The Revised 2021 ICC Arbitration Rules

Even though the ICC Rules remain largely the same, the 2021 revision brings notable amendments:

• a shift towards paperless filings and virtual hearings;
• a more flexible approach to joinder of additional parties and consolidation of proceedings;
• an obligation to disclose third-party funding;
• a possibility of deviating from the arbitration agreement as to the constitution of the arbitral tribunal in case of significant risk of unequal treatment and unfairness;
• new rules regarding the nationality of arbitrators and exclusion of emergency arbitrators in arbitrations based on treaties;
• a possibility of exclusion of new party representatives to prevent conflicts;
• a possibility of additional award in case of omission; and
• an increase of the opt-out threshold for expedited procedures (from USD 2 million to USD 3 million).

Less Paper, More Digital

The COVID-19 pandemic led to a beneficial shift towards less paper-based arbitrations. The revised ICC Rules removed the presumption of physical transfer of documents (e.g. in Arts. 3(1), 4(1) and 5(3)) and the general rule now is that the documents shall be exchanged electronically. This is not only more practical and economical but also more sustainable, as it will help to eliminate the unnecessary printing of tons of documents. With luck, arbitration practitioners will become more environmentally conscious and this green approach will also help avoid massive paper wastage during the hearings.

Joinder of Additional Parties

A significant amendment was made to Art. 7 on joinder that is, when a party to the arbitration requests that an additional party be joined to the arbitration. The ICC Rules are now more flexible in this regard. Prior to the 2021 revision, Art. 7 expressly provided that no additional party might be joined after the confirmation or appointment of any arbitrator, unless all parties, including the additional party, otherwise agreed. The new rules, however, provide for the possibility of joinder after the constitution of the arbitral tribunal even without the consent of all original parties to the arbitration proceedings.

As of 2021, arbitral tribunals will be vested with the power to join additional parties as long as they accept the constitution of the arbitral tribunal and agree to the Terms of Reference. This is provided for in new paragraph 5, which also lists some circumstances to be taken into account by the arbitral tribunal when deciding on requests for joinder, namely whether the arbitral tribunal has prima facie jurisdiction over the additional party, the timing of the request for joinder, possible conflicts of interests and the impact of the joinder on the arbitral procedure.

Online Hearing

The ICC Rules now clearly provide for the possibility of online hearings. According to Art. 26(1), the arbitral tribunal may decide, after consulting the parties, and on the basis of the relevant facts and circumstances of the case, that any hearing will be conducted by physical attendance or remotely by videoconference, telephone or other appropriate means of communications.

The new wording of Art. 26(1) eliminates any uncertainty created by the previous wording Art. 25(2), which provided that the arbitral tribunal should “hear the parties together in person” if any of them so requested or of its own motion.[1]

At the first peak of the COVID-19 pandemic in Europe that forced several hearings to be postponed or to be held online, the ICC issued its Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic of 9 April 2020. Pursuant to Art. 23 of this Note, while Art. 25(2) of the Rules referred to in-person meetings, “this language could be construed as referring to the parties having an opportunity for a live, adversarial exchange and not to preclude a hearing taking place ‘in person’ by virtual means if the circumstances so warrant”.

Anyway, the question is now moot for ICC arbitrations starting as of 2021.

Consolidation of Proceedings

Another important amendment brought by the 2021 ICC Rules concerns the scope of consolidation, i.e., when two or more parallel proceedings are merged into a single arbitration.

The former text of Art. 10(b) allowed the consolidation of arbitration proceedings when all claims were made under the “same arbitration agreement”. This provision has been amended to clarify an open question regarding the consolidation of arbitrations arising from separate arbitration agreements that are identical or that mirror each other. The new wording of Art. 10(b) expressly provides that consolidation is possible when all of the claims in the arbitrations are made under the “same arbitration agreement or agreements”. Accordingly, consolidation is also possible when the arbitration agreements are different but can be considered as part of the same dispute resolution mechanism regardless whether or not the parties to the proceedings are the same.

If the several proceedings are not based on the same arbitration agreement, consolidation is possible only to the extent that the arbitrations are between the same parties, the disputes arise in connection with the same legal relationship and the arbitration agreements are compatible (Art. 10(c)).

Disclosure of Third-Party Funding

The new Art. 11(7) increases transparency in ICC arbitrations by requiring the parties to promptly disclose the existence and identity of any non-party which has entered into an arrangement for the funding of claims or defences and under which it has an economic interest in the outcome of the arbitration.

This provision aims to assist prospective arbitrators in complying with their disclosure duties.

Constitution of the Arbitral Tribunal

In the new Art. 12(9), the ICC Rules provide that the ICC Court may appoint all members of the arbitral tribunal in exceptional circumstances in order to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award.

The possibility of appointing all members of the arbitral tribunal was already envisaged by the ICC Rules in multi-party arbitrations where multiple claimants and/or respondents fail to appoint a joint arbitrator (Art. 12(8)).

The new paragraph goes beyond joint appointments in multi-party arbitration and may also apply, for example, to bilateral arbitrations when pathological arbitration clauses provide for the constitution of the arbitral tribunal in an unfair way. Hence, Art. 12(9) may play an important role in preventing the parties from arguing breach of due process where, in exceptional circumstances, the arbitral tribunal is not strictly constituted pursuant to the parties’ arbitration agreement. Even though it is possible to argue that this new provision might violate the parties’ intention expressed in the arbitration agreement, it is important to consider that the true intention of reasonable parties is to have fair proceedings in the first place. Furthermore, whilst the possibility of nominating the arbitrators is one of the key advantages of arbitration, this does not constitute an absolute right of the parties and finds its limit in the risk of unequal treatment and unfairness. Nevertheless, it is expected that the ICC will make use of Art. 12(9) with utmost caution and only in exceptional circumstances (as envisaged by the provision itself).

Exclusion of New Party Representatives

Prior to the 2021 revision, Art. 17 only provided that the arbitral tribunal or the ICC Secretariat might require proof of the authority of any party representative. It now also requires that each party promptly informs of any changes in its representation and allows the arbitral tribunal to take any measure necessary to avoid a conflict of interest, including the exclusion of new party representatives from participating in in the arbitration.

In this regard, the ICC is following the LCIA, which was the first arbitral institution to expressly vest the arbitral tribunal with powers to withhold approval of any intended change or addition to a party’s legal representatives in order to avoid conflicts of interest (Art. 18.4 of the LCIA Rules 2014) (See also in this regard, Hrvatska Elektroprivreda d.d. v. Republic of Slovenia, ICSID Case No. ARB/05/24, Tribunal’s Ruling regarding the participation of David Mildon QC in further stages of the proceedings of 6 May 2008, paras. 33 and 34).

Investment Treaty-Based Arbitrations

The 2021 ICC Rules introduce two specific provisions for investment treaty arbitrations, which show the ICC’s ambition to attract more investment treaty arbitration proceedings.

Pursuant to Art. 13(6), no arbitrator shall have the same nationality of any party to the arbitration if the arbitration agreement upon which the arbitration is based arises from a treaty. Notably, this rule also applies to co-arbitrators as opposed to ICC commercial arbitrations where the long-established nationality restriction of Art. 13(5) applies only to the sole arbitrator or president of the arbitral tribunal. The parties are, however, free to deviate from both rules if they so wish.

The other novelty for investment treaty arbitration is found in Art. 29(6)(c) and excludes emergency arbitrator provisions from its scope.

According to statistics published by the ICC, since 1996, when the first bilateral investment treaty (BIT) case was registered, the ICC has administered 42 cases filed on the basis of such treaties until the end of 2019. In the last years, there were two BIT-arbitrations in 2019, two BIT-arbitrations in 2018 and four BIT-arbitrations in 2017. Nevertheless, even if these figures can be considered low, the number of ICC arbitrations involving states or state entities has been increasing. In 2019, states or state-controlled entities took part in 20% of the new cases. It is therefore not surprising that the ICC is targeting arbitrations arising from treaties.

Expedited Procedures

The 2021 update broadened the scope of application of the expedited arbitration rules set forth in Art. 30 and Appendix VI as the threshold concerning the amount in dispute was increased from USD 2 million to USD 3 million.

The expedited rules apply if the parties have so agreed or if the arbitration does not exceed the set threshold, provided that the arbitration agreement was entered into after the date on which the expedited procedure provisions came into force (1 March 2017), i.e.:

• USD 2,000,000 if the arbitration agreement was concluded on or after 1 March 2017 and before 1 January 2021; or
• USD 3,000,000 if the arbitration agreement under the Rules was concluded on or after 1 January 2021.

The parties may, however, opt into the expedited procedures when the above-mentioned conditions are not met or opt out if all the parties decide after the disputes has arisen that they do not wish to arbitrate under the expedited rules.

According to the statistics published by the ICC in 2019, there is a high number of opt-in requests which reflect the success of the expedited procedure rules. In fact, an expedited arbitration is quite appealing as the award should be rendered within six months from the date of the case management conference.

From March 2017 until the end of 2019, 146 cases had been or were being conducted under the expedited rules. With the increase of the threshold to USD 3 million, we are likely to see a surge in the number of the ICC expedited arbitrations. This is to be welcomed, especially at a time in which arbitrations are increasingly expensive and time-consuming.

Additional Award

Under the revised Art. 36, the parties may apply for an additional award if the arbitral tribunal fails to decide on a certain claim. Such an application should be made within 30 days from receipt of the award. Before the revision, Art. 36 provided solely for requests for corrections of minor errors, such as clerical, computational or typographical errors, and requests for interpretation.

Further Amendments

• Governing Law and Choice of Forum: The newly introduced Art. 43 of the ICC Rules provides that any claims arising out of or in connection with the administration of the arbitration proceedings shall be governed by French law and exclusively settled by the Paris Judicial Tribunal (Tribunal Judiciaire de Paris) in France.
• Case Management: The amended wording of Art. 22(2) provides that the arbitral tribunal shall (and no longer may) adopt procedural measures to ensure effective case management. The new text further refers to Appendix IV (Case Management Techniques), which has also been slightly amended: the arbitrators are recommended to encourage parties to consider settling the dispute instead of merely informing them that they are free to settle the dispute.
• Communication of Reasons of Decisions: The ICC includes in Art. 5 of Appendix II (Internal Rules of the International Court of Arbitration) the instances in which a party may request the ICC Court to communicate the reasons of its decisions. This provision builds on the ICC Court’s policy to share the reasons of its administrative decisions, which were first introduced in 2015 in the ICC’s Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration. The ICC shall communicate, upon the request of a party, its decisions on:
  • jurisdiction, Art. 6(4);
  • consolidation, Art. 10;
  • appointment of all members of the arbitral tribunal, Art. 12(8) and (9);
  • challenge of arbitrators (Art. 14); and
  • replacement of arbitrators (Art. 15).

It is worth noting that the request for the communication of reasons must be made in advance of the decision. Nevertheless, in exceptional circumstances, the ICC Court may refuse to communicate the reasons.

• The ICC Court: The 2021 revision has also led to amendments to Appendix I (Statutes of the International Court of Arbitration) and Appendix II (Internal Rules of the International Court of Arbitration) which contain rules on the functioning of the ICC Court.

Final Remarks

The revision of the ICC Rules is a welcome development and contributes to make the ICC Rules more attractive both for small and large disputes. The changes introduced by the 2021 revision go beyond the expected shift to more digital arbitration proceedings as a result of the COVID-19 pandemic. Apart from reflecting the new trends towards paperless fillings and online hearings, the revision addresses key points aimed at enhancing efficiency, flexibility and transparency. The amendments, however, are limited in scope and the ICC Rules remain essentially the same. Notably, the revised ICC Rules adopt a more flexible approach to joinder and consolidation, increase the threshold for application of the expedited arbitration provisions, require disclosure of third-party funding and allow arbitrators to exclude new counsel in order to prevent conflicts of interest.

The revised rules further show the ICC’s desire to attract investment treaty arbitrations by including two provisions specifically for this type of dispute, namely, prohibition of arbitrators of the same nationality of the parties, unless otherwise agreed, and exclusion of emergency arbitration provisions.

Not all of the new amendments are complete novelties, either because they reflect current ICC practice or because similar provisions can be found in other sets of institutional rules. The most innovative change is also the most controversial. The ICC now has the possibility to deviate from the parties’ arbitration agreement on the method of constitution of the arbitral tribunal and may appoint all arbitrators to avoid a significant risk of unequal treatment and unfairness. Whilst it is possible to argue that this provision may put the parties’ autonomy at risk, problematic arbitration clauses do exist and Art. 12(9) may play an important role to ensure that substance prevails over form and that arbitration proceedings are conducted fairly, which is the true intention of the parties when entering into an arbitration agreement. It is expected, however, that the ICC will apply this provision with the utmost caution. After all, the dose makes the poison.

[1] The French and German version of the ICC Rules do not contain the expression “in person”.