On 8 October 2020, the ICC released an unofficial revised version of its Arbitration Rules (the “2021 ICC Rules”). The text of the draft 2021 ICC Rules remains subject to editorial corrections prior to its official launch in December 2020.
The 2021 ICC Rules will take effect on 1 January 2021 and apply to all ICC arbitrations to be commenced on or after that date, regardless of when the underlying arbitration agreement was concluded, unless the parties “have agreed to submit to the Rules in effect on the date of their arbitration agreement” (Article 6(1) of the 2021 ICC Rules). The previous version of the ICC arbitration rules, currently in force, is the 2017 Arbitration Rules (“2017 Rules”), which will continue to apply by default to ICC arbitrations registered before 1 January 2021.
The most significant changes to the 2021 ICC Rules include the need for disclosure of third-party funding arrangements, the expansion of the tribunal’s powers to order joinder, consolidation and make additional awards, the introduction of specific provisions to cater for investment treaty arbitrations, the increased use of electronic means of communication, as well as the extended scope of application of the expedited procedure rules.
There is no increase in arbitration costs under the 2021 ICC Rules, which is salutary. This is not the case under the recently-revised 2020 LCIA Arbitration Rules and the 2020 LCIA Schedule of Arbitration Costs, which became effective on 1 October 2020, increasing the costs of LCIA Arbitration by 10% to 12,5%, amongst other notable changes, which are discussed here.
The key amendments to the 2021 ICC Rules are discussed in further detail below.
New Duty to Disclose Third-Party Funders
An important addition to the 2021 ICC Rules, aiming to increase the transparency of the ICC arbitral proceedings, is paragraph 7 of Article 11, which imposes a new, explicit duty to the parties to disclose any third-party funder agreements they have entered into.
New Article 11(7) of the 2021 ICC Rules
“In order to assist prospective arbitrators and arbitrators in complying with their duties under Articles 11(2) and 11(3), 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.” (emphasis added)
Over the past years, there has been a heated debate concerning the disclosure of third-party funding agreements in international arbitration (a useful guide on obtaining third-party in international arbitration works is available here). Arbitration rules, as well as national laws, used to be silent on this issue, although it can create conflicts of interest. This is no longer the case.
It is noteworthy that the 2014 IBA Guidelines on Conflicts of Interest in International Arbitration also address the question of disclosure of third-party funding agreements under the context of arbitrators’ impartiality and independence, placing third-party funders and insurers on the same level as parties with a “direct economic interest in the award.”
Explanation to General Standard 6(b) of the 2014 IBA Guidelines on Conflicts of Interest in International Arbitration
[…] “Third-party funders and insurers in relation to the dispute may have a direct economic interest in the award, and as such may be considered to be the equivalent of the party. For these purposes, the terms ‘third-party funder’ and ‘insurer’ refer to any person or entity that is contributing funds, or other material support, to the prosecution or defence of the case and that has a direct economic interest in, or a duty to indemnify a party for, the award to be rendered in the arbitration.” (emphasis added)
Joinder of Additional Parties
The 2021 ICC Rules are also modified to the effect that joinder of additional parties has become less burdensome, in order to cater for complex, multi-party and multi-contract arbitrations, as is the case, for example, in construction disputes, which are often resolved by arbitration.
Under Article 7(1) of the 2017 Rules, no additional party could be joined “after the confirmation or appointment of any arbitrator, unless all parties, including the additional party, otherwise agree[d].” The newly-inserted paragraph 5 of Article 7 of the 2021 ICC Rules allows a request for joinder of a third party to be made even after the confirmation or appointment of an arbitrator, if the arbitral tribunal makes a decision to that effect, upon considering “all relevant circumstances”, and the additional party accepts the constitution of the tribunal and agrees to the Terms of Reference, where applicable.
This means that joinder of additional parties is now possible over the course of the arbitration, even when the parties to the arbitration disagree, as long as the arbitral tribunal grants the request for joinder and the third party consents to join the arbitration.
The “relevant circumstances” to be considered by the arbitral tribunal, in deciding whether joinder is appropriate, include prima facie jurisdiction over the additional party, the timing of the rejoinder, possible conflicts of interests, as well as the impact of the joinder on the arbitral procedure.
New Article 7(5) of the 2021 ICC Rules
“Any Request for Joinder made after the confirmation or appointment of any arbitrator shall be decided by the arbitral tribunal once constituted and shall be subject to the additional party accepting the constitution of the arbitral tribunal and agreeing to the Terms of Reference, where applicable. In deciding on such a Request for Joinder, the arbitral tribunal shall take into account all relevant circumstances, which may include 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. Any decision to join an additional party is without prejudice to the arbitral tribunal’s decision as to its jurisdiction with respect to that party.” (emphases added)
Consolidation of Arbitrations
Article 10(b) has been revised to allow for consolidation where “all of the claims in the arbitrations are made under the same arbitration agreement or agreements.” While the wording is not ideal, it aims to allow “the consolidation of cases in presence of different parties”, as the ICC explains. It also puts an end to prior confusion in terms of whether consolidation was possible where the claims to the arbitrations were brought under more than one arbitration agreement, which frequently occurs. The updated wording of Article 10(c) further clarifies that it applies to claims that are “not made under the same arbitration agreement or agreements.”
New Article 10 of the 2021 ICC Rules
“The Court may, at the request of a party, consolidate two or more arbitrations pending under the Rules into a single arbitration, where:
a) the parties have agreed to consolidation; or
b) all of the claims in the arbitrations are made under the same arbitration agreement or agreements; or
c) the claims in the arbitrations are not made under the same arbitration agreement or agreements, but the arbitrations are between the same parties, the disputes in the arbitrations arise in connection with the same legal relationship, and the Court finds the arbitration agreements to be compatible.” (emphases added)
Old Article 10 of the 2017 ICC Rules
“The Court may, at the request of a party, consolidate two or more arbitrations pending under the Rules into a single arbitration, where:
a) the parties have agreed to consolidation; or
b) all of the claims in the arbitrations are made under the same arbitration agreement; or
c) where the claims in the arbitrations are made under more than one arbitration agreement, the arbitrations are between the same parties, the disputes in the arbitrations arise in connection with the same legal relationship, and the Court finds the arbitration agreements to be compatible.
In deciding whether to consolidate, the Court may take into account any circumstances it considers to be relevant, including whether one or more arbitrators have been confirmed or appointed in more than one of the arbitrations and, if so, whether the same or different persons have been confirmed or appointed.” (emphasis added)
These amendments are in line with the recent changes of the consolidation provisions in the revised LCIA Arbitration Rules, which expanded the arbitral tribunal’s and the LCIA Court’s power to order consolidation in cases where the parties are not the same, but their disputes arise out of the same or related transactions (2020 LCIA Arbitration Rules, Articles 22.7 and 22.8).
ICC Court’s Power to Appoint Arbitrators Notwithstanding any Parties’ Agreement
Another notable addition to the 2021 ICC Rules is paragraph 9 of Article 12 (Constitution of the Arbitral Tribunal) which empowers the ICC Court “in exceptional circumstances” to appoint the members of the arbitral tribunal regardless of “any agreement by the parties on the method of constitution of the arbitral tribunal”.
That is an ambitious addition considering that one of the few reasons that an arbitral award may be refused recognition under the 1958 New York Convention, Article V(1)(d) is where the “composition of the arbitral authority […] was not in accordance with the agreement of the parties”.
It remains to be seen how the ICC Court will interpret, in practice, the undefined “exceptional circumstances” to justify deviating from the parties’ agreement on the method of the constitution of the arbitral tribunal, without exposing the resulting award to enforceability hurdles.
The ICC comments in this respect that the provision aims to allow tribunals “to disregard unconscionable arbitration agreements that may pose a risk to the validity of the award”, thereby protecting the integrity of the arbitral proceedings.
New Article 12(9) of the 2021 ICC Rules
“Notwithstanding any agreement by the parties on the method of constitution of the arbitral tribunal, in exceptional circumstances the Court may appoint each member of the arbitral tribunal to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award.”
Provisions Related to Investment Treaty Arbitrations
Pursuant to the 2019 ICC Dispute Resolution Statistics (available here for download), “Since 1996, when the first BIT case was registered, to date, ICC has administered 42 cases based on BITs.” Despite having administered relatively few investment disputes over the past years, the ICC introduced two amendments to its 2021 ICC Rules referring explicitly to disputes arising from treaties.
First, Article 13(6) of the 2021 ICC Rules requires the appointment of arbitrators who do not have the same nationality as any party to the arbitration when “the arbitration agreement upon which the arbitration is based arises from a treaty”.
New Article 13(6) of the 2021 ICC Rules
“Whenever the arbitration agreement upon which the arbitration is based arises from a treaty, and unless the parties agree otherwise, no arbitrator shall have the same nationality of any party to the arbitration.”
Second, Article 29(6)(c) of the 2021 ICC Rules excludes the use of emergency arbitration where “the arbitration agreement upon which the application is based arises from a treaty.” The rationale for such exclusion seems to be that the tight deadlines featuring in the ICC’s emergency arbitration scheme would be unworkable for States or State-owned entities involved in investment disputes, which is a valid concern.
New Article 29(6) of the 2021 ICC Rules
“The Emergency Arbitrator Provisions shall not apply if: a) the arbitration agreement under the Rules was concluded before 1 January 2012; b) the parties have agreed to opt out of the Emergency Arbitrator Provisions; or c) the arbitration agreement upon which the application is based arises from a treaty.” (emphasis added)
Party Representation – Excluding New Counsel to Avoid Conflict of Interests
Article 17 of the 2021 ICC Rules has now been divided into three paragraphs, the first two being new additions and the last one containing what was, under the 2017 Rules, the entire Article 17.
Paragraph 1 imposes an explicit duty for the parties to promptly inform all arbitration participants, i.e., the ICC Secretariat, the arbitral tribunal and the parties, of any changes in its representation. This reflects what is currently common practice.
Paragraph 2 contains a more robust change, empowering the arbitral tribunal to exclude from the proceedings new counsel or take any other appropriate measure in presence of a conflict of interests, with the aim to protect the integrity of the proceedings (and to prevent arbitral tribunals from needing to be changed in the event a party changes counsel).
New Article 17 of the 2021 ICC Rules (Party Representation)
“1) Each party must promptly inform the Secretariat, the arbitral tribunal and the other parties of any changes in its representation.
2) The arbitral tribunal may, once constituted and after it has afforded an opportunity to the parties to comment in writing within a suitable period of time, 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.
3) At any time after the commencement of the arbitration, the arbitral tribunal or the Secretariat may require proof of the authority of any party representatives.” (emphasis added)
Old Article 17 of the 2017 Rules (Proof of Authority)
“At any time after the commencement of the arbitration, the arbitral tribunal or the Secretariat may require proof of the authority of any party representatives.”
Expedited Procedure Rules
Appendix VI, Article 1(2) of the 2021 ICC Rules expands the scope of application of the popular expedited arbitration provisions (Article 30 and Appendix VI) by increasing the threshold for their opt-out application from USD 2 million to USD 3 million.
Appendix VI, Article 1(2) of the 2021 ICC Rules
“The amount referred to in Article 30(2), subparagraph a) of the Rules is: i) US$ 2,000,000 if the arbitration agreement under the Rules was concluded on or after 1 March 2017 and before 1 January 2021 or ii) US$ 3,000,000 if the arbitration agreement under the Rules was concluded on or after 1 January 2021.” (emphasis added)
Primacy of Electronic Communications and Submissions
Under Article 3(1) of the 2021 ICC Rules, the default rule now is that “all pleadings and other written communications” are to “be sent to each party, each arbitrator, and the Secretariat” via electronic means, whereas, under the 2017 Rules they had to “supplied in a number of [hard] copies sufficient to provide one copy for each party, plus one for each arbitrator, and one for the Secretariat.”
New Article 3(1) of the 2021 ICC Rules
“Save as otherwise provided in Articles 4(4)(b) and 5(3), all pleadings and other written communications submitted by any party, as well as all documents annexed thereto, shall be sent to each party, each arbitrator, and the Secretariat. Any notification or communication from the arbitral tribunal to the parties shall also be sent in copy to the Secretariat.” (emphases added)
Old Article 3(1) of the 2017 ICC Rules
“All pleadings and other written communications submitted by any party, as well as all documents annexed thereto, shall be supplied in a number of copies sufficient to provide one copy for each party, plus one for each arbitrator, and one for the Secretariat. A copy of any notification or communication from the arbitral tribunal to the parties shall be sent to the Secretariat.” (emphases added)
Accordingly, the 2021 ICC Rules displaced Article 4(4)(a) of the 2017 Rules under which the Request for Arbitration had to be submitted by default in hard copies to all involved parties. Under Article 4(4)(b) of the 2021 ICC Rules, hard copies are now required only “where the claimant requests transmission of the Request by delivery against receipt, registered post or courier.”
New Article 4(4) of the 2021 ICC Rules
“Together with the Request, the claimant shall:
a) make payment of the filing fee required by Appendix III (“Arbitration Costs and Fees”) in force on the date the Request is submitted; and
b) submit a sufficient number of copies of the Request for each other party, each arbitrator and the Secretariat where the claimant requests transmission of the Request by delivery against receipt, registered post or courier.” (emphasis added)
Old Article 4(4) of the 2017 ICC Rules
“Together with the Request, the claimant shall:
a) submit the number of copies thereof required by Article 3(1); and
b) make payment of the filing fee required by Appendix III (“Arbitration Costs and Fees”) in force on the date the Request is submitted.” (emphasis added)
Similarly, under the revised Article 5(3) of the 2021 ICC Rules, hard copies of the Answer to the Request for Arbitration are no longer needed by default, but only “where the respondent requests transmission thereof by delivery against receipt, registered post or courier.”
These amendments are welcome adaptations to the new digital era, aiming to reduce unnecessary printing and shipping costs and being more environmentally friendly.
Virtual Hearings
The modified Article 26(1) of the 2021 ICC Rules introduces in explicit terms the possibility of holding virtual hearings, which became the new normal during the COVID-19 pandemic. The new wording further clarifies that a hearing shall not necessarily be held, unless any party so requests, or if the arbitral tribunal deems it necessary. This change is consistent with the ICC’s Note on Possible Measures Aimed at Mitigating the Effects of the Covid-19 Pandemic, which provides, inter alia, guidance concerning the organization of virtual hearings.
New Article 26(1) of the 2021 ICC Rules
“A hearing shall be held if any of the parties so requests or, failing such a request, if the arbitral tribunal on its own motion decides to hear the parties. When a hearing is to be held, the arbitral tribunal, giving reasonable notice, shall summon the parties to appear before it on the day and at the place fixed by it. The arbitral tribunal may 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.” (emphases added)
Old Article 26(1) of the 2017 ICC Rules
“When a hearing is to be held, the arbitral tribunal, giving reasonable notice, shall summon the parties to appear before it on the day and at the place fixed by it.”
Additional Award
Another newly-inserted provision under the 2021 ICC Rules, Article 36(3), allows the parties to make an application, within 30 days from receipt of the award, for an additional award as to claims that the arbitral tribunal has omitted to decide. The other party shall be granted “a short time-limit, normally not exceeding 30 days” to comment on the application for an additional award, before the tribunal renders its decision.
There was no such provision under the 2o17 Rules so, unless the law of the seat had a provision allowing an additional award to be made, the parties had to bring an entirely new arbitration for matters that were previously omitted by an ICC arbitral tribunal. The risk, of course, is that parties will make frivolous requests for additional awards.
New Article 36(3) of the 2021 ICC Rules
“Any application of a party for an additional award as to claims made in the arbitral proceedings which the arbitral tribunal has omitted to decide must be made to the Secretariat within 30 days of the receipt of the award by such party. After transmission of the application to the arbitral tribunal, the latter shall grant the other party or parties a short time-limit, normally not exceeding 30 days, from the receipt of the application by that party or parties, to submit any comments thereon. The arbitral tribunal shall submit its decision on the application in draft form to the Court not later than 30 days following the expiry of the time of the time limit for the receipt of any comments from the other party or within such other period as the Court may decide.” (emphases added)
Article 2(v) of the 2021 ICC Rules is modified accordingly to reflect this change: the term “‘award’ includes, inter alia, an interim, partial, final, or additional award.”
Governing Law and Settlement of Disputes
Another novel addition to the 2021 ICC Rules is Article 43, which provides that any disputes arising out of or in connection with the administration of the arbitral proceedings by the Court “shall be governed by French law and settled by the Paris Judicial Tribunal (Tribunal Judiciaire de Paris) in France”, which is granted “exclusive jurisdiction.” No such provision is found in previous versions. It is not uncommon for the ICC to be threatened to be sued by losing parties. This will allow the ICC to defend itself in a single jurisdiction, which is preferable so that it will not have to pass on excessive costs of sometimes spurious litigation to users of ICC arbitration.
New Article 43 of the 2021 ICC Rules
“Any claims arising out of or in connection with the administration of the arbitration proceedings by the Court under the Rules shall be governed by French law and settled by the Paris Judicial Tribunal (Tribunal Judiciaire de Paris) in France, which shall have exclusive jurisdiction.”
The 2020 LCIA Arbitration Rules have recently introduced a similar provision, Article 31.3, which gives exclusive jurisdiction to the courts of England and Wales to hear and decide any action, suit or proceedings arising from LCIA-administered arbitrations.
* * *
In sum, the amendments introduced by the 2021 Arbitration Rules enhance the overall efficiency, flexibility and transparency of ICC arbitrations, as well as codifying recent trends in international arbitration, such as the increased use of electronic communications and virtual hearings. The changes are to be welcomed.
