Perhaps no surprise that the Owners raised this unsuccessful defence to a counterclaim for underperformance in the recent London Arbitration 9/23 (published in LMLN).
In London Arbitration 9/23, Owners contended that the Charterers’ counterclaim was time-barred due to delayed service of the defence submissions, based on their narrow interpretation of sub-para 5(g) of the LMAA SCP that applied to this reference. Therefore, the tribunal decided to deal first with this issue before considering the counterclaim. For the reasons found in the award summary, the sole arbitrator disagreed with the Owners’ contention and held that the counterclaim could be advanced. Readers can read more about this award on LMLN only.
Regarding London Arbitration 9/23, the arbitrators’ conclusion on the issue was proper.. Sub-para 5(g) is clear in its effect and application. In addition to that stated in the summary, the full sub-para 5(g) spells out the procedure to be adopted to ensure that the tribunal will act fairly and give each party a reasonable opportunity of putting his case and dealing with that of his opponent, as mirrored in s.33 of the AA 1996, a mandatory provision of Part I of the Act. The Owners’ narrow interpretation of sub-para 5(g) – reading parts of the clause in isolation- would render sub-para 5(g) inconsistent with s.33 (a mandatory provision).
In the below LMAA ICP Arbitration dealing with the Owners’ claim for damages for detention, the Charterers raised the defence that the Owners’ claims were time-barred. The tribunal dealt first with this issue.
The Charterer’s Lawyer has argued that ICP (2012) provides at paragraph 6 (b) that Claims
submissions […] shall be served by the Claimant within 14 days of the appointment of the second member of the tribunal or the appointment of a sole arbitrator […]. The Claims Submissions were served on 28th August 2017 considerably beyond the laid down 14 days required under ICP (2012).
The Charterer’s lawyer further argued that even if settlement discussions were underway, the Owners should have preserved its rights by applying for an extension of time in accordance with ICP (2012) paragraph 12.
The Charterer’s lawyer added that the twenty-one day safe harbour provision otherwise applicable to a failure to comply with the ICP (2012) time limits, does not apply to claims submissions. This paragraph directs that the Tribunal shall dismiss the claim unless it would not be just to require service of claims submissions at that time but that any such determination must be made at the time the claims submissions were due.
The Charterer’s lawyer accepted the benefit of the amicable resolution of disputes. However, it was submitted that there was no basis for determining that it would not be just to require timely submission of the Owner’s claim which was presented over four months after the time limit.
The Charterer’s lawyer, therefore, submitted that even if, which was denied, settlement discussions had been continuing, as the parties had selected ICP (2012) for the resolution of any disputes, it was for the Owners to seek an extension of time to protect its position. The Owners failed to submit its Claims Submissions within the laid down period or seek an extension of time. The Owner’s claims were therefore time-barred and must be dismissed
The Owners’ lawyers admitted late service of the Owner’s Claims Submissions but this they have said was because English law encourages parties to try to settle disputes amicably before resorting to formal proceedings.
The Owner’s lawyers challenged the Charterer’s lawyer’s interpretation of ICP (2012) paragraph 12. As said, it provides that the Tribunal can give the parties 21 days to comply with a relevant step in the proceedings. The Charterer did not ask the Tribunal for an Order for the service of Claims Submissions and so none was made. Furthermore, the power to dismiss a claim arises where there is a failure to serve claims submissions which was not the case as Claims Submissions were served. The Owner’s Solicitor also drew attention to Section 33 of the Arbitration Act 1996 and added that Section 33 confers wide procedural discretion on the Tribunal and dismissing the Owner’s claims would be neither just nor proportionate.
ICP (2012) paragraph 19 (a) gives discretion to depart from the procedures (other than in respect of costs) in any case which the Tribunal considers to be exceptional. The circumstances of this case, with the disputed basis of the standing of settlement negotiations between the time of the arbitrator’s appointment and the service of Claims Submissions, the Charterer’s failure to seek an Order for compliance and the fact that the time-bar issue was not raised until service of the Defence Submissions, together present exceptional circumstances. Further, ICP (2012) provides for the application of English law and therefore the Arbitration Act 1996 with its requirements for the fair and impartial resolution of, and suitable procedures for dealing with, disputes. Justice and fairness would not be served by dismissing the Owner’s claims. For the reasons set out, the Owner’s claims were not time-barred.
Final Award 15 February 2018
Note: For more information, please check on Jus Mundihttps://jusmundi.com/en/.These awards mostly come into the public domain through enforcement under the NYC 1958.