The London Court of International Arbitration (LCIA) has produced its Casework Report for 2020 which shows a significant increase in the number of arbitrations commenced within it in 2020. This is illustrative of a general increase in the use of arbitration as a means of dispute resolution.

Increase in referrals

The LCIA's report notes that:

  1. In 2020 it received 444 referrals, 407 of which were arbitration referrals under the LCIA rules. This is a 10% increase in the total number of referrals and an 18% increase in referrals under the LCIA rules from the previous year.
  2. There was a general increase in the value of arbitrations referrals. Where disputes were quantified in the Requests for Arbitration:
    1. In 34% the amount claimed was under 1 million USD (compared to 43% in 2019
    2. In 28% of cases the amount claimed was 1 – 5 million USD (which was the same percentage as the previous year)
    3. In 28% of cases the sum claimed was 5 – 50 million USD (compared to 20% in the previous year)
    4. In 10% of the cases quantified at the outset, the amount claimed was greater that 50 million USD (compared to 9% in 2019).

So, it seems, there was both an increase in cases generally as well as an increase in high value referrals. What remained constant, from previous years, was that the top three sectors involved in LCIA arbitrations were energy and resources, transport and commodities and banking and finance.

Impact of COVID-19

While the true effect of COVID-19 on the figures from 2020 can never be entirely clear, the report comments on a number of knock-on effects that the pandemic did have.

From a dispute resolution point of view, national courts closed at various points globally. This delayed the progress of a number of cases through traditional dispute resolution. Meantime, arbitrations proceeded on virtual hearings or on the basis of documents-only (avoiding a hearing at all). The LCIA reports that this enhanced the efficiency of proceedings.

Additionally, COVID-19 itself produced disputes. While there can be no clear statistics on this, the LCIA does note that there were cases which were explicitly stated as being triggered by the pandemic - including cases involving entertainment or sporting events which were cancelled and commodity cases, where delivery schedules or pricing was impacted by restrictions. The impact of COVID-19 in creating disputes can also be seen in the decrease in time between the entering the agreement which was the basis of the dispute and the dispute itself. In 2020, the LCIA reports that almost half of the disputes filed arose from agreements entered into in the previous 2 years, a much higher percentage than previously.

Impact of a change in rules

In October 2020 the LCIA introduced new rules for LCIA arbitrations commenced from that date. We discussed these changes in a previous blog. Despite coming in the final quarter of the year, the LCIA report that by the end of the year parties were making use of the updated provisions.

Conclusion

Arbitration is a firmly established alternative means of dispute resolution and its popularity as a means of dispute resolution is increasing.