1 January 2021
Shortly after the entry into force of the revised Arbitration and Mediation Rules of the London Court of International Arbitration (the "LCIA") on 1 October 2020,[1] the International Chamber of Commerce (the "ICC") formally launched its amended Rules of Arbitration, 2021 (the “2021 Rules”) on 1 December 2020. This new version will enter into force on 1 January 2021 and apply to cases registered from this date. These changes have arisen in a very particular context and aim to align the ICC rules with current trends in arbitration and ICC practice (notably its Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration[2]), as well as clarify the interpretation of certain already-existing rules.
This article will present an overview of different amendments introduced by the ICC and examine whether they are primed to better serve the interests of all parties who have chosen to adopt the ICC Rules of Arbitration when seeking to resolve their disputes.
The 2021 version[3] has not altered the essence of the ICC Rules of Arbitration; yet, it has introduced new provisions as well as made some important amendments to already-existing Rules in view of two major objectives: Increasing Efficiency (1) and Enhancing Due Process in in Arbitration Proceedings (2).
1. Increasing Efficiency in Arbitration Proceedings
a. Efficiency ensured by the shift towards paperless communications and remote hearings
The ICC is one of many international arbitration institutions that have tackled the social distancing challenges brought on by the COVID-19 pandemic by implementing new rules and procedures which provide for greater flexibility, notably with respect to the conduct of hearings.
On a general note, the tribunal’s duties to efficiently manage the proceedings has been increased, with Article 22(2) providing that they “shall” have this duty. Article 26(1) now expressly provides that tribunals, after consulting the parties and on the basis of the relevant facts and circumstances of the case, may decide that any hearing will be conducted by physical attendance or remotely/virtually (the propriety of the term is sometimes debated) by videoconference, telephone or other appropriate means of communication. While tribunals previously had discretion to conduct hearings remotely, this new provision dispels any remaining doubts and does not favour any type of hearing over another.
Amendments were also made to Article 3.1 regarding written notifications. This article now simply provides that written pleadings and communications be "sent" to each party, arbitrator and the Secretariat, and that the Secretariat be copied on communication from the tribunal, thus excluding the presumption of a paper "filing". As a result of this change, slight amendments have been made to Articles 4 (Request for Arbitration), 5 (Answer to the Request) and Article 1 of the Emergency Rules. It should be noted, however, that the ICC has not gone so far as to enshrine the electronic signature of awards, as it has been implemented in the LCIA Rules, for example (art. 26.2).
b. Efficiency increased by the new threshold for Expedited Procedure and Emergency Arbitration
The automatic expedited procedure which provides for the disposal of awards within six months from the date of the case management conference was introduced by the 2017 ICC Rules of Arbitration (the "2017 Rules"). As a result of the undeniable success of the Expedited Procedure in ICC practice, the 2021 Rules (Article 30(2) read with Article 1(2) of Appendix VI of the 2021 Rules) have raised the threshold for the automatic application of the expedited procedure from USD 2 million to USD 3 million. Indeed, of the 850 cases introduced under the ICC Rules (in 2019), 146 of these have been rendered under the accelerated procedure. This new threshold shall apply where an arbitration agreement is concluded on or after 1 January 2021.
In addition, Article 29(6) of the ICC Rules was amended to exclude treaty-based arbitrations from the scope of the Emergency Arbitrator Rules set forth in Appendix V of the ICC Rules, effectively codifying ICC practice.
c. Greater flexibility in the joinder of additional parties and consolidation of arbitrations
The new 2021 Rules have amended Articles 7 and 10 of the 2017 version of the ICC Rules by expanding the scope for joinder of parties and the consolidation of arbitration proceedings. This change demonstrates the commitment of the ICC to meeting the needs and expectations of parties involved in complex disputes which may involve multiple parties and multiple contracts.
First, the 2021 Rules include a new Article 7(5) which permits the tribunal to decide upon a joinder of additional parties after the appointment of the arbitrator, without obtaining consent of all relevant parties. Indeed, while the additional party is required to accept the constitution of the tribunal and agree to the Terms of Reference, the party wishing to join another party to the arbitration (e.g. a respondent applying to join another willing co-respondent) is not constrained by the need to obtain the claimant's consent. Ultimately, the tribunal will have to consider factors such as the timing of the request for joinder, possible conflicts of interests and the impact of the joinder on the arbitral procedure before deciding on the joinder. Any decision to join an additional party is without prejudice to the tribunal's decision as to its jurisdiction with respect to that party.
Under the 2017 Rules, the consolidation of different arbitrations was rigidly curtailed by Article 10(b), which only permitted consolidation if all claims were made under the same arbitration agreement. The consolidation of arbitrations under more than one arbitration agreement was only allowed in situations where the arbitrations involved the same parties.
The 2021 Rules now permit the consolidation of cases involving non-identical parties or parties to related multiple common contracts. The amended Article 10(b) under the 2021 Rules allows for consolidation in circumstances where "all of the claims in the arbitrations are made under the same arbitration agreement or agreements". In addition, the amended Article 10(c) of the 2021 Rules expands this possibility by permitting consolidation in situations where the parties' claims are not made under the same arbitration agreement or agreements but the disputes arise in connection with the same legal relationship as long as the ICC Court finds the arbitration agreements to be "compatible".
Under the 2017 Rules, the parties faced an uphill task to join an additional party after the consolidation of a tribunal. Under the 2017 framework, no additional party could be joined to the arbitration proceedings after the appointment of the tribunal unless all parties, including the additional party, agreed to the joinder. Now, under the revised provision, the ICC Court may consider any circumstances it deems relevant, including whether one or more arbitrators have been confirmed or appointed in more than one of the arbitration proceedings and, if this is the case, whether the same or different persons have been confirmed or appointed.
2. Enhancing Due Process in Arbitration Proceedings
a. The implementation of safeguards against unequal treatment and unfairness
While Article 42 of the 2017 Rules currently allows the ICC Court and the tribunal to make "every effort" to ensure the enforceability of the award, the introduction of a new Article 12(9) in the 2021 Rules underscores the ICC's commitment to ensuring that parties consistently end up with more than a piece of paper in the event of due process failure.
Under Article 12(9) of the 2021 Rules, the ICC Court has the discretion and power in "exceptional circumstances" to disregard provisions of the parties' arbitration agreement pertaining to the method of constitution of the tribunal. To ensure party equality, the ICC Court may constitute 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 is the most controversial addition to the ICC Rules as it remains to be seen how this discretion will be applied. However, it is anticipated that the threshold for the exercise of the ICC Court's power pursuant to Article 12(9) will be relatively high given that the parties' ability to nominate members of the tribunal has always been enshrined as an essential right. On the other hand, where an arbitration agreement is determined to be unfair, this amendment will allow for its language or implementation to be rectified in a timely manner before an aggrieved party has a chance to challenge the constitution of the tribunal or the enforcement of an award. More generally, the ICC move towards the enhancement of due process is evidenced by Appendix II, Article 5 which provides for accessibility of the decisions taken by the ICC Court, notably on the constitution of the tribunal and the prima facie existence and scope of arbitration agreements.
In addition, and specifically with respect to investment arbitration, Article 13(6) is another rule that was added to promote party equality. Article 13(6) provides that where the arbitration is based on an arbitration agreement arising from a treaty, no arbitrator shall be of the same nationality as one of the parties, unless the parties agree otherwise.
b. Avoiding conflict of interest by limiting changes to party representation following the constitution of the tribunal
The ICC's commitment to the respect of principles of due process is further seen in the introduction of a new Article 17(2), which operates to exclude incoming counsel where the independence and impartiality of the tribunal is threatened. Article 17(2) confers power on arbitral tribunals to "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". Such exclusion is also provided for in art. 18.4 of the LCIA Rules.
c. Increasing transparency by requiring disclosure of third-party funding arrangements
The ICC Rules of 2021 also added new Article 11(7), which gives rise to a significant obligation on parties to disclose the existence and identity of third-party funders.
The obligation on a party benefiting from third-party funding to disclose as such was a pre-existing ICC practice in the context of a challenge to an arbitrator or an objection to his or her confirmation. Indeed, the question of whether there is any existing relationship between an arbitrator and an entity having "a direct economic interest in the dispute or an obligation to indemnify a party for the award"[4] was already relevant. The implementation of this obligation will assist prospective arbitrators and confirmed arbitrators, as stated in Article 11(7), in "complying with their duties under Articles 11(2) and 11(3)," which relate to their ongoing duties of impartiality and independence. Such new provision will increase transparency, without going as far as the existing and more extensive approach of the HKIAC Rules (art. 44) which requires disclosure of any "funding agreement".
It remains to be seen whether the narrow wording of Article 11(7) also includes other funding arrangements, such as legal costs insurance.
3. Final Remarks and a Comparative Approach
a. Additional changes made to the ICC Rules
Some less significant changes include:
Changes to certain time limits, including for the submission of an Answer and counterclaims (Article 5.1 and 5.6 of the Rules);
The possibility for the parties to request an additional award where the arbitral tribunal has failed to rule on a claim raised in the course of the proceedings (Article 36.3 of the Rules); and
Changes to the internal functioning of the ICC, such as in relation to the appointment of the Chairman, the formation of committees, their constitution, quorum and decision-making (see amendments to Appendix I and Appendix II of the ICC Rules).
b. Takeaways for 2021
The 2021 Rules usher in positive changes for both parties and practitioners alike. Having evolved to address the needs of parties, especially as those needs have changed in the context of the COVID-19 pandemic, the 2021 Rules introduce amendments that streamline and provide for greater flexibility within the arbitral process while also safeguarding the principles of impartiality and transparency. Increasing digitalisation, further flexibility in complex multi-party disputes, and greater discretion afforded to the Court in certain cases are all ways in which the 2021 Rules aim to meet these objectives. In particular, the shift to fully remote hearings is already being felt when compared to only two years ago: in the 2018 Queen Mary International Arbitration Survey, only 8 percent of respondents indicated that they had "frequently" or "always" used a virtual hearing room, with 64 percent having never used them at all.
The advent of the 2021 Rules will ensure that ICC arbitrations remain efficient, competitive and cost-effective for all participants in the years to come, despite the possibility of enduring disruption stemming from the current public health crisis.
c. Comparing the 2021 Rules with other standard institutional rules
The modification of institutional rules is the new trend of arbitral practice. Indeed, the LCIA implemented its new regulation in October 1, 2020 while the Singapore International Arbitration Centre (the “SIAC”) has announced an upcoming reform of its rules in 2021. To provide an overview of the new ICC Rules in comparison to the rules of other leading arbitral institutions, below is a table including the new ICC rules and the current rules of "SIAC"), the Hong Kong International Arbitration Centre (the "HKIAC") and the LCIA.
Comparison to rules adopted by other international arbitral institutions
When parties are considering which rules to apply to their disputes, a comparison between the arbitration rules of prominent international arbitration institutions is an inevitable reality. The amendments ushered in by the 2021 ICC Rules provide an interesting opportunity to consider equivalent provisions in other institutional rules as well. Accordingly, the following table presents the changes that will be introduced by the 2021 ICC Rules in comparison with similar provisions in the arbitration rules adopted by other notable international arbitral institutions (the SIAC, HKIAC and LCIA):
|
Type of Provision |
ICC The 2021 Rules |
Singapore International Arbitration Centre The SIAC Rules 2016 |
Hong Kong International Arbitration Centre The 2018 Administered Arbitration Rules |
London Court of International Arbitration The LCIA Arbitration Rules 2020 |
|
Consolidation |
Article 10(b) and (c) Consolidation is permitted in circumstances where: (a) parties have all agreed to the consolidation, (b) all of the claims are made under the same arbitration agreement(s); or where (c) the claims are not made under the same arbitration agreement(s) but are between the same parties, arising in connection with the same legal relationship, and the arbitration agreements are deemed "compatible". NOTE: These amendments have revised the ICC's position to be in line with the provisions on consolidation adopted by the SIAC, the HKIAC and the LCIA in their respective rules, which generally provide for greater flexibility for the consolidation of arbitrations involving the "same" or "compatible" arbitration agreements. |
Rule 8.1 Consolidation is permitted where: (a) all parties have agreed to the consolidation; (b) all the claims in the arbitrations are made under the same arbitration agreement; or (c) the arbitration agreements are compatible, and: (i) the disputes arise out of the same legal relationship(s); (ii) the disputes arise out of contracts consisting of a principal contract and its ancillary contract(s); or (iii) the disputes arise out of the same transaction or series of transactions. |
Article 28 Consolidation is permitted where: (a) the parties agree to consolidate; (b) all of the claims in the arbitrations are made under the same arbitration agreement; or (c) if the claims are made under more than one arbitration agreement, a common question of law or fact arises in both or all of the arbitrations, the rights to relief claimed are in respect of, or arise out of, the same transaction or series of transactions, and the arbitration agreements are "compatible". |
Article 22.7 Consolidation is permitted where: (a) the parties agree in writing to consolidation; or (b) the arbitrations to be consolidated are commenced under the same or compatible arbitration agreements and either between the same disputing parties or arising out of the same transaction or series of related transactions, provided that no tribunal has yet been formed by the LCIA Court for such other arbitration(s) or, if already formed, that such tribunal(s) is(are) composed of the same arbitrators. |
|
Joinder |
Article 7(5) The tribunal, once constituted, may consider a joinder of additional parties after the confirmation or appointment of any arbitrator, even if one of the parties to the arbitration does not agree to the joinder. NOTE: This is in line with the LCIA Rules (recently revised in 2020) which only require the consent of the applicant party and the third-party to be joined to file an application for joinder of additional parties. On the other hand, the rules adopted by the SIAC and the HKIAC require express consent of all parties. |
Rule 7.1(b) The filing of an application for one or more additional parties to be joined is permitted where all parties, including the additional party, expressly agree to the joinder. |
Article 27.1(b) Joinder of an additional party may be allowed provided that all parties, including the additional party, expressly agree to the joinder. |
Article 22.1(x) Joinder of an additional party may be allowed provided that all parties, including the additional party, expressly agree to the joinder. |
|
Remote hearings |
Article 26(1) This provision expressly acknowledges that hearings may be conducted by physical attendance or remotely by videoconference, telephone or other appropriate means of communication. NOTE: This is in line with the LCIA Rules (recently revised in 2020) which also expressly refer to the possibility of conducting the hearing virtually. |
There is neither a prohibition nor an express provision with respect to remote hearings. Nonetheless, Rule 19.1 provides that the tribunal shall conduct the arbitration in such manner as it considers appropriate, after consulting with the parties, to ensure the fair, expeditious, economical and final resolution of the dispute. The COVID-19 pandemic has exponentially increased the use of communications technology and remote hearing platforms by parties. In recognition of this, SIAC published a guidance note in August 2020 titled "Taking Your Arbitration Remote". |
There is neither a prohibition nor an express provision with respect to remote hearings.
Article 22.4 provides that the tribunal shall have the power to set the date, time and place of the hearing in the event the tribunal decides such a hearing is necessary. |
Article 19.2 There is an express provision that the form of the hearing may be in person, or virtually by conference call, videoconference or using other communications technology with participants in one or more geographical places (or in a combined form). |
|
Expedited Procedure |
Article 1(2) of Appendix VI The threshold for the automatic application of the expedited procedure has been raised from USD 2 million to USD 3 million and applies where an arbitration agreement is concluded on or after 1 January 2021. NOTE: The ICC's expedited regime is arguably the most robust, considering that it applies automatically to claim sums that fall below the stipulated value. Conversely, parties who choose to conduct their arbitrations under the rules of the SIAC, the HKIAC or the LCIA must agree to opt in to the expedited regime for it to apply or seek the respective approval of the relevant courts or administrative bodies of the institution(s). |
Rule 5.1 Parties may opt in to the expedited procedure where the amount in dispute is less than SGD 6 million, or where the parties so agree, or in cases of "exceptional urgency". |
Article 42.1 Parties may opt in to the expedited procedure where the amount in dispute is less than HKD 25 million, where the parties so agree or in cases of “exceptional urgency”. |
Article 9A In cases of "exceptional urgency" any party may apply to the LCIA Court for the expedited formation of the tribunal and the LCIA Court will determine the application as expeditiously as possible in the circumstances. |
|
Discretion on the constitution of the tribunal |
Article 12(9) The ICC Court has the discretion and power in "exceptional circumstances" to disregard the parties' arbitration agreement and appoint each member of the tribunal “to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award”. |
The SIAC does not have the discretion and power (at least to the extent conferred by the 2021 ICC Rules) to interfere with the parties' arbitration agreement on the constitution of the tribunal. However, Rule 14.1 provides that any arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to the arbitrator's impartiality or independence. |
The HKIAC does not have the discretion and power (at least to the extent conferred by the 2021 ICC Rules) to interfere with the parties' arbitration agreement on the constitution of the tribunal. However, Article 11.6 provides that any arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to the arbitrator's impartiality or independence. |
Article 10 The LCIA Court has wide discretion to (a) revoke the arbitrator's appointment upon its own initiative, (b) at the written request of all other members of the tribunal or (c) upon a written challenge by any party concerning, inter alia, circumstances that give rise to justifiable doubts as to that arbitrator's impartiality or independence. |
|
Limiting changes to party representation following the constitution of tribunal |
Article 17(2) Tribunals may take any measure to avoid a conflict of interest, including the exclusion of incoming counsel, where the independence and impartiality of the tribunal is threatened. NOTE: This power is unique to arbitrations conducted pursuant to the 2021 ICC Rules and affords greater protection in circumstances where the independence and impartiality of the tribunal is a concern. |
There is no explicit power to exclude incoming counsel. |
There is no explicit power to exclude incoming counsel. |
There is no explicit power to exclude incoming counsel. |
|
Requirement to disclose third-party funding arrangements |
Article 11(7) There is a requirement to disclose “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". NOTE: HKIAC's approach, which requires disclosure of any "funding agreement," is arguably more expansive than that of the ICC Rules 2021. The ICC, however, goes further than the SCC, as the latter had previously issued, on 11 September 2019, a policy to encourage, without requiring, the disclosure of the identity of “any third party with a significant interest in the outcome” of the dispute. On the other hand, the 2021 Rules also go further than the LCIA's as the latter has not introduced, in its new 2020 rules, a provision on third-party funding. |
There is no explicit requirement that parties disclose any funding arrangement entered into with a third party. |
Article 44 There is a requirement for the disclosure of any “funding agreement”. |
There is no explicit requirement that parties disclose any funding arrangement entered into with a third party. |
For further information, please contact:
Jonathan Choo, Partner, ATMD Bird & Bird
jonathan.choo@twobirds.com
[1] S. Eyre, Y. Miller, and R. Slater, “'Light-touch' changes have been made to the new The LCIA Rules 2020 in force from 1 October 2020,'” Website of Bird & Bird, October 2020, available at: https://www.twobirds.com/en/news/articles/2020/global/light-touch-changes-have-been-made-to-the-new-the-lcia-rules-2020-in-force-from-1-october-2020
[2] “Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration Under the ICC Rules of Arbitration,” ICC International Court of Arbitration, 1 January 2019, available at: https://iccwbo.org/content/uploads/sites/3/2017/03/icc-note-to-parties-and-arbitral-tribunals-on-the-conduct-of-arbitration.pdf
[3] “2021 Arbitration Rules,” ICC International Court of Arbitration, 1 December 2020, available at: https://iccwbo.org/dispute-resolution-services/arbitration/rules-of-arbitration/rules-of-arbitration-2021/
[4] “Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration Under the ICC Rules of Arbitration,” ICC International Court of Arbitration, 1 January 2019, available at: https://iccwbo.org/content/uploads/sites/3/2017/03/icc-note-to-parties-and-arbitral-tribunals-on-the-conduct-of-arbitration.pdf
