Over the past year, NNPC has continued to assist members with legal disputes included recovery claims against Charterers such as for demurrage or losses. Even in cases where responsibility seems clear-cut, in a number of cases Charterers will be reluctant to settle amicably meaning that formal proceedings are needed to recover a claim.
Given that a majority of charter parties are governed by English law, Shipowners typically resort to arbitration in London to enforce their rights. However, English arbitration is notoriously time-consuming and costly, especially for claims of modest value. Engaging legal counsel to initiate proceedings and secure an enforceable award often entails significant expenses—costs that may not be fully recoverable, even with a successful outcome.
To address these hurdles, Shipowners should consider adopting the LMAA Small Claims Procedure (SCP) within their charter parties. Designed for claims below a specified threshold (typically USD 50,000 but this may be adjusted), the SCP provides a streamlined, cost-effective arbitration process. Notably, it eliminates the need for formal legal representation, substantially lowering expenses, and delivers awards more quickly than traditional arbitration.
NNPC has extensive experience managing SCP cases directly on behalf of its members, finding it particularly effective for straightforward disputes. The procedure offers a pragmatic and affordable avenue for resolving such claims, balancing efficiency with fairness.
Despite these benefits, we have noted that charter parties do not always include the LMAA Small Claims Procedure as standard. This omission forces shipowners into full arbitration for even minor claims, inflating costs and delaying recovery.
We recommend that members confirm that where a contract is subject to English law, the LMAA Small Claims Procedure be incorporated into their charter parties wherever feasible. Doing so ensures access to an economical and efficient dispute resolution tool, enabling Shipowners to pursue smaller claims proportionally and effectively.
For further information you can reach out to the NNPC claims team at claims@nnpc.nl.
