New LCIA Arbitration Rules Come into Effect on October 1, 2014
October 01, 2014
| Vasilis F.L. Pappas and George M. Vlavianos
International arbitration is often selected over traditional litigation for resolving commercial disputes, as it is typically perceived that arbitrations can be undertaken more efficiently and swiftly than litigation. In recent years, and in the face of disputes that are becoming ever-more complex, some of the world's significant arbitration rule systems have been substantially amended to preserve the efficient and speedy character of arbitration.
On the heels of those events, the London Court of International Arbitration (LCIA), which handles hundreds of international arbitrations every year, recently amended its arbitration rules. These amended rules, which update the LCIA's 1998 arbitration rules, come into force on October 1, 2014, and seek to promote a more speedy, efficient, and fair arbitration process, one that is more aligned with modern arbitral practice.
Some of the more significant changes include:
- A substantial number of new rules designed to promote a swift and speedy process;
- An "emergency arbitrator" process to hear and determine urgent matters;
- A new code of conduct for legal counsel; and
- New rules facilitating the consolidation of multiple arbitrations.
New Rules for a More Efficient and Speedy Arbitration
The LCIA's new arbitration rules contain a significant number of new provisions designed to pressure and incentivize arbitrators, parties, and legal counsel to conclude arbitrations as efficiently and as swiftly as possible.
With respect to arbitrators, prospective arbitrators must now confirm to the LCIA that they are "ready, willing, and able to devote sufficient time, diligence and industry to ensure the expeditious and efficient conduct of the arbitration". Further, arbitrators are now bound to "seek to make [their] final award as soon as reasonably possible following the last submission from the parties" and to "set aside adequate time for deliberations as soon as possible after that last submission". Finally, the LCIA now has the discretion to revoke an arbitrator's appointment in the event that arbitrator "does not conduct or participate in the arbitration with reasonable efficiency, diligence and industry". Accordingly, a significant amount of pressure is brought to bear on arbitrators to move arbitrations along as quickly and efficiently as possible.
The new rules also require parties to undertake arbitrations as expeditiously as possible. To begin, the new rules require parties to "do everything necessary in good faith for the fair, efficient and expeditious conduct of the arbitration". Further, arbitrators are empowered by the new rules to apportion arbitration costs and legal expenses by taking into consideration "the parties' conduct in the arbitration, including any co-operation in facilitating the proceedings as to time and cost and any non-co-operation resulting in undue delay and unnecessary expense".
The parties' legal representatives are also incentivized to see to it that arbitrations are concluded as efficiently as possible. As discussed in greater detail below, the new rules require that the parties' legal counsel comply with a new code of conduct. This code of conduct provides that "[a] legal representative should not engage in activities intended unfairly to obstruct the arbitration", including applications "known to be unfounded by that legal representative". In the event a legal representative violates this provision, the new rules empower arbitrators to sanction them.
Finally, the revised LCIA rules also include a number of new procedural rules that are designed to promote a more efficient and speedy process. For example, formal pleadings can now be submitted in electronic form, numerous procedural timeframes have been compressed, standard electronic forms have been introduced that can be utilized to commence arbitral proceedings, pre-hearing conferences are encouraged early in the process in which arbitrators are required to avoid "unnecessary delay and expense, so as to provide a fair, efficient and expeditious means for the final resolution of the parties' dispute", and so on.
The New Emergency Arbitrator Process
In the past, if a party required an urgent remedy against another party prior to the constitution of a tribunal – such as for the preservation of an asset – the party's choices were limited to either seeking a remedy from the local courts, or trying to constitute a tribunal on an expedited basis. The new rules add another option.
In particular, the new rules allow a party to apply to the LCIA for the appointment of an emergency arbitrator prior to the constitution of the tribunal to conduct emergency proceedings. Again, speed and efficiency are of paramount importance for the LCIA: under these new provisions, the LCIA is required to appoint an arbitrator within three days of the party's application, and the emergency arbitrator is required to decide the claim within 14 days following his or her appointment.
The addition of these emergency-arbitrator provisions bring the LCIA rules into line with other established arbitral institutions, such as the International Chamber of Commerce (ICC), which have introduced similar procedures in recent years. This procedure has rarely been used in practice, so it will be interesting to see if parties avail themselves of it to any greater extent in arbitrations under the LCIA rules.
A New Code of Conduct for Legal Counsel in LCIA Proceedings
In recent years, a debate has taken place with respect to whether a professional code of conduct should be developed for lawyers practising international arbitration, given the fact that lawyers in this field typically hail from different jurisdictions which have varying rules of ethics.
The new LCIA rules have attempted to address this issue by introducing "General Guidelines for the Parties' Legal Representatives" that provide that legal counsel in an LCIA arbitration should not:
- engage in activities intended to unfairly obstruct the arbitration or to jeopardize the finality of any award;
- knowingly make any false statement to the Arbitral Tribunal;
- knowingly procure or assist in the preparation of, or rely upon, any false evidence presented to the Arbitral Tribunal;
- knowingly conceal or assist in the concealment of any document which is ordered to be produced by the Arbitral Tribunal; and
- deliberately initiate any unilateral contact with any arbitrator.
In the event that a legal representative violates any of the foregoing, the new LCIA rules empower arbitrators to sanction them by (i) issuing "a written reprimand", (ii) issuing "a written caution as to future conduct in the arbitration", and (iii) undertaking "any other measure necessary to fulfill within the arbitration the general duties required of the Arbitral Tribunal".
The LCIA is the first institution that has attempted to mandate a code of conduct for legal counsel in international arbitration. It will be interesting to see to what extent tribunals will be willing to enforce the foregoing sanctions on legal counsel, or whether other arbitration institutions follow suit by incorporating similar rules.
New Rules Facilitating the Consolidation of Multiple Arbitrations
Two of the trickiest issues in international arbitration are (i) whether third parties can be joined to an arbitration, and (ii) whether multiple arbitrations involving the same facts and law can be consolidated and heard together.
With respect to joinder, the previous incarnation of the LCIA rules allowed for the joinder of a third party to an arbitration provided that the parties to the arbitration and the third party consented. The new LCIA rules have more or less maintained this provision in its original form.
With respect to consolidation, however, the previous version of the LCIA rules was silent. The new LCIA rules have attempted to resolve this issue by including new rules that allow for the consolidation of arbitrations in two circumstances: (i) where all the parties to the arbitrations have agreed to consolidation, and (ii) where multiple arbitrations have been commenced under the same agreement or under compatible agreements between the same parties, provided that the tribunal for at least one of the arbitrations has not yet been constituted.
While the foregoing rules in respect of joinder and consolidation are a good first step, they are considerably more conservative than other institutional rules, such as the 2012 ICC rules of arbitration, which allow for joinder and consolidation in a wider set of circumstances.
It remains to be seen whether the new LCIA rules succeed in enhancing the efficiency and speed with which arbitrations are undertaken, allowing for greater use of the emergency-arbitrator process, achieving a more uniform pattern of conduct among counsel in international arbitration, or facilitating joinder and consolidation. It will depend on the extent to which parties avail themselves of these new rules in their intended spirit, and the extent to which LCIA tribunals have the resolve to enforce them. Nevertheless, it is undeniable that the LCIA has provided arbitrators, parties, and their counsel with the tools they need to participate in a speedier, efficient, and fair arbitration process.