The ICC has amended its arbitration rules to increase efficiency, flexibility and transparency, as well as making arbitrations easier to conduct by electronic means both during and after the pandemic. We look at the extent to which these goals are achieved, and some of the issues that arise.
On 1 December the ICC launched its new arbitration rules, which will apply to all arbitrations commenced on or after 1 January 2021. The rules were last revised in March 2017, less than four years ago, but the ICC has clearly thought it necessary to make further changes sooner rather than later because of the pandemic. However, these go further than just facilitating virtual hearings and electronic working. According to Alexis Mourre, the outgoing ICC Court President, they also aim to increase efficiency, provide for more flexibility when needed, and achieve greater transparency where funding is concerned.
The first task of the drafting committee was to adapt the rules to the Covid era. The ICC issued a Guidance Note on this some months ago, including a checklist and suggested wording for protocols and procedural orders to help get round difficulties caused by the pandemic, but clearly more was needed. For example, the rules used to say that "a number of copies" of pleadings and other documents had to be provided (old Art 3(1)). Now the general rule is that these only need to be "sent" to the other parties, the tribunal and the Secretariat. There are exceptions, where hard copies must be provided, but this is only where the party sending a Request or Answer asks for transmission "by delivery against receipt, registered post or courier" (revised Arts 4 and 5).
The rules are also explicit now on the subject of virtual hearings. Revised Article 26 says in terms that hearings may be conducted remotely "by videoconference, telephone or other appropriate means of communication". This is helpful, because virtual hearings are not only common at the moment, but may remain so in the longer term. They clearly have benefits in terms of cost, speed and convenience, as well as being environmentally friendly if international travel is avoided. That said, they are not suited to every circumstance and every case. In particular, there is widespread concern that virtual hearings are often problematic where factual and expert witnesses are being cross-examined, and are less than ideal when counsel is making submissions. This is why the ICC is careful to say add that they should be ordered only after the tribunal has consulted the parties and considered the "relevant facts and circumstances of the case". After the pandemic is over, and there is a real choice again between physical and virtual hearings, it will be possible to judge whether the ICC is being too cautious here or has struck the right balance.
Disappointingly, the ICC does not explicitly address here the possibility of the semi-virtual hearing, where some of these problems are less in evidence. Hearings of this kind involve typically involve only one or more arbitrators being physically present, together with some party representatives on each side. The wider team and witnesses participate remotely. The LCIA does address this kind of compromise arrangement in Article 19.2 of its new rules, which were introduced in October 2020 (see our article: Evolution not revolution: LCIA launches new rules adapted to the COVID era).
All the changes dealing with the pandemic arguably increase the efficiency of an arbitration, so there are no plans to remove them when the pandemic is over. On the contrary, the general expectation is that working practices will have changed forever, partly because the changes are seen as inevitable anyway, and all the health crisis has done is to speed up trends that had begun already.
However, in addition to COVID-related measures, the new ICC rules promote efficiency in one specific way - by expanding the scope of the Expedited Procedure that was introduced in 2017. This is set out in Appendix VI to the rules, which essentially dispenses with the Terms of Reference and requires the tribunal to hold a Case Management Conference within 15 days of receiving the file, and to deliver a final award no more than six months after that. The arbitrator may also limit submissions and documentary and witness evidence, and even decide a case on the documents alone. Crucially, only one arbitrator is appointed, even if the arbitration agreement says otherwise. This procedure has not changed, but what it will be applied now in a broader range of circumstances. Initially it was imposed on the parties whenever a dispute was worth USD 2 million or less, unless the parties had opted out or the ICC court thought it inappropriate. Now the financial limit has been raised to USD 3 million.
The ICC says this is because the Expedited Procedure has been a "great success", pointing to the fact that it is being (or has been) used in 150 arbitrations so far. Moreover, in the 50 arbitrations which have concluded, the award has been delivered on time or less than a month late in 40 cases. This is impressive as far as it goes, but given that the ICC administers more than 800 arbitrations each year, these numbers are not huge. In any case, they do not indicate that the parties were happy with the procedure, or with the result in each case. Often parties fail to opt out of the procedure simply because they or their lawyers are unaware of its implications. That said, it is clearly sensible to make arrangements of some sort for an abbreviated procedure in appropriate cases, since arbitration is no quick or cheaper than litigation now, and ICC arbitration (it has to be said) is longer and more expensive than most other kinds. The question that remains is how procedures can be consistently streamlined in higher value cases where the Expedited Procedure is inappropriate but a full ICC arbitration is unnecessary too.
Increased flexibility was the second goal identified by the ICC Court President. This is achieved in three ways. First, it will be possible to join new parties to the arbitration while it is ongoing - that is, after the confirmation or appointment of the tribunal. Before this was permitted only if everyone agreed, including all the new and existing parties (Art 7). The rules have also been clarified slightly where consolidating arbitrations is concerned. Arguably the ICC should have gone further and followed the more liberal approach of the LCIA in this area (see their new Art 22A).
A further way in which ICC procedure has become more flexible relates to the end of proceedings rather than the beginning. A new provision allows the tribunal to issue an additional award to tie up loose ends, so to speak, i.e. where it tribunal has omitted to decide a claim. Naturally, such an award must be applied for promptly, within 30 days of receipt of the main reward (revised Art 36(3)).
The final goal identified by the ICC Court President was increased transparency. This is about one issue in particular: the need to avoid conflicts of interests where tribunal members (or potential members) are concerned. It is sometimes the case that an arbitrator is linked in some ways to third party funders, and this is a growing problem given that funding is now more widely available than before. Indeed, when the full economic effects of the pandemic are felt, the funding market is likely to expand even more.
The ICC has decided that funding arrangements should be disclosed by a party where the funder "has an economic interest in the outcome of the arbitration" (new Art 11(7)). This has been criticised as too narrow, since it may exclude some insurance arrangements. However, it echoes wording in the ICC's Note to Parties and Arbitrators (para 28), so does not come as a complete surprise. Some arbitral rules include broader wording, but others do not refer to the issue at all, so arguably the ICC is just treading a middle course.
Although the ICC says that efficiency, flexibility and transparency are the goals behind its current reform, a number of changes have been made that relate to none of these, but are also not a reaction to the pandemic. Some of these further changes are quite significant, including two that limit party autonomy in small but important ways.
The ICC Court is now free to disregard entirely the chosen appointment mechanism where this is necessary "to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award" (new Art 12(9)). The rule itself says that this will happen only in "exceptional circumstances", but many will be disturbed that the ICC Court will be free to veto agreed procedures entirely at its discretion.
Less controversial, perhaps, is the power given to the tribunal now to "take any measure necessary to avoid a conflict of interest of an arbitrator arising from a change in party representation" (new Art 17(2)). This aims to pre-empt the well-known tactic of changing counsel mid-way through an arbitration, specifically so as to create a conflict of interest for one of the tribunal members and thereby derail the arbitration. The new rule says, in terms, that the tribunal's measures may involve excluding the new representative from participating in part or all of the proceedings.
The remaining changes to the rules are all relatively innocuous, including amendments to the ICC Court's statutes and internal rules (Appendices I and II), as well as two tweaks where investor-state disputes are concerned. The first of these is that an arbitrator should not have the same nationality as one of the parties (new Art 13(6)). This ensures the neutrality of the tribunal in disputes involving the public interest. The second explains that the emergency arbitrator procedure is not available in investor-state cases (revised Art 29(6)(c)). This was already the ICC's established practice, but it is good to see it set out in the rules themselves.
No change of direction
In summary, then, there are a few changes of substance to the ICC rules, including one or two that are controversial, but there has been no fundamental change of direction. In fact, most of the language of the rules remains entirely unchanged. This is probably because they have been prepared relatively quickly, unlike the 2020 LCIA rules that was due anyway and postponed rather than hastened by the pandemic. That is why the LCIA rules has been given a general spring clean, whereas the ICC has swept only the larger cobwebs away. It remains to be seen whether Claudia T Salomon will want to do something more radical when she succeeds Mr Mourre as President of the ICC Court in July next year.