Explanatory notes

Introduction

Prompted primarily by the coming into force of the English Arbitration Act 1996, BIMCO has thoroughly revised and updated its Standard Law & Arbitration Clause. In a slight departure from tradition and for ease of incorporation into non-standard charter parties and other agreements, three separate arbitration clauses have been drafted to replace the earlier ‘multiple choice’ version. The first clause provides for English law, London arbitration, the second clause provides for U.S. Law, New York arbitration while the third clause provides for law and place of arbitration as mutually agreed between the parties. By providing three distinct arbitration clauses, users will no longer be obliged to incorporate in their contract a lengthy ‘multiple choice’ standard arbitration clause when, in most cases, the terms and conditions of dispute resolution will have already been agreed as part of the contract negotiations. The main revisions to the text relate to the appointment procedure for London arbitration - although the text of the New York arbitration part and the “law and arbitration as agreed” part have been modified to take a consistent approach to the language and structure used.

NOTE: Users should be aware when incorporating the chosen standard law and arbitration clause into contracts and other agreements that the law and place of arbitration MUST be clearly stipulated. There is no automatic mechanism providing for English Law and London Arbitration in the event that the parties do not indicate a preferred forum. English Law, London Arbitration

On 31 January 1997 the Arbitration Act 1996 came into force in England. The new Act applies to all English arbitration proceedings commenced on or after the coming-into-force date. The new English Law/London Arbitration Clause takes full advantage of the non-mandatory provisions of the English Arbitration Act 1996 allowing parties to agree more tightly controlled appointment procedures to avoid the possibility of delaying tactics being employed by one side.

To ensure the widest possible industry appeal the English Law, London Arbitration Clause has been developed in close co-operation with the London Maritime Arbitrators Association (LMAA) who provided helpful and constructive comments throughout the drafting process.

The following is a summary of the key features of the English Law, London Arbitration Clause:

• All references to English arbitration Acts that pre-date the Arbitration Act 1996 have been removed to clarify and emphasise the repeal of earlier arbitration Acts.
• In keeping with common practice the arbitration is to be conducted in accordance with the LMAA Terms current at the time the proceedings are commenced. This is not to suggest that as a necessity, the appointed arbitrators must belong to the LMAA, only that the proceedings are conducted using the Association’s most current terms.
• To ensure that the appointment provisions of the Clause take precedence over the non-mandatory provisions of the Arbitration Act 1996, a statement to this effect has been made in paragraph one. It should be noted that the provisions of the Clause take precedence over the Act but not over the LMAA Terms. This is because the LMAA Terms do not contain an appointment procedure.
• The English Law, London Arbitration Clause gives parties the freedom to mutually vary the provisions of the Clause, if they so choose. This avoids the need for including an appointment procedure for the mutual appointment of a sole arbitrator which may be considered unnecessarily restrictive on parties.
• In acknowledgement of the need to speed up the appointment procedure and to discourage the parties from introducing delaying tactics, the revised Clause limits the time between the first notice being served and the arbitration panel being formally constituted to a maximum period of 14 calendar days. This is significantly shorter than the time permitted under the non-mandatory provisions of the Arbitration Act which allows parties up to a maximum of 51 days to constitute the panel, under certain conditions.
• By default, the reference is to three arbitrators. Failure by one party to appoint an arbitrator within the specified time results in the first appointed arbitrator being appointed without a requirement for a further notice to act as sole arbitrator. To avoid any possible misunderstanding between the parties, the party whose arbitrator has been appointed sole arbitrator must advise the other party that such an appointment has taken place.
• For the sake of conciseness, no specific mechanism is provided in the Clause for the appointment of a third arbitrator. In fact, no mechanism is actually required as Section 16(5) of the Arbitration Act 1996 provides clear and unambiguous instructions for the appointment of a third arbitrator when a panel of three arbitrators has been stipulated in the agreement.

U.S. Law, New York Arbitration

The main change to this part of the text is that the reference to the award being made a ‘rule of the Court’ has been replaced by a reference to a ‘court of competent jurisdiction’. The term ‘rule of Court’ is now obsolete. It dates back to a time when there was no statutory authority for courts in the US to enforce arbitration agreements or awards and enforcement could only be achieved by obtaining a court order.

An amount of US$50,000 for any claim or counterclaim dealt with by the Shortened Arbitration Procedure has been inserted into the New York Arbitration Clause consistent with the approach taken in the London Arbitration Clause. However, as there is some indication that this amount may currently be slightly higher than normally dealt with by this procedure, the parties are given the opportunity to vary the maximum amount by mutual agreement.

Law and Place of Arbitration as Agreed

To avoid the use of Box references in this part of the text where the Clause is incorporated into a non-BIMCO document, a reference is made to the place of arbitration and the law of the place to apply as mutually agreed between the parties.

Standard BIMCO Documents

Although BIMCO now has three Standard Law & Arbitration Clauses for users to select as appropriate to their needs, the more familiar ‘multiple choice’ format based on the three new clauses but with references to a box layout will still be maintained when new standard BIMCO documents are developed or existing ones revised.