LCIA Draft Rules 2014: addressing emergencies, efficiencies and ethics

by DLA Piper

It seems that it could be all change at the London Court of International Arbitration (LCIA), with new arbitration rules anticipated to come into force later this summer. The draft rules, which the LCIA published earlier this year, were the subject of lengthy discussions by the LCIA Court on 9 May 2014. The Court's decision as to which of them will be adopted has yet to be released; however, it is anticipated that those that are approved will enter into force later this year.

The draft rules promote procedural efficiency, support adherence to ethical standards and propose new mechanisms by which parties to an LCIA arbitration can address emergency situations. The relative merits of the key amendments are considered below.

Imposition of ethical standards

Arguably the most innovative proposal in the new rules, which is the imposition of conduct guidelines for legal representatives, is tucked away in an annex.  These guidelines are applicable to all legal representatives appearing before an LCIA tribunal and provision is made for the tribunal to police adherence to them.  A tribunal can impose significant sanctions in the event of default. 

In summary, the guidelines prohibit legal representatives from:

  • engaging in activities intended unfairly to obstruct the arbitration or jeopardise the finality of any award (Annex, paragraph 2)
  • knowingly making false statements to the tribunal or LCIA Court (Annex, paragraph 3)
  • knowingly procuring and/or relying upon false evidence (Annex, paragraph 4);
  • knowingly concealing any document ordered to be produced by the tribunal (Annex, paragraph 5) and
  • initiating or attempting to initiate unilateral contact with any member of the tribunal or the LCIA Court without disclosure to the other members of the tribunal, the other party and the LCIA Registrar (Annex, paragraph 6).

Sanctions that a tribunal can impose in the event of breach range from a written reprimand to, at the most severe end of the scale, "reference to the legal representative's regulatory and or professional body" (Article 18.6).

Although these provisions share similarities with the IBA guidelines on party representative ethics, the LCIA is the first major arbitral institution to propose such rules. It is to be hoped that they are adopted and set a trend for arbitral institutions imposing strict ethical standards.

The conduct of the parties will also come under scrutiny by the tribunal when determining costs, "including any co-operation in facilitating the proceedings as to time and cost and any non-cooperation resulting in undue delay and unnecessary expense" (Article 28.4).  

Appointment of an emergency arbitrator

The current rules permit parties in situations of "exceptional urgency" to apply for the expedited formation of the tribunal.  However, as an alternative, the draft rules offer parties the option of applying for the appointment of a temporary sole arbitrator (an "emergency arbitrator") in order to obtain emergency relief (Article 9B).  We understand that this particular proposal will be adopted, which would bring the LCIA rules into line with similar provisions in the ICC, SIAC and HKIAC rules. 

Once appointed, the emergency arbitrator will have 20 days to make a decision on the application for emergency relief. A hearing will not be necessary but reasons must always be given.  Any award or order by an emergency arbitrator must be confirmed by the arbitration tribunal (once formed), within 21 days, otherwise the order or award by the emergency arbitrator will lapse automatically.

Procedural efficiency

Pursuant to the draft rules, candidates for appointment as arbitrators are required to declare that they are "ready, willing and able to devote sufficient time, diligence and industry to ensure the expeditious conduct of the arbitration" (Article 5.4).  Once appointed, the tribunal has a continuing duty under Article 14.4(ii) to adopt procedures to ensure not only fair proceedings but also those that are "efficient and expeditious" by "avoiding unnecessary delay and expense".

Further amendments designed to encourage procedural efficiency are as follows:

  • the parties and the tribunal will be under a duty to make contact as soon as practicable but no  later than 21 days after the LCIA's notification of the formation of the tribunal (Article 14.1)
  • the award is to be rendered by the tribunal "as soon as reasonably possible" in accordance with a timetable notified to the parties (Article 15.10) and
  • should a party wish to change its legal representation it must notify all parties, the tribunal and the LCIA Registrar. Such a change is conditional on the approval of the tribunal, which may be withheld if the tribunal considers it could compromise the composition of the tribunal or the finality of the award (Articles 18.3 and 18.4).

Seat of the arbitration

As under the existing rules, parties will be free to agree the seat of the arbitration.  In the absence of agreement, the default seat is London (Article 16.2).  However, this will only apply until the formation of the tribunal, after which the tribunal may determine that another seat is more appropriate. The default seat will be of no relevance to the LCIA Court when appointing arbitrators, which is of some comfort to those concerned that an English law bias may prevail when arbitrating through the LCIA.

Conclusion: positive proposals

A stringently applied ethical code, the availability of an emergency arbitrator and the focus on procedural efficiency (which in turn will affect the costs of an LCIA arbitration as well as reduce the potential for any satellite litigation) are all positive proposals, which it is to be hoped are adopted by the LCIA Court. While the emergency arbitrator provisions serve to bring the LCIA in line with other leading institutions, the other proposals discussed above (notably the new ethical standards) offer a point of difference. If adopted, these proposals should help to make the LCIA an even more attractive institution for prospective parties.

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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