The LCIA’s New 2014 Arbitration Rules

by Allen & Overy LLP
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The London Court of International Arbitration (“LCIA”) has published in final form its new arbitration rules (the “2014 Rules”), which will apply to arbitrations commenced after 1 October 2014.

The changes between the 2014 Rules and a set of draft rules, published in February 2014, are relatively limited.

The 2014 Rules do not change substantially how LCIA arbitration works. The basic structure of the existing rules (the “1998 Rules”) remains essentially intact, along with the features which previously made the LCIA Rules distinctive (such as the ability to have the full tribunal appointed on an expedited basis in urgent cases; see Article 9A of the 2014 Rules). 

Instead, the amendments are largely intended to bring the LCIA Rules up-to-date with contemporary arbitration practice. Some of the amendments follow those seen in the recent wave of revisions to major sets of arbitral rules (including to the UNCITRAL Arbitration Rules in 2010, the ICC Arbitration Rules in 2012 and the HKIAC Administered Arbitration Rules in 2013). The introduction of an emergency arbitrator mechanism is a notable example; another example is the new provisions allowing consolidation of arbitrations.

The LCIA has not, however, simply fallen into line with other arbitral institutions. In addition to the existing distinctive provisions, which have been retained, the 2014 Rules include some novel amendments, most notably new rules controlling parties’ choice of counsel and the conduct of counsel.

Almost every rule has been amended to some extent, in many cases apparently to clarify the existing provision without changing its essential effect. The most important changes are described below. It is worth noting that there has not yet been any public explanation of the changes from the LCIA. Once made, the precise thrust of some of the new rules (like the rules on standard form Requests and Responses, described below) may become clearer.

Changes to promote efficiency

A number of amendments aim to make the arbitral process under the LCIA Rules more efficient. The concern, commonly expressed by users of arbitration – that the process was taking too long and costing too much – has been a significant influence behind all the recent revisions to the key arbitral rules.

Timetable for award (Article 15.10).  Perhaps most significantly, the arbitral tribunal will have to render its final award as soon as reasonably possible after the last submission from the parties and in accordance with a timetable, which the tribunal must notify to the parties and to the registrar. Considering the widespread concern about the time that tribunals can take to render awards, this unique provision is likely to be welcomed. Although the rule allows for the timetable notified by the tribunal to be revised, if necessary, it should nevertheless put substantial pressure on arbitrators to produce their awards promptly. Consistent with this provision, Articles 10.1 and 10.2 allow the LCIA Court to revoke an arbitrator’s appointment if (s)he fails to conduct the arbitration with “reasonable efficiency, diligence and industry”.

Declarations by prospective arbitrators (Article 5.4).  Prospective arbitrators will have to declare not only that they are independent and impartial, but that they are “ready, willing and able to devote sufficient time, diligence and industry to ensure the expeditious and efficient conduct of the arbitration”. This mirrors the ICC’s requirement for arbitrators to provide statements of their availability. It is not yet clear what level of detail the LCIA will expect from arbitrators in their declarations.

Standard form Requests and Responses (Articles 1.3 and 2.3).  In an intriguing development, parties will be able to submit Requests and Responses on standard electronic forms available on the LCIA website. These forms have not yet been published and their precise layout is not known. As such, it is not clear whether this is intended to encourage shorter Requests and Responses in standard formats, thus avoiding the replication that occurs to some extent at present between Requests and Responses, on the one hand, and later statements of case, on the other.

Consolidation (Article 22.1).  The ICC and HKIAC included in their revised rules new provisions about the consolidation of arbitrations, and the joinder of new parties to existing arbitrations, to address concerns that arbitration can be difficult where multi-party or multi-contract disputes arise.  The LCIA Rules already contained a (fairly limited) joinder provision, which remains essentially the same (now Article 22.1(viii)). In addition, the 2014 Rules will enable the arbitral tribunal to consolidate arbitrations, in two situations: first, where the parties agree to this in writing, and with the approval of the LCIA Court (Article 22.1(ix)); and, secondly, where multiple arbitrations have been commenced under the same arbitration agreement, or under compatible arbitration agreements, between the same parties, provided that the arbitral tribunal has not been formed for the other arbitration(s) (Article 22.1(x)). Article 22.6 grants a similar power to the LCIA Court where no tribunal has yet been constituted.

These new consolidation provisions are more conservative than those in some other arbitral rules, particularly the 2013 HKIAC rules, which permit the consolidation of arbitrations where there are different sets of parties (provided that a common question of law or fact arises, the rights to relief arise out of the same transaction or series of transactions, and the arbitration agreements are compatible). It may be that a concern about potential difficulties at the enforcement stage have led the LCIA to take this relatively conservative approach.

Emergency proceedings

The 2014 Rules retain the provision allowing parties to apply to the LCIA Court for the expedited formation of the arbitral tribunal in cases of exceptional emergency (Article 9A).

In addition, the 2014 Rules also introduce a mechanism for the appointment of an emergency arbitrator (Article 9B).

This enables urgent interim relief to be granted by an emergency arbitrator in the period before a full tribunal has been constituted. This brings the LCIA into line with the rules of most other major arbitral institutions like the ICDR, the ICC, the SIAC and the HKIAC, which have successively adopted such a mechanism in their new rules. The emergency arbitrator provision was included in parentheses in the draft circulated in February 2014, but the LCIA has decided to adopt it. Interestingly, the provision suggests that the emergency arbitrator will be empowered to render “awards”.  This is presumably intended to address concerns that interim “decisions” may not be enforceable under the New York Convention, but it is unclear whether national courts will regard such “awards” as such in a New York Convention sense.

Emergency arbitrator provisions have proven to be popular. For example, the SIAC recently reported that it had handled 34 emergency arbitrations since the procedure was introduced into its rules in July 2010. The LCIA Rules are the only ones, however, to provide for both an emergency arbitration procedure and for the expedited formation of the full tribunal. It will be interesting to see which option is more often chosen by users, and for what reasons. While an emergency arbitrator may be able to issue a decision more quickly, there remain potential advantages to expedited formation of the full tribunal. Among other factors, expedited formation may allow final, as opposed to interim, decisions to be rendered more quickly, and parties may prefer to bring interim relief applications before the full tribunal when it will make the ultimate substantive determinations.

Legal representatives

Perhaps the most innovative provisions in the 2014 Rules are the ones relating to parties’ legal representation, which currently have no equivalents in other major sets of arbitral rules. There are two relevant sets of provision in the 2014 Rules. 

Notification of legal representatives (Articles 18.2-18.4).  The 2014 Rules require parties to notify the arbitral tribunal of the names of their legal representatives, and of changes to their legal representatives. A change in legal representation requires the approval of the arbitral tribunal. The arbitral tribunal can withhold approval where the change could “compromise the composition of the Arbitral Tribunal or the finality of any award (on the grounds of possible conflict or other like impediment).” This provision is intended to address the situation which has arisen in cases such as Hrvatska Elektropriveda v. Slovenia, where the arbitral tribunal held that an addition to one party’s counsel team shortly before the hearing potentially meant that the president of the tribunal could no longer be regarded as independent because he and the new counsel were from the same set of barristers’ chambers. In that case, the arbitral tribunal invoked an inherent power to take measures necessary to preserve the integrity of the proceedings and ordered that the counsel no longer appear in the arbitration. The 2014 Rules essentially put that ‘inherent power’ on an express footing. This may be a controversial provision in some quarters because it places limits on a party’s ability to appoint legal representatives of its choice.

Conduct of legal representatives (Articles 18.5-18.6 and Annex).  There has been an ongoing debate in arbitration circles about whether more should be done to define standards of professional conduct for lawyers in international arbitration, given the lack of clarity about what, if any, rules apply in this context, and the potential for inequality of arms between parties when their lawyers are subject to different sets of ethical obligations. At the 2010 ICCA Congress, Doak Bishop encouraged arbitral institutions to take the lead by including a code of ethics in their arbitral rules. The LCIA is the first institution to pay heed, albeit cautiously, to his recommendation. The Annex to the 2014 Rules lays down certain guidelines for “good and equal conduct” by legal representatives. The guidelines are expressed in quite high-level terms. Essentially, they provide that legal representatives may not:

·         “unfairly … obstruct the arbitration”;

·         “knowingly make any false statement to the Arbitral Tribunal”;

·         “knowingly procure or assist in the preparation of or rely upon any false evidence …”;

·         “knowingly conceal … any document (or part thereof) which is ordered to be produced …”; or

·         deliberately initiate any unilateral contact with any arbitrator.

Although expressed as short-form principles, the guidelines in the Annex cover similar ground to the IBA’s Guidelines on Party Representation in International Arbitration, published in 2013. Like the IBA Guidelines, the new guidelines will, by being included in the LCIA Rules, form part of the parties’ arbitration agreement and responsibility for compliance must, therefore, lie with the parties, rather than their counsel. Their contractual basis also means that they must be subject to any mandatory rules of professional conduct to which counsel are subject under their home bar rules.

The tribunal is empowered to decide whether there has been a violation of the guidelines and choose from a range of sanctions prescribed by Article 18.6. These include a written reprimand, a written caution as to future conduct in the arbitration and “any other measure necessary to fulfil within the arbitration the general duties required of the Arbitral Tribunal…”.  It will be interesting to see what measures arbitral tribunals will take under this general power. Might tribunals, for example, be willing to exclude counsel who seriously or persistently fail to abide by the guidelines? One sanction that tribunals may not be willing to apply is to refer an offending legal representative to his or her regulatory or professional body. This sanction was proposed in the February draft of the rules but does not appear in the 2014 Rules.

There are strong arguments that such guidelines represent a commendable effort to provide a further safeguard of procedural fairness. However, some practitioners did not welcome the IBA Guidelines, so the LCIA’s guidelines are likely to attract similar controversy.

Other amendments

A couple of further amendments not covered above are worth noting.

Ex parte communications with arbitrators (Articles 13.4 and 13.5).  The 2014 Rules helpfully clarify and endorse the existing, but largely unwritten, understanding that it is permissible for arbitrators to consult the parties ex parte when seeking agreement on a presiding arbitrator, but that such unilateral contact is not permissible after the tribunal has been constituted.

Law applicable to the arbitration agreement (Article 16.4).  The 2014 Rules provide a default law applicable to the arbitration agreement (in the absence of a choice by the parties), which will be the law of the seat. This provision addresses the confusion caused by the different approaches taken under different choice of law rules about the law which would apply in the absence of a choice by the parties. In practice, parties are more often specifying a law applicable to the arbitration agreement in light of this confusion, and they usually choose the law of the seat.

Changes not made

Finally, it is interesting to note briefly what changes the LCIA has not made to its rules. Among other things:

  •  The LCIA Rules remain unusual for not providing automatically for the parties to have a right to nominate an arbitrator in the Request and Response where the arbitration agreement provides for three arbitrators on the tribunal.  Such a right, if desired (as is often the case), must be included expressly in the arbitration agreement.
  •  The LCIA Rules retain a standard timetable in Article 15 for the exchange of statements of case, defence and reply, although often in practice this timetable is departed from (e.g. with the inclusion of a rejoinder to be submitted by the respondent, and with different time limits applied).
  • As noted above, the LCIA has not expanded the power of the tribunal (or the LCIA Court) to join non-parties to the arbitration (e.g. by allowing the tribunal to join other parties to the arbitration agreement).

Conclusion

Provisions like the new emergency arbitrator mechanism and the various rules designed to improve the efficiency of LCIA arbitration bring the LCIA Rules into line with contemporary arbitral practice. At the same time, the LCIA has retained the distinctiveness of its rules with innovative new provisions like the rules on the conduct of legal representatives. Ultimately, the 2014 Rules represent a case of cautious evolution, rather than revolution, and are unlikely to alter fundamentally the character of LCIA arbitration. Nevertheless, the changes should ensure that the LCIA’s rules remain among the most popular for users of international arbitration and may further increase the efficiency of proceedings, which is of course to be welcomed.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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