Stewart R Shackleton
Meeting in Shanghai on 8 April 1997, the 173rd ICC International Council approved a series of proposed amendments to the ICC Rules of Arbitration. The new Rules are now set to come into force on 1 January 1998. ICC Rules have long enjoyed international popularity because of their concise and simple statements of universally adaptable procedures. The Rules have been tested in a wide variety of legal systems in jurisdictions around the world. They are of proven workability.
Why the recent changes?
Apart from certain minor adjustments in 1988, the last time the ICC Rules underwent any significant modification was in 1975. Recent reforms are the result of developments since then. There is increased competition. More arbitration centres have been set up. Improved arbitration rules have been developed for the new centres. In addition, ad hoc arbitration has been given renewed popularity following the publication and dissemination by the UN in 1976 of comprehensive procedural rules (UNCITRAL Rules).An increasing number of countries, including most of the important trading nations, have adopted, or are about to adopt, versions of the 1985 UNCITRAL model arbitration law which makes ad hoc arbitral proceedings in some major centres safer and more effective than ever. There are today, arguably fewer benefits and thus less justification for the extra costs of administered arbitration.
Aims of ICC revisions
Some of the ICC revisions are aimed at reducing costs by simplifying administration and improving case management to shorten delays for the appointment of, and transmission of a file to, an arbitral tribunal. New procedures have been added. The Rules have been rearranged to increase coherence of presentation so that the procedures will be more easily understood by users. Certain ambiguities in the Rules and discrepancies between the English and French versions have been eliminated to reduce unpredictability. Allowances have been made for advances in modern communications technology. Other changes reallocate responsibilities within the ICC, confirm present ICC practice or transfer to the Rules themselves certain of the internal rules of the International Court of arbitration.
The changes in the Rules are also a response to perceived shortcomings highlighted by a few widely publicised cases before municipal courts which attracted considerable commentary and suggestions for improvement.
Terms of Reference
One unique feature of ICC arbitration since 1923, the requirement that arbitration proceed on the basis of formal Terms of Reference ('TOR'), was subject to extensive debate. Under the current r 13, the TOR must include inter alia brief statements of each party's respective claims, a definition of the issues to be determined by the arbitrators and particulars of the rules of procedure to be followed.
Because parties sometimes engage in protracted negotiations over the wording of the TOR, the procedure has been criticised as a cause of unnecessary complication leading to more cost and delay. Some view it as a comparative disadvantage since no other institutional rules contain a similar requirement. Common law lawyers often find the TOR to be a restrictive practice which defines issues prematurely and shuts out the possibility that issues may evolve during the course of proceedings.
Advantages of TOR
Supporters of the TOR, on the other hand, see them as the principal advantage and distinguishing feature of ICC arbitration. They consider the TOR to be a valuable procedural tool which saves costs and reduces delays in the long term by focusing attention early in a dispute, thereby reducing the amount of litigation unrelated to the central issues. The TOR facilitate the structuring of an arbitration. They can also serve to cure defective arbitration clauses or settle at the outset questions of place, language and procedure of the arbitration. This can be a positive element for dispute settlement between parties of divergent cultural and legal backgrounds who may approach arbitration with conflicting expectations. The TOR allow parties an opportunity to resolve other important preliminary questions such as the applicable law. The TOR also assist the ICC Court in the scrutiny of awards and help to ensure that a final award will be enforceable by providing a means of ultra petito control.
The working party entrusted with the revision of the ICC Rules was, as part of its mission, instructed to retain the TOR as one of the 'fundamental characteristics of ICC arbitration'. However, an essential part of the TOR is now effectively optional. The new r 18 requires ICC arbitrators to include a list of issues in the TOR unless they consider this to be inappropriate.
TOR and payment of advance on costs
At present, the TOR become 'operative' only with respect to claims for which the advance on costs for the fees and expenses of the arbitrators and administrative costs has been paid. To reduce delays, the new Rules aim completely to disconnect the TOR from payment of the advance on costs. When proceedings are commenced under the new Rules, the ICC Secretary General will be able to request the claimant to pay a 'provisional advance' on costs calculated to cover only the period up to the time at which the TOR are drawn up (r 30. ]).This amount will be credited against the full advance on costs to be fixed by the ICC Court 'as soon as practicable' (r 30.2). In any event, under the new r 18(3), once the TOR 'are approved by the Court the arbitration shall proceed'.
Where an advance on costs has not been paid, the Secretary General will be able to request the tribunal to suspend work (r 30.4). It should be noted, however, that appendix III(I)(3) to the Rules instructs the tribunal to proceed after approval of the TOR, 'in general' and in accordance with r 30.4, only with claims for which payment has been received.
TOR and 'new claims'
Under the current r 16. parties may make new claims or counterclaims during the course of proceedings only if these remain within the limits fixed by the TOR. To allow greater flexibility, a new rule on 'new claims' (r 19) confers discretion on the arbitrators to authorise parties to raise claims which fall outside the TOR. The tribunal must have regard to relevant circumstances including the nature of the new claims or counterclaims and the stage of proceedings.
Multiple parties
An entirely new rule for multiple parties has been introduced as a consequence of the decision by the French Cour de cassation in Siemens AG and BKMI lndustrienlagen GmbH v Dutco Consortium Construction Company Ltd (Cass Ire civ, 7 January 1992, Bull civ 1, no 2; Rev. arb, 1992.470, note Pierre Bellet). The ICCs practice had been to require multiple respondents to agree jointly on a party-appointed arbitrator, failing which the ICC would make the appointment on behalf of all of the respondents-even where the claimant or claimants had already appointed an arbitrator. The Cour de cassation took the view that this practice amounted to unequal treatment of a respondent deprived in the circumstances of the same opportunity to choose an arbitrator
Under the new r 10, multiple parties will be able to appoint arbitrators provided they act collectively for the purposes of appointment as a single claimant or respondent. If this joint nomination procedure fails as, for example, where either the claimants or respondents are unable to agree on a nomination, and the parties fail to agree on some other party-appointment method, the ICC Court will choose and appoint all three members of the tribunal and nominate one to act as the Chair
Tribunal's powers to grant interim relief
The existing Rules, do not expressly set out an arbitral tribunal's power to grant interim relief. Actual practice relies on the short phrase 'relevant powers reserved to the arbitrator', which appears in the context of provisions for application to the courts for such relief (currently r 8.5) as the basis for a tribunal's inherent power to make interim or conservatory orders. The lack of an express provision became problematic following the House of Lords decision in SA Copee-Lavalin NV v Ken-Ren Chemicals and Fertilisers Ltd [1994] 2 All ER 449. Rule 23 now clarifies the situation confirming an CC arbitral tribunal's power to order any interim or conservatory measures it deems appropriate at the request of a party and as soon as it receives the file from the ICC Secretariat. Such relief may be in the form of an order or an award and may be subject to security provided by the requesting party.
Location of arbitration
Clarification of the notion of the 'place' of an arbitration has been introduced as a result of the House of Lords decision in Hiscox v Outhwaite [1992] I AC 562, which held that an arbitration award was made in Paris simply because it was signed there. Rule 14 will allow an arbitral tribunal to conduct hearings and meetings at any location it considers appropriate unless the parties agree otherwise. The tribunal will be free to deliberate at any location it chooses regardless of the parties' views. Wherever the tribunal chooses to meet or deliberate, r 25(3) now specifically provides that an award will be deemed to be made at the place of arbitration chosen by the parties or fixed by the ICC.
Applicable 'rules of law'
The applicable law provision has been modified to bring it into line with rules recently adopted by other institutions and jurisdictions and with what is already, in fact, current ICC arbitral practice. ICC arbitrators will be required to apply the 'rules of law' chosen by the parties. They will still, 'in all cases', also apply the terms of the contract and relevant 'trade usages'. Where the parties have not made a choice of law, ICC arbitrators will apply the 'rules of law' which they consider 'appropriate' (r 17) rather than 'the proper law'. Reference to a 'rule of conflict' has likewise been deleted.
Some other modifications
The arbitral tribunal is under a duty to 'act fairly and impartially and ensure that each party has a reasonable opportunity to present its case' (r 15.2).
The words 'arbitral tribunal', 'claimant, 'respondent' and 'award' are now defined terms (r 2).
Liability of the ICC Court, arbitrators and the ICC is excluded (r 34).
A request for arbitration will have to contain inter alia a statement of the relief sought including, where possible, an indication of any amounts claimed as well as comments on the applicable rules of law, language and the place of arbitration (r 4.3).
The delay for parties to nominate an arbitrator where there is no agreement between them on the number of arbitrators, but where it appears to the ICC Court that a three-member tribunal is appropriate, has been shortened from 30 days to IS days (r 8.2).
Prospective arbitrators must be amiable and capable of conducting an arbitration (r 9. 1).
To speed appointments, the Secretary Genera], rather than the ICC Court, will be able to confirm party-nominated co-arbitrators, sole arbitrators and the chairs of arbitral tribunals (r 9.2).
Provided that advances on costs requested by the Secretariat have been paid, a file will be transmitted to the arbitral tribunal 'as soon as it has been constituted' (r 13) rather than upon receipt of the respondent's answer.
A party which proceeds with the arbitration without objecting to any failures to comply with the ICC Rules or any other applicable rules, directions given by the arbitral tribunal or the agreement relating to the constitution of the arbitral tribunal will be deemed to have waived its rights to object (r 33).
Parties may agree to shorten time limits set out in the Rules, but any variation after the arbitral tribunal is set up will be effective only if approved by the tribunal-the ICC Court will be empowered to extend any such time limits on its own initiative (r 32).
Parties will be assured of an opportunity to question tribunal-appointed experts at a hearing (r 20.4).
The arbitral tribunal will be able to summon any party to provide additional evidence (r 20.5).
The arbitral tribunal may take measures to protect trade secrets and confidential information (r 20.7).
The procedure of 'closing the proceedings' is introduced and will be mandatory (r 22).
After the close of proceedings, no further submissions or arguments may be made or evidence produced, unless requested or authorised by the arbitral tribunal (r 22.I).
Instead of replacing an arbitrator who dies or is removed after the close of proceedings, the ICC Court will be able to decide that the truncated tribunal shall continue the arbitration (r 12.5).
Provision is made for arbitrators to correct clerical errors in an award and parties will be able to apply for the correction of such errors or for the interpretation of an award by the arbitrators within 30 days of the date on which it is rendered (r 29).
The new Rules will apply to ICC arbitrations commenced after 1 January 1998 unless the parties have specifically agreed to submit to the Rules in effect on the date of their arbitration agreement.
This article was first published by F T Law & Tax in Practical Arbitration Journ. Further information can be found at http:\\www.ftlawandtax.com on the FT Law & Tax homepage.
This note is intended to provide general information about some recent and anticipated developments which may be of interest. It is not intended to be comprehensive nor to provide any specific legal advice and should not be acted or relied upon as doing so. Professional advice appropriate to the specific situation should always be obtained.