Developments in Arbitration during the Coronavirus Pandemic
June 28, 2021
* This paper was presented at the webinar organized by the Association of Young Arbitrators at the International Chamber of Commerce entitled “Successful Arbitration – Choices and Expectations”, held remotely on April 7, 2021.
By: Sultan Al-Abdulla, Managing Partner
At the outset, I would like to extend my sincere thanks and appreciation to Professor, Saad Hegazy and the Association of Young Arbitrators at the International Chamber of Commerce, for their kind invitation to me to participate in this remote symposium.
Exactly a year ago, in April 2020, I participated in a remote symposium for the first time. Coincidentally, it was also on arbitration, and it was entitled “The Future of Arbitration amidst the Coronavirus Pandemic”. In that symposium, I presented a paper in which I stated that “It is noted that arbitration institutions have begun to adapt themselves to the new reality by developing mechanisms – using technology – that allow them to continue to perform their functions even during the stage of complete lock-down.
It might be a good opportunity to recall some of the developments in arbitration since I submitted my paper a year ago, focusing on the developments introduced by some arbitration centers to their rules.
The unmistakable truth is that many arbitration institutions and centers have amended their rules to keep pace with the new trends in arbitration practices, including but not limited to:
First: The Arbitration Rules of the London International Court of Arbitration (LCIA). Its new rules came into force on October 1, 2020;
Second: The new International Chamber of Commerce (ICC) arbitration rules, which came into force on January 1, 2021;
Third: The arbitration rules of the International Center for Dispute Resolution (ICDR), which is the international branch, may I say, of the American Arbitration Association (AAA). They came into force on March 1, 2021;
Fourth: The new rules of the Singapore Arbitration Center (SIAC) announced to be launched in the third quarter of 2021;
Fifth: IBA Rules on the Taking of Evidence in International Arbitration launched in February 2021;
Therefore, an observer can easily notice that there is a continuous development of the arbitration rules with the aim of making arbitration easier, streamlined and more responsive to the needs of users. In fact, this is the secret of the success of arbitration and the secret of its strong attractiveness to international companies and institutions, as the parties to arbitration deal with clear and specific rules that were developed based on the experiences of their predecessors, and these rules are characterized by continuous development in an ongoing historical controversy.
What I want to touch on is: What are the fine common threads that run through all of these rules amended in recent months or that are still under development, and to where the international arbitration centers are heading?
Given the complexity of the subject, I will make some remarks about some of the amendments introduced to the new ICC arbitration rules, which came into force on January 1, 2021, because, in my opinion, they reasonably reflect the general trends of international arbitration centers.
Although the new arbitration rules of the International Chamber of Commerce did not change the essence of the previous rules, but they introduced new provisions in addition to making some important amendments to the existing rules in order to achieve a number of objectives, including dealing with developments that occurred in this world as a result of the Coronavirus pandemic, in order to increase efficiency, to increase transparency and to control and strengthen the arbitration procedures.
The first remark is on the new rules is the adoption of the principle of paperless communication and remote hearings
Over the past year, the world had to deal with the challenges of social distancing resulting from the Coronavirus pandemic. The new rules addressed this challenge by adopting and implementing new rules and procedures to provide greater flexibility, particularly with regard to the exchange of briefs, and the holding of hearings and other arbitration proceedings.
Accordingly, the first paragraph of Article 26 expressly states that the arbitral tribunal may, after consulting the parties and after taking into account the circumstances relating to the arbitral proceeding, decide to conduct any hearing in person or remotely by video conference, telephone or other appropriate means of communication. It is well-known that the repealed 2017 rules gave only discretionary powers to the arbitral tribunal, but the new rules gave the arbitral tribunal absolute powers to hold sessions remotely, with a single obligation to consult the parties.
Furthermore, the first paragraph of Article 3 on written notifications stipulates that a copy of each submittal of either party shall be sent to the counter party, to the arbitral tribunal and to the Chamber’s secretariat, with no requirement for sending or depositing a hard copy.
The second remark is on the amendments to the financial ceiling for expedited arbitration proceedings
It is well-known that the 2017 Arbitration Rules introduced special rules for arbitration proceedings with a value of less than $2 million, so that the proceedings becomes faster and judgments in such cases are to be issued within six months of the appointment of the arbitral tribunal. I recall that some people were skeptical about the possibilities of success of such proceedings due to the alleged poorness of the procedural guarantees. However, in reality, the expedited arbitration proved to be a tremendous success and attracted wide acceptance. It also led to determination of hundreds of small value arbitration cases in a short period of time. For example, out of 850 arbitration cases registered with the Chamber in 2019, 146 cases were adjudicated under the Expedited Procedure Rules, i.e. 17%.
Based on this success, the ceiling of the value of arbitration cases which are subject to the Expedited Arbitration Rules was raised from $2 to $3 million. Despite the modesty of this increase, I believe that it will contribute to expedite settlement of many arbitration cases in a satisfactory manner for the parties, and it will raise the percentage of arbitration cases that are subject to this type of procedure to at least 20%.
The third remark is related to the admission of additional parties to the arbitration proceedings
It is noticeable that the new rules have amended Articles 7 and 10 of the Rules issued in 2017 by expanding the scope of admission of additional parties to the ongoing arbitration proceedings, as well as with regard to the consolidation of arbitration cases. This expansion aims at meeting the needs and expectations of the parties involved in complex disputes which might involve multiple parties and multiple contracts.
The fifth paragraph of Article (7) allows the arbitral tribunal to decide on the admission of additional parties immediately after the appointment of the tribunal without requiring the consent of all relevant parties, provided that the admitted party agrees to the formation of the arbitral tribunal and to the arbitration agreement or arbitration document. For example, if a party desired to be admitted into arbitral proceedings to the side of the claimant, the arbitral tribunal can admit it with no need for the consent of the respondent. All what the arbitral tribunal has to take into consideration and account – before deciding whether to accept the admission or not – is the timing of the admission request, any potential conflict of interests and the impact of the admission on the arbitral proceedings.
Fourth remark is on consolidating arbitration cases
With regard to consolidating cases, paragraph (b) of Article (10) of the 2017 Rules required that cases are to be consolidated in the event that the arbitration cases are resulting from the same contract, with only one exception which is the existence of multiple contracts but they are concluded between the same parties.
However, the 2021 Rules expanded this scope by allowing consolidation of cases resulting from the same arbitration agreement(s), as stated in paragraph (b) of Article 10, or cases resulting from different agreements, as stated in paragraph (c) of Article (10), provided that the arbitration terms shall be “compatible”. So, unlike the judiciary which requires identity of litigants, objects and causes for consolidating cases, once again arbitration appears more flexible and does not require the exact match, but rather the existence of a realistic link to the raised issue(s) in multiple arbitration cases in order to permit consolidation of the cases.
The fifth observation is related to the court’s authority to intervene in the composition of the arbitral tribunal
The 2021 Rules introduced other important amendments, including the composition of the arbitral tribunal. Paragraph 9 of Article 12 granted the International Chamber of Commerce the discretion in “exceptional circumstances” to ignore the agreement concluded between the arbitration parties regarding the manner in which the arbitral tribunal is to be constituted. It even permitted the court to appoint the entire arbitral tribunal in order to avoid the possibility of unequal treatment or injustice which may affect the validity of the award.
This new addition is the most controversial addition in the new rules of the International Chamber of Commerce, as many are waiting to see how this provision will be applied despite the fact that it contradicts the established practice which considers the right of the parties to appoint their arbitrators a fundamental right. However, others believe that this addition was necessary to correct any imbalances that may exist in the agreed upon arbitration clause, so that the party deprived of a certain right under the agreed clause does not have to wait until the arbitral award is issued to have the opportunity to challenge the arbitration proceedings. On the other hand, others will seek to abuse this clause in order to delay the arbitration proceedings and to delay the determination of the arbitration proceedings. For the sake of transparency as regards the composition of the arbitral tribunal, Article (5) of Annex II entitled the parties to have access to the reasons of the decisions taken by the International Chamber of Commerce, particularly regarding the composition of the arbitral tribunal.
The sixth remark is on treaty-based arbitrations
In this context, a paragraph was introduced aiming at promoting equality between the parties, i.e. paragraph (6) of Article (13) which states that in the cases where the arbitration results from a treaty-based arbitration agreement, the arbitrator may not be of the same nationality of either party, except where an express agreement is made by the parties to the contrary.
The seventh remark is related to the avoidance of conflict of interests
The second paragraph of Article 17 was newly introduced to the Rules of the International Chamber of Commerce. It relates to the ability of the parties to change their legal attorneys during the course of the arbitration proceedings, which may sometimes threaten the independence and impartiality of the arbitral tribunal. The second paragraph of Article 17 gives the arbitral tribunal the right to take any action necessary to avoid a conflict of interests which might arise from the change of a party’s legal attorney, including the right to exclude the new attorney from participating, in whole or in part, in the arbitration proceedings. By the way, this right granted to the arbitral tribunals is provided for in the fourth paragraph of Article 18 of the LCIA Rules.
The eighth remark is related to promoting transparency as regards financing by third parties
The 2021 ICC Rules also introduced a new Article 11(7), which requires parties to disclose the existence and identity of any third parties financing the arbitration expenses, if any.
The obvious reason for this is that such financing party will have an interest in the outcome of the arbitration and is a beneficiary party who seeks to profit from financing the arbitration case. Therefore, the disclosure of the existence and identity of such a financing party is necessary for investigating any conflict of interest by the arbitral tribunal. The arbitral tribunal is required to make sure of impartiality and independence, and disclosure of any matter which might raise doubts as regards impartiality and independence. Undoubtedly, this will lead in general to increase the transparency of the arbitral proceedings. It is noticeable here that the rules of the International Chamber of Commerce remained somewhat conservative by not requiring the disclosure of any financing agreement, as does Article (44) of the rules of the Hong Kong Center for International Arbitration.
There are, of course, some other changes, but they may be less important, such as amending some of the deadlines for submitting briefs, responses and corresponding requests, as mentioned in the first and sixth paragraphs of Article Five. The third paragraph of Article (36) also gives the parties the right to request a supplementary award from the arbitral tribunal in the event that the tribunal omitted any requests submitted to it during the course of the arbitral proceedings.
Finally, the 2021 Rules portend positive changes for the parties and arbitrators alike. The 2021 Rules introduced amendments that would simplify and provide greater flexibility in the arbitral proceedings with a greater scope of transparency, greater role for digitization, more flexibility in complex multilateral disputes, and greater discretion powers for the arbitral tribunals and the ICC Court.