LCIA publishes its third report on cost and duration

Introduction

The LCIA has published its third report on the costs and duration of its caseload, prepared in conjunction with the Brattle Group (Brattle). The purpose of the report is to give parties an insight into the costs and effectiveness of LCIA arbitration. Whilst the previous report, published in 2017, covered all cases that reached a final award between 1 January 2013 and 31 December 2016, this report covers a much longer period of seven years, between 1 January 2017 and 12 May 2024. The report can be accessed on the LCIA's website here.

Parameters

The report includes all cases that reached a final award by 12 May 2024, which amounts to a dataset of 616 cases, of which 568 had a quantified amount in dispute. The median amount in dispute across the 616 cases was USD 4.6 million.

The report excludes cases which settled or were otherwise concluded before the substantive issues were determined by the tribunal. Emergency arbitrator awards were also excluded.

Summary of findings

Duration

• The median LCIA arbitration lasts a total of 20 months (from the date on which the Request for Arbitration and registration fee are received by the LCIA to the final award). This represents a five-month increase in total duration for cases which are quantified since the previous analysis conducted in 2017.
• Article 15.10 of the LCIA rules (introduced in 2020) states that “the Arbitral Tribunal shall seek to make its final award as soon as reasonably possible and shall endeavour to do so no later than three months following the last submission from the parties”. The report confirms that arbitrators are reaching close to this target, with the average time to award being four months. This represents an increase of two months in the average time taken by tribunals to produce the final award compared to the 2017 analysis.
• There is a strong correlation between the increase in duration and the amount in dispute. By way of example, the report notes that the median duration for cases valued below USD 1 million is 12 months, with an average time to award of three months, whereas the median duration is almost three years for cases above USD 100 million. However, the time to award does not vary considerably with the amount in dispute. Indeed, only 30% of claims valued above USD 100 million take more than six months to reach final award. The report concludes that "the increasing total duration for higher-value cases between 2017 and 2024 is largely attributable to delays in party submissions rather than tribunal inefficiencies".

Sole versus three-member tribunals

• The data indicates a preference for three member tribunals in higher value disputes. Nearly 40% of cases with a sole arbitrator had a claim value of up to USD 1 million, compared to just 17% of cases with three arbitrators. Conversely, 17% of cases with three arbitrators involved claims exceeding USD 100 million, compared to just 5% of single-arbitrator cases.

Arbitration costs

• The median LCIA arbitration costs USD 117,653, a modest increase from USD 97,000 reported in the previous report published. It is noted that numbers have not been adjusted for inflation, and the real increase is therefore even smaller. These figures comprise the tribunal fees, which take up the majority of these costs, coupled with the LCIA's administrative charges.
• The analysis demonstrates, unsurprisingly, that cases with a longer duration tend to have higher costs. For example, more than 50% of the cases lasting longer than two years reported an arbitration cost above USD 300,000.
• As part of its analysis, the LCIA has estimated how much each of the 568 quantified cases in its dataset would have cost at competitor institutions (SIAC, the SCC, the ICC and the HKIAC). It is worth noting in this regard that whereas the LCIA charges parties by time spent by the tribunal and the LCIA team, most other institutions charge based on the amount in dispute (other than HKIAC where parties can opt for one or the other). The report concludes that:
  • The tribunal fees for the LCIA are the lowest of all the institutions (with a median of USD 93,000, compared with between 112,000 and 141,000 for the other institutions).
  • The LCIA's administrative charges are also amongst the lowest (but comparable with both the HKIAC and SIAC).
  • The LCIA's median costs are lower than all the other institutions analysed. As the amount in dispute increases, the difference becomes more pronounced (although of course the costs of the other institutions used for comparison are estimates only and are, therefore, subject to substantial caveats).
  • The report also notes that costs and duration are only two factors to be considered when comparing institutions, and choosing an arbitral institution is a nuanced question which should take into account consideration of all relevant circumstances.

Comment

This report is a very useful tool for both parties and counsel when seeking to estimate the potential costs and duration of LCIA arbitration. The mediation duration and cost figures are encouragingly low. It is also reassuring that generally tribunals are producing final awards within four months of the final submissions of the parties (notwithstanding that this has risen, alongside the average value of claims, since the LCIA's previous 2017 report).

The report is also a helpful starting point for comparing the costs and duration of LCIA arbitrations with those of other institutions, albeit that these are just some of the factors that are considered when choosing an arbitral institution. Interestingly, given the difficulty of conducting a direct and comprehensive comparison of the differences in institutions, due to differences in methodologies, the dataset size and date ranges, the LCIA has invited other institutions to instruct Brattle to create a neutral platform for discussion of users' needs and preferences. It will be interesting to see whether other institutions agree to this proposal in order to facilitate a broader comparison.