The London Court of International Arbitration (‘LCIA’) recently published its Annual Casework Report for 2021, which saw the number of new cases revert back to pre-pandemic levels following a record year in 2020. 2021 was the first full calendar year following the launch of new LCIA Rules in 2020 which introduced the ability to file composite requests for arbitration, amongst other innovations, which changes have seemingly been well received and well used by parties. These initial statistics under the 2020 Rules will be interesting to monitor in the coming years to identify any trends.
Read the further key highlights from the 2021 Report below.
Referrals still increasing
Whilst the LCIA received the third highest ever number of referrals of new cases in 2021 (377 referrals, including 322 for arbitration pursuant to the LCIA Rules), it nevertheless marked a 21% decrease from the record number of referrals (440) in 2020, when the LCIA experienced an unprecedented demand during the COVID-19 pandemic. Despite this decrease, the overall trend over the past decade demonstrates a 60% growth in the use of LCIA arbitration.
Industry sectors and types of agreement
The proportion of new LCIA cases from different industry sectors has remained broadly consistent with 2020. The three main industry sectors making up the majority (65%) of the LCIA’s caseload is the same as in 2020, namely:
- Banking and finance;
- Energy and resources; and
- Transport and commodities
The split between these three sectors has changed slightly since 2020: whilst energy and resources remains steady at 25%, transport and commodities has reduced from 22% to 14%, and banking and finance has increased from 20% to 26% (partly due to one composite request from that sector initiating 27 arbitrations).
The most common types of agreements constituting 82% of all new arbitrations pursuant to the LCIA Rules has also remained steady comprising:
- Sale of goods (25%)
- Service agreements (21%)
- Loans or other loan facilities (also 21%)
- Shareholders/Share purchase/Joint venture agreements (14%)
Timing of the referral to arbitrate
It is interesting to note the gap between the date of an agreement and the referral of a dispute arising under it to arbitration. Some 74% of the disputes referred have arisen within five years of the agreement being entered into, in keeping with long-term trends. However, the proportion of disputes arising within two years of an agreement has fallen to 34% from a pandemic-driven high of 43% in 2020, although it nevertheless remains higher than pre-pandemic levels. As many economies emerge from the pandemic, it will be interesting to see whether other shock events, such as those in Ukraine, will have a similar impact in provoking earlier disputes under commercial contracts.
International nature of the parties
Parties to LCIA arbitrations remain truly international – 85% of parties are from countries other than the UK. 2021 saw an increase in parties from MENA (18.3% up from 16.7% in 2020), and from the UAE in particular (9.5% up from 4.3%). Over the same period, the number of cases referred from Russian parties declined (from 6.8% in 2020 to 2.1% in 2021), perhaps reflecting the sanctions in place since 2014 and before the new sanctions regimes enacted since February 2022.
In terms of arbitrator appointments, there was an increase in the number of non-British arbitrators in 2021, rising from 37% to 41%.
Seat and governing law
The LCIA’s international status is also evident in the seat chosen and the applicable law of the dispute. Whilst the majority of arbitrations were seated in England, 15% of new cases were seated elsewhere. There was a 2% decrease in the number of arbitrations subject to English law, albeit still 76% of new cases. The report demonstrates the continuing correlation between the choice of seat and applicable law.
Diversity of appointments
The report shows the LCIA continuing to drive greater gender diversity in arbitrator appointments. 47% of all arbitrator appointments by the LCIA were of women (a slight increase from 2020), although the same statistic for party appointments saw a decrease from 22% to just 16%, which the LCIA attributes in part to an increase in repeat appointments.
Additions in the 2020 Rules
A new feature in the 2020 Rules is the option to file composite requests for arbitration (commencing multiple arbitrations against one or more respondents). This was utilised 29 times in 2021 and resulted in 96 arbitrations (one such request commenced 27 arbitrations).
The 2020 Rules also introduced an express power for tribunals to make an early determination that any claim, defence, counterclaim etc is “manifestly outside the jurisdiction” of the tribunal, or is inadmissible or “manifestly without merit”. In the first full year of such power, there were 15 applications for early determination. Of these: 7 were granted, 2 rejected, 1 ultimately settled, and 5 are yet to be determined.
These signs are that parties have embraced the 2020 Rule changes and are making use of the innovative procedures on offer.
What does this report mean for the LCIA going forward?
2021 saw a return to pre-pandemic levels in terms of referrals, bucking the trend of 3 consecutive years of increases. Whether the turmoil of 2022 (including in global energy markets) leads to a further spike remains to be seen. Overall, while the LCIA is far from the only type of arbitration selected by parties with a London seat, it remains a popular and robust choice. The changes in its 2020 Rules, which were a long time in gestation, have proven to be welcome innovations which parties are happy to use.
For further information, please contact:
Nick Peacock, Partner, Bird & Bird
nicholas.peacock@twobirds.com
