A Quick Guide to the 2021 Rules of the DIFC-LCIA Arbitration Centre
Introduction
The DIFC-LCIA Arbitration Centre (the "Centre") recently released updated Arbitration Rules which apply to arbitrations commenced on or after 1 January 2021 (the “2021 Rules”). Replacing the 2016 Rules, the 2021 Rules essentially mirror the changes made in 2020 to the LCIA's Arbitration Rules, hence they reflect a "light touch" update rather than a drastic re-write. With the 2021 Rules (available here) at their disposal, arbitrators, parties and counsel can expect a clearer process and more efficient and expeditious proceedings going forward.
About the Centre
The Centre is a joint venture between the Dubai International Financial Centre and the London Court of International Arbitration. Established in 2008, the Centre’s purpose is to promote and administer effective and efficient arbitration proceedings for parties based in the Gulf and MENA region. However, since its inception parties from further afield have also been using the Centre, including parties from the US, the EU and Asia. Receiving roughly 200 cases per year, the Centre is one of the world’s fastest growing arbitral institutions.
Significant changes to the 2021 Rules
1. Arbitrator tools to expedite proceedings, including an early determination procedure
Arbitrators have numerous tools to expedite proceedings, including a power of "Early Determination" under Article 22.1(viii). This enables tribunals to rule that any type of claim is manifestly outside the tribunal's jurisdiction or is inadmissible or manifestly without merit.
Following the footsteps of other major institutions - SIAC, SCC, ICC, HKIAC and ICSID - the availability of summary disposition means that the tribunal and parties can focus on defects and weaknesses in the case before too much time and costs have been incurred. The rule may be particularly appealing to financial institutions (known to promptly exercise their contractual rights) as it allows the summary determination of both claims and defences.
Other useful tools promoting procedural efficiency include:
- employing technology to enhance the speed and efficiency of the case;
- limiting the length of pleadings or dispensing with pleadings;
- limiting witness testimony;
- dispensing with a hearing; and
- deciding the stage of the arbitration at which any issue(s) shall be determined and in what order (Article 14.6).
The 2021 Rules confirm that the tribunal may make any procedural order that it considers appropriate regarding the fair, efficient and expeditious conduct of the case (Article 14.5).
2. Registration of multiple arbitrations made simpler with new "composite Requests"
For claimants wishing to commence multiple arbitrations either against multiple parties or under multiple arbitration agreements, the 2021 Rules permit composite Requests (Article 1.2). However, each arbitration referred to in a composite Request will still proceed separately and accordingly, each of the criteria set out in Article 1.1 must still be supplied for each arbitration.
A composite Response may be submitted in reply to a composite Request provided, again, that all the requirements of Article 2.1 are met for each arbitration (Article 2.2).
Accordingly, this change offers enhanced administrative flexibility when starting multiple arbitrations, but is unlikely to reduce time or costs of the arbitration as registration fees are still payable for each case and the tribunals are still constituted separately (no automatic consolidation).
3. Broader powers of consolidation and express recognition of tribunal's ability to order concurrent conduct of arbitrations
Under the 2021 Rules, if no tribunal has yet been formed (or the tribunals in all the arbitrations are identical) the LCIA Court can consolidate arbitrations, after giving parties a reasonable opportunity to state their views, if
i. all arbitrations are subject to the DIFC-LCIA Rules;
ii. commenced under the same arbitration agreement or any compatible arbitration agreement(s); and
iii. either between the same disputing parties or arising out of the same transaction or series of related transactions (Article 22.8(ii)).
The LCIA Court can also order consolidation where all the parties agree to it in writing (Article 22.8(i)).
Once a tribunal is in place, it has the power to order consolidation under the same conditions (above) subject to the LCIA Court's approval (Article 22.7(i) and (ii)). Tribunals may also order the concurrent conduct of arbitrations if the above-listed three conditions are fulfilled (Article 22.7(iii)), which may be useful where confidentiality issues militate against consolidation.
Consolidation is a particularly useful tool in construction-related disputes and given that it is now allowed in much wider circumstances, it is an important change given that such disputes comprise a large proportion of the Centre's caseload. The ability to consolidate cases in situations where the arbitration agreements are between different parties but arise out of a 'related transaction' is the most controversial change and may not sit easily with parties who have a firm belief in the consensual and confidential nature of the arbitration process.
4. Paper copy to Soft copy
Electronic communications are now the default in DIFC-LCIA arbitrations, bringing the rules in line with current working practices. Parties are now required to submit their Requests and Responses (under Article 1.3 and Article 2.3 respectively) in electronic form rather than in paper form (Article 4.1). This will be either by email or via any electronic filing system operated by the DIFC-LCIA Arbitration Centre.
All written communications relating to the arbitration must be delivered by email or other electronic form of communication that provides a record of its transmission (subject to written approval of the tribunal or the Registrar (if no tribunal is in place) otherwise) (Article 4.2).
5. Stamp of approval for virtual hearings
Consistent with the LCIA's 2020 Rules and the ICC's 2021 Rules, these rules recognise remote hearings as a new modus operandi rather than a short-lived trend. Article 19.2 clarifies that 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)". Leaving arbitrators with such latitude is praiseworthy.
6. E-awards could become the new norm in DIFC-LCIA arbitrations
In a bold move by the Centre, electronically signed awards ("E-awards") are now allowed under the 2021 Rules subject to (i) the parties agreeing otherwise or (ii) the Tribunal or LCIA Court directing otherwise (Article 26.2).
It is important that parties consider the jurisdiction(s) of enforcement as early as possible to ascertain if there would be any enforcement issues with an award without 'ink' signatures. If potential problems are foreseeable, they may wish to rely on caveats (i) or (ii) above to ensure they obtain an award with wet signatures.
The same article also confirms that awards may be signed in counterparts and assembled into a single document, which recognises that tribunal members are very often not physically together when signing an award (especially in the current circumstances).
7. The role of Tribunal Secretaries (and their reasonable hourly rate) is clearer
The provisions relating to tribunal secretaries in the "LCIA Notes for Arbitrators" have, to a large extent, been enshrined in section 14A of the 2021 Rules, providing much-needed clarity on the role of, and expectations relating, to tribunal secretaries.
There is a clear provision that the tribunal must not delegate its decision-making powers to a tribunal secretary (Article 14.8). All parties must approve his/her appointment and this includes agreeing his/her tasks and hourly rate (Article 14.10). The 2021 Schedule of Costs stipulates that an hourly rate of between AED370 and AED860 would be considered reasonable for a tribunal secretary and provides further details relating to tribunal secretaries' expenses and cancellation fees.
Tribunal secretaries are obliged to disclose any conflicts of interest prior to appointment, a duty which continues until the arbitration concludes (Article 14.9 and 14.14). The confidentiality obligation under Article 30 applies equally to tribunal secretaries.
8. Compliance, Data Protection and Cyber-Security rules promote transparency
The 2021 Rules include explicit provisions relating to compliance, data protection and information security. Promoting transparency, the compliance provisions at Article 24A require the institution, parties and their counsel to cooperate together to ensure all stakeholders comply with their legal obligations (for example to seek any necessary license for sanction purposes).
Article 30A aims at reassuring the parties that the Centre acts in accordance with the applicable data protection legislation (Article 30.4) and essentially, promotes a conversation between the Centre, parties and arbitrators about these issues (Article 30.5). For instance, the Centre and the tribunal may now issue binding directions addressing information security or data protection (Article 30.6). These changes go hand in hand with the shift to electronic communications now being the default in DIFC-LCIA arbitrations and should give parties additional confidence to conduct their arbitrations through digital means.
9. Confidentiality undertakings now required from all involved in the arbitration
The parties' confidentiality undertaking at Article 30.1 - to keep the award and materials in the arbitration confidential – is now said to expressly apply to the tribunal, any tribunal secretary and any tribunal-appointed expert (Article 30.2). Parties must also now seek the same confidentiality undertaking from all those that they involve in the arbitration, including authorised representatives, witnesses of fact, experts and service providers (Article 30.1).
This is a welcome development to ensure that confidentiality is safeguarded to the fullest extent possible. Parties should also be able to opt out of Article 30 if they so desire. Going forward, parties and their counsel team need to remember to obtain the undertaking each time they involve a new participant in the arbitration.
Six minor changes not to be forgotten
- Amendments to the Request/Response permitted
Before the tribunal is appointed, the LCIA Court may now permit a party to amend its Request or Response, on the Court's terms, after having given the parties the chance to state their views. It is hoped that the LCIA Court will exercise its power conservatively to focus on clerical/typographical/computational errors, rather than anything more substantial. - Focus on fast tribunal appointments
The LCIA Court has always committed to appointing the tribunal promptly after receiving the Response but if none is received, it will now make the appointment "promptly" after 28 days from the day the case is officially registered (Article 5.6); previously it was 35 days. - Further transparency as to nationality
The parties' nationalities must be specified in the Request and Response (Article 1.1(i) and Article 2.1(i)) and the rules now helpfully define nationality. For natural persons, nationality refers to citizenship. For legal persons, it refers to the jurisdiction(s) in which it incorporated and has its seat of effective management (which, if different, shall encapsulate both jurisdictions) and includes the nationalities of its controlling shareholders or interests (Article 6.2). These changes are likely to promote earlier challenges pertaining to nationality issues. - Emergency arbitrators' powers clarified
The 2021 Rules expressly clarify the broad-ranging powers available to emergency arbitrators. Emergency arbitrators may:- determine the amount of the Legal Costs relating to the emergency proceedings as well as the proportion of such costs (and the Arbitration Costs) to be allocated to each of the parties (Article 9.10).
- confirm, vary, discharge or revoke any order they make and/or issue an additional order (Article 9.12(i)).
- correct any computational, clerical or typographical error, any ambiguity or any mistake of a similar nature in any award they render (Article 9.12(ii)).
- make an additional award as to any claim for emergency relief presented in the emergency proceedings but not decided in any award they render (Article 9.12(iii)).
- When is unilateral communication with the DIFC-LCIA Registrar permissible?
Article 13.4 confirms that a party can have unilateral contact with the DIFC-LCIA Registrar regarding "administrative matters". To safeguard procedural fairness, parties should continue to copy the other side in all other communications with the DIFC-LCIA and the tribunal, as per current established practice.
- New target timeframe for handing down the award
Tribunals have always been required to notify parties (and the DIFC-LCIA Registrar) of their planned timetable for deliberations and handing down the final award, which had to be done "as soon as reasonably possible" after the parties' last submission (Article 15.10). With efficiency in mind, there is now a target timeframe for hand down which should please users: within three months of the parties' last submission (Article 15.10).
Comment about the impact of the 2021 Rules
In our view, the 2021 Rules, which govern all the proceedings of the Centre, should reinforce the Centre as a fair and effective means of resolving disputes both for local and international parties. Likewise, they should reinforce the Centre’s reputation as a leading commercial arbitration institution in the Middle East and Africa.
It remains to be seen whether an Arabic translation of the 2021 Rules will be published to support the local arbitration community, an endeavour which was jointly undertaken by two law firms in relation to the predecessor rules. If an Arabic version is published in due course, it is likely to attract more users in the region.
