The recent publication of the 2020 Annual Casework Report by the London Court of International Arbitration (LCIA) sets the scene for what was a remarkably successful year for the court. Last year, the LCIA received a robust and all-time high of 444 referrals, including 407 arbitrations pursuant to the LCIA Rules (an 18% increase from 2019). Revealingly, the long-term growth data shows a doubling of caseloads over the last ten years.
This, of course, followed an unprecedented year of global tragedy, uncertainty and disruption caused by the COVID-19 pandemic so the facts, figures and trends identified in the LCIA Report will necessarily be subject to further scrutiny once the world settles back to normality (or the “new normal”).
Overview
A brief recap on some of the highlights of the LCIA Report include:
- The top three industry sectors dominating the LCIA’s caseload remain, that is energy and resources, transport and commodities, and banking and finance (totalling 68% of arbitrations, compared to 69% in 2019). The remaining 32% relate to a wide variety of industry areas, including construction and infrastructure, hospitality and leisure, and professional services.
- 86.6% of parties came from 88 different countries other than the UK (an increase from 81.4% in 2019).
- Although England remained the most popular seat and English law the most frequently chosen law, the trend of non-UK seats and choice of law continued in 2020, with arbitrations seated in 18 different nations, and the laws of 34 countries chosen by parties to govern their disputes.
- From the Requests for Arbitration submitted by parties, the LCIA reported that 15% sought declaratory relief or specific performance but no monetary relief; 31% sought both monetary relief and declaratory relief or specific performance; and 54% sought monetary relief only.
- There was an apparent trend for fewer arbitrations of very low value (34% for less than USD1 million, a decrease from 43% in 2019), accompanied by a higher number of arbitrations for larger sums of relief (29% for over USD10 million, an increase from 21% in 2019).
A deeper dive
Looking further into the detail, the LCIA Report indicated some shift (albeit limited) in the demographics of arbitrators and other trends. For instance, the rate of British arbitrators rose from 51% in 2019 to 65% in 2020, despite the lower number of British parties and the decrease in the prevalence of English law and seated arbitrations (as discussed above). These figures appear to have been heavily influenced by party and co-arbitrator appointments, who appointed non-English arbitrators 32% and 18% of the time respectively (compared to the LCIA, who selected non-English arbitrators 47% of the time).
Challenges of arbitrators remained low (with six in total (and only one upheld), compared to seven in 2019). The percentage of challenges in proportion to arbitrations was less than 1.5% (compared to 2% in 2019). In terms of post-disclosure objections, there were 11 in 2020 and the LCIA advanced with appointment in seven of those cases.
There were also some, again limited but encouraging, steps in gender representation. While previously it was primarily arbitral institutions making significant headway towards gender diversity in arbitral appointments, parties and co-arbitrators have continued their recent, and much welcomed, contribution, with:
- Parties appointing female arbitrators 22% of the time (up from 12% in 2019).
- Co-arbitrators appointing female arbitrators 32% of the time (up from 30% in 2019).
The LCIA continues to lead in gender diversity, despite a slight dip this year, with 45% of its appointments being female in 2020 (compared to 49% in 2019).
Other trends of note
Joinder and consolidation
While the number of joinder applications continued the recent downward trend (with only five applications made in 2020, down from 13 in 2019), parties made 50 applications for consolidation of arbitrations in 2020 (with 76% granted, 2% partially granted, 8% rejected and 14% pending). In twelve of those cases, parties made use of the new consolidation provisions in the LCIA Rules (introduced on 1 October 2020). The decision to consolidate requires the tribunal or LCIA court (as applicable) to consider the concrete facts and circumstances of the arbitration.
Emergency arbitrator provisions and expedited appointment of tribunal
Compared with 2019, 2020 saw an increase in the number of applications for expedited formation of the tribunal (with 13 applications made, but only one granted) and the appointment of an emergency arbitrator (with five applications made and three granted).
While these numbers remain relatively low, the LCIA commented that although these tools are available to parties seeking urgent relief, “the LCIA’s prompt appointment of tribunals and the flexibility of the procedure provided by the Rules enable parties the opportunity to address preliminary matters with the tribunal at an early stage as well.” This is a fair observation. Often parties prefer to have urgent (and often very significant) issues addressed, where possible, by their fully constituted tribunal, appointed pursuant to the parties’ arbitration agreement. In contrast, parties do not have a say in the appointment of an emergency arbitrator.
The COVID-19 pandemic
Virtual hearings
Somewhat foreseeably following the COVID-19 outbreak and the accompanying travel and social restrictions implemented globally, more hearings took place virtually in 2020 than in any other year. The LCIA supported parties and tribunals grappling with this sudden change in environment and associated practical and logistical issues by accelerating the publishing of its refreshed rules on 1 October 2020, which contained provisions concerning electronic communication, virtual hearings, electronic awards and signatures, among others. One provoking thought is whether parties will continue to utilise virtual hearings post-pandemic where convenient for efficiency, expediency and cost purposes, and even possibly agree to such hearings taking place in their contracts (perhaps under certain conditions or for disputes up to a certain value).
Timing and causation
In addition to the pandemic triggering disputes, a sharp rise was observed in the percentage of contracts under dispute that were entered into within the two years prior to the arbitration commencing, noted by the LCIA to be a likely “knock-on impact” of the COVID-19 pandemic. The LCIA Report identified the difficulty in determining with precision exactly how many cases were triggered (as opposed to exacerbated) by COVID-19 (that is, “but for” the pandemic, the dispute in question would never have occurred). Whether the LCIA’s exceptional caseload of 444 referrals is an anomaly or evidence of genuine and sustainable growth subsists as a question for the future.
Ongoing considerations
The ongoing impact of the pandemic was aptly acknowledged in the LCIA Report:
“… [one] element of comfort in the uncertainty the pandemic has brought is the willingness of users to adapt and adopt new techniques and styles of working, demonstrating the flexibility of arbitration and the robustness of the system of dispute resolution.”
This is certainly true, and with the benefit of time, we will be able to understand whether the facts, figures and trends presented in the 2020 LCIA Report are more than merely transient, instead contributing to the permanent landscape of dispute resolution.
Similar observations related to the pandemic have been identified following the release of the SIAC Annual Report (as previously discussed in Blog post, The 2020 SIAC Annual Report: trends and questions).
