointed but adopts the role of mediator as the reference proceeds with
the parties then being bound by his conclusions if unable to resolve the
matter themselves in the mediation session of the reference. Another means
of resolving disputes is for the parties to agree to refer a set of facts to
an arbitrator or some other party for their opinion, without the requirement
of any formal award. Equally there are various means of settling disputes
where both parties are willing to make offers but not to be the first one to
do so. Obviously, though, a degree of co-operation between the parties is
needed to achieve any agreement to proceed in these ways.
Choosing your advisers
It is no exaggeration to say that the choice of legal advisers is a very
major consideration in any dispute situation. The quality of advice received
and the manner in which a case is handled may make the difference between
winning and losing a case, or at least of doing so cost effectively. For
this reason careful thought should always be given to the choice of adviser.
Equally, it is important for the parties to know what their advisers may be
doing or saying on their behalf in any arbitration proceedings. The
instruction of lawyers or advisers is only the beginning of the arbitration
process and it would be wrong to assume that the matter may simply be left
in the advisers' hands. There is no reason why advisers should not copy in
the party instructing them to all correspondence so that the client can make
sure that the case is being handled in a manner that meets their approval.
It is surprising to report how easily a case may be driven off-course, or
become far more costly than it should be, through over-enthusiasm, lack of
commercial perspective or downright stupidity on the part of advisers and
for this reason a hands-on approach to the conduct of ones own disputes is
to be encouraged. In this way, hopefully the objectives sought when entering
into any dispute may be best achieved.
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