- Ananya Dhar Choudhury
ICC Rules Of Arbitration, 2021: Heralding An Era Of Efficient Disputes Resolution
With the aim of moving “towards greater efficiency, flexibility and transparency” in the arbitrations administered by the International Chamber of Commerce (“ICC”), the ICC Rules of Arbitration, 2021 (“2021 Arbitration Rules”) were introduced on December 1, 2020. The 2021 Arbitration Rules came into effect on January 1, 2021 and are applicable to all cases registered thereon, while cases registered prior, continue to be governed by the 2017 ICC Rules of Arbitration. With parties from 147 countries, majority being from the United States, opting for arbitration administered by the ICC, the changes in the rules have significant ramifications for the various businesses embroiled in disputes. By way of this Article, I attempt to analyze the possible implications for business entities opting for dispute resolution through arbitration under the 2021 Arbitration Rules.
By introducing Article 7(5), the 2021 Arbitration Rules empower the arbitral tribunal to order the joinder of an additional party without having to acquire the consent of all the parties. This amendment enables third party businesses with a substantial stake in the dispute being arbitrated, to be enjoined as a party, without the arbitral tribunal having to await the consent of all parties. The waiver of requirement of universal consent simplifies the procedure. Further, businesses with interest in the outcome of the arbitral proceedings may now join as co-respondents, without receiving any consent from the plaintiff.
The 2021 Arbitration Rules, at Article 10(b), seeks to widen the scope of consolidation of arbitral proceedings by permitting consolidation of proceedings arising from multiple identical arbitration agreements and not necessarily from the same agreement. In today’s world of complex projects and transactions involving multiple agreements executed between the parties, this liberal approach allows businesses to streamline the dispute resolution process, avoid multiple arbitral proceedings and evade inconsistent results. This practical solution will significantly reduce the costs and time associated with the process, thus making arbitration a more lucrative mechanism for dispute resolution.
Being cognizant of the rising demand for transparency in the arbitral process, the 2021 Arbitration Rules have inserted Article 11(7), which requires the parties to reveal the 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”, to the arbitral tribunal and the ICC Secretariat. By mandating disclosure of third party finding, impartiality and independence of the arbitral tribunal is ensured, while averting any conflict of interest between the arbitral tribunal and any entity having an economic interest in the arbitral proceedings. It further allays all concerns that a party may have regarding disclosure and conflict of interest with respect to third party funding obtained by the other party.
The amended Article 17 of the 2021 Arbitration Rules addresses the issue of change in legal counsel to gain a tactical advantage in front of a particular arbitral tribunal. Parties are now obligated to inform the tribunal and other parties of any change in their counsel and the tribunal may in turn reject such a change in representation, in the event there is a possibility of conflict of interest between the new counsel and the arbitral tribunal. By bestowing on the tribunal the ability to pre-empt and avoid any challenges on the ground of conflict of interest, in line with the ongoing practice in international arbitration, this rule reduces the possibility of due process challenge to the final award and thus boosts efficiency.
Recognizing the practical reality of commercial agreements entered into by parties with unequal bargaining power, the 2021 Arbitration Rules, by way of Article 12(9), empowers the International Court of Arbitration (“Court”) of the ICC to appoint an arbitral tribunal in total disregard of “unconscionable arbitration agreements” executed between the parties. For small businesses who enter into arbitration agreements with major corporates and may be arm-twisted into consenting to unequal and unfair terms, this rule is a welcome relief. However, such a relief will only be available in exceptional circumstances, to be decided by the Court on a case-by-case basis. It will be upon the party alleging prejudice to establish before the Court that the agreed method of constitution of the arbitral tribunal creates risk of inequality and unfairness which impinges on the validity of the arbitral award.
The amended Article 22(2) of the 2021 Arbitration Rules by replacing “may” with “shall” casts a positive duty on the arbitral tribunal and removes effective case management from the ambit of arbitral tribunal’s discretion. While seemingly a minor amendment, by mandating effective case management, the 2021 Arbitration Rules have guaranteed the parties that the arbitral tribunal will establish procedures that are actually pertinent and useful for effective case presentation. Thus, by assuring elimination of time and cost inefficiencies, the 2021 Arbitration Rules make ICC administered arbitration more lucrative for businesses.
ICC constantly endeavors to bring its rules on arbitrations in sync with the ever-changing realities of the modern world. Hence, it comes as no surprise that in response to the challenges imposed by the Covid-19 pandemic, Article 26 has been incorporated into the 2021 Arbitration Rules. It is now within the arbitral tribunal’s discretion whether hearings will be held in person or remotely, depending on the individual circumstances of each dispute. With numerous restrictions in place due to the Covid-19 pandemic, virtual hearings ensure that dispute resolution can continue without any delay, while reducing the costs associated with proceedings for the parties. The 2021 Arbitration Rules have also finally abandoned the archaic practice of requiring paper filings and adopted the environment friendly and modern approach of electronic filings.
Lastly, the 2021 Arbitration Rules now require the tribunal to actively encourage the parties to settle the pending dispute, instead of just informing them of the right. Most corporate parties have strong business relations with each other and prefer settlement of their disputes in an amicable manner than continuing a long drawn legal battle. In fact, in the post Covid-19 pandemic world, where most businesses are grappling with negative financial ramifications, settlement of disputes through the available alternative dispute resolution mechanisms will help companies avoid the expenses associated with arbitral proceedings.
The 2021 Arbitration Rules attempt to herald practical changes that will ultimately contribute to the establishment of an efficient arbitral process, both in terms of time and cost. However, it remains to be seen how these rules translate into practice, as they are applied to the newly registered cases.
Ananya Dhar Choudhury serves as a Graduate Editor of the NYU Journal of Law & Business. She is an LL.M. candidate at NYU School of Law where she focuses on international commercial arbitration and investment treaty arbitration. Prior to attending NYU, she worked as an Associate with the Litigation and Disputes Resolution team at Cyril Amarchand Mangaldas, a leading full-service law firm in India.