On October 6, 2020, the Executive Board of the International Chamber of Commerce (ICC) approved the revised ICC Rules of Arbitration (the “2021 ICC Rules”), which will replace the ICC Rules issued in March 2017. The 2021 ICC Rules will enter into force on January 1, 2021 and will define and regulate the management of cases submitted to the ICC International Court of Arbitration (the “ICC Court”) from that date. The 2017 ICC Rules will continue to apply for all cases registered with the ICC Court before January 1, 2021.
As noted by ICC Court President, Alexis Mourre, “[t]he 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.”
The 2021 ICC Rules introduce some notable amendments and innovative features, some of which have recently been implemented across other major arbitration rules. This note provides a summary of these changes.
The existing 2017 ICC Rules provide an innovative framework for the joinder of additional parties in the course of the arbitration and the consolidation of cases involving different parties. The 2021 ICC Rules build further on this framework. This is particularly relevant to complex disputes involving multiple parties and/or contracts, such as those arising in the construction sector between employer, contractor and subcontractor, and those arising in the financial sector between lender, borrower and guarantor.
A new Article 7(5) provides that the arbitral tribunal (once constituted) may join additional parties at the request of any party. This is subject to such additional party accepting the constitution of the tribunal and agreeing to the Terms of Reference. In deciding a joinder request, the tribunal must take into account the relevant circumstances, including (i) whether it has prima facie jurisdiction over the additional party, (ii) the timing of the request for joinder, (iii) possible conflicts of interests, and (iv) the impact of the joinder on the procedure. Under the 2017 ICC Rules, a third party cannot be joined to the arbitration after the constitution of the tribunal without the consent of all parties, including the third party.
The 2021 ICC Rules also provide that the ICC Court may consolidate two or more pending arbitrations into a single arbitration, where the arbitrations involve different parties and the claims are made under more than one contract, provided that the arbitration agreements are the same (Article 10(b)). Under the 2017 ICC Rules, consolidation of arbitrations based on more than one contract is only possible if the arbitrations are between the same parties.
The newly-revised London Court of International Arbitration Rules, which entered into force on October 1, 2020 (the “2020 LCIA Rules”), also adopt a more flexible approach to consolidation. Notably, pursuant to Article 22.7(ii) of the 2020 LCIA Rules, an arbitral tribunal may consolidate arbitrations under compatible arbitration agreements between the same parties or arising out of the same transaction or series of related transactions. Under the previous version of the LCIA Rules, disputes between different parties could not be consolidated unless all parties had consented to such consolidation.
One of the most significant features of the 2017 ICC Rules was the introduction of an expedited arbitration procedure with reduced scales of fees and accelerated schedule requiring the final award to be rendered within six months of the first case management conference.
Article 30 and Appendix VI of the 2021 ICC Rules expand the scope of application of this expedited procedure by increasing the threshold for their opt-out application from US$2 million in dispute to US$3 million. The parties’ right to opt out of the expedited procedure at any time has been maintained.
The statistics show a demand for the expedited procedure. In 2019, the expedited procedure provisions applied in 65 cases by direct operation (i.e., to cases where the arbitration agreement was concluded after 1 March 2017 and the amount in dispute did not exceed US$2 million). In only 5 of these 65 cases did the parties agree to opt out from the procedure. Further, of the 50 final awards rendered in expedited proceedings in 2019, 37 were rendered within the six-month time limit.
With a significant proportion of lower-value cases being registered at the ICC (cases not exceeding US$2 million represented 36.3 percent of the cases registered in 2019), the ICC expects this change to increase the number of cases submitted to the expedited procedure, thereby promoting time and cost efficiency.
The 2021 ICC Rules introduce a new provision concerning remote hearings. This reflects the modern practice of international arbitration, particularly in response to the restrictions arising from the COVID-19 pandemic.
This follows the ICC’s Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 pandemic, which provides guidance concerning the organisation of conferences and hearings in light of COVID-19 considerations, including conducting such conferences and hearings remotely.
Whether an arbitration is suitable for a remote hearing is highly specific to the individual considerations of that particular dispute. Videoconferencing is not new in arbitral proceedings. Following the COVID-19 pandemic, the question has arisen whether holding hearings by video (either fully virtually or in a hybrid part-video and part-physical form) should become general practice. The fast multiplication of technology service providers has accelerated the phenomenon of remote hearings and has underscored its pros and cons. By way of example, remote hearings raise due process concerns such as whether witnesses are coached or prompted off-screen. Another concern is whether the tribunal can assess fully the credibility of a witness in a virtual setting. Some parties also question the efficacy of witness cross-examination without the benefit of the in-person hearing dynamic and raise concerns over difficulties communicating with and within their legal team in a virtual setting. At the same time, remote hearings do present advantages, including cost savings. This is particularly true for small cases that do not warrant in-person hearings, and for case management conferences.
A new Article 26(1) provides that an arbitral tribunal may, after consultation with the parties, decide to hold hearings remotely by videoconference, telephone conference or other appropriate means of communication. Article 19.2 of the 2020 LCIA Rules introduced a similar provision allowing hearings to take place “in person, or virtually by conference call, videoconference or using other communications technology with participants in one or more geographical places.” The reference in both rules to other means of communication accommodates future innovations in remote hearing technology.
Of further interest are changes to provisions relating to written communications and the physical transmission of the request for arbitration and answer to the request for arbitration. The 2021 ICC Rules provide that such pleadings shall be submitted physically in multiple sets only when requested by a party (Articles 3(1), 4(4)(b) and 5(3)). The presumption in favour of electronic communications and filings has also been incorporated in the 2020 LCIA Rules (Articles 1.3, 2.3 and 4.1). This innovation is a welcome step towards more technologically modern and environmentally friendly arbitration practice.
The 2021 ICC Rules also include two new provisions applying specifically to investment treaty arbitrations. This reflects the growing number of such cases involving States and State-owned parties administered by the ICC in recent years.
A new Article 13(6) provides that, whenever the arbitration agreement is based on a treaty and unless the parties agree otherwise, no arbitrator shall have the same nationality as that of any party. This follows the approach adopted in the ICSID Convention (Article 39) and the ICSID Arbitration Rules (Article 1.3).
A new Article 29(6)(c) further specifies that the ICC emergency arbitrator provisions, which provide a procedure for parties to seek urgent temporary relief pending the constitution of an ICC arbitral tribunal, are not available in arbitrations based on a treaty. This provision codifies the ICC Court’s established practice in relation to the emergency arbitrator provisions. In contrast to the 2021 ICC Rules, the use of an emergency arbitrator is permitted in investor-State disputes conducted under the arbitration rules of the Stockholm Chamber of Commerce.
The 2021 ICC Rules introduce new provisions on third-party funding, party representation and arbitral appointments aimed at enhancing transparency, protecting the integrity of the proceedings and guaranteeing equal treatment of the parties.
Reflecting the growing participation of third-party funders in international arbitration, a new Article 11(7) requires each party to promptly 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.” The stated purpose of this requirement is to assist arbitrators in complying with their duties of disclosure pertaining to independence and impartiality. This reflects the ICC’s existing approach. The January 1, 2019 ICC’s Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration provides, in relation to disclosure, that “an arbitrator or prospective arbitrator should consider relationships with non-parties having an interest in the outcome of the arbitration.” While the 2020 LCIA Rules do not contain a similar requirement, the 2018 version of the Hong Kong International Arbitration Centre Administered Arbitration Rules provide at Article 44 that a funded party must disclose the existence of a funding agreement and the identity of the third-party funder, as well as any subsequent changes to such information.
A new Article 17(1) requires each party to the arbitration to promptly inform the ICC Secretariat, the arbitral tribunal and other parties of any changes in its representation. Article 17(2) provides that the arbitral tribunal, once it has afforded the parties an opportunity to comment, may take any necessary measure to avoid a conflict of interest arising from a change in party representation, including by excluding the new counsel from participating in the proceedings in whole or in part. A similar provision was introduced in the 2014 revision to the LCIA Rules (Article 18.4).
The 2021 ICC Rules further provide that, in exceptional circumstances, the ICC Court may appoint each member of the arbitral tribunal if the application of the parties’ arbitration agreement would lead to a significant risk of unequal treatment and unfairness (Article 12(9)). This provision in practice allows the Court to disregard arbitration agreements that, whilst generally unobjectionable, may pose a risk to the validity of the award by requiring a procedure for constituting the tribunal that does not treat the parties equally in the circumstances of the particular dispute.
This change reflects the principle upheld in the 1992 Dutco decision of the French Cour de Cassation, which concerned an ICC arbitration initiated by one party to a consortium agreement against its two consortium partners. The ICC Rules at the time did not contain provisions on joint nominations by multiple parties, and the ICC Court ordered the two respondents, who had opposing interests, to jointly nominate one arbitrator, while directly appointing the third arbitrator. The respondents protested against the joint appointment and eventually brought an application to set aside the tribunal’s interim award. The French Cour de Cassation reversed the decision of the Paris Court of Appeal that had refused to set aside the interim award. The Cour de Cassation held that the constitution of the tribunal contravened international public policy as it had violated the principle of the equality of treatment regarding the parties’ right to appoint an arbitrator.
With these new provisions, the ICC reinforces its position as a leading global arbitral institution by endorsing established practice and adapting to new social realities, including through the use of technology. The 2021 ICC Rules build on the framework established by the 2012 and 2017 revisions and make ICC Arbitration even more attractive for both large complex arbitrations and smaller cases.
Prior to the entry into force of the 2021 Rules on January 1, 2021, the ICC will release an updated version of its Note to Parties and Arbitral Tribunals on the Conduct of Arbitration.
Shearman & Sterling’s International Arbitration team provides advice and advocacy to companies, ahead of and throughout arbitration proceedings, and is widely regarded as one of the very best in the market. We would be pleased to answer any questions or to provide any further analysis on the 2021 ICC Rules.