Italy: The 2014 LCIA Rules - A Brief Analysis Of The 2014 London Court Of International Arbitration Rules

Last Updated: 19 October 2015
Article by Giuseppe Broccoli

LCIA adopted new Arbitration Rules for all the proceedings starting from 1st October 2014 which provide significant changes mainly in respect of (1) the law governing the arbitration agreement, (2) the proceedings itself (3) the conduct required to legal representatives and (4) the appointment of emergency arbitrators (as part of the emergency procedures available under the LCIA Rules).

1. The law governing the arbitration agreement and the seat of arbitration.

Amongst the others, one of the most relevant changes relate to the law governing the arbitration agreement. Article 16.4 in fact now provides that:

"The law applicable to the Arbitration Agreement and the arbitration shall be the law applicable at the seat of the arbitration, unless and to the extent that the parties have agreed in writing on the application of other laws or rules of law and such agreement is not prohibited by the law applicable at the arbitral seat."

This provision expressly gives certainty in respect of the application of the common principle of the lex arbitri and avoids any discussion about the usual alternative between law of the seat and law of the contract. In the absence of parties' choice, in fact, if on the one side there are strong arguments to maintain that the arbitration agreement should be governed by the law applicable to the contract (since the arbitration agreement is a clause of the underlying contract) on the other hand the principle of autonomy and separability of the arbitration clause can rightly bring to consider the law of the seat as the most appropriate (as the 1958 New York Convention points under Article V (1)(a)).

As to the seat of the arbitration, while Article 16.1 provides that the parties have the power to choose the seat until the formation of the Arbitral Tribunal (and even after with the consent of the Tribunal itself), Article 16.2 provides that in case of failure from the parties to choose the seat of the arbitration, the latter will be London by default, unless the Tribunal, having considered the comments from the parties, will consider more appropriate a different place.

All the above shall therefore be carefully considered by the parties given the effect that the law of the seat might have on supervisory, conservatory or interim measures.

2. The arbitration proceedings.

The 2014 LCIA Rules provide also for various measures to improve the efficiency and the speed of the arbitration proceeding itself. Below a brief description of the most relevant.

  1. More efficiency from arbitrators. Article 5.4 of the LCIA new Rules provides that the candidate arbitrators, before their appointment, shall sign a declaration pursuant to which they will state "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." This provision has to be read in connection with Articles 10.1 and 10.2 pursuant to which the LCIA Court has the power to revoke the arbitrator if she "does not conduct or participate in the arbitration with reasonable efficiency, diligence and industry."

    In the context of improving the speed of the proceeding, Article 15.10 provides that:

    "the Arbitral Tribunal shall seek to make its final award as soon as reasonably possible following the last submission from the parties [...]. When the Arbitral Tribunal [...] establishes a time for what it contemplates shall be the last submission from the parties (whether written or oral), it shall set aside adequate time for deliberations as soon as possible after that last submission and notify the parties of the time it has set aside."

    These are certainly rather positive provisions since they should be effective in promoting a timely and efficient conduct of the arbitration.
  2. Timing and speed of proceeding. Various provisions are aimed at improving the speed of the proceeding.

    The 2014 Rules have slightly shortened generally the time limits from 30 to 28 days. Despite such reduction seems modest the main effect is to eliminate those situation where the last day fall on a weekend.

    Article 5.1 provides expressly that "any controversy between the parties relating to the sufficiency of the Request or the Response" shall not impede the formation of the Arbitral Tribunal so, as it was provided by Article 5.4 of the 1998 LCIA Rules, the LCIA Court does not carry out any assessment of the completeness of the Request or the Response. Any controversy relating to the Request or Response shall therefore be dealt with directly by the Tribunal once formed.

    Certainly to be welcomed is also Article 14.1 pursuant to which the parties and the Arbitral Tribunal are encouraged to make contact no later than 21 days from the notification of the formation of the Tribunal. Such contact may be made with any viable mean "whether by a hearing in person, telephone conference-call, video conference or exchange of correspondence". In line with said provision, Article 13.1 seeks to make contacts between the parties and the tribunal easier allowing the direct communication instead of through the Registrar.

    Again in the light of improving the speed of the proceeding, Article 18.4 (to be read in conjunction with Article 18.3) grants the Arbitral Tribunal the power to withhold the approval of the appointment of new legal representative if such appointment would have an impact (amongst the others) also on the costs and time of the proceeding. While in fact Article 18.3 provides that any appointment of new legal representative has to be approved by the Tribunal, said appointment can be withheld by the Tribunal 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)". In granting or withholding the approval the Tribunal "shall have regard to the circumstances, including: the general principle that a party may be represented by a legal representative chosen by that party, the stage which the arbitration has reached, the efficiency resulting from maintaining the composition of the Arbitral Tribunal (as constituted throughout the arbitration) and any likely wasted costs or loss of time resulting from such change or addition".

3. Conduct of legal representatives.

Certainly one of the most innovative changes is that contained in the Annex "General Guidelines for the Parties' Legal representative" as referred to by Article 18.5.

Despite the General Guidelines are not substantially different from the IBA Guidelines on Party Representation in International Arbitration (other provisions of the 2014 LCIA Rules recall the IBA Guidelines see for instance Article 13.5 of the 2014 LCIA Rules compared with IBA Guideline 8 (b)) it is to be welcomed the express inclusion in the Rules of principles which are to be intended "to promote the good and equal conduct of the parties' legal representatives...".

Pursuant to the General Guidelines, the legal representatives should not:

  1. engage in activities intended unfairly to obstruct the arbitration or to jeopardise the finality of any award, including repeated challenges to an arbitrator's appointment or to the jurisdiction or authority of the Arbitral Tribunal known to be unfounded by that legal representative;
  2. knowingly make any false statement to the Arbitral Tribunal or the LCIA Court;
  3. knowingly procure or assist in the preparation of or rely upon any false evidence presented to the Arbitral Tribunal or the LCIA Court;
  4. knowingly conceal or assist in the concealment of any document (or any part thereof) which is ordered to be produced by the Arbitral Tribunal.

The most important changes are however the one provided by Article 18.5, pursuant to which each representative shall have agreed to comply with the Guidelines as a condition of their appointment and the one contained in Article 18.6 which empowers the Arbitral Tribunal to sanction the legal representative who is found to have violated the Guidelines.

4. Emergency Procedures.

There are two mechanisms available in respect of emergency procedures. The first one relates to the expedited formation of the arbitral tribunal (already available also under the previous 1998 LCIA Rules) and the second is the possibility for a party to apply for the appointment of an Emergency Arbitrator who will deal with emergency relief.

  1. Expedited Formation of the Arbitral Tribunal. Article 9A provides that, in case of exceptional urgency, any party may apply to the LCIA Court (with written request to the Registrar) and request the expedited formation of the Tribunal. The request shall be made simultaneously with the Request for Arbitration or the Response (depending if it is the claimant or the respondent who makes the application). The application must state the specific grounds of the exceptional urgency which requires the expedited formation of the Tribunal.

    If the LCIA Court grants the application (ie recognizes that there are exceptional reasons for the expedited formation of the Tribunal) then the Court shall appoint the Tribunal as expeditiously as possible and will have also the power to abridge any time period of the proceeding pursuant to Article 22.5.The non-applicant will usually be given the opportunity to comments on the application, despite the fact that the Court may decide to grant the application even without having given such possibility to the non-applicant.

    It is relevant to mention that the Tribunal appointed under an expedited formation is the same Tribunal that will decide the merit of the case in the sense that it is the permanent (as opposite to a temporary) Tribunal.
  2. Appointment of an Emergency Arbitrator. Article 9B allows a party to request the appointment of an Emergency Arbitrator to deal with urgency relief. This is a new provision of the 2014 LCIA Rules (not provided by the replaced 1998 Rules) and it is in line with other main arbitration rules. Such provision reflects the importance of interim emergency reliefs that can be applied in arbitration procedures. It remains however problematic the enforcement of any interim relief granted by arbitral tribunal in various jurisdictions. This is the reason why the parties might prefer to recur to local courts (in various jurisdictions) and this is not prevented by the new provision of the LCIA Rules.

    Article 9B provides in particular that:

    "[...] in the case of emergency at any time prior to the formation [...] of the Arbitral Tribunal [...] any party may apply [...] for the immediate appointment of a temporary sole arbitrator to conduct emergency proceedings [...]."

    It is clear that the Emergency Arbitrator is a sole and temporary arbitrator appointed only for the purpose of deciding on any interim relief that the applicant wishes to obtain. In other words, the Emergency Arbitrator will not remain in office to determine the merit of the case.

    The main features of the procedure for the appointment of Emergency Arbitrator may be summarized as follows:

    1. "The application shall set out, together with all relevant documentation: (i) the specific grounds for requiring, as an emergency, the appointment of an Emergency Arbitrator; and (ii) the specific claim, with reasons, for emergency relief."
    2. The LCIA Court will determine the application as soon as possible and, if the application is granted, the LCIA Court will appoint the Emergency Arbitrator within the three days from the receipt of the application.
    3. The Emergency Arbitrator will conduct the emergency proceedings in any manner she/he will determine appropriate in the circumstances and giving the opportunity to each party, if possible, to be consulted on the claim submitted and the reasons for the emergency relief (even if the Emergency Arbitrator is not bound by holding a specific hearing and may take the decision solely on the basis of the documentation submitted).
    4. The Emergency Arbitrator shall take a decision on the application within 14 days following her appointment. The time limit could be eventually extended (in exceptional circumstances) by the LCIA Court or by agreement between the Parties.
  3. The decision of the Emergency Arbitrator may take the form of an order or even of an award (despite the award cannot fall within the concept of 'award' as provided for by the 1958 New York Convention). The order or the award may be confirmed, varied or revoked by an order or award made by the subsequently appointed Arbitral Tribunal.

    Particular attention should be given to the drafting of the arbitration clause to be governed by the 2014 LCIA since, as clarified by para 9.14, the provision shall not apply "if either: (i) the parties have concluded their arbitration agreement before 1 October 2014 and the parties have not agreed in writing to 'opt in' to Article 9B; or (ii) the parties have agreed in writing at any time to 'opt out' of Article 9B".

5. Conclusion.

As almost unanimously recognized, the 2014 LCIA Rules represent an effective improvement of the arbitration proceedings administered by LCIA which remains the second most preferred institution for international arbitrations and the new Rules certainly reflect the recent trends towards efficiency from time and cost perspective. The 2014 Rules will certainly improve also the competitiveness of the LCIA compared with other well regarded arbitration institutions. Despite some apparent confusion which comes mainly from its name, the great majority of the parties involved in arbitration proceedings administered by the LCIA are not on English nationality and the LCIA is one of the leading institutions for international commercial dispute resolution.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Giuseppe Broccoli
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