ICC 2021 Arbitration Rules: clarity at the cost of party autonomy?

The International Chamber of Commerce (ICC) 2021 Arbitration Rules (2021 Rules) amend the 2017 Arbitration Rules (2017 Rules) and will come into force and apply to arbitrations submitted to the ICC’s International Court of Arbitration from 1 January 2021.  

While the revisions to the 2017 Rules are intended to offer clarity and transparency to parties in complex disputes, this comes to some extent at the expense of party autonomy.

The changes are designed to provide “greater efficiency, flexibility and transparency” by amending the procedural framework of ICC arbitrations to better address issues commonly faced in complex and high-value commercial and investor state disputes.

Examples of these complexities include where there are multiple parties, when conflicts of interest arise and when issues of arbitrator fairness and impartiality arise. The amendments seek to reduce the risk of enforcement challenges at the end of the arbitration process.

The most significant amendments, which we cover in more detail below, are:

• powers for the arbitral tribunal to determine post-constitution joinder requests;
  
  
• broadening the ICC Court’s consolidation power;
  
  
• a requirement for the parties to disclose the existence and identity of third party funders;
  
  
• allowing the ICC Court to appoint each member of an arbitral tribunal where it is necessary to avoid the risk of unequal treatment and unfairness;
  
  
• a requirement for parties to inform all other parties of changes in its representation;
  
  
• express powers for the arbitral tribunal to take steps to avoid conflicts of interest which arise from changes in representation; and
  
  
• provision for the rendering of additional awards.

Arbitration users, particularly those currently in the ‘pre-dispute’ phase of a relationship, should consider how the conduct of any future arbitration under the 2021 Rules may differ from one conducted under the existing 2017 Rules.

The full text of the 2021 Rules are available on the ICC’s website here.

Changes to joinder - ignoring party autonomy?

In the 2021 Rules:

• the amended article 7(1) provides that, after an arbitrator has been confirmed or appointed, no party may be joined unless all parties, including the additional party, agree or unless provided for under article 7(5); and
  
  
• the new article 7(5) provides that any joinder request made after an arbitral tribunal has been confirmed or appointed shall be decided by the tribunal. Further that joinder is subject to the additional party accepting the constitution of the tribunal and agreeing to the Terms of Reference, where applicable. The arbitral tribunal is required to take into account considerations such as prima facie jurisdiction, timing, potential conflicts of interest and procedural impact.  

It is significant that article 7(5) of the 2021 Rules empowers the arbitral tribunal to force or reject the joinder of an additional party regardless of the position of all current parties. This seems to be an erosion of party autonomy.  

In either case, such decisions may give rise to enforcement concerns for any subsequent award where an aggrieved party may cite a lack of due process or excess of authority. We can, however, expect arbitrators to exercise their powers under article 7(5) carefully and with careful regard to the rules of natural justice.

Consolidation changes unclear

Article 10 of the 2017 Rules allows for the consolidation of arbitrations where:

• all parties consent (Article 10(a));
  
  
• the arbitrations fall under the same arbitration agreement (Article 10(b)); or
  
  
• where the arbitrations fall under different arbitration agreements, those agreements are compatible, and the disputes involve the same parties and arise in connection with the same legal relationships (Article 10(c)).  

Article 10(b) has now been expanded under the 2021 Rules to allow for the consolidation of disputes where all the claims are made under “the same arbitration agreement or agreements”.

The intended effect of this amendment is to allow for the “consolidation of cases in [the] presence of different parties” to make the ICC Rules more suitable for complex, high-value, multi-party and multi-contract arbitrations. We envisage that this article will impact disputes involving large-scale construction projects with disputes through the contractual chain.

Of note is the fact that consolidation can be applied for by ‘a party’, without any requirement for that party to be subject to all of the relevant arbitrations sought to be consolidated. The ICC Court is also not required to take or hear any submissions from any of the parties in making its decision to consolidate.  

There is some ambiguity around what would be required for multiple arbitration agreements to be considered ‘the same’ – whether they would only need to be substantively similar, for example, by nominating the same governing law, language and seat, or whether more is required.         

Disclosing third party funders

The ICC has amended article 11 to require a party to disclose the existence and identity of any third party with which it has entered into a funding arrangement and which has an economic interest in an arbitration’s outcome, for the purpose of arbitrators’ duty of impartiality and independence.  

The use of third party funders in arbitration has seen a marked increase in recent years, which has given rise to concern among the global arbitration community about how arbitrator conflicts are managed. These concerns centre around the requirements for disclosing the existence and nature of third party funders and how this affects arbitrators’ impartiality and independence. This has, until now, only been addressed superficially by the ICC in its guidance note to parties and tribunals.[1]

The changes to article 11 allay these concerns by requiring funding transparency, and ensure that any arbitrator conflicts are recognised immediately.  

However, the effect of this disclosure is limited because it is unlikely to capture any evolution to funding arrangements or arrangements not falling under the disclosure requirements (such as the purchase of equity in a party).

As a result, parties will have to be more vigilant in vetting potential conflicts with funders prior to entering into funding arrangements in the coming years.

Overruling arbitral appointment mechanisms

Under the new article 12(9) of the 2021 Rules, the ICC Court will be empowered to overrule the parties’ agreed method of constituting the arbitral tribunal and appoint all tribunal members itself where there is a “significant risk of unequal treatment and unfairness” which may affect award validity. This is intended to avoid unconscionability in relation to the tribunal’s constitution.

While this provision represents a potentially significant affront to party autonomy, it is designed to prevent abuses of natural justice which can enliven enforcement challenges on both due process and public policy grounds.

Despite the New York Convention providing explicit protection to parties’ right to determine their own appointment process,[2] this is subject to the international standards of due process and the standards of natural justice imposed by the public policy of the lex arbitri.[3]  

In relation to this latter ground, Australian courts have acknowledged that an “important part of [the court’s supervisory] balance is the protection… of the fundamental norms of fairness and equality embodied in the rules of natural justice”.[4]

It should also be noted that the ability to overrule the parties’ agreement in relation to arbitrator selection is not unprecedented in the ICC Rules, with the Expedited Procedures in Appendix VI already empowering the ICC Court to appoint a single arbitrator “notwithstanding any contrary provision of the arbitration agreement”.[5]  Similar overruling provisions in the context of expedited procedure have generally been found to be enforceable under the SIAC Rules, even where such provisions were incorporated into the rules after formation of the arbitration agreement.[6]

Changes in representation

Pursuant to article 17 of the 2021 Rules, a party will be required to inform the ICC, the arbitral tribunal and all other parties of changes in its representation. Where this change would cause an arbitrator conflict to arise, the arbitral tribunal is empowered to take ‘any measure necessary’, including excluding the new representatives from participating in proceedings.  

This is a significant change as an outright veto power on a party’s legal representatives can, depending on the timing of the change in representation, seriously impede a party’s right to present its case.  

It is also unusual in that it only applies to party representation, which is somewhat logically inconsistent with the third party funder disclosure requirement discussed above. The effect of the two new provisions is that:

• where a party enters into a third party funding arrangement, and that third party causes a conflict with an arbitrator, there is potential for the arbitrator to be removed by the ICC Court; but
  
  
• where a party changes legal representatives during an arbitration, and the new representatives cause a conflict with an arbitrator, the arbitral tribunal may exclude the new representatives.

Allowing an arbitral tribunal to determine whether to veto a party’s representatives based on the tribunal’s own conflicts, in circumstances where an arbitrator can be removed by the ICC Court where a conflict arises due to a third party funder, appears to result in inconsistent conflict procedures.

Allowing for additional awards

Under a new article 36(3), parties will be entitled to apply to the ICC Court, within 30 days of the rendering of an award, for an additional award to deal with matters which were omitted from the original award.  

The arbitral tribunal is required to consider the application and allow other parties to provide comments within a ‘short time limit’, with its decision then to be rendered within 30 days of any responsive comments or within such other period as the ICC Court may decide.

This provision is similar to article 33(3) of the UNCITRAL Model Law, and ensures that an arbitral tribunal’s power to render additional awards after the ‘main’ award exists in future ICC arbitrations.

Next steps

Parties should be aware that the 2021 Rules will apply to all arbitrations commenced with the ICC from 1 January 2021 onwards, subject to an express stipulation in the arbitration agreement for an earlier version of the ICC Rules to apply.  

Parties with arbitration agreements which are part of complex multi-party relationships or who envisage using third party funding in future arbitrations should be aware of the changes the 2021 Rules will bring.  

Parties currently engaged in a ‘pre-dispute’ should consider the potential advantages and disadvantages of initiating an ICC arbitration under the current 2017 Rules or future 2021 Rules, where their circumstances may be affected by any of the points discussed above.  

Other changes under the 2021 Rules

Other changes and additions of note under 2021 Rules include:

• a requirement that, where the ICC Court is to appoint a sole or presiding arbitrator, the appointed arbitrator must be of a different nationality to the parties, except in suitable circumstances [article 13(5)];
  
  
• a blanket ban on arbitrators sharing a nationality with a party in investor-state disputes [article 13(6)];
  
  
• removal of the requirement to have written submissions prior to a hearing [deletion of article 25(2)];
  
  
• expressly allowing hearings to be held remotely by videoconference or telephone [article 26(1)]
  
  
• emergency arbitration is expressly excluded from investor-state disputes [article 29(6)(c)];
  
  
• an exclusive jurisdiction provision for the settlement of claims arising out of the ICC Court’s administration of an arbitration, with disputes to be settled by the Tribunal Judiciare de Paris [article 43];
  
  
• modifications to how the ICC Court’s Committees (the bodies responsible for scrutinising awards and deciding certain matters under the rules) work [see generally Appendices I and II];
  
  
• an obligation on the ICC Court to disclose reasons for certain decisions under the rules at the request of a party [Appendix II, article 5]; and
  
  
• the monetary threshold for opting out of expedited procedure is lifted to USD 3,000,000 for arbitration agreements concluded (not disputes arising) on or after 1 January 2021 [Appendix VI, article 1(ii)].