LCIA Arbitration Rules 2020—a heavier touch?

LCIA Arbitration Rules 2020—a heavier touch?

The LCIA Arbitration Rules 2020, which come into force on 1 October 2020, have been brought up to date with some pragmatic and user-friendly innovations, such as new provisions for electronic communications, electronic signing of arbitration awards, virtual hearings, and early disposal of unmeritorious claims. Notably, the LCIA Court has also assumed new powers, which, depending on how they are exercised in practice, may not be welcomed by all parties who had been attracted by the LCIA’s ‘light touch’ approach to administration. James Clanchy of the Lexis®PSL Arbitration team considers some of the changes and their practical implications.

What are the practical implications of the rule changes?

Many of the changes are of a housekeeping nature and bring the rules up to date in terms of language, day-to-day to practice, and users’ expectations.

The primacy given to electronic communications (LCIA Rules 2020, art 4), the abandonment of fax numbers (LCIA Rules 2020, art 1.1(i)), the recognition of virtual hearings (LCIA Rules 2020, art 19.2), the encouragement of expedited procedures (LCIA Rules 2020, art 14.6), provisions for early determination (LCIA Rules 2020, art 22.1(viii)), greater emphasis on timely delivery of awards with a new three months target deadline from final submissions (LCIA Rules 2020, art 15.10), the availability of electronic signatures on awards (LCIA Rules, 2020, art 26.2), the reversion to counterclaims in place of cross-claims (LCIA Rules 2020, art 2.1(iii)), the removal of the qualifier ‘legal’ before ‘authorised representative’ (LCIA Rules 2020, art 18 and Guidelines), and clarification that the rules are to be interpreted in accordance with the laws of England, irrespective of the law applicable to the arbitration agreement and the arbitration (LCIA Rules 2020, art 16.5) are all examples of these and will be welcomed.

So too, we expect, will the LCIA’s decisions to address, in the rules, data protection and cybersecurity concerns (LCIA Rules 2020, art 30A) and issues of compliance (ie restrictions on parties and/or the LCIA itself relating to bribery, corruption, economic sanctions, etc) (LCIA Rules 2020, art 24A) (both ‘firsts’ among the leading arbitral institutions) but not to introduce any provisions in relation to third-party funding (see our post, Whatever happened to third-party funding in international arbitration?).

However, the LCIA’s enthusiasm to embrace modern techniques of case handling may not be shared everywhere, for example in some national courts, which may require ‘wet’ signatures on awards to be enforced there, and it may not be catered for in every contract that may give rise to LCIA arbitrations. There are potential pitfalls to look out for in the new rules.

The LCIA has committed to update its guidance notes and other resources in due course. In the meantime, parties with LCIA arbitration clauses in their contracts may wish to consider whether there would be value in commencing an arbitration, in respect of an existing dispute, before the new rules come into force on 1 October 2020. This is because, among other matters, parties risk losing control over the following:

  • keeping their dispute confidential and separate from other disputes—the LCIA Rules 2020 permit composite Requests for different claims against multiple respondents (LCIA Rules 2020, art 1.2) and allow the LCIA Court to order (prior to the appointment of the tribunal in any of the relevant arbitrations) the consolidation of arbitrations between different parties but arising out of the same transaction or series of related transactions (LCIA Rules 2020, art 22.8(ii)). Note: the tribunal’s own consolidation powers are contained in LCIA Rules 2020, art 22.7 and require the approval of the LCIA Court too
  • limitation defences—the LCIA Court has a new power to allow a claimant to amend its Request (LCIA Rules 2020, art 1.5) which parties may seek to exploit for the purpose of rectifying errors in the commencement of an arbitration
  • method of delivery of the Request and communications to the respondent—the Registrar’s prior permission (acting on behalf of the LCIA Court) is required for delivery other than by email or other electronic means (LCIA Rules 2020, art 4.2), which may not be practical for a claimant faced with a time bar (limitation period) and only a registered office address for the respondent
  • the initiation of the procedure after appointment of the arbitral tribunal—where the parties and tribunal had previously been encouraged to make contact soon after the formation of the tribunal, which may be useful in many cases, early contact is now mandatory (LCIA Rules 2020, art 14.3), which may not always be suitable in every arbitration and has costs consequences

Conversely, of course, there may be parties who would rather wait for 1 October 2020 before commencing their LCIA arbitrations in order to take advantage of the new provisions.

These changes are discussed in further detail below.

Going forward, some parties may wish to consider introducing into their LCIA arbitration clauses in new contracts:

  • notice provisions, setting out the email address(es) to which a Request and other communications in an arbitration should be sent
  • confidentiality provisions, prohibiting the sharing of information about a dispute with other parties, even in related transactions, and perhaps expressly prohibiting composite Requests
  • non-consolidation provisions, seeking to opt out of LCIA Rules 2020, art 22.8(ii)

What was the background?

The LCIA is unusual among international arbitral institutions in that it was established, in its modern form, in a jurisdiction in which ad hoc arbitration already attracted thousands of international users. The Arbitration Act 1996 (AA 1996) presented the LCIA with an opportunity to demonstrate that it could add value to the process. The 1998 edition of its Arbitration Rules did so in a number of ways, while remaining ‘light touch’.

The 2014 edition continued to cater for the many commercial users who would normally have taken the ad hoc route instead. The Rules retained this sensitivity to London traditions while also introducing innovations from reforms and discussions in the world of institutional arbitration in other jurisdictions, such as the emergency arbitrator and guidelines for the conduct of counsel.

Against this background, the LCIA Rules 2020 represent a departure. Ad hoc arbitration continues to predominate in London—see our post: Arbitration statistics 2019—rise of the sole arbitrator. However, the choice has become a starker one for commercial parties. The LCIA Court has assumed new powers. These may be responses to case law and other developments since 2014 but, while welcomed by some, they may not suit all of the LCIA’s users or its potential users, who may remain content with the default provisions in the AA 1996.

Among the case law to which the new rules respond is the following:

It should be noted that the LCIA has not found it necessary to respond to the Court of Appeal decisions in Halliburton v Chubb [2018] EWCA Civ 817 on arbitrators’ disclosures and apparent bias and in Enka v Chubb [2020] EWCA Civ 574 on the law of the arbitration agreement (both of which are on appeal to the Supreme Court), as the institution’s arbitration rules already contained clear provisions about these matters.

Among international developments in institutional arbitration, which form the background to the new rules are:

Increased focus on cybersecurity and data protection obligations in international arbitration and increased awareness of compliance matters generally also form the background to the revised rules—see Practice Notes: Arbitration—data protection and GDPR considerations and Cybersecurity in international arbitration.

What are the new rules?

New rules, which merit particular attention, are briefly discussed below.

Composite Requests (LCIA Rules 2020, art 1.2)

The new provision for composite Requests is no doubt a response to the decision in A v B but it goes further than might have been expected. It contemplates a Request which could cover several claims against different parties under different contracts. There is no explanation as to how duties of confidentiality would not thereby be breached. A party, who already has an LCIA arbitration clause in an existing contract, may not have contemplated such a departure from one of the fundamental benefits of arbitration. That party may not be expected to know that associated transactions with other parties might likewise be subject to LCIA arbitration and that respective claims against each of them risked being shared in this way, contrary to their commercial interests.

Arbitrations so commenced would each be separate and the provisions of LCIA Rules 2020, art 1.1 would apply to each of them. It follows that a registration fee will be payable in respect of each such arbitration. Costs savings, which might motivate a composite Request, would not therefore be available. Of course, the ability to submit composite Requests may be attractive for some would-be claimants.

Amendments to Requests (LCIA Rules 2020, art 1.5)

The power of the LCIA Court to allow amendments to a Request is possibly the most surprising, and potentially most far reaching, of all of the changes introduced in the LCIA Rules 2020.

It is important to remember that, unless adopted as such under LCIA Rules 2020, art 15.2, the Request is not a pleading. Its function is the commencement of the arbitration and it is the equivalent of a notice of arbitration under AA 1996, s 14(3).

There is no provision under AA 1996 for the amendment of such a notice. The AA 1996 allows applications for extensions of time under AA 1996, s 12 but these are rare and rarely successful.

The reason a claimant would seek to amend a Request in an LCIA arbitration must be to cure a problem which puts its claim at risk, whether in correctly identifying a respondent or a contract, or another element of the dispute in respect of which the arbitration has been commenced. Until now, a respondent has been entitled to expect that such a problem may provide it with a limitation or other defence, which only the arbitral tribunal or a court could resolve. This new rule potentially allows the LCIA Court to make a decision itself, which could deprive the respondent of such a defence. The LCIA Court has never previously enjoyed such a power and how it might be exercised is therefore unknown. The language of the new rule is similar to that found in LCIA Rules 2020, art 27, which deals with corrections to awards, but it is wider and open to interpretation.

Note: the same power of amendment is potentially available in respect of the Response to the Request (LCIA Rules 2020, art 2.5).

LCIA Court’s permission for non-electronic communications (LCIA Rules 2020, art 4)

The LCIA cannot be faulted in giving primacy to electronic communications. However, it is not infrequently the case, in disputes arising from international commerce, that a party does not have a functioning email address for its counterparty, let alone one that has been designated or agreed. This may be because the contract was negotiated through brokers or with an associated company. It is usual practice, in such circumstances, for the claimant to deliver a notice or Request by hand to the respondent’s registered office.

Under LCIA Rules 2020, art 4, the LCIA Court’s prior permission will be needed before taking that usual step. No doubt, that permission would be readily given but the need for it could cause problems, particularly when a time bar is in the offing.

No such administrative hurdles face a claimant in an ad hoc arbitration under the AA 1996. It is difficult therefore to see what added value the new LCIA rule provides, worthy as its intentions might be.

Tribunal secretary (LCIA Rules 2020, art 14A)

It has become relatively common practice in institutional arbitration for a tribunal to seek to appoint an additional person, often a lawyer, to carry out certain tasks in the proceedings, characterised as administrative, despite the presence and availability of an institution’s secretariat and despite the general tendency towards disintermediation and rationalisation in other spheres.

Calls to provide younger arbitration lawyers with opportunities, combined with a tendency for some parties to nominate arbitrators with insufficient time to devote to mundane procedural matters, led this practice to be adopted in various LCIA arbitrations. The decision in P v Q concentrated minds and the LCIA published guidelines on the use of tribunal secretaries, which have now found their way into the rules.

Parties, already sceptical about the need for an arbitration to be administered in the first place, may be bemused by the inclusion of the tribunal secretary in the rules. For others, the formal adoption of rules on the use of tribunal secretaries brings the LCIA in line with approaches taken by other arbitral institutions.

Mandatory early contact (LCIA Rules 2020, art 14.3)

In institutional arbitrations, particularly in those requiring terms of reference, it is usual for the parties and tribunal to meet at an early stage. Parties in London arbitrations often prefer to be left alone to exchange submissions, contacting the tribunal only after their dispute has been ventilated or if they need an interlocutory order. This preference may be accompanied by a suspicion that a proactive arbitrator, who calls an early meeting, is primarily concerned to generate fees.

The LCIA Rules 2014 had introduced a provision that parties and tribunal were ‘encouraged’ to make early contact. This additional measure could assist, particularly if one or some of the parties is disinclined to engage with the process. For example, a claimant that files a Request simply to get the respondent to the negotiating table, or a respondent that intends to move at the slowest pace possible. An early meeting can also have benefits where there is impetus to resolve the dispute as soon as possible and to agree key procedural matters such as the timetable or need for hearings or not. Nevertheless, if those are concerns, then an early meeting will usually be seen as desirable and agreed without the need for a rule to that effect. The permissive language in the LCIA Rules 2014 maintained the LCIA’s customary sensitivity to the expectations of parties coming from ad hoc arbitration.

The compromise has been removed with the new rule that the parties and tribunal ‘shall make contact’ no later than 21 days after notice of the formation of the tribunal. Of course, with video technology and other modern communications, such contact may be straightforward from a practical point of view. However, it may not be suitable or convenient. Above all, parties might expect this to be their choice and nobody else’s. This change may be seen in some quarters as an interference with party autonomy. The accompanying requirement to make early advance payments because the rules, not the parties, oblige the tribunal to do some early work, may likewise not be appreciated in some quarters.

LCIA Court’s power to consolidate arbitrations (LCIA Rules 2020, art 22.8(ii))

The LCIA Rules 2014 had introduced provisions for consolidation of arbitrations. The new rules take these provisions to a new level, allowing the LCIA Court to consolidate arbitrations, not necessarily between the same parties, but ‘arising out of the same transaction or series of transactions’. As with the provisions for a composite Request, there is no explanation as to how confidentiality obligations are to be overcome. Parties who signed up to the previous rules may have legitimate concerns in this regard. Others may see opportunities to acquire information about associated proceedings in which they are not involved.

Given that party autonomy is one of the founding principles of arbitration, and the requirement for the LCIA Court to give parties a reasonable opportunity to state their views, it is expected that the LCIA Court will exercise this power in a circumspect manner.

Interim and conservatory measures (LCIA Rules 2020, art 25.3)

The new rules include some amendments presumably designed to address problems raised by Gerald Metals v Timis. However, they do not go so far as to remove the provisions for emergency arbitrators, which had been called for in some quarters, and despite the fact that they have only rarely been used since they were introduced in 2014.

The practical effect of the adjustments to the language is not clear. Under LCIA Rules 2020, art 25.3, a party may apply to court for measures which the tribunal would have power to order under LCIA Rules 2020, art 25.1. Previously a party could apply for measures ‘to similar effect’. At first sight, the new rule is more restrictive, rendering it impossible for a party to apply for orders which only a court, not a tribunal, could order. It is hard to believe that this was the intention and clarification from the LCIA would be welcome.

For a fuller version, see our News Analysis published on 13 August 2020.

Some links require a Lexis®PSL subscription. See below for a free trial. 

Subscription Form

Related Articles:
Latest Articles:

Access this article and thousands of others like it free by subscribing to our blog.

Read full article

Already a subscriber? Login

About the author:

James is an arbitration specialist. He has more than 25 years’ experience of ad hoc, trade association, institutional and investment arbitrations as a solicitor in London and Paris, as a former Registrar of the London Court of International Arbitration (LCIA), and as a case assessor for legal costs insurers and third party funders. His background as a lawyer is in international trade, commodities, shipping and insurance.

He trained at Withers in London and then spent four years in the firm’s Paris office. He was admitted as an avocat at the Paris bar (1994 – 2008). Returning to London, he spent more than 13 years at Holman Fenwick Willan in its Trade & Energy group. As Registrar and Deputy Director General of the LCIA in 2008 – 2012, he oversaw the administration of more than a thousand commercial arbitrations and assisted with a review of its Arbitration Rules. He subsequently spent two years at Thomas Miller Legal, assessing and managing a wide range of commercial and investment claims on behalf of insurers and funders. Returning to private practice in 2015, he spent a year in Stephenson Harwood’s International Arbitration group where he assisted on ICC and LCIA arbitrations, principally oil and gas disputes.

James is a Fellow of the Chartered Institute of Arbitrators. At LexisNexis, James works on the Lexis®PSL Arbitration module.