New Year - New Rules: The ICC's new arbitration rules come into force on 1 January 2012
15 December 2011
This is the first revision for 14 years and includes a number of important amendments and innovations. The ICC Rules are amongst the most popular rules for international arbitration. All regular arbitration users should be aware of the key changes and consider how the revisions affect them.
The ICC has recently launched its revised Rules of Arbitration (the Rules), which come into force on 1 January 2012. The new Rules have been much anticipated and follow a lengthy consultation process with arbitration practitioners and users. As well as clarifications and, in some cases, codification of existing practice, the amendments introduce a number of new features into the Rules, reflecting changes in arbitral practice and procedure since the Rules were last revised, in 1998. Amongst the most notable, the new Rules contain provisions designed to address the complexities of modern, multi-party arbitration and to establish an emergency arbitrator procedure (following the example of several other arbitral institutions). Other provisions are designed to address the concerns of the business community for increased efficiency in the arbitral process.
The main changes to the Rules are summarised below, together with a number of practical suggestions in relation to the revisions.
2. Notable Changes
A party that is in need of interim measures (such as an injunction) prior to the constitution of an arbitral tribunal may now apply for such measures from an "emergency arbitrator" (Art. 29). The emergency arbitrator will be available to a party that has concluded its arbitration agreement on or after 1 January 2012, that is a signatory to the arbitration agreement (or a successor to a signatory) and that has not opted out of the emergency arbitrator procedure. The procedure is not available for investment treaty arbitrations. Applications will cost USD 40,000, which covers the fees/expenses of the ICC and the emergency arbitrator.
The emergency arbitrator procedure is intended to provide speedy relief: the President of the International Court of Arbitration of the ICC (the ICC Court) will appoint an emergency arbitrator within two days of receipt of a valid application. Following transmission of the file to the emergency arbitrator, he or she will have two days to establish a procedural timetable and 15 days to make a decision. That decision will not, however, bind the arbitral tribunal that is subsequently formed, which may modify, terminate or annul the order.
A party that is considering whether to seek urgent interim measures from a court, an arbitral tribunal or an emergency arbitrator should be aware that an arbitral order for interim measures is not covered by the enforcement regime of the 1958 New York Convention, and is therefore not strictly enforceable in all jurisdictions. However, in practice such orders are often complied with, and arbitral interim measures can be effective, because parties are often reluctant to disobey a direction from the tribunal that will ultimately decide the dispute. Failure by a party to comply with an order of an emergency arbitrator would be communicated to the tribunal once it is constituted and would also amount to a breach of contract.
A decision whether to seek an interim remedy from an emergency arbitrator or a court should be made on a case by case basis. At times, an application to the court will be preferable, for instance where an application must be made without notice to prevent the other party taking action to frustrate the order that is sought, or where access to the wider powers of the court are required. It may be argued in certain jurisdictions that the availability of an emergency arbitrator precludes urgent interim relief from the courts; although the Rules suggest this is not the case, it is untested and may influence whether parties wish to opt out of this procedure.
The ICC is not the first institution to establish an emergency arbitrator procedure, to bridge the gap between commencement of the arbitration and the constitution of the tribunal. The Singapore International Arbitration Centre, the Arbitration Institute of the Stockholm Chamber of Commerce and the International Center for Dispute Resolution of the American Arbitration Association have in recent years introduced similar procedures. The Singapore Government has also recently proposed legislation to give statutory recognition to emergency arbitrators.
MULTIPLE PARTIES, CONTRACTS AND PROCEEDINGS
Complex transactions, involving multiple (i.e. more than two) parties and a suite of documents, can give rise to multiple disputes between different combinations of parties and involving claims arising under different but related contracts. This is one area where courts have typically had available to them more flexible procedural tools than arbitral tribunals for the purpose of ensuring that related disputes are resolved together, to avoid additional costs and the risk of inconsistent decisions. Whilst parties are already able expressly in their arbitration agreement to confer additional powers on the arbitral tribunal, the revised ICC Rules contain new provisions designed to assist in the management of complex disputes.
Article 7 provides for joinder of additional parties. An existing party to an arbitration may join a third party, although a third party is not able to join itself to an arbitration. Where a third party is joined, it may subsequently join other parties (and, under Art. 12(7), may participate in the appointment of an arbitrator). Subject to the agreement otherwise of the parties (including any additional party), joinder is only available before the confirmation or appointment of any arbitrator.
Article 10 provides for consolidation of two or more arbitrations into a single arbitration. The ICC Court will only consolidate proceedings where a request is made by a party and where either (i) the parties have agreed to consolidation, (ii) the claims are made under a single arbitration agreement or (iii) the claims relate to multiple, compatible arbitration agreements between the same parties and relating to the same legal relationship. Proceedings will be consolidated into the arbitration that was commenced first. No time restriction exists for consolidation.
The Rules set out when and on what basis claims can be made in multi-party or multi-contract situations (Art. 8, 9). In multi-party situations, the ICC Court may refuse to allow an arbitration to proceed if it does not consider that, prima facie, there is an arbitration agreement binding all of those parties (Art. 6(4)(i)). In multi-contract situations, where claims are made under more than one arbitration agreement, the ICC Court may refuse to allow an arbitration to proceed unless it is prima facie satisfied that the arbitration agreements are compatible and the parties agreed that claims can be determined in a single arbitration (Art. 6(4)(ii)).
Parties entering into suites of documents should consider how these provisions will apply to their contracts. For arbitrations that involve both multiple contracts and multiple parties, it will be important to satisfy the requirement for "an arbitration agreement" that binds all the parties (as Art. 6(4)(i) and (ii) appear to apply cumulatively). It may be possible to address this with express wording that these provisions are satisfied or by opting for an umbrella arbitration agreement, but this requires careful thought at the drafting stage.
Parties arbitrating under the new Rules will need to take decisions on the possibility of joinder and consolidation at an early stage of proceedings. The timing for instituting joinder is limited. Meanwhile, the ICC Court has a discretion as to whether to grant a request for consolidation. It may refuse where the relevant arbitrations have advanced beyond the preliminary stages.
FOCUS ON COST AND TIME EFFICIENCIES
Concerns about the efficiency of arbitration have often been voiced in recent years. The ICC has sought to address these concerns by a number of amendments. Whilst a positive move, since some of these provisions codify or make mandatory what would be good practice in any event, it remains to be seen how far these changes will make a practical difference to proceedings.
The previous version of the Rules required the ICC Court to make preliminary assessments on questions of jurisdiction whenever an objection was made. This approach has been revised: questions of jurisdiction will now be dealt with by the arbitral tribunal, unless the Secretary General refers the matter to the ICC Court for a preliminary assessment (Art. 6(3)).
The Rules introduce an express requirement that the arbitral tribunal and the parties must conduct the arbitration in an "expeditious and cost-effective manner" (Art. 22(1)). Where a party fails to do so, the Rules state that the arbitral tribunal may sanction that party when deciding costs (Art. 37(5)).
A case management conference at the beginning of an arbitration will now be mandatory (Art. 24). As before, the arbitral tribunal has the power to adopt such procedural measures it deems appropriate, which the parties are required to comply with (Art. 22(2), 22(4)). New Appendix IV to the Rules now lists a number of suggested case management techniques that parties and tribunals may wish to follow.
A particularly common complaint in recent years has been the amount of time sometimes taken for tribunals to draft their awards. Arbitral tribunals are now required to provide an estimate to both the ICC Court and the parties as to when they expect to submit their draft award following the close of proceedings (Art. 27). The requirement to render an award within six months of the terms of reference has been retained (although this time limit is routinely extended, the ICC has indicated that it is taking a stricter line with tribunals seeking extensions), as has the role of the ICC Court to scrutinise an award (Art. 30, 33).
APPOINTMENT OF ARBITRATORS
The provisions relating to the appointment of arbitrators are made more flexible under the new Rules. The ICC now has more scope to make an appointment directly (rather than confirming the nomination of one of the ICC's National Committees). Direct appointments are permitted where a National Committee fails to make a proposal within the time limit fixed or that is acceptable to the ICC Court (Art. 13(3)). In some circumstances, such as where one party is a state, the ICC may also make a direct appointment without first obtaining a nomination from a National Committee (Art. 13(4)). In addition, where a party has failed to nominate an arbitrator, the ICC Court need no longer obtain a proposal from the National Committee of the country of which that party is a national.
The Rules require that arbitrators be and remain impartial, adding to the pre-existing requirement for independence (Art. 11(1)). Codifying a recent practice of the ICC Court, the Rules now also require that arbitrators confirm their availability for the arbitration in their statement of acceptance (Art. 11(2)).
ADMINISTRATION OF ICC ARBITRATIONS
The ICC Court is now exclusively entitled to administer arbitrations under the Rules (Art. 1(2), 6(2)). This revision seeks to prevent other arbitral institutions from administering the Rules, as happened in a case in Singapore (Insigma Technology Co Ltd v Alstom Technology Ltd  3 SLR(R) 936).
We advise parties not to draft arbitration agreements which provide for one arbitral institution to administer arbitrations under the rules of another institution. Such clauses always risk being invalid and/or unworkable; that risk is particularly acute in the case of the ICC Rules in light of this new provision.
ADVANCE ON COSTS
The ICC's practice has been to seek a substantial advance on the costs of the arbitration at an early stage of proceedings. The ICC Court may now authorise payment by instalments, subject to any conditions that it sees fit to apply (App. III, Art. 1(6)). This is a welcome new provision, which provides added flexibility, and which may prove to be an attractive addition for parties entering into an ICC arbitration clause.
3. Other changes of note
- Confidentiality: The Rules helpfully provide that an arbitral tribunal may make orders on the confidentiality of the proceedings or on connected matters (Art. 22(3)). This allows tribunals to provide bespoke solutions to meet the requirements of the parties. However, problems may arise if the tribunal makes an order for confidentiality but the law of the seat does not recognise it. Parties who anticipate that they will want the arbitration to be confidential should provide for this in the arbitration agreement.
- Modernisation: The Rules address the developments in technology by updating the reference to communications by "facsimile transmission, telex, telegram" to include "email" (Art. 3(2)).
- Substance of pleadings: Parties are now required to provide further information and documentation when submitting their request for arbitration, answer to the request and counterclaim (Art. 4(3), 5(1), 5(5)).
- Terminology: The Chairman of the ICC Court and of an arbitral tribunal will now be known as the "President" (Art. 1(3), 12(5)).
- Investment treaty disputes: A number of small changes have been made to make it clear that the Rules can be applied to investment treaty disputes.
The Rules enter into force on 1 January 2012 and will apply to ICC arbitrations taking place from this date. The previous version of the ICC rules will apply to ICC arbitrations arising from arbitration agreements entered into before 1 January 2012 where the parties have agreed to submit to the ICC rules in effect on the date of the agreement.