A Shift Towards a More Co-ordinated Approach? – The LCIA Updates Its Arbitration Rules

On 11 August 2020, the London Court of International Arbitration (the LCIA) published its long-awaited updates to its Arbitration Rules and Mediation Rules (the New Rules). The updates, which the president of the LCIA said the institution tried to implement with a “light touch”, include provision of increased discretion to arbitral tribunals to expedite proceedings, and updates to rules governing virtual hearings and electronic communications (no doubt prompted by changing working practices as a result of the COVID-19 pandemic). The New Rules will take effect on 1 October 2020.

This alert discusses the key changes that will be introduced by the 2020 LCIA Arbitration Rules (the “2020 Rules”) and considers the extent to which the updates align the LCIA’s procedures with those of other leading arbitral institutions.

The 2020 Rules

The LCIA made clear that the updates to its Rules of Arbitration were close to being completed before the COVID-19 pandemic changed the global landscape earlier this year and that the pandemic did not lead to a specific change in direction or focus for the updates. However, while it is clear that the primary aim of the updates was the general modernisation of the 2014 LCIA Arbitration Rules (the “2014 Rules”) and improving the efficiency of LCIA arbitrations, some of the updates also reflect the changes in practices seen as a result of the “new normal” remote working environment. 

We summarise the key changes to the 2020 Rules below:

• Express Power to Make Early Determinations (Article 22.1(viii))

A clear focus of the 2020 Rules is to provide arbitral tribunals with additional tools to expedite proceedings. The 2020 Rules will expressly empower arbitrators to decide the stage of the arbitration at which any issue shall be determined and the appropriate procedure to be adopted for each stage. Further, the arbitral tribunal will be able to determine, at any stage, that claims are either: (i) manifestly outside the jurisdiction of the tribunal; or (ii) manifestly without merit. In such cases, the arbitral tribunal will have the power to issue an appropriate award to that effect in what is described by the 2020 Rules as an “Early Determination”. This update is in line with article 43 of the Hong Kong International Arbitration Centre Administered Arbitration Rules (the “HKIAC Rules”), rule 29 of the Arbitration Rules of the Singapore International Arbitration Centre (the “SIAC Rules”), and article 39 of the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce (the “SCC Rules”).

• Increased Focus on Efficient and Expeditious Conduct of Arbitrations (Articles 14.5 and 14.6)

The 2014 Rules already require that the parties do everything necessary for the “fair, efficient and expeditious” conduct of the arbitration. However, the 2020 Rules go further and expressly empower the tribunal to make any procedural order that it considers appropriate with regard to the “fair, efficient and expeditious” conduct of the arbitration. This includes:

1. limiting the length of or dispensing with any written statement;
2. limiting the written and oral testimony of any witness;
3. employing the use of technology to enhance the expeditious conduct of the arbitration; and/or
4. deciding the stage of the arbitration when issues shall be determined (including by an early determination as noted above).

The 2020 Rules also expressly provide that, in all circumstances, an arbitral tribunal shall endeavour to make its final award no later than three months following the last submissions from the parties.

Similarly to the 2020 Rules, the Rules of Arbitration of the International Chamber of Commerce (the “ICC Rules”) provide for expedited proceedings, with one important difference. Whilst Article 30 and Appendix VI of the ICC Rules determine the automatic application of the Expedited Procedure Provisions where the amount in dispute does not exceed US$2,000,000, the 2020 Rules leave the decision on whether there should be expedition and what measures should be adopted entirely to the arbitral tribunal. 

• Expanded Powers to Order Consolidation and Concurrent Conduct of Arbitrations (Article 22A)

Whilst the 2014 Rules provided for the consolidation of arbitrations, this was only where the parties had all consented to consolidation or where the arbitrations were all subject to the same arbitration agreement or between the same disputing parties. The 2020 Rules have broadened this scope and, from 1 October 2020, an arbitral tribunal will also have the power to order consolidated or concurrent proceedings where the disputes arise under compatible arbitration agreements and relate to the same transaction or series of transactions (even if not necessarily based on the same arbitration agreement). This update brings the LCIA closer to the HKIAC Rules and the SIAC Rules. However, while the 2020 Rules permit consolidation or concurrent conduct only if the tribunals in the other arbitrations have not yet been constituted or if the composition of the tribunals is the same, no such restriction exists for consolidation, for example, under the HKIAC Rules. 

• Presumption of Electronic Submission of Communications (Article 4.1)

In contrast to the 2014 Rules, which permitted the delivery of communications to the Tribunal via post, courier, or personal delivery, the 2020 Rules mandate that electronic means shall (unless directed otherwise by the LCIA or a tribunal) be the prevailing method of communication in the arbitration. The 2020 Rules also expressly provide for arbitral awards to be signed electronically.

• Express Contemplation of Remote Hearings (Article 19.2)

Virtual meetings and hearings have become a necessity during the COVID-19 pandemic (see our client alert on the ICC’s Arbitration procedures in light of COVID-19). The new explicit references to the possibility of virtual hearings and videoconferences under the 2020 Rules are, therefore, not surprising. The 2020 Rules, whilst confirming the legitimacy of virtual and remote hearings, are not prescriptive regarding the manner in which hearings are to be conducted, providing rather that hearings may be in person, or by conference call, videoconference, or other communications technology (or a combination of these methods).

• Clarification of the Powers of the Emergency Arbitrator (Article 9.12)

Parties to an arbitration under the 2014 Rules are entitled to seek appointment of a sole emergency arbitrator prior to the formation of the arbitral tribunal, who will then determine any claim for emergency relief (article 9B). The 2020 Rules clarify the extent of the emergency arbitrator’s powers, confirming that he/she can (either on his/her own initiative or upon application from a party) confirm, vary, discharge, or revoke any order that he/she had made, or make an additional award for emergency relief.

• Introduction of the Role of a Tribunal Secretary (Article 14A)

The 2020 Rules provide that an arbitral tribunal may obtain assistance from a tribunal secretary to assist in fulfilling certain of its functions. The provisions governing the appointment and involvement of the tribunal secretary are, however, limited and prescriptive, designed to ensure that the role of the tribunal secretary is properly limited. In particular, the 2020 Rules make clear that under no circumstances can the arbitral tribunal delegate its decision-making function to a tribunal secretary and, prior to the appointment, the parties to the arbitration must agree to the scope of the tasks that are to be carried out by the tribunal secretary.  

• Increased Maximum Hourly Rates for Arbitrators (Updated Schedule of Costs)

The 2020 Rules provided an opportunity for the LCIA to re-evaluate the maximum hourly rate for arbitrators to better reflect the demands of users in complex and significant disputes. The LCIA concluded that it was appropriate to raise the maximum hourly rate from £450 to £500. It is noteworthy that the LCIA does not prescribe a fee range for arbitrators based on the value of the dispute, like the ICC does.

• Express Regulatory Compliance and Data Protection Considerations (Articles 24A and 30A)

The 2020 Rules introduce two new provisions dealing exclusively with regulatory compliance and data protection issues. The 2020 Rules provide that the LCIA will deal with the parties of a dispute on the understanding that each party is complying with all requirements relating to anti-bribery, anti-corruption, and applicable sanctions. Parties will have an obligation to provide the LCIA with information that it may reasonably request to comply with laws relating to these issues. 

The 2020 Rules also adopt new data protection measures, allowing an arbitral tribunal (in consultation with the parties and the LCIA) to consider whether it is appropriate to adopt specific information security measures or other processes to comply with applicable data protection law and to issue binding directions to address data protection and information security.

Do the changes indicate a shift towards greater alignment with other institutions?

As confirmed in the LCIA’s accompanying press release, the updates were intended to be a refinement of the 2014 Rules, as opposed to a radical overhaul. Overall, the substantive updates on expedited process, early determination, and consolidation largely bring the 2020 Rules in line with other leading institutional rules (while still preserving the broad discretion of arbitral tribunals to conduct and determine arbitrations as they deem appropriate).