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The revised International Chamber of Commerce (ICC) Arbitration Rules for 2021 (2021 Rules) have now come into force and apply to all ICC arbitrations begun after 1 January 2021. While the new Rules do not differ substantially from the previous ICC Rules 2017, there are a number of changes which parties should keep in mind.
Virtual hearings and shifting away from paper pleadings
Unsurprisingly, the pandemic has accelerated the move away from reliance on hard copy documents. While the arbitration community was increasingly considering issues of technology and “greener” arbitrations before the pandemic, working from home and the inability to travel has pushed the need for remote hearings to the forefront.
The ICC issued guidance on measures to mitigate the impact of the pandemic in April 2020, although parts of the 2017 Rules remained which could be interpreted to require in-person hearings. Article 26(1) of the 2021 Rules now provides that the arbitral tribunal may decide, after consultation with the parties and in light of the facts and circumstances of the case, that hearing(s) will be conducted either physically or remotely by videoconference, telephone or other means of communication. This means that hearings may be held remotely, even if one party objects. After consulting with parties and carefully considering any objections, the tribunal will exercise its discretion to ensure that all parties have the opportunity to properly present their case.
The new Rules are also a move away from the presumption that pleadings and written communications should be “supplied in a number of copies sufficient to provide one copy” for each party, arbitrator and the ICC Secretariat. This effectively necessitated hardcopy copies. Article 3(1) of the 2021 Rules now replaces that language with “sent”, meaning that email is now acceptable.
Measures to ensure fairness, transparency and due process
The new Rules introduce a range of measures targeted at ensuring due process and transparency during arbitrations.
One such measure is the introduction of new Article 11(7), which requires each party to promptly disclose any third-party funding arrangements. This is intended to help arbitrators comply with their duty of disclosure relating to independence and impartiality. Note that the 1 January 2019 ICC’s Note to parties and arbitral tribunals provided that, when considering whether to disclose, arbitrators should consider any relationships with non-parties having an interest in the outcome of the arbitration. This provision also applies to investor-state dispute settlement (ISDS) arbitrations.
Similarly, the new Rules permit closer supervision of party representation. Under Article 17(2), arbitral tribunals are enabled 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”. This provision will likely be controversial, as it empowers tribunals, with regard to all the circumstances, to limit a party’s ability to appoint legal representation of its choice. Tribunals may decline the proposed change of representation, or limit new counsels’ participation to certain parts of the proceedings. While this may seem extreme, its intention is to address tactical appointments designed to delay or derail arbitrations by introducing conflicts of interest. It is therefore part of the 2021 Rules’ wider goal to increase efficiency and transparency, and streamline arbitrations.
Article 12(9) of the 2021 Rules provides that, in exceptional circumstances, the ICC Court may appoint each member of the tribunal if application of the arbitration agreement would lead to a significant risk of unequal treatment and unfairness. In practice, this is for use where an arbitration agreement may require a procedure for appointment of arbitrators which sdoes not treat the parties equally in their particular circumstances. This is particularly important because permitting appointment according to the arbitration agreement despite the risk of unequal treatment could jeopardise the validity of the award.
Finally, the new Article 5 under Appendix II confirms that, upon a party’s request, the ICC Court may communicate its reasoning behind various procedural decisions. These include: on the existence and scope of a prima facie arbitration agreement (Article 6), consolidation (Article 10), and the appointment, challenges, and replacement of arbitrators (Articles 12, 14 and 15).
Consolidation and joinder provisions
Under the 2017 Rules, the ICC Court could allow consolidation of two or more arbitrations under the ICC rules where all the claims were made “under the same arbitration agreement”. This left ambiguous whether the “same arbitration agreement” included identical arbitration agreements within different contracts. By modifying this phrase to read “the same arbitration agreement or agreements”, the revised Article 10(b) clarifies that this includes identical arbitration agreements within different contracts. Likewise, the revised Article 10(c) permits consolidation where the claims are not made under the same arbitration agreement(s), but the arbitrations are between the same parties, the disputes arise in connection with the same legal relationship, and the ICC Court finds the arbitration agreements to be compatible. This is part of a trend in successive ICC Rules to widen the scope of the consolidation clause and will help to streamline arbitration of complex disputes.
Higher opt-out threshold for expedited arbitrations
The expedited procedure provisions enable a faster, less expensive procedure for smaller disputes. The previous threshold of up to US$2 million has been retained for arbitration agreements concluded after 1 March 2017 and before 1 January 2021. Meanwhile, the threshold has been increased to US$3 million for arbitration agreements concluded after 1 January 2021. This process is intended to promote efficiency and retain arbitration as a viable, value-conscious option for dispute resolution of smaller claims. Increasing the threshold will support this aim.
Investor-state dispute settlement provisions
Because the ICC Rules are increasingly being used for arbitrations involving states and state-owned parties, the new Rules introduce two new provisions applying specifically to these arbitrations. The new Article 13(6) provides that where the arbitration agreement arises from a treaty, unless the parties agree otherwise, no arbitrator shall have the same nationality of any party to the arbitration. In this regard, the 2021 Rules go further than the ICSID Convention, which only requires that the “majority” of the arbitrators shall be nationals of states other than the parties.
The new Article 29(6) codifies the ICC Court’s practice in relation to the emergency arbitrator provisions, which enables parties to seek urgent temporary relief pending the creation of an arbitral tribunal. This Article provides that this procedure is not available in arbitrations where the arbitration agreement arises from an investment treaty. This rule reflects existing procedure set out in the arbitration rules most commonly used for ISDS, such as the ICSID and UNCITRAL Arbitration Rules.
Overall, these amendments reflect the ICC’s intention to encourage use of its rules for ISDS arbitrations. It also demonstrates the ICC’s acknowledgement of the specific needs of parties involved in ISDS arbitrations. In light of the public discourse around ISDS arbitration over the past decade, and concerns relating to arbitrators’ independence, the inclusion of these rules is a positive step.
Our comments
While a number of these changes are intended to enable arbitrations to continue to run smoothly during the current pandemic, many more are aimed at increasing fairness and due process in ICC arbitrations, as well as ensuring that arbitration continues to be seen as a viable and cost-effective option for smaller claims. The new Rules show that the ICC is responsive to the need for flexibility, transparency and due process in arbitrations, and is committed to developing the Rules so as to provide for this. However, it remains to be seen whether the increased trend towards remote hearings and “greener” arbitrations continues once the pandemic is over, or whether it is a short-lived innovation set aside once travel becomes possible again.
If you have any questions about arbitration, please get in touch with our litigation team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
