The new ICC Rules 2021 in the context of the China Pakistan Economic Corridor

In the final months of 2020, there has been a flurry of revisions to institutional arbitration and mediation rules, including the rules of the London Court of International Arbitration (“LCIA”) and, more recently, the International Court of Arbitration of the International Chamber of Commerce (“ICC”).

The new ICC rules (“2021 ICC Rules”) officially have been launched, and will come into force on 1 January 2021. The 2021 ICC Rules, amongst other things, address the seismic changes brought about as a result of COVID-19.

The ICC is one of the most well-established arbitral institutions in the world. Indeed, the figures published by the ICC earlier this year show a clear preference by states and state-owned enterprises to for the ICC arbitral rules. In 2019, 869 new arbitration cases were registered with the Secretariat of the ICC, indicating a clear rise from previous years.[1]

However, Pakistani parties have not been actively involved in ICC arbitrations.  In 2019, there were only 6 cases involving Pakistani parties,[2] whether as a claimant or respondent, which is a welcome relief.  On the other hand, it may reflect the reluctance of Pakistani parties to engage in institutional arbitration. Having said that, it is pertinent to note that the ICC’s Belt and Road Commission,[3] which promotes the ICC as the “go-to”[4] institution for disputes arising out of China’s Belt and Road development initiative, has improved the ICC’s position as the preferred institution for such disputes. The ICC Court’s caseload involving Chinese parties increased by more than 50 percent compared with its average caseload involving Chinese parties in the past 10 years.  The number of Chinese parties rose from 59 to 105, moving China to 11th position in 2018 and 5th position in 2019 in the list of the nationalities which feature most frequently in ICC arbitrations.[5]  It is likely that, in the future, as a result of the China Pakistan Economic Corridor (“CPEC”) initiative, more ICC arbitrations involving Chinese and/or Pakistani parties may occur. It is therefore pivotal for arbitrators, lawyers, the concerned governmental authorities and other stakeholders in Pakistan to keep up to speed with the changes in the arbitration landscape, particularly the 2021 ICC Rules.

This article provides a brief analysis of the key changes introduced in the 2021 ICC Rules. These are as follows.

  • Article 7(5) (Joinder of additional parties): The 2021 ICC Rules allow parties to submit requests seeking the joinder of additional parties after the appointment or confirmation of any arbitrator. This is a departure from the previous framework whereby no additional parties could be joined after the confirmation or appointment of the Tribunal, unless all parties, including the additional party, agreed.

  • Article 10(b) (Consolidation of Arbitrations): The 2021 ICC Rules elucidate the previously open question under Article 10(b), namely whether consolidation of arbitral references was only possible where all the claims in the arbitration were made under “the same arbitration agreement” (i.e., the same contract), or whether it allowed for consolidation of arbitrations filed under multiple agreements with mirror arbitration clauses. The 2021 ICC Rules now clarify that consolidation may happen where “all of the claims in the arbitrations are made under the same arbitration agreement or agreements”. (emphasis added)

  • Article 11(7) (General Provisions): This is a significant and relevant addition as to the independence and impartiality of a tribunal, and to prevent potential conflicts of interest. This provision requires parties promptly to communicate to the tribunal, the other parties and the ICC Secretariat 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“.

  • Article 12(9) (Constitution of the Arbitral Tribunal): This is one of most significant additions in the 2021 ICC Rules. Further to this provision, “in exceptional circumstances the Court may appoint each member of the arbitral tribunal to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award.”Put simply, the ICC Court’s power as to the appointment of the tribunal has been widened: the ICC Court may disregard the arbitration agreement when constituting the tribunal and appoint each member of the tribunal itself. This provision will only be used in “exceptional circumstances”; however, it will be of concern to many that, unless a prescriptive view is taken of its application, this provision will negate a fundamental advantage of arbitration, i.e., a party’s ability (subject to conflicts) to nominate its own specialist arbitrator.

  • Article 13(6) (Appointments and Confirmation of the Arbitrators): The 2021 ICC Rules state that “[w]henever the arbitration agreement upon which the arbitration is based arises from a treaty, and unless the parties agree otherwise, no arbitrator shall have the same nationality of any party to the arbitration”.  This is a sensible and welcome addition as it emphasises that only with the parties’ agreement can an arbitrator of the same nationality as a party to the arbitration may be appointed.

  • Article 17(2) (Party Representation): The title of Article 17 has been changed to “Party Representation” from “Proof of Authority”, and new provisions have been added to it. Each party is now required promptly to inform the Secretariat, tribunal and other parties of any changes in its representation. The tribunal is empowered to take “any measure to avoid a conflict of interest of an arbitrator arising from a change in party representation, including the exclusion of new party representatives from participating in whole or in part in the arbitral proceedings”. This provision may not sit comfortably with all: tribunals now have the authority to limit a party’s ability to appoint new legal representatives of its choice. However, the intention behind the provision is to prevent parties from using tactics that are designed to derail arbitral proceedings, whether through frequent changes in representation or by creating a potential conflicts situation. Therefore, in our view, this amendment can prove to be an objective and fruitful addition to the ICC arbitral rules.

  • Article 26(1) (Remote hearings): In light of COVID-19 and the current travel restrictions, the 2021 ICC Rules have granted tribunals the authority to decide – following consultation with the parties – whether to hold a hearing in person, or through videoconference, telephone or any other appropriate means of communication. Similar measures have been included in the new LCIA Arbitration Rules (Article 19 thereof). This is a necessary and welcome addition.

  • Article 29(6)(c) (Emergency Arbitrator):  In addition to the unavailability of the emergency arbitrator where the arbitration agreement was concluded prior to 1 January 2012, and where the parties have expressly excluded such a possibility, the 2021 ICC Rules preclude the application of the emergency arbitration provisions in treaty-based arbitrations.

  • Article 36(3) (Correction and Interpretation of the Award; Additional Award; Remission of Awards): The 2021 ICC Rules allow parties to apply for an additional award where the tribunal has omitted to rule on a claim raised during the arbitration. The applicant has 30 days following receipt of the award to apply to the Secretariat. Once the application is transmitted to the tribunal, the tribunal will provide the other party with no more than 30 days to respond. Unless the ICC Court decides otherwise, the tribunal will then have further 30 days to render a draft of the additional award to the ICC Court.

 

The 2021 ICC Rules introduce significant changes in respect of third-party funding, joinder of additional parties, constitution of the tribunal and remote hearings.  With the advent of COVID-19, the world has had to adjust to a new normal, and the 2021 ICC Rules will provide useful guidance and a workable framework to the global arbitration community. It will be interesting to see whether, with the momentum of the CPEC project, Pakistan can keep the number of disputes to a minimum, and if we will see more Pakistani and Chinese parties in ICC arbitrations in 2021.

References

[1] ICC Dispute Resolution 2019 Statistics, International Chamber of Commerce (2020).

[2] Ibid.

[3] ICC Belt and Road Commission, International Chamber of Commerce <https://www.flickr.com/photos/international-chamber-of-commerce/sets/72157668435793317> accessed on 1 December 2020.

[4] Ibid.

[5] ICC Dispute Resolution 2019 Statistics, International Chamber of Commerce (2020).

Author:

Dr Tariq Mahmood

The author is a barrister at 33 Bedford Row, and leads their Arbitration & Alternative Dispute Resolution group.