Sanctions Increase The Complexity and Costs of LCIA Arbitrations

Daniel CalvoBlog

Cost increase of LCIA Arbitrations

The LCIA is introducing a number of new measures for arbitrations and mediations that will take effect from 1 December 2023 and apply to LCIA arbitrations registered on or after that date. 

Schedule of Costs 

The new measures include a new Schedule of Costs that introduces a new fee range between £250 and £650 per hour for the Arbitral Tribunal and raises the fee cap from £500 to £650 per hour. 

The hourly rate that will be applied to your matter within this range will be based on the overall complexity of the case. The updated ‘Guidance Notes for Parties and Arbitrators’ provides examples of cases that may require a higher rate including those that involve complicated sanctions issues that go to the substance of the dispute or where multiple sanctions regimes are alleged to impact the merit or substance of the claims. 

We are yet to see any further clarification on what is meant by a sanctions issue that goes to the ‘substance of the dispute’ or ‘impact the merit of the claim’; however, it is likely that just because an entity is sanctioned, it will not automatically result in the dispute being considered so complex that the Arbitral Fees are to be set a the top of this range. 

The change to the Schedule of Costs demonstrates, yet again, how sanctions are complicating dispute resolution across the world and increasing costs for parties even in the more cost-efficient ADR setting. That being said, the increase in the hourly rate should ensure the LCIA remains competitive against other major arbitral institutions and continues to attract high-quality arbitrators, whilst the introduction of the fee range ensures there is a more accurate reflection of the complexity of the case in the fees charged. 

Receipt of Funds 

The updated Guidance Notes for Parties and Arbitrators also state that from 1 December 2023, the LCIA will take a new approach to the receipt of funds. 

Under the new policy, the LCIA will only accept payment from: 

  1. an account held in the name of a party to the arbitration; or
  2. from an account held in the name of a person(s) or law firm(s) who is authorised to act for the party and who is on the record for the party to the arbitration. 

The new policy comes in the wake of the extensive sanctions regime that came into force following Russia’s invasion of Ukraine, and the greater need for enhanced due diligence by the LCIA when receiving funds from parties to ensure they are not in breach of any sanctions. 

The updated Guidance also states the LCIA may require further information in these circumstances where sanctions are involved.

Clearly, this may raise concerns for parties of unnecessary delay resulting from these new policies, which is against the very principle of speed of resolution for which parties choose to engage in arbitration. However, the LCIIA is aware of this and may still accept payments from parties and their legal representatives, including payments for Registration Fees, deposits, arbitrator fees and LCIA charges (see paragraph 276 of the Guidance Note). 

Commentary 

There is no doubt that these new measures and policies announced by the LCIA as increasing the cost and complexity of arbitration proceedings, all as a result of sanctions. 

Despite this, arbitration is still a far more cost-efficient and quicker process than court litigation for resolving your dispute. 

These changes also highlight the need for businesses and litigators to always have one eye on sanctions and consider the impact they may have on the matter before them. At Eldwick Law, we understand the legal landscape surrounding sanctions is constantly evolving and is one of the most significant concerns for businesses across the world. Our extensive experience with both arbitration proceedings and sanctions best places us to provide tailored advice and help you navigate this ever-changing landscape. 

For more information on how Eldwick Law can assist you, or to arrange a consultation with our commercial arbitration solicitors, please contact our London office.

 

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