New ICC arbitration rules
January 2012 | TALKINGPOINT | LITIGATION & DISPUTE RESOLUTION
FW moderates a discussion on the new ICC arbitration rules between Peter Wolrich at Curtis, Mallet-Prevost, Colt & Mosle LLP and the chairman of the ICC Commission on Arbitration, Jérôme Richardot at Fasken Martineau, and Hiroyuki Tezuka at Nishimura & Asahi.
FW: Could you provide a broad overview of the new ICC arbitration rules, due to come into effect on 1 January 2012? What are the main reasons behind their introduction?
Richardot: The new ICC rules are designed to meet the actual requirements of arbitration practice to better serve businesses and governments engaged in international commerce and investments. Special emphasis was put on time and cost effectiveness; emergency procedures, such as the appointment of an ‘emergency arbitrator’ for ordering urgent measures; and new provisions to address disputes involving multiple contracts and parties. The objective was to meet the needs of States and the business community, as international arbitration was, in the past, often criticised for its costs, length and incompatibility with business requirements.
Wolrich: The rules were last revised back in 1998. Then, the rules needed to change rather urgently to take into account court decisions that affected the existing rules. This time around, there was nothing that required an urgent change. Instead, since more than 10 years had elapsed, we felt it would be worth taking a fresh look at the rules in order to bring them up to date and make sure they would be useful for years to come. Guiding principles were established in terms of what changes would or would not be made. The first guiding principle was that only changes that were genuinely useful and genuinely necessary should be made. The second principle was to retain, to the greatest extent possible, the key and distinguishing features of ICC arbitration. The third was to be economical in the drafting and to avoid being overly prescriptive. The rules are deliberately quite short. Keeping to that philosophy allowed us to retain what we consider to be the cross cultural character of the rules, as well as their flexibility.
Tezuka: The new ICC arbitration rules add provisions to address such matters as disputes involving multiple contracts and parties; updated case management procedures; the appointment of an emergency arbitrator to order urgent measures; and changes to facilitate the handling of disputes arising under investment treaties and free trade agreements. The new rules purport to meet the growing complexity of today’s business transactions, the needs surrounding disputes involving states, and the demand for greater speed and cost-efficiency. The rules also take into account developments in information technology, since they were last revised in 1998.
FW: In what ways do the new rules address multi-party and multi-contract arbitrations?
Wolrich: When the rules were altered in 1998, only a very small percentage of arbitrations were multi-party. By the time we came to amending these rules, multi-party arbitrations, with all their complexities, were becoming very common – up to a third of cases now involve some multi-party aspect. Over the past 10 years or so, the court had developed certain practices to deal with these situations, but there was no guidance in the rules. The court used some of the authority contained in Article 6 to find solutions to these issues, but the consensus was that there should be a rule-based structure. Also, we felt that, for transparency purposes, the outside world should know what these practices are, and how they are to be applied. That’s why we decided to include these multi-party provisions.
Tezuka: The new rules deal with the joinder of additional parties, claims arising from multiple contracts, claims between multiple parties, and consolidation of arbitration. Claims arising from multiple contracts or multiple arbitration agreements may be resolved in a single arbitration under certain circumstances. In multi-party arbitration, claims may be made by any party against any other party. The new rules permit an existing party to join new parties prior to the appointment/confirmation of an arbitrator, subject to jurisdictional requirements. Consolidation of multiple arbitration proceedings may be possible under certain circumstances, where claims arise under the same or ‘compatible’ arbitration agreement.
Richardot: The new rules introduce provisions to deal with issues relating to complex arbitration disputes, in particular multiple-party and multiple-contract arbitrations. As regards claims involving multiple parties, any party can make a claim against another party. There are no limitations in cross-claims or counterclaims unless the arbitral tribunal decides otherwise. Regarding multiple contracts, claims arising out of, or in connection with, one or more contracts, can be made in one single arbitration, provided that the different arbitration agreements are compatible and that all the parties have agreed that these claims can be ruled together within the same arbitration procedure. The most radical measure relates to the joiner of additional parties. Existing parties – especially respondents – are now allowed to call upon additional parties to join the arbitration procedure, up until an arbitrator is appointed or confirmed. Moreover, the ICC Court of International Arbitration may consolidate two or more pending arbitrations into one sole proceeding, at the request of a party and under certain conditions. Once arbitrations are consolidated, the court’s decision is a final administrative one. The arbitral tribunal cannot question the latter nor deconsolidate the arbitration into separate arbitration proceedings.
FW: The new rules contain provisions for a so-called “emergency arbitrator”. What function will this role provide, and is this a welcome addition?
Tezuka: Under the new rules, a party may apply for urgent interim or conservatory measures even before the constitution of the arbitral tribunal through an emergency arbitrator appointed by the President of the Court, unless the parties agree to opt out of the emergency arbitrator provisions. Under the old rules, a party seeking such interim measures could apply to the national courts of the relevant jurisdiction. This is a welcome revision that offers more choice: the interim measure granted by an emergency arbitrator is not an exclusive remedy and a party may choose between application for an interim measure from an emergency arbitrator, and from a national court. These emergency arbitrator provisions will apply only where the arbitration agreement was concluded after the new rules come into force.
Richardot: To date, a party seeking interim or conservatory measures before the tribunal’s constitution had to apply before a national court. The emergency arbitrator was instituted by the new ICC Rules, to issue interim or conservatory orders that cannot await the constitution of the arbitral tribunal. This arbitrator is empowered before the arbitral tribunal is constituted, and even before the filing of a request for arbitration. In the event that the appointment of an emergency arbitrator is requested, the applicant is to file a request for arbitration within 10 days to avoid the termination of the emergency proceedings. This procedure will be applicable for agreements concluded after 1 January 2012. The emergency arbitrator will render an order, not an award. The arbitral tribunal will have the power to modify, terminate or annul the order and to rule on any claim relating to the non-compliance with the order. Applications for urgent interim relief before state courts will still be available. However, the state courts option is not affected by the new ICC Rules, which is a more than welcome feature. However, the parties may prefer to choose the emergency arbitrator in order to preserve the privacy of the proceedings and be in keeping with the legal action on the merits they may have to file in the near future.
Wolrich: A number of points have to be made here. We wanted to be sure that while the emergency arbitrator provisions would give genuine help to a party in need, protections were put in place to avoid abusive measures against the other party. For example, the new rules require that a claimant who brings an emergency arbitrator proceeding must file a request for arbitration within 10 days. It therefore cannot be used merely to put pressure on the other party, and then not commence an arbitration. The rules also provide that you can only bring an emergency arbitrator proceeding against someone who is a signatory to an arbitration agreement with you. This prevents oblivious parties from receiving news in the mail that there is an emergency arbitrator proceeding starting against them, when they never signed an arbitration agreement with the party seeking the emergency relief.
FW: What steps have been taken to improve the speed, efficiency and modes of communication when conducting arbitration procedures?
Richardot: The new arbitration rules are intended to make ICC arbitration more efficient and cost effective. Both the arbitral tribunal and the parties have to make all efforts necessary to conduct the arbitration in an expeditious manner. The new ICC rules provide that the arbitral tribunal must convene a case management conference at the outset, to consult the parties on the procedural measures to adopt. Another example of case management techniques consists in requiring the parties to produce all of the relevant documents with their submissions so as to avoid procedural issues in relation to the disclosure of evidence, limited to certain relevant documents. With a view to speeding up the procedure, the arbitral tribunal shall declare the proceedings closed as soon as possible after the last hearing or after the filing of the last authorised submissions. More incentives are introduced by the new ICC rules to speed up the procedure. On the one hand, the court will consider the “diligence and efficiency” of the arbitrators and the “timeliness of the submission of the draft award” in determining the arbitrator’s fees. On the other hand, the parties have to conduct the arbitration in an expeditious and cost effective manner. Lastly, the secretariat and the tribunal will now be able to use emails, which is a first step towards an electronic management system.
Tezuka: First, the new rules impose on arbitrators and parties obligations to “take every effort to conduct the arbitration in an expeditious and cost-effective manner, having regard to the complexity and value of the dispute”. Secondly, arbitrators are required to convene a case management conference to consult the parties on procedural measures. Thirdly, Appendix IV sets out a non-exclusive list of case-management techniques, such as bifurcation, identification of issues that can be resolved by agreement or based solely on documents, and so on, and limitation of the scope, and timing, of document production. Although Appendix IV is not mandatory, tribunals are recommended to adopt one or more of the case management techniques described therein. The outdated communication tools such as telex have been replaced with updated and broadly defined references to communication tools such as email.
Wolrich: The new case management provisions were specifically designed to increase the speed and efficiency of arbitration. If you compare rules of arbitration with codes of civil procedure in various countries, the codes of civil procedure provide a very weighty document spelling out everything that can happen or is supposed to happen in the procedure. By contrast, rules of arbitration, and not just those of the ICC, are just a few pages long. The difference between arbitration and court proceedings is that arbitration is intended to be a bespoke procedure, tailor-made for a specific case. We have discovered that, all too often, arbitral tribunals will either use boilerplate solutions to set up the procedure or they won’t set it up at all, deciding on key points as they arise throughout the process. This is inefficient, resulting in extra time and expense. Although we have not prescribed exactly what the procedure should be, because we want to retain flexibility and the bespoke nature of arbitration, we have included a new explicit step which makes tailoring the procedure a formal requirement in the rules. The rules now require that there is a case management conference, and the parties may be requested to propose procedures that would be appropriate for the case, making it time and cost efficient. If the parties agree on procedures, they will apply. If they disagree, the tribunal will decide which procedures to apply.
FW: In your opinion, how will the new rules affect international arbitration processes going forward? What are the benefits and drawbacks of the revised framework?
Wolrich: It is very much our hope that this specific requirement of tailor-making the case will significantly improve the efficiency of arbitrations going forward. That is probably likely to be the biggest benefit moving forward. Clearly, the possibility of an emergency arbitrator can be a real benefit to a party that does not have an effective national court to go to, as it gives them an alternative. Parties should now feel more comfortable with multi-party situations because they can find out what is permitted and what is not. The secretariat of the ICC will soon be publishing the ‘Secretariat’s Guide to ICC Arbitration’, which will explain, in basic terms, all of these provisions, so individuals can evaluate them and understand their content.
Tezuka: The new rules take steps to improve ICC arbitration and to deal with criticism against today’s arbitration. Most of the changes will help to make arbitration a more attractive alternative to court litigation. However, there is a concern regarding emergency arbitrators. Although emergency arbitrators have broad power to grant emergency remedies, there may be no effective remedy for damages caused by wrong decisions made by emergency arbitrators, where security ordered is insufficient. A remedy by the Arbitral Tribunal under Article 29(4) may not work if the applicant for emergency order does not have sufficient assets. Furthermore, emergency arbitrators are not appointed by the parties. Emergency arbitrators may prove useful, but if emergency arbitrators render orders that are too aggressive without sufficient security, emergency arbitrators may be viewed as risky and parties may want to opt out.
Richardot: The new multi-party and multi contract provisions should have long-term effects on international arbitration processes. They should render ICC arbitrations more efficient and streamlined. However, the scope for consolidated arbitrations under several arbitration agreements may still be limited, requiring the parties’ consent, or, for arbitrations already existing, to be between the same parties. The new arbitrator rules are a well-drafted and tailor-made solution for an emergency procedure. They should further the attractiveness of ICC arbitrations. However, as the parties can agree another form of pre-arbitral procedure for interim relief, they may prefer to keep the ‘force’ of a court order over an emergency arbitrator’s order. Those rules will only apply where parties have entered into an arbitration agreement after 1 January 2012. Indeed, only time will tell whether the new arbitrator rules are considered and applied.
FW: Do you envisage any problems for parties adapting to the new rules during 2012, or should the transition be fairly smooth?
Tezuka: Generally speaking, the transition will be fairly smooth. Many provisions of the new rules reflect existing best practices, codification of which will help less experienced arbitrators. However, if emergency arbitrators render orders that are too aggressive, parties may feel troubled and want to have guidance as to the level of required proof and security.
Richardot: In my opinion, the transition should be fairly smooth. The new ICC rules preserve many of the pillars of ICC arbitration, and also codify some existing practices. However, there will remain some uncertainty under the rules. For example, the circumstances in which arbitrations arising out of more than one agreement will be consolidated remain uncertain; indeed, if parties want to ensure consolidation of arbitration, they should include identical arbitration clauses in each agreement and provide for consolidation. Moreover, the emergency arbitrator provisions apply only to agreements concluded after 1 January 2012. Indeed, all procedures related to an agreement concluded before this date should not benefit from this provision. Therefore, we will not be able to evaluate the opportunity of such a measure before a certain amount of time has lapsed.
Wolrich: I don’t anticipate any problems, but if there are any issues regarding the interpretation of rules, the parties are free to contact the secretariat and ask them for guidance, and they will receive an answer. That is why I believe the transition will be relatively smooth, because we have an infrastructure that deals with any problems that might arise. This is not a set of ad hoc rules. The existence of institutional administration of the rules makes transition much smoother.
FW: To what extent are we likely to see further revisions to international arbitration processes from the ICC in the near future?
Richardot: Further revisions are highly hypothetical insofar as the new ICC rules have adjusted to business requirements in terms of speed and costs. This being said, no system is ever perfect and further reforms are likely to be envisaged in the future. Therefore, new steps towards improving international arbitration processes will depend on the outcome of the application of the new ICC Arbitration rules due to come into effect on 1 January 2012.
Wolrich: In 10 years or so I have little doubt that we will be looking at the rules again and revising them again, because new practices, new problems, and new issues will arise. We held an initial conference back in 2008, at the very beginning of this process. We invited anyone who wanted to, to offer suggestions on what they would like to see added in the rules. We also obtained suggestions from the ICC National Committees and from the ICC Court and its Secretariat. Every suggestion that was made was carefully studied and debated. We did not make every change that was suggested, because in the end the majority thought some of the changes were not genuinely useful or necessary. That we undertook this broad, democratic process makes me feel confident that we did not miss some change that really should have been made.
Tezuka: One of the criticisms of today’s arbitration is that it is becoming too costly and time-consuming. The new rules have responded to such criticism by revising the rules of arbitration itself. In addition to such improvements, further steps may be taken by adding rules regarding hybrid forms of arbitration and mediation – arb-med or med-arb. Another possible change may be made with respect to expert witnesses, codifying best practices regarding the roles and the treatment of both party-appointed experts and tribunal-appointed experts.
Peter Wolrich is a partner in the International Arbitration group of Curtis, Mallet-Prevost, Colt & Mosle LLP. His arbitration activities include acting as chairman of arbitral tribunals, sole arbitrator, co-arbitrator and counsel for claimants and respondents in connection with ICC, International Centre for Settlement of Investment Disputes (ICSID), London Court of International Arbitration (LCIA), Netherlands Arbitration Institute (NAI), Stockholm and ad hoc arbitrations. Mr Wolrich is chairman of the ICC Commission on Arbitration. He was chairman of the Task Force on the Revision of the ICC Rules of Arbitration and a principal draftsman of the new Rules. He can be contacted on +33 1 42 66 39 10 or by email: email@example.com.
Jérôme Richardot is a partner at Fasken Martineau. He is a seasoned litigator with over 25 years’ experience mostly in international law firms. Mr Richardot’s practice has included business and corporate litigation, and international arbitration. He has managed cases in connection with turn-key industrial agreements, claims based on contractual representations and warranties, industrial supply agreements, civil aviation, intellectual property disputes, construction contracts, and many others. Mr Richardot is a member of the Association Française d’Arbitrage and he is a registered ‘mediator’ with the Centre de Médiation et d’Arbitrage de Paris (CMAP). He can be contacted on +33 1 44 94 96 98 or by email: firstname.lastname@example.org.
Hiroyuki Tezuka is a partner at Nishimura & Asahi in Tokyo. Mr Tezuka was vice-chairperson of the Inter-Pacific Bar Association, Dispute Resolution and Arbitration Committee between 2006-2010; vice-chair of the International Bar Association, Legal Practice Division, Arbitration Committee between 2007 and 2008;and has been director of the Japan Association of Arbitrators from 2007. He received his LL.B. from University of Tokyo in 1984 and LL.M. from Harvard Law School in 1992. He can be contacted on +81 3 5562 8577 or by email: email@example.com.
© Financier Worldwide
Curtis, Mallet-Prevost, Colt & Mosle LLP
Nishimura & Asahi