ICC RULES OF ARBITRATION, 2021 – KEY CHANGES
January 27, 2021
By: Umang Singh , Associate
Recently, the International Chamber of Commerce (“the ICC”) issued the Rules of Arbitration, 2021 (“the New Rules”). The New Rules came into effect on January 1, 2021. This brief note summarises the key changes in the New Rules.
The ICC regularly updates its rules to keep it in conformity with the best international practices and to fill in the gaps, if any. Further, with the increasing popularity of institutional arbitrations, it is important for any arbitral institution to evolve and adopt the best practices. The New Rules seeks to do just that.
Concisely, the New Rules emphasises on disclosure requirements, joinder of parties and the appointment process of the arbitrators. As expected, responding to the needs of the post-pandemic (rather pandemic-ridden) world, the New Rules provides for an express mechanism for virtual hearings. The notable changes of the New Rules are discussed below.
Joinder of Parties
A new provision, namely Article 7(5) has been added which allows the parties to make a request for joining additional parties even after the constitution of the arbitral tribunal. Under the current rules, such a joinder after the constitution of the arbitral tribunal can only happen by parties’ consent.
The New Rules is a welcome departure in this respect and puts ball in the arbitral tribunal’s court. Now, the arbitral tribunal can decide on any application for joinder of additional party subject to the additional party accepting the ‘constitution of the arbitral tribunal and agreeing to the terms of reference, where applicable’.
Article 7(5) of the New Rules provide that while deciding the application for joinder of an additional party, the arbitral tribunal amongst other things will be guided by factors such as timing of the application, whether the tribunal has a prima facie jurisdiction over the additional party, conflicts of interest and impact of such a joinder on the arbitration. It is pertinent to note here that the New Rules specify that the arbitral tribunal only have to consider its jurisdiction over the additional party in a prima facie manner. A successful joinder application is without prejudice to the additional party’s right to object to the arbitral tribunal’s jurisdiction in relation to it.
Consolidation of arbitrations
The New Rules make slight changes in Article 10, which now expressly allows consolidation of claims arising out of the same arbitration agreement(s). On the other hand, Article 10(c) applies to those claims, which are not made under the same arbitration agreement(s) but involves same parties having similar legal relationship under arbitration agreement(s) that are compatible.
The New Rules focuses on disclosure requirements to promote transparency. Under the New Rules Article 11(7), the parties are under an obligation to disclose promptly to the arbitral tribunal, the Secretariat and other parties about identity of third party funders. This is in line with best international practices and the IBA Guidelines on Conflict of Interest in International Arbitration.
It is interesting as to how this provision will be implemented in jurisdictions where the laws in relation to third party funding is evolving.
A far-reaching amendment in the New Rules is in the form of Article 12(9). This gives the ICC Court the power to appoint each member of the arbitral tribunal irrespective of the parties’ agreement. This is an exceptional power and is only to be exercised in rare situation “to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award”.
Some institutions such as Qatar International Centre for Conciliation and Arbitration have the power to appoint an arbitrator, other than those nominated/preferred by the parties. However, such power must be exercised with due caution as it is antithesis to the sacrosanct principle of party autonomy.
Further, a new provision, Article 13(6) is added which provides that in an arbitration arising out of a treaty, unless agreed otherwise by the parties, the arbitrators must be from a different nationality than the parties.
On Virtual Hearings
The New Rules have been updated to cater for the needs arising out of the prevailing Covid-19 situation. Although, the arbitral tribunal and parties have increasingly embraced the use of technology and therefore, virtual hearings are common, it is good to see that the New Rules under Article 26(1) expressly provides a mechanism for virtual hearings.
Other notable changes
The threshold for expedited procedure has been increased from US$ 2 million to US$ 3 million. This will greatly benefit low quantum matters.
The New Rules have amended Article 17, and now parties are required to notify promptly to the arbitral tribunal, the Secretariat and other parties about any change in their representation. The arbitral tribunal to avoid any conflict of interest, after giving parties an opportunity to respond, may decide to exclude the new representative from participating in the arbitral proceedings.
The arbitral tribunal can issue additional awards under Article 36(3). The additional award may include claims, which in the party’s view, the arbitral tribunal did not decide. An application in this respect is to be made within 30 days from the receipt of the final award. A note of caution for the parties requesting for an additional award is to ensure that such an award complies with the requirements of the state where it is rendered so as to not impair its enforcement.
There are few changes in relation to the internal workings of the ICC Court to promote transparency. This includes two consecutive term limits on the members of the ICC Court, creation of special committees etc. There is a welcome change wherein a party may seek reasons from the ICC Court for its decisions. This indeed will be helpful in light of the ICC Court’s exceptional power under Article 12(9) to appoint arbitrators.
There are many progressive changes in the New Rules, which may have an important impact on the conduct of ICC arbitrations. The ICC Court’s power to appoint arbitrators under Article 12(9) is significant and is to be exercised cautiously. In jurisdictions, where third party funding is unregulated or not permitted, the parties have to be careful.
However, there are no changes in relation to interim measures, more specifically with regards to grant of security for claim/costs. Considering, the ICC Rules are used globally, it would have been beneficial if Article 28(1) was amended to provide more clarity on security for claim/costs. The LCIA Arbitration Rules (as in effect from 1 October 2020) specifically provides for such measures in Articles 25.1(i) and 25.2. It is true that in ICC arbitrations, the Tribunals have granted security for costs but a specific reference akin to those in the LCIA Rules would have been a welcome addition, more so if the law of the seat of the arbitration were silent on grant of such measures.
Preferred Method of Citation – Umang Singh, ‘ICC Rules Of Arbitration, 2021 – Key Changes’ (ICAR, 21 November 2020) <https://www.investmentandcommercialarbitrationreview.com/post/icc-rules-of-arbitration-2021-key-changes>.