On 11 August 2020, the London Court of International Arbitration (LCIA) released an update to its LCIA Mediation Rules, 2012 (2012 Rules) which became effective from 1 October 2020 (2020 Rules). This is the first major set of amendments to the 2012 Rules, which largely aims at making the mediation process more streamlined and clearer for mediators and parties. The significant changes involve usage of electronic means of communication, facilitating electronic signature on settlement agreements and encouraging communication technology to conduct virtual meetings. It appears that the amendments have been introduced in the wake of COVID-19 and to make the current rules more efficient and relevant to the present times.
Mediation, in general, is a more informal and less widely used procedure than arbitration. In the context of administration of mediation, it makes a significant difference if there are well defined rules. To this end, institutions administering mediation have devised certain rules. These rules have evolved over the years and need to be regularly updated in view of rapid advancement in the methods of dispute resolution and developments in technology. COVID-19 has brought its own share of complications with a paradigm shift from physical to virtual platforms. In this context, so far, the LCIA is one of the only institutions that has made comprehensive changes to their mediation rules by not only revamping the 2012 Rules but also accounting for emerging trends and changes.
This article seeks to provide an update on all the amendments that have been made to the 2012 Rules, and analysis of the same.
Applicability of LCIA Mediation Rules
LCIA Mediation Rules are applicable in cases where an agreement between parties provides for mediation of existing or future disputes under the rules of the LCIA. The 2020 Rules are effective from 1 October 2020 and shall be applicable to mediations commencing from that day onwards.
Request for Mediation
As per the 2012 Rules, parties were inter alia required to mention their full names and contact details in their written request for mediation to the Registrar of the LCIA Court. As per the 2020 Rules, the parties are also required to mention their nationality, in addition to the aforesaid details.
Further, as per the 2020 Rules, the request for mediation (including all accompanying documents) is required to be submitted to the Registrar in electronic form, either by email or other electronic means including via any electronic filing system operated by the LCIA. In case the requesting party / parties wish to submit the same by any alternative method, prior written approval of the Registrar would have to be sought. In the 2012 Rules, there was no provision allowing for submission of the request for mediation in electronic form.
Date of Commencement of Mediation
As per the 2012 Rules, in case of a prior agreement between the parties to mediate, the date of commencement of the mediation was the date of receipt by the Registrar of the request for mediation and the registration fee. There was no clarity about the date of commencement of the mediation in a situation of delayed payment of registration fee.
As per the 2020 Rules, where the registration fee is received subsequently, the mediation shall be treated as having commenced on the date of actual receipt of the registration fee by the LCIA.
The 2020 Rules specify that unless otherwise directed by the LCIA Court or by the mediator, all written communications shall be made electronically.
Appointment of Mediator
Before appointment by the LCIA Court, a mediator candidate is required to submit certain details in writing to the Registrar (for example, qualifications and professional positions, declaration of circumstances likely to give rise to justifiable doubts regarding independence and impartiality, etc).
As per the 2020 Rules, a mediator candidate shall also be required to declare in writing whether the candidate is ready, willing and able to devote sufficient time, diligence and industry to ensure the expeditious and efficient conduct of the mediation. Such written declaration is required to be submitted by the candidate to the Registrar promptly.
The 2020 Rules give an option to mediators to convene meetings virtually by conference call, video conference or using other communications technology (or in a combined form), in consultation with the parties. Under the 2012 Rules, the meetings could not be conducted virtually.
Signing of Settlement Agreement
Under the 2020 Rules, unless the parties agree otherwise, there is an option to get the settlement agreement signed electronically and / or in counterparts and assembled into a single instrument. Under the 2012 Rules, there was no option to get the settlement agreement signed electronically.
A possible situation where it may not be feasible to get the settlement agreement electronically signed is if the law of a state does not recognize an electronically signed agreement as an original agreement for enforcement of the settlement agreement..
The 2020 Rules specify that parties shall be jointly and severally liable to the LCIA and the mediator for all costs. Further, the advance payment for costs shall be the property of the LCIA, to be disbursed by the LCIA in accordance with the LCIA Rules 2020 and keeping in mind the interests of the LCIA. It is specified that the LCIA shall not act as trustee and its sole duty to the parties in respect of the advance payment shall be to act as per the LCIA Rules 2020. In case the advance payment exceeds the actual costs, the LCIA shall make reasonable efforts to contact the parties and transfer the excess amount, however, if within a total period of 90 days from the date of such contact, no response is received from the parties, the parties will be deemed irrevocably to have waived any right to claim and / or receive the excess amount.
In the 2012 Rules, it was specified that a mediator shall not be appointed and the mediation shall not proceed unless the deposit / advance payment for costs has been paid in full by the parties. However, the 2020 Rules have carved out an ‘exceptional circumstances’ to this rule. What these exceptional circumstances are, has not been specified and would vary from case to case, but they could arise when there is a guarantee / undertaking from the parties that the payment would be made by a fixed date, there is an extreme urgency on account of which mediation needs to be commenced at the earliest, there is an early / fixed date by which settlement discussions need to be concluded etc. The threshold for determining an exceptional circumstance is likely to be high.
A new section pertaining to ‘compliance’ (Article 10) has been added in the 2020 Rules.
Dealings between a party and LCIA will be subject to requirements, if any, relating to bribery, corruption, terrorist financing, fraud, tax evasion, money laundering and / or economic or trade sanctions (Prohibited Activity), and the LCIA will deal with any party on the understanding that it is complying with all such requirements.
The LCIA may refuse to act on any instruction and / or accept or make any payment, if the LCIA determines that doing so may involve Prohibited Activity, or breach of law, regulation, or other legal duty which applies to it, or exposes the LCIA to enforcement action or censure from any regulator or law enforcement agency. In this regard, the discretion of determination rests solely with the LCIA and it will not be required to state any reasons for the same.
Further, parties would be required to provide the LCIA with any information and / or documents reasonably requested by it for the purpose of compliance with laws relating to Prohibited Activity. The LCIA may take any action to comply with any applicable obligations relating to Prohibited Activity, including disclosure of any information and documents to courts, law enforcement agencies or regulatory authorities.
It is evident from this section that the 2020 Rules have introduced strict scrutiny to prevent any Prohibited Activity and the LCIA has been given wide discretion / powers to deal with such situations and keep itself protected from any legal action which may be initiated in this regard.
A new section pertaining to ‘data protection’ (Article 13) has been added in the 2020 Rules.
Any processing of personal data by the LCIA is subject to applicable data protection legislation.
Further, the mediator shall, in consultation with the parties and where appropriate with the LCIA, consider whether it is appropriate to adopt:
- any specific information and security measures to protect the physical and electronic information shared in the mediation; and
- any means to address the processing of personal data produced or exchanged during the mediation in light of applicable data protection or equivalent legislation.
The LCIA and the mediator may issue directions addressing information security or data protection, which shall be binding on the parties, and in the case of those issued by the LCIA, also on the mediator, subject to the mandatory provisions of any applicable law or rules of law.
Since the 2012 Rules, there has been significant development across various jurisdictions in the field of data protection and privacy. As more and more social, economic, and business activities are being carried out online, especially in the wake of COVID-19, the importance of privacy and data protection is being increasingly realised and States are accordingly coming up with bills / legislations for regulation and protection of data and privacy in the cyber space. It thus becomes necessary to take into account such legislations, particularly when electronic means are involved for exchange of information, communications, signatures, filing of documents, placing requests, etc. As such, the introduction of this section in the 2020 Rules is a step in the right direction.
Exclusive Jurisdiction clause
The 2012 Rules did not specify any jurisdiction clause in relation to disputes, if any, between the LCIA and parties, arising from or in connection with mediations.
The 2020 Rules, however, specify in Article 14.3 that any party agreeing to mediation in accordance with the LCIA Rules irrevocably agrees that the courts of England and Wales shall have exclusive jurisdiction to hear and decide any proceedings between that party and the LCIA (including all members thereof) which may arise from or in connection with such mediation and, for these purposes, each party irrevocably submits to the jurisdiction of the courts of England and Wales.
Parties should bear in mind that agreeing to mediate in accordance with the LCIA Rules would automatically imply that any dispute between such a party and the LCIA would have to be resolved through litigation exclusively before the courts of England and Wales. While the chances of such a dispute arising are low, parties may bear in mind the considerations surrounding litigating before the courts of England and Wales, vis-à-vis ease of enforceability of judgments passed by such courts, costs of litigation, time taken by courts to pass the final judgment, etc.
At the end of the 2020 Rules, certain recommended clauses are prescribed for parties to incorporate in their agreements, if they wish to have their disputes referred to mediation and / or arbitration under the auspices of the LCIA. The recommended clauses pertain to ‘mediation only’, ‘arbitration only’, and ‘mediation and arbitration’. This section also specifies that the LCIA Secretariat is available in case parties need assistance with wording of mediation / arbitration clauses, modification of standard clauses, obtaining recommended clauses for other forms of alternative dispute resolution to be administered by the LCIA, etc.
It is evident that amendments to the 2012 Rules have been made with the aim to streamline the mediation process and keep up with / stay relevant to the changing times. A major shift from physical to virtual platforms and an increased use of technology in general has been necessitated on account of COVID-19 and such trend may be here to stay, if mediations can be concluded smoothly. Given that the fundamental nature of mediation process is flexible and customisable, there is a good chance that mediations would adapt more easily to the changing circumstances.
The 2020 Rules have taken into account applicable laws, if any, for data protection and privacy, which is a progressive step likely to instil faith and confidence in parties apprehensive about their data and information being available in the cyber space. This makes LCIA the first institution to explicitly provide for such safeguards in its rules.
Another aspect that stands out is that with the introduction of certain explicit provisions relating to Prohibited Activity, compliances, non-refund of excess advance payment to parties in certain circumstances, date of commencement of mediation in case of delay in payment of registration fees, exclusive jurisdiction in case of a dispute between the LCIA and parties, etc., the LCIA has ensured that: (i) there is greater clarity and reduced uncertainty regarding interpretation of provisions; and (ii) the LCIA remains sufficiently protected from any legal action as long as it acts pursuant to and in accordance with the 2020 Rules.
While the 2020 Rules cover a wide range of issues, improving the overall efficiency appears to be the main focus of the amendments. Considering the changing times, the amendments are a welcome step. In fact, the time may be right to shift gears and make a more accelerated move towards using mediation as a viable means to resolve disputes (commercial or otherwise). To that end, institutions, while changing their rules, should consider providing certain incentives for parties to choose mediation over litigation / arbitration, wherever appropriate.
One anticipates that similar changes in mediation rules would be rolled out by Indian mediation institutions. It would be interesting to see how Indian institutions adopt / modify their existing rules to deal with emerging trends and challenges in the field of dispute resolution. One can hope that appropriate changes will be brought out soon, in a manner that not only caters to the changing needs but also promotes mediation among parties.
- Chakrapani Misra (Partner, Khaitan & Co) and Saasha Malpani (Associate, Khaitan & Co)