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Updated LCIA Arbitration Rules increase flexibility for users in modern era

  • United Kingdom
  • International arbitration
  • Litigation and dispute management
  • Technology

08-10-2020

On 1 October 2020, the updated LCIA Arbitration Rules (“2020 Rules”) came into force. These aim to streamline the LCIA’s existing 2014 version (“2014 Rules”) by modernising its arbitral processes and introducing greater flexibility for users. The 2020 Rules are supported by insights and input from a wide number of arbitrators, practitioners and users to reflect current best practice, including measures intended to promote time and cost efficiency.

While the updates were initiated prior to the COVID-19 pandemic, the 2020 Rules have also been informed by the new realities of remote working. They do not contain any radical innovations – and many of the updates have the effect of bringing the Rules in line with similar provisions already in the rules of other arbitral institutions - but we highlight below some of the most significant changes.

1) Embracing electronic communications and the use of technology

The 2020 Rules also respond to the COVID-19 pandemic and the experiences of arbitration proceedings and users during this period with regard to enhanced electronic communications and other technologies which have made virtual hearings possible.

Article 4 provides for Requests and Responses to be submitted electronically and specifies email as the preferred means of communication, unless a direction from the Arbitral Tribunal stipulates otherwise.

The use of virtual hearings is formalised under Article 19.2, which provides a hearing may take place “in person, or virtually by conference call, videoconference or using other communications technology with participants in one or more geographical places.” The Rules incorporate terminology to encompass the evolving nature of technology, although parties will still be permitted to follow more traditional practices if agreed and at the Tribunal’s discretion.

While other arbitral institutions have not yet codified the primacy of virtual technology and electronic communications in their rules, they have produced guidance notes on conducting virtual hearings during COVID-19 to mitigate the effects of the pandemic on conducting hearings and to adapt to this ‘new normal’.

2) Highlighting the Tribunal’s wide case management discretion

Article 14.1 outlines the general duties of the Tribunal to, on the one hand, act fairly and impartially, and, on the other, to adopt appropriate procedures to avoid unnecessary delay and expense and to provide fair, efficient and expeditious resolution of disputes. Article 14.2 makes the overarching point that Tribunals have the widest discretion to discharge those duties.

These provisions only state expressly what was already widely acknowledged but the new Article 14.6 usefully provides a non-exhaustive list of procedural directions that a Tribunal can make when discharging its duties, such as by shortening time scales, limiting evidence, and directing the use of technology for a remote hearing. In addition, Article 15.7 has been updated to emphasise the breadth of the Tribunal’s procedural discretion in relation to the form and timing of the parties’ written submissions and evidence.

3) Early determination and expedition of proceedings

Article 22.1(viii) of the 2020 Rules empower Tribunals to order an ‘Early Determination’. Tribunals can now determine whether any claim, defence, counterclaim, cross-claim, defence to counterclaim or defence to cross-claim is “manifestly outside” of their jurisdiction, or is inadmissible or “manifestly without merit”, and can issue an order or award to that effect. The aim here is to enhance procedural efficiency in LCIA arbitrations and to give Tribunals more confidence to determine and dismiss unmeritorious claims at an earlier stage.

Other leading institutional rules already include similar provisions on summary dismissal or early determination (the Singapore International Arbitration Centre (SIAC) was one of the first to introduce them).

Further, Article 15.10 seeks to facilitate expedition of proceedings by requiring the Tribunal to endeavour to make its final award no later than three months following the last submission from the parties, rather than as “soon as reasonably possible” as provided by the 2014 Rules.

4) Enhanced flexibility when commencing multiple proceedings

Articles 1.2 and 2.2 of the 2020 Rules introduce formalities which allow parties to submit composite Requests for Arbitration and Responses for multi-contract disputes. As a result, a claimant may commence more than one arbitration using a single Request document and a respondent may submit a composite Response. It is however important to note that these changes do not act to automatically consolidate multiple arbitrations even if they have been included in a single Request. Claims will remain separate unless and until consolidation is ordered by the Tribunal and/or LCIA Court.

The 2020 Rules have also broadened the circumstances in which arbitrations may be consolidated. While, under the 2014 Rules, consolidation was only permitted between the same disputing parties, it is now possible for a Tribunal, with the approval of the LCIA Court, to order consolidation of arbitrations arising out of the same transaction or series of related transactions even where the parties differ. The LCIA Court is empowered to order consolidation in similar circumstances prior to the appointment of a Tribunal (Article 22.8(ii)).

These new provisions should increase flexibility and facilitate a simplification and streamlining of the arbitration process for parties under multiple contracts and in multi-party disputes.

5) The use of a Tribunal Secretary

Current practice concerning tribunal secretaries has been introduced formally in Article 14A of the 2020 Rules, although the LCIA addressed their role previously in its 2017 Guidance Note. Article 14.8 makes clear that the Tribunal may not delegate its decision-making function to the Tribunal secretary and Article 14.10 requires party approval for the use of a secretary and outlines the tasks they are to perform.

6) Arbitrators’ fees

The 2020 Rules increase the maximum hourly rates for arbitrators from £450 to £500 to better accommodate needs of users in complex cases. This does not apply retrospectively but only for new cases commenced under the 2020 Rules provided they are of sufficient complexity. While some criticism has been levied against the LCIA for this change, the LCIA maintains that this relatively modest increase better reflects the demands of users in cases involving complex and significant disputes.

It should also be noted here that the Hong Kong International Arbitration Centre (HKIAC) Rules provide for a maximum hourly rate of HKD 6,500 (equivalent to approximately £650) and that higher rates may be charged if expressly agreed by all parties or if the HKIAC determines in exceptional circumstances.

7) Data protection and other regulatory issues

Finally, the 2020 Rules introduce certain provisions related to data protection and compliance, illustrating how the LCIA is looking to modernise and address the concerns of its users, particularly in response to the increased digitalisation of the arbitral process.

Article 24A addresses issues of compliance relating to bribery, corruption, terrorist financing, fraud, tax evasion, money laundering and economic or trade sanctions. Article 30A introduces provisions related to data protection, clarifying that data protection legislation applies to any processing of personal data by the LCIA and requiring the Tribunal to consider data protection and information security issues at an early stage. An enhanced duty of confidentiality in Article 30 has also been expanded to include all participants in the arbitral process.

No other major arbitral institution has introduced provisions explicitly addressing issues of data protection and compliance to this effect.

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