New changes to the LMAA and the ICC Arbitration Rules

Changes have been made to two of the more popular sets of arbitration rules currently in use; the LMAA Rules in the shipping sector and the ICC Arbitration Rules for international arbitrations.

The LMAA Rules:

From 1st May 2017, certain revisions shall apply to the LMAA Arbitration Rules, the Intermediate Claims Procedure and the Small Claims Procedure.  These changes will affect any LMAA arbitration commenced from that date.  The key changes are:

Constitution of the Tribunal:  The LMAA has now clarified that where both parties are to appoint an arbitrator and one party fails to do so within the specified time, then as per section 17 of the Arbitration Act 1996, the non-defaulting party may serve a 7 day notice on the defaulting party to appoint its arbitrator, after which the non-defaulting party’s arbitrator will be installed as sole arbitrator.

Concurrent Arbitrations:  There are now provisions for the time limits for service or submission to be shortened or truncated to minimise the delay and costs of submissions passing up and down charterparty chains in concurrent cases.

Settlement Offers:  The LMAA Rules now make it clear that Part 36 Offers (seen in civil Court cases) shall not apply to LMAA Arbitrations as they do in Court.  Often a party will make an 'Equivalent Part 36 Offer’ in an arbitration expecting the offer to necessarily carry the same costs consequences that would apply to such an offer in a Court case, and often Arbitrators go along with that interpretation.  This change makes it clear that a so called Equivalent Part 36 Offer in a LMAA arbitration is something different and will not attract the cost regime applied in Court cases by Part 36 of the Civil Procedure Rules.

Small Claim limit:  The limit for claims brought under the LMAA Small Claims Procedure is increased from USD 50,000 to USD 100,000.  Parties can still agree a different (including higher) limit if they want to.

The ICC Arbitration Rules 2017:

The ICC has introduced new Arbitration Rules from 1st March 2017.  The new rules respond to criticism of the ICC arbitration process as being bloated, slow and costly.

Now Tribunals have less time to prepare Terms of Reference and have to give reasoned decisions if requested by a party to do so.  

The most far reaching change, however, is the introduction of the Expedited Procedure Rules which automatically apply to each ICC arbitration commenced from 1st March 2017 where the amount in dispute is less than USD 2 million.  The new rules seek to truncate the arbitration process and reduce party costs by: accelerating the process for constituting a Tribunal; referring the dispute to a sole arbitrator even in the applicable arbitration clause requires a three person tribunal; removing the requirement of Terms of Reference; allowing the scope of submissions to be limited; avoiding disclosure; avoiding an oral hearing; and speeding up publication of an award.

Whilst the introduction of the Expedited Procedure Rules will be welcomed as a way to speed up the rather slow ICC process and reduce often heavy costs, as these rules will apply by default to arbitrations where less than USD 2 million is at stake, parties and advisers should consider if they want to opt out of these rules when drafting arbitration clauses, if for instance, a sole arbitrator or non disclosure of documents, would be inappropriate. 

If you would like more information about these developments, please contract Andrew Iyer at: [email protected] or on +44 (0)207 1007714.

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