Key Features of the LCIA Arbitration Rules 2014

– A Guide

LCIA Arbitration Rules 2014 – A Guide

On 25 July 2014, the London Court of International Arbitration (LCIA) released its long-awaited LCIA Arbitration Rules 2014 (the LCIA Rules 2014), which take effect from 1 October 2014. The LCIA Rules 2014 maintain the institution’s lighter-touch approach to administration, while bringing the articles up-to-date with modern international arbitral practice.

For those familiar with the LCIA Rules 1998 (yes, it has been that long), please be aware that most of the articles have been revised, but generally the changes represent welcome, sometimes subtle, tweaks to the established LCIA arbitration process. Nevertheless, the LCIA Rules 2014 do include some substantive changes, including the inclusion of emergency arbitrator provisions and a short, but significant and mandatory, code of conduct for the parties’ legal representatives.

This Guide is intended to help lawyers and parties navigate some of the key features of the LCIA Rules 2014. It doesn’t pretend to cover the breadth of the LCIA arbitration rules and it goes without saying that anyone involved in LCIA arbitration should read the rules that apply to their dispute in full.

Barry Fletcher, Solicitor Lexis®PSL Arbitration

“ This is a notable development and one without any comparable international precedent.”

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Quick AnswerThis will depend on the terms of your arbitration agreement, ie the agreement (in writing or otherwise) between the parties to submit to arbitration.

If your arbitration agreement provides expressly that your dispute is to be submitted to arbitration pursuant to the LCIA Rules 1998, then that earlier version of the rules will govern your arbitration, unless the parties agree separately that the LCIA Rules 2014 will apply instead.

If your arbitration agreement is silent on which version of the rules will apply, then the latest version in force at the time of commencement of the arbitration will govern the conduct of the dispute (LCIA Rules 2014, Preamble):

• If the arbitration is commenced prior to 1 October 2014, the LCIA Rules 1998 will apply (subject to any separate, ad hoc agreement between the parties that the LCIA Rules 2014 will apply instead); and

• If your arbitration is commenced on or after 1 October 2014, the LCIA Rules 2014 will apply, unless the parties enter into a separate, ad hoc agreement that the arbitration will be conducted in accordance with the LCIA Rules 1998.

If your arbitration agreement provides for arbitration pursuant to the LCIA Arbitration Rules 2014, then your arbitration will proceed in accordance with the new rules.

Whether the new emergency arbitrator provisions in LCIA Rules 2014, art 9B apply is a separate question – see the analysis opposite.

Commentary/AnalysisThe Preamble to the LCIA Rules 2014 provides clear guidance on when a parties’ arbitration shall be conducted in accordance with the LCIA Rules 2014 (as amended from time to time) and can be a useful tool for checking whether or not an arbitration agreement achieves what the parties intended. If there is any ambiguity regarding the effect of an arbitration agreement, the parties may be able to enter into a new, ad hoc agreement that the dispute shall be conducted in accordance with the LCIA Rules 2014 (or, indeed, the LCIA Rules 1998 if preferable).

Parties should take the time to read the version of the rules that applies to their dispute. Prior to commencing proceedings, practitioners should consider sending a letter to the client that sets out the key features of the rules and enclosing a copy for their reference.

There is a slight wrinkle in relation to when the emergency arbitrator provisions in LCIA Rules, art 9B applies. If your arbitration agreement is silent on which version of the LCIA’s emergency arbitrator, and you commence LCIA arbitration proceedings on or after 1 October 2014, the emergency arbitrator provisions will not apply to your dispute if either:

1. the arbitration agreement was concluded before 1 October 2014 and the parties have not agreed in writing to opt-in to art 9B; or

2. the parties have agreed in writing to opt-out of art 9B

Accordingly, don’t assume that by commencing proceedings on or after 1 October 2014 that the emergency arbitrator provisions will automatically apply to your dispute – if your arbitration agreement was concluded before that date, you’ll have to opt-in to their application.

Able to choose between the two versions? It is important to weigh the pros and cons of the old vs the new.

“ ...consider sending a letter to the client that sets out the key features of the rules and enclosing a copy for their reference.”

Q1I am about to commence LCIA arbitration: will the LCIA Rules 2014 apply?

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“ In the absence of any express choice of law, the law applicable to the arbitration agreement and the arbitration will be the law of the seat.”

Quick AnswerThe starting point is, once again, your arbitration agreement: does it provide expressly for an arbitral seat or applicable law of the arbitration and/or the arbitration agreement?

In the absence of a specified seat in the arbitration agreement, the parties can agree their seat in writing at any time before the formation of the tribunal or, after formation, with the tribunal’s prior written consent (LCIA Rules 2014, art 16.1).

In the absence of any agreement on seat, the default position under the rules is that the seat of the arbitration will be London, England, unless and until the tribunal orders that another arbitral seat is more appropriate, in view of the circumstances and after having given the parties a reasonable opportunity to make written comments to the tribunal (LCIA Rules 2014, art 16.2).

As for the law applicable to the arbitration agreement and the arbitration, it is important to check whether your arbitration agreement specifies any choice of law applicable in either respect. In the absence of any express choice of law, the law applicable to the arbitration agreement and the arbitration will be the law of the seat. Accordingly, if your seat is England, the applicable law will be the law of England and Wales (LCIA Rules 2014, art 16.4).

Commentary/AnalysisThe seat, or legal place, of the arbitration is key because it determines:

• the applicable procedural law for the arbitration

• the national court that may assist or supervise the tribunal during the arbitration

• the national court that has jurisdiction to determine any challenge or appeal of the arbitral award

• the nationality of the award for the purposes of recognition and en forcement

The arbitration seat does not necessarily determine the place in which tribunal meetings are held, hearings take place or where the award is signed. For example, the parties to an international arbitration in London may find it more convenient to hold hearings outside England due to the location of witnesses or counsel. They are free to do so, but for legal purposes England would remain the seat of the arbitration.

The revised LCIA Rules 2014, art 16.1 provides clarification on the timing of when agreement on seat can be reached and whether the tribunal’s consent is required, which is helpful and provides the parties with more flexibility for reaching agreement on this key aspect.

The LCIA Rules 2014 also provide, for the first time, a default position on the law applicable to the arbitration agreement. This addition is useful in the event of any challenge to the jurisdiction of the tribunal (LCIA Rules 2014, art 23), as it will be clear to the parties and the tribunal in accordance with which law the arbitration agreement should be interpreted. In July 2014, the HKIAC introduced a default applicable law provision in its model clause.

Q2Where’s my seat? What is the applicable law?

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“ [The Guidelines] are, in essence, a code of conduct for legal representatives appearing in LCIA arbitration proceedings.”

Q3

Quick AnswerThe ‘General Guidelines for Parties’ Legal Representatives’ are contained in the Annex to the LCIA Rules 2014 and, according to the Preamble, form part of the rules. They are, in essence, a code of conduct for legal representatives appearing in LCIA arbitration proceedings.

If you’re a party, you need to know the following:

• You are responsible for ensuring that your legal representatives appearing by name before the tribunal have agreed to comply with the general guidelines (LCIA Rules 2014, art 18.5)

• By permitting any legal representative to appear before the tribunal, you ‘represent’ to the tribunal that such agreement has been provided (LCIA Rules 2014, art 18.5)

• Practically speaking, you should formally request in writing that your legal representatives agree to comply with the general guidelines before you allow them to appear by name before the tribunal and you should keep a record of such agreements when they are provided

• It is unclear from the LCIA Rules 2014 what the consequences for a party may be for failing to ensure compliance, but there may be costs or other consequences for failing to ensure compliance

If you’re a legal representative you need to know that:

• Agreeing to comply with the general guidelines is a condition of appearing by name before the tribunal

• You should provide your agreement to comply with the general guidelines before appearing in front of the tribunal or refuse to act

• The tribunal is able to impose sanctions against legal representatives for violations of the general guidelines (LCIA Rules 2014, art 18.6)

Commentary/AnalysisThe inclusion of a code of conduct for legal representatives is a notable development and one without any comparable international precedent. The general guidelines are aimed at ensuring that the arbitral process is conducted fairly and they reflect increasing awareness and debate in the arbitration community on the need for the further regulation of counsel in international arbitration.

Although expressed as ‘guidelines’, such a description is potentially confusing as a legal representative’s agreement to comply with the general guidelines is a condition of appearing by name before a LCIA tribunal (LCIA Rules, art 18.5), whereas the label may give the impression that compliance is in some way optional.

As those familiarising themselves with the new rules will know, the general guidelines impact the three key stakeholders involved in LCIA arbitrations (the lawyers, the parties and the tribunal) and each is charged under the new rules with ensuring compliance with what amounts to an ethical code of conduct for counsel. How, exactly, the general guidelines will work and be applied in practice is yet to be seen.

Parties and their lawyers need to be very clear about the nature and extent of their obligations pursuant to the general guidelines. This information should be included in the letter sent to the client before arbitration proceedings are commenced.

For further commentary on the guidelines, see the New Law Journal article, ‘Cheering News’.

What do I need to know about the ‘general guidelines’ for the parties’ legal representatives?

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“ Don’t assume that by commencing proceedings on or after 1 October 2014 that the emergency arbitrator provisions will automatically apply to your dispute.”

Q4

Quick AnswerYes, in some circumstances.

As commented above, if your arbitration agreement is silent on which version of the LCIA rules will apply to your dispute, and you commence LCIA arbitration proceedings on or after 1 October 2014, the emergency arbitrator provisions as contained in LCIA Rules, art 9B will not apply to your dispute if either:

1. the arbitration agreement was concluded before 1 October 2014 and the parties have not agreed in writing to opt-in to art 9B; or

2. the parties have agreed in writing to opt-out of art 9B

Accordingly, don’t assume that by commencing proceedings on or after 1 October 2014 that the emergency arbitrator provisions will automatically apply to your dispute – if your arbitration agreement was concluded before that date, you’ll have to opt-in to their application.

To apply for an emergency arbitrator, you must:

• Apply in writing (preferably by electronic means) to the Registrar setting out the specific grounds for requiring, as an emergency, the appointment of an emergency arbitrator and the specific claim, with reasons, for emergency relief, together will all relevant documentation

• If you are the claimant, file your Request for Arbitration with the application

• If you are the respondent, file the Response with the application

• Deliver a copy of the application to all other parties or notify them of the application. It is not clear what will constitute notice so it may be prudent to deliver a copy of the application

• Confirm you have paid or are paying the Special Fee as set out in the Schedule of Costs. Note: The level of this fee has yet to be set by the LCIA

The LCIA Rules 2014 do not state the grounds on which an emergency arbitrator will or will not be appointed. The LCIA Court will determine the application as soon as possible in the circumstances (LCIA, art 9.6) and if the application is granted, the LCIA Court will appoint the emergency arbitrator within three days of the Registrar’s receipt of the application or as soon as possible thereafter.

The emergency arbitrator will decide on the claim for emergency relief as soon as possible, but no later than 14 days, after appointment (LCIA Rules 2014, art 9.8B). This timeframe can be extended by agreement of the parties or in exceptional circumstances by the LCIA Court (LCIA Rules 2014, art 22.5).

Under the LCIA Rules 2014 can I apply for emergency arbitrator relief prior to the formation of the tribunal?

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“ The take up of emergency arbitrator services provided by other international arbitral institutions has been low...

Time will tell whether the LCIA’s procedure is subject to any significant use.”

Q4

Commentary/AnalysisIn arbitration generally, emergency relief can only be ordered once the arbitral tribunal has been constituted. This leaves a period of time prior to the constitution of the tribunal when a party may require emergency relief but is unable to obtain that relief in arbitration. A party’s usual recourse in such circumstances is to apply for interim relief in an appropriate state court, but this option may not be open to all parties in all circumstances. Emergency arbitrator provisions seek to address this potential difficulty.

The LCIA’s new emergency arbitrator articles follow a trend for emergency arbitrator provisions in other leading institutional rules, including the SCC, SIAC and ICC, and they dovetail with the alternative provisions for the urgent formation of the arbitral tribunal (LCIA Rules 2014, art 9A), which also formed part of the LCIA Rules 1998 (LCIA Rules 1998, art 9). The emergency arbitrator procedure under the LCIA Rules 2014 is only available prior to the formation or expedited formation of the arbitral tribunal (LCIA Rules 2014, art 9.4).

It is clear from the LCIA Rules 2014 that an application for the appointment of an emergency arbitrator does not affect a party’s right to apply to a state court or other legal authority for any interim or conservatory measures before the formation of the tribunal. If a party makes any application or receives any order from a state court or other legal authority during the emergency proceedings, they must communicate it promptly in writing to the emergency arbitrator, the Registrar and all other parties (LCIA Rules 2014, art 9.12B)

The take up of emergency arbitrator services provided by other international arbitral institutions has been low. The ICC reported in its 2013 statistics that it had only received six applications for emergency arbitration since 2012; and, at the beginning of 2014, the SCC reported that it only received nine applications in four years. Accordingly, the LCIA’s decision to include emergency arbitrator provisions in its revised rules could be viewed as an attempt to keep pace with the competition rather than addressing a pressing user need. Time will tell whether the LCIA’s procedure is subject to any significant use.

Under the LCIA Rules 2014 can I apply for emergency arbitrator relief prior to the formation of the tribunal?

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“ ...embarking on LCIA arbitration involves costs for both parties... although most supporters of arbitration would say that this is a price worth paying...”

Q5

Quick AnswerIn summary, the key costs of an LCIA arbitration are:

• The registration fee (currently £1,750) – payable by the claimant prior to or at the time of submitting the request for arbitration. No payment of registration fee, no commencement date for the arbitration (LCIA Rules, art 1.1(iv) and art 1.4).

• Deposits – the LCIA Court may direct the parties to make one or more payments to the LCIA on account of the Arbitration Costs (LCIA Rules 2014, art 24.1), which amounts are held on trust by the LCIA. The Arbitration Costs are the costs of the arbitration other than the legal or other expenses incurred by the parties themselves as determined in accordance with the Schedule of Costs (LCIA Rules 2014, art 28.1).

• The Arbitration Costs – these are determined by the LCIA Court in accordance with the Schedule of Costs and the parties to a LCIA arbitration are jointly and severally liable to the LCIA Court and the tribunal for these costs (LCIA Rules 2014, art 28.1).

• Legal Costs – these are separate to the Arbitration Costs and cover a parties’ legal fees (solicitors and counsel), disbursements and other expenses such as experts’ fees (LCIA Rules 2014, art 28.3)

• Special Fee – this is payable for invoking the new emergency arbitration procedure (LCIA Rules 2014, art 9B). The level of this fee has yet to be set by the LCIA.

Commentary/AnalysisLike any administered arbitration, embarking on LCIA arbitration involves costs for both parties. This is one of the obvious differences between arbitrating and litigating a commercial dispute and the costs of paying for the services and time of the LCIA staff and the tribunal can be significant, although most supporters of arbitration would say that this is a price worth paying in exchange for privacy, confidentiality and having a say in who determines your dispute.

In January 2014, the LCIA released four new costs schedules, including one that applies to LCIA arbitration proceedings, and these remain unchanged in light of the LCIA Rules 2014.

In relation to the Arbitration Costs and Legal Costs, it is important to note that the tribunal has the power to order by way of an award that the Legal Costs incurred by one party be paid by another party (LCIA Rules, art 28.2). The tribunal will also decide on the proportions in which the parties shall bear the Arbitration Costs (subject to any party settlement in this regard) (LCIA Rules, art 28.3). In both respects, the tribunal will apply the general principle that costs should reflect the parties’ relative success and failure in the award or arbitration or under different issues, except where in the circumstances that would be inappropriate (LCIA Rules, art 28.4)

What about costs?

Further InformationWe hope you’ve enjoyed this Guide to the Key Features of the LCIA Rules 2014. We have the following LexisNexis resources available if you’d like more information on arbitrating pursuant to the LCIA Rules 2014, or on arbitration matters generally.

LexisPSL Arbitration LCIA contentWe have full suites of Practice Notes on arbitrating under the 2014 and 1998 versions of the LCIA Rules, as well as Precedents, Checklists and Flowcharts to assist and guide you through the entire process.

Understanding institutional arbitrationAre you new to institutional arbitration or just need to brush up on the key issues? Our Practice Notes provide all you need to know on subjects such as costs, choosing an institution, confidentiality, emergency arbitration and evidence. Our institutional arbitration coverage is broad and covers 12 of the leading international institutions written by or in partnership with the experts.

LexisPSL Arbitration – why not try it out?LexisPSL Arbitration offers practical guidance on all key aspects of domestic, institutional, international and industry-specific arbitration, as well as news and analysis of the latest developments in arbitral practice and procedure. If you’re not already a customer, why not sign up for a free trial?

A London seat? Comprehensive coverage of the Arbitration Act 1996Our coverage of Arbitration Act 1996 is comprehensive, with practical guidance on all key aspects of English and Welsh arbitration law, including applying for anti-suit injunctions, how to stay proceedings in favour of arbitration, mounting challenges and appeals to arbitral awards and how to effect or challenge enforcement.

Free ContentRegular roundup of highlights and news from the LexisPSL Arbitration team and guest contributors on the LexisNexis DR blog. lexisnexis.co.uk/QM/Arbitration/blog

To find out more visit lexisnexis.co.uk/Arb/PSL

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