"How much will an arbitration cost?" and "How long will it take?" are two of the three key questions in-house counsel typically ask (the third is "Will we win?"). Whilst being unable to assist with the third question, the LCIA, one of the leading international arbitration institutions, has published its latest Cost and Duration Report which sheds light on the first two questions. This report shows that the median cost of an arbitration (i.e. the Tribunal's and the LCIA's fees) is US$97,000, the median length of an arbitration is 16 months, and that the median amount of time for a tribunal to produce an award is 3 months.
Unlike many other institutions, the tribunal and administrative fees of LCIA arbitrations are charged at an hourly rate, rather than ad valorem (proportionately to the value of the claim).
The LCIA report estimates its total costs (including administrative and tribunal fees) to be considerably lower than those of other institutions. On average, the report estimates that its tribunal fees are 50% less than those of tribunals under comparable institutions, and its administrative charges are 40% less.
Strikingly, in large cases with over US$100 million in dispute, other institutions are on average 225% more expensive than the LCIA.
3 months to produce an award
One notable finding in the Report (the first edition of which was published in 2015) is that an LCIA tribunal does not take proportionately longer to produce a decision in more valuable matters. While complexity and value are often linked, and the overall time cost of a dispute does increase in proportion with the amount at stake, on average an LCIA tribunal takes the same amount of time – 3 months – from final submissions to award whether the claim is worth $1 million or $100 million.
This may partly be due to the introduction of Article 15.10 in the 2014 LCIA Rules, which requires the Tribunal to make its award as soon as reasonably possible following last submission, and to set itself a deadline notified to the parties and the Registrar.
Transparency to benefit the end user
In the past, the full data sets and methodologies used by arbitral institutions in their own cost reports have not been made available to the public, inhibiting direct comparisons between arbitral institutions. Acknowledging this issue, the LCIA engaged independent third party consultant The Brattle Group in the preparation of its report.
The continued publication by the LCIA and other institutions of costs and duration data is a welcome development that will benefit the increasingly sophisticated and informed end users of international arbitration.
The LCIA Cost and Duration Report 2013-16 is available here.
Part of Bird & Bird's series of Arbitration SpeedReads aimed at providing busy practitioners and in-house counsel with easy to read updates on topical Arbitration issues.
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