Arbitration Update – March 2021

2021 ICC rules update aims at greater efficiency, flexibility and transparency and addresses Covid-19 issues

Oksana Wright, New York City

Sarah Biser, New York City

Craig Tractenberg, New York City

The leading international arbitration institutions, including the London Court of International Arbitration (LCIA) and the International Court of Arbitration of the International Chamber of Commerce (ICC), are revising their arbitration rules to improve efficiency, flexibility and transparency, and address challenges and concerns relating to the Covid-19 pandemic.

The LCIA recently updated its arbitration and mediation rules, which came into effect on 1 October 2020. The ICC has issued similar updates to its 2017 Arbitration Rules, which will take effect on 1 January 2021 (the 2021 ICC Rules). The updates, according to the ICC Court President, Alexis Mourre:

‘[…] 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.’

We provide an overview of the notable and substantive revisions to the 2021 ICC Rules below.

Electronic submissions

Article 3 of the 2021 ICC Rules now allows parties to make their submissions via email, replacing the previous requirement to provide the submissions in hard copy. This amendment recognises that most communications are now conducted electronically and addresses Covid-19 concerns and present health risks when hard copy filing may be impossible.

Virtual hearings

The ICC, like other international arbitration fora, has quickly adapted to the Covid-19 reality of remote hearings. Article 26(1) of the 2021 ICC Rules now provides that:

‘[t]he 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.’

Joinder

The ICC made important amendments to its joinder rules. Article 7(5) of the 2021 ICC Rules now allows, on request of one party, joinder of an additional consenting party after the tribunal has been confirmed or appointed. The amendment further provides that:

‘[i]n 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.’

The previous joinder rule did not allow the joinder of an additional party after confirmation of appointment of the tribunal unless all parties consented to such a joinder.

Avoidance of conflicts of interest

The amendments also aim to prevent potential conflicts of interest. Article 11(7) provides for additional disclosure requirements, which now include ‘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.’ Therefore, a party now has an obligation to disclose any third party funding of the arbitration.

Further, Article 17(2) of the 2021 ICC rules grants the tribunal power to exclude new party representation when it causes a conflict of interest.

Constitution of the tribunal

Article 12(9) of the 2021 ICC Rules is another provision that expands the ICC powers with regard to the constitution of the arbitral tribunal. It provides that:

‘[n]otwithstanding 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.’

Previously, Article 12(8) empowered the ICC Court to appoint each member of the arbitral tribunal (and designate one to act as president) in multiparty arbitrations ‘where all parties are unable to agree to a method for the constitution for the arbitral tribunal’.

On the one hand, the new rule ensures fairness in the arbitration process in cases when there are multiple parties involved or when the agreement unequally provides one party with the right to choose an arbitrator. On the other, it allows the ICC to interfere with the parties’ freedom of contract, although only in exceptional circumstances. Time will tell under which circumstances the ICC will actually employ this new rule.

Third-party funding disclosure

Article 11(7) of the 2021 ICC Rules requires that each party must inform the Secretarial, the arbitral tribunal and the other parties of the existence and the identity of any third-party funder. The new provision provides:

‘[i]n order to assist prospective arbitrators and arbitrators in complying with their duties under Articles 11(2) and 11(30), 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.’

The introduction of this section serves to avoid conflicts of interest that may arise by use of third-party funding arrangements and avoid objections to confirmation or a challenge of arbitrators.

Investment arbitrations

The 2021 ICC Rules introduced several amendments that concern the treaty-based investment arbitrations. Article 29(6) prevents emergency arbitrations in treaty-based investment arbitrations. Moreover, Article 13(6) precludes the appointment of an arbitrator who is of the same nationality as any party to the treaty-based dispute.

Expedited proceedings

The threshold for expedited procedures has been increased from $2m to $3m. See Article 30(2) and Article 1(2)(ii) of Appendix VI. The $3m threshold will apply to the arbitration agreements concluded on or after 1 January 2021.

Other changes

Additional award

Article 36(3) now allows a tribunal to issue an additional award to address claims that were not addressed in the original award.

‘[Any such] 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 from receipt of the award by such party.’

French law governs claims regarding administration of arbitration

A new section, Article 43 (Governing Law and Settlement of Disputes), explicitly provides that

‘[a]ny 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.’

Operations of the ICC

Appendices I and II of the 2021 ICC Rules were likewise updated. Appendix I contains information concerning the operation of the ICC and provides for a two consecutive term limit for its members. Article 5 of Appendix II now allows a party to request the ICC to provide reasons for its decision regarding whether and to what extent the arbitration shall proceed; consolidation of arbitrations; appointment of tribunal in multi-party arbitrations and other circumstances. The amendments aim to provide more transparency regarding the ICC’s operations.

Conclusion

The 2021 ICC Rules introduce robust provisions that enhance the efficiency, flexibility and transparency of ICC-administered arbitrations. Notably, the 2021 ICC rules target potential conflicts of interest and expand the powers of the ICC Court and Tribunal to efficiently facilitate arbitrations. At the same time, the 2021 ICC Rules may cause some controversy by allowing the ICC Court to circumvent the parties’ agreement regarding the constitution of the arbitral tribunal.