New ICC Arbitration Rules entered into force on 1 January 2021 (the "2021 Rules"). They apply to arbitrations registered with the ICC from 1 January 2021, unless the arbitration agreement provides otherwise. The 2017 Arbitration Rules (the "2017 Rules") shall continue to apply to cases registered before that date.
The 2021 Rules aim to make ICC arbitrations even more efficient, flexible and transparent. They should make ICC arbitration ever-more suited to complex arbitrations, multi-party and multi-contract cases and smaller-value cases.
The ICC also recently released an updated version of its Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration which provides useful practical guidance about conducting arbitrations under the 2021 Rules as well as the practices of the ICC Court.
While the 2021 Rules are not drastically different from the 2017 Rules, there are some important changes which will impact users – notable examples include:
- the expanded application of the expedited procedure rules;
- new disclosure requirements relating to third-party funding;
- the ICC Court's new power to select and appoint the tribunal (overriding the parties' agreement); and
- the ability to exclude new counsel where his/her appointment creates a conflict of interest.
This update summarises the 10 most important changes that you need to know.
1. More cases will, by default, be governed by the expedited procedure provisions
- For cases with up to USD$3 million in dispute where the arbitration agreement was concluded on or after 1 January 2021, the expedited procedure provisions ("EPP") will automatically apply unless all the parties expressly opt out (Article 30 and Appendix VI).
- Under the 2017 Rules, the threshold was USD$ 2 million and the new increased threshold is a corollary of the success of the EPP.
- The USD$2 million threshold will continue to apply automatically to cases involving arbitration agreements concluded between 1 March 2017 and 31 December 2020 (again subject to all parties opting out) (Appendix VI, Article 1(2)).
- The other instance where the EPP may not apply is if the ICC Court decides that it is inappropriate in the circumstances to apply the EPP (Article 30(3)(c)).
- The EPP promote faster and more cost-effective case resolution – expect reduced arbitrator fees, an early case management conference ("CMC"), no terms of reference, the possibility of limited evidence and/or a "documents only" decision and a final award within six months of the CMC.
- Parties may also opt-in to the EPP for higher value claims or for arbitration agreements pre-dating 1 March 2017 when drafting their arbitration clause or by agreement post-dispute (Article 30(2)(b)).Likewise, parties can opt out by using express language that they intend not to subject themselves to the EPP (Article 30(3)(b)).
2. Flexible joinder and consolidation provisions
- Under the 2017 Rules, no additional party could be joined after the tribunal was constituted unless all parties consented.
- Pursuant to a Request for Joinder, tribunals may now decide to join additional parties during the arbitration, without the agreement of all parties, provided that the joining party:
- is a party to the arbitration agreement;
- agrees to the tribunal that has been constituted; and
- agrees to the terms of reference, where applicable (Article 7(5)).
- Practically speaking, a respondent can now join a willing co-respondent without needing the claimant's express consent. However, this does not mean that the tribunal acknowledges jurisdiction with respect to the joining party. The tribunal retains discretion whether or not to join the willing co-respondent, taking into account all relevant circumstances (Article 7(5)).
- Consolidation is also allowed under multiple agreements with identical arbitration clauses (Article 10(b)) and so is particularly useful for back-to-back contracts.
- Consolidation of cases with the same parties is permitted where the arbitration agreements are not the same but are compatible, provided that the ICC Court also finds that the disputes arise in connection with the same legal relationship (Article 10(c)).
3. Paperless filings and remote hearings
- The latest rules remove the presumption that pleadings and written communications shall be sent in hard copy.
- As a general rule, Requests (Article 4), Answers and any counterclaims (Article 5) and Requests for Joinder (Article 7) must be filed electronically with the ICC Secretariat (by email).
- Hard copies should only be submitted to each other party, the tribunal and the ICC Secretariat where the party filing the document requests transmission of it by "delivery against receipt, registered post or courier" (Article 4(4)(b), Article 5(3) and Appendix V, Article 1(2).
- Eradicating the previous ambiguity under the 2017 Rules as to whether a physical hearing had to take place, the 2021 Rules expressly recognise remote hearings by video conference and also permit a mixture of in-person and remote attendance (Article 26(1)).
- The tribunal has to consult the parties before determining what type of hearing is appropriate and will decide based on the relevant facts and circumstances of the case.
- This rule reflects ICC guidance note relating to the COVID-19 pandemic and remains necessary while health and travel related restrictions linked to the COVID-19 pandemic persist.
4. ICC Court can appoint tribunal in exceptional circumstances
- In exceptional circumstances, the ICC Court may now appoint a full tribunal of its choice, overriding the parties' agreement about the constitution of the tribunal. This is to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award (Article 12(9)).
- While this is one of the most controversial additions and parties may be concerned about how the ICC will interpret "exceptional circumstances", the ICC has said that this is not aimed at opening the doors for increased scrutiny by the ICC Court. Rather, the provision is designed for rare cases where the arbitration agreement breaches the principle of party equality in the appointment of arbitrators and the award risks being nullified.
- According to the ICC, in its almost 100-year history, it has only had 3 cases of arbitration agreements including an unfair appointment mechanism.
- Examples of where the ICC Court could apply Article 12(9):
- when the arbitration agreement provides for a unilateral right by one party to constitute the tribunal and such unilateral right is not admitted by the law at the place of the arbitration (see the ICC's Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration);
- where one party has the right to nominate one arbitration and the other party has the right to nominate one arbitrator as well as the presiding arbitrator; and
- in multi-party cases, where more arbitrators are nominated on one side than the other.
5. Conflicts of interest
- Tribunals may prevent new party representatives from participating in the arbitration if a conflict of interest arises (Article 17(2)).
- Likely aimed at stopping dilatory tactics, this should encourage parties to do thorough conflict checks before engaging new representatives and may encourage them to seek tribunal approval prior to any formal engagement.
6. Third party funding and insured cases
- Parties must now disclose the existence of any third-party funding together with the funder's identity (Article 11(7)).This is designed to assist arbitrators with their disclosure duty, which is ongoing throughout the case.
- The rule applies to a "non-party" which has "an economic interest in the outcome of the arbitration" and so is likely to apply to any third party funder. As a general rule, parties do not disclose the existence of insurers and we understand that the new rule isn’t intended to depart from that position.
- By contrast, the ICC's Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration confirms that arbitrators should consider disclosing relationships "with any entity having a direct economic interest in the dispute or an obligation to indemnify a party for the award" so arbitrators may need to disclose relationships with insurers.
- In current and upcoming cases, we recommend alerting funders and insurers to these new provisions at the earliest opportunity to ensure they are comfortable with them.
7. ICC Treaty-based arbitrations
- In ICC treaty-based arbitrations, unless the parties agree otherwise, arbitrators must not have the same nationality as any party (Article 13(6)).This prevents a State (or State-owned entity) from obtaining any benefit from designating its own nationals for inclusion in the tribunal.
- This was already ICC practice prior to 2021 but it is useful to have this expressly formalised in the 2021 Rules.
- The 2021 Rules also codify the ICC Court's practice of excluding emergency arbitration in treaty-based disputes (Article 29(6)(c)).The rationale is that State or State-owned entities are often unable to meet the very short timeframes involved in emergency proceedings.
8. Settlement encouraged by tribunals
- Tribunals are now invited to "encourage" parties to consider settlement (Article 22(2) and Appendix IV, paragraph (h)(i)). For example, tribunals may now inform parties about the ICC Mediation Rules and the benefits of mediation or suggest that a negotiation is appropriate.
- The shift towards settlement and mediation is highly relevant in this global pandemic where a dispute avoidance strategy may be preferable to avoid the expense of arbitral proceedings.
9. Additional awards
- Where a tribunal has not ruled on a claim raised during proceedings, a party may now apply for an additional award within 30 days of receiving the award (Article 36(3)).
- Under the 2017 Rules, parties had to initiate a new arbitration if the law of the seat was silent on additional awards. This change therefore promotes certainty, efficiency and effective enforcement.
10. Obtaining reasons for ICC Court decisions
- Any party can now request reasons for certain decisions made by the ICC Court (Appendix II, Article 5). These include decisions relating to:
- prima facie jurisdiction (Article 6(4));
- consolidation (Article 10);
- the ICC Court's appointment of the tribunal (Article 12(8) and (9));
- challenges made against arbitrators for lack of independence or impartiality (Article 14); and
- whether to replace an arbitrator (Article 15(2)).
- A party's request for reasons must be made before the decision of the court – meaning parties do not know the outcome first (Appendix II, Article 5(2)).
- The ICC Court can refuse to provide reasons in exceptional circumstances (Appendix II, Article 5(3)).