The new DIFC-LCIA Arbitration Rules 2021 promote efficiency and effectiveness

In Brief:

1. The DIFC-LCIA Arbitration Centre introduced new rules effective from 1 January 2021, replacing the 2016 rules. 

2. Key changes include express powers for the Arbitral Tribunal to promote greater efficiency, to dismiss weak claims or defences on a summary basis by early determination, and broader scope to order consolidation of related arbitrations.

3. The new rules also emphasise the primacy of electronic communications and the usage of technology, including virtual hearings.

Introduction

The new updated DIFC-LCIA Arbitration Rules were adopted on 1 January 2021 (the “2021 Rules”) and apply to any DIFC-LCIA arbitration commenced from that date. The 2021 Rules replace the 2016 DIFC-LCIA Arbitration Rules (the “2016 Rules”) and mirror the newly enacted LCIA Rules of Arbitration which came into effect on 1 October 2020.

Whilst the 2016 Rules contained a number of provisions to promote efficiency, the 2021 Rules have taken this a step further by crystallizing and enhancing the Arbitral Tribunal’s case management powers, including “to make any procedural order” that the Arbitral Tribunal considers appropriate “with regard to the fair, efficient and expeditious conduct of the arbitration”.

Notably, the new enhancements include that the Arbitral Tribunal is given specific powers to issue an order or award for “Early Determination”, i.e. the summary dismissal of any claim or defence that is “manifestly without merit”, or inadmissible, or “manifestly outside the jurisdiction” of the Arbitral Tribunal.

In addition, the 2021 Rules provide both the Arbitral Tribunal and the LCIA Court with expanded powers to order consolidation of multiple arbitrations into a single arbitration, as well as for the Arbitral Tribunal to order the concurrent running of two or more arbitrations.

Various provisions have also sensibly been added to the 2021 Rules to reflect the primacy of electronic communications, increased use of technology and virtual hearings in the post-pandemic era, as well as on matters such as data protection and sanctions/compliance.

Early Determination

Most significantly, the 2021 Rules grant a new express power to the Arbitral Tribunal under Article 22.1(viii) to determine that any claim, defence, counterclaim, cross-claim, defence to counterclaim or defence to cross-claim is manifestly outside the jurisdiction of the Arbitral Tribunal, or inadmissible, or manifestly without merit.

This is a notable development as it is similar to a summary judgment procedure and therefore fills a gap which has long existed in international arbitration.

In practice, parties should consider the possibility of relying on this new provision and making an application for early determination under Article 22.1(viii) to the extent appropriate when faced with a manifestly weak claim or defence.

Enhanced powers to promote efficiency

Articles 14.5 and 14.6 of the 2021 Rules give the Tribunal express authority to make “any procedural order” to speed up the arbitral process, listing eight specific measures the Tribunal can consider using to improve efficiency, including for example:

• limiting the length of, or dispensing with, any written submission;
• limiting the written and oral testimony of any witness;
• employing technology to enhance expeditious conduct;
• deciding the stage at which any issue shall be determined and in what order;
• dispensing with a hearing; and
• setting and abridging any time periods.

While the 2016 Rules already granted flexibility and broad powers to Arbitral Tribunals, the 2021 Rules take this a step further by codifying such powers and highlighting the type of procedural measures that the Arbitral Tribunal may consider as appropriate to order depending on the specific circumstances of the relevant case.

Consolidation and concurrent conduct of arbitrations

The 2016 Rules contained certain existing powers of consolidation which have now been extracted into a separate section of their own (Article 22A) in the 2021 Rules and significantly expanded.

Article 22A retains the existing power to consolidate one or more arbitrations into a single arbitration where the arbitrations arise from the same arbitration agreement or a compatible arbitration agreement between the same disputing parties. Moreover, Article 22A gives the Arbitral Tribunal a new power to order consolidation where the arbitrations “arise out of the same transaction or series of related transactions”.

This is a notable development as it opens the possibility of the Arbitral Tribunal consolidating arbitrations between different disputing parties. In either case, consolidation can only be ordered if no Arbitral Tribunal has yet been formed by the LCIA Court for the other arbitration or, if already formed, the Arbitral Tribunal is composed of the same arbitrators.

The 2021 Rules also grant the LCIA Court the same powers as the Arbitral Tribunal to order consolidation of multiple arbitral proceedings. In practice, this means that an application can be made to the LCIA Court for consolidation prior to the formation of the Arbitral Tribunal (e.g. at the time of filing the Request for Arbitration or Response).

In addition, Article 22A gives a new power to the Arbitral Tribunal to order that two or more arbitrations may be conducted concurrently where the same Arbitral Tribunal is constituted in respect of each arbitration.

Notably, Article 1.2 of the 2021 Rules permits a claimant wishing to commence more than one arbitration under the DIFC-LCIA Rules (whether against one or more respondents and under one or more arbitration agreements) to serve a composite Request for Arbitration in respect of all such arbitrations. Each arbitration commenced by a composite Request shall proceed separately, unless the LCIA Court or the Arbitral Tribunal determines otherwise.

Electronic communications and virtual hearings

The 2021 Rules have removed the need for hard copy/paper filings and, rather, make communication by electronic means the default position in DIFC-LCIA arbitrations.

Under Article 4.1, parties must now submit the Request for Arbitration and the Response in electronic form, whether by email or through a designated electronic filing system. Prior written approval must now be sought from the Registrar to submit the Request or the Response by any alternative method.

In practice, this means that the email address for service contained within any notice clause in the relevant contract takes on greater importance, given that service to that email address will be deemed valid service under the DIFC-LCIA Rules and will start time running for service of the Response.

Further, all written communications in relation to the arbitration must now be delivered by email or any other electronic means of communication that provides a record of its transmission (Article 4.2).

Note that Article 26.2 also provides that any Award may be signed electronically and/or in counterparts and assembled into a single instrument. Parties should take care, however, to comply with any local law requirements for “wet” signatures which may be required for the purposes of recognition and enforcement of the Award, depending on the jurisdiction of enforcement.

Reflecting current trends, the 2021 Rules are explicit that hearings may take place in person, or virtually by conference call, videoconference or using other communications technology with participants in one or more geographical places, or in a combined form (Article 19.2).

Other noteworthy changes

The 2021 Rules also make a number of other updates and amendments, including:

• Tribunal secretary – Article 14A crystallizes the role of a Tribunal secretary to carry out tasks on behalf of the Arbitral Tribunal. Article 14A incorporates the principles already contained in the LCIA Notes for Arbitrators in relation to Tribunal secretaries, including that under no circumstances may an Arbitral Tribunal delegate its decision-making function to a Tribunal secretary.
• Timing of Final Award – Article 15.10 has been bolstered by expressly stating that the Arbitral Tribunal shall endeavour to issue its Final Award no later than three months following the last submission of the parties (whether made orally or in writing).
• Compliance – Article 24A of the 2021 Rules provides that the DIFC-LCIA may refuse to act where a party has not complied with any applicable requirement in relation to bribery, corruption, terrorist financing, fraud, tax evasion, money laundering and/or economic or trade sanctions (defined as a “Prohibited Activity”).
• Data Protection – reflecting the heightened importance of data security, Article 30A of the 2021 Rules requires that, at an early stage of the arbitration, the Arbitral Tribunal consider (in consultation with the parties and the DIFC-LCIA) whether any special measures are required to protect the physical or electronic information shared in the arbitration as well as any personal data.

Conclusion

The additions and amendments to the 2021 Rules are effective in clarifying a number of procedural issues and seeking to further promote the fair, efficient and expeditious conduct of arbitrations, most notably in providing express authority for the Arbitral Tribunal to make early determinations. The changes also expand the powers of the Arbitral Tribunal in respect of case management and widen the scope for consolidation of multiple arbitrations in appropriate circumstances. 

The 2021 Rules reflect the ever-evolving nature of arbitration and the post-pandemic climate, in particular the increased reliance on and usage of technology, electronic means of communication, and virtual hearings.

The changes have been welcomed by commercial parties and the wider arbitration community and reflect international best practice, thereby reinforcing the leading status of the DIFC-LCIA Arbitration Centre in the region.