Comparative review of the ICC and LCIA arbitration rules for small claim arbitrations
Updated: Oct 28, 2021
This article will offer a comparative review of some of the differences of the new ICC and LCIA arbitration rules with focus on their individual strengths and weaknesses in order to assess their support for small claim arbitrations.
The new arbitration rules reflect the institutions’ efforts to adopt to the new technological developments to improve the efficiency, flexibility, and transparency of arbitration.
Although there are a few differences in the rules, most of the updates have taken a similar direction in response to the new industry changes including the impacts of the pandemic.
Both the International Chamber of Commerce (ICC) and the London Court of International Arbitration (LCIA) have recently updated their arbitration rules.
The new ICC arbitration rules were launched on 1 December 2020 to apply to cases filed from January 2021 whilst the LCIA arbitration rules came into effect in October 2020.
This article will focus on the comparison of the following;
The Expedited Procedure
The Arbitration Cost Structure
1. Virtual Hearings
LCIA Arbitration Rules
ICC Arbitration Rules
Article 19.2 – ‘...As to form, a hearing 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 26(1) - ‘...The arbitral tribunal may decide, after consulting the parties, and on the basis of the relevant facts and circumstances of the case, that any hearing will be conducted by physical attendance or remotely by videoconference, telephone or other appropriate means of communication.’
Although the 2014 LCIA arbitration rules recognised video and telephone conference hearings, Article 19.2 of the new LCIA rules has drawn more attention to virtual hearings. Article 19.2 states that hearings may be heard ‘...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).’ Any provisions in the rules that previously showed preference of one form of hearings over the other have also been removed.
In comparison the ICC rules also provide for virtual proceedings under Article 26(1). The arbitral tribunal has the discretion to decide whether proceedings should be conducted physically or virtually based on the circumstances of the case.
In a nutshell, the added recognition of virtual hearings under both rules works to promote efficiency in small value money claims where it may not be commercially feasible for parties to move across different geographical locations which has been of benefit during the current COVID – 19 restrictions.
2. Expedited Arbitration Procedure
LCIA Arbitration Rules
ICC Arbitration Rules
Article 9A ‘9.1 In the case of exceptional urgency, any party may apply to the LCIA Court for the expedited formation of the Arbitral Tribunal under Article 5. 9.2 Such an application shall be made to the Registrar in writing by electronic means, together with a copy of the Request (if made by a Claimant) or a copy of the Response (if made by a Respondent), and shall be delivered or notified forthwith to all other parties to the arbitration. The application shall set out the specific grounds for exceptional urgency requiring the expedited formation of the Arbitral Tribunal. 9.3 The LCIA Court shall determine the application as expeditiously as possible in the circumstances. If the application is granted, for the purpose of forming the Arbitral Tribunal the LCIA Court may set or abridge any period of time under the Arbitration Agreement or other agreement of the parties (pursuant to Article 22.5). ‘
Article 30 ‘1) By agreeing to arbitration under the Rules, the parties agree that this Article 30 and the Expedited Procedure Rules set forth in Appendix VI (collectively the “Expedited Procedure Provisions”) shall take precedence over any contrary terms of the arbitration agreement. 2) The Expedited Procedure Rules set forth in Appendix VI shall apply if: a) the amount in dispute does not exceed the limit set out in Article 1(2) of Appendix VI at the time of the communication referred to in Article 1(3) of that Appendix; or b) the parties so agree. 3) The Expedited Procedure Provisions shall not apply if: a) the arbitration agreement under the Rules was concluded before the date on which the Expedited Procedure Provisions came into force; b) the parties have agreed to opt out of the Expedited Procedure Provisions; or c) the Court, upon the request of a party before the constitution of the arbitral tribunal or on its own motion, determines that it is inappropriate in the circumstances to apply the Expedited Procedure Provisions.’ Appendix VI (Article 1(2)) ‘The amount referred to in Article 30(2), subparagraph a) of the Rules is: a) US$ 2,000,000 if the arbitration agreement under the Rules was concluded on or after 1 March 2017 and before 1 January 2021 or b) US$ 3,000,000 if the arbitration agreement under the Rules was concluded on or after 1 January 2021.’
International arbitration was formerly introduced to provide a more efficient and cost-effective dispute resolution mechanism.
However, due to complexities of the issues brought by the parties’ and the trend to try to follow litigious procedural practices such as disclosure, and separate cost submissions, the arbitral process has in recent years became an expensive process.
To solve this problem, the arbitral institutions like the ICC have developed the expedited arbitral process to fast-track some claims.
Article 30 of the ICC arbitration rules provide for an expedited arbitration process. This process previously applied to small claim disputes that do not exceed $2million if the arbitration agreement was concluded on or after 1 March 2017 and before 1 January 2021.
Under the new rules, this threshold has been increased to cover disputes of up to $3million if the arbitration agreement was concluded on or after 1 January 2021. Article 30(3) offers parties the option to opt-out of the expedited arbitration process.
The court also has the discretion to determine the expedited process as inappropriate in a particular case or upon the request of a party before the constitution of the arbitral tribunal.
Unlike the ICC arbitration rules, the LCIA rules only make provision for the expedited arbitration process in exceptional circumstances of urgency.
Article 9A of the LCIA rules requires either party to make an application for the expedited process stating the grounds of urgency.
Fast-track arbitration is beneficial to small claims because it saves time by ensuring that final awards are made within months.
This arguably also has a direct effect on the cost of arbitration in small-value claims. A more streamlined arbitration process characterised by the absence of oral hearings and shorter submissions lowers the overall arbitral cost for all parties.
A fast-track process may not be appropriate for all cases. It may limit the ability of the parties to fully defend their claim and present all the necessary evidence.
In certain cases, the arbitrator may require more effort and time to accurately assess the documentation before making a decision which might have been quicker if they could hear oral submissions from witnesses during a hearing.
In summary, although both institutions provide for an expedited arbitration process, the structure and effect of the ICC provisions provide for better opportunity to use the expedited procedure due to the increase of the threshold and the lack of requirement of exceptional circumstances as the LCIA provisions.
The cost of arbitration varies from case to case depending on the amount in dispute, the complexity of the matter, and the number of arbitrators handling the arbitration.
The ICC and LCIA both provide cost calculators which can provide you with a cost estimate of your arbitration matter.
On average, the ICC administrative and tribunal cost of arbitrating a dispute worth $1 million will cost approximately $141,472, excluding the arbitrators’ expenses.
The LCIA arbitration fees are calculated at an hourly rate of £500 which is a £50 increase from the previous set of rules.
The LCIA administrative and tribunal fees for a $1 million dispute will approximately be $32,000.
Based on this analysis the general cost of bringing a small cost claim under the LCIA is more cost- efficient than under the ICC.
It is important to remember however, that the costs associated for the dispute depend not only on the value of the claim, but also the complexity of the matters, the number of parties and arbitrators, it is difficult to ascertain a direct comparison without taking into consideration any intervention of the Courts who may manage the fees.
LCIA Arbitration Rules