LCIA publishes latest costs and duration analysis: are parties getting value (and efficiency) for money?

The London Court of International Arbitration (“LCIA”) has published its third report on the costs and duration of arbitrations conducted under the LCIA arbitration rules, following previous reports published in 2015 and 2017 (the “Report”).  The Report covers all 616 cases that reached a final award between 1 January 2017 and 12 May 2024. This is the longest time period studied by the LCIA to date and apparently the longest time period covered by any costs and duration analysis by any arbitral institution to date.  In that period, the LCIA received the highest number of cases in its history.

The Report provides useful insights for parties into how long LCIA arbitrations tend to take (including how long it takes to receive a final award), and how much they tend to cost, including by reference to the value in dispute.

We have analysed the Report and the LCIA’s own highlights to bring your our views on the analysis and what it means for those involved in LCIA arbitrations, or considering including LCIA clauses in their contracts.

Duration

The Report reveals that the median LCIA arbitration lasts 20 months in total. This represents a four-month (or 25%) increase since the previous analysis carried out in 2017, when arbitrations were taking 16 months on average.

Of those 20 months it takes, on average, around four months from the close of the proceedings for tribunals to produce an award, which is an increase of one month since the 2017 report (when awards were taking three months on average).  As the Report acknowledges, the LCIA Rules 2020 state that “the Arbitral Tribunal shall seek to make its final award as soon as reasonably possible and shall endeavour to do so no later than three months following the last submission from the parties” (emphasis added).  Whilst the Report states that the LCIA is close to achieving this target by reference to the average duration, it is noteworthy that the Report refers to only “close to half” of awards being delivered within four months, with 70% within six months.  It follows that tribunals in 30% of cases are taking more than six months to issue their awards, double the target set by the LCIA in the 2020 Rules.

We have considered whether the increase in cases with three arbitrators could play a part in any delays to tribunals issuing their awards.  The LCIA reports that the number of cases with three arbitrators resulting in a final decision has increased to around 50% (so just over 300 of the 616 cases in the dataset), from the initial 20 – 25 cases studied in the LCIA’s first report in 2015.  There is also a clear preference among parties for three arbitrators in higher value disputes, even though it is not inevitable that such disputes are the most complex and most ‘deserving’ of having three arbitrators on the panel.  However, the LCIA observes that the average ‘time to award’ does not increase significantly in line with the amount in dispute (with >USD 100 million cases taking on average four months, and USD 1 million – USD 10 million cases taking on average five months), suggesting award delays are not entirely attributable to three arbitrator tribunals taking longer to deliberate. 

However, the LCIA notes a strong correlation between total duration and the amount in dispute, which could be linked to three arbitrator tribunals and their prevalence on higher value cases.  For example, cases below USD 1 million have a median duration of 12 months from Request to Award, whereas cases above USD 100 million take almost three years.  It stands to reason that cases that require communication and deliberation between three (often very busy) people at every stage of the arbitration will take significantly longer than those run by a one member tribunal. 

The default position under the LCIA Rules 2020 (Rule 5.8) is for a sole arbitrator to be appointed, but many arbitration clauses, at least in our  experience, provide for three arbitrators as standard.  Transactional lawyers involved in the drafting of arbitration agreements should therefore think  carefully about whether any disputes arising out of their agreement are likely to be so complex as to require a three member panel, or if a sole arbitrator is likely to suffice.  Therefore, we respectfully partly disagree with the LCIA’s conclusion  that “the increasing total duration for higher-value cases between 2017 and 2024 is largely attributable to delays in party submissions than tribunal inefficiencies”, at least not without further data.  Delays in the course of the proceedings, as parties wait for interim awards on jurisdiction, or procedural orders making document production decisions, might contribute significantly to delays and the total duration of the proceedings, through no fault of the parties. 

Costs

The Report reveals that the median average LCIA arbitration costs USD 117,653, with tribunal fees naturally making up the vast majority of those costs. Costs have therefore increased since the USD 97,000 reported in 2017, by approximately 21%, albeit the LCIA refers to the increase as “limited”.  The LCIA also notes that the updated figures have not been adjusted for inflation, meaning the increase in real terms is smaller.

This not-insubstantial rise in costs is, according to the LCIA “predominantly due to increases in tribunal fees”.  This could prompt parties  to consider carefully whether they are getting value for money and if they would be inclined to select the same arbitrator/s in any future dispute.  However, an important factor in that decision making is the LCIA’s methodology for calculating administrative costs and tribunal fees. 

By contrast with a number of other major arbitral institutions (e.g. the ICC and SIAC), the LCIA calculates such costs and fees according to time spent, rather than amount in dispute, noting (as mentioned above) that the complexity of a dispute is a key driver in the LCIA’s costs system, and cannot be assessed by the amount in dispute.  For example, a straightforward contractual debt claim, involving little documentary or witness evidence, which could essentially be decided ‘on the papers’ might nevertheless have a significant sum at stake.  By contrast, low value disputes can sometimes give rise to complex questions of fact or law.  This is particularly likely to be the case where smaller or less-sophisticated commercial parties have not had the benefit of proper legal advice during their negotiations, such that the drafting in their documents gives rise to complex legal questions in relation to interpretation. 

Crucially, the LCIA’s methodology means the longer a case lasts (due to its complexity), the higher the costs tend to be.  The arbitration costs for a straightforward case, that should be possible to conclude swiftly, may be much lower than those that would be charged by other institutions based on the value of that (otherwise simple) dispute.  The LCIA has helpfully estimated how much each of the quantified cases it analysed might have cost at other arbitral institutions (the Singapore International Arbitration Centre (“SIAC”), the Stockholm Chamber of Commerce (“SCC”), the International Chamber of Commerce (“ICC”) and the Hong Kong International Arbitration Centre (“HKIAC”). Overall, the study found that the LCIA tends to have the lowest median arbitration costs as a result of its methodology.  The difference in arbitration costs becomes more pronounced as the amount in dispute increases – for disputes ranging in value from USD 100 million to USD 1 billion, for example, the LCIA’s costs are less than half the costs of SIAC and the HKIAC, and almost half of the ICC’s costs.

Despite the increase in tribunal fees since 2017, the Report also notes that the LCIA’s tribunal fees are the lowest of the institutions, as well as its administrative charges (although the latter are not dissimilar to SIAC and the HKIAC).

Conclusion

The Report is a useful resource for parties (and their legal advisors) considering LCIA arbitration as a means of dispute resolution.  Overall, it suggests that the LCIA continues to be a cost-effective and time-efficient choice of arbitral institution – not only can parties rely upon relatively low administrative and tribunal fees, particularly compared with other institutions, but also on the fact that they should receive  a final award within four months of final submissions.

That said, there is no room for complacency.  It is positive that the LCIA set the three month target for issuing awards in its 2020 Rules, which should hopefully reduce the number of cases where awards are still taking more than six months to be issued.  However, it may be that more active intervention is needed by the LCIA during cases themselves, to avoid delays caused during the proceedings themselves, whether by parties or tribunals.  Commercial parties and their advisers also have a role to play when drafting their arbitration clauses and contemplating the types of disputes that may arise, and how they might then unfold. 

It is also promising to see the LCIA’s continued commitment to greater transparency and accountability.  Last year, CMS reported in its article ‘Deciphering dispute values in arbitration – A call for consistent reporting’ (available here), “a noticeable lack of data on disputes values published by arbitral institutions”. Where data was available, there was a “significant lack of uniformity in terms of what is reported and how it is reported”. The LCIA itself observes in the Report that there is a need for all leading institutions to “provide transparent and comparable statistics”.  This would not only help users (and potential users) of arbitration to make fair comparisons between institutions, but would also help the institutions themselves when benchmarking and positioning themselves in the market. 

In terms of next steps for the LCIA’s (and other institutions’) costs and duration reports, it would also be interesting to see the statistics behind emergency arbitrations, as well as the rate of early determinations  and settlements, all of which are currently excluded from the Report but play a crucial role in enhancing efficiency and reducing costs in arbitration (see also our own data-driven reports calling for more early determination provisions, and exploring the role of tribunals in the settlement process). 

The full report is available via the LCIA’s website here.