General trends
The LCIA remains particularly popular in the transport and commodities sector
“In 2023, 36% of LCIA arbitrations were from the transport and commodities sector.”
The largest proportion of LCIA arbitrations related to the transport and commodities sector. In our experience, this is unsurprising, reflecting the volume and complexity of disputes in that sector more generally.
A further 14% were Energy and Resources disputes (treated by the Report as a separate category from disputes in the closely related transport and commodities sector). Banking and Finance disputes represented 16% of the LCIA’s caseload. Technology, and Construction and Infrastructure, disputes represented a further 6% each. The LCIA therefore continues to have a strong focus on transport and commodities, while steadily attracting disputes in other key industry sectors.
Contracts for the sale of commodities (including, among others, LNG, coal, metals and agricultural commodities) remained the most common type of agreement to be the subject of LCIA arbitration. Services agreements represent 17% of the caseload, followed by shareholder, share purchase and joint venture agreements at 15%.
Disputes under commodities sale contracts often arise soon after the contract is entered into, especially as many contracts are for the sale of a single cargo. It is therefore unsurprising that the Report reveals a notable increase in disputes involving “younger” agreements; we understand that to be a consequence of the increase in disputes in the commodities industry as a result of, among other things, COVID-19 disruption, market turbulence and numerous cases involving sanctions, allegations of fraud, as well as trade credit insurance claims. Interestingly, the Report notes that “commodities traders also continue to pursue some claims where the sums involved do not appear to be significant”. Often, of course, disputes in the commodities industry can be about matters of principle.
Despite heavy competition, the LCIA retains its enduring popularity as an arbitral institution, particularly with parties in the commodities industry.
Nationality of the parties:
LCIA arbitration continues to be overwhelmingly international in nature, with 96% of arbitrations in 2023 involving one or more parties based outside the UK.
Parties from the UK, Switzerland, the U.S., Brazil, the UAE and Saudi Arabia were the most common. The highest proportion of parties was from Western Europe and the second highest was from the MENA region.
The most significant changes were:
- An increase from 0.8% to 4.2% in parties from Saudi Arabia. This trend likely emanates both from rapidly expanding economic activity in, and inwards investment to, Saudi Arabia, as well as the more arbitration-friendly approach of Saudi courts with respect to enforcement of foreign awards.
- A doubling of the percentage of parties from Africa (from 4% in 2022 to 8% in 2023). Although this increase accords with a long-awaited spike in cases brought by African parties (as trade and foreign investment levels increase), it is still significantly below the 11.7% record in the LCIA Casework Report for 2020.
- An increase in the percentage of parties from Brazil from 2.5% in 2022 to 4.8% in 2023.
- A reduction from 24% to 8% of parties from Asia. Although an eye-catching figure, this represents a return to 2021 levels.
- An increase from 5% in 2022 to 8% of parties from North America. Again, this marks a return towards 2021 figures (10%).
Increased variety of arbitral seats and governing laws
Although there were proportionally fewer LCIA arbitrations with London as their seat and cases with English governing law in 2023 (86% and 83% respectively), those reductions follow significant rises across 2021 to 2022 (English governing law: 76% in 2021 to 85% in 2022; London seat: 85% in 2021 to 88% in 2022). The noteworthy takeaway is that parties opted for a greater variety of seats and governing laws, “mixing and matching” applicable law and seat more frequently.
In choosing the seat of an arbitration, parties choose which national laws provide the framework for the arbitration. By choosing London as the seat, for example, the parties benefit from the provisions of the Arbitration Act 1996, which gives the English courts powers to remove arbitrators, imposes certain duties on the tribunal and the parties, and makes provisions as to enforcement of and challenge to an award. The choice of seat will also impact the level of potential intervention from the local courts in granting relief in support of arbitration, as well as the enforceability of the award in different jurisdictions. London was the chosen seat in 88% of LCIA arbitrations in 2023.
It might be assumed that parties would match, for example, English governing law in the contract with an English seat for arbitration, for the sake of convenience and because similar factors apply in each decision (for example, the neutrality and impartiality of the judiciary). 82% of LCIA arbitrations concern disputes governed by English law. However, the remaining divergence between governing laws and seat shown in the Report suggests parties are thinking more carefully about their choices and possibly making more sophisticated decisions. Parties may, for example, perceive England as an arbitration-friendly jurisdiction for the seat, while preferring to apply the law of their home nation and/or a civil law system for the determination of substantive issues.
Challenges to arbitrators
The LCIA reports only five challenges to arbitrator appointments in 2023. Two of the challenges were rejected and, in one case, the arbitrator resigned, with the remaining two challenges pending at year end.
The LCIA puts this low figure down to its “robust appointment system, where disclosures are dealt with efficiently and transparently”. The LCIA Rules require an arbitrator to disclose “justifiable doubts as to his or her impartiality or independence” before appointment and throughout the arbitration. The Report records that “objections based on pre-appointment disclosures were made by parties in relation to 14 appointments in 2023” and “the LCIA Court proceeded with the appointment in eight of those cases”.
The clear procedure for challenges is supported by the LCIA maintaining a public record of challenge decisions. This allows parties to make an informed decision as to whether a challenge is justifiable, and hence helps avoid delay due to unmeritorious applications.
Applications for interim relief and conservatory measures
58 applications were made for interim relief and conservatory measures in 2023, of which only around one third was granted or partially granted, another third was rejected and the remainder are pending or have been superseded. The majority of the applications were for security for costs (23 in total) and, of these, only five were granted or partially granted and nine were rejected. The remaining applications were for security for claim, preservation or disposal of documents and assets and other powers exercisable by tribunals.
Early determination
The express early determination procedure is a relatively recent addition to the LCIA rules, introduced in 2020. Previously, tribunals were able to make an early determination only under their broad case management powers. Of the 24 early determination applications in 2023, only two were granted; three were partially granted and 15 were rejected. The 2023 figures suggest that the LCIA’s efforts to encourage early determination, and thereby promote the competitiveness of arbitration under its rules compared with those of, for example, SIAC and HKIAC, are not resulting in a significant change (at least not yet). However, this may be explained by the fact that such a power is only ever intended to be used sparingly.
The expedited formation of a tribunal continues to be more popular than the appointment of an emergency arbitrator, presumably because parties generally prefer to have urgent issues (which are often legally complex) dealt with by a panel of arbitrators, rather than by a single emergency arbitrator.
It is worth noting that, unlike other arbitral institutions, including the ICC, SIAC and HKIAC, the LCIA does not have an express expedited or “fast track” arbitration procedure, except in respect of the potential expedited formation of the tribunal or appointment of an emergency arbitrator. However, the LCIA’s guidance notes make clear that the LCIA Rules “permit the parties and Arbitral Tribunal to tailor the arbitration procedure to the particular needs of a case, with efficiency in mind”. This also means that, unlike other institutions (including HKIAC, SIAC and the ICC), there is no claim value cap for an expedited procedure, leaving that to the discretion of the tribunal in each case. Despite this flexibility, it is generally less likely that a higher value dispute will be decided on an expedited basis.
Composite requests and consolidation
The 2020 LCIA Rules also introduced a “composite request” procedure. This change is the result of concerns, partly in light of a decision of the English High Court (A v B [2017] EWHC 3417 (Comm)), that a single request for arbitration under the old LCIA rules could only validly give rise to one arbitration for a dispute under one contract, even if both contracts contained an identical arbitration clause. The mechanism inserted into the 2020 LCIA Rules attempts to avoid the resulting procedural inefficiencies, allowing a party to request multiple arbitrations within a single request for arbitration.
A party can then apply for the arbitrations to be consolidated. In 2023, 48 applications were made for consolidation of LCIA arbitrations and 84% were successful. 26 of 29 composite requests for arbitration led to consolidation. These statistics suggest the 2020 LCIA Rules are proving effective in improving the procedural efficiency of complex, multi-party/multi-contract LCIA arbitrations.
Diversity
The latest statistics show a further improvement in the gender diversity of appointed arbitrators: 48% of LCIA Court appointments and 39% of co-arbitrator appointments were of women arbitrators. Party nominations continue to fall behind, with only 21% of women arbitrators.
Arbitrators were, however, diverse in nationality, partially reflecting the international nature of most disputes. Even though 82% of LCIA arbitrations are governed by English law, 42% of arbitrators were non-British.
The majority of arbitrators were appointed only once in 2023 (72%, compared with 74% in 2022). 16% of all arbitrators appointed in 2023, including those nominated by parties, were appointed by the LCIA Court for the first time (compared with 17% in 2022).
You can read the full LCIA Annual Casework Report for 2023.
In-depth 2024-150
