LCIA: general guide

This is an introductory article on the LCIA (London Court of International Arbitration) arbitration.

A brief history of the creation of the LCIA

The first steps to establish the LCIA were taken as early as the end of the 19th century.

In 1883 a committee was set up to draw up proposals for a tribunal to deal with cross-border commercial disputes. However, it was not until 1891 that the final scheme was approved, and a new tribunal was created: “The City of London Chamber of Arbitration”. The new tribunal was officially inaugurated a year later. In 1903 the tribunal was renamed the London Court of Arbitration.

The institution did not assume its present name, The London Court of International Arbitration, until 100 years later, in 1981.

What disputes does the LCIA hear?

The LCIA arbitration rules can be applied to any dispute regardless of the location of the parties and the applicable law.

According to the LCIA’s 2021 report:

1. 85.2% of the parties to the disputes were non-English.
2. Only 76% of disputes were under English law.
3. Most disputes arose from the following contracts: sale and purchase, services, loan agreements and corporate agreements. The disputes also involved intellectual property, shipbuilding, etc.

Which arbitration rules apply?

The general rule: the arbitration rules as in force at the time of the commencement of the arbitration (i.e. the date of the notification of arbitration) shall apply. The arbitration rules of 2020 are currently in force. They came into force on 1 October 2020.

Exception: If the parties have expressly agreed that a different version of the rules applies (e.g. 2014 or 1998).

How do I refer a dispute to the LCIA?

All parties must agree for a dispute to be referred to the LCIA. This agreement is usually reached before a dispute arises when the parties agree on contractual terms.

There are common misconceptions about arbitration clauses. Before I deal with them, I will briefly outline what an arbitration clause includes:

1. The name of the body that will hear the dispute;
2. Categories of disputes that may be referred to arbitration;
3. The number of arbitrators who will hear the dispute. If this is not specified, a sole arbitrator will hear the dispute in the LCIA.
4. The place of arbitration (i.e. which law will apply to the procedural matters) and the applicable law (the law that applies to the merits of the dispute). If the applicable law is not specified, the law of the place of arbitration (usually London) will apply by default.
5. Language of the arbitration.

To avoid problems, the LCIA recommends using its model arbitration clause:

Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the LCIA Rules, which Rules are deemed to be incorporated by reference into this clause.

The number of arbitrators shall be [one/three].

The seat, or legal place, of arbitration shall be [City and/or Country].

The language to be used in the arbitral proceedings shall be [    ].

The governing law of the contract shall be the substantive law of [    ].

Back to the most common misconceptions with arbitration clauses:

1. The parties have misrepresented the name of the institution. I sometimes hear that the phrase “arbitration in London” is equivalent to the parties agreeing to refer the dispute to the LCIA (some say to the LMAA). This is fundamentally wrong. In reality, such a clause implies that the parties have agreed to ad hoc arbitration under the rules of the Arbitration Act 1996.
2. The invalidity of the main contract implies that the arbitration clause is also invalid. This is perhaps the second myth which needs to be dispelled. In English law, there is a principle of separability (independence) of an arbitration clause. An arbitration clause (even if it is a sub-clause in the main contract) is an independent agreement, separate from the main contract. This means that it can be valid in a situation where the main contract is not, and vice versa.

How is the arbitration process conducted?

It all starts with the submission of a Request for Arbitration. There is no prescribed form for this document, but there are requirements for its contents:

1. Name of the parties and their details (address, country, etc.).
2. A reference to the arbitration agreement.
3. A brief description of the dispute and the claim.
4. Procedural matters on which the parties have already agreed (number of arbitrators, language, etc.).
5. Name and particulars of the arbitrator (if the Tribunal consists of three arbitrators).
6. Confirmation of payment of registration fee (£1,950).
7. Confirmation of sending the Request to the Respondent.

Upon receipt of the Request, the Respondent has 28 days to Reply. This period may be extended by the LCIA itself (not by the Tribunal as it has not yet been formed). The Reply is a fairly short document, but it also has requirements for what information to include, such as a confirmation or denial of the claim (or part thereof).

The LCIA then establishes the Tribunal – appointing a single arbitrator or the Chairman of the Tribunal if the dispute is heard by three arbitrators. If the Respondent has not filed a Reply, the LCIA shall commence the appointment of a Tribunal after 28 days from the date of the Request.

Once the Tribunal has been constituted, and the Request has been filed, the arbitrator shall normally convene a case management conference. The conference determines the next steps in the case: when, who and what documents are filed; the question of what evidence is to be submitted, e.g. expert reports or witness statements, etc. is resolved.

After the conference, the Tribunal issues a procedural order with a timetable for exchanging submissions and the date of the oral hearing. The order may also contain technical requirements for the documents submitted (title and font size, numbering requirements for attachments, method of sending attachments, etc.).

The usual time limits for the exchange of documents are as follows:

1. Within 28 days of the formation of the Tribunal, the Claimant files claim submissions.
2. Within 28 days, the Respondent files Defence to the claim and a counterclaim (if any).
3. Within 28 days, the Claimant shall file a Reply to Defence and Defence to the Counterclaim
4. Within 28 days, the Respondent files a Reply to the Counterclaim (if any).

After the exchange of submissions and oral hearing, the proceedings are closed, and the Tribunal prepares an award.

Difference from other arbitration

The LCIA has a number of differences from other arbitrations:

1. The LCIA does not have an open and approved list of arbitrators.
2. If the parties appoint arbitrators, they can choose whomever they want. The most important thing is that the arbitrator should be independent, have sufficient experience in arbitration and/or the field of dispute, and have sufficient time to carry out his or her duties.
3. If the parties have not agreed on the number of arbitrators, the dispute shall be heard by a sole arbitrator (in other arbitrations – three). However, based on the circumstances, the LCIA may appoint three arbitrators and, in exceptional cases, more than three.
4. In the LCIA, both parties pay the costs of the arbitration equally. In other arbitrations, the costs shall be borne by the claimant and, if the claimant wins, may be recovered from the other party.
5. In the LCIA, the Tribunal can take interim measures, such as security for costs.
6. The Tribunal may also consolidate several cases into one proceeding. This is usually only possible in other arbitrations if all parties agree.

How much does the LCIA arbitration cost?

97,000 USD is the average cost of arbitration according to LCIA statistics.

There are no fixed arbitration costs in the LCIA. They are divided into two types: administrative costs (costs of LCIA staff to administer the dispute) and arbitrators’ fees.

The main expense in arbitration is the arbitrators’ fees. Each arbitrator has an hourly rate, which cannot exceed £500 (with a few exceptions). So the more time an arbitrator spends on a dispute, the higher the cost will be.

How long does it take the LCIA to decide on a dispute?

16 months is the average time from filing the Request for Arbitration to the arbitral award.