Tom Moore assesses the impact of the new London arbitration rulebook
The battle lines between arbitration lawyers and litigators have long been drawn along arguments of efficiency and cost. The urban myth, somewhat manufactured by arbitration practitioners themselves, that arbitration is more expedient and less costly than its cousin in the courts has long been dismissed, while increasingly the London Court of International Arbitration (LCIA) is not only competing with courts for big-ticket cases, but other institutions around the world.
In an effort to reassert its position, the new rules produced by the LCIA that took effect in October address long-held frustrations over delays in issuing awards. Exacerbated by the boom in arbitration and increased demand for premium arbitrators, some counsel believe the delays have adversely affected the quality of outcomes. The LCIA’s new rules weigh heavy on tribunals, which will need to devote more time in the immediate aftermath of a final hearing to deliberate on the evidence, and are now obliged to issue awards promptly and to a timetable.
The LCIA has also made new ground by implementing innovative conduct rules for tribunals to punish guerrilla tactics used by counsel to disrupt cases. Such tactics typically revolve around costs, inflating legal fees through delays and requests for more hearings to increase the burden of the dispute and push the other party towards a settlement.
Need for speed
The new rules state that ‘the arbitral tribunal shall seek to make its final award as soon as reasonably possible following the last submission from the parties… in accordance with a timetable notified to the parties’. While some of this may seem obvious, the codification will enable the LCIA to better monitor delays and force tribunals to enter into a commitment that is hard to break without damaging their reputations.
Anthony Sinclair, London-based partner at Quinn Emanuel Urquhart & Sullivan, said that while the LCIA is not bottom of the pile for the time it takes tribunals to render an award, ‘awards can still take months and months, if not years, to be issued after the final hearing and that rule is a welcome response to the frustrations of users’.
‘The number of cases where awards are outstanding for a year or more seems to be increasing. It’s doing the institution of arbitration no credit.’
Anthony Sinclair, Quinn Emanuel Urquhart & Sullivan
He added: ‘The number of cases where awards are outstanding for a year or more seems to be increasing. It’s doing the institution of arbitration no credit either as frequent users of arbitration have probably seen awards rendered long after the final hearing where the assessment of the evidence is superficial at best and they might wonder whether it was the passage of time that caused the arbitrators not to have the evidence fully fresh in their minds.’
The consensus among global arbitration practitioners is that the LCIA has been proactive in tackling tribunal delays and, as the only institution to introduce timelines for tribunals, there is an element of first-mover advantage on the international stage.
As Craig Tevendale, an arbitration partner at Herbert Smith Freehills, commented: ‘The new rules are a boost for London and its status as a leading arbitration hub.’
This advantage continues in the rulebook’s guidelines for counsel conduct – the first to be issued by an institution – with a seven-paragraph annex empowering tribunals to punish so-called guerrilla tactics and obliges them to handle proceedings more efficiently.
Guerrilla tactics are aptly addressed in paragraph two, which says that ‘a legal representative should not engage in activities intended unfairly to obstruct the arbitration or to jeopardise the finality of any award, including repeated challenges to an arbitrator’s appointment or to the jurisdiction or authority of the arbitral tribunal known to be unfounded by that legal representative’. Such behaviour, which has in the past made awards unenforceable due to question marks over the ability of a tribunal to decide the dispute, will now be punishable through the legal costs awarded to each party, a huge incentive for counsel to abide by these new ethical guidelines given that clients will end up footing the bill and perhaps then renegotiating overall fees.
Putting ethical rules down in writing has been controversial in some quarters, particularly among those who question the powers of a tribunal to regulate lawyers instead of the appropriate Bar authority, and proposals to sanction legal representatives were taken out during the drafting stages. The suitability of a tribunal to punish legal counsel is also questionable due to the financial conflict of interest, with the legal counsel appointing around two thirds of all arbitrators and a small coterie of law firms in London dominating the market. However, Linklaters’ London-based partner Ben Carroll argued that the body is not powerless and can ensure ethical rules are complied with ‘through its selection of arbitrators and not appointing arbitrators who develop a reputation for having a laissez-faire attitude towards counsel behaviour’.
He added: ‘I would applaud the LCIA for what it has done. I’ve been in many cases where I wish the arbitral tribunal had been more assertive with its case management to make the process more efficient. The new rules give a very strong steer to tribunals that that’s what’s required of them. Hopefully they’ll pick that up and run with it.’
tom.moore@legalease.co.uk