London arbitration looks to its strengths

THE London Arbitration Act 1996 has now been with us for over two years. It has been a force for good and it has brought a breath of fresh air into the way that maritime arbitrations are handled, although there is still some resistance to that notion. This, in conjunction with steps taken by the LMAA itself as a result of the act, ought to secure the position of London as the leading centre of maritime arbitration in the world.

London developed as a maritime arbitration centre for the obvious reasons that many shipowners were based there, their ships were traded on the Baltic Exchange, and their hull and P&I insurance was placed in London. To the extent that other expertise - such as maritime lawyers, surveyors, engineers, naval architects etc - needed to be called on, that was also readily available.

Despite the changes of the last twenty years, London has remained, by a clear margin, the pre-eminent centre of maritime arbitration in the world. In 1997 the number of appointments to full LMAA members amounted to 3,191, with 1,046 awards being published, up from 919 in 1996.

In most of the cases dealt with in London, neither party will be UK resident.

There is of course competition from abroad and centres such as New York, Paris, Beijing, Hamburg and Hong Kong are well-established. Competition is good for the consumer, and so is diversity of choice.

As well as competition from abroad, there has also been criticism that maritime arbitration is not what it once was - that the simplicity of the process has been lost and that it has become more complex, slower and more expensive.

There is a clear and unambiguous duty on all those involved in the arbitration process to get on with it quickly, efficiently, fairly and at a reasonable cost.

These are criticisms that the London Maritime Arbitrators Association takes very seriously, and it has taken - and continues to take - measures to address them in a structured programme designed to maintain the attractions of London as the leading forum for maritime arbitration.

The very first section of the 1996 act sets out the general principles on which it is founded, and according to which it is to be construed. The section states in part that:

(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;
(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest .."

There is also only limited intervention by the courts, essentially where:

(i) a decision is obviously wrong as a matter of law; or
(ii) the question is one of general public importance and the decision of the tribunal is open to serious doubt. It must also be just and proper for the court to intervene. An award may also be challenged where there has been a serious irregularity affecting the tribunal, the proceedings or the award.

The act sets out for the first time the general duties of arbitrators:

(a) to act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting their case and dealing with that of their opponent, and
(b) to adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.

The act makes it clear that the tribunal is bound to comply with this general duty in conducting the proceedings, in all its decisions on procedure and evidence and in the exercise of all other powers conferred on it.

The parties themselves have a parallel duty under Section 40 to "do all things necessary for the proper and expeditious conduct of the arbitral proceedings." This includes complying without delay with the orders and directions of the tribunal.

In other words, there is a clear and unambiguous duty on all those involved in the process to get on with it quickly, efficiently, fairly and at a reasonable cost.

It is for the tribunal to decide all procedural and evidential matters, subject to the right of the parties to agree any matter. This gives the arbitral tribunal an extremely useful tool.

Arbitrators are prepared to use these new powers by making orders which parties will have to respect - or pay the price.

Arbitrators have repeatedly been told by Commercial Court judges that they will be backed by the courts if they make full use of the powers available to them, provided they observe the principles of natural justice.

To quote the international commercial arbitrator, Arthur Marriott:

"If arbitrators have the courage of the convictions of those who promoted this act, Section 33 and the specific powers of decision given to arbitrators under Section 34 will give them all the support they require to do justice; and to do so economically and speedily."

I suggest that there is an increased willingness on the part of maritime arbitrators to develop new procedures, in accordance with the general duty imposed on them under the act, fortified by the knowledge that they will, save in the unlikely case of a breach of the rules of natural justice, be backed by the judges of the Commercial Court.

It is still too early to say exactly how the act is working in practice. Arbitrators, professional advisers and users are generally aware that a new approach is required, to ensure that the object of arbitration as defined in the act - "the fair resolution of disputes .... without unnecessary delay or expense" - is achieved. That sense of awareness is obviously to be welcomed.

The LMAA terms (1997)

As most readers will know, the LMAA has revised its terms and produced the LMAA Terms (1997) to take account of the changes introduced by the 1996 act.
The 1997 terms give arbitrators rather greater powers than they have under the 1996 act. They can limit the number of expert witnesses to be called, or exclude expert evidence altogether. They can also - and this is an important power - direct that separate references be heard concurrently where they appear to raise common issues of fact or law. The additional powers are to be exercised in suitable cases "so as to avoid unnecessary delay or expense, and so as to provide a fair means for the resolution of the matters falling to be determined".

With the right approach and an element of goodwill, cases can be brought on for hearing very quickly indeed. Recent LMAA newsletters have contained examples of cases requiring an urgent decision being brought on for expedited hearing, with the decision being handed down orally at the end of the hearing, and full written reasons following within days. It has been gratifying to see similar reports appearing in a number of solicitors' newsletters.

I suggest that there is an increased willingness on the part of maritime arbitrators to develop new procedures ... fortified by the knowledge that they will be backed by the judges of the Commercial Court.

There is of course nothing new in this - such expedited hearings have been a feature of London maritime arbitration for many years. But these reported examples do go some way to providing a counter-balance to the negative publicity that has been given recently to the broader problem of delay in publication. That is something that the LMAA is very aware of and has been working hard to rectify with, I think, some success. Those efforts must obviously continue.

Mention should also be made of the Small Claims Procedure and FALCA, both of which are designed to provide alternatives to a full-blown arbitration.

The Small Claims Procedure is becoming increasingly popular - 115 new small claims procedure appointments were made, and 109 published, in 1997. The figures for 1996 were one hundred new small claims procedure appointments and 81awards published.

FALCA is an intermediate procedure between a full-blown arbitration and the small claims procedure. After a slow start it has now been used, and the first awards under it are being made.

The future

Looking to the future, the aim must be to maintain London as the leading maritime arbitration centre worldwide. London will only do that if it maintains the confidence of its users and ensures that it provides an impartial, speedy and cost-effective service which retains intellectual credibility. To that end, it needs to keep its procedures under review, as it has always done, with regular revisions to the LMAA terms. Perhaps more importantly, London must continue to develop new procedures, both of its own initiative and with the help of the parties and their clubs, lawyers and advisers.