The International Court of Arbitration of the International Chamber of Commerce has unveiled revised Rules of Arbitration that will enter into force on January 1, 2021 with text subject to editorial corrections until that time.
These Rules will be applicable to cases submitted to the ICC on or after January 1, 2021.
The 2021 Rules have introduced new provisions pertaining to:
Unlike the amendments that were made to the ICC Rules in 2012 and 2017, the 2021 Rules have not introduced substantial changes.
Here are the details of the most important changes brought by the new Rules:
COMPUTATION OF DEADLINES
While the 2017 Rules provided that the Respondent was required to submit his Answer “within 30 days from the receipt of the Request” (Article 5.1) and that the Claimant was required to reply to any counterclaim “within 30 days from the date” of receipt of the counterclaims communicated by the Secretariat (Article 5.6), the 2021 Rules have clarified the computation of these deadlines by stating that each document is to be submitted “within 30 days from the day following the date of receipt”.
JOINDER FOR ADDITIONAL PARTIES
Under the 2012/2017 Rules, a party was only able to join an additional party before the confirmation or appointment of any arbitrator unless all parties, including the additional party, otherwise agree.
The new Article 7 (5) of the Rules allows for a request for joinder to be made to the Arbitral Tribunal after the confirmation or appointment of any arbitrator. Subject to the additional party accepting the constitution of the Arbitral Tribunal and agreeing to the Terms of Reference, the Tribunal can now decide on that request for joinder after taking into account all relevant circumstances, which may include whether the arbitral tribunal has prima facie jurisdiction over the additional party, the timing of the Request for Joinder, possible conflicts of interests and the impact of the joinder on the arbitral procedure.
It follows that the request for joinder can be made after the constitution of the Arbitral Tribunal and without the express consent of the other party in the arbitration. However, the additional party cannot be forced to join the proceedings after she has expressed her refusal.
The Tribunal has jurisdiction to decide on the request for joinder after considering all relevant circumstances. Although Article 7(5) of the Rule provides a list of circumstances that might be taken into consideration, this list is not exhaustive and the Tribunal can examine other circumstances depending on each situation.
CONSOLIDATION OF ARBITRATIONS
The 2021 Rules have amended Article 10 (b) of the ICC Rules. From now on, consolidation is possible where “all of the claims in the arbitrations are made under the same arbitration agreement or agreements”. This new amendment allows for consolidation of cases in the presence of different parties or between the same parties who have entered into multiple contracts with mirror arbitration agreements.
DISCLOSURE OF THIRD-PARTY FUNDING
The 2021 Rules have inserted a provision into Article 11 that places an obligation of disclosure on the parties. The new Article 11 (5) of the Rules compels each party to promptly inform the Secretariat, the Arbitral Tribunal and the other parties, of the existence and identity of any non-party which has entered into an arrangement for the funding of claims or defences and under which it has an economic interest in the outcome of the arbitration.
This new provision aims to increase transparency and is inserted to assist prospective arbitrators and arbitrators in complying with their duties of impartiality and independence. It is consistent with the modern approach to conflicts of interests adopted by the IBA (General Standard 7 of the IBA Guidelines on Conflicts of Interest in International Arbitration) and by the ICC that extends the scope of disclosure to the relationship between an arbitrator and “any entity having a direct economic interest in the dispute” (ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration, paragraph 28).
This new provision presents three main features:
First, it places an express obligation on the parties to disclose the existence and the identity of third-party funders. The ICC has taken a different approach to the less constraining SIAC Investment Rules (Article 24) which only requires disclosure of funding arrangements when the Arbitral Tribunal orders such disclosure. However, the obligation placed upon the parties is only intended to “assist prospective arbitrators and arbitrators in complying with their duties under Articles 11(2) and 11(3)” and does not compel the parties to disclose the existence of the identity of any third party when such disclosure does not affect the ability of the arbitrators to conduct an independent and impartial arbitration.
Second, the scope of the obligation of disclosure seems to be limited. On one hand, the provision only requires parties to disclose “the existence and the identity of any third party which has entered into an arrangement for the funding of claims or defences and under which it has an economic interest in the outcome of the arbitration”. A literal interpretation of the provision would exclude any disclosure of the contents of the funding arrangement or of details of the third party's interest in the outcome of the proceedings, and/or whether or not the third party has committed to undertake adverse costs liability. On the other hand, the provision limits the scope of disclosure to situations where an arrangement for the funding has been made and under which a third party has an economic interest in the outcome of the arbitration. The restrictive wording of the provision might be interpreted as to exclude disclosure of certain funding arrangements that do not provide an economic interest to the third party or whenever a third party has an economic interest in the outcome of the case that stems from an agreement that cannot be characterized as a funding arrangement.
Third, the provision does not specify when or how disclosure must be made. Contrary to Article 44 of the HKIAC Rules, Article 11 (7) of the ICC Rules does not provide any details as to the moment of disclosure or as to the formalities that must be followed to comply with such an obligation. Moreover, Article 11 (7) of the ICC Rules does not specify the applicable sanctions in case of non-disclosure and it remains to be seen whether non-disclosure can lead to the annulment of the award.
CONSTITUTION OF THE ARBITRAL TRIBUNAL
The 2021 Rules have introduced a new provision that aims to ensure greater compliance with the principle of equality in the appointment of arbitrators whose violation has led National courts to declare arbitral awards null and void (e. g. Dutco, Civ. 1ère, 7 janvier 1992, n˚89-18.708 89-18.726). After introducing amendments to comply with the principle of equality in multi-party arbitrations, the 2021 Rules have introduced a new rule that applies without regards to the number of parties involved in the arbitration.
The new Article 12(9) of the Rules allows the ICC Court, in exceptional circumstances, to deviate from any agreement by the parties on the method of constitution of the Arbitral Tribunal and appoint the entire Tribunal in order to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award.
This new provision raises two issues that might prove problematic.
The first pertains to the discretion of the Court in appointing the entire Arbitral Tribunal. According to Article 12 (9), the Court “may” only appoint each member of the arbitral tribunal “in exceptional circumstances”. The new ICC Rules do not provide any indication as to what constitutes an exceptional circumstance within the meaning of this provision. Moreover, the Court is not compelled to appoint each member of the tribunal even if such a circumstance has been established. The discretional nature of the power of the Court might hinder the predictability of the arbitration process and cause parties to shy away from adopting the ICC Rules.
The second issue pertains to the mandatory nature of this provision. According to Article 12(9) of the Rules, the Court may appoint each member of the tribunal “notwithstanding any agreement by the parties on the method of constitution of the arbitral tribunal”. This wording raises a question as to whether the parties may be able to exclude the application of Article 12(9) of the Rules in the arbitration agreement. In addition, it might lead to unforeseen complexities at the post-arbitration stage because the losing party might seek annulment of the award on the grounds that the composition of the Arbitral Tribunal, that deviated from the method described in the arbitration agreement, was not made in accordance with the agreement of the parties.
For the purposes of increasing transparency and ensuring impartiality and independence of the Arbitral Tribunal, the 2021 Rules have changed the title of Article 17 to “party representation” and inserted two new provisions pertaining to conflicts of interests resulting from a change in party representation.
The first provision is Article 17(1) of the Rules which incorporates the rule set out by Article 4 of the IBA Guidelines on Conflicts of Interest in International Arbitration by placing on each party an obligation to inform promptly the Secretariat and the Tribunal of any change in representation.
The second provision is Article 17(2) of the Rules which is inspired by Article 18 of the LCIA Rules and deals with a change in representation that occurs after the Tribunal has been constituted. According to Article 17(2) of the Rules, “the arbitral tribunal may, once constituted and after it has afforded an opportunity to the parties to comment in writing within a suitable period of time, take any measure necessary to avoid a conflict of interest of an arbitrator arising from a change in party representation, including the exclusion of new party representatives from participating in whole or in part in the arbitral proceedings”.
Contrary to Article 18 of the LCIA, this provision does not require the authorization of the Tribunal for the change in representation to take effect and only deals with a potential conflict of interest arising from such a change. Where a conflict of interest arises, the Tribunal is granted the power to deal with such a conflict “by taking any measure necessary”. Although Article 17(2) of the Rules does not mention it, the Tribunal may have regard to all the circumstances before taking any measure to deal with a conflict of interest. According to Article 17 (2) of the the Rules, the Tribunal may take any measure necessary, including “the exclusion of new party representatives from participating in whole or in part in the arbitral proceedings”.
By empowering the Tribunal to restrict the ability of a party to appoint a legal representative, the Rules have provided the Tribunal with an efficient tool against fictitious appointments designed to subvert the arbitral proceedings. However, Arbitrators must use this power wisely because it might be seen as an interference with the freedom to select counsel and a violation of due process.
The new ICC Rules include two new provisions that apply whenever the arbitration agreement upon which the arbitration is based arises from a treaty.
The first provision is Article 13(6) which aims at ensuring neutrality of the Arbitral Tribunal by establishing that no arbitrator shall have the same nationality of any party to the arbitration, unless otherwise agreed by the parties.
The second is Article 29(6)(c) which codifies the existing practice of the ICC Court that excludes the application of the Emergency Arbitrator Provisions where the arbitration agreement upon which the arbitration is based arises from a treaty. Once again, the ICC has taken a different approach to the less constraining SIAC Investment Rules (Article 27.4) which allow the parties to expressly agree on the application of the Emergency Arbitrator provisions.
It should be noted that these two provisions are applicable to arbitration agreements that “arise from a treaty”. The wording of the ICC Rules does not seem to restrict the scope of these provisions to “investment” treaty arbitration between a state and a foreign investor. A literal interpretation of these provisions might lead to the application of Articles 13(6) and 29(6)(c) of the Rules to Commercial Arbitrations based on an arbitration agreement that arises from a treaty that is binding for the nationals of the signatory States (e.g. Additional Protocol to the Bilateral Treaty between Lebanon and the Czech Republic of January 11, 1957).
HEARINGS AND SUBMISSIONS
Following the recent Covid-19 Pandemic, the 2021 Rules have adopted a flexible approach that normalizes virtual hearings and electronic submissions.
Regarding hearings, the Rules have amended Article 26 (1) which now contains three sets of provisions.
First, Article 26(1) provides that a hearing shall be held when any of the parties requests it or if the tribunal on its own motion decides to hear the parties. This provision enshrines the right of each party to a hearing and grants the Tribunal the power to order a hearing on its own discretion.
Second, Article 26(1) provides that, when a hearing is to be held, the Tribunal shall summon the parties after prior reasonable notice to appear before it on the day and the place fixed by the Tribunal. This provision grants the Tribunal the power to determine the place and date of the hearing and puts an end to a recent discussion pertaining to the right of the Tribunal to order a hearing in a place other than the seat of arbitration.
Third, Article 26(1) provides that “the arbitral tribunal may decide, after consulting the parties, and on the basis of the relevant facts and circumstances of the case, that any hearing will be conducted by physical attendance or remotely by videoconference, telephone or other appropriate means of communication”. This last provision grants the Tribunal the power to order a virtual or remote hearing and takes into consideration technological advances by referring to other appropriate means of communication. However, the Tribunal may only order virtual or remote hearings after consulting the parties. Although, the wording of Article 26(1) is unclear as to the possibility of ordering such hearings in case both parties have expressed their desire to hold a hearing by physical attendance, it might be unwise for the Tribunal to conduct virtual or remote hearings where all the parties have expressed their desire to hold a hearing by physical attendance.
Regarding submissions, the 2021 Rules have acknowledged that all pleadings and communications are not necessarily submitted in multiple hard copies for each party, the Tribunal and the Secretariat. Indeed, Article 3.1 of the Rules has removed the requirement to submit pleadings and written communications in a number of copies and only provides for these submissions to be “sent” to each party, arbitrator and the Secretariat who is to be copied into communication from the Tribunal. Moreover, Articles 4 and 5 of the 2021 Rules and Article 1 of the Emergency Arbitrator Rules only provide for the submission of a sufficient number of copies where the submitting party requests transmission by delivery against registered post or courier. These amendments illustrate a shift towards a new era of “paperless arbitration” where electronic submissions have become the norm.
A new provision that deals with the application of a party for an additional award has been added to Article 36 of the Rules. According to the new Article 36(3) of the Rules, “any application of a party for an additional award as to claims made in the arbitral proceedings which the arbitral tribunal has omitted to decide must be made to the Secretariat within 30 days of the receipt of the award by such party. After transmission of the application to the arbitral tribunal, the latter shall grant the other party or parties a short time-limit, normally not exceeding 30 days, from the receipt of the application by that party or parties, to submit any comments thereon. The arbitral tribunal shall submit its decision on the application in draft form to the Court not later than 30 days following the expiry of the time of the time limit for the receipt of any comments from the other party or within such other period as the Court may decide”.
This new provision confirms that where the tribunal omits to decide on claims made in the arbitral proceedings and seeks to remedy this omission after the issuance of the Award, it shall do so in the form of an “additional award”.
EXPEDITED PROCEDURE PROVISIONS
The 2021 Rules have expanded the scope of application of the Expedited Procedure Rules found in Appendix VI of the Rules. Article 1(2) of Appendix VI has increased the threshold for the application of the Expedited Procedure Rules from 2 Million USD to 3 Million USD if the arbitration agreement under the Rules has been concluded on or after January 1, 2021.
INTERNATIONAL COURT OF ARBITRATION
The 2021 Rules have amended the Statutes of the International Court of Arbitration (Appendix 1 of the Rules) and the Internal Rules of the Court of Arbitration (Appendix 2). These amendments pertain to the appointment of the members of the Court (Article 3 of Appendix 1), the Committees of the Court (Articles 4, 5 and 6 of Appendix 1), the participation of members of the Court in ICC Arbitration (Article 2 (1) of Appendix 2), the constitution, quorum and decision-making (Article 4 of Appendix 2) and the communication of the reasons of decisions made by the Court (Article 5 of Appendix 2).
This last provision was inserted to increase the transparency of the decisions of the Court. According to Article 5 (1) of Appendix 2, the Court will communicate the reasons for the decisions made on the basis of Article 6(4), 10, 12(8), 12(9), 14 and 15(2) upon request of any party. However, the Court may, in exceptional circumstances, decide not to communicate the reasons for any of these decisions (Article 5 (3) of Appendix 2).
CASE MANAGEMENT TECHNIQUES
A minor amendment to Appendix VI on Case Management Techniques illustrates the current trend that aims to encourage the settlement of disputes through other amicable dispute resolution methods. The 2021 Rules have cited “encouraging the parties to consider settlement of all or part of the dispute either by negotiation or through any form of amicable dispute resolution methods such as, for example, mediation under the ICC Mediation Rules” as an example of a case management technique. By replacing the word “informing” which was used in the previous edition of the Rules with the word “encouraging”, the 2021 Rules show that the ICC has recognized the emergence of amicable forms of dispute resolution as a viable tool to solve international disputes.
GOVERNING LAW AND SETTLEMENT OF DISPUTES
The Rules have inserted a new provision pertaining to the governing law and the competent court for disputes arising out of or in connection with the administration of the arbitration proceedings by the ICC Court. According to Article 43 of the Rules, “any claims arising out of or in connection with the administration of the arbitration proceedings by the Court under the Rules shall be governed by French law and settled by the Paris Judicial Tribunal (Tribunal Judiciaire de Paris) in France, which shall have exclusive jurisdiction”.
In conclusion, the 2021 Rules have not introduced substantial changes to the ICC Rules of Arbitration. The new Rules aim to increase the transparency of the arbitration process and improve the efficiency of the proceedings. In addition, the 2021 Rules have consolidated current arbitration practices that have shifted towards paperless submissions and virtual hearings in light of the recent Covid-19 pandemic.