The LCIA’s 2020 Casework Report reveals that the London arbitration market is busier than ever, at least in part as a result of the Covid-19 pandemic.
According to the 2020 Report, the LCIA had an “exceptional year”, seemingly due to the Covid-19 pandemic, with a record 407 arbitrations being referred to the LCIA under the LCIA Arbitration Rules. This marks an increase of 18% compared to 2019 (up from 346 referrals).
Banking & finance is no longer the dominant industry sector of the LCIA’s caseload, with percentage of cases in this area falling from 32% in 2019 to 20% in 2020. Indeed, the percentage of claimants being from the banking & finance sector “more than halved” from 22% in 2019 to 10% in 2020. Financial disputes were overtaken by the energy and resources (26%, up from 22% in 2019) and transport and commodities (22%, up from 15% in 2019) sectors. Perhaps unsurprisingly, it appears that the influx of LCIA referrals in 2020 was at least in part attributable to industry sectors most immediately impacted by Covid-19 disruption (i.e., energy, transportation and commodities).
The LCIA casts doubt on whether the decrease in banking and finance referrals since 2019 reflects a shift in the overall trend, noting that the 2019 figure for cases in this sector was inflated by a group of 41 related low-value arbitrations. However, it bears mention that banking and finance was also the dominant sector in 2018 LCIA referrals (representing almost a third of cases at that time) and was tied for first place with the energy and resources sector in 2017 (at 24%). As such, the 2020 data suggests a slight shift towards energy and transportation disputes when compared to previous years.
This overall trend is confirmed by data regarding the types of agreements seen in LCIA arbitrations. Most arbitration arose from a sale of goods contracts (24%, up from 18% in 2019), agreements for the provision of services (21%, up from 19% in 2019) and shareholders, share purchase and joint venture agreements (20%, up from 14% in 2019). The proportion of cases arising from loan agreements dropped from 30% in 2019 to 16% in 2020.
The LCIA observes that 43% of cases referred in 2020 involved an agreement entered into in the two previous years (2018 and 2019), marking a sharp increase in this metric since 2019 (23%) and 2018 (30%), respectively. Importantly, the LCIA notes that “the Requests for Arbitration received in 2020 (some of which expressly refer to COVID-19 as triggering the dispute) suggest that this spike represents a positive correlation with the pandemic”.
Parties, applicable law and seat of arbitration
The proportion of UK-based parties in LCIA arbitration continues to fall, with 86.6% of parties from elsewhere (an increase from 81.4% in 2019). An astonishing 88 different party nationalities were represented. That said, the UK remains the highest represented at 13.4%.
There has also been a rise in disputes referred to the LCIA with no obvious nexus to England & Wales, whether by governing law or seat. English law was the applicable governing law in 78% of the arbitrations referred to the LCIA in 2020, a 3% drop compared to 2019. Arbitrations were seated outside of England & Wales in 16% of the cases, marking a 5% increase. The LCIA observed a greater link between applicable law and seat in 2020, meaning that more Parties selected the same jurisdiction for governing law and seat of arbitration.
The shift towards greater diversity in arbitrator nationalities in earlier years continued in 2020. Reflecting the global spread of the caseload, 40 nationalities were represented. Despite reporting a lower percentage of UK-based parties and decrease in prevalence in English law and seat, British arbitrators were appointed 63% of the time (up from 51% in 2019). While the LCIA Court is said to have appointed non-British arbitrators 47% of the time, parties and co-arbitrators were less likely to do so (32% of the time and 18% of the time, respectively).
In terms of gender diversity, women continued to be under-represented, although there is evident progress in recent years. Women accounted for 33% of all appointments in 2020, a notable increase from the 23% figure reported for 2018. The LCIA continues to lead the way in addressing the imbalance: where the LCIA Court made arbitrator selections, female arbitrators were selected 45% of the time (a decrease of 3% compared to 2019). Parties and their counsel can clearly do more to address the issue when making arbitrator nominations, as only 22% of party appointments went to female candidates (an increase from the 2019 figure of 12%).
It bears mention that the proportion of first-time appointees dropped to 14% in 2020 from 19% in 2019.
Relief sought and sums in play
In terms of relief sought, cases under the LCIA Rules in 2020 followed broadly the same trend as 2019. The majority of claimants requested monetary relief only (54% of the time, down from 65% in 2019), while a smaller proportion requested both monetary relief and declaratory relief / specific performance (31% of the time, up from 28% in 2019) or declaratory relief only (15% of the time, up from 8% in 2019).
On the whole, it appears the value of quantified claims in LCIA requests for arbitration is gradually increasing, with claims below USD 1m accounting for only 34% of cases (down from 43% in 2019) whereas the proportion of claims quantified at above USD 10m has risen from 21% in 2019 to 29% in 2020.