The Revised New 2021 ICC Arbitration Rules

With 851 new cases in 2019, the International Chamber of Commerce (ICC) maintained its position as a leading international arbitration institution. The ICC arbitration rules thus represent the “gold standard” of the international arbitration practice. In explaining the practical implications of the revised 2021 ICC Arbitration Rules (2021 ICC Rules), ICC Court President Alexis Mourre points out that “[t]he amendments to the [new] Rules […] mark a further step towards greater efficiency, flexibility and transparency of the Rules, making ICC Arbitration even more attractive, both for large, complex arbitrations and for smaller cases.” For all cases registered with the ICC Court before 1 January 2021, the 2017 ICC Arbitration Rules (2017 ICC Rules) will continue to apply.

This article briefly highlights the most significant changes and innovations of the 2021 ICC Rules.

Joinder and Consolidation

The ICC is globally known for its experience in handling complex, high-value, multi-party and multi-contract arbitrations. Against this backdrop, the new “joinder provision” Article 7 (5) 2021 ICC Rules allows the arbitral tribunal, upon request of any party, to admit additional parties to the arbitration proceeding even without the consent of all parties, if the additional party accepts the constitution of the arbitral tribunal and agrees to the terms of reference. This amendment increases the chances of a successful joinder in an ongoing arbitration. The arbitral tribunal shall render the joinder decision based on its assessment of all relevant circumstances, which may include whether (i) the arbitral tribunal has prima facie jurisdiction over the additional party, (ii) the timing of the request for joinder, (iii) possible conflicts of interests, and (iv) the impact of the joinder on the arbitral procedure. However, according to the new Article 7 (5) 2021 ICC Rules, the decision to join an additional party is without prejudice to the arbitral tribunal’s decision on its jurisdiction with respect to such an additional party. Under the previously applicable Article 7 2017 ICC Rules a joinder of a third party to the arbitration after the confirmation or appointment of any arbitrator required the consent of all parties, including the third party. While the new Article 7 (5) 2021 ICC Rules could potentially be regarded as violating the principle of party autonomy insofar as it substitutes the consent of the parties with a decision of the arbitral tribunal, the factors to be considered by an arbitral tribunal in deciding a request for joinder under Article 7 (5) 2021 ICC Rules, however, appear sufficient to ensure procedural fairness. The broader and more flexible approach of this new ICC joinder provision is particularly beneficial for complex arbitration disputes involving multiple parties and/or contracts.

In addition, the expanded scope of Article 10 (b) 2021 ICC Rules allows the ICC Court to consolidate two or more pending arbitrations into a single arbitration, even if the arbitrations are between different parties and based on separate contracts, as long as the “arbitration agreements [plural]” are the “same.” In contrast, the previous Article 10 2017 ICC Rules – absent an agreement by the parties – only permitted the consolidation of arbitrations between different parties under the same “arbitration agreement [singular].” This newly introduced option to consolidate claims submitted by different parties under different arbitration agreements will especially be useful, when disputes arise under interrelated contracts (e.g., owner, main contractor and subcontractor) or under a series of back-to-back contracts. A consolidation pursuant to the 2021 ICC Rules, of course, requires that the parties’ contracts contain ICC arbitration agreements that are the “same” in all material respects; this applies in particular to the choice of the seat and the number of arbitrators. So the new Article 10 (b) 2021 ICC Rules demonstrates the ICC’s commitment to meet the needs and expectations of parties in complex disputes, which commonly involve multiple parties and multiple contracts.

The liberal approach of these new features will make the 2021 ICC Rules even more suitable for complex multi-party arbitrations and align the 2021 ICC Rules with the international standard (see, e.g., LCIA Rules 2020). Moreover, the new 2021 ICC Rules are expected to further reduce the cost of resolving multi-party disputes through “single-tier” ICC arbitrations and make arbitration more attractive – even in cost-sensitive cases.

Transparency, Integrity and Equal Treatment of the Parties

The 2021 ICC Rules introduce new provisions aimed at enhancing transparency, protecting the integrity of the arbitral proceedings and safeguarding equal treatment of the parties.

Transparency is increased by the new Article 11 (7) 2021 ICC Rules, which introduces the obligation for parties to disclose to the Secretariat of the Court (ICC Secretariat), the arbitral tribunal and the other parties the existence and identity of any third-party funder. Pursuant to this article, economic interests of third parties in the outcome of the arbitration must be promptly disclosed in order to assist prospective arbitrators and arbitrators to comply with their disclosure obligations regarding their independence and impartiality. It remains to be seen whether the narrow wording of Article 11 (7) 2021 ICC Rules also covers other funding arrangements, such as legal expenses insurance. However, Article 11 (7) 2021 ICC Rules recognizes the increasing involvement of third-party funders in international arbitration and requires disclosure of third-party funding arrangements to safeguard the integrity of ICC arbitrations by ensuring an impartial and independent tribunal.

Additionally, the Internal Rules of the ICC Court now codify in Article 5 (1) of Appendix II 2021 ICC Rules that the ICC Court shall, upon prior request of any party, communicate the reasons for its decisions on whether prima facie an ICC arbitration agreement exists (Article 6 [4] 2021 ICC Rules), the consolidation of arbitrations (Article 10 2021 ICC Rules), the appointment of the arbitral tribunal (Article 12 [8] and [9] 2021 ICC Rules) and on challenges (Article 14 2021 ICC Rules) and replacement (Article 15 [2] 2021 ICC Rules) of arbitrators. In exceptional cases, however, the ICC Court may decide not to communicate the reasons for any of these decisions (Article 5 [3] of Appendix II 2021 ICC Rules). This provision should promote the transparency and acceptance of ICC Court decisions and also help counsel to draft tailored submissions in the future.

The newly added Article 17 (1) 2021 ICC Rules obliges each party to promptly inform the ICC Secretariat, the arbitral tribunal and the other parties of any changes in its representation. The new Article 17 (2) 2021 ICC Rules then empowers the arbitral tribunal, after giving the parties an opportunity to submit written comments, to take any measure necessary to avoid a conflict of interest of an arbitrator arising from a change in party representation, including the full or partial exclusion of new party representatives in the arbitral proceedings. Article 17 (2) 2021 ICC Rules strikes a balance between the necessary integrity of arbitral proceedings and the right of the parties to be represented by counsel of their choice. In the context of this tension, there is, on the one hand, a legitimate interest of the opposite party and the arbitral tribunal to avoid independence and impartiality conflicts of the arbitrators, which may lead to the replacement of arbitrators and the related procedural delays. On the other hand, this article might be considered an infringement of party autonomy and of the party’s right to appoint their counsel of choice. The newly implemented provisions in Article 17 2021 ICC Rules, however, are based on the ICC’s experience with tactical appointments of counsel to delay proceedings and are intended to further protect the integrity of ICC arbitrations and to avoid challenges. In arbitration practice, the newly revised Article 17 2021 ICC Rules may encourage parties to conduct thorough conflict checks before retaining new counsel and may urge parties to seek the tribunal’s approval before any formal counsel engagement.

Furthermore, the ICC Court may – in exceptional circumstances – disregard “unconscionable” arbitration agreements under the new Article 12 (9) 2021 ICC Rules and appoint all members of the arbitral tribunal to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award. This is a new exception to the general rule that the ICC Court intervenes only when parties are unable to appoint the arbitral tribunal. Nevertheless, it is expected that the ICC Court will use this power only in exceptional cases and that an arm’s length agreement of the parties on the constitution mechanism of the arbitral tribunal will not be disregarded. In light of the well-known Siemens v Dutco decision of the French Cour de Cassation, unequal treatment and unfairness under an arbitration agreement might be a concern if an arbitration agreement either grants one party the right to nominate the sole arbitrator or the presiding arbitrator or requires multiple claimants or respondents with conflicting interests to jointly nominate an arbitrator, as such an asymmetrical nomination mechanism may violate the law of the seat. Article 12 (9) 2021 ICC Rules demonstrates the ICC’s commitment to ensure integrity, fairness and efficiency of ICC arbitration as well as the enforceability of awards. However, since Article 12 (9) 2021 ICC Rules limits the right of the parties to appoint an arbitrator of their choice, it will certainly be a topic of further discussion.

 

Effective Case Management

The 2021 ICC Rules also contain provisions designed to ensure that ICC arbitrations are conducted efficiently.

Article 22 (2) 2021 ICC Rules provides that the arbitral tribunal, after consulting the parties, “shall” – instead of “may” under the previous 2017 ICC Rules – take such procedural measures as it deems appropriate (see, e.g., case management techniques in Appendix IV) in order to ensure effective case management, provided that they are not inconsistent with an agreement of the parties. This amendment of Article 22 (2) ICC Arbitration Rules (ICC Rules) emphasizes the ICC’s support for proactive case management by arbitral tribunals and strikes a balance between party autonomy and procedural efficiency.

In the same spirit, the new Article 24 (2) 2021 ICC Rules further streamlines ICC arbitrations by requiring the arbitral tribunal to establish during the case management conference “or as soon as possible thereafter” – the previous 2017 ICC Rules referred only to “[d]uring or following such conference” – the procedural timetable it intends to follow for the “efficient” (newly introduced) conduct of the arbitration.

Neutrality in Investment Arbitration

The 2021 ICC Rules also include – for the first time – two new provisions specifically applicable to treaty-based investment arbitrations. Through these amendments, the ICC intends to further attract investment arbitration proceedings.

First, Article 13 (6) 2021 ICC Rules strives to ensure the neutrality of the tribunal in cases involving the public interest of states by providing that no arbitrator shall be a national of any party, unless the parties agree otherwise. The previous 2017 ICC Rule in Article 13 (5) only mandated that the sole arbitrator or the presiding arbitrator shall be of a nationality other than those of the parties. Article 13 (6) 2021 ICC Rules acknowledges the specific nature of treaty-based arbitration: In investment arbitrations, the arbitral tribunal, while applying international law, may have to assess the legitimacy of governmental measures, regulations and laws of states adopted in the public interest.

Second, the ICC recognizes that not all cases are suitable for emergency arbitration. Article 29 (6) (c) 2021 ICC Rules now codifies the established practice of the ICC Court not to allow emergency arbitration in treaty-based investor-state disputes. This is because, in investor-state arbitrations, public interests are at stake and states are often unable to comply with the short deadlines of emergency arbitration. However, emergency arbitration is available for contract-based arbitrations involving states.

These new features for treaty-based arbitrations in the 2021 ICC Rules are to be welcomed and will increase the attractiveness of the ICC Rules for investor-state arbitrations in the future, as disputes arising from investment treaties currently account for only a small portion of the ICC’s caseload.

Increased Threshold for Expedited Arbitration

The expedited arbitration procedure was one of the most significant innovations introduced in the 2017 ICC Rules. The expedited procedure provides for reduced fee rates and delivery of awards within six months from the date of the case management conference by a sole arbitrator. Article 30 and Appendix VI 2021 ICC Rules expand the scope of application of the highly successful expedited arbitration provisions – 146 cases by the end of 2019 – by increasing the monetary threshold for their automatic application from an amount in dispute not exceeding USD2 million to USD3 million for arbitration agreements concluded on or after 1 January 2021. The revised 2021 ICC Rules will therefore, on the one hand, further increase the number of cases subject to expedited arbitration by default. On the other hand, the 2021 ICC Rules warrant party autonomy and grant parties the right to opt in or out of the expedited procedure, although, pursuant to Article 30 (3) (b) 2021 ICC Rules, the parties can only jointly opt-out of the otherwise applicable expedited arbitration procedure. Raising the threshold from USD2 million to USD3 million accordingly balances the right to be heard and procedural efficiency. As a significant proportion of cases registered with the ICC are low-value arbitrations (36 percent of cases registered in 2019 involved an amount in dispute not exceeding USD2 million), raising the threshold will enhance the number of arbitrations filed under the streamlined expedited procedure, thereby promoting the time and cost efficiency of ICC arbitrations. Ultimately, parties should carefully consider, when employing an ICC arbitration clause, whether their potential disputes are appropriate for expedited proceedings and whether an opt-in or opt-out should be declared in their arbitration agreement.

COVID-19: Virtual Hearings and Electronic Submissions

The impact of the COVID-19 pandemic and the associated lockdowns and travel restrictions led to a number of international arbitrations being held virtually.

The 2021 ICC Rules reflect these changes to the practice of international arbitration. Previously, the English wording of Article 25 (2) 2017 ICC Rules required that arbitral tribunal “shall hear the parties together in person if any of them so requests.” The newly introduced Article 26 (1) 2021 ICC Rules now explicitly empowers the tribunal, after consulting the parties, to hold hearings also by means of remote communications (videoconference; telephone; or other appropriate means of communication). This clarification in Article 26 (1) 2021 ICC Rules is – especially during the ongoing COVID-19 pandemic – helpful if the parties are unable to agree on a virtual hearing. This is because the ambiguous language in Article 25 (2) 2017 ICC Rules of the English-language version has caused challenges in a series of cases since the beginning of the COVID-19 pandemic, as parties objecting to virtual hearings have relied on this article to argue the necessity of physical “in person” attendance, in particular when hearings included witness and expert testimony. The clarification in Article 26 (1) 2021 ICC Rules to grant the tribunal discretion whether to conduct hearings by physical attendance or remotely should end this debate. But even after the COVID-19 times, remote hearings offer advantages, including saving costs and travel time. Virtual hearings, on the one hand, are particularly beneficial for small or cost-sensitive cases that may not warrant in-person hearings and for case management conferences. On the other hand, it is important to note that it is difficult to assess the credibility of witnesses/experts or to cross-examine witnesses/experts efficiently remotely. In any case, it is only logical that the arbitral tribunal, when deciding whether to order a virtual hearing, must take into account the time difference between the locations of the participants involved in the proceedings in order to preserve the equal treatment of the parties and the parties’ right to be heard. In the end, time will tell whether and how this provision will affect ICC arbitration practice and the standard of international arbitration in the aftermath of the COVID-19 pandemic.

Article 3 (1) 2021 ICC Rules now specifies that pleadings and other written communications submitted by any party shall be sent electronically to each party, each arbitrator and the ICC Secretariat. According to the revised 2021 ICC Rules, the request for arbitration (Article 4 2021 ICC Rules), the answer and any counterclaims (Article 5 2021 ICC Rules) and any request for joinder (Article 7 2021 ICC Rules) shall, as a default rule, be sent to the ICC Secretariat by email but the claimant/respondent may request transmission of their request/answer in hard copy by delivery against receipt, registered post or courier (Article 3 [1], 4 [4] [b] and 5 [3] 2021 ICC Rules). In all other cases, hard copies should not be sent to the ICC Secretariat, even when the arbitral tribunal has asked to be provided with hard copies. In contrast, under the previously applicable 2017 ICC Rules the request, answer, counterclaims, as well as requests for joinder, had to be sent to the ICC Secretariat both in hard copy and electronically via email. The introduction of electronic service of submissions in the 2021 ICC Rules, as a default rule, is a welcome adjustment to the needs of international arbitration in times of COVID-19 and a step towards an environmentally friendly arbitration practice.

 

Additional Award as Remedy for Omitted Claims

According to Article 36 (3) and (4) 2021 ICC Rules, the arbitral tribunal now has the authority to render additional awards to decide upon claims raised in the course of the arbitral proceedings but left unaddressed in the original award. This “post-award tool” facilitates more efficient arbitration proceedings, as under the former 2017 ICC Rules, in cases where the law of the seat did not provide for additional awards, parties had to initiate a new arbitration with respect to issues not covered by the original award. Article 36 2017 ICC Rules empowered the arbitral tribunal only to correct a clerical, computational or typographical error, or similar errors contained in an award. In light of the ICC’s scrutiny of awards, applications for additional awards are not expected to arise frequently. Nevertheless, the ability to issue an additional award minimizes the risk that an award will be challenged based on a violation of the infra petita principle and, thus, generally strengthens the enforceability of ICC arbitral awards.

Conclusion

Overall, the new 2021 ICC Rules are a welcome revision. While the new 2021 ICC Rules do not break any significant new ground, the update nevertheless aligns the ICC Rules with prevailing arbitration practice and further raises the gold standard of ICC arbitration. With the 2021 ICC Rules, the ICC has strengthened its position as a leading arbitral institution by incorporating and supporting established arbitration practices in its 2021 ICC Rules and adapting to the instantaneous reality triggered by COVID-19 through the increased use of technology. At the same time, the limited number of changes and innovations in the 2021 ICC Rules confirms that the 2017 ICC Rules have proven their effectiveness for international arbitrations. The 2021 amendments to the ICC Rules, however, will ensure ICC arbitrations remain efficient, competitive and cost-effective for users in the years to come. Alexis Mourre’s statement is therefore accurate, as with the 2021 ICC Rules, the ICC successfully updated its rules to meet the needs of modern, state-of-the-art arbitration, leading to yet more efficient, flexible and transparent ICC arbitration proceedings and making ICC arbitration an even more attractive venue for both large complex arbitrations and smaller cases.