The new DIFC-LCIA Arbitration Rules: 10 things you need to know

The new DIFC-LCIA Arbitration Rules (the 2016 Rules) came into force as of 1 October 2016. The 2016 Rules reflect amendments made to the LCIA Arbitration Rules in 2014 and make significant changes in relation to promoting the efficiency of DIFC-LCIA arbitration, management of multi-party disputes, and the conduct of party representatives. In line with revisions made to the other leading institutions' rules, the 2016 Rules now also include an emergency arbitrator mechanism. 

Here, we set out the top 10 things you need to know about the 2016 Rules.

1. Adopting the trends seen in other revised arbitration rules

The UNCITRAL Arbitration Rules were revised in 2010, the ICC Arbitration Rules in 2012 and the LCIA Rules in 2014. Other institutions such as SIAC and HKIAC have also amended their rules in recent years. Certain common elements are featured in a number of these updates, including provisions dealing with multi-party arbitration and measures intended to increase the efficiency of arbitration, the latter in response to concerns about the escalating costs of arbitration. Provision for emergency arbitrators has also proven to be a popular addition. The 2016 Rules follow these trends, incorporating rules addressing each of these innovations. 

2. The 2016 Rules apply from October 2016

The 2016 Rules apply to all new DIFC-LCIA arbitrations commenced on or after 1 October 2016, regardless of when the contract was entered into.

3. Enhancing the efficiency of DIFC-LCIA arbitration

A principal focus of the 2016 Rules is on streamlining the process of DIFC-LCIA arbitration, and reducing the scope for delay and excessive costs. Provisions intended to address this include:

Reduced time periods: Certain time periods in the 2016 Rules have been reduced. For example, a respondent now has 28 days to submit a response to a request for arbitration, rather than 30 days (Article 2.1). Although, the LCIA Court now has 35 days to appoint the Tribunal, rather than 30 days, following receipt of the request for arbitration (if no response is received) (Article 5.6). 

Arbitrator's availability: Article 5.4 provides that a candidate for appointment as arbitrator must provide a written declaration that he or she is "ready, willing and able to devote sufficient time, diligence and industry to ensure the expeditious and efficient conduct of the arbitration". This provision is intended to reduce the likelihood of tribunal members being too busy to either (i) focus satisfactorily on the arbitration or (ii) to schedule hearings within a reasonable time frame. Article 10.1 also entitles the LCIA Court to revoke an arbitrator's appointment on its own initiative if the arbitrator is unfit to act, which includes a failure to conduct or participate in the arbitration with reasonable efficiency, diligence and industry. 

Case management: The Tribunal and the parties are encouraged to make contact to discuss the conduct of proceedings as soon as practicable, and, in any event, no later than 21 days after notification of the formation of the Tribunal. This provision aims to focus the parties on case management issues early in the arbitration process (Article 14.1).

Delivery of award: Following final submissions by the parties, the arbitral award is to be rendered "as soon as reasonably possible" in accordance with a timetable communicated to the parties so as to reduce any delay between the closure of proceedings and the dissemination of the award (Article 15.10).

Costs to be affected by conduct: The Tribunal now has an express power to consider the conduct of the parties during the course of the arbitration when deciding costs, including any cooperation that facilitates proceedings and non-cooperation resulting in delay and unnecessary expense (Article 28.4).

Online filing: The 2016 Rules provide the Claimant and the Respondent with the option of using the standard electronic form available on-line from the DIFC-LCIA Arbitration Centre's website to commence proceedings and to submit the response (Articles 1.3 and 2.3).

 

4. Some quirks remain

There is no entitlement for each party to nominate an arbitrator in a three person tribunal. This is different from the ICC or UNCITRAL Rules. Parties should bear this in mind when incorporating DIFC-LCIA arbitration clauses into their contracts. It is necessary to provide expressly for party nomination. 

5. The DIFC as the default seat of arbitration

The 2016 Rules provide that the default seat of arbitration is the DIFC in the absence of any agreement between the parties, although parties are free to agree to any seat of arbitration (Article 16). However, in the absence of agreement between the parties, the default seat applies up to and until the formation of the Tribunal. Thereafter, the Tribunal can consult with the parties and order that a different seat of arbitration applies.

6. Emergency arbitrator provisions address issues of urgency arising prior to the formation of the Tribunal

In one of the most highly anticipated additions, the DIFC-LCIA has added a provision enabling the parties, in circumstances of "urgency" and on a temporary basis, to appoint an Emergency Arbitrator (always as sole arbitrator) prior to the constitution of the Tribunal (Article 9B). The parties can "opt out" of this feature, and it will not apply to arbitration agreements concluded prior to 1 October 2016 unless the parties have "opted in". An Emergency Arbitrator must decide a claim for emergency relief as soon as possible, and no later than 14 days following his or her appointment.

This adds to the arsenal of options available to a party which wants to prevent another party dissipating or concealing assets before an arbitration is on foot, or otherwise undermining any future arbitration. However, it will be interesting to see whether, in practice, parties utilise the Emergency Arbitrator provisions and whether local Courts, particularly in the Middle East, find such emergency arbitration awards to be enforceable.

The ability of the parties to apply for expedited formation of the Tribunal, is retained (Article 9A) and it will be interesting to see to what extent this provision is used in the light of the Emergency Arbitrator provisions, and vice versa. 

7. Multi-parties: consolidation and joinder

Although the previous DIFC-LCIA rules permitted the Tribunal to join a third party to the proceedings on the application of one of the existing parties to the arbitration, the 2016 Rules include further provision for multi-party disputes (Article 1.5 and 2.5). The Tribunal may order, with the approval of the LCIA Court, consolidation of two or more arbitrations, in certain circumstances, and the LCIA Court may consolidate two or more arbitrations if no Tribunal has yet been appointed (Article 22.1(ix)-(x) and Article 22.6).

8. Addressing the issue of the governing law of the arbitration agreement

Conventionally, arbitration agreements are considered to be separate agreements from the agreements in which they reside. One of the consequences of this is that the arbitration agreement may be governed by a different law to that of the parent agreement. This has led to disputes over which law governs the arbitration agreement in circumstances where the seat (e.g. Dubai) is different to the law governing the parent agreement (e.g. English law) and the arbitration agreement has not specifically stated which law governs it: is it the law of the seat (Dubai), or the law of the parent agreement (English)? This can have implications for the enforceability of the arbitration agreement or its interpretation. 

Article 16.4 clarifies that, unless the parties provide otherwise, the governing law of the arbitration agreement, as well as the law of the arbitration itself, will be the law of the seat of the arbitration. This now removes any uncertainty. 

9. Regulation of the conduct of legal representatives

The 2016 Rules include provisions on regulation of legal representatives in Article 18 and the Annex of General Guidelines. Parties now have to notify all other parties, the Tribunal and the Registrar if there are any changes or additions to the parties' legal representatives following the Tribunal's formation (Article 18.3). Such changes are conditional on the Tribunal's approval which it is entitled to withhold if it feels the changes or additions would compromise the composition of the Tribunal or the finality of the award (Article 18.4). 

Each party must also ensure that all of its representatives "appearing by name" before the Tribunal have agreed to comply with the guidelines in the Annex of General Guidelines (Article 18.5). These place obligations on representatives not to engage in obstructive activities, knowingly make false statements to the Tribunal, procure or assist in the preparation of false evidence, conceal documents ordered to be produced, or initiate ex parte communications with any member of the Tribunal. 

10. And finally…

The role of "Chairman" becomes that of "Presiding Arbitrator". Across the 2016 Rules, there has also been a general refreshment and reworking of the language.

Comment

The 2016 Rules now substantially mirror the LCIA Arbitration Rules. The new provisions include innovations which consumers of international arbitration have come to expect, and which have, in recent years, been incorporated into rules issued by the DIFC-LCIA's global competitors. The growing popularity of DIFC-LCIA arbitration is likely to be bolstered by the 2016 Rules as will Dubai's aspiration of becoming a regional hub for international commercial arbitration.