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Useful Novelties

11.11.2014

Dmytro Shemelin, Lawyer at Ilyashev & Partners Law Firm
Source: The Yurydychna Praktyka

Extensive arbitration practice provided enough material to the authors of the new version of LCIA Arbitration Rules to develop a number of changes

The new Arbitration Rules of the London Court of International Arbitration (LCIA Rules 2014) came into force on October 01, 2014 and replaced the previous version of the Rules effective as far back since 1998.

The new Rules can be compared to the new model of a high-end car: amendments are seemingly unessential, but notably bring the desired result to perfection. So, what are the amendments?

Emergency Arbitrator

As it is known, in contrast to the state official judges, who attend their work on a daily basis, the Arbitral Tribunal must be formally set up before making any decisions. Therefore, one of the key problems of arbitration procedure is a time gap between filing a claim (“declaration of war”) and formation of the Arbitral Tribunal, when “warfare” can actually begin. During this pause, the defendant already knows that certain arbitration procedure has been initiated against him, but arbitration tribunal still can not apply any interim measures.

As a solution of the problem with “a pause at the start” certain rules stipulate for a possibility of appointment of an “emergency” arbitrator immediately after serving the notice of arbitration. LCIA Rules containing a new Article 9B also stipulate for such possibility.

According to the new Rules a party may apply for the urgent (within three-day period) appointment of an arbitrator for settlement of any urgent matters (first and foremost, application of interim measures, of course). Such arbitrator, appointed according to the LCIA Rules, will be obliged to render a decision under the petition of a certain party within 14-day period (after hearing the other party). Decision rendered by the arbitrator may be later recalled or amended by the Arbitral Tribunal.

In terms of effectiveness of application of interim measures even the emergency arbitrator is less advantaged than the state official court which may apply measures not only towards the parties, but also towards third parties as well (e. g. such as banks) or do so without participation of the other party (ех раrtе). However, filing a claim to the official court in a foreign jurisdiction causes additional (often considerable) expenses, as well the necessity to apply for assistance of local professional attorneys. That is why in the situation when there is a hope that the other party will faithfully abide the decision of an arbitration instance, it may be reasonable to resort to the services of the emergency arbitrator. In any case appointment of an arbitrator by no means precludes from claiming interim measures from a competent court of law under parallel, consequential and preliminary procedure.

It shall  be noted that regulations related to emergency arbitrator can be applied only if the Arbitration Agreement was concluded after October 01, 2014. In all other cases consent of the parties will be required.

Rules for lawyers

An unusual novelty of the Rules is establishment of the rules of conduct for the parties’ legal representatives. For the first time in the history of arbitration such rules were adopted as part of the Arbitration Guidelines (annex General Guidelines for the Parties’ Legal Representatives, as well as new regulations of Article 18 of the Rules).

Moreover, according to the new version of the Arbitration Rules the Tribunal may not only control conduct of legal representatives, but may also ban the change to the parties’ legal representatives if such change “compromises the composition of the Tribunal or the finality of the award”.

Implied here apparently is the situation in the proceedings at the International Centre for Settlement of Investment Disputes in the case between Hvartska Elektroprivreda v Slovenia in which several days prior to the start of the hearing the defendant declared that it was going to engage a barrister being a member of the same chambers with one of the arbitrators. By a quite a controversial decision the Tribunal banned participation of the said barrister in the proceedings to avoid suspicion of its impartiality. Nevertheless, such instances of sabotage are possible in the future, so, new regulations of the Arbitration Rules are directed against such cases.

Guidelines for the arbitrators

Contrary to the guidelines for the parties’ legal representatives the Arbitration more distinctively defines the arbitrators’ obligation to effectively follow the case and devote sufficient amount of time, diligence and industry, as well as render the award within reasonable time following the moment when the parties finish presenting their positions.

Otherwise, appointment of a violating arbitrator may be withheld by the LCIA Court — both upon the complaint filed by a party, and under its own initiative. A proposal to introduce a fine in the form of decreasing the amount of the violating arbitrator’s fee did not find its place in the final version of the Arbitration Rules.

Consolidation of arbitrations

Consolidation of arbitration proceedings is one of the most expected novelties intended to simplify review of complex proceedings involving several parties. Earlier consolidation was allowed only upon consent of all the parties.

At present the Article 22 of the new version of the Arbitration Rules stipulates for the possibility to consolidate several arbitration cases even without consent of all the parties, however, in very limited circumstances.

According to the new Rules the Arbitration Tribunal may consolidate multiple arbitrations between the same disputing parties provided that no Arbitral Tribunal has been formed yet (or composition of such tribunal includes the same arbitrators), and the arbitration rules coincide or are “compatible”. In such way the Arbitration Rules avoid the conflict of competences of the tribunals.

Apart from that if in neither of such cases the Tribunal has been formed, but they are must be reviewed under the LCIA Arbitration Rules,  the LCIA Court may consolidate such cases by its decision under petition of a certain party.

Thus, a first careful step towards compulsory consolidation of arbitration proceedings has been made. As one can judge right from the start  the authors of the LCIA Arbitration Rules are trying to minimize its interference into the competence of other arbitrators or arbitration institutions. The practice will reveal how justifiable introduction of the said amendments was.

Organizational novelties

Abundant experience of the LCIA Court provided the authors of the new LCIA Arbitration Rules with enough material for development of comparatively minor novelties which, nevertheless, often explain convenience of the Arbitration Rules.

It was a good decision to introduce a direct-application provision stipulating that unless and to the extent that parties expressly agreed otherwise the law applicable to the arbitration shall be the arbitration law of the seat of arbitration (Article 16). This regulation considerably simplifies the matters of choice of jurisdiction as soon as the regulation applied to an Arbitration Agreement is not expressly used by the parties almost ever.

Apart from that the parties have been expressly permitted to carry out oral questioning of their witnesses before calling them in the case (Article 20), to deliver any written communications by electronic means only without provision of paper materials (Articles 4), to allow direct communication between the parties and the tribunal without participation of the LCIA Court (Article 13), etc.

In general the LCIA Arbitration Rules have been revised quite substantially, although its basic provisions (including appointment of all arbitrators by the decision of the LCIA Court) remained unchanged. As always only the practice will tell how efficient the new version of the new LCIA Arbitration Rules will be.

 

 
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