Kimberley Bazelais examines the LCIA’s 2023 annual report in International

By Kimberley Bazelais
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Kimberley Bazelais
Kimberley Bazelais

Associate Kimberley Bazelais examines the key takeaways of the LCIA’s 2023 annual report, highlighting that the number of disputes referred to the LCIA increased by 13% from 2022.

Kimberley’s article was published in International, 23 June 2024, and can be found here

The activity of the LCIA, as of all arbitral institutions, is vulnerable to external factors beyond its control in an ever-volatile global context. Nonetheless, the LCIA’s annual report for 2023 delivers an assessment which is decidedly on the upswing, with steady growth punctuated by institutional evolution.

An initial high level overview first reveals that the LCIA appears to have successfully mitigated the downward trend in its caseload, discussed in our commentary on the LCIA’s report for 2022. The number of disputes referred to the LCIA increased by 13% from 2022 and returned to 2021 levels. It will likely require several more years to determine whether the institution will reprise the pattern of upward growth established in the past decade, and thus strongly rebound from the challenges of the COVID-19 pandemic and ongoing geopolitical crises.

Looking beyond the figures, the LCIA’s international reach is apparent from the breakdown of its caseload. In 2023, 96% of cases involved an international (non-UK) party, with 79% involving only international parties. As in previous years, the LCIA’s appeal with Western parties remains largely stable, neither undergoing tremendous growth nor significant decline. Figures in Western and Northern Europe and the United Kingdom remain within the range of the past few years, while the LCIA’s caseload has varied widely in other regions. 2022’s massive upsurge in cases involving Asian parties has not continued in 2023, with the percentage of parties from Singapore, China or Hong Kong having more than halved. In contrast, the number of African parties to arbitration markedly doubled, along with a significant increase in North, Central and South America, as well as the Caribbean.

The party breakdown appears to evolve in such a way that patterns may likely only emerge with decades-level analysis. While the attempt of year-on-year analysis remains a potentially futile endeavour, some features have clearly become entrenched in the institution’s activity. First, London as a seat of arbitration and English law as the applicable law have become almost synonymous with LCIA arbitration (respectively 86% and 83% of LCIA arbitration, a stable figure from year to year).

Second, the profile of disputes before the LCIA in 2023 remained largely concentrated in the transport and commodity sector, constituting 36% of disputes (37% in 2022). The LCIA credits ongoing developments in energy prices and supply chains around the world for the continued prevalence of transport and commodities related matters two years running. The second most frequently seen sector was once again banking and finance, making up 16% of disputes, and energy and resources gaining ground in third at 14% (11% in 2022).

Despite the continuation of these patterns from years prior, the LCIA also experienced notable changes in its caseload in 2023.

The report for 2023 shows a significant rise in disputes relating to so-called “younger” agreements, i.e., agreements concluded within two years prior to the year of referral of the dispute to the LCIA. This spike (48.2% of 2023 cases, compared to 41.94% in 2022 and 34.6% in 2021) shows similarities with the upsurge in 2020, which was attributed to the Covid-19 pandemic. This trend can be explained by the overall, and regrettably long-lasting market and sectoral volatility due to energy prices and ongoing global conflicts (particularly in agreements pertaining to the sale of goods, which made up 31% of agreements in LCIA arbitrations).

The LCIA also saw a notable surge in the amount of monetary relief sought by parties, as well as a proportionate decrease in cases seeking awards of lower value. Claims over 20 million USD increased from 19% in 2022 to 29% in 2023, while claims under 5 million USD now make up just slightly over half of cases where monetary relief is sought. Some of the impact of this trend may be addressed in 2024 by the coming into effect of the new LCIA Schedule of Costs on 1st December 2023. The LCIA’s previous rates, in particular for arbitrator fees, had previously been criticised as being lower than the market rates for high value and/or complex arbitrations, and therefore at risk of failing to retain and attract top calibre arbitrators. The new approach aims at ensuring that the LCIA remains competitive while maintaining its flexibility to adapt hourly rates for all cases, including lower value disputes.

On the diversity front, 2023 presents a more upbeat picture than 2022. Co-arbitrators have returned to higher levels of female arbitrator appointments (39%, compared to only 23% in 2022 and 33% in 2021), while parties continue to (very) incrementally increase the proportion of female arbitrator appointments (21% in 2023, a slight increase from 20% in 2022 and nearly back to 2020’s 22%). The LCIA is, as is usually the case, far ahead and close to reaching parity at 48% (a positive leap from 45% in 2022).

Regarding geographic diversity, all indicators available are also positive, as the increase in the proportion of arbitrators of various nationalities continues. Despite English law remaining the preferred choice in LCIA arbitration referrals, 42% of arbitrators appointed were non-British, a slight increase compared to the 40% appointed in 2022. The LCIA Court continues to appoint more non-British arbitrators as a percentage of its total appointments than parties and co-arbitrators. Nonetheless, similar to the gender diversity issue, parties and co-arbitrators are beginning to catch up in this respect. These developments demonstrate the commitment of the LCIA to serve as a driver for diversity in international arbitration.

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