Timothy Hill, Damon So, and Mark Lin, Partners, Hogan Lovells
On 25 July 2014, the LCIA published the final version of its rules of arbitration (the “Rules”). The new Rules will come into force on 1 October 2014 and – unless agreed otherwise – will automatically apply to arbitrations commenced on or after that date.
The new Rules maintain the general and flexible approach to arbitration procedure, so that it is capable of adapting to disputes of a different type and amount and to parties from different legal backgrounds. Although numerous amendments have been made, many of them are relatively minor and simply serve to clarify the drafting of existing provisions or bring them up-to-date to reflect developments in arbitral practice since 1998.
However, there a number of important modifications and additions that should be considered by all arbitration users. They fall broadly into four categories:
- rules to streamline and ensure greater efficiency of arbitral proceedings;
- the introduction of new rules applicable to multi-party disputes;
- the introduction of an “Emergency Arbitrator” provision; and
- the introduction of ethical guidelines for counsel.
1) Rules to Ensure Greater Efficiency of Arbitral Proceedings
A number of the revisions are aimed at speeding up and streamlining arbitral proceedings, or encouraging the parties and the tribunal to conduct proceedings as efficiently as possible. For example:
- the initial round of pleading documents can be submitted in electronic form, including by way of a standard electronic form on the LCIA’s website;
- prospective tribunal members must declare whether they are ready and able to devote sufficient time to the arbitration to ensure its timely and efficient conduct;
- the tribunal must make its final award as soon as reasonably possible following the final hearing and must also notify the parties of the time it has set aside and the timetable for the making of the award;
- a change by a party of its legal representatives during the arbitral process must be notified to the tribunal promptly and is subject to the tribunal’s approval (which can be withheld if the change may compromise the composition of the tribunal or the finality of any award (eg, due to a potential conflict arising as between the tribunal and the new legal representative)); and
- the tribunal is expressly permitted to take into account the parties’ conduct in the arbitration when awarding costs, in particular any conduct which creates unnecessary delay and expense.
2) Multi-Party Disputes
The new Rules seek to address some of the common issues that can arise in disputes involving multiple parties.
Under the old rules, a respondent could only commence a counter-claim against the claimant, meaning that a claim against a co-respondent (eg, for a contribution) would have to be made in separate arbitration proceedings (which it may or may not have been possible to consolidate with the main claim). The new Rules provide that a respondent can bring a “cross-claim” against the claimant as well as against any other respondent in the arbitration.
The new LCIA Rules also contain provisions enabling the Tribunal (or prior to the formation of the Tribunal, the LCIA Court) to consolidate two or more related arbitrations between the same parties into a single arbitration.
3) Emergency Arbitrator Provisions
The new LCIA Rules introduce provisions for the appointment of an emergency arbitrator, following the recent precedent set by arbitral institutions such as the SCC, the ICC and the ICDR.
Where urgent relief is required at any time prior to the formation of the tribunal, any party may apply to the LCIA for the immediate appointment of a temporary sole arbitrator to conduct emergency proceedings pending the formation of the tribunal. If the application is granted, the LCIA shall appoint an emergency arbitrator within three days of receipt of the application. The emergency arbitrator shall then decide the claim for emergency relief no later than 14 days following the appointment.
The Emergency Arbitrator Rule will not apply to arbitration agreements signed before the entry into force of the new Rules or where the parties agree to opt out of it.
4) Conduct of Legal Representatives
The most notable addition to the Rules is the introduction of ethical guidelines for parties’ legal representatives, which parties are required to ensure that their representatives agree to comply with. The LCIA is therefore the first arbitral institution to include ethical guidelines into its procedural rules. The apparent purpose of the guidelines is to ensure that all parties are represented by counsel subject to common ethical obligations, thereby minimising the difficulties that can arise where counsel from different jurisdictions are subject to (sometimes widely) varying professional conduct obligations.
The guidelines provide that legal representatives should not:
- engage in activities intended to obstruct the arbitration or jeopardise the finality of the award, including repeated unfounded challenges to an arbitrator’s appointment or to the tribunal’s jurisdiction;
- knowingly make false statements or procure/assist the preparation of/rely on false evidence;
- knowingly conceal/assist in the concealment of any document ordered to be produced by the tribunal; or
- make/attempt to make undisclosed unilateral contact with tribunal members.
If a party’s legal representative violates the guidelines, the tribunal can sanction the offending legal representative by either (i) issuing a written reprimand; (ii) issuing a written caution as to future conduct in the arbitration; or (iii) taking any other measure necessary to fulfil the arbitral tribunal’s general duties to act fairly and impartially between the parties and adopt procedures to avoid unnecessary delay and expense.