The International Chamber of Commerce (ICC) International Court of Arbitration, one of the leading international arbitral institutions, has released revised Rules of Arbitration to take effect in January 2021. The 2021 ICC Rules contain some important updates, especially for the construction and energy sector, which constitutes approximately 40% of the ICC’s overall caseload. The 2021 ICC Rules also make adjustments for international arbitration in the era of COVID-19, providing accommodations that could make international arbitration more efficient and economical in the long term.
- Consolidation and Joinder: The 2021 ICC Rules expand the provisions of joinder and consolidation making it easier to join additional parties and consolidate multiple matters. These changes may prove important for construction and energy disputes, which often involve multiple cross border parties and contracts.
- Joinder: Under the 2017 ICC Rules, all parties had to consent to the joining of an additional party after appointment of the tribunal. The 2021 ICC Rules include a new Article 7(5) allowing the tribunal to join third parties if those parties consent and agree to the Terms of Reference. The tribunal will consider “all relevant circumstances” when weighing the joinder of additional parties.
- Consolidation: The 2021 ICC Rules attempt to clarify some previous ambiguity and broaden the rules for consolidation of disputes. Previously, Article 10 stipulated that disputes arising from multiple agreements could only be consolidated if they involved the same parties. The 2021 ICC Rules provide more flexibility and broaden consolidation options. This revision will be helpful in construction and energy sector disputes as it will allow consolidation of claims arising under multiple contracts, such as prime and subcontracts. However, parties should be careful in drafting these agreements to ensure that all contracts contain the same arbitration clauses consenting to ICC arbitration pursuant to the ICC Rules.
- Virtual Hearings and Electronic Filings: The 2021 ICC Rules take into account the drastically different professional landscape brought on by COVID-19. These amendments will not only be useful as parties navigate the impacts of the pandemic, but they open the door to a more efficient and economical arbitral process in the post-COVID-19 world. The most significant change is found in Article 26(1), which now allows for virtual hearings, subject to the tribunal’s decision “after consulting with the parties, and on the basis of relevant facts and circumstances.” The option for virtual hearings, which one can only assume will outlast the virus, may provide a more economical option for parties willing to forgo an in-person hearing. It is also likely to be a more efficient process as scheduling will be made easier without the need to coordinate travel to the hearing locale.
The revised ICC Rules also specifically allow for electronic submission of pleadings and written communications (see Articles 3(1), 4(4)(b), and 5(3)).
- Award Enforcement and Due Process: The ICC has taken the opportunity to set forth several amendments that are aimed at strengthening the enforceability of arbitration awards by warding off due process concerns. While these amendments may increase the enforceability of awards, parties should be aware of some of the increased powers granted to arbitral tribunals.
- Article 11(7) requires all parties to disclose any non-party entities or individuals who are funding a party’s claims or defenses. While this new clause seeks to promote transparency and ward off potential conflicts of interest, it may place new disclosure requirements on parties regarding information they would typically keep confidential.
- Article 12(9) allows the ICC to appoint the entire arbitral tribunal “in exceptional circumstances . . . to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award.” Such exceptional circumstances may be found where the arbitration agreement contains one-sided provisions for party appointment of arbitrators and thus provides another motivation to draft arbitration agreements carefully and thoughtfully.
- Article 17 has been wholly reworked to grant greater authority to the tribunal in dealing with potential conflicts of interest arising from the parties’ representatives. Section 2 allows the tribunal to “take any measure necessary to avoid a conflict of interest” in regards to party representatives, including exclusion of any representative with a conflict of interest from participating in the proceedings. This is a fairly significant change to tribunal authority in an area that was historically left to counsel to disclose and handle accordingly.
- Article 36(3) clarifies that the tribunal may issue “additional awards” for claims it “omitted to decide” in the original award but were presented during the hearing upon request from a party and approval by the Secretariat. This clarification should be welcome as it provides parties a clear process by which to ensure consideration of all claims, even when the tribunal initially declines to address them.
- Fast Track Arbitration: The revised ICC Rules amend Appendix VI, Article 1(2) to increase the amount in controversy for Expedited Procedure (Article 30) from $2 million to $3 million. This change should also be welcome. The fast track arbitration option provides a more efficient and expedient arbitral process for smaller claims, and the amount in controversy should increase to match the reality of the global economy and cross border contracting. Parties can and should expect to see this amount continue to increase with subsequent amendments to the ICC Rules.
The 2021 ICC Rules serve to modernize ICC procedure to meet the practical needs of key industries, ensure arbitral enforceability, and accommodate the significant changes brought on by COVID-19. Parties frequently adopting the ICC Rules, especially those in the construction and energy sector, will be well served to take these changes into account when drafting arbitration agreements in cross-border contracting.