The London Court of International Arbitration (LCIA) released an update to its arbitration rules (the “Rules”), with the changes set to take effect from 1 October 2020 and the stated intention of making the arbitral process more streamlined and clear for those involved.
Whilst the changes may not appear dramatic, their combined effect is significant: not only are they evidence of the LCIA endeavouring to bring London arbitration into the digital age, but they also seek to close loopholes that lead to delays, thereby giving parties confidence that the process will be efficient in terms of time and costs.
The LCIA was drawing up the Rules as the COVID-19 pandemic hit, so it was able to review the successful shift toward more remote means of working and integrate some of these good practices.
The most obvious step toward modernisation is in the shift to, and heavy emphasis on, electronic communications. The Request for Arbitration, and Response, must now be submitted in electronic form, and all communications between the parties must be by email or other electronic means. Prior approval must be obtained from the LCIA Registrar if any party wishes to submit the Request or Response or communicate via an alternative method which, it is to be imagined, is likely to be granted in cases where a party has genuine difficulties in terms of its local digital infrastructure (but may be difficult to obtain in other circumstances).
Awards now may be signed electronically. However, it remains to be seen how this will be interpreted alongside the New York Convention, which is silent as to whether electronic signature of awards is permitted. This uncertainty will be an area of concern for parties that intend to enforce an award in one of the 164 countries that are party to the New York Convention, as the absence of an express provision in the New York Convention could well be used as grounds for upholding a challenge to enforcement.
Also, following the widespread success in the increased usage of virtual hearings due to the COVID-19 pandemic, the Rules update also permits hearings to take place “virtually by conference call, videoconference or using other communications technology with participants in one or more geographical places (or in a combined form).” Indeed, in light of the emphasis on electronic communications generally, the Rules might now be read as encouraging virtual hearings, especially at the interim stage. In light of these changes, tribunals are permitted to issue directions regarding information security and data protection.
Each of these changes represents an important step by the LCIA to update the arbitral process to factor in significant technological advances since the last update in 2014, and the changing work practices as parties and professionals continue to adapt to the ever-changing COVID-19 landscape.
The updated Rules also address (and remove) loopholes previously exploited to create delays, in order to maintain confidence in the efficiency of the arbitral process. The principal approach adopted has been to increase, and make express, a tribunal’s discretion when it comes to case management, so making it harder to raise challenges to matters of procedure, especially where the motivation for doing so may be simply that a party does not like the direction of travel in the decisions or makeup of a tribunal.
The new provisions granting such discretion cover a number of key aspects, including the tribunal’s ability to make any procedural order it sees fit (having considered the views of the parties, but not necessarily adopting them); powers to expedite the procedure; the power to give additional directions regarding any part of the written stage of the arbitration; powers to direct at which stage certain issues will be determined and how; and express authority to dismiss claims on grounds of jurisdiction or that they lack merit.
Other key changes aimed at improving efficiency can be summarised as follows:
- Parties now must inform the LCIA Registrar of their nationality, and the Rule clarify which parties must have their nationality declared; this is intended to limit the scope for challenges to arbitrator appointments.
- The powers and processes in the early stages of arbitration are clarified. References to “Arbitral Tribunal” now expressly include emergency arbitrators, and emergency arbitrators now have the power to determine how the parties will bear the legal costs of emergency proceedings.
- In the event of a challenge to an arbitrator, provided the parties and arbitrator have a reasonable opportunity to comment on the challenge, the LCIA Court has discretion as to the process for resolving the challenge, including the ability to require information and materials from the parties, their authorised representatives and the challenged arbitrator, and to determine to what extent the previous proceedings will stand.
- Parties can now serve a composite Request to commence multiple arbitrations, although each arbitration will be heard separately unless otherwise ordered. In which respect, tribunals can now order the consolidation of multiple arbitrations if commenced under the same arbitration agreement or any compatible arbitration agreement, and either between the same parties or arising out of the same transaction or series of related transactions. In addition, tribunals can order concurrent conduct of two or more arbitrations.
Additional updates and new provisions logically address a number of underlying legal developments in recent years, such as the General Data Protection Regulation, an overt undertaking in respect of duties on witnesses and experts about confidentiality, and anti-corruption obligations.
The LCIA appears to have made a concerted effort to address our new operating environment. A number of amendments and new provisions show the LCIA has heeded criticism about delays and unnecessary cost arising out of procedural aspects; and the more practical measures follow the recent changes to standard working practices in the international arbitration community, so modernising the Rules and promoting certainty and efficiency. As ever, it needs to be seen how the updated Rules are implemented, but parties, practitioners and arbitrators alike should welcome the changes as not just improving the attractiveness of arbitration, but the attractiveness of arbitration in London after a period when other jurisdictions may have been stealing the reputational march for modernity and value for money.
Please contact any of the authors of this article, any member of the London dispute resolution team or your regular McGuireWoods contact if you have questions about the contents of this article.