London's blockchain-driven mediation and arbitration scheme – an overview
Head of International Arbitration at RPC, Chairman of the Board of Trustees, Chartered Institute of Arbitrators and Director of LCAM, London
Dating back to the late 19th century, an arbitration scheme administered under the auspices of the City of London Chamber of Commerce has been in existence for over 125 years. Supported by the City of London Corporation and the London Chamber of Commerce, in 1975 the Institute of Arbitrators, which later became the Chartered Institute of Arbitrators, joined in the management of the scheme. The scheme was named in 1903 as the London Court of Arbitration which led to the establishment of the London Court of International Arbitration (LCIA) as a private body independent of the founding bodies, which continues to operate as one of the major global institutions.
The original Chamber of Commerce Scheme was revamped in 2016. And now, under the auspices of the London Chamber of Commerce, it has undergone a complete overhaul, providing a new set of Rules for Mediation, Expedited Arbitration and Arbitration, using blockchain technology as a platform for documentation. It has been renamed the London Chamber of Arbitration and Mediation (LCAM). The scheme was launched during the COVID-19 pandemic on 26 May 2020 which allowed the Arbitration Rules to take account of virtual hearings which have taken off in this period (see https://virtualarbitration.info). The scheme can be found at https.//lcam.org.uk.
A historical cornerstone for arbitration has been economy, efficiency and expedition, the three ‘e's’, added to which confidentiality has played an increasingly important part in the sell to users. Unfortunately for the business community who are the users, the three ‘e's’ have been substantially eroded. It was with this in mind the revised LCAM scheme has been developed.
The scheme is overseen by the Board of LCAM comprising members from both business and the legal profession. It is administered by a Secretariat.
It was felt that any scheme promoting alternative dispute resolution (ADR) should include provision for mediation which can be used at any stage of a dispute. An overriding mantra in resolving disputes by means of ADR might be coined as ‘avoid, communicate, negotiate, mediate, arbitrate’.
The aim of the mediation aspect of the scheme is to provide an expeditious process for business users with a confidential, flexible opportunity to resolve disputes in a less formal environment, with the option to make it enforceable by commencing an arbitration then referring the case to mediation. Upon a successful settlement, the terms can then be recorded in the form of an arbitral award for enforcement purposes. The Singapore Convention on Mediation relating to enforcement of international settlement agreements resulting from mediation came into force in September 2020, but it will be some considerable time before it is as widely recognised as the New York Convention.
The fees are clearly set out and transparent, providing for a fixed fee for a set amount of hours with a competitive hourly rate should extra hours be involved. There is a panel of experienced mediators to choose from, although parties may choose their own mediator.
This scheme is designed for parties who seek a faster process with a clear timeline. It is a ‘documents only’' process, giving businesses the opportunity to resolve their disputes without representation, as in the case of many trade association-type arbitrations which currently exist. Pleadings, statements and experts' reports are subject to a word limit.
The Expedited Arbitration operates on a scale of fixed fees, providing the parties with relative cost certainty. If the parties are represented, recoverable legal costs are capped. The fees range from £2,500 to £4,000 with a limit of £3,000 for a counterclaim (exclusive of VAT). The maximum recoverable legal costs range from £4,000 to £6,000 depending on whether there is a counterclaim.
The aim is to obtain an award within six months.
Arbitration under the auspices of the London Chamber of Commerce has been written into contracts all over the world.
The LCAM Arbitration Rules provide for the resolution of disputes by an institution on a competitive fixed-fee basis for administration on an ad valorem basis. This provides users with certainty at the outset without being met with a substantial and often unexpected fee during, or at the end of, the process from the institution. On a sliding scale, the maximum administrative fee charged by LCAM is £10,000. Arbitrators' fees are also tailored to match the amount in dispute by providing a fixed hourly rate on a scale related to the claim value.
The process is built around blockchain technology which provides a confidential and secure document retention process.
As with the Expedited Arbitration scheme, the Rules are effective as of 1 June 2020.
The Board has the power to decide whether LCAM manifestly lacks jurisdiction, decide the number of arbitrators, appoint arbitrators and determine the Advance on Costs (Article 9).
While the parties may agree on the number of arbitrators, the default position is one arbitrator. If the parties cannot agree upon the tribunal, there are provisions for the Board to make the appointment from the LCAM panel, unless it decides otherwise, to allow for some flexibility, for example, where specialist expertise is required. The Board shall confirm the appointment of arbitrators in its absolute discretion and the parties may not derogate from this provision (article 13).
The LCAM panel aims to be diverse in its make-up and endeavours to reach out to candidates who are experienced but may be early on in their way to a career as arbitrators rather than necessarily just comprising a panel of already well-known individuals. The panel is made up of 57 per cent female, 43 per cent male and 25 per cent BAME members. The parties are free to make their own selection. Arbitrators must be impartial and independent and provide disclosure of any circumstances which may give rise to justifiable doubts as to independence and impartiality in the eyes of the parties, which is an ongoing duty throughout the process (Article 14).
The Arbitral Tribunal shall conduct the arbitration as it considers appropriate, in an impartial, practical and expeditious manner, giving each party an equal and reasonable opportunity to present its case (Article 19).
Whilst the parties are at liberty to choose who represents them, if after the appointment of the tribunal a representative is appointed and that representative gives rise to a requirement for that arbitrator to make a disclosure under Article 14, the tribunal may order that such new representative may not represent that party in the arbitration. This is to stem in part the increasing use of ‘guerrilla’ tactics to steer the process off course.
The seat of the arbitration shall be London unless the parties agree otherwise. The hearing can take place other than in London after consultation with the parties. Virtual hearings are contemplated by the Rules.
Early dismissal of a case advanced by either claimant or respondent may be ordered if it is determined to be manifestly without legal merit (article 23A).
Interim measures may be granted by the tribunal pursuant to article 32. Importantly it is provided that a request for interim measures to a judicial authority by a party is not incompatible with the arbitration agreement or the Rules.
There is no express provision for the appointment of an emergency arbitrator. It was felt that parties might generally be better served by application to a court whose order may well have greater teeth than an interim order from a tribunal, which of itself remains a matter of debate in many jurisdictions.
London remains one of the most popular locations and seats for international arbitration, but it is not complacent.
The new LCAM scheme provides for the resolution of all types of disputes by ADR both international as well as domestic. The approach to costs both for the smaller case as well as the more complex and substantial case makes it a competitive alternative to other arbitration institutions around the globe. It embraces technology which is now the ‘new normal’ along with e-disclosure and virtual hearings which have rapidly become an accepted part of the dispute lawyer's toolkit. A diverse and inclusive panel of arbitrators and mediators aims to reflects concerns about diversity in the field of ADR.
Model clauses can be found on the website for those who wish to consider using LCAM for resolution of disputes in the future.