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Asia Pacific – The New LCIA Rules.

9 October, 2014

 


The London Court of International Arbitration (LCIA) has formally adopted new arbitration rules which came into effect on 1 October 2014, and will apply to any arbitration commenced on or after this date. The new rules revise and update the previous rules, which came into force in 1998.

 
The revisions aim to bring the LCIA up to date with current practice and procedures and streamline the LCIA arbitration process. The availability of an emergency arbitrator and the focus on procedural efficiency in the new rules brings the LCIA in line with other leading institutions including the ICC (2012), the SIAC (2013) and the HKIAC (2013).

 

Conduct Requirements For Legal Representatives

 
The most innovative change to the rules is the introduction of new powers allowing the tribunal to sanction legal representatives for poor conduct. The new rules include a set of general conduct guidelines (set out in an Annex of General Guidelines and Article 18) which are intended to promote the good and equal conduct of the parties’ legal representatives within the arbitration. While these provisions are not dissimilar to the IBA Guidelines on Party Representation approved in May 2013 and whilst the ICDR Rules which came into effect on 1 June 2014 contain a provision which accepts that the ICDR may develop its own conduct rules, the LCIA is the first international arbitration institution to empower the arbitral tribunal to take action against inappropriate counsel conduct by virtue of its procedural rules.

 

Under Article 18.5 of the new LCIA rules, each party must ensure that its legal representatives appearing before the tribunal have agreed to comply with the conduct guidelines. The guidelines include prohibitions on (1) engaging in activities intended unfairly to obstruct the arbitration or to jeopardise the finality of any award; (2) knowingly making false statements or presenting false evidence; (3) knowingly concealing any document which is ordered to be produced and (4) initiating any unilateral contact (without disclosure in writing to all other parties)during the arbitration proceedings with any member of the tribunal or the LCIA Court.

 
In the event of a complaint by one of the parties (or if the tribunal makes a complaint upon its own initiative), the tribunal may decide, after consulting with the parties and granting the legal representative a reasonable opportunity to answer the complaint, whether or not the legal representative has violated the conduct guidelines. If the tribunal determines that a legal representative has violated the guidelines, it may order any or all of the following sanctions:

 

  • a written reprimand; 
  • a written caution as to future conduct in the arbitration; or
  • any other measure necessary to allow the tribunal to fulfill its general duties.

 
Conduct By Arbitrators

 
The new rules require arbitrators to undertake their duties in a timely, efficient and expeditious manner. The relevant provisions include:

 

  • Arbitrator appointment (Article 5.4). A candidate’s initial written declaration must include whether he or she is “ready, willing and able to devote sufficient time, diligence and industry to ensure the expeditious and efficient conduct of the arbitration”.
  • Revocation of an arbitrator’s appointment (Article 10).The basis on which the LCIA Court may revoke an arbitrator’s appointment has been expanded: arbitrators must conduct or participate in arbitrations not only with reasonable diligence, but also with reasonable efficiency and industry. In addition, the LCIA Court may now revoke an appointment upon its own initiative, as well as on the application of a party.
  • Making of the final award (Article 15.10). The tribunal is to make its final award as soon as reasonably possible following the last submission from the parties, and must set aside adequate time for deliberations as soon as possible after the anticipated date of the last submission. The tribunal is required to notify the parties and the Registrar of the timetable for the making of the award and notify the parties of the time it has set aside for its deliberations. However, the new rules do not empower the LCIA Court to penalise the tribunal for failure to meet its duties under this provision (for example, by way of reducing the fees of the tribunal) – the ultimate sanction would be removal of the tribunal. It is yet to be seen whether the fees of the tribunal may be affected by failure to meet its requirements under Article 15.10 by virtue of the LCIA’s assessment of the Arbitration Costs in accordance with the Schedule of Costs.

 
Saving Time And Costs
The new rules also contain several key procedural changes intended to improve the speed and cost-effectiveness of LCIA arbitrations. These changes include:

 

  • Shorter timeframes. The time limits set out in the rules have generally been shortened by a couple of days to speed up the arbitration process. Further, the parties cannot delay the formation of the tribunal (Article 5.1), and once constituted, the tribunal and the parties are required to make contact within 21 days of the formation of the tribunal (Article 14.1)
  • Electronic delivery. Documents may now be submitted in electronic form (without the need for paper copies) where the electronic delivery address has been agreed or ordered by the tribunal (Article 4.3).
  • Direct communication. The new default position is that communications will take place directly between the tribunal and the parties (copying in the Registrar), rather than through the Registrar (Article 13.1).

 
Emergency Arbitrator

 
Under the new rules, at any time prior to the formation (or expedited formation) of the tribunal, parties can apply for the immediate appointment of a temporary sole arbitrator by the LCIA Court to conduct emergency proceedings.

 
On a successful application, the LCIA Court will appoint an Emergency Arbitrator within 3 days (or as soon as possible thereafter). Once appointed, the Emergency Arbitrator has 14 days to decide the claim for emergency relief. A formal hearing is not mandatory, but the Emergency Arbitrator must give written reasons for his or her decision. Any order or award of the Emergency Arbitrator may be confirmed, varied, discharged or revoked in whole or in part by an order or award of the tribunal.

 
Notably, this provision will not apply to arbitration agreements concluded before 1 October 2014, unless the parties agree to “opt in” to Article 9B.

 

Multi-Party Disputes

 
To deal with the growing complexity and diversity of disputes, the new rules expand upon mechanisms contained in the old rules for dealing with multi-party disputes. These revisions include:

 

  • Consolidation. The new rules enable consolidation of two or more arbitrations into a single arbitration. Consolidation may be ordered by the tribunal where the parties agree in writing or in circumstances where multiple arbitrations are commenced under the same or compatible arbitration agreements between the same parties, provided an arbitral tribunal has been formed (Article 22.1(ix) and (x), and Article 22.6).
  • Cross claims. The concept of “cross-claims” has been introduced in the new rules, allowing counter-claims by a respondent against a claimant as well as cross-claims between respondents.

 
Comment

 
The modifications to the rules should be taken into account by LCIA users when considering the drafting of their arbitration clauses, and when participating in LCIA arbitrations commenced after 1 October 2014.

 
The revisions to the LCIA rules should be welcomed by the international business community. The changes represent a tightening-up and modernisation of the rules in a way that should reduce costs and increase the efficiency of LCIA arbitrations. The rules on parties’ legal representatives are unique to the LCIA but the extent to which arbitrators will utilise their powers to sanction counsel remains to be seen.

 

herbert smith Freehills

 

For further information, please contact:

 

Peter Godwin, Partner, Herbert Smith Freehills
peter.godwin@hsf.com


Dominic Roughton, Partner, Herbert Smith Freehills
dominic.roughton@hsf.com


David Gilmore, Partner, Herbert Smith Freehills
david.gilmore@hsf.com


Elaine Wong, Herbert Smith Freehills
elaine.wong@hsf.com


Christopher Hunt, Herbert Smith Freehills
christopher.hunt@hsf.com

 

Victoria MacMillan

victoria.macmillan@hsf.com

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