LCIA releases costs and duration data in international arbitration

On 3 November 2015, the London Court of International Arbitration (“LCIA”) has released the results of an analysis on the costs and duration of arbitration cases it recently administrated under its rules. In publishing these results, the LCIA reported its intent to provide “users with adequate tools for efficient and effective arbitrations”.

For each case in which a final award was issued in the period between 1 January 2013 and 15 June 2015, the LCIA recorded the costs incurred in the procedure and the duration thereof from the date it received the Request for Arbitration to the issuance of the final award.

Its findings are as follows:

As regards the costs of the arbitration

The analysis on costs only covers the arbitrators’ fees and institutional costs which “in reality are the least significant costs components” since they generally comprise only 20% of the total costs occurred in the proceedings. It is interesting to note that the ICC recently made the same exercise and concludes that the “arbitration costs” including institutional and arbitrators costs amounted to approximately 17% of the total costs (as reported here).

This analysis was an opportunity for the LCIA to highlight to users one of the key features of LCIA arbitration which is the hourly rate system. In contrast with, for example, the International Chamber of Commerce (“ICC”) and the Singapore International Arbitration Centre (“SIAC”) systems where the costs of the arbitration are a percentage of the total amount in dispute, in LCIA arbitration parties are billed for the time actually spent by the arbitrators and the institution on their case. In order to prevent abuse, the maximum hourly rate that an arbitrator can charge is capped at £450 per hour.

According to the LCIA, its costs could be overall lower than those of other institutions. The LCIA thus concludes that the hourly-based system is competitive although users might have expected that an hourly-based system to be more expensive. The LCIA clarifies, in this regard, that USD 1 million of amount in dispute is the turning point at which the hourly rate system would be preferable since it appears to be cheaper that the percentage of the total amount method of calculation. Thus for example, the costs of LCIA arbitration remain higher than the Hong Kong International Arbitration Centre (“HKIAC”) for cases under USD 1 million.

The conclusions reached were that the mean and median costs of LCIA arbitrations are USD 99,000 and USD 192,000 respectively.

As regards the duration of arbitral procedures

The analysis on the duration reveals that the median and the mean duration of LCIA arbitrations are 16 and 20 months respectively. The LCIA’s analysis also confirms, without surprises, that arbitration conducted by a sole arbitrator are shorter compared to arbitration conducted by three arbitrators, the first lasting 18,5 months and the second 21 months in their average duration.

The LCIA clarifies that it was unable to compare its duration data to other institutions since no such comparable data is presently available. In this regard, it concludes its analysis by encouraging others institutions to “provide comparable data allowing further analysis to the benefit of potential users”.

The release of the LCIA’s costs and duration data reflects a general trend towards more transparency in international arbitration, which will undoubtedly be profitable to international arbitration.

It remains to be seen how others arbitral institutions will react and whether they will follow suit.

The LCIA analysis on costs and duration data is available here.

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