London Court of International Arbitration Implements Rules to Improve, Expedite Commercial Arbitration Proceedings

On 1 October 2020, the London Court of International Arbitration (LCIA) implemented its newly promulgated and updated rules, seeking to improve and expedite its international commercial arbitration proceedings.

With these updated rules, American companies who intend to enter into commercial contracts with international counterparties should consider including an arbitration clause in the contract, committing the parties to submit any future disputes under the contract to LCIA arbitration instead of leaving dispute resolution to the courts. The new rules give American companies the benefit of familiar procedural mechanisms (similar to pre-answer motions to dismiss), protect the parties’ privacy, and ensure a fast and cost-effective resolution of the dispute.

Increased Efficiency and Cost-Saving Procedural Mechanisms

In recent years, parties in international commercial arbitrations have experienced a slow increase in the complexity, length and cost of arbitrations. The LCIA’s new rules take several proactive steps to combat these trends, to ensure that LCIA arbitrations are among the fastest and most cost-effective in the industry, and to satisfy the parties that LCIA arbitration is always preferable to litigation of international disputes. The LCIA rules expressly aim to streamline and expedite the proceedings through several new mechanisms.

First, the updated rules create a new procedural mechanism for Tribunals to incorporate into an arbitration: the “Early Determination.” See LCIA Rules Art. 22.1(viii). With the Early Determination mechanism, Tribunals are permitted — and encouraged — to dispose of any claims or defenses that are (1) “manifestly outside the jurisdiction of the Arbitral Tribunal”; (2) “inadmissible”; or (3) “manifestly without merit.” Id. If a Tribunal determines any claim or defense meets one of these criteria, it may dispose of the claim or defense through an order or award — named an Early Determination. Furthermore, unlike in most America litigation settings, if an arbitration is dismissed because it is “manifestly without merit,” the prevailing party has the opportunity to seek its legal costs and fees. Id. Art. 28. American companies and their attorneys will be particularly well situated to take advantage of the Early Determination mechanism because it closely resembles the ubiquitous Rule 12(b) pre-answer motion to dismiss in U.S. federal courts.

Second, the updated rules now encourage Tribunals to enter procedural orders “with a view to expediting the procedure to be adopted in the arbitration.” Id. Art. 14.6. The rules expressly identify several methods to expedite the proceedings, including clear limitations on the length or substance of briefs, submissions, and written witness statements. Id. Art. 14.6(i), (ii). Tribunals may now set brisk deadlines for each stage of the arbitration and may further shorten deadlines when possible. Id. Art. 14.6(vii), (viii).

Third, the updated rules expressly contemplate “employing technology to enhance the efficiency and expeditious conduct of the arbitration” — “including any hearing.” Id. Art. 14.6(iii). Since the emergence of the COVID-19 pandemic, parties in international arbitrations have already begun to adjust to holding evidentiary hearings and witness examination by video teleconference. In the short term, the updated LCIA rule encouraging the use of such technologies to expedite the proceedings means that LCIA arbitrations are likely to proceed to disposition considerably earlier than American litigations while U.S. courts spend the next several years working through backlogged dockets as a result of the pandemic. In the long term, the updated rule ensures that LCIA Tribunals will always have the most expeditious procedural options at hand to ensure the dispute is resolved quickly to keep costs down.

Fourth, the updated rules encourage LCIA Tribunals to closely manage the substantive disputes and to dispose of any dispositive claims or defenses as early as possible. LCIA Tribunals can bifurcate the proceedings into discrete stages that may enable it to dispose of the dispute altogether (e.g., via Early Determination) without resolving every substantive claim and defense. Id. Art. 14.6(iv). Indeed, the updated rules state that the Tribunal can forego an evidentiary hearing altogether when appropriate. Id. Art. 14.6(v).

Fifth, new Article 22A of the updated rules enhances the power of the Tribunal and the LCIA Court to order the consolidation of one or more arbitrations. Like the 2014 rules, the updated rules allow the Tribunal to consolidate one or more arbitrations “where all the parties to the arbitrations to be consolidated so agree in writing” and where the arbitrations were commenced under the same (or comparable) arbitration agreements concluded by the same parties. Art. 22.7(i) and (ii). The update rules, however, broaden the Tribunal’s authority to order consolidation of arbitrations commenced under the same or comparable arbitration provisions and “arising out of the same transaction or series of related transactions.” Art. 22.7(ii). This allows the consolidation of arbitrations where the disputing parties are different, provided certain additional requirements are met. Id. Notably, these consolidation powers are also available to the LCIA Court. Art. 22.8

In addition, the updated rules also provide that the Tribunal may conduct concurrently multiple arbitrations that are “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.” Art. 22.7(iii).

With these revisions to the arbitration rules, the LCIA has ensured that its Tribunals are fully equipped to resolve submitted disputes as expeditiously and cost-effectively as possible.

Improved Confidentiality and Data Protection Measures

The new LCIA Rules also address two issues that have generated a significant amount of discussion in the past 12-months: confidentiality and data protection.

Confidentiality is often cited by commercial parties as one of the main reasons they choose arbitration over litigation.

Under the old LCIA Rules, parties undertook to keep confidential all awards, materials created for the purpose of the arbitration and all documents produced by another party in the proceedings. Further, the deliberations of the Arbitral Tribunal remained confidential.

Now, in addition to the above, the new LCIA Rules contain a duty on parties to seek confidentiality undertakings from those they include in the arbitration process. Id. Art. 30.1. This includes witnesses of fact, expert witnesses and any service providers. The LCIA’s requirement that the parties ensure witnesses, experts, and vendors maintain the confidences of the arbitration distinguishes it from other international arbitration organizations like the American Arbitration Association or the International Centre for Dispute Resolution, whose rules do not have such a requirement. Under the LCIA Rules, the duty of confidentiality also extends to the Arbitral Tribunal and any Tribunal appointed secretary or expert.

The new LCIA Rules also contain an express provision on data protection. Id. Art. 30A. Specifically, the Arbitral Tribunal has a duty (in consultation with the parties) to consider information security measures and the means to address the processing of personal data produced or exchanged in the arbitration. Id. Art. 30.5(i), (ii).

These amendments go some way to addressing concerns over confidentiality and privacy in arbitration. They show the LCIA’s determination to adjust flexibly to contemporary issues in disputes.

Key Takeaways

With the LCIA’s improved 2020 Arbitration Rules, parties to international commercial agreements should consider including arbitration clauses in their contracts naming the LCIA as the arbitral institution even if neither party to the contract is based in London. The new LCIA rules ensure that the dispute will remain confidential, that the parties’ privacy will be maintained, and that the dispute can be resolved as expeditiously and cost-effectively as possible. Faegre Drinker’s deep bench of experience in international arbitration before the LCIA in its London and American offices can ensure the procedural improvements in the new LCIA rules can be utilized to their full effect.