LCIA Introduces New Arbitration Rules for New Era

On 11 August 2020, the LCIA Court formally adopted its new arbitration rules (the “2020 Rules”). The 2020 Rules will come into force on 1 October 2020 and shall apply to any LCIA arbitration commenced from that date.

The 2020 Rules introduce a number of notable amendments that cater to the changing needs of arbitrators, counsel and parties in the age of the ‘new normal’ brought about by the COVID-19 pandemic. Overall, the amendments should be welcomed by the arbitration community as they further streamline the arbitral process, which in turn should increase the efficiency and reduce costs of LCIA arbitrations.

The amendments in the 2020 Rules reflect a conscious and careful effort by the LCIA to modernise its rules and accommodate user preferences regarding greater use of technology in arbitration proceedings. The new rules come at an apt moment, since they equip arbitrators and parties with tools to grapple with the challenges precipitated by the COVID-19 pandemic.

The 2020 Rules introduce changes that can be grouped into four main categories:

• Format of arbitral hearings and awards
• Expedition of proceedings
• Consolidation, composite Requests and concurrent conduct of arbitrations
• Other amendments reflecting global trends and developments

The 2020 Rules should be taken into account by LCIA users when considering the drafting of their arbitration clauses, and when participating in an LCIA arbitration commencing from 1 October 2020 onwards.

Notable amendments in the 2020 Rules

A. Format of arbitral hearings and awards

The 2020 Rules modernise the older 2014 LCIA Rules by embracing the increased prevalence of virtual hearings and confirm the primacy of electronic communication in LCIA arbitrations.

With regards the format of arbitral hearings, Article 19.2 states that: “As to form, 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 (or in a combined form)“.¹ The breadth of Article 19.2 affords parties much-desired flexibility to decide upon the format of hearings, be it in person, virtual or a combination of both.

The 2020 Rules also confirm the primacy of electronic communication with the LCIA. Article 4.1 of the 2020 Rules stipulates that Requests for Arbitration must be submitted in electronic form. Prior written approval is necessary should the Request for Arbitration be submitted by any other method.² Moreover, Article 4.2 states that any written communication in relation to the arbitration shall be delivered by electronic means of communication, unless written approval or direction from the Arbitral Tribunal stipulates otherwise.³ Article 26.2 facilitates electronically signed awards, stating that: “Unless the parties agree otherwise, or the Arbitral Tribunal or LCIA Court directs otherwise, any award may be signed electronically and/or in counterparts and assembled into a single instrument“.

These amendments cater to the changing needs of parties and arbitrators, and should enhance the efficiency as well as the sustainability of the LCIA process. There has been growing interest amongst users regarding increased use of technology in international arbitration.⁴ In the 2018 International Arbitration Survey by Queen Mary University of London and White & Case LLP, respondents stated that they expected improvements in technology to be utilised in future arbitrations. As many as 73 per cent of the respondents claimed that they ‘always’ or ‘frequently’ used ‘hearing room technologies’,⁵ while 61 per cent of respondents identified increased efficiency, including through the use of technology, as the factor most likely to impact the future evolution of international arbitration.⁶ Notably, these survey results were recorded before the onset of the COVID-19 pandemic. The impetus for using technology in arbitration has only been accelerated by the pandemic. While virtual hearings are not new, parties, counsel and arbitrators are all adapting to the ‘new normal’ of conducting proceedings in the face of travel restrictions and social distancing measures. The 2020 Rules allow parties to more effectively deal with these challenges, and save time and costs for parties while doing so.

B. Expedition of proceedings

A particularly notable feature of the 2020 rules is the inclusion of an additional power allowing arbitrators to expedite proceedings by making an ‘Early Determination’ order when they decide that a particular application is either manifestly outside of the jurisdiction of the Arbitral Tribunal, inadmissible or manifestly without merit.⁷ This follows other institutions such as SIAC and HKIAC that have already provided for summary dismissal or early determination in their rules.

Article 22.1(viii) of the 2020 rules provides that the Arbitral Tribunal shall have the power upon the application of any party “to determine that any claim, defence, counterclaim, cross-claim, defence to counterclaim or defence to cross-claim is manifestly outside the jurisdiction of the Arbitral Tribunal, or is inadmissible or manifestly without merit; and where appropriate to issue an order or award to that effect (an “Early Determination”)“.⁸

While it remains to be seen how Arbitral Tribunals will interpret the ‘manifestly without merit’ standard in practice, this amendment should be welcomed because it seeks to fill a gap that critics of arbitration often highlighted, i.e. the inability or unwillingness of tribunals to summarily dismiss manifestly unmeritorious claims and thus save time and cost.

Another change to expedite arbitration timelines is made by Article 15.10 of the 2020 Rules, which now states that Arbitral Tribunals shall endeavour to make their final awards no later than three months following the last submission of the parties, rather than merely ‘as soon as reasonably possible’, as stipulated in the 2014 LCIA rules.⁹

C. Consolidation, composite Requests, concurrent conduct of arbitrations

Another significant addition in the 2020 Rules is the broadened power of the LCIA Court and the Arbitral Tribunal to order consolidation and concurrent conduct of arbitrations.

Article 22.7(ii) states that the Arbitral Tribunal, with the approval of the LCIA Court, shall have the power to order “the consolidation of the arbitration with one or more other arbitrations subject to the LCIA Rules and commenced under the same arbitration agreement or any compatible arbitration agreement(s) and either between the same disputing parties or arising out of the same transaction or series of related transactions, provided that no arbitral tribunal has yet been formed by the LCIA Court for such other arbitration(s) or, if already formed, that such arbitral tribunal(s) is(are) composed of the same arbitrators“.¹⁰ Although much of the language remains the same from the 2014 LCIA Rules, the Arbitral Tribunal’s power to consolidate proceedings under the 2020 Rules is significantly broader than that under the old rules, now encompassing proceedings “arising out of the same transaction or series of related transactions”.¹¹

In line with this change, Article 1.2 of the 2020 Rules now allows for composite Requests for Arbitration, which means that parties can commence a single arbitration in respect of disputes under multiple contracts.¹² Article 2.2 then allows the Respondent to file a composite Response.¹³ Notably, while the issuance of a composite Request may be accompanied by a request for consolidation of those disputes, the consolidation will not be automatic. Instead, consolidation will be determined by the tribunal and/or the LCIA Court.

As noted in A v B [2017] EWHC 3417,¹⁴ composite Requests were previously not permitted under the 2014 LCIA rules. Under the old rules, parties had to issue separate Requests for Arbitration and then seek to have arbitrations consolidated. The amendment in Article 1.2 of the 2020 Rules, which allows for composite Requests for Arbitration, is clearly a practical response to user need and demand.

Furthermore, the 2020 Rules also broaden the Arbitral Tribunal’s power to order the concurrent conduct of arbitrations. Article 22.7(iii) states that “two or more arbitrations, subject to the LCIA Rules and commenced under the same arbitration agreement or any compatible arbitration agreement(s) and either between the same disputing parties or arising out of the same transaction or series of related transactions, shall be conducted concurrently where the same arbitral tribunal is constituted in respect of each arbitration“.¹⁵ This amendment should not only reduce duplication of work and hence achieve cost savings for parties, but also prevent inconsistent arbitral awards.

D. Other amendments reflecting global trends and developments

The 2020 Rules also make a number of additional amendments that demonstrate an effort by the LCIA to accommodate a shift in user preferences. Article 14A includes provisions addressing the role of tribunal secretaries, which topic was not addressed in the 2014 LCIA rules.¹⁶

The 2020 Rules also include new provisions on data protection, cybersecurity and regulatory issues. Article 30A sets out new rules regarding data protection and cybersecurity, while Article 24A sets out compliance measures relating to bribery, corruption, terrorist financing, fraud, tax evasion, money laundering and economic or trade sanctions.¹⁷ Cybersecurity and data protection are particularly important concerns in today’s digital age, and therefore, these amendments are likely to improve user confidence in LCIA arbitrations.

The 2020 Rules modernise LCIA arbitral procedure and enhance party autonomy. They reflect the LCIA’s attempt to adapt its rules for a new era, and should be welcomed by the arbitral community.