UK: Revisions Of The LCIA And ICC Rules For International Arbitration - Some Of The Key Changes

Last Updated: 17 July 1997
(First published in In House Lawyer, March 1997)

England, Wales and Northern Ireland are not alone in modernising and improving their arbitration rules. Two of the leading institutions which have administered international commercial arbitrations for most of this century, the London Court of International Arbitration and the Paris based International Chamber of Commerce, are presently engaged in extensive discussions of proposed revisions to their arbitration rules. The LCIA published a 'discussion draft' of its new rules late last year. The ICC Commission on International Arbitration met just last month to debate a further working draft of its new rules.

The ICC and LCIA rules have long been regarded by the international business community as reliable and sophisticated procedural frameworks allowing for the management of disputes between parties from sometimes vastly different legal backgrounds. Renowned for their concise and simple statements of universally adaptable procedures, they are arguably the best known arbitration rules worldwide.

Recent developments in international dispute resolution explain the pressures to reform. The current LCIA rules were adopted in 1985. Apart from certain adjustments in 1988, the last time the ICC rules underwent any significant modification was in 1975. Since then new arbitration centres have sprung up around the world offering similar services sometimes catering to regional interests or specialised areas of the law. These new centres often present themselves as alternatives and potential rivals to the older institutions. Many of the younger institutions have developed what could be called a new generation of arbitration rules. Several of the LCIA reforms currently under discussion are directly inspired, for example, by the rules developed in 1994 for the Arbitration Centre of the World Intellectual Property Organisation.

Another potential competitor is ad hoc arbitration which was given a new popularity following the publication by the United Nations in 1976 of comprehensive procedural rules (UNCITRAL Rules) for international arbitration between parties who wish to bypass the institutions altogether. The ICC and LCIA rules which once set the standards for change in local municipal laws have now, in some cases, been overtaken by new legislation. An increasing number of countries, including most important trading nations, have adopted, or are about to adopt, versions of the 1985 United Nations model arbitration law. The LCIA, for instance, has expressly set its revision discussions in the specific context of the new English Arbitration Act 1996 and announced its intention to take full advantage of the new law.

Finally, certain of the more important changes are clearly a response to perceived shortcomings and ambiguities. Some weaknesses in the rules have been highlighted by widely publicised cases which brought existing arrangements under intense scrutiny and attracted considerable commentary and suggestions for improvements and clarifications.

The changes under consideration are aimed at simplifying the administration of cases, lowering costs, reinforcing confidentiality and improving case management so that delays in appointing arbitrators and transmitting a file to an arbitral tribunal are reduced. The rules are also being modified to enable the institutions and arbitrators better to handle disputes involving more than two parties. The rules are being reorganised and reworded to eliminate ambiguities, allow for advances in communications technologies and increase coherence of presentation so that the rules will be more easily understood by users.

The maintenance of a unique and distinguishing feature of ICC arbitration since 1923, the Terms of Reference ('TOR'), has been subject to wide-ranging debate. Under existing ICC Rule 13, an arbitral tribunal must draw up the TOR before it proceeds with 'the preparation of the case'. The parties invariably engage in sometimes protracted negotiations on the exact wording of the TOR, which will include inter alia concise statements of each party's respective claims, a definition of the issues to be determined by the arbitrators, a timetable and basic rules of the procedure to be followed.

The TOR has been criticised as an unnecessary procedural extra which only engenders additional cost and delay. There is no equivalent provision in the LCIA Rules. Others view it, on the contrary, as a valuable procedural tool which saves costs and reduces delays by focusing attention on the issues in dispute and reducing the amount of litigation not related to those issues, settling points of procedure at the outset, allowing the parties an opportunity to determine questions relating to the applicable law and the language of proceedings - matters which are too often left undecided in the contract itself - and helping to ensure that the final award will be enforceable.

As part of its mission, the ICC Working Party on the Modification of the ICC Rules was instructed to retain the TOR as one of the 'fundamental characteristics of ICC arbitration.' Under the most recent draft of the new rules, however, an essential element of the TOR is now optional. The proposed new Rule 17 makes it clear that an ICC arbitral tribunal will not be under any obligation to define the issues determined by the arbitral tribunal, but will be free to do so only if it considers that this is appropriate.

One area where arbitral tribunals are inherently weak and invariably less effective than the courts is in the provision of interim relief on an urgent basis. With few exceptions, such as the City Disputes Panel which is specifically designed to be set up within days, and if circumstances warrant, within hours, arbitral tribunals are notoriously slow to get under way. Unlike the courts, they are not permanent institutions. It can take a minimum of several months just to appoint arbitrators and to constitute a tribunal even when the process is facilitated by administering institutions such as the LCIA and ICC.

In 1990 the ICC sought to remedy this deficiency by bringing into force a separate set of rules, the ICC Pre-arbitral Referee Procedures, designed to provide users of arbitration with the interim relief pending the appointment of an arbitral tribunal. These special procedures suffer one important handicap: their use and operation is constrained by the fact that parties must expressly consent to them.

An arbitration clause referring disputes to ICC arbitration does not automatically entail the application of the Referee Procedures which are distinct from the ICC rules. The ICC has proposed a model clause for adoption by parties who wish to have recourse to its pre-arbitral Referee Procedures. However, parties rarely consider such matters at the drafting stage and inclusion of this clause is far from common practice with the result that a specific and extra-contractual agreement is still necessary.

Unlike the ICC, the LCIA presently lacks any provisions for urgent interim relief. It is now proposed to incorporate, as part of the LCIA rules themselves, a specific article under which parties to an LCIA arbitration clause may apply directly to the President of the LCIA for the appointment of a 'Delegate for Provisional Measures.' The delegate would be a person independent of the parties. Contrary to the relief presently provided under ICC Referee procedures which, absent inclusion of an additional express clause, relies on the unlikely possibility that both parties will consent to them, the interim and conservatory measures that would be available to LCIA users under the new proposals would not require any additional contractual reference since they would already form a part of the rules incorporated by the parties' reference of all disputes to LCIA arbitration.

According to the proposed draft Article 4 of the new LCIA rules, any order of the Delegate would have the same obligatory force as a contractual stipulation and any failure to comply with a provisional order would be considered to be a breach of contract. Once the tribunal is established, it will have full authority to maintain or terminate any provisional orders issued by the Delegate.

Both institutions are grappling with the difficulties of multiparty arbitration. Because arbitration is dependent on the consent of the parties to the underlying contract, it can be more difficult than in litigation before courts to join third parties or to set up tribunals to handle such disputes between more than two parties. The LCIA rules already contain provisions allowing arbitrators to join third parties unless all other parties to the arbitration agree otherwise. The LCIA, whose rules were the first to contain such provisions, has debated broadening its joinder provisions, but has decided not to do so for the moment.

The ICC has introduced an entirely new rule for multiple parties. Under its proposed new Rule 10, multiple parties will be able to appoint their own arbitrators provided they act collectively, for the purposes of appointment, as a single claimant or defendant. If this joint nomination procedure fails for some reason, or if the parties are unable to agree on an appointment method, the ICC Court will appoint all of the tribunal members and nominate one to act as the chair.

The new rules will not be in force for some time. The new LCIA rules are not expected to be finalised until the end of this year. The ICC is aiming at issuing its new rules in January 1998.

This note is intended to provide general information about some recent and anticipated developments which may be of interest. It is not intended to be comprehensive nor to provide any specific legal advice and should not be acted or relied upon as doing so. Professional advice appropriate to the specific situation should always be obtained.

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