ICC releases its revised 2021 Arbitration Rules: top 5 things you need to know

The International Court of Arbitration of the International Chamber of Commerce (ICC) has released the text for its revised 2021 ICC Arbitration Rules ahead of their formal launch in December. The new rules will enter into force on 1 January 2021.¹  

In this article we summarise the top five changes introduced:

1. Expansion of the tribunal's powers to order joinder and consolidation in recognition of the complex disputes submitted to the ICC by its main users.
2. New mechanisms introduced and existing mechanisms bolstered to address due process concerns and increase the chances of enforceable ICC awards.
3. Amendments made to promote the efficiency and flexibility of arbitration proceedings.
4. Tweaks to cater for investor state disputes.
5. Key updates that recognise the "new normal"' for arbitration hearings in a post-COVID world.

Joinder and consolidation

The cases administered by the ICC regularly involve highly complex disputes between multiple parties, and arising under multiple contracts and arbitration agreements. This is particularly prevalent in disputes arising out of the construction and energy sectors, which are the main users of ICC arbitration – accounting for approximately 40% of its caseload.²  These disputes typically involve a number of international players and many layered contractual structures. The new rules expand the current joinder and consolidation provisions, making it easier to join third parties in the course of the arbitration and to consolidate multiple arbitrations.

Currently, a party wishing to join a third party to the arbitration after the tribunal has been appointed needs the consent of all parties, including the additional party. The new Article 7(5) gives the tribunal the ability to allow joinder of a third party where that additional party consents and agrees to the Terms of Reference. In deciding whether joinder is appropriate, the tribunal will consider "all relevant circumstances", including whether the tribunal has prima facie jurisdiction over the additional party, the timing of the request, possible conflicts of interest and the impact on the arbitration procedure. 

As regards consolidation, Article 10(b) has been amended to allow consolidation of arbitrations involving different parties where the arbitration agreements are the "same". This is broader than the current rules which only permit consolidation of arbitrations under more than one arbitration agreement where the arbitrations involve the same parties. The ability to consolidate claims commenced by different parties under different contracts will be useful where, for example, disputes arise under a series of back-to-back contracts. However, it will be important to ensure that all relevant contracts contain ICC arbitration agreements that are the same in all material respects, including with respect to the choice of seat and the number of arbitrators.

These amendments are consistent with the changes made by the LCIA in its October 2020 revised rules, which provided greater flexibility for the consolidation of arbitrations brought under compatible arbitration agreements arising from the same transaction or a series of related transactions (LCIA Rules, Article 22.7). 

Due process concerns

A number of amendments demonstrate an increased focus on ensuring that the parties are accorded due process in order to promote the enforceability of awards (under Article V(I) of the New York Convention, a court can refuse enforcement for a number of reasons including due process concerns). Many of these amendments relate to matters that could be addressed using Article 42, which allows the ICC Court and the tribunal to make "every effort" to ensure the enforceability of the award, but their express inclusion in the new rules is helpful. 

A new Article 12(9) expressly allows the ICC Court, in "exceptional circumstances", to disregard an arbitration agreement and appoint each member of the arbitral tribunal itself, in order to "avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award." This might be a concern where, for example, an arbitration agreement gives one party the power to appoint a sole arbitrator or the presiding arbitrator without recourse to the other party, and in violation of the law of the seat.

Two amendments are intended to help arbitrators comply with their ongoing duties of impartiality and independence:

• Article 11(7) introduces a new requirement for parties to disclose the existence and identity of any third-party funder.
• The tribunal can take "any measure necessary" to avoid a conflict of interest of an arbitrator arising from a change in party representation in the course of the arbitration – this extends to excluding that new representative from participating entirely (Article 17(2)).

Increased efficiency of arbitration proceedings

A number of amendments promote greater efficiency of arbitration proceedings.

Expedited procedure

The expedited arbitration procedure was introduced in the 2017 revision of the ICC Rules, and provides for the disposal of awards within six months from the date of the case management conference. The procedure has proven popular – the ICC's 2019 Dispute Resolution Statistics noted that there were 146 cases being conducted under expedited procedure provisions as at the end of 2019 and that at that time, 37 of the 50 awards that had been rendered had been finalised within the six month time limit. 

The current rules provide that the procedure applies automatically to disputes with a value of under USD $2 million, unless the parties opt-out (the parties may also opt-in to the process). The new rules have raised that threshold to USD $3 million for arbitration agreements concluded on or after 1 January 2021 (Appendix VI, Article 1(2)). This will increase the number of cases submitted to expedited arbitration on a default basis.

Emergency relief

The rules remove a provision in the current rules providing for waiver of agreement to emergency arbitration where the parties have agreed another pre-arbitral procedure (2017 Rules, Article 29(6(c))).

Additional awards

The tribunal now has the express power to make additional awards where certain issues were omitted from a first award (Article 36(3)-(4)). This is efficient because under the current rules, where the law of the seat does not allow for additional awards, parties would need to commence a new arbitration in respect of issues that were not covered. 

Alternative dispute resolution

A tweak to Appendix 4 recommends that arbitrators actively encourage parties to consider alternative dispute resolution and settlement of all or part of their case. Previously the rules provided only for a tribunal to inform the parties of the availability of alternative dispute resolution.

Investment treaty arbitration

Disputes arising from bilateral investment treaties make up only a small proportion of the ICC's case load – having administered only 42 such cases since 1996³ - but two amendments are focused on these disputes:

• New Article 13(6)(c) provides that no arbitrator in a claim made under an arbitration agreement contained in a treaty should have the same nationality as any party to the arbitration. This is in recognition of the importance of public interest in investor-state arbitration and the need for the tribunal both to be and to appear to be impartial.
• Article 29(6)(c) codifies the ICC Court's policy that emergency arbitration is not available in arbitrations arising from a treaty. That is because state or state-owned entities are often unable to comply with the very short time limits involved in the procedure.

Arbitrating in a post-COVID-19 world

Since the 2017 ICC Rules were released, the way that international arbitration is conducted has changed as the international arbitration community has responded to the impact of the coronavirus pandemic and associated lockdowns.

The 2021 rules acknowledge these changes to international practice. Current Article 25(2), which states that a tribunal "shall hear the parties together in person if any of them so requests" has been deleted, and new Article 26(1) introduced that allows the tribunal to hold hearings remotely after full consideration of the facts and proper consultation with the parties. This is a welcome revision. The language in Article 25(2) of the English language version of the ICC Rules has caused problems in a number of cases since the beginning of the year, as parties have sought to delay proceedings by insisting that the reference to hearings being conducted "in person" requires a physical hearing. Making it clear that the tribunal has a discretion to conduct hearings by physical attendance or remotely should put an end to that debate.

The revisions also provide for the Request for Arbitration and Response to be served electronically, and removes the requirement for paper copies to be served as a default (Articles 3(1), 4(4)(b) and 5(3)).

Comment

The ICC is considered by many to be the leading international arbitration institution and a pioneer for international arbitration reform. The changes introduced in the 2021 ICC Rules focus on increasing the efficiency and flexibility of arbitrations administered by the ICC, consistent with recent revisions introduced by other institutions, including the London Court of Arbitration (LCIA), whose updated rules came into effect on 1 October 2020 (see our summary here). 

The 2021 ICC Rules should generally be welcomed by all ICC users. The changes are limited in scope, but they reflect the desire of the ICC – like other arbitration institutions – to make adjustments to ensure that their rules remain at the forefront of dispute resolution practice in an ever-changing commercial environment.

The ICC also intends to release an updated version of its Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration before these new rules come into effect in the new year.

Authors: Tom Cummins, Partner; Lucy McKenzie, Associate

1. The 2021 Rules will apply to cases submitted to the ICC from 1 January 2021. The 2017 version of the rules will continue to apply to cases registered before that date.
2. ICC, "2019 ICC Dispute Resolution Statistics", ICC Dispute Resolution Bulletin 2020 Issue 2.
3. Ibid.