1 Costs and what we can do about them

 Costs are a cause for concern in all litigation, including arbitration  Costs can exceed the amounts in issue  Everyone involved in arbitration has a duty to keep costs under control ◦ The Parties ◦ Their Lawyers ◦ The Tribunal 2

 Provide for the cost-effective handling of small disputes ◦ LMAA Small Claims Procedure (‘SCP’) for disputes up to US$100k  Included in BIMCO Clause ◦ LMAA Intermediate Claims Procedure for claims from US$100k to US$500k  Not included in BIMCO Clause 2015 but included in version found in LMAA Handbook 3

 Consider whether it is necessary to instruct lawyers ◦ Can the submissions be prepared in house? ◦ Or by the P&I or Defence Club?  Particularly in SCP references 4

 Choose their lawyers with care ◦ Are they experienced in the particular field? 5

 Negotiate the fee rates ◦ The market is quite wide ◦ Rates do vary 6

 Follow the case closely every step of the way ◦ Agree each major step before it is taken 7 Remember it is your money that is being spent

 Use the appropriate level of resources available 8

 Don’t take it personally 9

 Be realistic ◦ Have the courage to tell your client the truth about the merits of the claim ◦ Do not contest every point  Abandon the weak points early on  5 weak points do not make 1 strong one 10

 Establish good working relationship with your counterparty  s do tell you the tone of voice or the expression on the face 11 Give yourself time to think before you act

 Don’t trouble your tribunal with minor matters 12

 Agree that the case be decided on documents alone ◦ Note that Tribunal has power to decide on documents alone, unless the parties have agreed that there shall be an oral hearing 13 Some 80% of LMAA arbitrations are decided on documents alone Very cost-effective, as usually no hearings are held Usually decided by two arbitrators rather than three

 If you do have to have an oral hearing (less than 20% of cases) ◦ Do you need to engage Counsel – could you do the job yourself? ◦ If you do need Counsel, choose with care ◦ Do you really need a QC? ◦ Could not a good junior do the job well, at half the price? 14

 Negotiate the rates  It’s a very competitive market out there  Is a fixed price deal or a capped deal available?  Agree your brief fees and refreshers early  When alternatives are still available 15

 Agree its fees on appointment, particularly its hourly rates  Send interim Invoices on a regular basis, depending on the progress of the case ◦ Be ready to provide detail if asked to do so  But few arbitrators have sophisticated means of time- recording 16

 Use its powers to run the arbitration cost-effectively  Require the LMAA Questionnaires ◦ to be completed fully ◦ to include a breakdown of the costs  incurred to date and  to be incurred if the case goes to a hearing ◦ and to be signed by the client 17

 May 2015 Practice Guidelines  (i) Where more than one question is raised in any section of the LMAA Questionnaire separate responses shall be provided for each question (for example, 3 separate responses shall be provided to Question 9 re Statement Evidence).  (ii) When responding to Question 13 it should be stated whether it is considered necessary for all witnesses of fact and experts to give evidence in person at the hearing or by video, or other similar, link.  (iii) When responding to Question 15(a) a breakdown of the figures shall be provided identifying individually, among other things, the fees of solicitors/consultants (and number of each it is anticipated will be required), counsel (specifying whether senior or junior) and experts, including the charge out rates applied by each. 18

 Order security for Costs  Section 38(3) of the Arbitration Act 1996: “The tribunal may order a claimant to provide security for the costs of the arbitration”.  Section 41(6): “If a claimant fails to comply with a peremptory order of the tribunal to provide security for costs, the tribunal may make an award dismissing his claim”. 19

 Paragraph 14 of the LMAA Terms: “In addition to the powers set out in the Act, the tribunal shall have the following specific powers … …  (c) if a party fails to comply with a peremptory order of the tribunal to provide security for costs, then without prejudice to the power granted by section 41(6) of the Act, the tribunal shall have power to stay that party’s claim or such part of it as the tribunal thinks fit in its sole discretion”. 20

 When the power to order security for costs cannot be exercised  Section 38(3) of the Arbitration Act 1996 continues: “This power shall not be exercised on the grounds that the claimant is –  An individual ordinarily resident outside the United Kingdom or  A corporation or association incorporated or formed under the law of a country outside the United Kingdom or whose central management and control is exercised outside the United Kingdom.” 21

 Criteria to be considered in an application for security for costs ◦ Has the Claimant any readily reachable assets with the jurisdiction of the arbitration?  One-ship companies/Brass plate companies ◦ Is the Respondent using the application to intimidate a weaker party into settlement or discontinuance? ◦ Is the apparent state of the Claimant’s finances due in part or in whole to the Respondent’s conduct? ◦ Is there any significance in the timing of the application?  Burden of proof is on the Respondent 22

 Ordering counterclaimants to provide security?  S.82 Arbitration Act 1996: ‘claimant’ includes ‘counterclaimant’  Dismissing a claim for failure to provide security for costs ◦ Does not prevent the Claimant from bringing the claim afresh within the statutory time-limit  What form should the security take?  Adopt a stage-by-stage approach? 23

 Securing the fees of the tribunal ◦ See paragraph E of the First Schedule ◦ Becoming a more frequent practice ◦ Means of security flexible  Solicitors’ or PandI/Defence Club letter of guarantee  Avoids the need for Respondent to meet the Tribunal’s costs where Claimant does not pick up the Award 24

 Where costs are awarded, scrutinise the schedules carefully ◦ What rates have been charged? ◦ How many hours have been worked, and by whom? ◦ What disbursements have been claimed?  Counsel’s fees  Was the choice of counsel appropriate?  Was their remuneration reasonable and justified? 25

26 The End Thank you for your attention