Briefing ArbitrAtion

61www.thebaltic.com Autumn 2013

Working capital the London maritime Arbitrators Association’s ian Gaunt explains why arbitration is more important than ever in today’s cash-strapped markets, and why London is still the dominant seat

Last year the deputy secretary of the China Maritime Law Association estimated that 2,000 disputes involving Chinese shipbuilding contracts

had been decided in London arbitration, and there remains a large overhang of cases resulting from the sharp change in market conditions in 2008-2009.

Statistics for 2012 showed little decline in the number of awards, but now the glut of arbitration concerning Chinese and Korean newbuildings is beginning to abate, and this year fewer of these cases are being referred to arbitration. There are signs that numbers could tail off further from the end of 2013, leading to more normal conditions in the dispute resolution field by 2015.

Accordingly, if there is a reduction in London awards next year or the year after, this seems more likely to be due to the run-off of shipbuilding cases than to a shift of arbitration cases to other locations.

The period since 2009 has also seen many cases involving the premature termination of time charters. These too seem to be declining. By contrast, however, there has been no reduction in sale and purchase, demurrage and other traditional maritime claims.

London continues to be the preferred forum for the arbitration of maritime disputes, even though other centres compete for the attention of owners, charterers and brokers. In 2012 alone 650 London awards were issued by tribunals including one or more full members of the London Maritime Arbitrators Association (LMAA). This compares with 69 cases in total between 2009 and April 2013 as reported by the Singapore Chamber of Maritime Arbitration; 136 cases of all types in 2012 at the Hong Kong International Arbitration Centre; fewer than 50 awards of the Chambre Arbitrale Maritime de Paris in that year; and around 100 maritime cases in New York arbitration.

city centre The factors that favour London include the experienced and varied body of arbitrators in London with qualifications as naval architects, marine engineers, shipbrokers or insurance specialists, as well as lawyers. London arbitrators also have an outstanding reputation for impartiality, which results in few challenges to the arbitrators appointed by the parties. Arbitrators do not therefore normally need to be flown in for the purposes of arbitrating in London.

Much maritime business is now of course carried out in the Asia-Pacific region, where, particularly since 2000, there have been rapid increases in the demand for transportation of raw materials and finished goods for export. Dispute resolution centres in the region may be expected to attract more cases between local parties. However, as London arbitrations now frequently hear witnesses by video link, the Asia-Pacific centres do not necessarily

Briefing ArbitrAtion

63www.thebaltic.com Autumn 2013

ian gauntis the honorary secretary of the London Maritime Arbitrators Association. Ian has been a full-time arbitrator since 2008, and was previously director of the UK P&I Association.

enjoy any significant advantage by virtue of their location near the action, even in the few cases that involve oral hearings.

Speed, as well as accuracy of decisions, is also important, and expedited procedures are available to make sure cases can be determined quickly where necessary, even though a small number of awards are being held up by pressures on the most popular arbitrators.

LMAA terms and procedures are well respected, and they are regularly reviewed in the light of experience. The procedures are designed to be practical and to be applied with a minimum of administration. This is a distinct advantage over the more interventionist approach of arbitrations administered by institutional bodies. The supportive attitude of the English courts to the arbitration process is

also a significant factor in the choice of English law and London arbitration, and the body of case law that has grown up from several centuries of commercial cases often helps to give clarity to wordings of standard documents and practices used by commercial parties.

paved With gold The costs of London arbitration are comparable with those of other major commercial centres. In fact, according to the P&I clubs, which have experience of funding arbitration in most available jurisdictions, costs in London are often cheaper than in competing centres. The costs of hearings are undoubtedly high, as they are elsewhere, but most cases (80% in terms of awards) are decided on documents only, making the process much cheaper.

In arbitrations on the LMAA Terms, the costs are not prescribed by any institution and are largely in the hands of the parties and their lawyers. Experienced commercial parties can, if they choose, manage the process

with their external lawyers in a way that minimises unnecessary playing to the gallery, as excessive and acrimonious exchanges are unlikely to impress experienced arbitrators.

Although it is principally for the parties to run the preliminaries to an arbitration, arbitrators too have a role in case management. Early case-management meetings may be appropriate to confine the real issues in a case to the essentials, and thus prevent the unnecessary debate of irrelevant points. Again, the experience and confidence of London arbitrators is important when selecting a seat for an arbitration when a contract is formed.

The availability of expert witnesses in London, with particular experience in the maritime industries, is also important. The use of a single joint expert who is instructed by all the parties to provide an opinion on

defined issues in the proceedings can be a useful way to reduce the expense of conflicting oral expert testimony. In cases where more than one expert is appointed, it may also be efficient for the arbitration tribunal to require “hot tubbing”, a procedure in which experts are gathered together to be cross-examined on specific questions rather than heard separately.

When selecting the forum for arbitration in a commercial agreement, it’s important to consider the skill and competence of the courts in that jurisdiction. In arbitration with a London seat, the specialist experience of judges of the Commercial Court continues to be an advantage.

confidential casesThe number of appeals from arbitration awards in maritime cases reaching the English courts has fallen since the passing of the Arbitration Act 1996. This is seen as a positive development in some quarters, as it suggests a finality to the arbitration process. Others are concerned that the confidential nature of arbitration and the reduction in the number of reported court decisions will curtail the development of commercial law based on reported cases. Arbitration awards may, however, be reported with the agreement of the parties, and it is hoped that more parties will be willing to agree to this. Nevertheless, to the extent that confidentiality is seen as a reason to adopt arbitration rather than public court procedures, the reluctance of parties to allow awards from London arbitration tribunals to be published is well understood.

Directly and indirectly, international maritime arbitration in London is a major contributor to the UK’s invisible earnings and a significant part of London’s maritime services. The LMAA will adapt to the demands of the international maritime industry and can confidently look forward to London maritime arbitration continuing to underpin London’s position as the world’s leading provider of maritime services, even as the nature of disputes changes with the market conditions of the future.

in arbitration with a London seat, the specialist experience of judges of

the Commercial Court continues to be an advantage

c h o i c e o f t e r m s the London maritime Arbitrators Association offers not only the full Terms 2012, which may be appropriate to deal with larger and more complicated claims, but also a Small Claims Procedure 2012 (SCP), designed to enable a sole arbitrator appointed by the parties or by the president of the LmAA to deal with small and less complicated claims.

the guidelines for this popular, fixed-fee procedure indicate that the value of claims should be $50,000 or less, but in practice many commercial parties opt for the SCP and set higher limits.

the LmAA has also adopted an Intermediate Claims Procedure 2012 to deal with medium-sized claims that deserve a fuller procedure than that provided by the SCP but which do not, on grounds of proportionality, justify the full procedure offered by the LmAA Terms.