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Happy New Year, Happy New Rules7 January 2021

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Following hot on the heels of the LCIA’s recent rule changes¹, the ICC recently published updates to its arbitration rules which came into force on 1 January 2021. This is the first update to the ICC Rules (the “Rules”) since 2017 and while the changes represent more of a gentle evolution than a dramatic change to the conduct of ICC arbitration, they nevertheless include notable developments designed to make ICC arbitration more attractive, particularly relating to joinder and the consolidation of disputes, remote hearings and the requirement to disclose third party funding arrangements.

"Key changes in the new Rules include amendments to make it more straightforward for complex multi-party disputes to be arbitrated."

CONSOLIDATION AND JOINDER

Key changes in the new Rules include amendments to make it more straightforward for complex multi-party disputes to be arbitrated. In particular the provisions on the joinder of additional parties now include a new rule which enables a request for joinder to be made after an arbitrator has been confirmed or appointed. The 2017 Rules previously required consent from all parties for the joinder of additional parties at this stage in proceedings. Now, provided the additional party accepts the constitution of the tribunal and agrees to the Terms of Reference, the tribunal can determine a joinder request once constituted. Effectively this means that, even if one of the existing parties to the arbitration is not in agreement, a willing third party can be joined to proceedings even after the tribunal has been constituted.

At the request of a party, the new Rules also provide the ICC Court of Arbitration (the body which administers ICC arbitrations) with powers to consolidate arbitration claims made under the same arbitration agreement or agreements (emphasis added). This small amendment to Article 10(b) clarifies that consolidation is available in circumstances where multiple contracts have been entered into, each containing the same arbitration agreement, and offers greater flexibility than the approach taken in the 2017 rules, where arbitrations could only be consolidated if the parties agreed; or the claims in the arbitrations were between the same parties, the disputes arose in connection with the same legal relationship and the ICC Court found the arbitration agreements to be compatible; or if all the claims were made under the same, single arbitration agreement.

REMOTE HEARINGS

Recent technological developments enabling hearings to be heard remotely were already a feature of arbitration, involving as it frequently does, parties from disparate parts of the globe who may not always be able or willing to travel to the same location for a physical hearing. However, these developments have perhaps been more rapidly embraced by the arbitration community as a result of the restrictions imposed by the Covid-19 pandemic and are now being reflected in changes to arbitral rules.

Article 26(1) of the new ICC Rules now expressly recognises the tribunal’s discretion to order that hearings may be conducted remotely by video conference, telephone or other “appropriate means of communication” (the latter wording an attempt to “future proof” the provision). This amendment is a welcome change to the previous provision, Article 25(2) of the 2017 Rules, which stated that a tribunal “shall hear the parties together in person if any of them so requests” (emphasis added) and resolves any ambiguity that a physical hearing must take place. The new Rules also provide for the transition away from hard copy documents, enabling both the Request for Arbitration and Response to be served electronically.

"Most controversially the new Rules include a provision which empowers the ICC Court to appoint tribunal members where there is a risk of unequal treatment and unfairness that may affect the validity of an award."

INCREASED TRANSPARENCY

The amendments to the Rules also seek to increase transparency, particularly in relation to funding. Recognising the recent growth of third party funding in arbitration, which enables parties to pursue claims without taking on the commensurate balance sheet risk, and in an effort to avoid any resulting conflicts of interest, Article 11(7) of the new Rules now requires parties to disclose the existence and identity of any certain funding arrangements. While this might be viewed as an additional burden for funded parties, in fact disclosure of funding arrangements has, in any event, been good general practice and the new rule is therefore unlikely to dissuade parties who wish to enter into third party funding arrangements from doing so.

In addition, the new Rules require the parties to promptly inform the ICC Secretariat, the tribunal and other parties of any change in representation, and the tribunal can take any measure necessary to avoid a conflict of interest arising, including excluding new party representatives from participating in proceedings, either in whole or in part. Whether a tribunal will ever decide to take such a drastic step, which has been open to LCIA tribunals since 2014, remains to be seen.

CONSTITUTION OF TRIBUNAL

Most controversially the new Rules include a provision which empowers the ICC Court, in exceptional circumstances, to appoint tribunal members where there is a risk of unequal treatment and unfairness that may affect the validity of an award, notwithstanding any agreement between the parties on the method of constitution of the tribunal. This provision may be intended to cover the position in multi-party arbitrations where it is not simply a case of each party nominating their own arbitrator, and the “exceptional circumstances” threshold for its use is high. Nevertheless, some parties may balk at this apparent encroachment on party autonomy.

"These latest changes provide more transparency, flexibility and efficiency in the conduct of proceedings, in particular by recognising that most current arbitrations do not require a physical hearing or hard copy documents to be provided, setting the ICC in good stead for the future."

EXPANSION OF EXPEDITED PROCEDURe

Expedited procedures are increasingly popular among arbitral institutions, enabling a case to be determined more rapidly than would be the case under standard procedures. The 2017 rules introduced an expedited procedure, which applied automatically to cases where the amount in dispute did not exceed US$2m, unless the parties had expressly opted out or the ICC Court or  tribunal considered that it would be inappropriate to apply the expedited procedure provisions.  Noting the success of that innovation, under the new Rules the expedited procedure will now apply to disputes with a value of under US$3m where the relevant arbitration agreements was executed on or after 1 January 2021, again, unless the parties have opted out or the ICC Court or tribunal determine that it is inappropriate to apply the procedure.

CONCLUSION

In order to maintain its position as one of the leading international arbitral institutions, it is important for the ICC to regularly review and update its rules to ensure that they are fit for purpose in an ever-evolving commercial environment.

These latest changes provide more transparency, flexibility and efficiency in the conduct of proceedings, in particular by recognising that most current arbitrations do not require a physical hearing or hard copy documents to be provided, setting the ICC in good stead for the future. Changes to consolidation and joinder, meanwhile, will be welcomed by parties engaged in complex arbitrations involving multiple participants and multifaceted contractual arrangements.

However, it is perhaps a little surprising that, notwithstanding its October 2017 practice note, which made clear that an application for the dismissal of manifestly unmeritorious claims or defences can be made within the broad scope of Article 22 concerning the conduct of the arbitration, unlike the LCIA the ICC has not taken the opportunity to expressly provide for a summary procedure in its updated rules. Whether that will have any impact on the parties use of the procedure remains to be seen.

[1] As to which, see our recent article, available here

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