Legal Update - FALCA Rules

A large number of ITIC's Members have first hand experience of the arbitration process. This may be as a witness in relation to a dispute involving their principals but frequently this method of dispute resolution applies to cases where they are the defendants.

Many liner agency agreements contain arbitration clauses as do some standard trading conditions, such as those of Institute of Chartered Shipbrokers. One benefit is that disputes are heard in private and the outcome is confidential, thus avoiding the publicity that can follow appearances in open court.

In an important development for London arbitration, the London Maritime Arbitrators Association (LMAA) have recently published their new FALCA RULES. The letters stand for "Fast and Low Cost Arbitration" and as such present a direct response to the most frequent criticisms of maritime dispute resolution in London.

The FALCA Rules set out to achieve their aims of speed and low cost in a number of ways. The reference will be to a sole arbitrator rather than a three person tribunal. The manner in which the single arbitrator is appointed has also been amended to avoid delay. The parties are encouraged to try to agree a sole arbitrator but in the absence of agreement a party wishing to refer his claim to arbitration merely has to send a note to the other party requiring them to agree within 14 days to the appointment of a sole arbitrator. If they are unable or unwilling to agree then the claimants invite the president of the LMAA to appoint a sole arbitrator.

The president is not restricted to appointing members of that association and can appoint any appropriation and can appoint any appropriate person. This will be useful in the event that the claim requires special expertise.

The imposition of a strict timetable is the essential feature of the FALCA Rules. The process should produce an award within approximately nine months from the arbitrator’s appointment. This is largely achieved by passing control of the proceedings to the arbitrator. There will, for example, be no oral hearing except where the arbitrator requires examination of any particular witness or expert. It is clearly envisaged the this will only be done in rare circumstances. The other major development is that the discovery process has been subjected to the timetable and reduced to the exchange of relevant documents. In most cases this should greatly refuse the level of costs.

The rules are intended to be applied claims where the amount at stake is larger than US$ 50,000 below which popular LMAA small claims procedure remains applicable. The FALCA Rules provide that, unless otherwise agreed, they will cover claims for amounts of up to US$ 250,000. This means there are now three tiers of arbitration available; small claims, FALCA and, for the largest disputes, the LMAA’s "full" terms. A draft charterparty clause incorporating the three options has been produced by the LMAA.

The FALCA Rules were the brainchild of Thomas Miller Defence, and solicitors, Clyde & Co.