Updated LCIA Arbitration Rules come into force

The 2020 update to the LCIA Arbitration Rules (the 2020 Rules) comes into force today, 1 October 2020. The 2020 Rules see substantive changes to the procedures for starting and consolidating multiple arbitrations. There are also a range of clarificatory changes, notably in relation to the exercise of tribunal powers, and amendments that reflect the latest best practice in international arbitration, including in light of the COVID-19 pandemic.

1. Composite requests and consolidation

The 2020 Rules allow claimants in LCIA arbitrations to start multiple arbitrations under a single, composite request for arbitration. Such requests had previously been held to be ineffective as a matter of English law under the 2014 LCIA Rules (see A v B [2017] EWHC 3417), meaning that claimants seeking to commence multiple arbitrations had to file multiple requests for arbitration. This change is welcome and should increase efficiency of the arbitral process.

The 2020 Rules also widen the powers of tribunals and the LCIA Court to order the consolidation of arbitrations. Under the 2014 LCIA Rules, tribunals had the power (with the approval of the LCIA Court) to order consolidation of arbitrations only where (1) all parties to the arbitrations agreed in writing, or (2) there were multiple arbitrations under the same (or compatible) arbitration agreements, provided that no tribunal had yet been formed for those arbitrations (or, if formed, the arbitral tribunals were comprised of the same arbitrators). These powers were also available to the LCIA Court, if no tribunal had been appointed.

Under new Article 22A(ii) of the 2020 Rules, tribunals may also (with the approval of the LCIA Court) order the consolidation of arbitrations under the same (or compatible) arbitration agreements that arise out of the same transaction or series of related transactions, regardless of whether the parties are the same, provided that no tribunal has yet been formed for those other arbitration(s) (or, if formed, the arbitral tribunals are comprised of the same arbitrators). As with the powers of consolidation under the previous rules, this power is also available to the LCIA Court, if no tribunal has been appointed.

Together, the changes to the procedures for starting and consolidating arbitrations create a more flexible framework for dealing with multiple related disputes in a single arbitration. These changes reflect a trend in international arbitration towards more flexible approaches to consolidation and joinder - similar powers have previously been introduced by the Stockholm Chamber of Commerce (SCC) and the Singapore International Arbitration Centre (SIAC).

2. Tribunal discretion

The 2020 Rules see an overhaul of the provisions setting out tribunal powers, chiefly in Article 14 (Conduct of Proceedings) and Article 22 (Additional Powers). Although tribunals already had the "widest discretion" in their conduct of proceedings, many powers remained only implicit, leading some arbitrators to be reluctant to exercise them.

It is therefore helpful that the 2020 Rules clarify what is meant by tribunals having the "widest discretion" in discharging their duties. This includes limiting pleadings and evidence, employing technology, dispensing with the need for a hearing and shortening timescales.

The 2020 Rules also introduce an express power of early determination. Under previous versions of the LCIA Rules, it was widely considered that tribunals' broad discretion as to how proceedings should be conducted gave them such a power in respect of claims that were outside of their jurisdiction or were manifestly without merit. However, this power is now explicit under the new Article 22.1(vii). This may encourage tribunals to deploy this power more readily, protecting parties from unmeritorious claims, enhancing the efficiency of the arbitral process and saving costs. However, tribunals will need to remain vigilant that their awards remain enforceable under the New York Convention. The impulse to ensure unmeritorious claims are dismissed efficiently should not be exercised so as to deprive a party of the opportunity to present their case.

3. Impact of the COVID-19 pandemic

The 2020 Rules address the increased use of virtual hearings and electronic communications that has been growing in prevalence and which have been given a particular boost by the COVID-19 pandemic. The key changes include:

1. Virtual hearings. Although virtual hearings were possible under the 2014 LCIA Rules, the 2020 Rules provide that "a hearing may take place in person, or virtually by conference call, videoconference or using other communications technology".

2. Electronic communications. The 2020 Rules clearly establish electronic communication as the default mode of communication in LCIA arbitrations. Previously, for example, requests for arbitration or responses could be filed in electronic form, in paper or both. Now, such documents must be submitted electronically unless the LCIA Registrar gives prior written approval for paper submissions.

3. Electronic signatures. The 2020 Rules expressly provide that "any award may be signed electronically and/or in counterparts" unless the tribunal or the LCIA Court directs otherwise, or the parties agree to depart from this position.

Although the use of electronic communication reflects current good practice and should increase the efficiency of the arbitral process, parties should be aware that the electronic signing of awards could have implications for enforcement of awards. Courts in some jurisdictions take a very formalistic approach, and may be unwilling to enforce an award where no original physically signed copy of the award (or arbitration agreement) is available.

4. Other changes

The 2020 Rules also contain a number of minor clarificatory changes, for example, in relation to tribunal secretaries and authorised representatives, and some changes to timescales to improve the efficiency of the arbitral process. In addition, the 2020 Rules also address data protection and compliance, reflecting increased regulation and scrutiny of data protection and AML issues.

In addition, new Article 16.5 states that, irrespective of what law may govern the arbitration agreement between the parties, the LCIA Rules shall be interpreted in accordance with English law. This could introduce yet another system of law for tribunals and parties to have to grapple with, in addition to the law governing the substantive contract, the procedural law of the seat, and the law of the arbitration agreement (all of which may now be different).

In a similar vein, Article 31.3 now provides that any party agreeing to arbitration under the LCIA Rules irrevocably agrees that the court of England and Wales shall have exclusive jurisdiction to hear any dispute between that party and the LCIA or its officers, and any arbitrator. This may indicate that the LCIA is aware that it may face legal challenges in future, and wishes to ensure that any such dispute is referred to a London court. It remains to be seen how this will play out. For example, parties might expressly exclude this provision from their arbitration agreement, perhaps because they are not willing to submit to the jurisdiction of an English court for any purpose, leaving for a later day an argument as to which court should hear any dispute with the institution or an arbitrator.

5. Comment

The 2020 Rules forgo any drastic alterations and reflect a "light touch" approach to amendments adopted by the drafters. This reflects the fact that the 2014 LCIA Rules have proved largely fit for purpose. Nevertheless, the 2020 Rules contain a number of important improvements that reflect changing best practice and international trends in arbitration. It is hoped that these changes will strengthen the effectiveness of the LCIA Rules for the benefit of all its users.