On 6 October 2020, the International Court of Arbitration of the International Chamber of Commerce (the ICC Court) released a revised version of its Rules of Arbitration. The revised Rules will enter into force on 1 January 2021. They will apply to all arbitrations commenced on or after 1 January 2021, unless the parties "have agreed to submit to the Rules in effect on the date of their arbitration agreement" (Art. 6(1)). While the revisions of the Rules do not constitute major changes, it is important to be aware of them as they further enhance the transparency, flexibility, and efficiency of ICC arbitration.
A step towards transparency
The new Rules provide that each party must promptly disclose any changes in its representation (Art. 17(1)). When such a disclosure is made, the arbitral tribunal may, after consulting with the parties, take any measure that it deems necessary to avoid a potential conflict of interest arising from such change, “including the exclusion of new party representatives from participating in whole or in part in the arbitral proceedings” (Art. 17(2)). The arbitral tribunal’s power to exclude a party’s newly appointed counsel from participating in the arbitral proceedings interferes with the parties’ freedom to choose their counsel. However, such interference is justified in certain circumstances to address potential conflict of interest situations when it would be more appropriate to exclude a newly appointed counsel rather than replacing the arbitrator whose independence and impartiality may be questioned as a result of that new counsel’s appearance in the case.
Both parties will now also have an obligation to promptly disclose the existence and the identity of any third-party funder, i.e. “any non-party which has entered into an arrangement for the funding of claims or defenses and under which it has an economic interest in the outcome of the arbitration” (Art. 11(7)). The parties’ obligation to disclose any such third-party funding will in turn allow arbitrators or prospective arbitrators to comply with their disclosure obligations. Indeed, according to the ICC Court’s previously provided guidance, arbitrators should consider disclosing their “relationships with any entity having a direct economic interest in the dispute” including third-party funders.[1]
A step towards flexibility in complex arbitrations
To further adapt the Rules to complex multi-party arbitrations, the existing provisions on the joinder of additional parties after the constitution of the tribunal have been modified. Whereas under the 2017 Rules such a joinder was subject to the agreement of all the parties to the arbitration, the new rules provide that a request for joinder will now be subject only to the additional party “accepting the constitution of the arbitral tribunal and agreeing to the Terms of Reference, where applicable” (Art. 7(5)).
As to the consolidation of multi-party arbitrations, the new wording clarifies that it is possible in cases where the claims are made “under the same arbitration agreement or agreements” (Art. 10 (b)).
A step towards efficiency
The revised Rules explicitly empower the tribunal to decide, after consulting the parties, that a hearing will be conducted virtually (Art. 26(1)). At the same time, the previous provision of Article 25(2) – under which “the arbitral tribunal shall hear the parties together in person” – was deleted. These modifications are consistent with the ICC Court’s clarification earlier this year that Article 25(2), in its previous version, “can be construed as referring to the parties having an opportunity for a live, adversarial exchange and not to preclude a hearing taking place ‘in person’ by virtual means, if the circumstances so warrant.”[2]
The new Rules set forth a default rule that provides a basis for allowing electronic filing of all pleadings. According to the new version, “all pleadings and other written communications […] shall be sent to each party, each arbitrator, and the Secretariat” (Art. 3(1)), as opposed to the previous version requiring that all pleadings 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.” As a result, the revised Rules do not require anymore the supply of hard copies of pleadings, which is not only welcome in these times of pandemic but also more ecologically friendly.
The revised Rules also increase the upper limit for automatic application of the Expedited Procedure Rules from $2 million to $3 million (Appendix VI, Art. 1 (2)). This modification is in line with the growing number of opt-in requests which reflects the success of the expedited procedure.[3]
Finally, the 2021 ICC Rules notably provide that parties may apply for an additional award “as to claims made in the arbitral proceedings which the arbitral tribunal has omitted to decide” (Art. 36(3)), while the previous version of the Rules only allowed parties to apply for the correction of an error or interpretation of the award. The introduction of this new mechanism should allow reducing the risk of an award being challenged on the ground of infra petita and thus enhance the efficiency of the ICC arbitration.
Constitution of the arbitral tribunal by the ICC Court in “exceptional circumstances”
Probably the most controversial modification is the one providing 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” (Art. 12(9)). According to the ICC, this new provision allows to “disregard unconscionable arbitration agreements that may pose a risk to the validity of the award.”[4] However, the new Rules do not give any guidance as to what agreements might be qualified as unconscionable, and the determination of the “exceptional circumstances” is left to the ICC Court’s discretion. The threshold of “exceptional circumstances” should be set sufficiently high to make this provision legitimate and justified in the eyes of the parties. Otherwise, there is a risk that the new Rules would backfire with awards being challenged on the ground that the arbitral tribunal was not constituted in accordance with the parties’ agreement (Art. V(1)(d) of the New York Convention).
This new provision appears to be aimed at circumstances when the method of constitution of the tribunal chosen by the parties is clearly unbalanced. This could be the case when one of the parties is given much more control over the designation process e.g. by having a unilateral right to disagree with the other party’s appointee or by having an exclusive right to control the list of potential arbitrators from which the other party must select its appointee. Such inherently unbalanced agreements might be contrary to the public policy, thus warranting the application of the above discussed new provision.
Modifications in relation to investment treaty arbitration
The revised Rules provide for treaty-based arbitrations that “unless the parties agree otherwise, no arbitrator shall have the same nationality of any party to the arbitration” (Art. 13(6)). The new Rules also clarify that emergency arbitration does not apply to treaty-based arbitration (Art. 29(6)(c)). However, one should note that these provisions do not apply to arbitrations initiated against a State pursuant to an investment agreement or local law, as opposed to arbitrations initiated under an investment treaty.
Forum and applicable law for disputes arising out of ICC’s services for the administration of the arbitration proceedings
Arbitral institutions are sometimes subject to claims being raised against them based on their contractual relationship with the parties concerning the administration of the arbitration proceedings. The grounds for these claims may include an alleged failure to comply with the principle of the parties’ equality and due process, poor scrutiny of the award, erroneous prima facie analysis of the arbitration agreement, incorrect calculation of costs, etc. However, the cases in which an arbitral institution was held liable are scarce.[5]
In this regard, the new Rules now include a specific choice of law and dispute resolution provision with respect to claims arising out of or in connection with the ICC Court’s administration of the arbitration proceedings. These claims “shall be governed by French law and settled by the Paris Judicial Tribunal (Tribunal Judiciaire de Paris) in France, which shall have exclusive jurisdiction” (Art. 43). This new provision should allow to centralize before French courts all the potential litigation involving the ICC and arising out of the ICC Court’s administration of the arbitration proceedings. This should reduce the risk of the ICC being subject to claims brought elsewhere against it, including at the seat of arbitration.
The choice of French courts and French applicable law is justified by the fact that the ICC is a legal entity constituted under French law with its seat in France. The designation of French law is also in line with the French courts’ practice.
Conclusion
The amendments brought about by the new Rules are not numerous and do not revolutionize the current landscape of ICC arbitration. However, they are much welcome as they fit into the current business environment by further enhancing the efficiency and transparency of arbitration and filling in the gaps where needed.