The new ICC Arbitration Rules (“2021 Rules”), approved by the International Chamber of Commerce (“ICC”) on October 6, 2020 and officially launched on December 1, 2020, entered into force on January 1, 2021.
The rules include interesting changes to address concerns of parties and of arbitration practitioners, some of which are relevant amendments to the 2017 Rules. In other cases the new provisions of the 2021 Rules largely reflect practices already in place (at least partially), in response to new realities, including the use of technology as embraced in 2020. Additionally, the 2021 Rules continue to make arbitration more efficient and flexible as an alternative for comprehensively deciding disputes, and in particular address cases involving multiple parties or disputes for smaller amounts. Following we mention some of the most salient changes.
A. More flexibility for joinder of parties and consolidation of proceedings
Under article 7(5) of the 2021 Rules, once the arbitral tribunal has been constituted it can accept joinder requests filed after the confirmation or appointment of an arbitrator, subject only to the additional party’s giving its consent to the composition of the arbitral tribunal and the Terms of Reference. Under the 2017 Rules, this would require, in addition to the consent of all parties, filing prior to constitution of the tribunal.
The new article 7(5) favors acceptance of requests for joinder made in an ongoing arbitration by eliminating the requirement for the request to be submitted before appointment/confirmation of an arbitrator. Similarly, it does not require all the parties to the procedure to consent, but rather the tribunal must decide, taking into account “all relevant circumstances,” in particular: (i) if it has prima facie jurisdiction over the additional party; (ii) the timing of the request for joinder; (iii) possible conflicts of interests; and (iv) the impact of the joinder on the procedure.
Additionally, regarding consolidation of arbitrations, the 2021 Rules broaden the scope of application of article 10, specifically to allow the consolidation of two or more arbitrations administered by the ICC, even when: (i) there are different parties, if all the claims are made under the same arbitration agreement; or (ii) there is one or several different but compatible agreements, if the parties are the same and the disputes in arbitration arise in connection with the same legal relationship. Under the 2017 Rules consolidation could be ordered for disputes arising from the same arbitration agreement, which in turn gave rise to doubts as to its scope, especially with regard to identical agreements in different contracts.
B. Virtual hearings and digital pleadings
Recognizing the reality deriving from the pandemic, the 2021 Rules amended article 26(1) on Hearings to better regulate and avoid questioning of remote hearings. The decision to move forward with online formats is left to the discretion of the arbitrators, who may decide “after consulting the parties, and on the basis of the relevant facts and circumstances of the case.” The new wording establishes that hearings may be held in person, or remotely by videoconference, telephone or other appropriate means of communication. While in its Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic the ICC had already made clear that the purposes of adversarial debate were equally fulfilled in virtual format, the new rules eliminate the grounds for a party to demand physical presence, as occurred in some cases, particularly during the initial stages of the pandemic.
Along the same line, article 3(1) eliminates the requirement to remit communications in writing “in a number of copies sufficient to provide one copy for each party, plus one for each arbitrator, and one for the Secretariat.” In the new wording, it is presumed that it is no longer necessary to submit physical copies for the tribunal, the ICC Secretariat and the other party. As a consequence of this change, amendments were made to articles 4 (Request for Arbitration) and 5 (Answer to Request) of the previous Rules, and article 1 of the Emergency Arbitrator Rules.
C. Expedited Procedure Rules (Appendix VI)
The new Rules expand application of the Expedited Procedure, which had been one of the most significant new inclusions in the 2017 Rules. This procedure reduces costs and fees and establishes an accelerated calendar that requires issuance of the award within six months from the first case management conference (article 24). It is applicable for disputes not exceeding a certain limit, unless the parties agree to exclude it. In 2019, the Abbreviated Procedure was used in 146 cases out of a total of 869 cases initiated that year.
Under the 2021 Rules, the opt-out threshold for the Expedited Procedure increases to USD 3 million (previously it was USD 2 million).
D. Duty to report third party funding
In light of the growing frequency of third party funding, the 2021 Rules (article 11(7)) establish the obligation to inform the ICC Secretariat, the arbitral tribunal and the other parties of the existence and identity of any non-party which has entered into an arrangement for funding of claims and/or defenses and under which such third party has an economic interest in the outcome of the arbitration.
The inclusion of this new article, unlike a simple suggestion or guidance to the parties or arbitrators imposes an express disclosure obligation regarding financing of the claim and/or defense.
While article 11(7) and the parties’ obligation to inform is a novelty in the 2021 Rules, it reflects a trend already underway, with narrower scope, in the January 2019 ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration. There it required that in their disclosures arbitrators must consider “relationships with any entity having a direct economic interest in the dispute.” Similar provisions exist in other arbitration rules, such as those of the Hong Kong International Arbitration Centre (article 44) and in the IBA Guidelines on Conflicts of Interest in International Arbitration (General Standard No. 7).
E. Limits on legal representation and constitution of the tribunal in exceptional circumstances
Also new on the subject of conflicts of interest, article 17, now titled “Party Representation,” adds articles 17(1) and 17(2), require the parties to promptly inform the tribunal and other parties of any change in their legal representation. It likewise provides that if the tribunal considers that the change may give rise to conflicts of interest, after hearing both parties, it may exclude the new legal representatives from participating in whole or in part in the arbitral proceedings in order to avoid such conflicts.
With respect to constitution of the arbitral tribunal, the new article 12 (9) of the 2021 Rules provides that, in exceptional circumstances, the ICC Court may appoint all the members of the arbitral tribunal, if applying the arbitration agreement as established by the parties could pose a significant risk of unequal treatment. This is to avoid the risk of annulment or nonrecognition of the award in cases where the procedure for appointing arbitrators as agreed could compromise the equality or the procedural right of the parties.
F. Investment arbitration
The 2021 Rules also include two new provisions applicable to arbitrations based on investment protection treaties.
Under the new article 13(6), in such cases, none of the arbitrators may have the same nationality as any of the parties, unless the parties expressly agree otherwise. This rule already exists under the ICSID Convention (article 39) and the ICSID Arbitration Rules (article 1.3). Additionally, the new article 29(6)(c) provides that ICC Emergency Arbitrator Provisions shall not apply if the arbitration arises from a treaty.
The new 2021 Rules have clearly made headway in terms of efficiency, transparency and flexibility, and have come to very swiftly and wisely respond to the problems that have arisen in recent times.
