This article first appeared on the Herbert Smith Freehills Arbitration Notes, here.
The International Chamber of Commerce (ICC) has released its 2021 Arbitration Rules in draft (the 2021 Rules). This is a “soft launch” with the current text still subject to editorial changes prior to their formal release in December. The 2021 Rules will come into force on 1 January 2021.
Changes to the Consolidation and Joinder provisions
The ICC Rules 2012 introduced innovative and wide-ranging changes regarding consolidation and joinder. By and large the fundamental framework of those provisions remains unchanged, subject to some clarifications in the consolidation provisions and a shift in approach in joinder following the formation of the arbitral tribunal.
In Article 10 (Consolidation), the 2021 Rules now tidy up an open question under Article 10(b) as to whether consolidation was only possible where all the claims in the arbitration were made under “the same arbitration agreement” (i.e. the same contract), or also allowed for consolidation under multiple agreements with mirror arbitration clauses. The 2021 Rules now confirm that consolidation may happen where “all of the claims in the arbitrations are made under the same arbitration agreement or agreements”. Article 10(c) now confirms that it relates to claims that are “not made under the same arbitration agreement or agreements”. These changes are helpful, and should be welcomed.
Article 7 (Joinder) has, however, seen a more fundamental change. Under the framework of the 2012/2017 Rules, no additional party could be joined after the confirmation or appointment of the Tribunal unless all parties, including the additional party, agreed. The 2021 Rules include a new Article 7(5) which allows for a Request for Joinder to be made after the confirmation or appointment of any arbitrator. The Tribunal, once constituted, may now decide on that Request, taking into account all relevant circumstances, including whether the tribunal has jurisdiction over the additional party, the timing of the Request, possible conflicts of interest and the impact of the joinder on the arbitral procedure. The additional party must also accept the constitution of the arbitral tribunal and agree to the Terms of Reference.
Practically speaking, the impact of this change may be minor. What new Article 7(5) will now allow is for a Respondent to join a willing co-respondent without the express agreement of the Claimant party (providing the Tribunal considers it appropriate in the circumstances). Where the party to be joined is unwilling to participate and refuses to accept the constitution of the arbitral tribunal or the Terms of Reference, clearly, the prior hurdles remain.
Provision for virtual hearings and shift away from paper filings
The 2021 Rules follow a similar approach to the 2020 LCIA Rules in acknowledging the reality of modern practice, particularly during the COVID-19 pandemic. Article 26.1 (Hearings) has undergone a rewrite and now provides that “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”. This provision places the discretion with the Tribunal to order a virtual or remote hearing if appropriate, and, like the 2020 LCIA Rules, “future-proofs” the drafting with the phrase “other appropriate means of communication” to allow for remote hearing technology to continue to evolve over time.
The 2021 Rules have also shifted away from a presumption that pleadings and written communications will be submitted in hard copy in multiple sets for each party, arbitrator and the ICC Secretariat. Article 3.1 (Written Notifications) now merely provides for pleadings and written communications to be “sent” to each party, arbitrator and the Secretariat, and that the Secretariat be copied into communication from the tribunal. Article 4 (Request for Arbitration), Article 5 (Answer to the Request) and Article 1 of the Emergency Arbitrator Rules have all seen an amendment as a result. The onus is now placed on the Claimant and Respondent to decide whether they requests transmission of the Request, Answer or Emergency Arbitrator Application by “delivery against receipt, registered post or courier” and if so, they are required to submit a sufficient number of paper copies.
Third party funding and Party Representation
The 2021 Rules introduce a significant new provision into Article 11 (General Provisions) regarding the independence, impartiality and conflicts of interests of the Arbitral Tribunal. New Article 11.7 states that “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”.
This provision is new to the ICC Rules, but reflects the ICC’s existing approach to conflicts of interest (and standard practice more generally). The 1 January 2019 ICC’s Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (paragraph 28) confirmed that the ICC Court would consider relationships between arbitrators and “any entity having a direct economic interest in the dispute”. General Standard 7 of the IBA Guidelines on Conflicts of Interest in International Arbitration also extends a party’s disclosure obligation to “entities having a direct economic interest in the award to be rendered in the arbitration”. In incorporating this new provision into the Rules rather than in guidance, the ICC has placed an express obligation on the parties to disclose funding arrangements at the outset. However, the provision is quite narrowly worded and could, arguably, not extend to certain funding arrangements such as insurance. The ICC is arguably taking a different approach to the more expansive language of the HKIAC (Article 44) which requires the disclosure of any “funding agreement”.
Article 17 has changed its title to “Party Representation”, and incorporates a number of new additions. Each party is now required to promptly inform the Secretariat, tribunal and other parties of any changes in its representation. New Article 17.2 follows the approach taken in the LCIA Rules 2014 in allowing an arbitral tribunal to “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”. Like the addition to the LCIA Rules before it, this will be quite a controversial provision – even though the tribunal must have regard to all the circumstances, the tribunal is nonetheless expressly empowered to limit a party’s ability to appoint legal representatives of its choice. This is a power which, if exercised, is unlikely to be well received by the instructing party, and may be regarded as an interference with the freedom to select counsel of the party’s choice. However, the intention behind the provision – namely, to address ‘tactical’ appointments designed to derail the proceedings through introducing conflicts of interest – is sound.
Inequality of tribunal appointment: ICC Court discretion
Under new Article 12.9 the ICC Court now has a fall-back discretion “in exceptional circumstances” to deviate from any agreement by the parties on the method of constitution of the arbitral tribunal, and for the ICC Court to appoint the entire tribunal. The new provision states that this power may be invoked “to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award”. The ICC Rules led the way in ensuring that arbitral rules provide for the principle of equality in the appointment of arbitrators following the 1992 French case of Siemens AG/BKMI Industrienlagen GmBH v Dutco Construction Company XVIII YBCA 140 (1993). The 1998 ICC Rules provided for the formation of claimant and respondent “sides” for the purposes of appointment in multi-party arbitrations, an approach retained in the 2012 and 2017 amendments. This additional change to the 2021 Rules seeks to enshrine that principle further within the ICC Rules. However, the discretional nature of this change may be viewed with some concern by users, who view their ability to nominate the arbitral tribunal as a fundamental right and a cornerstone of arbitral practice.
Other changes include:
The 2021 Rules are not substantially different from their previous iteration. This is unsurprising, considering the major changes previously introduced in the 2012 and 2017 Rules and which heralded a real shift in arbitral institutional practice across the globe. Many of the changes in the 2021 Rules are relatively minor and are intended to recognise current practice or to clarify interpretation.
However, there are some material changes, including the provisions on party representation, third party funding and joinder. Of particular note for many parties will be the new Article 12.9, which confers a discretion upon the ICC Court to disapply an agreed tribunal appointment mechanism in order to avoid inequality between the parties. For many, party appointment is a fundamental principle of arbitration and a key reason to arbitrate, so there will be some concern about how the ICC will interpret the requirement of “exceptional circumstances” in future. Whether and how it will be possible to draft express provisions to limit or disapply these powers, or to confirm the parties’ agreement to potential inequality in certain circumstances, remains to be seen.
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