How arbitration works
LME arbitration is a private dispute resolution system, designed to settle disputes fairly, expertly and economically, without having to resort to action in the UK or other courts.
Designed to lead to a final enforceable award, it is distinct from mediation or conciliation. The parties will have agreed that an independent decision on their dispute will be made by a Tribunal formed of arbitrators chosen from the LME panel: this can be in the form of one, two or three arbitrators. Usually, each party appoints an arbitrator and a third is appointed if required. A recommended arbitration clause is set out below: this can be used by parties entering into a contract who wish disputes in relation to that contract to be settled in accordance with LME arbitration. Disputes in relation to LME market contracts must be settled in accordance with LME arbitration.
The LME's arbitration service is generally recognized as the best available for the metals industry, which includes physical transactions as well as market trading. Indeed, so well regarded is the LME's arbitration facility that the service is used by enterprises who have no direct involvement in LME metals.
The arbitration procedural rules have been drawn up under the framework of English law but the arbitrators can deal with contracts governed by any other laws. Awards are enforceable by the High Court. They are also enforceable in virtually all overseas countries under the 1958 New York Convention for the Recognition and Enforcement of Foreign Arbitral Awards.
LME Arbitration Rules encompass the flexibility to adopt an expedited procedure. This can allow time and costs to be significantly reduced. Matters can also, if agreed by the parties, be considered by documents only, thereby negating the necessity for hearings, and awards can be published swiftly. Settling disputes by LME arbitration also ensures confidentiality with very limited exceptions, as all parties involved are obliged to maintain confidentiality in perpetuity.
The amount of the Registration Fee (referred to in the Arbitration Regulations) is £ 5,000 (including VAT). The amount of the Deposit (referred to in the Arbitration Regulations) is £ 5,000 (no VAT payable). Payment can be made by cheque or bank transfer. Cheques should be made payable to "The London Metal Exchange". The details for bank transfer can be obtained by emailing the Arbitration team .
All queries regarding LME arbitration are to be addressed to the Arbitration Secretary at The London Metal Exchange.
Selection of the arbitration panel
Members of the LME arbitration panel are carefully selected. Panelists do not have to be members of the LME, or even associated with the Exchange, but they are generally only admitted to the panel if they can show a broad knowledge based on the practical experience of trading in metals. A legal or arbitration background is now an added requirement but is not the sole requirement. Appointments to the panel are made by the Arbitration Panel Committee.
The arbitrators, whether appointed by parties to a dispute or by the company, remain totally impartial and do not represent any party or act as advocates.
On 14 December 2009, the Arbitration Regulations contained at Part 8 of the LME Rules & Regulations were amended to establish a process to circulate a notice to members in the event that a counterparty has defaulted on an LME arbitration award.
The default notice process only applies to arbitrations where one of the parties is a Category 1, 2 or 4 member of the LME. This encompasses disputes relating to LME registered contracts, but not disputes relating to contracts in the physical metals industry or general commercial contracts .
The notice will only be circulated once the time for payment of the award and for any appeal has elapsed. Before circulating the notice, the LME will allow the counterparty a further 14 days to make payment.
If, following publication of a notice stating that a party has defaulted, that party then pays all amounts owing under the award, the LME will issue a further notice stating that payment has subsequently been made in full.
The new process will apply to agreements entered into on or after 1 June 2010. The new process is set out in Regulations 12.11 to 12.15 of Part 8 of the LME Rules.
For parties who wish to contract for the use of the LME's arbitration service to resolve any disputes arising out of or in connection with their contracts, the LME would recommend incorporating a clause along the following lines into such contracts:
"Any dispute arising out of or in connection with this agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the Arbitration Regulations of The London Metal Exchange."