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New Year – New Rules in Dispute Resolution: Key Changes in the ICC Arbitration Rules

2021-01-29

Authors
Dina Prokic 438 387-5497 - dprokic@woods.qc.ca
Stephen L. Drymer 514-370-8745 - sdrymer@woods.qc.ca

As we have recently written, arbitration is an effective, expeditious and sure alternative to court litigation for the resolution of commercial disputes. And the process keeps getting easier, as it adapts to new realities and the demands of its business users.

An example of this adaptability as it affects international arbitration is the recently revised Arbitration Rules of the International Chamber of Commerce (“ICC”), which entered into force on 1 January 2021. The 2021 Rules introduce a number of changes to the previous version of those rules:

  • Streamlining arbitrations by expressly allowing for remote (virtual) hearings;
  • Facilitating the joinder and consolidation of related parties and cases;
  • Acknowledging third-party funding arrangements;
  • Expanding the Expedited Procedure rules by raising the threshold value in dispute to USD 3 million;
  • Introducing new provisions specifically designed for investment treaty disputes.

The ICC has also updated its essential Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (the “Note”).

The following will outline key changes in the 2021 Rules, which are intended to further facilitate the conduct of arbitrations and mitigate business disruptions.

Adapting to the “New Normal”

Although technology was already a major component in international arbitration, [1] travel restrictions, social distancing measures and other public health considerations during the COVID-19 era have ensured that “virtual” or “remote” hearings on the merits have become a new normal – not necessarily (yet) a mandatory default approach in all cases, but certainly a feasible and widely-used alternative to in-person hearings and meetings.[2] Many arbitral institutions have amended their rules to reflect this reality.[3]

Whereas the ICC has long encouraged parties to conduct purely procedural hearings by telephone and video conferencing,[4] the 2021 Rules clarify that even hearings on the merits may be conducted remotely, including in appropriate circumstances without party agreement or over party objection (Art. 26(1)).

ICC tribunals consider all relevant circumstances in deciding whether to conduct a remote hearing.[5] The Note also provides guidance on specific means and procedures for remote hearings.[6]

Complex Arbitrations

One of the occasional frustrations with arbitration is its perceived inability to address the realities of complex commercial arrangements involving a multiplicity of related contracts and parties. The 2021 Rules bring welcome clarity to the issue, expressly allowing for additional parties to be joined in specific situations after the tribunal has considered relevant circumstances, including “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” (Art. 7(5)).

The requirements for the consolidation of separate but related arbitrations, set out in Art. 10 of the 2021 Rules, are likewise helpfully clarified.[7]

Safeguarding the Integrity of the Process

  • Third-party funding

Third-party funding of claimants and respondents in arbitration is an ever-growing phenomenon.  It is also a phenomenon that many arbitration rules have been slow to address notwithstanding the prevailing consensus that the existence of third-party funding and the identity of funders ought to be disclosed in order to avoid potential conflicts of interest.[8]  Such disclosure is now provided for under the 2021 Rules (Art. 11(7)).

  • Constitution of the arbitral tribunal

One of the foundational principles of arbitration is a party’s right to appoint an arbitrator. However, the exercise of this right can sometimes be difficult to achieve, for example in arbitrations in which there are multiple claimants or respondents. In response to such situations and in order to avoid the risk of significantly unequal treatment or unfairness that could potentially jeopardize the validity and enforceability of the award, the newly introduced Art. 12(9) allows the ICC Court, in exceptional circumstances, to appoint each member of the arbitral tribunal.

  • Nationality of arbitrators

In an attempt to address concerns regarding arbitrators’ impartiality and independence, the revised Art. 13(5) imposes nationality restrictions with respect to arbitrators who are appointed by the ICC Court. Although in suitable circumstances and in the absence of the parties’ objections this prohibition may be dispensed with,[9] the general rule is that “where the Court is to appoint the sole arbitrator or the president of the arbitral tribunal, such sole arbitrator or president of the arbitral tribunal, shall be of a nationality other than those of the parties.”

  • Changes in party representation

Parties are of course free to choose their own counsel to represent them.  This right is somewhat qualified under the 2021 Rules, again with a view to protecting the integrity of the proceedings.  The revised Article 17 provides that, after consulting the parties, a  tribunal may, “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” (Art. 17(2)). In deciding whether to exercise this extraordinary authority, the tribunal will consider “(a) the ability of the party that has introduced the new representative to properly submit its case in the absence of that representative, (b) the timing of the addition of such newly introduced party representative, and (c) the disruption to the arbitration that may result from its continuing participation in case of a successful challenge against one or more of the arbitrators.”[10]

To be clear, the 2021 Rules do not require that a change in a party’s representation be authorized by the tribunal. They merely empower a tribunal to act where necessary to avoid disruption or other compromise of the proceedings. By contrast, under the Arbitration Rules  of the London Court of International Arbitration (“LCIA Rules”) a change in party representation will only become effective once approved by the tribunal.[11]

Fast-track Arbitrations

The enthusiastic reception of the ICC Expedited Procedure Provisions (“EPP”), which were introduced in 2017, has prompted the increase in the threshold amount of disputes automatically subject to the EPP (subject to “opt out” and “opt in” provisions), from USD 2 million to USD 3 million for arbitration agreements concluded on or after January 1, 2021.

Treaty-based Arbitrations

Articles 13(6) and 29(6)(c) of the 2021 Rules reflect the rise in the number of states and state-owned parties opting for ICC arbitration in recent years.[12]

  • Unless the parties agree otherwise, Art. 13(6) prohibits any arbitrator to have the same nationality of any party to the arbitration. Although restrictions on arbitrator nationality are fairly common in investment arbitration rules, some affect only a sole or presiding arbitrator (e.g., the 2017 SIAC IA Rules[13] or the 2017 CIETAC IIA Rules[14]). The ICC’s stricter approach resembles that of the ICSID Rules[15] in this respect.
  • Article 29(6)(c) excludes the application of the Emergency Arbitrator Provisions if “the arbitration agreement upon which the application is based arises from a treaty.” This provision codifies the practice of the Court and is justified “by the fact that the very short time-limits that are imposed on the parties in the context of emergency arbitration would not be compatible with the time needed by the relevant State administrations to select counsel, if any, and to organize its defense.”[16]

Suggestions for Future Amendments?

Although the 2021 Rules update and clarify various matters, further revisions might also have been welcome.  

For instance, as do many other institutional rules, the newly introduced Art. 13(6) of the 2021 Rules, and Art. 13 in general, omit to define “nationality” or to provide any guidance in this respect. Although it has become common to equate nationality with citizenship,[17] that is not a given[18] and explanations similar to those contained in Articles 6.2 and 6.3 of the 2020 LCIA Rules[19] may well have been appreciated. 

Furthermore, as the ICC Rules are issued in multiple languages, a statement providing for the prevailing version (similar to the provisions found in the SIAC,[20] HKIAC[21] and ICSID Arbitration Rules[22] ) may have been helpful.  Discrepancies between different language versions are inevitable and, at times, can lead to significant debate. A striking example of such discrepancy was Article 25(2) of the 2017 version of the Rules, the English version of which required the “tribunal [to] hear the parties together in person”. In contrast, the French[23] and Spanish[24] versions required the tribunal to allow an adversarial exchange (i.e. hear the parties in compliance with the principe de contradictoire / principio de contradicción), without specifying that it had to be “in person”. The Italian translation reflected a mixed approach, requiring both a hearing “in person” and compliance with the adversarial principle.[25] The ICC has attempted to bring some clarity on the possibility of remote hearings in its 2020 Guidance note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic by, among other things, referring to the French text.[26] However, having a provision that sets out the primary version of the Rules would have likely minimized uncertainty. While Article 26(1) now expressly allows remote hearings, it is possible that other discrepancies, which have not yet come to light or been mined by diligent counsel, remain. All that the parties have in case of such future inconsistencies is a mention on the page containing the publication details that “the English version of the Rules is the original text”. Apart from the fact that being an “original text” does not make it the prevailing version, this sentence has not, thus far, been uniform across the various translations: the Russian text of the 2017 Rules states that “the English and French versions are the only official ones.”[27]

Conclusion

The 2021 Rules are not intended as a comprehensive overhaul of the 2017 Rules. Rather, in the words of the President of the ICC Court, they “mark a new step towards an even more efficient, flexible and transparent ICC Arbitration.”[28] The 2021 Rules are undoubtedly a useful step in this progression. 

Moreover, although the changes brought to the 2021 Rules are undoubtedly motivated by the desires of its users and the need to ensure the viability and continuing improvement of ICC arbitration in a pandemic-ridden world, it is noted that, perhaps unwittingly, they also put wind in the sails of the Campaign for Greener Arbitrations.[29]



1 In 2018, 89% of respondents to the  International Arbitration surveyconducted by the School of International Arbitration at Queen Mary University of London believed that arbitration users should make even more use of “videoconferencing”. See Queen Mary University of London / White & Case, “2018 International Arbitration Survey: The Evolution of International Arbitration,” at 32.

2 For the definition and typology of “remote hearings” please see Maxi Scherer, “Remote Hearings in International Arbitration: An Analytical Framework,” (2020) 37:4 Journal of International Arbitration 407, at 410 et seq.

3 See, e.g., the 2020 LCIA Rules (effective October 1, 2020), Art. 19.2; the 2020 CEPANI Arbitration Rules (effective July 1, 2020), Art. 24(3).

4 ICC Arbitration Commission Report on Techniques for Controlling Time and Costs in Arbitration (ICC, 2018), at para. 71.

5 See the ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (the “Note”) dated January 1, 2021, para. 99-100.

6 See the ICC Note, paras. 102-103.

7 For examples clarifying the amendments please see the ICC Note, para. 19.

8 Queen Mary University of London / White & Case, “2015 International Arbitration Survey: Improvements and Innovations in International Arbitration,” at 48; International Council for Commercial Arbitration, “Report of the ICCA-Queen Mary Task Force on Third-Party Funding in International Arbitration” (April 2018), the ICCA Reports No. 4, at 87, accessible at : https://www.arbitration-icca.org/icca-reports-no-4-icca-queen-mary-task-force-report-third-party-funding.

9 For examples of such circumstances, please see the ICC Note, para. 44.

10 See the ICC Note, para. 15.

11 See the 2020 LCIA Rules, Art. 18.3.When deciding whether to grant approval, the LCIA Rules require the tribunal to consider, inter alia, the stage which the arbitration has reached and any likely wasted costs or loss of time resulting from the intended change (LCIA Rules, Art. 18.4)

12 ICC Dispute Resolution 2019 Statistics, at 10-11: “In 2019, 20% of new cases involved a state or state entity. This figure represents an important 67% increase in the number of states and state-owned parties in ICC Arbitrations over the past five years and sets a new all-time ICC record. […] In 2019, two cases were field on the basis of bilateral investment treaties (BITs). […] Since 1996, when the first BIT case was registered, to date, ICC has administered 42 cases based on BITs.”

13 2017 SIAC Investment Arbitration Rules, Rule 5.7: “Where the Parties are of different nationalities, the Court shall appoint a sole arbitrator or a presiding arbitrator of a different nationality than the Parties, unless the Parties agreed or unless the Court otherwise determines it to be appropriate having regard to the circumstances of the case.”

14 2017 CIETAC International Investment Arbitration Rules, Rule 11(3) : “Unless otherwise agreed by the parties or by joint nomination by the parties, a sole arbitrator, a presiding arbitrator or the majority of arbitrators shall be of different nationality or nationalities than the parties.”

15 ICSID Arbitration Rules, Rule 1(3) : “The majority of the arbitrators shall be nationals of States other than the State party to the dispute and of the State whose national is a party to the dispute, unless the sole arbitrator or each individual member of the Tribunal is appointed by agreement of the parties. Where the Tribunal is to consist of three members, a national of either of these States may not be appointed as an arbitrator by a party without the agreement of the other party to the dispute. Where the Tribunal is to consist of five or more members, nationals of either of these States may not be appointed as arbitrators by a party if appointment by the other party of the same number of arbitrators of either of these nationalities would result in a majority of arbitrators of these nationalities.”

16 Message from the President of the ICC International Court of Arbitration, Alexis Mourre, published in the ICC Dispute Resolution Bulletin 2020, Issue 3 and accessible on the ICC website :  ICC Digital Library (iccwbo.org).

 

17 Ilhyung Lee, “Practice and Predicament: The Nationality of the International Arbitrator (With Survey Results)” (2008) 31:3 Fordham Int’l LJ 603, at 608.

18 Gary Born once rightly questioned: “What does ‘nationality’ mean? Are Germans and French nationals of the European Union? Are Austrians the same nationality as Bavarians? Are there different nationalities in North America?”SeeGary B. Born, International Commercial Arbitration: Commentary and Materials (Kluwer Law International, 2001), at 623.

19 While reference is made to the most recent version of the LCIA Rules, these provisions existed under the 2014 version as well. Article 6.2 of the 2020 LCIA Rules states: “For the purposes of Article 6.1, in the case of a natural person, nationality shall mean citizenship, whether acquired by birth or naturalisation or other requirements of the nation concerned. […]”

Article 6.3 further clarifies: “A person who is a citizen of two or more States shall be treated as a national of each State; citizens of the European Union shall be treated as nationals of its different Member States and shall not be treated as having the same nationality; a citizen of a State’s overseas territory shall be treated as a national of that territory and not of that State; […]”

20 2016 SIAC Rules, Rule 41.3: “In the event of any discrepancy or inconsistency between the English version of these Rules and any other languages in which these Rules are published, the English version shall prevail.”

21 2018 HKIAC Administered Arbitration Rules, Art. 2.19: “English is the original language of these Rules. In the event of any discrepancy or inconsistency between the English version and the version in any other language, the English version shall prevail.”

22 ICSID Arbitration Rules, Rule 56(1): “The texts of these Rules in each official language of the Centre shall be equally authentic.”

23 “[…] le tribunal arbitral entend contradictoirement les parties si l’une d’elles en fait la demande; à défaut, il peut décider d’office de leur audition.”

24 “[…] el tribunal arbitral deberá oírlas contradictoriamente si una de ellas así lo solicita. A falta de tal solicitud, podrá oírlas de oficio.”

25 “[…]il tribunale arbitrale sente le parti personalmente in contraddittorio se richiesto da una di esse, e, in difetto, può decidere d’ufficio di sentirle.”

26 ICC, “Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic,” dated April 9, 2020, at para. 24.

27 2017 Arbitration Rules and 2014 Mediation Rules (Russian version), p.2; accessible on the ICC website: https://iccwbo.org/publication/2017-arbitration-rules-2014-mediation-rules-russian-version/

28 Message from the President of the ICC International Court of Arbitration, Alexis Mourre, published in the ICC Dispute Resolution Bulletin 2020, Issue 3 and accessible on the ICC website : ICC Digital Library (iccwbo.org)

29 The Campaign for Greener Arbitrations began as a promise by an international arbitrator Lucy Greenwood to manage her arbitrations in an environmentally friendly manner. The Campaign now includes arbitration practitioners committed to achieving sustainable change and promoting awareness of the environmental impact of arbitrations.