LCIA’s Annual Casework Report 2019: Steady growth

International

Introduction

On 19 May 2020, the London Court of International Arbitration (“LCIA”) released its Annual Casework Report for 2019 (“Report”). This article focuses on arbitrations administered under the LCIA Arbitration Rules and analyses the significance of certain of the key statistics in the Report, when compared to similar reports released by other international arbitration centres, namely the Singapore International Arbitration Centre (“SIAC”) and the Hong Kong International Arbitration Centre (“HKIAC”).

Number of cases

The Report notes that the number of cases referred to the LCIA, 406 including 346 arbitrations administered pursuant to the LCIA Rules, are both records for the LCIA. This is a significant jump from 2018, in which a total of 317 cases were referred to the LCIA (of which 271 adopted the LCIA Rules).

The rise in cases is perhaps more reflective of a general increase in the number of referrals to arbitration as SIAC, HKIAC and the International Court of Arbitration, International Chamber of Commerce (“ICC”) all reported record numbers of referrals in 2019.

In its Annual Report for 2019, SIAC announced 479 new case filings (of which 454 cases were administered pursuant to SIAC’s Rules), with a total sum in dispute of USD 8.09 billion.

HKIAC reported a total of 503 new cases in 2019, of which 308 were arbitrations and with a total amount in dispute in arbitration cases of approximately USD 4.7 billion.

For 2019, the ICC has announced 869 new case registrations of which 851 are under the ICC Rules of Arbitration, also being the highest number of registrations in a single year for the ICC.

Sectors

The LCIA’s caseload for matters administered under the LCIA Rules in 2019 continues to largely comprise disputes in the banking and finance, and energy and resources sectors. In particular, the LCIA has seen a steady increase in banking and finance cases (29 % in 2018 and 32% in in 2019).  It has also seen a similar increase in energy and resources cases, but approximately the same proportion of transport and commodity cases as in 2018, and a significant drop in construction cases compared to 2018 (from 10% in 2018 to 5% in 2019).

Similarly, in 2019, the make-up of SIAC’s caseload has changed proportions slightly, with an increasing proportion of corporate matters (29% in 2019, up from 15% in 2018) and construction and/or engineering matters (16% in 2019, up from 11% in 2018). SIAC’s 2019 caseload has seen a decreasing proportion of trade matters (21% in 2019, down from 27% in 2018), commercial matters (16%, down from 19% in 2018) and maritime/shipping (8%, down from 18% in 2018). The proportion of “other” matters was 10% of SIAC’s caseload and remains so in 2019.

In 2019, HKIAC’s caseload continues to be largely comprised of international trade / sale of goods cases, with these cases making up 34.3% of HKIAC’s caseload in 2019 (up from 29.6% in 2018). The next significant portion of HKIAC’s 2019 caseload consist of corporate matters (17%), construction matters (14.8%), maritime matters (14.4%) and banking and financial services (10.5%), although these cases make up a slightly smaller proportion of HKIAC’s caseload overall than they did in 2018.

Parties

The LCIA Report states there is a diverse profile of parties choosing the LCIA, with parties coming from 138 different countries.  However, on closer review, there has been a marked increase in the number of cases involving parties from “Western Europe” (which includes Ireland, Switzerland, the Netherlands, Luxembourg). The LCIA has seen drops in parties from Asia (from 14.4% in 2018 to 10% in 2019), CIS, the Caribbean and North America.

Switzerland and the United Kingdom have also both moved into each of SIAC’s and HKIAC’s top ten list of parties organised by geography / nationality. However, Asian and North American users continue to use SIAC and HKIAC and retain their place in the respective lists of top ten foreign users. In 2019, SIAC’s top foreign user was India, by some margin, followed by the Philippines, China, USA, and Brunei and UAE as joint fifth users.

As in 2018, HKIAC continues to be used most by parties from Hong Kong and Mainland China, the British Virgin Islands, the USA, Cayman Islands, Singapore and South Korea.

MENA and Central and South America party involvement in LCIA cases have remained on par with 2018 figures.

Further, for LCIA cases, parties mostly chose England as the seat of the arbitration (89%), and English law as the governing law of the arbitration (89%).  Whereas for SIAC, the most commonly applied governing laws were Singapore (41%) followed by India (24%) and England (16%). For HKIAC, the most commonly applied governing laws were Hong Kong law, followed by English law and Chinese law (percentages not available). 

Dispute features

The four most common types of agreements identified as the subject of the arbitrations administered pursuant to the LCIA Rules in 2019 were:

  1. loan or other facility agreements
  2. service agreements
  3. sales of goods agreements
  4. share purchase, joint venture or shareholder agreements.

The data shows that there was an increase in the number of cases relating to agreements entered into more than four years earlier (from 30% in 2018 to 38% in 2019).

In the majority of all cases (65%), the claimants sought monetary relief only.

In terms of multi-party or multi-contract disputes, the LCIA routinely deals with applications for joinder and consolidation. In respect of joinder applications, the LCIA considers the impact on, and rights and utility of third parties.  The LCIA also granted or partially granted 24 of 35 applications for consolidation.  The Report notes that the number of applications for consolidation has significantly increased by over 50% in comparison with those in 2018.  In comparison, in 2019 SIAC granted 31 of 53 consolidation applications and in HKIAC granted 3 of 4 consolidation applications.

The LCIA granted 2 of 10 applications for expedited formation of a Tribunal. The LCIA also received and granted 1 application for emergency arbitration. The emergency arbitrator issued the award within 14 days of their appointment. In comparison, SIAC received and granted 10 applications for emergency arbitration, and the HKIAC did not receive any applications.

Introduced in 2016, SIAC’s mechanism for early dismissal of claims has also gained traction, with 8 applications received in 2019, out of which 5 were allowed to proceed.  In 2019, SIAC also granted 32 of 61 applications for its expedited procedure for disputes that do not exceed the equivalent amount of S$6,000,000.

In terms of the value of arbitrations, the majority of arbitrations administered under the LCIA Rules were for less than USD 1 million (43%) or for between USD 1 million and USD 5 million (29%). The Report does not state the total value of 2019 disputes. SIAC reported a total sum in dispute for all new case filings in 2019 of USD 8.09 billion and HKIAC reported a total sum in dispute for 2019 of USD 4.7 billion.

Arbitrators

In 2019, the LCIA Court made a total of 566 appointments of 306 different arbitrators, for arbitrations administered under the LCIA Rules. There is a relatively even split between three-member tribunals and sole arbitrators, with three-member tribunals being slightly more popular in 2019 (54%). This ratio of three-member tribunals to sole arbitrators is not in keeping with other institutions.  In 2019, both SIAC and HKIAC mostly appointed sole arbitrators in arbitrations administered under their respective rules, as did the ICC.

The LCIA continues to be a leader in gender diversity, noting a further increase in the overall number of female arbitrator appointments in LCIA arbitrations. Overall, the number of female arbitrator appointments has increased from 23% in 2018 to 29% in 2019, with the LCIA Court appointing 48% of roles to female arbitrators. This is significant, compared to SIAC’s appointment of female arbitrators in 36.5% of cases; and 20.5% of HKIAC’s appointments. The ICC appointed women to 50% of new arbitration roles.

Challenges

In 2019, 7 arbitrator challenges were made in LCIA arbitrations. Of these, 5 challenges were dismissed, and the outcome of 2 remain pending. This is a decrease in the overall number of challenges on previous years, and seemingly consistent with SIAC and HKIAC who both reported a higher caseload with fewer successful challenges in 2019.

The trends

The increase in number of cases administered by global arbitral institutions is reflective of party-confidence and the high quality of dispute resolution that arbitration can offer. 

The growing number of arbitration cases in the banking and finance sector is another positive sign that there is greater adoption of arbitration by those who have traditionally being reluctant to use it. 

In relation to the HKIAC we are yet to see the full effect of the arrangement with Mainland China for interim measures (i.e. the ability to apply via HKIAC to Mainland Courts for evidence and/or asset preservation in support of Hong Kong arbitrations).

One of the challenges arbitral institutions will be looking to tackle is the international spread of their caseloads.  The 2019 statistics suggest that there is a growing divide between Asian and North American parties tending to prefer SIAC/HKIAC and European parties choosing LCIA/ICC.  In addition, although English law was the most prominent governing law for LCIA arbitrations, it also gets strong representation in SIAC’s and HKIAC’s more diverse caseloads.  Arbitral institutions will, no doubt, be looking at ways to increase their international appeal and it remains to be seen what measures and improvements this brings to users of arbitration. 

Please click here for our analysis of SIAC’s Annual Report 2019.