AN "EXCEPTIONAL YEAR" FOR THE LONDON COURT OF INTERNATIONAL ARBITRATION

The London Court of International Arbitration (the LCIA) has released its Casework Report for 2020. The statistics in the Report show an "exceptional year" and a continuing picture of growth for the institution. The statistics also show a gradual "internationalisation" of the LCIA's caseload while also demonstrating the institution's long-standing commitment towards improving the diversity of arbitral tribunals.

Caseload

The past year has witnessed a significant increase in the number of arbitrations commenced at the LCIA and an increase in the number of high value claims. Of particular note:

• In 2020 the LCIA received a total of 444 referrals, including 407 arbitrations under the LCIA Rules, an all-time high for the LCIA and a doubling of its caseload over the last 10 years.
• Where the claims were quantified in the Request for Arbitration, in 34% the amount claimed was under USD 1 million (compared with 43% in 2019), in 28% the amount claimed was between USD 1 and 5 million (compared to 28% in 2019) and in 28% the sum claimed was between USD 5 and 50 million (compared to 20% in 2019). In 10% of arbitrations where the claims were quantified in the Request, the amount claimed was over USD 50 million (compared to 9% in 2019).
• The top three industry sectors at the LCIA remained stable in 2020 with energy and resources, transport and commodities and banking and finance together representing 68% of all the arbitrations under the LCIA Rules.

Growing "Internationalisation" of the LCIA?

A choice of the LCIA as arbitral institution has historically been linked with a choice of a London seat and/or English law. This link remains, but there is some evidence in the statistics that this may be gradually weakening.

• 86% of the parties in arbitrations administered under the LCIA Rules were from countries other than the UK, up from 81.4% in 2019.
• There is a gradual movement towards parties using LCIA arbitration alongside other international seats and governing laws, with a drop in English law being chosen from 81-78% from 2019 to 2020, and a drop in England being the chosen seat from 88-84% of cases from 2019 to 2020.
• In particular, the LCIA saw a rise in the number of cases seated in Germany and governed by German law (16), while 2019's trend for the LCIA to administer cases with a Mexican governing law and seat continued.

Tribunal constitution and diversity

In 2020 the LCIA made 533 appointments of 293 different arbitrators, including three appointments of emergency arbitrators. In doing so, the Court selected 42% of all appointments in arbitrations pursuant to the LCIA Rules in 2020, up from 39% in 2019. The long-term pattern of a relatively even split between three-member tribunals (52%) and sole arbitrators (48%) also continued in 2020.

The LCIA witnessed a very low number of challenges to arbitrators in 2020, with only one of the six challenges made being upheld. However, there was an increase in both applications for expedited formation of the tribunal under Article 9A of the LCIA Rules (13, up from 10 in 2019) and for the appointment of an emergency arbitrator under Article 9B of the LCIA Rules (five, up from one in 2019, three of which were granted).

The LCIA has a long-standing commitment to diversity in arbitration, taking the lead amongst arbitral institutions in monitoring and improving their gender statistics in appointment. This trend continued in 2020 with the overall percentage of female arbitrators appointed reaching 33% in 2020, up from 29% in 2019. The LCIA continued to drive this increase, appointing female arbitrators in 45% of its institutional appointments.

The LCIA has also sought to draw candidates from a more diverse pool in other ways, seeking to avoid too many repeat appointments in a year, while encouraging more first-time appointees and arbitrators from different ethnic and regional backgrounds. The statistics show a more mixed picture in this regard:

• There was an increase in the overall percentage of arbitrators appointed only once in the same calendar year in arbitrations administered pursuant to the LCIA Rules, from 60% in 2019 to 62% in 2020.
• However, the statistics indicate that first-time appointments fell in 2020 from 19% in 2019 to 14% in 2020, a difference shown across the board in both LCIA, party and co-arbitrator appointments.
• Similarly, regional diversity in arbitral appointments also declined in 2020, with the number of British arbitrators appointed rising from 51% to 63% in 2020, the majority being appointed by the parties or by co-arbitrators.

Success of the 2020 Rule revision?

The 2020 LCIA Rules introduced a number of changes, including the new "composite request" allowing parties to commence multiple arbitrations in one Request for Arbitration, broader provisions on consolidation. These appear to have been welcomed and used. In particular:

• The number of joinder applications decreased in 2020 compared with 2019, continuing a three-year trend. This may, in part, be due to the increased use of the composite request and consolidation, thus making joinder less necessary.
• There has been a significant increase in applications for consolidation (50, an increase of over 40% compared with 2019). Twelve of these applications were made under the expanded consolidation provisions of the new 2020 Rules.

The Covid-19 effect

The Report provides some interesting insight into the impact of the Covid-19 pandemic. It discusses the impact on the institution and its users, focusing on the move towards virtual hearings. The Report also discusses the difficulty of drawing clear conclusions from their data about the impact of the pandemic on disputes. Importantly, the LCIA stresses that it is not always apparent from the documents received whether the pandemic was a trigger for the dispute. Despite this, it does acknowledge that there are certain commodity, entertainment and sporting disputes which are clearly "covid-related" and others which clearly reference reliance on force majeure provisions in relation to the pandemic.

The LCIA also highlights a shift in the "lag time" of new disputes- the length of time between the dates agreements were entered into and when the actual dispute arises.  Almost half of all disputes filed in 2020 arose out of agreements entered into between 2018 and 2020, much higher than the percentage of disputes arising within the two years previous in 2019 and 2018. The LCIA concludes that this spike represents a positive correlation with the pandemic.

For further information, contact Paula Hodges QC, Partner, Andrew Cannon, Partner, Vanessa Naish, Professional Support Consultant, or your usual Herbert Smith Freehills contact.