Wednesday, August 11, 2010

LCIA India Rules: Tailored for Indian Scenario - Guest Post by Mr. Sonal Singh

We are happy to publish a guest post by Mr. Sonal Singh on LCIA India Rules. Mr. Singh is an Advocate and Solicitor (England & Wales) and is an alumnus of Kings College, London. He is currently associated with the Indian International & Domestic Arbitration Center, a recent initiative which has on its list of consultants stalwarts like Prof. Martin Hunter. Following is the text of Mr. Singh's post:

LCIA India has recently introduced its new arbitration rules (LCIA Rules (India)) specifically tailored for Indian scenario. The opening of LCIA India and unveiling of the LCIA Rules (India) has provided a boost to the development of institutional arbitration in India. The LCIA Rules (India) of course have the advantage of well established and recognized LCIA Rules (London), while at the same time; they have been modified to compliment the current Indian Legal regime.

The LCIA Rules (India) have tried to ensure fairness and expediency in the arbitration proceedings by creating obligations on the parties and Tribunal and granting greater powers to the LCIA Court. Also the new rules have provided an extremely attractive frame work of arbitration cost for parties. All these deviations specifically made to counter the obstacles in India being Arbitration-attractive destination are discussed herein below.

Arbitrations to be handled with speed and efficiency

The LCIA Rules (India) have specifically made a provision under Article 14.2 which states that:

“At all times the parties shall do everything necessary for the fair, efficient and expeditious conduct of the arbitration including complying without delay with any determination of the Arbitral Tribunal and the LCIA Court as to procedural or evidential matters or with any order of directions of the Arbitral Tribunal and the LCIA Court”.

This clause obligates the parties to do everything for efficient and expeditious conduct of arbitration proceedings. This clause does not find place in the original LCIA Rules.

Another effort to expedite the arbitration proceedings can be seen in clause 5.3(b) of the LCIA Rules (India), which require the prospective Arbitrators to confirm their ability to devote sufficient time to ensure the expeditious conduct of the arbitration before they are appointed.This article is some what similar to the new ICC statement of acceptance availability and independence and clarifies that only those arbitrators who can devote sufficient time and conduct the proceedings expeditiously will be selected.

Article 28.4 which appears to be most interesting and innovative states that Tribunal may order costs taking in account the “conduct and cooperation by the parties during the arbitration proceedings”. Thus any undue delay, unnecessary expenses caused by parties or their representatives can be detrimental to their interest and pocket. There might be a possibility, where a party wins the case and gets an order in its favour, but may also be imposed with costs for causing undue delay, obstructing the arbitration proceedings etc.

This clause imposes an obligation on both, the Tribunal, to observe the conduct of the parties, and the parties, to bear good conduct during the arbitration proceedings.

LCIA Court to appoint Members and Chairman of the Tribunal

The LCIA Rules (India) (Article 5.5, 5.6 & 5.7) empowers the LCIA court to appoint the members and the chairman of the Tribunal. Greater authority is provided to the LCIA court to control and ensure that the Arbitration proceedings are conducted in fair, neutral and expeditious manner.

Article 5.6 of the LCIA Rules (India) states that in case of a three-member Arbitral Tribunal, the chairman shall in all cases be selected by the LCIA court. Even power to nominate the chairman has been taken away from the parties and the party nominees.

However, Article 5.7, allows the parties to “nominate” its nominee arbitrator (party arbitrators) but article 5.6 empowers the court to “appoint” them. However, it has been clarified that LCIA court would give due regard for any particular method or criteria of selection agreed in writing by the parties, nature of transaction, circumstances of disputes etc while appointing such arbitrators.

Further, Article 7.1 states in case the parties have agreed that any arbitrator is to be appointed by one or more of them or any third party, such agreement shall be treated as an agreement to nominate the arbitrator. This means that the power to appoint the arbitrators has been exclusively given to LCIA Court.

Seat of arbitration to be determined by LCIA Court

Unlike the LCIA Rules (London), which makes London the default seat if parties fail to arrive at any agreement as to the seat, neither New Delhi nor any other city has been made the default seat under the LCIA Rules (India).

Moreover, Article 16.1, states that when parties fail to agree to the seat of arbitration, LCIA Court shall decide the seat in view of all circumstances and taking into account the written statements made by the parties.

Bhatia International Sidelined

Another unique India-specific provision is Article 32.6 of the LCIA Rules (India) which provides for exclusion of Part-I of the Indian Arbitration and Conciliation Act 1996, where the place (or seat) of arbitration is outside India.

This clause sidelines the much controversial decision of the Hon’ble Supreme Court in the case of Bhatia International. Notably, by virtue of this article, in case of arbitrations held outside India, part I is excluded even if parties fail to stipulate to such exclusion in arbitration agreement

Attractive frame work of arbitration costs

The Rules provide for an hourly rate of compensation for arbitration capped at `20,000/- per hour. This is a departure from the current general practice in India. Currently, in ad-hoc arbitrations in India, the arbitrators are the ones who decide their fees. There are no fixed parameters to decide the fees and which may vary from `20,000/- to `1,00,000/-, for High Court Judges and `50,000/- to `2,00,000/- for Supreme Court Judges on per sitting basis (Usually a sitting is scheduled for 3-4 hour and anything over it is considered to be second sitting). The fees also depends on the amount of claim and complexity of disputes. Sometimes arbitrations may charge an extra fee for reading the cases and for drafting the awards. Considering the current practice the new Rules might prove to be attractive and cost effective to the parties.

But the cap on the arbitrators fee leave the floor open for many questions: would international arbitrators who get paid at £400 per hour or so under original LCIA rules and other arbitration rules, agree to conduct arbitrations in almost half the fee? Would it be possible for a party to nominate an arbitrator of its choice? Would not the other party refuse to higher cap as it would affect its own pay out?

These questions will be answered in months to follow when the Rules would be put to judicial scrutiny.


LCIA Rules (India) have been made to strike the correct balance between the well established LCIA Rules and new innovations, improvements and clarifications made as per Indian Legal regime. The New Rules are well equipped to avoid unnecessary delays that may be caused by the employment of dilatory tactics by the parties. In this respect the rules surpass Indian courts and ad-hoc arbitrations.

We can just hope that the opening of LCIA and introduction of the New Rules is the much awaited light at the end of the tunnel for a new culture International Commercial Arbitration in India.

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