The London Court of International Arbitration (“LCIA”) is firmly established as one of the world’s truly international arbitral institutions - in 2013 over 80% of the parties to LCIA arbitrations were non-UK - and London is increasingly recognised as one of the world’s leading seats for international arbitration. A further evolution of the LCIA’s arbitration rules has now been adopted, and from 1 October 2014 the LCIA’s revised Arbitration Rules (“2014 LCIA Rules”) come into force and will apply to any arbitration commenced under the auspices of the LCIA on or after this date. The 2014 LCIA Rules replace the current LCIA Arbitration Rules, in force since 1 January 1998.
The key driver behind the revisions found in the 2014 LCIA Rules has been to make the LCIA arbitration process more efficient and less expensive for its users, while also enabling arbitral tribunals to deal with increasingly complex multi-party disputes. With these goals in mind, the 2014 LCIA Rules include a number of innovative features, with key amendments including (i) improvements to the speed and efficiency of LCIA arbitration proceedings (including shortened timeframes and sanctions for counsel misconduct); (ii) a new “emergency arbitrator” mechanism; and (iii) powers to enable arbitral tribunals to manage complex arbitrations (including a new power to consolidate arbitrations).
Revisions aside, parties including an LCIA arbitration clause in their commercial contract (or providing for international arbitration under other institutional rules or ad hoc arbitration) still need to carefully consider and take advice on the terms of the arbitration agreement they intend to use.
1. Speed and procedural efficiency (and sanctions for counsel misconduct)
One of the key points of focus for the drafters of the 2014 LCIA Rules was to improve the efficiency of LCIA arbitration proceedings. The 2014 LCIA Rules tackle this issue from a number of different angles, including regulating party conduct and promoting efficient conduct by arbitrators. For example:
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Shorter timeframes for written submissions. Time limits for the filing of written submissions have generally been shortened.
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Arbitrators to commit sufficient time to the arbitral proceedings. Candidates for the role of arbitrator are now required to sign a written declaration as to their ability to devote sufficient time to ensure the expeditious and efficient conduct of the arbitration (Article 5(4)).
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Early meeting between the parties and the Tribunal. Provision is made for an early meeting between the parties and the tribunal as soon as practicable and no later than 21 days from receipt of the Registrar’s written notification of the formation of the tribunal (Article 14(1)). This is to identify at the outset key issues for determination, and put in place procedural steps and timetables most appropriate for the particular circumstances of the case.
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Prompt rendering of the arbitral award. The tribunal must seek to render its award “as soon as reasonably possible” (Article 15.10) after the parties’ final submissions, in accordance with a timetable notified “as soon as practicable” to the parties and the Registrar for this purpose. To help it achieve this goal the tribunal is to “set aside adequate time for deliberations” between its members as soon as possible after the last submissions.
Perhaps the most pioneering revision to the 2014 LCIA Rules is granting to arbitral tribunals powers to sanction legal representatives for non-compliance with new “general conduct guidelines” introduced with the new Rules:
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Good and equal conduct of proceedings. The most striking aspect of the 2014 LCIA Rules is the introduction of an Annex consisting of general conduct guidelines “intended to promote the good and equal conduct of the parties’ legal representatives appearing by name within the arbitration".
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Efficiency. As with other sections of the 2014 LCIA Rules, provisions such as the requirement that legal representatives refrain from mounting unfounded challenges (paragraph 2, Annex) are introduced with increased efficiency in mind.
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Tribunal has the power to sanction breaches. Significantly, the tribunal has the express power (Article 18.6) to rule on whether or not the general conduct guidelines have been violated, and may order various sanctions against legal representatives.
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Costs sanctions. The parties’ conduct may also be taken into account by the tribunal when apportioning costs (Article 28.4).
2. “Emergency Arbitrator” and expedited formation of the Arbitral Tribunal
Several of the leading international arbitral institutions have amended their rules in recent years to include a mechanism allowing parties to appoint an “emergency arbitrator” who may, on an expedited basis prior to the formation of the arbitral tribunal, hear and determine applications for urgent interim or conservatory measures that cannot await formation.
After much discussion within the LCIA, it is to be welcomed that the 2014 LCIA Rules also provide for an emergency arbitrator facility. Such facility is a practical and logical affirmation of the choice parties make to arbitrate their disputes to the exclusion of domestic courts.
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Emergency Arbitrator can order emergency relief. Article 9B of the 2014 LCIA Rules introduces such a mechanism. The LCIA Court will strive to appoint the Emergency Arbitrator (who will always be a sole arbitrator) within three days of an application, and s/he shall decide the claim for emergency relief as soon as possible, but no later than 14 days following his/her appointment. No hearing is necessary for the Emergency Arbitrator to reach a decision. Once a tribunal is formed, it may confirm, vary, discharge or revoke any order made by the Emergency Arbitrator.
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Expedited formation of the tribunal in cases of “exceptional urgency”. In addition to the Emergency Arbitrator option set out above, the 2014 LCIA Rules retain the option in the 1998 Rules to apply for the expedited formation of the tribunal in cases of “exceptional urgency” (Article 9A). Such expedited formation provisions are relatively rare amongst other major institutional rules.
In addition to these avenues, parties retain the right (Article 25.3) to apply to a state court or other legal authority for interim or conservatory measures to similar effect before the formation of the arbitral tribunal.
3. Complex arbitrations: consolidation of related arbitrations and “cross-claims”
While the LCIA has produced rules that seek to introduce greater efficiency into LCIA arbitrations, the 2014 LCIA Rules also needed to address the reality that many disputes are becoming increasingly complex—particularly in multi-party and multi-contract scenarios. While the 1998 LCIA Rules provided only for joinder of additional parties, the 2014 LCIA Rules introduce a new power to consolidate two or more arbitrations into a single proceeding before one tribunal.
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Consolidation of arbitral disputes. Where all the parties to the arbitrations so agree, the tribunal now has the express power to order (with the approval of the LCIA Court) the consolidation of an arbitration with one or more other arbitrations into a single arbitration in writing (Article 22.1(ix)). Further, where there are multiple arbitrations involving the same parties and only one tribunal has been appointed (or the tribunals appointed in the different arbitrations are the same), the tribunal can order consolidation without the need for the parties’ agreement. The approval of the LCIA Court is still required, however (Article 22.1(x)).
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Cross-claims. The 2014 LCIA Rules also expressly deal with so-called “cross-claims”—a term used to described counterclaims and claims between respondents. These must be raised in a party’s Response.
These are also welcome developments. For parties, however, the important practical point is that the ability to consolidate arbitrations arising under different but related contracts (and potentially between different sets of parties) must be agreed consistently across the respective arbitration agreements in the various related underlying commercial agreements. Such clauses need to be carefully drafted to ensure they operate as intended.
4. Importance of planning for disputes
Planning for disputes is a critically important component of managing the risks associated with any contract or transaction. That is particularly so in contracts with an international dimension, which raise important questions as to where, by whom and by which legal rules any disputes arising out of the contract(s) will be resolved. The answers to those questions will have a critical impact on the merits and enforceability of any judgment or award, the cost and speed of resolving any disputes and, ultimately, the risk that a contract will be performed according to its terms.
If the choice is made to use international arbitration over litigating in domestic courts, parties will then in their arbitration agreement need to address further important practical matters such as, for example, the seat (or place) of the arbitration (which critically determines which courts will have supervisory jurisdiction over the arbitration and the procedural law of the arbitration), which institutional arbitration rules to use (LCIA, ICC, ICDR, HKIAC, SIAC etc.) or ad hoc arbitration, the number and method of appointing arbitrators, ensuring strict confidentiality of the arbitral process, consolidation of disputes arising under related contracts, exclusion of appeals on points of law and other potentially important procedural issues.
Parties should always take advice on what form of arbitration agreement is necessary and most advantageous in the circumstances of their commercial dealings or transaction.
Conclusion
The revisions in the 2014 LCIA Rules are to be welcomed, and will no doubt further cement the LCIA’s position and reputation amongst the international business community as one of the world’s premier international institutions for the resolution of complex international arbitration disputes.
