Key changes to the LCIA and ICC Arbitration Rules

Two of the most prominent arbitral institutions globally, the London Court of International Arbitration and the International Chamber of Commerce, have recently updated their rules to modernise and streamline the way in which arbitrations are administered. The changes are designed to increase efficiency, flexibility and transparency and to embrace the growing use of technology in business today.

The updated LCIA Arbitration Rules took effect from 1 October 2020 (“LCIA 2020 Rules”).

The new ICC Arbitration Rules came into force on 1 January 2021 (“ICC 2021 Rules”). These will now apply to all arbitrations registered at the ICC. Any arbitrations that were registered before the 1 January 2021 will continue to be governed by the 2017 Arbitration Rules (“ICC 2017 Rules”).

We highlight some of the key changes below.

1. Paperless filings (both LCIA and ICC)

The LCIA 2020 Rules have confirmed that electronic communications should take primacy. The rules now provide that, by default, any written communication in relation to the arbitration shall be delivered by electronic means, unless written approval or direction from the Arbitral Tribunal states otherwise.

The ICC 2021 Rules concerning the filing of documents removes the presumption contained in the ICC 2017 Rules that pleadings and written communications shall be sent in hard copy. Replacing the old wording that documents ought to be, ‘supplied in a number of copies sufficient to provide one copy for[…]’, with the requirement that documents are simply ‘sent’, indicates that the parties can send correspondence and pleadings in electronic format.

2. Remote hearings (both LCIA and ICC)

The LCIA 2020 Rules allows for greater flexibility for the parties to decide upon the format of hearing whether it be in-person, virtual or a combination of the two.

The ambiguity that existed in the ICC 2017 Rules surrounding physical hearings has been removed. Remote hearings are now recognised, via ‘video conference, telephone or other appropriate means of communication’, and a mixture of in-person and remote hearings is permissible. A tribunal will consult the parties before determining what type of hearing is appropriate.

3. Expedited process (both LCIA and ICC)

A new power that allows arbitrators to expedite proceedings has been introduced in the new LCIA 2020 Rules. The power allows arbitrators to make an Early Determination Order when they consider that the application, whether it be any claim, defence, counterclaim, cross-claim, defence to counter-claim or defence to cross-claim, is:

• Manifestly outside of the jurisdiction of the Arbitral Tribunal;
• Inadmissible; or
• Manifestly without merit.

The ICC Expediated Procedure provides for a simplified and faster procedure. For matters arising out of arbitration agreements concluded on or after 1 January 2021, parties must now opt out of the expediated arbitration procedure for disputes up to the value of US$3million. The figure was previously US$2million thus meaning more disputes can now utilise the expediated procedure.

4. Consolidation (both LCIA and ICC)

The LCIA 2020 Rules now make it possible for a tribunal, with the approval of the LCIA Court, to order the consolidation of arbitrations that are commenced under the same agreement or any compatible arbitration agreement(s) either between the same disputing parties or arising out of the same transaction or series of related transactions, provided that no arbitral tribunal has yet been formed by the LCIA Court for such other arbitration(s) or, if already formed, that such arbitral tribunal(s) is (are) composed of the same arbitrators.

The new rule also allows for separate arbitrations being heard under the same arbitration agreement, or, any compatible arbitration agreements between the same parties, or, arising out of the same transaction, to be conducted concurrently. In practice this should reduce duplication of work and save costs. It should also reduce inconsistencies of arbitral awards.

Ambiguity surrounding previous ICC rules as to whether it was possible to consolidate two arbitrations where the claims were made under the same arbitration agreement has been clarified.

The ICC 2021 Rules make it possible to consolidate two arbitrations in cases where:

i.   The parties have agreed to consolidation; or

ii.  All of the claims in the arbitrations are made under the same arbitration agreement or agreements; or

iii. The claims in the arbitrations are not made under the same arbitration agreement or agreements, but the parties in the arbitrations are between the same parties, the disputes in the arbitration arise in connection with the same legal relationship, and the ICC finds the agreements to be compatible.

5. Costs & Fee Structure (LCIA)

The LCIA 2020 Rules allow an emergency arbitrator to determine the costs of emergency proceedings. This means arbitrators will now be able to consider how parties and their representatives act when determining cost awards.

The LCIA 2020 Rules see an increase in an arbitrator’s maximum hourly rate from £450 to £500 p/h.

6. ICC appointed tribunal (ICC)

In exceptional circumstances and notwithstanding any agreement by the parties on the method of constitution of the arbitral tribunal, the ICC Court may now appoint each member of the arbitral tribunal. This is to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award.

Although this change may, by some, be seen as somewhat controversial, it is qualified by exceptional circumstances and is intended to protect the integrity of the award.

7. Flexible joinder provisions (ICC)

Under the ICC 2017 Rules the joinder of additional parties was only permitted with the consent of all parties and before the constitution of the arbitral tribunal. The new rule now allows an arbitral tribunal, once constituted and upon a party’s request, to join a third party. This is subject to the additional party accepting the constitution of the arbitral tribunal and agreeing to the Terms of Reference, where applicable. In deciding on such a Request for Joinder, the arbitral tribunal shall take into account all relevant circumstances, which may include whether the arbitral tribunal has prima facie jurisdiction over the additional party, the timing of the Request for Joinder, possible conflicts of interests and the impact of the joinder on the arbitral procedure. Any decision to join an additional party is without prejudice to the arbitral tribunal’s decision as to its jurisdiction with respect to that party.

8. Third party funding (ICC)

The new rules require all parties to disclose the existence and identity of any non-party which has entered into an arrangement for the funding of claims or defences and under which it has an economic interest in the outcome of the arbitration. The reasoning behind this addition is to assist prospective arbitrators and arbitrators with their duties of impartiality and independence and duty to disclose any facts or circumstances that may lead to their impartiality and independence being questioned. This new rule promotes transparency in the process.

9. Settlement (ICC)

Under the ICC 2021 Rules tribunals are now invited to encourage parties to consider settlement of all or part of the dispute either by negotiation or through any form of amicable dispute resolution methods such as, for example, mediation under the ICC Mediation Rules. Where agreed between the parties and the arbitral tribunal, the arbitral tribunal may take steps to facilitate settlement of the dispute, provided that every effort is made to ensure that any subsequent award is enforceable at law.

This shift towards encouraging settlement should be embraced by parties to avoid the expense of continued proceedings when otherwise the dispute could have been settled.

10. Additional awards (ICC)

A new rule empowers a tribunal, on application by a party within 30 days of receiving an award, to grant an additional award in relation to claims made in the proceedings that the tribunal has omitted to decide. This addition addresses an issue that previously existed in that once a tribunal had issued an award, its ability to correct it was limited and parties had to initiate new arbitral proceedings if the law of the seat was silent on additional awards.

11. Reasons for decision (ICC)

Any party can now request the reasons for the certain decisions made by the ICC. These include decisions relating to:

• Jurisdiction
• Consolidation
• The ICC’s appointment of the tribunal
• Challenges made against arbitrators on grounds of lack of independence and/or impartiality
• Whether to replace an arbitrator

A request for the reasons must be made before the decision of the ICC is made, and, in exceptional circumstances, it can refuse to provide the reasons.

Take-Away

The changes reflect the new world that we live in. The intention and purpose behind the changes are to allow more streamlined processes by adopting technologies to facilitate a more efficient and flexible way of working. This is a welcome development in an interconnected world which has, in many respects, become even closer with the increased use of technology during the Covid pandemic.

Shoosmiths are hosting a webinar series on Regional Perspectives in International Arbitration. Our first webinar was on Africa. Our second webinar was on Asia, to be followed by America, Middle East & Europe.