What you need to know about the new ICC arbitration rules 2021
Arbitration is an important alternative method of dispute resolution that attracts an increasing attention from the business community for solving international and domestic business disputes. The ICC is one of the most renowned institutions administering international arbitration proceedings and is therefore often chosen in arbitration agreements. As from 1 January 2021, an updated version of the ICC arbitration rules entered into force (the 2021 Rules). The 2021 Rules apply to cases filed as from 1 January 2021. The former rules continue to apply on cases introduced earlier.
We summarize some of the most important changes.
IMPROVEMENTS FOR MULTI-PARTY ARBITRATION
One of the traditional issues in arbitration is how third parties can be involved in an already pending arbitration. The previous version of the ICC Rules did not allow the intervention of a third party in a pending arbitration once an arbitrator had been appointed or confirmed, unless all parties agreed. Article 7(5) of the 2021 Rules now provides that such request for joinder is possible even at that stage and will be evaluated by the arbitral tribunal. The arbitral tribunal will decide on such request in the light of the relevant circumstances such as its prima facie jurisdiction over the additional party, the timing of the request, the existence of possible conflicts of interests and the impact of the joinder on the arbitration. There is thus an additional flexibility in the 2021 Rules, be it under strict circumstances to avoid abuse of such rules.
The 2021 Rules also contain a modification to article 10(b) regarding the conditions under which different pending arbitrations can be consolidated into one single arbitration. It is now possible that different arbitrations are consolidated when they are based on different arbitration agreements and not just the same arbitration agreement (e.g. when different connected contracts are concluded that contain the same dispute resolution clause).
E-SUBMISSIONS AND VIRTUAL HEARINGS
Arbitral institutions have not waited for the COVID-19 pandemic to invest in digital tools in order to increase the efficiency of arbitration. The COVID-19 pandemic has accelerated the already growing digitalization of international arbitration and the conduct of the proceedings under the 2021 Rules is clearly impacted by an increased role of technology.
Under the 2021 Rules, it is no longer required that the Request for Arbitration and the Answer on the Request are submitted in hard copies to the Secretariat of the ICC, unless the submitting party insists on the distribution of hard copies.
Also communication between parties, the arbitral tribunal and Secretariat is in principle done by e-mail only.
Article 26(1) now expressly allows the arbitral tribunal to organize a virtual hearing, after consultation of the parties, even if one party objects. The ICC had already indicated in its Guidance Note of 9 April 2020 regarding the COVID-19 pandemic that this would be possible, although there were still uncertainties. This has now been resolved in the 2021 Rules. The arbitral tribunal nonetheless still needs to take relevant facts into consideration when making such decision (especially if not all parties agree), such as in particular the risk that the arbitral award could be null and void in the absence of a physical hearing. The virtual hearing can be conducted by videoconference, telephone or any other appropriate means of communication.
MORE TRANSPARENCY REGARDING THIRD-PARTY FUNDING
Over the years, we have seen an increase in specialized funders becoming involved in international arbitration, funding parties that do not want or can fund the proceedings. One of the typical questions there is whether such funded party must disclose the funding or not to the arbitral tribunal and the other party. The 2021 Rules require the parties to communicate to the arbitral tribunal, the other parties and the ICC Secretariat the identity of a non-party which has entered into an arrangement for the funding of claims or defenses and under which it has an economic interest in the outcome of the arbitration (Article 11(7)). This provision should help the arbitrators complying with their duty to disclose the circumstances which might be of such a nature as to call into question the arbitrator’s impartiality or independence.
ICC COURT DISCRETION REGARDING INEQUALITY OF TRIBUNAL APPOINTMENTS
One key advantage of arbitration and a fundamental difference with court proceedings, is the possibility for the parties to choose an arbitrator or arbitrators who are experts in the field of the dispute. Nevertheless, the method of constitution of the arbitral tribunal has frequently led to difficulties, for instance where the dispute involves multiple claimants, respondents or additional parties, therefore ending in slowing down the start of the arbitration proceedings or worse, compromising the validity of the award.
To prevent this, the 2021 Rules give the power to the ICC Court, in exceptional circumstances, to appoint the arbitral tribunal itself to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award (Article 12 (9)).
MAXIMUM AMOUNT FOR APPLICATION OF EXPEDITED RULES INCREASED
While arbitration does typically not suffer from the problem of backlogs that parties can experience in (some) state courts, arbitral institutions always try to speed up the arbitration proceedings, therefore increasing its efficiency, but also decreasing its costs. A key (and successful) measure in this respect was the introduction in the 2017 ICC Rules of the Expedited Procedure (Article 30 and Appendix VI) allowing the parties to request the ICC Court to appoint a sole arbitrator who renders its award in principle within 6 months. The 2021 Rules expands the scope of application of the Expedited Procedure to disputes with a value not exceeding USD 3 million for arbitration agreements concluded on or after 1 January 2021. This means that more disputes will be able to be dealt with in an expedited way, decreasing the overall time needed to come to an arbitral award.
OUR FIRST IMPRESSIONS
It is clear that a strive for more efficiency and flexibility was already perceivable in the 2017 revision, in particular with the introduction of an Expedited Procedure. With its 2021 Rules, the ICC continues pursuing these same goals. It is also seeking for more transparency and accelerates its digitalisation, therefore keeping the rules innovative and responsive to the current COVID-19 pandemic.
For more information on arbitration in general, we refer to our fact sheet arbitration. Do not hesitate to contact any of our experts with questions you may have.