Arbitration Agreement

The LMAA have just published their statistics for 2017. These give a snapshot of what is going on in the world of maritime arbitration. Although the figures are described as “robust”, the reality is that 2017 saw the lowest number of known LMAA appointments since 2002 and the lowest number of Awards published since 2008. So what is going on in the world of maritime arbitration?

The first reaction might be that London is losing ground. However, that does not appear to hold true. The Singapore Maritime Arbitration Centre also reported a decline in references from 48 in 2016 to 38 in 2017 (https://www.scma.org.sg/pdf/2017YearInReview.pdf). London is probably still the most attractive forum for maritime arbitration. It is simply that those who in the past have resorted to arbitration are now less inclined to do so.

There are probably many factors behind this. There was a distinct peak in arbitration activity after the 2008 market crash and in the years that followed. That took several years to play out. Since 2009 the market has been distinctly flat with many bankruptcies and restructurings. Mediation has also been utilised much earlier in the dispute resolution process. It is also true to say that one can’t get blood out of a stone. Many clients are reluctant to spend money to get an arbitration award when the prospects of enforcing it are, at best, remote. Legal costs insurers are also less likely to fund arbitration unless the prospects for enforcement or recovery of legal costs are reasonable.

So what about the future? Is this the new normal? In our view, the number if maritime disputes will probably rise slightly as markets improve. Although we are unlikely to see freight rates back at pre-2008 levels anytime soon, it stands to reason that clients are more likely to have disputes when the sums in issue are higher. A disputed off hire claim at US$30,000 a day is more likely to fight than a disputed off hire claim at US$3,000 a day. Likewise, if ships and cargo values increase, the sums in dispute go up.

Pending an upturn in the market, those of us in the maritime arbitration business are knuckling down and focusing on improving our market share as others leave the market or diversify away from shipping. What is encouraging is that London is still by far and away the world hub for maritime arbitration. As world trade improves we see good prospects for London as the international maritime dispute resolution centre.

BDM is a specialist shipping law firm offering high quality legal advice and representation at a reasonable price.  Please follow us on social media by clicking below.