ICC ISSUES NEW ARBITRATION RULES EFFECTIVE JANUARY 1st, 2021

ICC ISSUES NEW ARBITRATION RULES EFFECTIVE JANUARY 1st, 2021

12.17.2020

In October 2020, the International Chamber of Commerce (“ICC”) released a new set of Arbitration Rules, effective for cases submitted to the International Court of Arbitration starting on January 1st, 2021. [1] Below is our “top 10” list of most important changes:

1.         Adding additional parties after the constitution of the Tribunal. Article 7(1) has been amended in conjunction with the addition of a new article 7(5) to permit a Request for Joinder to be considered after the constitution of the Tribunal. Under the 2017 Rules, a party who may not have been named in the initial filings, but has a nexus to the matter that provides a basis for joinder, could not be added to the case unless the request was made prior to the constitution of the Tribunal without the consent of all parties involved. Under these new amendments, the Tribunal may consider adding a party to the case after its constitution upon a receipt of a Request and even over the objection of a party, but in so doing should consider the following factors: [1] all relevant circumstances, [2] whether the Tribunal has prima facie jurisdiction, [3] timing of the request, [4] possible conflicts of interests, and [5] the impact of the joinder on the procedure.

Per this Rule, an initial consideration of whether to permit joinder in the face of opposition turns on whether the Tribunal considers that it has prima facie jurisdiction. In contrast to the Court’s prima facie jurisdictional analysis in article 6(4), the analysis of the Tribunal here is elevated, but still falls short of a final determination to extend jurisdiction over the joined party at this stage. This is made plain by the final sentence of article 7(5), which anticipates that a comprehensive decision on jurisdiction may come at a later point and that any decision to join an additional party is without prejudice to the Tribunal’s decision as to its jurisdiction with respect to that additional party.

2.         Required disclosure for third party funding. Article 11 of the ICC Rules addresses the general provisions for the arbitral tribunal. A new Article 11(7) has been introduced requiring parties to disclose the existence and identity of any non-party which [1] has entered into a funding arrangement and [2] which has an economic interest in the outcome of the arbitration. The inclusion helps to address concerns surrounding third party funding and brings the ICC Rules into harmony with other Rules, such as the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration and the SIAC Investment Arbitration Rules, Art. 24(l), which pose a similar requirement. The new rule will also likely impact appropriate disclosures by arbitrators in subsequent matters.

3.         Authority for the Court to overcome the agreement of the parties and itself appoint the Tribunal. New article 12(9) confers exceptional authority on the Court to overrule the arbitration agreement and itself appoint the Tribunal. This authority is triggered where after reviewing the agreed upon method for selecting an arbitrator, the Court considers that to implement such an approach would result in “unequal treatment and unfairness that may affect the validity of the award.” This provision may also assist in multiparty issues (e.g., the situation where the claimant appoints an arbitrator but the respondent and the additional parties are not exactly aligned).

Although it is not clear whether contracting parties may derogate from this provision, nevertheless this rule is seemingly introduced to address situations where multiple respondents are not necessarily aligned, such as AVIC Int'l USA, Inc. v. Tang Energy Grp., Ltd., No. 3:14-CV-2815-K, 2015 WL 477316 (N.D. Tex. Feb. 5, 2015), aff'd, 614 F. App'x 218 (5th Cir. 2015). There, a provision calling for each party to “name an Arbitrator,” Id. at *1, “resulted in a panel of seven (7) arbitrators being selected [by the parties] [and] [t]hose seven arbitrators then selected two additional arbitrators, thereby creating a nine member arbitration panel,” Id., that favored one side in the dispute. Under the new Rule, the Court would potentially be able to rectify such an appointment process.

4.         Authority for the Tribunal to exclude counsel appointed by the parties after the constitution of the Tribunal. The 2021 Rules expand article 17 [regarding proof of authority, i.e., power of attorney] into a more general “party representation” provision, which requires the parties to inform the Secretariat of any changes in a party’s representation. More specifically, article 17(2) codifies the authority of an arbitral Tribunal to exclude counsel appointed by a party after the constitution of the Tribunal in order to avoid a potential conflict of interest with the arbitrators. This is a welcomed change, as it helps address some of the so called “guerrilla tactics” in international arbitration. Past cases, such as the well-known precedent Hrvatska Elektroprivreda d.d. v. Republic of Slovenia, ICSID Case No. ARB/05/24, have considered the authority of the Tribunal to exclude counsel, establishing that there are grounds for accepting that this is an inherent power of the Tribunal, although not all jurisdictions will follow that view. This added rule provides clarity on the Tribunal’s authority which is a welcomed development.

5.         The conduct of remote hearings. In what appears to be a reaction to the global COVID-19 pandemic, a new article 26(1) gives tribunals the express power to hold hearings via remote communications (videoconference, telephone, or other means). While this power was previously implied in the 2017 Rules, the addition of this article gives the Tribunal the express power to make such a ruling, even in the face of opposition from one party.

6.         Choice of French law and jurisdiction in Paris for claims involving the ICC itself. Article 43 includes a catch all provision for French law and choice of forum in Paris in the event of claims arising out of or in connection with the administration of the arbitration proceedings in which the ICC itself would be a party. Notably, the broad immunity that arbitrators enjoy in the United States is not always followed the civil law world, where gross negligence and breach of duties may lead to liability on the part of the institutions and the arbitrators.

7.         Reasoned decisions by the Court upon prior request of either party. A new Article 5 in Appendix II provides for the issuance of reasoned Court decisions, upon request, in the following situations: article 6(4) [prima facie jurisdiction], article 10 [consolidation of arbitrations], article 12(8) [Court appointment of arbitrators in three-member panels], article 12(9) [Court’s authority to overcome the agreement of the parties in exceptional circumstances], article 14 [challenge of arbitrators] and article 15(2) [replacement of arbitrators]. The obligation to issue reasoned decisions is a welcome change because reasoned decisions clearly support institutional legitimacy. Notably, the LCIA not only provides reasons for the challenges of arbitrators, but publishes those decisions for future reference and further development of arbitration practice. One can anticipate that at least some of these reasoned decisions will be published, in redacted form, in future ICC Bulletins.

8.         Increase in the threshold amount for expedited procedures. Article 1(2) in Appendix VI increases from $2 million to $3 million the amount in controversy for expedited procedures. The increase shows institutional confidence in the conduct of the expedited procedures.

9.         Clarification on clerical issues. Several new articles provide further clarity regarding the computation of deadlines and the number of copies of documents that should be sent, and to whom. These rules should help to resolve any administrative uncertainties that may have arisen in the past.

10.        Composition of the Court and Relationship with the Secretariat. Several articles of the 2021 rules clarify the roles that the President and Vice-Presidents of the Court may perform, how they are selected, how their committees, special committees, and plenary meetings will take place and be convened. There is a clear trend towards delegating authority to the Vice-Presidents and providing more flexibility to the Committees.

The ICC Arbitration Rules continue to represent leading institutional standards and innovations on a worldwide basis. The changes proposed for the 2021 version of the Rules provide updates in much needed areas, especially in regard to transparency and multiparty issues.

*        [1] The Rules are available at: https://iccwbo.org/dispute-resolution-services/arbitration/rules-of-arbitration/rules-of-arbitration-2021/.