New LMAA Clauses Concerning Commencement of Arbitration

June 2019
Video article

In November 2018, the LMAA published two new clauses for use in charterparties. The clauses can be found on the LMAA’s website.

LMAA Arbitration Clause

The new LMAA arbitration clause is very similar to the BIMCO Standard Dispute Resolution Clauses. There is now a specific reference to a hearing taking place outside of England, and that if this does occur, it will not affect the seat of arbitration, which will remain as England.

The default figure for the LMAA Small Claims Procedure to apply is US$100,000 or less. Parties can opt in to arbitration under the LMAA Intermediate Claims Procedure in cases involving claims between US$100,000 and US$400,000. These amounts can be amended by agreement should the parties wish.

LMAA Arbitration Notice Clause

This clause is a completely new LMAA clause which addresses the service of arbitration notices, and provides for the service of notices of arbitration by email.

If this clause is used in a charterparty, then at the time of the fixture both parties should enter the correct email addresses they would like notices and any communications in relation to arbitration proceedings to be sent. This includes the sending of any emails that give notice of commencement of arbitration as well as emails discussing the appointment of an arbitrator. If there are any changes to email addresses, then the charterparty should be amended to reflect this. This should avoid the kind of problems that have arisen in a number of recent cases, where one party disputes whether an email notice of arbitration was validly served, on the basis either that the addressee was not authorised to accept service or was otherwise not the correct party to which to give notice.

Recent Case Law

The Commercial Court considered, in Glencore Agriculture BV v Conqueror Holdings Ltd (The Amity) [2018] 1 Lloyd's Rep 233, a dispute that arose between the parties under a voyage charterparty which contained an agreement to arbitrate on LMAA terms. Conqueror Holdings Ltd (“Conqueror”) served an arbitration notice by email to Glencore Agriculture BV (“Glencore”). The notice was sent to the email address of a junior employee at Glencore, who was employed in an operational/chartering role, and whilst emails had previously been sent to this individual concerning the voyage, the email commencing arbitration and further emails sent by Conqueror and the appointed arbitrator in relation to the arbitration all went unanswered.

When the arbitrator issued an award in Conqueror’s favour, Glencore applied to set it aside on the basis that there was no valid service of the arbitration notice, submitting that the employee to whom the arbitration notice was sent did not have authority to receive such documents. Conqueror argued that agency principles did not apply because they had served the notice directly on Glencore by writing to a Glencore email address.

The Judge made an order in Glencore’s favour and held that the award should be set aside. This was on the basis that there is a clear distinction between an individual business email address and a generic department email address. In this instance, service on the individual’s email address could not constitute valid service because the particular individual did not have express authority to accept service, and nor could authority be implied in this regard. The individual concerned had no more than a limited operational role concerning the voyage in question. It was therefore far more probable that an email sent to a generic company email address would come to the attention of a person or persons internally authorised to deal with them.

The new notice clause clearly aims to avoid these types of problems by nominating specific email addresses to receive notice.

Comment

When concluding a fixture, owners and charterers should give consideration to the default position in the standard charterparty form as to the dispute resolution and whether those provisions require amendment. If so, they should consider what arbitration provisions are most appropriate.

Members should take heed that previous communications with a particular individual concerning a charterparty will not necessarily mean that that person has legal authority to accept service of an arbitration notice. Incorporation of the LMAA Notice Clause is likely to be beneficial in eliminating the scope for challenge to the validity of service. Furthermore, care should always be taken when the time limit for commencing arbitration is approaching, as failure to serve an effective notice could result in the claim becoming time barred.

Article by Joanna Bailey

Syndicate Executive

Americas Syndicate