Clifford Chance

LCIA Publishes Third Set of Arbitrator Challenge Decisions

The latest set of 24 decisions, issued between 22 July 2017 and 31 December 2022, offers parties contemplating challenge applications useful guidance on the emerging law and practice in this area.

On 16 December 2024, the London Court of International Arbitration (LCIA) released its third set of decisions on arbitrator challenge applications. The decisions include challenge proceedings under both the 2014 and 2020 LCIA Arbitration Rules (LCIA Rules), as well as cases in which the LCIA provided administration and/or appointment services in UNCITRAL proceedings.

Background

The database contains the full text of decisions subject to limited redactions for confidentiality. The complete database comprises 84 decisions published since 2010 and is available here, with decisions from 2023 onwards to be published on a periodic basis. Notably, objections made by parties based on pre-appointment disclosures do not constitute formal challenges and are therefore excluded from the data set.

The publication of the latest tranche of decisions forms part of the LCIA's ongoing commitment to transparency, and coincides with a number of recent developments seeking to ensure arbitrator independence and impartiality, in particular: the UK Supreme Court's decision in Halliburton v Chubb [2020] UKSC 48 (which clarified the test for apparent bias under English law) and the draft Arbitration Bill currently making its way through the UK Parliament (which introduces a statutory disclosure obligation under proposed Section 23A).

According to the LCIA, the database is intended to serve as a "research tool" for parties, counsel, and arbitrators to provide insight into the reasoning and procedures likely to be adopted in future challenge cases under the LCIA and UNCITRAL Arbitration Rules. The database therefore facilitates the dual purpose of bolstering the procedure for challenging arbitrators while also deterring frivolous applications.

Rarity of successful applications

The database demonstrates that challenges in LCIA arbitrations are rare, and successful challenges rarer still. Between 2017 and 2022:

• 39 challenge applications were filed in total, comprising 32 applications under the LCIA Rules and 7 under the UNCITRAL Arbitration Rules;
• Only 2 challenge applications were upheld; and
• 6 other challenge applications were resolved without formal decisions being issued, due to resignations or withdrawals.

Overall, challenge applications accounted for just 1.7% of the LCIA's caseload between 2017 and 2022. Of the 32 challenge applications filed in LCIA cases during this period, only 1 succeeded – a success rate of just 3%.

LCIA vs UNCITRAL

Under the LCIA Rules, the arbitral tribunal is typically appointed by the LCIA Court following a centralised review process in which arbitrator disclosures are scrutinised for potential conflicts. By contrast, the UNCITRAL Arbitration Rules provide for the parties themselves to appoint the tribunal as a default rule.

These differences in the appointment processes are reflected in the distinct grounds on which parties pursued challenges. While the majority of challenges in LCIA cases arose from objections to procedural decisions made in the course of proceedings or in an award, challenges in UNCITRAL cases primarily concerned allegations that arbitrators lacked independence or impartiality due to their relationships or connections.

Takeaways

Although limited in number, the latest set of 24 decisions provides parties, counsel and arbitrators with numerous valuable insights. Key takeaways include:

• Procedural decisions that are adverse to one party (for example, an order for security for costs or a refusal to admit additional evidence) do not necessarily constitute evidence of bias or conflicts, and challenges on these grounds are unlikely to succeed;
• Challenges that have the effect of seeking to appeal a point of law or the merits (for example, attempts to remove an arbitrator due to a failure to address a specific issue or a lack of reasoning in an award) are unlikely to succeed; and
• Challenges based on alleged connections between an arbitrator and another party (for example, a co-arbitrator, law firm, or expert) are unlikely to succeed in LCIA cases, as the LCIA's disclosure-based appointment process operates to root out such relationships to mitigate the risk of conflicts arising.

Separately, the LCIA expressly recommends that future challenge decisions include determinations on the allocation and quantum of costs to avoid unsuccessfully challenged tribunals having to determine costs at a later stage. As a result, unsuccessful challenge applications could now carry immediate adverse costs risk.

The outcomes of the latest challenge decisions underscore the LCIA's clear position, as reflected in Article 14.2 of the LCIA Rules, that tribunals have significant discretion in exercising their duties, particularly in relation to procedural matters.

Moreover, the LCIA's appointments procedure – in which arbitrators are required to make disclosures to allow the LCIA Court to review potential conflicts prior to making appointments – means that challenges in LCIA cases based on alleged arbitrator connections or relationships are likely to have limited prospects of success.