UK: LCIA (The London Court Of International Arbitration) Introduces New Arbitration Rules

Last Updated: 19 December 2014
Article by Jonathan Haydn-Williams

The LCIA's new arbitration rules ("Rules") were introduced on 1 October 2014. They apply to all LCIA arbitrations commenced on or after that date, even if the arbitration agreement (usually found in a clause in a contract) was entered into before that date.

In line with the English tradition of saying one thing and meaning another, The London Court of International Arbitration is not a court. Rather, it is one of several entities, across the world, which administer international arbitrations and, for that purpose, publish arbitration rules which contracting parties may adopt as an alternative to any disputes between them being dealt with by a court with which the contract is connected.

Although LCIA arbitration can be used in disputes within England and Wales, it is aimed at disputes in which the parties come from different countries. The word "international" does not mean that it is limited to disputes between governments or states.

A short introduction to arbitration and a table setting out the respective pros and cons of arbitration and litigation can be found by clicking here.

The Rules are published in a slim booklet of 47 pages. That compares with the English courts' Civil Procedure Rules which run to 3,173 close typed pages. The Rules can also be accessed on the LCIA website http://www.lcia.org/Dispute_Resolution_Services/lcia-arbitration-rules-2014.aspx

Annexed to the Rules are Recommended Arbitration Clauses, one for inclusion in contracts to cover future disputes and one to be used where there is an existing dispute which the parties wish to refer to LCIA arbitration, rather than commencing court proceedings.

The Rules set out the procedure to be adopted from start to finish, including how to commence an LCIA arbitration, appointment of arbitrator(s) (who are referred to as the "Arbitral Tribunal"), exchange of written submissions, powers of arbitrator(s), presentation of evidence, hearings and the decision ("award") of the Arbitral Tribunal.

New features of the Rules include:

  • The Rules attempt to crack down on arbitrators who are guilty of delay, which has become a problem. Arbitrators now have to certify in advance that they have enough time to devote to the case and are liable to be side-lined or removed if guilty of delay.
  • There are provisions for Expedited Formation of an Arbitral Tribunal (in the event of "exceptional urgency") and appointment of an Emergency Arbitrator (in case of "emergency" prior to the formation of the Arbitral Tribunal). The LCIA's application fee for the appointment of an Emergency Arbitrator is £8,000 and the initial (and non-refundable) fee of an Emergency Arbitrator, if appointed, is £20,000. Hence, applications for such an appointment are likely to be rare.
  • Under the new fees schedule, in the case of an ordinary arbitration the LCIA's administrative charges are £1,750, plus 5% of the Arbitrators' fees and expenses, an hourly charge for LCIA time and reimbursement of LCIA expenses. The Arbitral Tribunal's fees are to be at an hourly rate (for each arbitrator) of not more than £450, save that in exceptional cases higher hourly rates may be charged with the agreement of all parties. The Arbitral Tribunal may comprise one or three arbitrators (or in exceptional cases, more than three).
  • The law applicable to the arbitration agreement and the arbitration is specified as that applicable at the seat (i.e. location) of the arbitration, unless otherwise agreed in writing or unless prohibited by the law of the seat. This is in line with the current approach of the English courts to the choice of law. The English courts' approach used to be that, in the absence of express choice, the law of the arbitration agreement and of the arbitration would be the same as the law applicable to the substance of the contract (which may be different from the law of the seat). Under the Rules, if, for example, a contract governed substantively by Brazilian law provided for LCIA arbitration with its seat (location) in London, the meaning of the arbitration clause in the contract and the workings of the arbitration would be governed by English arbitration law. That makes sense, as any issue or challenge as to the conduct of the arbitration would therefore be decided by the English courts, i.e. at the same location as the arbitration, rather than having to be referred to the courts of Brazil.
  • There has been dissatisfaction within the international arbitration "community" about the conduct of some legal representatives. The Rules provide that each party must ensure that all its legal representatives appearing by name before the Arbitral Tribunal have agreed to comply with general guidelines as to conduct set out in the Annex to the Rules. These provide, for example, that a legal representative should not knowingly conceal or assist in the concealment of any document (or any part thereof) which is ordered to be produced by the Arbitral Tribunal. There is provision for an opposing party to complain about another party's legal representative's conduct, for the Arbitral Tribunal to look into the matter and, if the complaint is upheld, for it to sanction the legal representative by means of a written reprimand or some other unspecified sanction. One can see, however, that the cure could become worse than the complaint, as it is not unusual for parties to feel antagonistic to the opposing party's lawyers and complaints to Arbitral Tribunals could abound.

By attempting to provide solutions to problems that have been experienced in practice over recent years, the LCIA is aiming to maintain, or increase, the attraction of its international arbitration "offering", not just as an alternative to the courts, but also in competition with other entities which offer an international arbitration service in different parts of the globe.

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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