LMAA arbitration - new intermediate claims procedure


Published: 13 March 2009

The LMAA is a well established and much used forum for resolving disputes for the shipping industry. LMAA arbitration has until now been available as a “full” arbitration, but for claims below a certain amount (usually agreed to be USD 50,000) the Small Claims Procedure has been available. The Small Claims Procedure has the advantage that references to small claims arbitration can be dealt with rather quickly, on documents alone, before a sole arbitrator and, significantly, a cap on the costs which would be incurred.

Under the Small Claims Procedure, the applicable limit in terms of the amount in dispute is USD 50,000, but nothing prohibits the parties to a contract from agreeing on a higher level e.g. USD 100,000. A higher level (at least, if it is significantly higher) may, on the other hand, mean that arbitrators decline to be appointed.

The LMAA has now introduced an “Intermediate Claims Procedure 2009” which is designed for slightly larger claims (although below USD 400,000) and is intended to be a somewhat “fuller procedure”  that goes somewhat beyond the limits set for the Small Claims Procedure but, on the other hand, does not necessarily need to be referred to an arbitration under the “full” LMAA terms.

It is also the intention that this new procedure should be predictable and “provide its own momentum” (fixed time limits and strict rules for time extensions apply) and also ensure that costs are proportionate to the amount involved and the costs are in fact capped. The parties should be able to predict their maximum liability for costs.

This article is not intended to set out a detailed explanation of this new procedure but merely points out some of the most relevant features:

  • The parties must have agreed to refer the dispute to arbitration under this particular procedure (and the usual arbitration clauses will therefore have to be amended accordingly).
    BIMCO have just published recommended additional wording which can be added to the usual BIMCO Dispute Resolution/Arbitration Clause.
  • The amount in dispute should be between USD 100,000 or any applicable agreed upper limit under the Small Claims Procedure (the minimum amount in dispute) and the below USD 400,000 (the maximum amount in dispute). The parties are (as with the Small Claims Procedure) free to agree other minimum and maximum limits.
  • The parties can freely agree on the composition of the tribunal (if there is no agreement on this, the tribunal will consist of three arbitrators).
  • Time tables are strict: claim submissions must be served within 14 days of the appointment of any second member of the tribunal (or the appointment of a sole arbitrator) and defence submissions will have to follow within 28 days and reply submissions within a further 21 days.
  • Requests for extension of time to serve submissions will have to be applied for before expiry of any applicable time limit (otherwise the tribunal may, even of its own motion, notify the defaulting party that compliance (i.e. service of a particular set of submissions) must be made within a fixed period which can maximum be 21 days).
  • It is clearly intended that these references shall be conducted mainly on documents alone – there is no automatic right to an oral hearing, and oral hearings will only “exceptionally” be held.
  • In the rare instances where oral hearings are allowed, they should be limited to a maximum of five hours total.
  • There is no formal stage of disclosure. Relevant documents must accompany the first claim submissions (whether or not things are favourable to the party itself). A request for documents from the other side must be included in the first submissions.
  • Witness statements (on fact) and expert evidence are limited in scope.
  • The rules specifically mention that the intention is that the award will be made within six weeks of the last submissions.
  • The parties’ costs will be awarded on a “summary and commercial basis” in the tribunal’s absolute discretion, but the rules establish that the parties’ recoverable costs are to be capped. Neither party can recover more than an amount equivalent to 30% of the claimants’ monetary claim (increased to 50% in the exception cases where there is an oral hearing).
  • The tribunal’s costs will consist of an appointment fee and an amount which cannot exceed 1/3 of the total at which a party’s costs are capped for sole arbitrators or 2/3 of the capped costs for 2- or 3-man tribunals.