In current cross-border commercial transactions, the London Court of International Arbitration (LCIA) has become a major forum for many Chinese enterprises due to the global enforceability of its awards and the professionalism of its procedures. However, in handling multiple LCIA international arbitration cases, Lawyer Qiao Huanran (the author) has identified a common misunderstanding among domestic clients: they habitually apply the logic of “party-led tribunal formation” from domestic arbitration procedures to LCIA arbitration, failing to pay sufficient attention to the special design of the arbitrator appointment procedure under the LCIA Rules. This often leaves them in a state of procedural passivity when disputes arise: some enterprises assume the “each party appoints one arbitrator, and the parties jointly select the presiding arbitrator” model, only to find that the LCIA directly appoints a sole arbitrator in accordance with the Rules; others nominate their preferred arbitrators, only to have the nominations rejected by the LCIA Court for failing to meet its review criteria; and more still face challenges to the enforceability of awards due to neglecting the arbitrators’ disclosure obligations. In view of this, the author, combining Article 5 (Tribunal Formation Rules) of the LCIA Rules 2020 (hereinafter referred to as the “LCIA Rules”) and comparing it with the Arbitration Rules of the China International Economic and Trade Arbitration Commission (hereinafter referred to as the “CIETAC Rules”) which are familiar to Chinese clients, strives to help Chinese enterprises sort out the key points to be grasped when drafting LCIA arbitration agreements, providing guidance for Chinese enterprises to prevent procedural risks related to LCIA tribunal formation in cross-border transactions.
The core feature of Article 5 of the LCIA Rules is “institution-led as the principle, with party autonomy as a supplement,” which differs significantly from the logic of “prioritizing respect for parties’ appointment rights” under domestic arbitration rules—a key area where Chinese enterprises are most prone to cognitive biases. Under Article 27 of the China International Economic and Trade Arbitration Commission (CIETAC) Rules 2024, unless otherwise agreed by the parties or provided for in these Rules (e.g., application of the summary procedure), an arbitral tribunal shall consist of three arbitrators by default (ordinary procedure); Article 28 governs the formation of a sole arbitral tribunal, which is the default only when the “summary procedure” applies. The summary procedure applies to disputes where the amount in dispute does not exceed RMB 5 million (parties may agree in writing to exceed this amount)—it is not the case that “a three-member tribunal is the default when the dispute amount exceeds RMB 5 million”; the application of a three-member tribunal is unrelated to the dispute amount and is the default form for ordinary procedures. Under the CIETAC Rules, each party has the right to appoint one arbitrator, and the presiding arbitrator shall be jointly selected by the parties or appointed by the CIETAC from a list of candidates recommended by the parties (Paragraph 2 of Article 27 of the CIETAC Rules). This “parties first nominate, institution later coordinates” model has led Chinese enterprises to form an inertial perception that “they have significant control over the tribunal formation process.” However, Article 5.8 of the LCIA Rules clearly stipulates: “A sole arbitrator shall be appointed unless the parties have agreed in writing otherwise or the LCIA Court determines that in the circumstances a three-member tribunal is appropriate (or, exceptionally, more than three).” The original intention of this design is to improve procedural efficiency and reduce dispute resolution costs, especially for cases with small claim amounts (e.g., less than USD 1 million) or simple legal relationships. For Chinese enterprises accustomed to three-member tribunals, failure to explicitly exclude this default provision in the agreement may result in a situation where “the enterprise expects a three-member tribunal, but the LCIA Court appoints a sole arbitrator” when a dispute arises. More importantly, even if the parties agree to form a three-member tribunal, Article 5.7 of the LCIA Rules stipulates: “No party or third person may appoint any arbitrator under the Arbitration Agreement: the LCIA Court alone is empowered to appoint arbitrators (albeit taking into account any written agreement or joint nomination by the parties or nomination by the other candidates or arbitrators).” That is, only the LCIA Court has the authority to appoint arbitrators; when forming a three-member arbitral tribunal, each party may nominate one arbitrator in accordance with the arbitration agreement, but such nomination still needs to be reviewed and confirmed by the LCIA Court, and the presiding arbitrator must be directly appointed by the LCIA Court rather than jointly selected by the parties. In practice, a Chinese foreign trade enterprise once agreed only to “LCIA arbitration, three-member tribunal” in its agreement with a European supplier, without specifying the procedure for exercising the nomination right. Later, when the enterprise nominated an arbitrator familiar with Chinese foreign trade law, the LCIA rejected the nomination in accordance with the requirement of Article 5.3 (“All arbitrators shall be and remain impartial and independent of the parties; they shall not act as advocates for any party in the arbitration and shall not advise any party on the merits or outcome of the dispute”), because the arbitrator had previously represented a Chinese enterprise in a case similar to the current one. This resulted in a nearly two-month delay in tribunal formation, causing the enterprise to miss the optimal negotiation window.
Another major pain point for Chinese enterprises in the LCIA arbitrator appointment process is their insufficient grasp of the standards for “arbitrators’ impartiality, independence, and disclosure obligations,” which often leads to procedural risks due to overlooked details. Article 5.3 of the LCIA Rules clearly requires arbitrators to remain impartial and independent and prohibits them from acting as advocates for any party; Article 5.4 further stipulates: “Before appointment by the LCIA Court, each arbitrator candidate shall furnish to the Registrar (upon the latter’s request) a brief written summary of his or her qualifications and professional positions (past and present); the candidate shall also agree in writing fee rates conforming to the Schedule of Costs; the candidate shall sign a written declaration stating: (i) whether there are any circumstances currently known to the candidate which are likely to give rise in the mind of any party to any justifiable doubts as to his or her impartiality or independence and, if so, specifying in full such circumstances in the declaration; (ii) whether the candidate is ready, willing and able to devote sufficient time, diligence and industry to ensure the expeditious and efficient conduct of the arbitration. The candidate shall promptly furnish such agreement and declaration to the Registrar.” The standard of “justifiable doubts” here is far stricter than that in domestic arbitration practice. Under Article 31 of the CIETAC Rules (“An arbitrator shall sign a declaration stating his or her impartiality and independence and disclose any facts or circumstances that may give rise to justifiable doubts about his or her impartiality or independence”), in domestic arbitration, if an arbitrator only has general business dealings with a party (e.g., providing legal consultation once), it is usually not considered a conflict of interest requiring disclosure. However, in LCIA practice, even if the arbitrator’s connection with a party is “indirect and minor,” disclosure is required if it could reasonably lead the other party to perceive “bias.” For example, in an arbitration between a Chinese manufacturing enterprise and a German buyer, the sole arbitrator appointed by the LCIA in accordance with Article 5.8 had provided a compliance training session to the parent company of the German buyer three years earlier. Although this had no direct connection to the current case, the arbitrator failed to disclose it proactively. After discovering this, the Chinese enterprise filed a challenge application in accordance with Article 10 (Revocation and Challenges), resulting in a three-month suspension of the arbitration proceedings. This not only increased time costs but also disrupted the progress of subsequent substantive disputes. More notably, Article 5.5 of the LCIA Rules stipulates: “Each arbitrator shall assume a continuing duty, until the arbitration is finally concluded, forthwith to disclose in writing any circumstances becoming known to that arbitrator after the date of his or her written declaration (under Article 5.4) which are likely to give rise in the mind of any party to any justifiable doubts as to his or her impartiality or independence, to be delivered to the LCIA Court, any other members of the Arbitral Tribunal and all parties in the arbitration.” That is, arbitrators bear a “continuous disclosure obligation.” Chinese enterprises often lack awareness of this obligation and fail to promptly monitor changes in the arbitrator’s status (e.g., the arbitrator joining an institution associated with one party mid-proceedings), missing the optimal opportunity to raise objections.
To address the above risks, Chinese enterprises should not simply apply template clauses when drafting LCIA arbitration agreements. Instead, they should “customize” the tribunal formation method based on the characteristics of their transactions and dispute prevention needs. The core is to exclude the adverse effects of default rules through explicit agreements while securing reasonable procedural rights for themselves. First, if the transaction involves complex legal relationships (e.g., cross-border intellectual property licensing, multi-party liability allocation) or a large dispute amount (e.g., exceeding USD 5 million), the agreement should explicitly stipulate that “the arbitral tribunal shall consist of three arbitrators” to prevent the LCIA from appointing a sole arbitrator by default in accordance with Article 5.8. A specific clause may be phrased as: “Any dispute arising from this Agreement shall be submitted to the London Court of International Arbitration (LCIA) for arbitration in accordance with its then-effective arbitration rules; the arbitral tribunal shall consist of three arbitrators. The claimant shall nominate one arbitrator candidate within 14 days of receiving the arbitration notice from the LCIA Registrar; the respondent shall nominate one arbitrator candidate within 14 days of receiving the claimant’s nomination notice; the above two candidates shall be confirmed by the LCIA Court in accordance with Article 5.9; the presiding arbitrator shall be appointed by the LCIA Court within 30 days of receiving the confirmation of the parties’ nominations, from among arbitrators with dual practice experience in Chinese law and English law.” This type of agreement not only clarifies the formation method of the three-member tribunal but also sets basic requirements for the arbitrators’ qualifications, preventing the LCIA from appointing arbitrators unfamiliar with relevant Chinese laws (e.g., the Civil Code of the People’s Republic of China, the Law on the Application of Law for Foreign-Related Civil Relations) and thus avoiding adverse impacts on the fair adjudication of substantive disputes.
Secondly, regarding the arbitrator nomination and review process, Chinese enterprises can further refine the agreement on “exercise of nomination right” and “review criteria” to reduce uncertainties in subsequent procedures. Pursuant to Article 5.10 of the LCIA Rules, which states: “The LCIA Court shall appoint arbitrators with due regard for any particular method or criteria of selection agreed in writing by the parties. The LCIA Court shall also take into account the transaction(s) at issue, the nature and circumstances of the dispute, its monetary amount or value, the location and languages of the parties, the number of parties and all other factors which it may consider relevant in the circumstances,” enterprises can set clear standards for “professional competence” in the agreement. For example, it can be agreed that “the arbitrator nominated by each party shall have at least 10 years of cross-border commercial arbitration experience and be familiar with laws and regulations related to China’s import and export trade,” or “the presiding arbitrator shall have prior experience in adjudicating disputes arising from international sales contracts.” Although such agreements cannot completely exclude the review authority of the LCIA, they can significantly increase the probability that the nominated arbitrators pass the review. At the same time, to avoid delays in tribunal formation due to the other party’s failure to nominate an arbitrator on time, a clause on “consequences of late nomination” can be added to the agreement, such as “If either party fails to nominate an arbitrator within the agreed time limit, it shall be deemed to have waived the nomination right, and the LCIA Court shall directly appoint the arbitrator that the party should have nominated in accordance with Article 7.2 (“Where the parties have howsoever agreed that the Claimant or the Respondent or any third person (other than the LCIA Court) is to nominate an arbitrator and such nomination is not made within time (in the Request, Response or otherwise), the LCIA Court may appoint an arbitrator notwithstanding the absence of a nomination.”)”—this agreement not only aligns with the LCIA Rules’ objective of “avoiding procedural delays” but also effectively prevents the other party from obstructing the arbitration process on the ground of “delaying nomination.”
Finally, from the perspective of “overall dispute resolution strategy,” Chinese enterprises should also design the tribunal formation rules of Article 5 of the LCIA Rules in coordination with other clauses of the agreement (such as governing law, enforcement of awards, and cost allocation) to avoid logical conflicts between clauses. For example, if the agreement stipulates that “Chinese law shall apply as the governing law” in accordance with Article 41 of the Law on the Application of Law for Foreign-Related Civil Relations, but fails to require the arbitrators to be familiar with Chinese law in the arbitrator appointment clause, it may lead to deviations in the application of law by the arbitral tribunal; if it is agreed that “the losing party shall bear all arbitration costs” but the rules for bearing additional costs caused by delays in tribunal formation (such as arbitrators’ lost wages, institutional management fees) are not clearly defined, the enterprise may be at a disadvantage in subsequent cost disputes. In addition, considering that Chinese enterprises often face “language barriers” in cross-border arbitration, the arbitration agreement can stipulate that “the language of the arbitration proceedings shall be Chinese and English, and the arbitrators shall be proficient in both Chinese and English.” Although this agreement does not directly involve the tribunal formation rules of Article 5 of the LCIA Rules, it can indirectly improve procedural participation and understanding of the award by clarifying the arbitrators’ language proficiency requirements. When handling an arbitration case involving a Sino-German equipment sales contract, the author encountered a situation where the agreement did not stipulate the arbitrator’s Chinese proficiency, leading to the LCIA appointing a sole arbitrator who was only proficient in English. The Chinese enterprise had to bear additional translation costs, and deviations occurred in the statement of key facts due to cultural and linguistic differences. Although the enterprise ultimately won the case, unnecessary costs were incurred. Practice has proven that a mature cross-border arbitration agreement is not a simple combination of “arbitration institution + seat of arbitration,” but rather requires the systematic integration of procedural rules, application of substantive law, and paths for remedy of rights. Among these, the tribunal formation rules of Article 5 of the LCIA Rules, as a core link in initiating the procedure, require refined design based on the enterprise’s specific needs.
In summary, the procedural design for arbitrator appointment under Article 5 of the LCIA Rules reflects the characteristics of “efficiency first and institutional control” in international arbitration, which differs significantly from the domestic arbitration logic familiar to Chinese enterprises. When drafting relevant arbitration agreements, Chinese enterprises must abandon the “template-based” mindset and focus on three core points: first, explicitly exclude the default rule of a sole arbitral tribunal and agree on the formation of a three-member tribunal in accordance with Article 5.8 based on the complexity of the transaction; second, refine the professional qualifications of arbitrators and the nomination procedure, and enhance their influence on the tribunal formation process in accordance with Article 5.10; third, attach importance to the arbitrators’ independence and disclosure obligations, and proactively prevent procedural objection risks in accordance with Articles 5.3, 5.4, and 5.5 (Note: This statement is accurate. Article 5.3 of the LCIA Rules clarifies the arbitrators’ obligation of impartiality and independence, Article 5.4 stipulates the pre-appointment disclosure and declaration obligations, and Article 5.5 stipulates the continuous disclosure obligation; the three provisions together cover the core requirements of “independence and disclosure obligations”). Only in this way can enterprises ensure that the arbitration procedure proceeds as expected when cross-border disputes arise, providing solid procedural protection for the realization of substantive rights.
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