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The relevance of new LMAA Terms for shipbuilding and offshore construction

The London Maritime Arbitrators Association (LMAA) has issued a new edition of its Terms, which will govern all LMAA arbitrations commenced after 1 May 2017.

The LMAA is the pre-eminent body for shipbuilding and offshore construction disputes. A sub-committee of the LMAA under the chairmanship of David Owen QC, a full time arbitrator with experience of shipbuilding and offshore construction disputes, drafted the 2017 Terms taking the approach of “if it ain’t broke, don’t fix it”, because the previous edition worked well for many arbitrations covering a wide range of disputes.

The driver behind the changes seems to be improving efficiency and cost-effectiveness of arbitration proceedings. For example, the 2017 Terms now incorporate the LMAA’s existing guidelines on promoting cost-effectiveness and efficiency, known as the Checklist. Furthermore, the 2017 Terms require the parties to provide a separate breakdown of actual or estimated fees for solicitors, counsel and experts when completing the LMAA Questionnaire.

Subsequently, if the tribunal considers costs, the 2017 Terms expressly provide that it may consider any unreasonable or inefficient conduct by a party (which could include failing to comply with the Checklist), and the parties’ cost estimates in the Questionnaire. They therefore actively discourage such conduct and encourage the parties to consider costs seriously.

The 2017 Terms also hone the timing of certain procedural steps, which will assist shipyards and buyers who need to resolve their disputes quickly if, for example, their dispute concerns the on-going construction of a complex offshore unit. Firstly, if concurrent arbitrations are on foot (perhaps commenced by different SPV buyers under the same ownership and control in relation to sister vessels under construction at the same shipyard), the tribunal now has the power to modify time limits for serving submissions in order to save time and costs. Secondly, after exchange of Questionnaires the 2017 Terms now provide a 21-day time limit for parties to agree or make submissions as to the future procedural steps before the tribunal makes an order for directions.

Another notable addition in the 2017 Terms is the introduction of a mechanism for the appointment of sole arbitrators, but it still provides for considerable flexibility in the constitution of the tribunal, which can be useful in technically complex shipbuilding disputes.

For further information on the 2017 Terms (not all changes are addressed here), the revised Small Claims Procedure and the revised Intermediate Claims Procedure, please see the LMAA website

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