Key Changes in the 2021 ICC Arbitration Rules

The International Chamber of Commerce (the “ICC”) Arbitration Rules are used internationally to resolve contractual disputes. On January 1, 2021, the new ICC Arbitration Rules came into force (the “2021 Rules”). The 2021 Rules apply to arbitrations registered with the ICC from January 1, 2021 onwards, unless the parties agree to submit to an earlier version of the Rules as in force on the date of their arbitration agreement. The ICC has also updated its “Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration Under the ICC Rules of Arbitration” (the “2021 Note”) to assist parties and arbitral tribunals with the application of the Rules.

The revisions to the 2017 edition of the Rules are intended to “mark a further step towards greater efficiency, flexibility and transparency.”^[1] They provide useful guidance and enhanced clarity for both parties and arbitral tribunals. The 2021 Rules were published on December 1, 2020, after the COVID-19 pandemic had begun, and they take into account the changing needs of arbitration users as a result of the pandemic and in general.

Conflicts of Interest

The avoidance of conflicts of interest is a paramount concern for arbitrators, and it is relevant to construction arbitrators, given the likelihood of repeat appointments. As such, the 2021 Rules carry forward certain items from the 2017 edition of the Rules (the “2017 Rules”). One such item is Article 11(1), which requires arbitrators to be and remain impartial and independent of the parties involved in the arbitration. The disclosure requirements under Articles 11(2) and 11(3) of the 2017 Rules have also carried forward. Article 11(2) requires that, prior to an appointment or confirmation, an arbitrator shall sign a statement of acceptance, availability, impartiality and independence and shall disclose in writing to the Secretariat any facts or circumstances which might be of such a nature as to call into question the arbitrator’s independence in the eyes of the parties, as well as any circumstances that could give rise to reasonable doubts as to the arbitrator’s impartiality. Article 11(3) requires an arbitrator to immediately disclose in writing to the Secretariat and to the parties any facts or circumstances of a similar nature to those referred to in Article 11(2) concerning the arbitrator’s impartiality or independence which may arise during the arbitration.

One significant addition in the 2021 Rules is Article 11(7), which helps to ensure that arbitrators are able to maintain their impartiality and independence under Articles 11(1) to 11(3). The new Article 11(7) requires any party entering into an arrangement for the funding of claims or defences with a non-party economically interested in the outcome of the arbitration to disclose the existence and identity of that non-party to the Secretariat, the tribunal and other relevant parties.

Article 17 was titled “Proof” in the 2017 Rules. The 2021 Rules have changed the title of this section to “Party Representation” and added Articles 17(1) and 17(2). Article 17(1) requires parties to an arbitration to promptly inform the Secretariat, the arbitral tribunal and the other parties of any changes in its representation and Article 17(2) gives the tribunal the authority to take any measure necessary to avoid a conflict of interest arising from a change in party representation, including the exclusion of new party representatives from participating in whole or in part in the arbitral proceedings. It also imposes a new duty on the parties to keep the tribunal and the other party informed of any changes in their legal representation, which will assist the tribunal to avoid conflicts of interest. The 2021 Note stipulates that parties should refrain from introducing counsel “if a relationship exists between that representative and one or more of the arbitrators that affects the arbitrator’s independence and impartiality”.^[2] This raises a question of whether this note of guidance extends to experts, who may have appeared before tribunal members in other, unrelated proceedings, and who are introduced later on in the proceedings. In any event, the guidance pertaining to counsel may help to avoid the strategic maneuvering, procedural disruption and delay that sometimes occurs when counsel is introduced late in arbitral proceedings.

Joinder

The previous ICC Rules did not allow joinder of additional parties after the confirmation and appointment of an arbitrator, unless all existing parties to the proceedings and the additional party to be joined consented.^[3] That baseline remains, but Article 7(5) of the 2021 Rules introduces a carve-out to the general rule by introducing the possibility of a third party being joined to an arbitration after the appointment of an arbitrator, provided the additional party accepts the constitution of the tribunal and agrees to the Terms of Reference (where applicable).

A party wishing to join an additional party to the arbitration must submit a request for arbitration against the additional party (the “Request for Joinder”) to the Secretariat. The date on which the Request for Joinder is received by the Secretariat is deemed to be the commencement of the arbitration against the additional party. In deciding whether to join a party, the tribunal is required to take into account all relevant circumstances, which may include:^[4]

• whether the arbitral tribunal has prima facie jurisdiction over the additional party
• the timing of the Request for Joinder
• possible conflicts of interest
• the impact of the joinder on the arbitral procedure

Any decision to join an additional party is without prejudice to the arbitral tribunal’s decision as to its jurisdiction with respect to that party. So long as all parties, including the additional party to be joined, consent, joinder shall be allowed. If other existing parties do not consent to the joinder, the tribunal may still determine that the additional party should be joined. Previously, the consent of all parties was required. Now, greater reliance is placed on the tribunal’s application of the guidance set out in Article 7(5).

Consolidation

One of the most significant changes in the 2021 Rules are the changes to the consolidation provisions (Article 10). Pursuant to the 2017 Rules, the consolidation of arbitrations was possible in three situations:

1. where all parties agreed to the consolidation;
2. where all claims in the arbitrations were made under a single arbitration agreement (even if there was no party common to the different sets of proceedings); or
3. where claims were made across different, but compatible arbitration agreements and by the same parties in respect of the same legal relationship.

Absent the agreement of all parties, these provisions excluded the possibility of the consolidation of two sets of proceedings if one party was not common to both sets of proceedings or where the two agreements involved two different legal relationships between the same parties.

Article 10 was revised to address this gap. Subject to the provisions of Articles 6(3) to 6(7) and 23(4), the Court may, at the request of a party, consolidate two or more arbitrations pending under the Rules into a single arbitration on agreement, where:

1. the parties have agreed to consolidation; or
2. all of the claims in the arbitrations are made under the same arbitration agreement or agreements; or
3. the claims in the arbitrations are not made under the same arbitration agreement or agreements, but the arbitrations are between the same parties, the disputes in the arbitrations arise in connection with the same legal relationship, and the Court finds the arbitration agreements to be compatible.

Consolidation may now be employed in a far larger set of circumstances, thus allowing for greater efficiency and improved cost effectiveness. The broader reach of consolidation under the 2021 Rules makes it more important for parties to ensure that the relevant arbitration agreements are compatible.

Transparency

It is not uncommon for parties, particularly when unsuccessful in their procedural motions, to point to the lack of transparency surrounding unreasoned decisions made by the ICC Court. The 2021 Rules now give parties the possibility of getting access to the reasoning of the ICC Court in respect of decisions relating to the prima facie existence of arbitration agreement, consolidation of arbitrations, appointment of arbitrators, challenges to arbitrators and replacement of arbitrators. This is not a right and the ICC Court may decline to provide reasons in “exceptional circumstances”.^[5] It is important to note that any request for reasoning must be made prior to the decisions whose reasoning is sought is rendered.^[6]

Fairness in constituting tribunals

Along with increased transparency, the 2021 Rules bring with them an increased emphasis on due process principles. Article 12(8) carries forward from the 2017 Rules to the 2021 Rules and stipulates that, absent any joint nomination or agreement between the parties regarding the constitution of a three-member tribunal, the Court may appoint each arbitrator and designate the president.^[7] This provision applies only where the dispute involves multiple claimants or respondents or where an additional party has been joined.^[8] The 2021 Rules build on Article 12(8) by allowing the Court to disregard “unconscionable arbitration agreements” and appoint the arbitral tribunal in any arbitration.^[9]

Under the new Article 12(9), in exceptional circumstances and notwithstanding any agreement by the parties on the method of constitution of the arbitral tribunal, the ICC may appoint each member of the arbitral tribunal to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award. The ICC may exercise this discretion if, for example, one party has contractual authority under the arbitration agreement to unilaterally appoint all members of the tribunal. This change is in line with public policy considerations regarding unequal bargaining power between parties and may help to preserve the enforceability of awards.

That being said, one of the well-recognized benefits of arbitration is that parties can select their own arbitrator(s). It remains to be seen how this limitation on the right of the parties to select their own arbitrator(s) will be received.

Cost-effective resolution of claims and expedited procedures

One significant change to the provisions of Article 22(2) is that the word “may” has been changed to “shall”, meaning the tribunal now has a positive duty to use case management techniques to move the arbitration forwards:

(2) In order to ensure effective case management, after consulting the parties, the arbitral tribunal shall adopt such procedural measures as it considers appropriate, provided that they are not contrary to any agreement of the parties. Such measures may include one or more of the case management techniques described in Appendix IV.

In addition, case management technique (h) now requires arbitrators to encourage settlement, rather than simply informing parties of the option to settle. This is reflective of an increasing emphasis in the justice sector at large on improving cost-effectiveness and the speed at which claims are resolved.

Another way in which these objectives are met is through the Expedited Procedure provisions (Article 30 and Appendix IX), which were introduced in the 2017 version of the Rules. The 2021 Rules expand the scope of the application of the Expedited Procedure provisions by raising the opt-out threshold from $2 million (USD) to $3 million (USD). By the end of 2019, 146 cases were filed under the Expedited Procedure.^[10]

Electronic submissions and virtual hearings

The COVID-19 pandemic has necessitated the swift adoption of virtual hearings across the justice sector. Arbitration is more flexible than litigation by design and has generally adapted well to the recent changes. In April 2020, the ICC issued a Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic (the “Guidance Note”).^[11] The Guidance Note contains a checklist for a Protocol on virtual hearings (Annex I), as well as Suggested Clauses for Cyber-Protocols and Procedural Orders Dealing with the Organization of Virtual Hearings (Annex II), which parties and arbitrators may wish to consult. The 2021 Rules were then published in December 2020, just over a year after the pandemic began and they contain a number of changes which formalize and enhance the tribunal’s power to hold hearings remotely.

In line with these changes, Article 25(2) no longer mandates that the tribunal shall hear the parties together in person if any of them so requests. It now states that the arbitral tribunal may decide to hear witnesses and experts in person. Although parties can no longer insist on an in-person hearing, in deciding whether to hold a hearing in person or virtually, the tribunal will confer with the parties and make a determination on the basis of the relevant facts and circumstances of the case. In the Guidance Note, the ICC confirmed that the paramount purpose of article 25(2) was to ensure “live adversarial exchange”, which was considered satisfied if the hearings were to be held “by virtual means”.^[12]

Further, Article 26 has been bolstered to expressly allow for remote hearings and the presumption of the requirement for hard-copy filings has been removed. Parties are now only entitled to a hard copy if requested.^[13]

Given that construction arbitrations often take place once a project is complete, one or more parties are no longer on the project and/or witnesses have moved on to other projects in places other than where the arbitration is being conducted, remote hearings are likely to be embraced moving forwards. In the right circumstances, they can be used to significantly reduce travel time and costs and allow for more flexibility in the planning of hearings, as parties can simply “video in and out” as required, without having to attend a central location.

Conclusion

The changes in the 2021 Rules are not as groundbreaking as those in the 2011 and 2017 Rules, such as the emergency arbitrator provisions and the expediated arbitration provisions, respectively. Certain changes are simply codifications of recent arbitral practices. However, the 2021 Rules provide welcome guidance and improvements in terms of efficiency, effectiveness, transparency, and modernization of the ICC arbitral process.