Part A: Unchanged provisions

Some of the existing provisions contained in the ICC Rules of 1975/1988 (hereinafter 'ICC 1975') which, more closely than others, relate to the making of the arbitral decision, remain basically unchanged. These are:

• the time limit for making the award

ICC 1975 Art. 18 ? 1998 Art. 24

• the decision by the chairman 1

ICC 1975 Art. 19 ? 1998 Art. 25(1)

• the award by consent

ICC 1975 Art. 17 ? 1998 Art. 26• the scrutiny of the award by the ICC 2

ICC 1975 Art. 21 ? 1998 Art. 27

• the notification, enforceability and deposit

ICC 1975 Art. 23 ? 1998 Art. 28

Part B: Improved and new provisions

A number of provisions that, more closely than others, relate to arbitral decision-making were improved, or are new.

A. Conservatory and interim measures

ICC 1975 Art. 8(5) ? 1998 Art. 23

• The new ICC provision on conservatory and interim measures is up to the most modern standard; it provides for a broad power of the Arbitral Tribunal.3

• The tribunal may impose a security on the requesting party.

• There was discussion within the Working Party whether the ICC Pre-Arbitral Referee Procedure should somehow be incorporated, or at least referred to, in the new Rules, but the Working Party decided not to do that, in view of the complexity of issues that are connected thereto.

• The question was also discussed whether an explicit reference to the possibility of requesting a security for costs should be made (avoiding 'Ken-Ren' for the future).4 The Working Party preferred not to make any specific reference in this respect, but the wording of Art. 23 would seem broad enough to allow the making of an application by a party for, and the issuing of a ruling by the Tribunal on, security for costs.

• The new 1CC Rules now also indicate very specifically that conservatory or interim measures may be issued in the form of either a procedural order or an award (which possibly, but subject to local practice, may qualify for recognition and enforcement under the New York Convention). Thus, the ICC has followed, wisely so, the solutions already adopted in Art. 26(2) UNCITRAL AR, Art. 46(c) WIPO, Art. 22(2) AAA IAR and Art. 23(2) CAMCA. [Page45:]

• Of course, the jurisdiction of the Arbitral Tribunal must not be understood as being exclusive. A party remains free to go to a competent state court, as provided in Art. 23(2) 1998 ICC Rules.

• The power now given to the Arbitral Tribunal by the ICC Rules is one thing; the question whether the applicable lex arbitri (i.e. the arbitration law prevailing at the place of arbitration) also allows an arbitral tribunal to rule on interim measures is another. Austria, Italy, Greece and some Scandinavian countries, for instance, reserve that power to state courts! One will sometimes also need to check whether the relevant legal provision is mandatory, or whether it can be departed from by agreement of the parties (by agreeing to submit disputes to the ICC Rules, for instance).

B. The equal treatment requirement

ICC 1975: none? 1998 Art. 15(2)

• The major institutional arbitration rules all reflect the equal treatment requirement and the parties' right to be heard, except LCIA and, thus far, the ICC Rules.5

• All ICC National Committees were in favour of including this basic principle in the new ICC Rules; Art. 15(2) was worded as a general standard to be satisfied by the Tribunal.

C. New claims

ICC 1975 Art. 16? 1998 Art. 19

• Article 16 of the current Rules is rigid as far as the making of new claims during the course of the arbitral proceedings (after the signing of the Terms of Reference) is concerned; this lack of flexibility had to be remedied in a cautious manner. 6

The Arbitral Tribunal now has the authority to allow new claims, considering (and depending on):

- the nature of such new claims

- the stage of the proceedings (new claims should certainly not be made at the last minute when the other party may not have a suitable opportunity to defend its case; thus, arbitrators will pay special attention to the equality principle which is now reflected specifically in Art.15(2) 1998 ICC AR;

- all other circumstances (e.g. the delay that might be caused, for instance, if the examination of witnesses has already been concluded such that the admission of a new claim would amount to reopening the case, etc.)

The new Art. 19 is certainly an excellent solution conforming to modern views and requirements. It appropriately relaxes the much-criticized rule as per Art. 16 of the 1975 ICC Rules; in future, it will no longer be necessary to have a separate rider signed by the parties. However, it would stand to reason that the ICC Secretariat will be kept informed of any such new claims by the Chairman of the Arbitral Tribunal, so as to allow the Secretariat to review the appropriateness of the advance on costs where necessary.

D. Truncated tribunal clause

ICC 1975: none ?1998 Art. 12(5)

• The concern with truncated tribunals is well known, and the lesson learned from past experience is clear;7 it is not necessary to discuss this more fully.

The existing models that were closely examined by the Working Party are Art. 11 AAA IAR and Art. 35 WIPO AR; these models reflect a somewhat 'more courageous' solution.8[Page46:]

With but a few exceptions, the ICC National Committees clearly recognized the need for, and desirability of, a truncated tribunal provision. During the 'shaping' process, the discussion turned on the following questions:

- should the truncated tribunal provision be as wide as those of AAA and WIPO?

- how much discretion should be given to the ICC Court?

- should one aim to formulate a distinction between 'non-suspicious circumstances' (such as death) where there would be a presumptive right to replace the arbitrator, and other circumstances such as manoeuvres of a rather tactical nature?

- should a party be granted the right to make a new appointment in 'non-suspicious circumstances,' whereas the replacement would have to be made by the ICC Court in 'suspicious circumstances?'

• The cautious solution finally reached in Art. 12(5) can be explained as follows:

- no truncated tribunal can operate prior to the closing of the proceedings;9

- the competence to determine the issue rests with the ICC Court, and not with the remaining arbitrators; the ICC solution thus guarantees an objective approach in a critical situation;

- the 'defaulting' arbitrator must be removed by the ICC Court (unless he has died); again, the Court will remain in control of the situation;

- wisely, the provision does not aim to draw a distinction between 'non-suspicious' and other circumstances; in cases of replacement, the ICC Court has the appropriate discretion based on Art. 12(4) 1998 ICC Rules;

- the views of the remaining arbitrators as well as those of the parties shall, appropriately, be taken into account by the ICC Court.

• In the author's view, the ICC has adopted a very wise formula. In fact, a truncated tribunal provision is the kind of provision which institutional rules should by all means have. Since it is hoped, however, that such a provision will never have to be used or applied in the decades to come, the ICC solution is appropriately 'tuned down'.

E. Applicable rules of law

ICC 1975 Art. 13(5) ? 1998 Art. 17

There is no revolutionary change to be reported under this heading; and yet, the new provision in Art. 17 is, in the author's view, a landmark, and therefore deserves to be put into a broader perspective. The Chart reproduced in Annex II will facilitate the understanding of the text to follow.

a) Recognizing the Choice of the Parties

It is of course a very basic notion in international arbitration that the choice of law made by the parties will be fully respected and recognized by the Arbitral Tribunal.

• Normally, the choice of law made by the parties will be explicit. However, despite a particular choice made by the parties, an arbitral tribunal might have to take into account (or directly apply) the mandatory rules of law of another legal system which claim extraterritorial application!

• Sometimes, however, the choice of the parties may be tacit or implied, and as such might have to be determined by the Arbitral Tribunal.10

• In the absence of a determination made by the parties (whether explicitly or impliedly), the determination will have to be made by the Arbitral Tribunal. Here, we need to distinguish two steps: [Page47:]

(i) the method: the means to get to the resultant law or rules of law, i.e. the conflict of law aspect.

(ii) the target: the applicable substantive law (or rules of law), i.e. the substantive law aspect.

2) The Method: Conflict of Law Rules (four different solutions)

There is an evolution to be briefly highlighted here:

• The 1955 ICC Rules contained no specific provision on the choice of law and on the Tribunal's power to determine the applicable law where the parties had failed to do so.

• First Solution: the old solution prevailing in the 1950s was to apply the conflict of law system in force at the place of arbitration. This solution was put to an early death in 1961.

• Second Solution: since the 1961 European Convention, an arbitral tribunal should apply the 'appropriate conflict rule'. A rule means what it says: a rule, in contrast to an entire system of private international law. This is a very significant improvement; using a 'rule' will leave flexibility, whereas using the 'system' of the place of arbitration may subject the arbitration to undesired localisms, local perceptions, local court practice, local scholarly writings, etc. The difference of approach ('rule' versus 'system') may lead to diametrically opposite results.

• The new formula as per the 1961 European Convention received unanimous acclaim around the world and was eventually incorporated in most institutional arbitration rules as well as in many national laws.11

• The same solution was also incorporated in the 1975 ICC Rules.

• Third Solution: an alternative to the European Convention solution was also developed: this is the so-called 'closest connection' test or approach, which was adopted in Art. 4 of the 1980 Rome Convention, in the USA Second Restatement, in Art. 187(1) of the Swiss Arbitration Act (PIL) and, most recently, in Art. 1051(2) of the new German Arbitration Act 1997/98 (Book X of the Code of Civil Procedure).

• Fourth Solution: the 'ice-breaker' was France, which came to be known as the pioneer of the voie directe approach. This approach was enacted in 1981 as Art. 1496 of the Nouveau Code de Procédure Civile.

• The most modern solution takes inspiration from the French approach and no longer suggests (or imposes) any particular method of conflict of law or obligation to apply a conflict rule; instead, this solution deliberately leaves the matter open. This most modern approach has been reflected in Art. 29(1) AAA IAR, Art. 13(1)(a) LCIA, Art. 46 Netherlands Arbitration Institute Rules, Art. 41 Milan Chamber Rules, Art. 59(a) WIPO AR and Art. 30(1) CAMCA AR.

• The 1998 ICC Rules now also adopt this most modern and most appropriate solution: they are, on purpose, silent as far as the conflict-of-law rule is concerned, and thus the arbitrators enjoy a total freedom to apply one (or more) particular conflict rule(s), or to apply the closest connection test (or to search for the centre of gravity and the most characteristic performance), or, finally, to avoid any of these 'tools' and to apply the voie directe.

3) The Target: Determining the 'Law' or the 'Rules of Law' (two solutions)

• Notions or criteria of private international law (conflict rule(s)) should guide the arbitrators in choosing the 'right' law;

• What is meant by the term 'law' in this context? Under an outdated approach, and under a narrow interpretation of the term, 'law' is understood as referring to one particular national law. [Page48:]

• In contrast, the wider term 'rules of law' encompasses a broader notion and will include, as the case may be, not only a national law, but also national or supranational rules of law, general principles of law, notions forming part of the lex mercatoria (for those who like that expression), rules of law contained in multinational conventions (whether formally applicable or not), or rules codified in the 1994 UNIDROIT Principles.

• An arbitral decision made according to such 'rules of law' should not be confused with a decision ex aequo et bono, or with a decision made according to 'natural justice' (a term sometimes used in state contracts), or as a result of amiable composition. A decision based on 'rules of law' is and remains a decision based on law.

• The 1975 ICC Rules referred only to the term 'law'. However, such term has always been interpreted quite liberally by ICC arbitrators. Under the current Rules, ICC arbitrators in fact felt free to determine, if so warranted by the situation, that a contract shall be governed not by one particular (national) law, but by certain 'rules of law,' for instance by generally accepted principles of law.

• However, recent discussions have shown that sometimes the term 'law' is indeed meant to encompass the narrow sense only. Reference may be made, for example, to Art. 28(2) of the UNCITRAL Model Law, which was much criticized for giving less power to the Arbitral Tribunal than to the parties themselves; the same unfortunate distinction has now re-appeared in Art. 1051(2) of the new German Arbitration Act 1997/98.12

• For the ICC Working Party, it was clearly perceived as a necessity to use the correct and unambiguous term 'rules of law'; only one National Committee, during the extensive consultation process, objected to the term 'rules of law,' with some reservations.

• Up to the very final stage of the discussions in the Working Party, the drafts referred to 'the law or rules of law' (as in Art. 59(a) WIPO AR). However, in the final stage, the wording was simplified to refer to 'rules of law' only, which term of course may also mean or comprise a particular national law (but does not need to comprise a national law, and will not be limited to encompass a national law only).13

4) A Remarkable Progress: Increased Certainty and Foreseeability

• The 1998 ICC Rules will now reflect not only the most modern but also the most appropriate solution (and, indeed, in my firm conviction, the only appropriate solution).

• They grant the arbitrators a full 'conflict of law autonomy'; arbitrators are no longer the 'slaves' who have to bow before purely local perceptions which may or may not be appropriate.

• Moreover, arbitrators are granted a full 'substantive law autonomy', in that they may apply rules of law; they are not restricted to applying a national law only.

• The importance of these two elements is very significant:

First, they are truly essential for enabling a tribunal to reach a correct decision which satisfies the 'subjectively reasonable and objectively fair expectations' of parties engaged in international business.

Second, they, as a matter of fact, substantially increase certainty and foreseeability of the law, in that parties need no longer fear that they might become the victims of unexpected local pitfalls.

Third, arbitrators will no longer be able to hide behind the dictum 'lex dura, sed lex' (which this author once heard from a [Page49:] chairman apologizing for an outcome which, as he believed, was based on a strict and correct application of a particular provision of a national law, but which resulted in a solution that he himself found disturbingly unfair and inappropriate), or to seek comfort in the equally inappropriate comment 'summum ius, summa iniuria'!

• Thus, the new ICC Rules clearly provide for a more reflective responsibility of the arbitrators. The significance of this element cannot be overemphasized.

• The almost unanimous support that the new ICC solution received truly stands out as a land-mark and makes the ICC Rules fit for the upcoming challenges of the next millennium. Clearly, the ICC was wise to overcome the hesitation that still existed during the 1980s when Art. 28(2) of the UNCITRAL Model Law had been discussed, with its unfortunate and much criticized bifurcation regarding the authority granted to the parties themselves, and the more restricted authority granted to the arbitrators.

• The new Art. 15(1) l 998 ICC Rules is even more important for those countries whose arbitration acts still refer to the term 'law' (which may or may not be meant in the restrictive sense as referring to one particular national law only), particularly for England and Germany. As the provisions in arbitration acts regarding the applicable law can usually be set aside by contract, it would stand to reason that Art. 15 1998 ICC Rules will prevail (as an indirect determination made, or an authority conferred upon the arbitrators by the parties as a result of the ICC arbitration clause).

• There is yet another reason why the term 'law' was misleading, inappropriate and too restrictive, namely, the fact that we are now facing an increase in the number and scope of mandatory rules of law, which-beyond the national 'Law' (as may be determined by the parties or, failing that, by the Tribunal)-might have to be taken into account, due to their extraterritorial effects (e.g. competition laws, import and export restrictions, boycott measures, and the like).14

F. Correction and interpretation of award 15

ICC 1975: none ? 1998 Art. 29

• It was certainly necessary for the ICC to include provisions for corrections, which may sometimes be necessary despite the scrutiny process at the ICC.

• More hesitation was expressed regarding interpretation, for fear that losing parties might be tempted to 'bombard' the Arbitral Tribunal with requests for interpretation, possibly with a view to paving the way for challenges against the Award, or resisting enforcement proceedings. Nevertheless, on balance, it was certainly justified to include requests for interpretation.

• An essential aspect of this provision is the time limitation of thirty days, which follows the solution first adopted in the UNCITRAL AR.

• However, the new ICC Rules contain no provision for additional awards.16 The omission was deliberate; the matter of additional awards is more controversial than interpretation and correction.

G. Waiver rule

ICC 1975: none ?1998 Art. 33

• So far, the ICC Rules had had no explicit waiver rule.

• The adoption and incorporation of such a rule, conforming to those provided in other major institutional rules, were not a controversial matter during the drafting period (only one National Committee was against).17[Page49:]

• A waiver rule (as an expression of the bona fides principle and requirement) is important not only for maintaining the integrity of the arbitral proceedings, but also, and perhaps even more so, for any subsequent proceedings before state courts, e.g. in the context of a challenge against the award, or on the occasion of enforcement proceedings.

• The new ICC provision is more complete than other 'models' and is certainly a welcome improvement which enhances certainty and bona fides in the arbitral process.

H. Exclusion of liability

ICC 1975: none ? 1998 Art. 34

• Similarly, the ICC Rules thus far lacked a provision protecting the ICC Court and the arbitrators from liability. This was certainly a lacuna to be filled (why should an ICC arbitrator be more at risk than any other?).18

• The wording of the ICC exclusion protection is deliberately broad, similar in this respect to the AAA provision and unlike the WIPO provision, which specifically exclude deliberate wrongdoing.

• However, no arbitrator in his right mind will take this as a carte blanche to do n 'importe quoi. National laws will apply to the determination, in a particular case, of whether an arbitrator has misbehaved or whether there was unlawful intent, deliberate wrongdoing or gross negligence; it would seem rather foolish for an arbitrator to rely too heavily on Art. 34 1998 ICC Rules. This was clearly understood by everyone working on the revision of the Rules; yet, the broad wording of the provision was justified, as was the decision to leave its interpretation to courts in case of a liability claim. [Page51:]

ANNEX 1

Two Models of Truncated Tribunal Provisions

AAA - International Arbitration Rules

Article 11

1. If an arbitrator on a three-person tribunal fails to participate in the arbitration, the two other arbitrators shall have the power in their sole discretion to continue the arbitration and to make any decision, ruling or award, notwithstanding the failure of the third arbitrator to participate. In determining whether to continue the arbitration or to render any decision, ruling or award without the participation of an arbitrator, the two other arbitrators shall take into account the stage of the arbitration, the reason, if any, expressed by the third arbitrator for such non-participation, and such other matters as they consider appropriate in the circumstances of the case. In the event that the two other arbitrators determine not to continue the arbitration without the participation of the third arbitrator, the administrator on proof satisfactory to it shall declare the office vacant, and a substitute arbitrator shall be appointed pursuant to the provisions of Article 6, unless the parties otherwise agree.

2. If a substitute arbitrator is appointed, the tribunal shall determine at its sole discretion whether all or part of any prior hearings shall be repeated.

WIPO Arbitration Rules

Article 35

(a) If an arbitrator on a three-person Tribunal, though duly notified and without good cause, fails to participate in the work of the Tribunal, the two other arbitrators shall, unless a party has made an application under Article 32, have the power in their sole discretion to continue the arbitration and to make any award, order or other decision, notwithstanding the failure of the third arbitrator to participate. In determining whether to continue the arbitration or to render any award, order or other decision without the participation of an arbitrator, the two other arbitrators shall take into account the stage of the arbitration, the reason, if any, expressed by the third arbitrator for such non-participation, and such other matters as they consider appropriate in the circumstances of the case.

(b) In the event that the two other arbitrators determine not to continue the arbitration without the participation of a third arbitrator, the Center shall, on proof satisfactory to it of the failure of the arbitrator to participate in the work of the Tribunal, declare the office vacant, and a substitute arbitrator shall be appointed by the Center in the exercise of the discretion defined in Article 33, unless the parties agree otherwise. [Page52:]

ANNEX 2

Chart by Marc Blessing on the Determination of the Applicable Law or Rules of Law

See chart here

1
This is considered a particularly characteristic element of ICC arbitration, and it was never questioned that it should remain so in the years 2000.

2
Idem.

3
Compare e.g. Art. 46 WIPO AR, Art. 26 UNCITRAL AR, Art. 17 UNCITRAL ML, Art. 22 (1) AAA IAR, Art. 23 CAMCA AR; slightly more restrictive: Art. 13 (h) LCIA).

4
See e.g. the provisions in Art. 46 (b) WIPO AR and Art. 15.2 LCIA.

5
See e.g. Art. 16 (1) AAA IAR, Art. 15 (1) UNCITRAL AR, Art. 18 UNCITRAL ML, Art. 38 (b) WIPO AR, Art. 17 (1) CAMCA AR.

6
Compare e.g. Art. 44 WIPO AR, Article 20 UNCITRAL AR, Art. 23 (2) UNCITRAL ML, Art. 4 AAA IAR, Art. 4 CAMCA.

7
PIM v Deutsche Babcock

8
See Annex 1.

9
Compare with AAA AR and WIPO AR, where the stage of the proceedings is simply taken into account.

10
Implied choices are usually negative in that they refer to a choice not to subject the dispute to the national law of one of the parties involved. For a typical example, see Preliminary Award of 5 June 1996, ICC Case No. 7375.

11
The annexed chart lists the institutional arbitration rules that followed the solution as per the European convention.

12
See also the criticized provision in section 46(3) of the 1996 English Arbitration Act (in respect of which Lord Hacking had also expressed his regrets on the occasion of an ICC Conference).

13
For a more detailed discussion of this fascinating subject (which is much broader than herein sketched), see Marc Blessing, 'Choice of Substantive Law in Arbitration,' Journal of International Arbitration, Vol. 14, No 2, p. 39; see also Marc Blessing, 'Regulations in Arbitration Rules on Choice of Law,' in ICCA Congress Series, No 7 (1996), pp. 391-446.

14
See the discussion of the parameters and criteria in Marc Blessing, 'Choice of Substantive Law in Arbitration,' supra.

15
Compare in particular Art. 66(a) and (b) WIPO AR, Art. 31 AAA IAR, Art. 17 LCIA AR, Art. 35 and 36 UNCITRAL AR, Art. 33 UNCITRAL ML; compare also Section 57 of the 1996 English Arbitration Act. See the contribution of Michael Bühler in this volume.

16
Contra: Art. 66(c) WIPO; Art. 31 AAA IAR; Art. 37 UNCITRAL AR; Art. 33(3) UNCITRAL ML; Art. 17(3) LCIA Rules.

17
See e.g. Art. 58 WIPO AR, Art. 26 AAA IAR, Art. 20(1) LCIA, Art. 30 UNCITRAL AR, Article 4 UNCITRAL ML.

18
Compare Art. 77 WIPO AR, Art. 36 AAA IAR, Art. 19 LCIA, Art. 37 CAMCA; compare also ss. 29 and 74 of the 1996 English Arbitration Act.