A question of time and money

THE London arbitration scene has recently been criticised for allowing too much scope for wasting time and money. Addressing the problems encountered during the arbitration process, the London Maritime Arbitrators Association (LMAA) has introduced new procedural guidelines to help iron out some unwanted creases.

Speaking at a recent seminar in London, Mark Hamsher, LMAA president, warned that, "LMAA arbitrations are in danger of being overwhelmed by unnecessary interlocutory exchanges and applications," with some arbitrators receiving between forty and sixty faxes or letters in one day. Despite a large number of these being unnecessary, they all need to be looked at, demanding a considerable amount of the arbitrators' time and running up significant costs for all involved. What is causing concern among LMAA arbitrators is the impact this has on their ability to produce awards within acceptable time limitations.

To illustrate the point, the LMAA organised a mock arbitration. The dispute in question was based around the time charter of the Blue Chip and alleged under/over payment of hire. Insult, Gooden & Co, Honest, Day & Long and Dot Com Dot Co, were just some of the parties involved, providing a humorous but effective insight into the problems encountered during the arbitration process and how they can be overcome.

It is not only excessive documentation that is responsible for slowing down the process. Although, to use Hamsher's words, "solicitors are unlikely to spontaneously start exercising self-restraint and initiating constructive dialogues with their opposite numbers," the need to persuade solicitors to talk to each other was also highlighted. The resistance by solicitors to pick up the phone to discuss matters directly, in an attempt to find a quicker, smoother solution, is also hindering the process.

Long pleadings for adjournment due to favoured counsel being unavailable are also slowing down the process. The LMAA has highlighted the need to examine how integral the favoured counsel is to a case, bearing in mind that proceedings could be postponed for months on end until a convenient date is finally arrived at.

This is one area in which litigation offers some real benefits over arbitration. Whereas extensive time can be lost in the arbitration process in finding a date suitable for all the parties concerned, in litigation the court fixes the date and the parties have to be present.

The availability of expert witnesses can also cause unnecessary delays. Video conferencing provides just one alternative route to overcoming this hurdle, although attention must be paid to its suitability for cross-examination, for example, to avoid favouring one party over another.

The drive behind the new LMAA guidelines is to encourage the use of common sense and to make parties realise that not everything is up for debate. Having received approval from all LMAA members, the guidelines will be applied for two years and reviewed. Following extensive feedback as to how they work in practice, this could lead to an amendment of the LMAA terms.

The introduction of the Woolf reforms and new Civil Procedures Rules (CPR) has gone some way to identifying how delays in the legal process can be smoothed out. Although aimed at litigation rather than arbitration, "these reforms, following on the heels of the 1996 Arbitration Act, cannot be ignored by those involved in LMAA arbitrations," says Richard Lord, barrister at Brick Court Chambers.

The time and money lost to interlocutory applications, both in litigation and arbitration, was particularly recognised by Woolf. "The power of the court, on hearings of one day or less, to order costs to be assessed and paid by the losing party within fourteen days is being used, and with considerable effect," says Lord, and in so doing it is opening the eyes of solicitors, counsel and clients to the costs of such applications.

Prior to the 1996 Arbitration Act, arbitration was criticised for being too legalistic and too expensive, and for allowing too much interference by the courts. "The Arbitration Act sought to get rid of court interference but has not yet addressed the expense of arbitration or its legalistic nature," says David Greene, partner at London-based commercial law firm Edwin Coe and member of the Civil Procedure Rules committee. "The fault of the latter often lies with arbitrators themselves."

In the past, there have been calls for judges to be more like arbitrators, imposing penalties and time delays. Now the reverse appears to be the case. "Lord Woolf identified litigation as being too expensive, too long, too complex and too unpredictable. He proposed the cures of avoiding litigation, simplifying the proceedings, reducing the costs, imposing proportionality and cost penalties. Arbitrators would do well to pick up on this and take these ideas into arbitration," says Greene.

As one of the most significant changes brought about by Woolf, mediation is enjoying a gradual but deliberate renaissance within the shipping industry as a means of settling cases quickly and cost-effectively. A recent MORI CEDR Civil Justice Audit revealed that 78 per cent of in-house lawyers believe mediation should be required at some point if a business dispute goes to court, reflecting the increasing acceptance within legal circles of the role it has to play. Although in shipping the commercial courts are largely responsible for the drive towards mediation, pressure from clubs and insurers to cut costs through the use of ADR will prove to be increasingly instrumental in its future use in maritime cases.

One debate which is currently hotting up is how far down the line the court can go under Woolf, not only to recommend mediation but also to require parties to undertake it. While the courts are under pressure to be seen to advise parties to opt for the mediation route, all parties concerned must be consensual. Article 6 of the European Convention states that all parties to a case must get a fair trial and access to the court. If this access is denied by being forced into mediation, this may amount to a breach of the Human Rights Act, which comes into full force on October 2, 2000.

Legal processes can be expensive and time-consuming. It falls to the arbitrators to exercise their role, and power, in identifying the key issues at an early stage and to impose restrictions on both time and cost where appropriate.

Maritime London at Posidonia

The Lord Mayor of London will visit the Posidonia exhibition in Piraeus in June and host a party. This reflects the fact that the Maritime London stand will be twice the size it was in 1998 and will be, once again, hosted by the Baltic Exchange. One of the aims of Maritime London is to raise the profile of the multi-disciplinary maritime services that London has to offer, particularly to foreign investors and jurisdictions. Representatives from the shipping community in London will be taking their turn to meet and greet visitors on the stand.