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LCIA Arbitration Rules
(Preliminary Discussion Draft of the proposed new rules to take effect in 1997)

Rules  1 

Article 1 - Request for Arbitration  4 

Article 2 - Response by Respondent  5 

Article 3 - Notices, Period of Time  6 

Article 4 - Provisional Orders  7 

Article 5 - Constitution of the Arbitral Tribunal  8 

Article 6 - Nationality of Arbitrators  9 

Article 7 - Revocation of Appointment  10 

Article 8 - Nomination of Replacement Arbitrators  11 

Article 9 - Truncated Tribunals  12 

Article 10 - Communications between Parties and the Tribunal  13 

Article 11 - Conduct of the Proceedings  14 

Article 12 - Submission of Written Statements and Documents  15 

Article 13 - Place of Arbitration  16 

Article 14 - Language of Arbitration  17 

Article 15 - Party Representatives  18 

Article 16 - Hearings  19 

Article 17 - Witnesses  20 

Article 18 - Experts Appointed by the Tribunal  21 

Article 19 - Additional Powers of the Tribunal  22 

Article 20 - Jurisdiction of the Tribunal  23 

Article 21 - Deposits and Security  24 

Article 22 - The Award  25 

Article 23 - Correction of Awards and Additional Awards  26 

Article 24 - Costs

Article 25 - Nature of decisions by the Court

Article 26 - Confidentiality

Article 27 - Exclusion of Liability

Article 28 - General Rules

Recommended Arbitration Clauses

Future disputes

Existing disputes

Endnotes

Endnotes

Metadata

SiSU Metadata, document information

Manifest

SiSU Manifest, alternative outputs etc.

London Court of International Arbitration Rules - (Preliminary Discussion Draft of the proposed new rules to take effect in 1997)

London Court of International Arbitration (LCIA)

copy @ Lex Mercatoria

LCIA Arbitration Rules
(Preliminary Discussion Draft of the proposed new rules to take effect in 1997)

Rules

Recommended Arbitration Clauses

Existing disputes

If a dispute has arisen when the contract or agreement does not contain an arbitration clause, or when the parties wish to change a clause to provide for LCIA arbitration, the following form of agreement is recommended:

"A dispute having arisen between the parties concerning ... the parties hereby agree that the matter shall be referred to and finally resolved by arbitration under the Rules of the London Court of International Arbitration".

Further provisions as suggested above relating to the governing law, number of arbitrators, place and language, may be added as appropriate to the case.

A permanent subcommittee of the LCIA has for the past ten years monitored application of the Rules in light of difficulties and criticisms that have arisen. Until now, the Rules have generally functioned well and the LCIA has believed that any benefits from incidental amendments would be outweighed by the disadvantages of presenting users with a new text. At this stage, however, the passage of time, the lessons of practice, and the advent of important legal reforms make it appropriate to consider a revision of the Rules.

A new discussion draft is attached hereto.

In the following comments, the abbreviation 85R refers to the existing 1985 Rules, and 96DR to the current draft revision.

96DR does NOT cover the following:

1. Issues that may arise where the LCIA acts as appointing or administering authority outside its own Rules (such as exclusion of liability). These issues are probably best dealt with by conditions expressed in from letters from the LCIA when it is asked to intervene.

2. Implementation of Schedule-of-Cost questions such as timing of charges to the parties for work in progress, cancellation of charges, or fees for arbitrators who resign. The drafting committee believes that the Schedule should contain an indication, like the ICC's standard language, making clear that nominees cannot insist on their ordinary rates,* and that there may be circumstances where arbitrators on the same tribunal are remunerated according to different rates (since arbitrators may have significantly different overheads, a same-rate policy may be illusory). Furthermore, we support three particular amendments relating to costs:

- establishing the LCIA's authority to set fees (proposed in new Article 24.1 );

- making appointment conditional upon acceptance of fee rates proposed by the Registrar (new Article 5.3);

- making clear that the arbitrators may order costs of representation (new Article 18.3),

* Note: The ICC's form letter of appointment says: "Your usual hourly rate or the usual systems of remuneration in your profession in your country are not taken into consideration by the Court in determining fees".

The English Arbitration Act 1996 is intended to contain a new statement of the law and practice of English commercial arbitration. The Act is the most extensive statutory reform of English arbitration law in the history of the United Kingdom Parliament. More particularly for the LCIA, the Act proposes a much greater liberty for parties to agree their arbitral procedure and thereby, in effect, enfranchises the LC1A to provide a near-exhaustive procedural code for its users.

Section 4(3) of the Act makes it explicitly clear that reference to institutional rules create a permissible regime for all non-mandatory provisions of the Act with respect to the initiation and conduct of arbitral proceedings.

The LCIA Rules should be revised to take full advantage of the 1996 Act.

It is inevitable that the LCIA should not bring revised Rules into effect until after the operative date of the 1996 Act. Whilst I January 1997 is the target date for such operative date, there may be some delay if the Lord Chancellor's Department is tardy with the new rules of the Supreme Court, required to be in place prior to that date.

Accordingly, the proposals made at this stage are necessarily incomplete and are offered with the expectation that they will benefit from criticism and suggested improvements.

The footnote from 85R is deleted since the LCIA's name, changed in 1985, is now familiar. Although it is true that requests are still submitted referring to the London Court of Arbitration (or the International Rules of the London Court of Arbitration), there is no difficulty in demonstrating the continued identity of the institution.

The second paragraph from 85R is deleted. Its meaning is obscure, and indeed at first blush contrary to all expectations; as a matter of practical reality, arbitrators rather than the Court will most often ensure the application of the Rules. The idea sought to be expressed is more complex, but is not made explicit. It either requires a fuller statement, or none at all. Since the body of the Rules in various instances specifically indicate the supervising function of the Court, deletion seems preferable. At the same time, one eliminates the need to use the confusing expression "Arbitration Court of the LCIA," which is technically correct (since "the LCIA" is a corporation with a Board of Directors separate from "the Court," operating as a sui generis offshoot of that corporation) but obscure to users.

Subparagraph (g) does no more than make the requirement more visible, since parties frequently overlook it.

96DR does not incorporate a suggestion that the claimant be asked to give an indication of the amount in dispute, although this may be useful in selecting arbitrators. For various reasons, it does not appear appropriate to go beyond 85R subparagraph (c) .

It should be noted that the Respondent may not agree with the Claimant that there has been an agreement as to the number of arbitrators.

The deadline for the Response runs from receipt of the Request, while the date of commencement of the arbitration is receipt by the Registrar. Occasionally, the Registrar has received the Request much later than the Respondent, and some times has received an incomplete Request (e.g. no registration fee). Given the optional nature of the Response, no revision is proposed on this account.

This text essentially follows Article 4 of the WlPO Arbitration Rules.

Ultimately there is probably no way to draft rules with regard to notices and deadlines that will operate perfectly in all circumstances, particularly with regard to Respondents in distant countries who simply do not manifest themselves. Some flexibility is needed here, especially with a view to such legal requirements that may apply to the enforcement of awards in a given situation.

Article 3.2 is permissive rather than mandatory. The Registrar will ordinarily accept the Claimant's indication as to the Respondent's address (subject to inquiry if it appears peculiar), and the Claimant will bear the consequences of an erroneous indication.

This new Article 4 - and indeed its very existence - will doubtless be the object of very extensive discussion. The most fundamental concepts at work in this Article may be listed as follows:

- by including this mechanism in the Rules, it becomes available without any special contractual reference;

- an application may be made ex parte, subject to a request for retraction;

- Provisional Orders have merely contractual weight, and may not be enforced as awards; any non-judicial provisional relief that must be enforced judicially will necessarily not be immediate, and may as well be granted by the Arbitral Tribunal as per the final words of draft Article 4.3;

- when a party needs immediate and enforceable relief, there is no good substitute for the courts; hence draft Article 4.8.

WIPO is currently considering "Supplementary Emergency Interim Relief Rules" to be applied by a so-called Emergency Arbitrator.

The LCIA strives to give users a cost-effective solution. Occasionally it has been impeded by arbitrators demanding egregiously high fees. The added phrase in Article 5.3 is designed to assist in dealing with such situations.

The nationality requirement in 85R Article 5.3 seems out of place; it appears in a special Article 6.

Article 7 merely reiterates subparagraphs 3.6, 3.7, and 3.8 of 85R Article 3 which seems too long and confusing. Similarly, Article 8 reiterates subparagraph 3.5 of 85R Article 3, which seems out of logical order.

The new Article 9 follows the WIPO Rules, which in turn were inspired by the AAA International Rules. Notwithstanding these reputable precedents, the drafting committee wonders whether an award rendered by two arbitrators, deciding to continue the arbitration in the absence of the third one, whereas the arbitration convention had provided for a panel of three arbitrators, could be challenged in national courts, e.g. on the basis of Article 1502 of the French new Code of civil procedure (appeal of exequatur) or Article 1504 (recourse for annulment if the award is rendered in France). If one answered that the parties had referred to the LCIA Rules containing a provision to that effect, the words "in their sole discretion" could nevertheless appear going too far.

There has been some comment to the effect that the risk to enforceability of proceeding with two arbitrators is not worth running, given the fact that the LCIA could quickly name a replacement under 96DR Article 7.1, and the remaining arbitrators could by majority decide not to repeat the presentation of evidence and arguments (under Articles 11.2 and 17.2).

This is a reiteration of 85R Article 4, except for Article 10.4 (85R 4.4) which is deleted in view of Article 3.3.

These are reiterations of 85R Articles 5 and 6.

Article 13.1 eliminates the curious possibility that arbitrators who were named for a particular place of arbitration can decide to go elsewhere.

Article 13.3 follows Article 59(b) of the WIPO rules, which was intended to respond to the India/ Pakistan problem (e.g. Singer)

Should one use "seat" rather than "place"? (Article 3 of the English Act uses "seat.") On the one hand, we are really encouraging the parties to select a juridical base for the arbitration. On the other hand, "place" is used in a lot of other contexts including the New York Convention.

The Registrar has been asked what the LCIA did about tribunals signing awards at the place of arbitration. (Article 22 ICC Rules contains a deeming provision.) Lack of such a provision has not caused problems to date, although tribunals do ask for guidance from time to time. Is it something we should consider?

The fallback reference to London is perhaps the most often-discussed element of 85R. Some views have been expressed to the effect that it is a deterrent to users in other parts of the world such as Asia. The counter-argument is that it is useful to have a fallback in the interest of certainty, and that parties who have referred to the LCLA should legitimately expect that the only such fallback would be London. Parties who are deterred by London need only select a different venue in their arbitration agreement.

The purpose of this article (originally 85 R Article 8 ) is to neutralise dilatory tactics by a party having signed a contract in an internationally used language but then insisting that its fundamental rights would be violated if it could not present its case in its own language.

Although in theory the rule as originally drafted could have given rise to difficulties if the contract at issue was itself in a very unusual language, this has not turned out to be a major problem in practice. A claimant having signed a contract in an obscure language with a reference to the LCIA will simply have to live with the consequences, which are that the proceedings may be less efficient and more expensive than if they were conducted in English. This seems a reasonable trade-off for the valuable purpose mentioned above.

On the other hand, the LCIA occasionally must deal with contracts in two languages, each having equal status. Under the existing subparagraph 1, this appears to mean that all correspondence relating to the arbitration should, strictly speaking, be sent in both languages (which is costly in terms of translation fees). Where the contract is in two languages, but one version of the contract is the authoritative version, would it be correct to say that the language of the authoritative version was the language of the arbitration, or would both languages still be applicable? Obviously, as with most things, where the parties are co-operating , such matters are usually resolved by agreement. Problems arise when one party declines to participate in the proceedings. A different issue arose recently where the contract was in Russian. The Claimant was Russian and the Respondent an Irish company not participating in the arbitration. The place of arbitration was London and the arbitrator was an Englishman, having knowledge of Russian. The Claimant was content to proceed in English, but the Respondent did not agree to this as it did not respond to anything. As a matter of practice, the matter is proceeding in English, with the Respondent having been given the opportunity to object. 96DR Article 6.2 addresses this difficulty.

The problems mentioned in the preceding paragraph have been addressed by the new wording of Article 14.1.

No changes are suggested except in subparagraph 16.1, where the new wording is intended to make clear that the Arbitral Tribunal need not conduct a hearing in a case where the Claimant does not want one and the Respondent is in default, and the insertion of a new subparagraph 16.5, which gives the Arbitral Tribunal authority to impose time limits on hearings.

Thought has been given to the need to make specific references in Article 17 to "parties" as opposed to "witnesses" given the continental distinction between the two. On balance it seems that any important distinction may be made by the Arbitral Tribunal under subparagraph 17.2

85R Article 13.1 (c) provides that unless all the parties agree otherwise, the arbitral tribunal may allow the joinder of parties who wish to enter the arbitration. This means that it is possible than an award may be rendered that purports to bind not only A and B, who signed the arbitration agreement, but also DC, who did not but appeared voluntarily; and this even though B did not want X to be joined. It has been suggested that this may create problems of enforcement, as B might argue that it never agreed to arbitration with X. The counter to this argument (which was considered at length during the preparation of the Rules) is that B by definition would have accepted arbitration under rules that do allow joinder. There is no reason to imagil1e that B would be able to resist an award against B in favour of A on the grounds of the presence of X. A may have a legitimate interest in having X bound by the result of the proceedings; that is for the arbitral tribunal to appreciate. This seems to be a modest but real achievement in the daunting area of multiparty arbitration, and the Working Party is not inclined to give this up because of the difficulties that might arise in the rather more remote hypothesis of an award against B in favour of X.

85R Article 13.1(c) may have been the first manifestation of an arbitration rules providing for consolidation, albeit in a limited form. Since then, the WIPO Rules have gone further. The LCIA drafting committee does not propose to follow suit, but rather reflect the assumption that contract drafters should be left to devise solutions to their particular contexts. On the other hand, it has been recognised for some time that the original words "allow" and "them" required clarification.

The words in subparagraphs (g) and (h) have been added in order to address concerns that the original drafting was over-broad.

Article 19.2 no longer refers to subparagraph 1 (h), which was a mistake, while introducing the idea that the arbitrators might authorise judicial assistance re inspection (g) or discovery (i). The removal of (h) should put an end to what has been a constant source of telephone inquiries to the Registrar from the advisers of parties wishing to apply to the High Court for conservatory measures relating to contracts where there is an arbitration clause.

85R Article 14.3 has been deleted on the grounds that its only essential provision is covered in 96DR Article 19.7.

The administration of funds by the Court rather than by arbitrators represents an important change allowing greater institutional management in the interest of consistency and, it is hoped, overall cost-efficiency.

In consequence, the Court and the Registrar will have to develop clear guidelines as to the manner in which time spent and disbursement made by arbitrators is to be justified.

Subparagraph 4 must be reviewed in light of the outcon1e of proposed Article 4 (provisional orders).¨

Subparagraph 4 will, in light of Article 24.2, require co-operation between the Court and the Tribunal. This may be cumbersome, but seems unavoidable. (ICC practitioners are familiar with this process.)

This reiterates 85R Article 17.

Subparagraphs 1 and 2 remove arbitrators' power to fix their own fees. There have been occasional difficulties in this respect. Better practices (record-keeping, prior understandings) should follow automatically when arbitrators realise they must convince the Registrar.

Certain decisions by arbitrators under the Rules may be reviewable by national courts, e.g. jurisdictional issues, questions of the right to be heard. But we do not intend any decisions of the Court to touch on such issues. Therefore 85R Article 3.9 has been moved to become the free-standing general Article 25. It should be reviewed with particular scrutiny to the extent that a regime of provisional orders (i.e. Article 4) is adopted.

At this stage, very few rules contain any provisions regarding confidentiality. ⌠The WIPO Rules⌡/trade_law/doc/WIPO.Arbitration.Rules.1994.html are unique in their explicit and detailed treatment of the issue in five entire articles ( ⌠52⌡/trade_law/art/wipo.arbitration.rules.1994/052.html, ⌠73⌡/trade_law/art/wipo.arbitration.rules.1994/073.html, ⌠74⌡/trade_law/art/wipo.arbitration.rules.1994/074.html, ⌠75⌡/trade_law/art/wipo.arbitration.rules.1994/075.html and ⌠76⌡/trade_law/art/wipo.arbitration.rules.1994/076.html). The ICC Rules will doubtless contain a confidentiality provision expressed in more general succinct terms. The latter approach is proposed here, recognising that WIPO by its nature is particularly concerned with trade and industrial secrets.

The change reflects the fact that the rules revision committee has for a number of years considered that it was a mistake to suggest to users that the Court would not be liable for "conscious and deliberate wrongdoing." The new English Act uses the expression "bad faith" instead of "conscious and deliberate wrongdoing" (which was adopted in the Bermuda enactment of the ⌠UNCITRAL Model Law⌡/trade_law/doc/UN.Procurement.Model.Law.1994.html). There seems to be no inconsistency, but for a wide international audience the longer expression might be more comprehensible (as well as avoiding the impression that substantive change was intended by changing the language).

The drafting committee is reluctant to alter the LCLA model clause, but it should be compared with its more explicit WIPO cognate (e.g. re "non-contractual claims" ) to determine whether we should follow suit. It is however doubted that it is necessary to amend the model clause. There is plenty of authority in the US and in England to the effect that the "arising out of or in connection with" wording encompasses non-contractual claims:

an amendment now may sow the seeds of doubt as to the effect of hundreds of existing clauses.


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