- New LCIA International Arbitration Rules Come Into Effect
- October 7, 2014 | Authors: David Baron; Andrew Briggs; Hugh E. Hackney; Thomas R. Snider
- Law Firms: Greenberg Traurig, LLP - Washington Office ; Greenberg Traurig, LLP - Mexico, D.F. Office ; Greenberg Traurig, LLP - London Office ; Greenberg Traurig, LLP - Dallas Office ; Greenberg Traurig, LLP - Washington Office
The London Court of International Arbitration (LCIA), one of the world’s leading international arbitral institutions, has issued an updated set of procedural rules for LCIA-administered arbitrations. The updated rules replace the LCIA’s previous rules, which had been in force since 1998, and will apply to all arbitrations filed with the LCIA after Oct. 1, 2014, unless the parties have otherwise agreed.
The updated rules represent evolution rather than revolution and are unlikely to alter fundamentally the character of LCIA arbitrations. Provisions like a new emergency arbitrator mechanism and various rules designed to improve the efficiency of LCIA arbitrations bring the LCIA rules into line with contemporary arbitration practice. At the same time, the LCIA has retained the distinctiveness of its rules with innovative new procedures like the rules on conduct of legal representatives. The changes should ensure that the LCIA remains among the most popular for users of international arbitration and may further increase the efficiency of proceedings, which is to be welcomed. Some of the noteworthy substantive changes are discussed below.
Perhaps the most notable change in the new LCIA rules involves the robust powers that are given to arbitral tribunals to regulate the parties’ legal representatives and their conduct. Under Article 18.3 of the new rules, once the arbitral tribunal is formed, any changes that a party seeks to make to the constitution of its legal representatives “shall only take effect in the arbitration subject to the approval of the Arbitral Tribunal.” Pursuant to Article 18.4, the tribunal may reject such a change if it “could compromise the composition of the Arbitral Tribunal or the finality of any award (on the grounds of possible conflict or other like impediment),” taking into account the circumstances of the change.
Further, under Article 18.5, the parties must ensure that their legal representatives in the arbitration have agreed to comply with the General Guidelines for the Parties’ Representatives, which is set forth as an annex to the new rules. Among other things, the guidelines prohibit legal representatives from engaging in activities intended unfairly to obstruct the arbitral proceedings (including making repeated challenges to arbitrators or unwarranted jurisdictional objections); knowingly making false statements; knowingly procuring, assisting in the preparation of, or relying upon any false evidence; knowingly concealing or assisting in the concealment of any document ordered to be produced by the tribunal; and deliberately initiating or attempting to initiate unilateral contact with any member of the tribunal or any member of the LCIA Court involved in making decisions related to the arbitration without disclosing it to the other party, the entire tribunal, and Registrar.
If a party makes a complaint against a legal representative of the other party, the arbitral tribunal may, pursuant to Article 18.6, determine whether the legal representative has violated the guidelines and, if so, may sanction the legal representative through a written reprimand, a written caution against future conduct in the proceedings, or “any other measure necessary to fulfil within the arbitration the general duties required of the Arbitral Tribunal.”
Article 9B sets forth new provisions providing for emergency arbitrators. Under Article 9.4, “any party may apply to the LCIA Court for the immediate appointment of a temporary sole arbitrator to conduct emergency proceedings pending the formation or expedited formation of the Arbitral Tribunal.” If the LCIA Court grants the application, the emergency arbitrator is to be appointed within three days (or, as soon as possible thereafter) and must render a decision on the requested emergency relief as soon as possible but, in any event, within 14 days of his or her appointment. This deadline can be extended only under exceptional circumstances or by written agreement of the parties.
The emergency arbitrator has the discretion to conduct the proceedings in any manner that he or she deems appropriate under the circumstances and is not required to hold a hearing. Orders or awards rendered by an emergency arbitrator “may be confirmed, varied, discharged or revoked, in whole or in part, by order or award made by the Arbitral Tribunal upon application by any party or upon its own initiative.” Further, the appointment of an emergency arbitrator in no way prejudices a party’s right to seek interim or conservatory measures before national courts.
The ability of arbitrators to devote sufficient time and energy to the arbitrations to which they have been appointed has received considerable attention in the international arbitration community over the past several years. In recognition of such concerns, Article 5.4 of the new rules now require that nominated arbitrators submit a written declaration confirming “whether the candidate is ready, willing and able to devote sufficient time, diligence and industry to ensure the expeditious and efficient conduct of the arbitration” before they are appointed.
Communications with Tribunals
The new rules have more stringent standards for communicating with an arbitral tribunal or its members. Article 13.4 now provides that “[d]uring the arbitration from the Arbitral Tribunal’s formation onwards, no party shall deliberately initiate or attempt to initiate any unilateral contact relating to the arbitration or the parties’ dispute with any member of the Arbitral Tribunal or any member of the LCIA Court exercising any function in regard to the arbitration” without also disclosing such communication in writing to the other parties, arbitrators, and Registrar.
Arbitrators or arbitrator candidates and nominees are, however, permitted under Article 13.5 to consult with parties concerning the selection of a presiding arbitrator prior to the formation of the arbitral tribunal, provided that the arbitrator, candidate, or nominee informs the Registrar of the consultation.
Article 16.4 of the new rules has been updated to clarify that the law applicable at the seat of the arbitration is also the law applicable not only to the arbitration proceedings, but to the arbitration agreement as well. (Previously, this provision indicated only that the law of the seat of the arbitration was the law applicable to the arbitration, not the arbitration agreement.) A similar change was recently incorporated by the Hong Kong International Arbitration Centre (HKIAC) into its model arbitration clause. These changes seek to address uncertainty that has arisen with respect to the law governing arbitration agreements following various approaches taken by courts to the issue.
The new rules provide arbitral tribunals with the power to consolidate cases. Under Article 22.1(ix), an arbitral tribunal may, with the approval of the LCIA Court, consolidate an LCIA arbitration with one or more other arbitrations into a single LCIA arbitration where the parties to the arbitrations agree in writing. Similarly, Article 22.1(x) permits an arbitral tribunal, again with the approval of the LCIA Court, to consolidate an LCIA arbitration with one or more other LCIA arbitrations commenced under the same arbitration agreement or a compatible arbitration agreement between the same parties if no tribunal has been formed by the LCIA Court for the other arbitration or the other arbitration has the same arbitrators.
Without prejudice to the above provisions empowering arbitral tribunals to consolidate arbitrations, Article 22.6 also permits the LCIA Court to consolidate multiple LCIA arbitrations that are commenced under the same arbitration agreement and between the same parties if no arbitral tribunal has been formed for any of the arbitrations to be consolidated.
An addition to Article 28.4 provides that an arbitral tribunal may “take into account the parties’ conduct in the arbitration, including any co-operation in facilitating the proceedings as to time and cost and any non-co-operation resulting in undue delay and unnecessary expense” in assessing arbitration and legal costs.
The updated rules reflect an emphasis on arbitral efficiency. For example, under Article 14.1, the parties and the arbitral tribunal are encouraged to meet within 21 days of the Registrar’s written notification of the formation of the tribunal. Similarly, at the other end of the proceedings, Article 15.10 provides that the tribunal is to seek to issue a “final award as soon as reasonably possible following the last submission from the parties.”
The LCIA has also gone “green” under the new rules. Under Articles 1.2 and 2.2, parties may submit requests for arbitration and responses to requests in electronic form; it is no longer necessary to submit paper documents. The LCIA has also expressed a preference for electronic communications throughout the rules. For example, under Article 9C, an application for the expedited appointment of a replacement arbitrator is to be made “preferably by electronic means.” Apart from the environmental benefits, these changes will make the arbitral process less cumbersome and expensive for parties.
The number of international arbitrations referred to the LCIA continues to rise according to a recent report by the LCIA Registrar. In 2013, parties referred 290 arbitrations to the LCIA, an increase of almost 10 percent over the previous year. While arbitrations involving parties from the United Kingdom have traditionally constituted the lion’s share of arbitrations referred to the LCIA, the caseload is becoming increasingly internationalized. Parties from around the globe referred disputes to LCIA arbitration in 2013 with arbitrations involving parties from the United States alone making up approximately 7 percent of these arbitrations.
The LCIA’s decision to update its rules follows a trend among the leading international arbitral institutions of making rule changes to reflect the latest developments in international arbitral practice and procedure. Like the LCIA, the International Center for Dispute Resolution (ICDR), the international arm of the American Arbitration Association (AAA), updated its rules earlier this year to provide mechanisms for more efficient proceedings as reported.