ICC 2021 Rules
One of the world’s most respected dispute resolution institutions, with increasing popularity for parties operating in the Middle East, is the International Court of Arbitration of the International Chamber of Commerce (the “ICC”).
The ICC has recently updated its rules for arbitration: the new rules entered into force on 1 January 2021 (the “2021 Rules”). These rules define and regulate the management of arbitration cases received by the ICC from 1 January 2021 onwards and replace the previous 2017 Arbitration Rules (the “2017 Rules”), unless the parties specify otherwise in their arbitration agreement. The 2021 Rules also codify a number of provisions contained within the ‘ICC Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic’ (the “COVID-19 Guidance Note”) released in April last year.
ICC Court President Alexis Mourre when announcing the rationale behind the changes found in the 2021 Rules stated that: “The amendments to the Rules … mark a further step towards greater efficiency, flexibility and transparency of the Rules, making ICC Arbitration even more attractive, both for large, complex arbitrations and for smaller cases.”
Notable amendments to the 2017 Rules relate to the following areas:
- Joinder of parties and consolidation of cases;
- Disclosure of third-party funding arrangements;
- Preventing conflicts of interest and ensuring fairness of proceedings;
- Remote hearings and paperless filings; and
- Changes to the expedited arbitration procedures.
Joinder of Parties and Consolidation of Cases
As facts often come to light after a case has been filed, the 2017 Rules provided for a mechanism by which a litigating party could join an additional third party to the arbitral proceedings. The 2017 Rules stated that no such additional party may be joined after the confirmation or appointment of any arbitrator, unless all parties, including the additional party, otherwise agree. This has been changed in the 2021 Rules by Article 7(5) so that additional parties may now be joined by the arbitral tribunal once constituted (if the joining party/parties agree to the terms of reference and composition of the tribunal) without requiring the agreement of all the parties.
In addition, a tweak has been made to Article 10(b) of the 2017 Rules, so the ICC Court may now consolidate multiple arbitrations into a single arbitration, even where the claims in the arbitrations are made under more than one arbitration agreement between different parties. This therefore captures situations in which multiple parties and contracts are effectively in dispute over the same issues.
These updates to the rules are a reflection of the ICC’s intention to provide as much flexibility and efficiency to proceedings as possible. Taking a holistic approach to dispute resolution by allowing for the grouping of parties and consolidation of disagreements should increase the time and cost efficiency of the process.
Disclosure of Third-Party Funding Arrangements
Third party funding in international arbitrations has been a hot topic in the last few years and what with the financial strain to businesses that the COVID pandemic has brought, could well rise in popularity in 2021. As was discussed at the recent ‘virtual arbitration summit’, many arbitral bodies wish to balance the desire for third party funding arrangements with the need for transparency and avoiding of potential conflicts of interests.
Article 11(7) of the 2021 Rules adds a provision that each party must ‘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’. Doing so will assist prospective arbitrators and arbitrators in complying with their duties of impartiality and independence as well as assuring all parties that the arbitrators are acting without bias or conflict.
Preventing Conflicts of Interest and Ensuring Fairness of Proceedings
Part of the flexibility of arbitration proceedings is that parties ordinarily have the ability to nominate which arbitrators, as well as how many arbitrators, sit on the Tribunal that will determine their dispute. The 2021 Rules have, however, introduced a new Article 12(9) enabling the Court to override the parties’ agreement of arbitrator(s) in exceptional circumstances to avoid a ‘significant risk of unequal treatment and unfairness that may affect the validity of the award’. The example given in the guidance note to the 2021 Rules (the “2021 Guidance Note”) is where one party has drafted the arbitration agreement and (potentially unfairly) included a right for them to constitute the panel unilaterally. Whilst this is perhaps not a remote possibility (as arbitration clauses in commercial contracts are perhaps not reviewed as thoroughly as others) the use of the rule is likely to tie the ICC in a bind where it is forced to either risk infringing on the rights of the parties to make decisions for themselves; risk making an early statement regarding a power imbalance of the parties in dispute; or undermine the arbitrators’ ability to be impartial, all of which are to be avoided in order to maintain its reputation of a flexible, structured and fair institution.
Similarly, Article 17(2) further empowers an arbitral Tribunal 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.
Article 13 regarding the appointment and confirmation of the arbitrators has also been adjusted by the 2021 Rules. Firstly, Article 13(5) of the 2017 Rules stated that the default position was that a sole arbitrator or the president of the arbitral Tribunal shall be of a nationality other than those of the parties (albeit that the parties had a right to waive this should they choose). This was amended slightly so that the default position now is that the sole arbitrator/president should be of a different nationality where it is the court that appoints them. The 2021 Guidance Note suggests that this is ultimately to place the choice in the hands of the parties, who may well have no objections to or interest in the nationality of a sole arbitrator. A limitation to this rule is the additional Article 13(6), which cements the position that no arbitrator shall have the same nationality of any party to the arbitration whenever the arbitration agreement upon which the arbitration is based arises from a treaty (unless the parties agree otherwise). The differentiation here is likely to relate to the fact that arbitration under a treaty may have more of a focus on a national interest as opposed to an arbitration agreement made in commercial, non-territorial dealings.
Remote Hearings and Paperless Filings
An inevitable update to the rules would have to include some provisions relating to the increased demand for remote hearings and rise in usage and adoption of technology in arbitral proceedings. Whilst the COVID-19 Guidance Note already provided for the use of telephone or video conferencing for hearings, Article 26(1) of the 2021 Rules has now codified that the arbitral Tribunal has the power to 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. What will be interesting to see in the future is whether there will be any circumstances in which a tribunal can effectively force a party to attend physically. This is a grey area at present which may require future guidance.
A further product of the COVID-19 Guidance Note are the updates to Articles 1(3), 3(1), 4(4) and 5(3). This, along with the 2021 Guidance Note, has clarified that as a general rule, the Request for Arbitration, the Answer and any counterclaims, and any Request for Joinder, must be sent to the Secretariat by email. Hard copies should be submitted only where the filing party specifically requests transmission thereof by delivery against receipt, registered post or courier. This is not only a practical solution to remote working but generally as an initiative to reduce waste and promote a greener practise.
Changes to the Expedited Arbitration Procedures
One of the historic aims of arbitration has been to resolve disputes quickly and efficiently. Unfortunately, that aim is rarely achieved. The 2017 Rules introduced the ‘Expedited Procedure’ which provides a final award within six months of the case management conference. Judging by the uptake of this expedited process the initiative was a great success. Under the 2017 Rules, the expedited procedure applied automatically (with the option to opt-out) if the amount in dispute did not exceed US$2 million (Article 30 and Annex VI). The 2021 Rules have increased the financial threshold to US$3 million for cases where the arbitration agreement was concluded on or after 1 January 2021.
It therefore appears the ICC’s updated 2021 Rules have been introduced for two key reasons. Firstly, changes such as the remote hearing provisions, expansion of the expedited procedure and further ability to join cases and parties, appears to be reflect the ICC’s intention to adapt to the times as well as providing a flexible service which resolves disputes quickly. Secondly, with speediness comes a greater need for diligence in order to ensure that potential conflicts of interests or unjust results are not reached in rushed circumstances. The increased visibility of third party funding and other conflict measures should give arbitrating parties the peace of mind that the ICC is a reliable and trustworthy forum for dispute resolution.
Charles Russell Speechlys: International Arbitration