New arbitration rules enter into force at the LCIA: the key changes that you need to know about
Sara Nadeau-Seguin (counsel) & Marie Jones (intern)
On 1 October 2020, new Arbitration Rules (the “2020 Rules”) came into force at the London Court of International Arbitration (“LCIA”), the second most preferred arbitral institution after the ICC. Interestingly, on 8 October 2020, the ICC has also unveiled revised Rules of Arbitration due to enter into force in January 2021.
The 2020 Rules will apply to LCIA arbitration starting from 1 October 2020 onwards. The LCIA Court formally adopted the new arbitration rules on 11 August 2020. The rules are available here: https://www.lcia.org/lcia-rules-update-2020.aspx.
The 2020 Rules introduce a number of amendments to the LCIA Rules, last revised in 2014. Overall, the amendments seek to streamline the arbitral process and reflect a conscious effort by the LCIA to modernise its rules rather than completely rewrite them.
This brief note outlines the notable amendments made to the arbitration rules, grouped into the following categories: expedition of proceedings, consolidated or concurrent proceedings and composite requests, default of the electronic form for filing and communications, tribunal secretaries, fees and costs, nationality, and confidentiality and data protection.
Expedition of proceedings and compression of arbitration timelines
The 2020 Rules contain a number of changes that seek to streamline the conduct of arbitral proceedings.
Importantly, LCIA tribunals are now provided with the express power to make an “early determination order” if the case before them is manifestly outside of the jurisdiction of the tribunal, inadmissible, or manifestly without merit (Article 14.6 (vi)). This aligns with the rules of other institutions such as SIAC and HKIAC, which already provide for summary dismissal or early determination.
Additionally, the 2020 Rules widen the discretion of arbitral tribunals to limit the length or content of written statements, oral or written testimonies, as well as the duration of hearings.
Finally, another change to compress the arbitration timeline is the express mention in Article 15.10 that tribunals must endeavour to render the final award within 3 months from the date of the last submission of the parties. While this is not a mandatory requirement, it is more specific than the previous version of the rules, which only provided that arbitral tribunals were to render their award “as soon as reasonably possible”. For reference, Article 31.1 of the ICC Arbitration Rules provides a mandatory deadline to render the final award within 6 months and the Note to the Parties to the Arbitral Tribunals on the Conduct of Arbitration further specifies that the ICC Court expects tribunals to submit their draft awards within 2 months (sole arbitrator) or 3 months (three-member arbitral tribunals) after the date of the last substantive hearing or the filing of the last written submission.
Furthermore, the rules enable the quick appointment of a tribunal by the LCIA (down to 28 days from 35) when the respondent does not file a response (Article 5.6).
Consolidated proceedings, composite requests and concurrent conduct of arbitrations
The 2020 Rules broaden the power of tribunals to order the consolidation or concurrent conduct of proceedings (Article 22.7 (i-iii)).
Tribunals now have extensive power, with the approval of the LCIA Court, to bring together arbitrations brought under compatible or identical arbitration agreements and arising out of the same transaction or a series of related transactions (22.7 (ii)). The novelty here is the express reference to the possibility of consolidating proceedings “arising out of the same transaction or series of related transactions”. Furthermore, tribunals now have discretion to order consolidation without the parties’ agreement. As was the case under the 2014 Rules, the LCIA Court may consolidate pending arbitrations upon its own initiative, according to the aforementioned criteria (Article 22.8 (ii)).
An additional innovation under the 2020 Rules is that tribunals may also order that two or more arbitrations be conducted concurrently where the same tribunal has been constituted for each arbitration (Article 22.7 (iii)).
Some commentators have raised concerns that these new provisions could jeopardise the enforceability of awards rendered in consolidated proceedings, in view of the well-established principle that both parties must be treated equally in relation to the appointment of arbitrators. Parties to a dispute that has been consolidated with another dispute may object that they were deprived of the possibility to appoint an arbitrator and seek to challenge the award under Article V(1)(d) of the New York Convention.
In the same vein, the 2020 Rules also permit the commencement of more than one arbitration under a “composite request” (Article 1.2), whether against one or more respondents or under one or more arbitration agreements. Once such a request has been made, the respondent may then serve a composite response (Article 2.2). Each arbitration is separate however, and therefore parties using composite submissions must identify the estimated monetary amount or value in dispute, paying the registration fee for each referral.
These new rules in effect mean that parties can commence a single arbitration in respect of disputes under multiple contracts. This was not previously possible under the 2014 rules, which required the parties to issue separate requests for arbitration and then seek to have the arbitrations consolidated.
Primacy of electronic communications and filings and prevalence of virtual hearings
Under the 2020 Rules, electronic filings and communications “either by email or other electronic means” become the default rule in LCIA arbitration (Article 4). In contrast, non-electronic means of communication and filing require the approval of the LCIA Registrar or the tribunal.
The 2020 Rules give the parties and the tribunals more precise flexibility over the format of the proceedings, which can take place in person, virtually by conference call, videoconference or using other communications technology or in a combined form (Article 19.2).
Finally, the 2020 Rules provide that the award will by default be transmitted to the parties via electronic only, with the paper version being sent only when (i) the parties have expressly requested the award in paper, or (ii) in case there is any impossibility for a party to receive the award by electronic form. Under the 2020 Rules, in case there is a discrepancy between the electronic and paper versions, it is the electronic version of the award that prevails, rather than the paper version, as was the case under the 2014 rules (Article 26.7).
These amendments respond to the changing needs of parties and arbitrators, and come at a particularly opportune moment, since the COVID-19 pandemic has forced arbitral participants to move away from their traditional paper-heavy methods.
The 2020 Rules include explicit provisions addressing the role of tribunal secretaries under Article 14A, updating the detailed guidance provided in the “Guidance Note to Arbitrators” published by the LCIA in 2017. The rules confirm that the parties have to agree to the use of tribunal secretaries (Article 14.10). They also clarify the need for tribunal secretaries to disclose any conflicts of interest and that the obligation of confidentiality applies to tribunal secretaries (Article 14.9).
Furthermore, the 2020 Rules specify that tribunals must under no circumstance delegate any of the decision-making process to a secretary (Article 14.8), who may be removed by the tribunal at its discretion (Article 14.15).
Fees and Costs
The 2020 Rules include new provisions of the Schedule of Costs (2020), which modify the LCIA Fees structure, increasing the maximum hourly rate for arbitrators from £450 to £500 per hour (Article 2).
In emergency proceedings, the arbitrators may opt to determine the costs relating to the proceedings, including by taking into account the conduct of the parties’ representatives (Article 9.10).
Parties are now required to give information on their nationality (or nationalities) to the Registrar, facilitating the timely and accurate appointment of arbitrators (whose nationality must be different nationality from that of the parties) (Article 6.1).
Confidentiality and Data Protection
The 2020 Rules also address the need for explicit measures for handling data protection and cyber security. This includes considerations such as processing personal data and the relevant legislation, a duty for parties to undertake confidentiality commitments for those involved in the arbitration, and specific security measures aimed at protecting information divulged in the arbitration (Article 30A).
Presented as an update to the 2014 Rules, the 2020 Rules give arbitral tribunals wider discretion to procedurally manage the LCIA arbitrations in which they sit, particularly in terms of consolidation, the possibility to order concurrent conduct for pending arbitrations, and the possibility to make an early determination. The rules also respond to recurrent concerns raised by LCIA arbitration users and include clarifications on the tribunal secretary’s role as well as new provisions addressing data protection and cyber security management. Finally, on a practical level, the amendments make electronic exchanges the default rule for filings and communications, a change of particular relevance in light of the current COVID-19 pandemic era.