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The Small Claims Procedure

What is the Small Claims Procedure (SCP)?

The Small Claims Procedure (SCP) is a procedure designed to ensure a speedy and relatively low-cost resolution, by arbitration, to smaller disputes. A sole arbitrator generally proceeds on the basis of written submissions and documents alone, which are provided according to a restricted timetable. The arbitrator’s fee is fixed, as is the maximum amount of costs that a successful party may recover. It is commonly used for disputes involving no more than US$100,000, although parties not infrequently agree higher limits.

What costs may be recovered in a Small Claims Procedure arbitration?

The successful party may recover its costs in an amount in the arbitrator’s discretion up to £5,000. Breakdowns of costs will not be required unless the parties agree that they should be provided, or the arbitrator orders it. In addition, the successful party will normally be awarded the Small Claims fee (including the fee of £350 payable to the LMAA in cases where the President is requested to appoint an arbitrator) in addition to any legal costs which it has incurred, but always in the sole discretion of the arbitrator.

What is the cost of a Small Claims Procedure arbitration?

For SCP arbitrations commenced after 1st January 2019 a fixed fee of £4,000 (plus VAT where applicable) is payable in advance to the arbitrator. The fixed fee includes the appointment fee, interlocutory work, a hearing not exceeding one day (if required by the arbitrator pursuant to para 5 (g)), the writing of the award and the assessment of costs (if any). It does not include expenses, such as the hire of an arbitration room, which is to be paid in the first instance by the claimant. If the respondent puts forward a counterclaim which exceeds the amount of the claim, an additional fixed fee in the amount of £2,500 (plus VAT where applicable) is payable by the respondents. Such fee is to be paid within fourteen days of service of defence and counterclaim submissions failing which the arbitrator may, at his discretion, stay the counterclaim and proceed. If the case is settled amicably before an award has been written, the arbitrator may retain out of the Small Claims fee a sum sufficient to compensate him for services rendered by him and any balance shall be repaid.

It is important to note for time-bar purposes that the valid commencement of a SCP arbitration depends on the prior payment of the SCP standard fee.

When can the Small Claims Procedure be used?

The Small Claims Procedure can only be used when the parties have agreed that it should be. It is increasingly common to find it referred to in charterparty arbitration clauses. Such references normally spell out the maximum amount in dispute for the SCP to apply.

How do I start a Small Claims Procedure arbitration?

The Small Claims Procedure provides for a sole arbitrator. The parties may agree one. Failing that the President of the LMAA will appoint one as provided for in the SCP itself. Note that payment of the standard fee is a condition precedent to the commencement of a SCP arbitration (para. 3(b) of the Small Claims Procedure). This is important if a time limit needs to be respected.