The LCIA: New rules and new frontiers

The LCIA is changing, but is it moving quickly enough?

Arbitration: ”Expeditious where the law is slow, cheap where the law is costly, simple where the law is technical, a peacemaker instead of a stirrer-up of strife.” (The Law Quarterly Review)

The London Court of International Arbitration (LCIA) was set up in 1985 with that goal in mind and its new director general (DG), Dutch arbitrator Dr Jacomijn van Haersolte-van Hof, is tasked with keeping the organisation popular, relevant and competitive.

That means overseeing the centre’s first major rule change since 1998, not a small task for the new DG, who follows outgoing Adrian Winstanley OBE after being appointed by a succession planning committee (24 February 2014).

Winstanley insists the new rules are “evolution not revolution” but the shift is a sign of the times in the increasingly busy space of international arbitration.

Disputes are becoming more complex, with a greater focus on multi-party rows. The LCIA needs to keep up.

“You very frequently find contracts entered into among many parties, from three to 20 in a major shareholding agreement that brings together a number of jurisdictions,” Winstanley says. ”As contractual relationships become more complex in the global economy, so the number of multiple party arbitrations increases.”

All of that means tweaking multi-party issues in the LCIA rules. The rules are currently in consultation and are expected to be approved at the next meeting of the court in May in time for implementation by the end of June. 

However one issue still to be hammered out is the organisation’s response to emergency arbitration. It is the latest hot topic to hit the marketplace and several institutions have put in place measures to allow parties to seek urgent interim relief on issues which cannot wait for the constitution of a tribunal.

The Paris-based ICC amended its rules in 2012 and the Hong Kong International Arbitration Centre (HKIAC) added in a new article for interim relief in November 2013.

Emergency arbitration is designed to prevent a respondent from destroying key evidence or dissipating assets before a hearing takes place. It allows parties to get urgent relief before a tribunal is called. But enforceability is still an issue according to many and Winstanley and Haersolte-van Hof are unsure changes will be necessary for the LCIA.

The centre has already constituted hearings of one with 48 hours notice and it says there is debate over the level of demand for such a service, though Winstanley concedes it could be a “useful tool”.

This is the one sticking point for the LCIA – to be debated at the 9 May 2014 court meeting –  and the last wrinkle to be ironed out before its new rules go live.

Meanwhile Haersolte-van Hof’s hands will be busy with continuing the centre’s international push. Amid the burgeoning market in regional arbitration centres the LCIA is paddling hard to keep up.

The centre’s first international move was to Dubai in 2008, when it signed a joint agreement with the Dubai International Financial Centre to set up an independent institution in the region. Its current caseload in Dubai is just over a tenth of its total caseload, at 35 cases out of 301 (up from 118 back in 2005).

In 2011 the centre opened its first independent office in Delhi, India.

Winstanley says it is still “relatively early days” but the centre has a strong reputation. In 2011 a report by Ernst & Young’s Indian fraud investigation and ­dispute services group found it was the most popular domestic centre, with 34 per cent of respondents saying that they would be happy to refer ­disputes there (28 November 2011).

However persuading business of the benefits of local institutional arbitration in the region has proved tricky, with many preferring to turn to major international centres or ad hoc arbitration.

“LCA-India case numbers are much smaller,” says Winstanley, “because the LCIA-India rules were not promulgated until 2010 and there are particular challenges associated with India, where ad hoc arbitration currently predominates.”

“We’ve been successful in persuading important corporates to adopt the rules but the lead time for live cases is typically three to five years,” he adds. ”There is no doubt that it’s a challenging environment.” 

India isn’t the only international feather in the LCIA’s cap. It entered another joint venture with the Government of Mauritius in 2011, to set up LCIA-MIAC.

“In going to Mauritius we took into consideration a jurisdiction which has a good mix of important elements,” says Winstanley. “Those include stability in government, a good and growing economy and a good combination of common law and civil law traditions.”

Being closer to Africa – a region in demand –  is also understood to have been on the agenda.

Most recently the centre entered into a cooperation agreement with the newly established Seoul International Dispute Resolution Centre in 2013 and will soon be stationing an Asia representative there. 

The LCIA needs to keep up with its competitors. It was joined in Seoul by the Singapore International Arbitration Centre (SIAC) and the Hong Kong International Arbitration Centre (HKIAC). SIAC also ventured to India last year, opening its first independent liason office in Mumbai.

Haersolte-van Hof says, “internationalisation is a very important theme to be considered for the future”. But for now the focus is on maintaining the current workload.

“There isn’t any doubt that all of the institutions benefitted from the economic meltdown, that’s where we saw a real surge in cases coming to all institutions and to state courts for litigation,” says Winstanley. “As the global economy has gradually improved one might have expected a levelling off and a decline in cases, but that has not happened, and the LCIA caseload has continued on an upward curve.”

Plenty of work left for Haersolte-van Hof then.