Keeping up with the times: 2020 update to the LCIA Arbitration Rules

The London Court of International Arbitration (LCIA) recently released its much anticipated LCIA Arbitration Rules Update 2020 (2020 LCIA Rules), which comes into effect on 1 October 2020.  

The LCIA has also updated its Mediation Rules, which will come into effect at the same time. The updates relevantly coincided with the COVID-19 pandemic enabling the LCIA to explicitly address changes brought about in arbitration practice by social distancing and travel restrictions, including the move to virtual hearings and the use of electronic communication.  

The LCIA describes the updates as designed to ‘make the arbitral and mediation processes even more streamlined and clear for arbitrators, mediators and parties alike’.

There are a number of substantive changes in the 2020 LCIA Rules.

Electronic communication

The 2020 LICA Rules have endorsed the use of electronic communication as the primary form of communication for the conduct of arbitral proceedings. Requests for arbitration must now be submitted electronically with no option for submission in paper form.  

A consequence of this requirement is that the arbitration formally commences contemporaneously with receipt by the Registrar of the electronic request. The requirement for electronic submission is reflected in Articles 9A, 9B and 9C, respectively, for applications for expedited proceedings, emergency arbitrators and expedited appointment of a replacement arbitrator.

Article 4 of the 2020 LCIA Rules covers written communications between the parties.  The 2020 update has removed all options to submit communications by registered post or courier services and requires that all communication be delivered by email or any other electronic means of communication. The LCIA reserves the power to order written communications in the event a party is unable to receive electronic communication.

Data protection

The 2020 LCIA Rules recognise the significance of data protection, providing a new Article 30A referencing ”applicable data protection legislation” and the LCIA’s data protection notice published on its website.

As to data protection in arbitral proceedings, the 2020 LCIA Rules provide specifically that:

”In accordance with its duties under Article 14.1, at an early stage of the arbitration the Arbitral Tribunal shall, in consultation with the parties and where appropriate the LCIA, consider whether it is appropriate to adopt:

(i) any specific information security measures to protect the physical and electronic information shared in the arbitration; and

(ii) any means to address the processing of personal data produced or exchanged in the arbitration in light of applicable data protection or equivalent legislation.

The LCIA and the Arbitral Tribunal may issue directions addressing information security or data protection, which shall be binding on the parties, and in the case of those issued by the LCIA, also on the members of the Arbitral Tribunal, subject to the mandatory provisions of any applicable law or rules of law.”

The new power of the tribunal to issue directions regarding information security or data protection imposes an obligation on tribunal members to acquaint themselves with relevant data protection and privacy legislation.  

For many tribunal members this will be an added responsibility and one which they have not previously held. From the parties’ perspective, the inclusion of Article 30A in the 2020 LCIA Rules provides reassurance in a world where cybersecurity and privacy are of genuine concern. The data protection provisions are important given the requirement for electronic communications under the 2020 LCIA Rules.

Tribunal secretaries

The 2020 LCIA Rules acknowledge the widely adopted practice of the appointment of a tribunal secretary.   

In recent years a number of legal commentators and international arbitration users have criticised the use of secretaries and questioned their role in the award writing process.  Many of the arbitral institutions, including the LCIA, have developed guidance or practice notes for tribunals and parties in response to this criticism.  

Article 14A confirms the tribunal’s power to appoint a secretary but specifically prohibits the delegation of “its decision making function” to a tribunal secretary. It provides further, by way of clarification that:

“All tasks carried out by a tribunal secretary shall be carried out on behalf of, and under the supervision of, the Arbitral Tribunal which shall retain its responsibility to ensure that all tasks are performed to the standard required by the LCIA Rules.”

Additionally, and importantly, Article 14.9 of the 2020 LCIA Rules requires tribunal secretary candidates to confirm their capacity to support the arbitration and to sign a statement of impartiality and independence.

Article 14.10 makes it clear that a tribunal secretary may only be engaged with the consent of all parties.

Expedited formation of arbitral tribunal

The extended period between the submission of a Request for Arbitration and the constitution of a tribunal (and transfer of the file to it) often comes as a surprise to parties who are new to the process of arbitration. They overlook the fact that the nomination and appointment of tribunal members invariably involves some attempt at consensus between the parties, failing which the relevant institution or appointing authority steps in by default.

The 2020 LCIA Rules see the incorporation of a new Article 9A providing for ”expedited formation of the Arbitral Tribunal”, a procedure which applies ”in case of exceptional urgency”.

Where the LCIA Court accepts a party’s application, ”the LCIA Court may set or abridge any period of time under the Arbitration Agreement or other agreement of the parties (pursuant to Article 22.5).”

Early dismissal determination

One of the most significant developments in the 2020 LCIA Rules is the inclusion of explicit provisions dealing with early dismissal determination.  

Article 22.1(viii) specifically confirms the power of a tribunal ”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’).”

Early dismissal determination is an important tool in the arbitration process and it is a relatively recent development. The Singapore International Arbitration Centre and the Stockholm Chamber of Commerce were the first two institutions to incorporate specific provisions in their rules for early dismissal. The International Chambers of Commerce (ICC) also provided guidance on early dismissal to arbitrators in their Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration published in 2017.  

An application for early dismissal enables a party, against whom a claim is prosecuted through an arbitral proceeding, to take pre-emptive steps to bring the arbitration proceeding to an end where the claims against it are clearly without merit, including claims brought in breach of an applicable limitation period.

The process was arguably available, without express provision, under the 2014 LCIA Rules. Article 14.4(ii) of the 2014 LCIA Rules gave the Arbitral Tribunal power to adopt procedures suitable to the circumstances of the arbitration. Article 14.5 provides that the Arbitral Tribunal may ”make any procedural order it considers appropriate”. These provisions were, however, open to the interpretation of the tribunal and the parties.

The most recent update provides clarity and establishes the LCIA as one of the three international arbitral institutions to offer specific summary dismissal procedures.

Consolidation of multiple proceedings 

Another notable development in the 2020 LCIA Rules is the broadening of the tribunal’s power to order the consolidation and concurrent conduct of arbitrations arising out of the same transactions.  

Under the new Article 22A, tribunals have power to order consolidation, into a single arbitration, proceedings commenced under the same arbitration agreement or any compatible arbitration agreement and either between the same disputing parties or arising out of the same transaction or series of related transactions.

Article 22A significantly widens the tribunal’s powers of consolidation. The 2014 LCIA Rules permit consolidation only where all parties to the arbitrations agree in writing to this course or where arbitrations were commenced under the same arbitration agreement or any compatible arbitration agreements between the same disputing parties.

Consolidation was only permitted before the tribunal had been constituted or, if the tribunal were constituted, the tribunal in each of the arbitrations comprised the same arbitrators.  

Composite requests

The 2020 LCIA Rules also introduce a new provision in Article 1.2 which provides that a claimant wishing to commence more than one arbitration may serve a composite Request for Arbitration for all such arbitrations. This provision addresses a gap in the 2014 LCIA Rules in respect of claims arising out of multi-contract arbitrations.  

The issue was highlighted by the decision of A v B [2017] EWHC 3417 where an arbitration request under the LCIA Rules was held to be invalid because the 2014 LCIA Rules did not permit parties to commence a single arbitration to resolve multiple disputes arising from related agreements.

Virtual hearings

Article 19 of the LCIA Rules covers hearings. Under the current LCIA Rules the tribunal has ”the fullest authority under the Arbitration Agreement to establish the conduct of a hearing, including its date, form, content, procedure, time-limits and geographical place”. In practical terms, arbitration hearings have been conducted by video conference under these rules for some time, increasingly since the beginning of 2020.  

The 2020 LCIA Rules close the door to objections to virtual hearings (provided of course that there is no impediment under applicable procedural laws or in the parties’ arbitration agreement). Article 19.2 provides specifically that:

”… 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).”

The addition of the phrase ”other communications technology” ensures that future modes of communication are captured by this provision.

The award

The adoption of electronic means of communication extends to the award. Article 26.2 of the LCIA Rules provides that ”any award may be signed electronically and/or in counterparts and assembled into a single instrument”.  

The technical elements of an award remain the same: the award must be in writing, state the date it is made and the seat of the arbitration and, unless the parties agree otherwise, must include the reasons upon which the award is based.  

In a new approach and in recognition of the increasing use of technology, Article 26.2 now also provides 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.”

Arbitration is the preferred process for resolution of cross border disputes. The reason for this is that foreign arbitral awards are enforceable in over 164 countries under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (known as the New York Convention).  

The New York Convention applies to ”awards made in the territory of a State other than the State where the recognition and enforcement is sought”. A party seeking to enforce a foreign arbitral award is required to supply to the enforcing court ”[t]he duly authenticated original award or a duly certified copy thereof”. The New York Convention is silent as to counterparts and silent as to awards which may bear an electronic signature.  

Arbitration practitioners and tribunals will be watching with interest the response of domestic courts in convention countries when counterparts are produced in support of recognition and enforcement.  

Observations

The new 2020 LCIA Rules have been welcomed by the international arbitration community. They demonstrate the adoption by the LCIA of emerging best practice and responsiveness to the changing environment in which arbitration is conducted (including the unprecedented challenges of 2020).  

The 2020 LCIA Rules directly and transparently address the gaps of the 2014 LCIA Rules and include new procedures to allay criticism in practice, for example, in the appointment of, and delegation to, tribunal secretaries. The incorporation of express early dismissal will garner favour from parties who choose international arbitration, but have in the past expressed concern over unmeritorious claims or claims commenced without a genuine basis.  

The move to electronic communications, the recognition of the prevalence of virtual hearings and the focus on data protection and privacy are both essential elements in modern international business.