Report confirms international appeal of LCIA

Out-Law News | 26 May 2021 | 7:06 pm | 3 min. read

The London Court of International Arbitration (LCIA) remains an attractive forum for resolving disputes between businesses, regardless of where those companies are based around the world, a report published by the institution has confirmed.

International arbitration specialist Jason Hambury of Pinsent Masons, the law firm behind Out-Law, said the increasing caseload reported in the LCIA’s annual casework report for 2020 signals the continued success of London as a disputes ‘hub’ despite the challenges faced by the UK in a post-Brexit era and the impact of the Covid 19 pandemic.

“Unsurprisingly, a new feature of the 2020 report is the section on Covid-19, which provides some interesting insight into the impact of the pandemic on the LCIA and its stakeholders,” Hambury said.

Examples of impact of the pandemic on the nature of LCIA proceedings include an increase in requests for deadlines to be extended for the submission of documents, and the closure of courts preventing progress in some arbitral proceedings which were dependent on the outcome of court rulings. The pandemic also resulted in practical and logistical challenges to arbitral proceedings.

“The report acknowledges that one of the legacies of the pandemic has been to highlight the flexibility of arbitration and the willingness and ability of all participants to adapt to the new technologies, leading to greater efficiency and potentially more access,” Hambury said.

Whilst the LCIA report emphasises that it is not always apparent from the documents received whether the pandemic was a trigger for the dispute, it cautiously set out a few examples of disputes that were explicitly triggered by the Covid-19 pandemic. These include claims relating to cancelled entertainment and sporting events due to lockdowns and restrictions imposed by governments and commodity cases where delivery schedules and the price factors were directly impacted by the pandemic.

“A common theme amongst these cases has been whether remedies are available to parties under force majeure and change of law provisions in contracts,” Hambury said. “The report suggests that the aviation and shipping industries have been particularly affected. These issues are also prevalent in the construction and energy sectors albeit in many instances they are being addressed at the project level and they have yet to be elevated to formal disputes,” Hambury said.

The LCIA reported that a record 444 disputes were referred to it in 2020 – an 18% rise on 2019, which was itself a record year at the time. The vast majority of the cases commencing in 2020 were brought under the LCIA Rules. Of those 407 cases, 86% involved parties from countries other than the UK, which the LCIA said demonstrates “the continued international nature” of its caseload.

Although the parties were primarily from countries outside of the UK, 84% of arbitrations conducted under the LCIA Rules were seated in London and 78% concerned agreements governed by English law. The popularity of selecting English law as the governing law for agreements in the energy and finance sectors is reflected in the breakdown of the LCIA’s caseload per sector.

According to the LCIA’s report, changes made to the LCIA Rules, which took effect on 1 October last year, appear to be reflective of the ‘new normal’. The LCIA reported that, by the end of 2020, it had seen parties making use of the updated provisions. The new rules include a broadening of the powers of the LCIA Court and tribunals to order consolidation and concurrent conduct of arbitrations.

“These new powers enable separate but related arbitrations to be consolidated in a wider set of circumstances or for arbitrations commenced in multi-contract transactions, and multi-party disputes, with the same arbitral tribunal to run concurrently, allowing greater scope for procedural efficiencies as well as cost effectiveness,” Hambury said. “This is likely to be beneficial in the energy and construction sectors in which multi-contract schemes are common on major projects.”

In 2020, 50 applications for consolidation were made by parties under the LCIA Rules, an increase of over 40% compared with 2019 – 12 of the applications were made in cases pursuant to the 2020 Rules that allow consolidation under broader circumstances.

“Updates to the 2020 Rules which were accelerated due to Covid-19 appear to have been received favourably by parties, with the LCIA already seeing users make use of the revised provisions,” Hambury said.

Although there were no formal applications for early determination, which are also provided for in the 2020 Rules, the LCIA said parties have started to utilise this provision and that it expects those applications will be reported in coming years.

“The LCIA’s report also highlighted its long-standing commitment to diversity in arbitration, with the institution confirming that female arbitrators were appointed in 45% of its institutional appointments in 2020,” Hambury said.

“The historical link between the choice of English law and the selection of London as a seat continues. It comes as no surprise therefore that cases in the energy and natural resource sectors lead the way at the LCIA (26% of cases) since English law tends to be the preferred choice of law for many large energy corporates,” he said.