I. Introduction

Nearly eight years ago, a report entitled 'Terms of Reference Under the 1988 ICC Arbitration Rules - A Practical Guide'1 produced by a Working Party of the ICC Commission on International Arbitration, was published in the ICC International Court of Arbitration Bulletin.

On 1 January 1998, after several years of preparatory work, the ninth revision of the ICC Rules of Arbitration since 1923 came into force. At the preparatory stage, the necessity of the Terms of Reference was reviewed in the light of the practical experiences of users of the ICC procedure over the years. The outcome was that the drafting committee, the Commission on International Arbitration, the International Court of Arbitration, and the ICC Council, which were all involved in the revision process, retained the Terms of Reference as one of the characteristic 'pillars' of ICC arbitration. However, certain changes were introduced into the 1998 Rules in an attempt to overcome the inbuilt structural problems in the preceding versions of the Rules that were a potential cause of delay in the swift progress of arbitral proceedings. At the same time the function of the Terms of Reference as a 'process management tool'2 was enhanced.

Two years of experience under the 1998 Rules would appear to offer a good basis for (a) revisiting the 1992 Report of the Working Party on Terms of Reference, with a view to establishing to what extent the practical recommendations made at that time are still relevant today, and (b) for ascertaining whether the changes contained in the 1998 Rules, intended to make the Terms of Reference a more efficient tool, have brought about the desired results.3

II. Relevant changes

Surprisingly, perhaps, our review of the 1992 Report has led us to the conclusion that its recommendations are still valid and useful in most regards.

A. The 'list of issues to be determined' (Article 18(1)(d) of the 1998 Rules)

This is particularly true of the enumeration of the 'issues to be determined', as the structural problems that the 1992 Report had to address no longer have the same practical implications. [Page15:]

Firstly, the arbitral tribunal is now expressly authorized to refrain from drawing up said list.4 This positively sanctions a practice established under the former Rules5 by certain arbitral tribunals which did not establish a detailed list but simply included in the Terms of Reference a general clause pursuant to which the arbitral tribunal would have to decide on all relevant issues flowing from the parties' claims and submissions.

Secondly, the main reason for disputes between parties over what should be included in the list of issues to be determined, i.e. Article 16 of the former Rules, which provided that new claims could be introduced into the arbitration subsequent to the Terms of Reference only if all parties signed a 'rider', has been replaced by the far more flexible new Article 19. Pursuant to the latter, the arbitral tribunal may allow new claims or counterclaims to be introduced into proceedings, after considering 'the nature of such new claims or counterclaims, the stage of the arbitration and other relevant circumstances'. This means that, subject to authorization from the arbitral tribunal, a new claim or counterclaim may be filed after the operative date of the Terms of Reference, even if all parties are not in agreement. However, in our view, this provision does not give unlimited powers to the arbitral tribunal, which in this matter as in all others must exercise its discretionary powers reasonably. For example, it would appear inappropriate to admit new claims that do not fall within the scope of the relevant agreement to arbitrate, unless all parties expressly agree thereto. Failing such agreement, it is not unreasonable to expect that an arbitral tribunal will refuse the introduction of new claims that are based on facts markedly different from those underlying the claims contemplated in the Terms of Reference, especially if such new claims are made at an advanced stage of the proceedings.

Interestingly, most arbitral tribunals do not 'opt out' but rather include in the Terms of Reference a list, in greater or lesser detail, of issues to be solved.6 This would seem to indicate that the effort required to reach agreement on a list of contentious issues usually does not lead to an impasse in which the parties dispute over the inclusion or exclusion of issues. It also shows that arbitrators and arbitral tribunals are less concerned about changes in the issues at stake as a result of subsequent pleadings.

In view of the considerable number of cases that are settled when the Terms of Reference are being drawn up,7 it would appear that to require the parties to work together with the arbitral tribunal on a text which they will sign, summarizing the positions and issues, stimulates settlement. This may be explained by the fact that, especially when working on the issues, the parties have to analyze and evaluate their and the other side's cases once again. Another explanation may be that the exercise of working on a draft text to be agreed upon by the parties calls for a co-operative rather than an adversarial approach. It marks a change of pattern,8 giving rise to a different attitude, which may be described as one of problem solving. footnote_9>

Not all cases, however, will allow a list of issues to be determined to be established and agreed without tough dispute over certain points.10 In such circumstances, the arbitral tribunal may simply wish to decide that such list be omitted. To allow it to handle such situations with the required flexibility, the general clause suggested in the Commission Report may be included in the first draft of the Terms of Reference.11 If the arbitral tribunal decides to forgo the list of issues, it should bear in mind that the wording of Article 18(1)(d) calls for it to explicitly state (decide) that it finds it inappropriate to enumerate the issues to be determined. The following clause would seem to fulfil this purpose: [Page16:]

'The issues to be determined by the Arbitral Tribunal shall be those resulting from the parties' submissions, including forthcoming submissions, and which are relevant to adjudication of the parties' respective claims and defences, without prejudice to the provisions of Article 19 of the 1998 ICC Rules. Therefore, pursuant to Article 18(1)(d) of the Rules, the Tribunal considers it inappropriate to include a specific list of the issues to be determined.'

B. Procedural rules (Article 18(1)(g) of the 1998 Rules)

This subsection exactly corresponds to the wording of Article 13(1)(g) of the 1988 Rules. It may therefore be safely stated that the 1992 Commission Report continues to be fully relevant in this regard. There is one issue, however, which is only briefly mentioned in the Report,12 because at that time the arbitration community had not become aware of the problem. In 1992, it was still taken more or less for granted that arbitral proceedings are always confidential. The only provisions which until 1998 dealt expressly with this topic were sections 2 to 4 of the Internal Rules of the International Court of Arbitration governing the terms of confidentiality applicable to the members of the ICC International Court of Arbitration and the employees at its Secretariat. Since then, it has transpired that in certain countries it may not be presumed that an arbitrator who sits in an ICC case will be legally bound to respect the confidential nature of the information of which he or she becomes aware in connection with the arbitral proceedings. The same can be said for experts and expert witnesses, who may acquire in-depth information relating to a case. As far as the parties are concerned, the issue is even less certain. Sometimes they may even be under a statutory duty to disclose information relating to actual or potential liabilities, in particular to their shareholders.

The 1998 Rules have wisely avoided including detailed provisions in this regard, as it is practically impossible to formulate a rule which could be considered as being appropriate for all situations. The likelihood is that such rules would dispose of certain difficulties only, while creating new problems in other instances. Hence, the drafters of the 1998 Rules included only one new provision addressing the issue: Article 20(7) now expressly authorizes the arbitral tribunal to take measures to protect trade secrets and confidential information. For most ICC arbitrations this provision may be more than sufficient to deal with confidentiality issues. Certain situations, however, may require rather more sophisticated provisions concerning confidentiality, applying not only to those directly involved in the proceedings in relation to third parties, but also covering any participants in respect of crucial information that must be introduced into the proceedings but which for justified reasons should not be disclosed to one of the parties. There are also instances where knowledge of the mere fact that arbitration has been initiated could be damaging to the parties. In our view, such issues should be raised by the arbitral tribunal or the parties as early as possible during the proceedings, because the 'strategy' they adopt will depend on how confidentiality is to be handled. We believe it preferable for the parties and the arbitrators to bind themselves by negotiated rules rather than by a decision taken by the arbitral tribunal. It is therefore appropriate for this type of issue to be provided for in a procedural rule agreed upon as part of the Terms of Reference. However, such a rule would not bind third parties such as witnesses and experts, who, if need be, would have to commit themselves to confidentiality at the appropriate stage in the arbitral proceedings. [Page17:]

C. The provisional timetable (Article 18(4) of the 1998 Rules)

The 1992 Commission Report had already indicated the desirability, as part of the agreed procedural rules, of a timetable for the sequence of submissions and the planned hearings. It was recommended that this timetable should not be included in the Terms of Reference, in order to allow for the necessary flexibility and modifications imposed by unforeseen events.13 The 1998 Rules now require all arbitral tribunals to establish a provisional timetable, after consulting the parties on this matter. This should be done when drawing up the Terms of Reference, or as soon as possible thereafter. The resulting document should be separate from the Terms of Reference. There is no need for the parties to sign or otherwise accept the timetable. It would indeed be unwise to have the timetable signed, as this could be considered as an agreement on procedural rules as referred to in Article 15(1) of the 1998 Rules, making it difficult for the arbitral tribunal to modify the timetable if the parties do not agree thereto. On the other hand, it is likely that a timetable to which all parties have given their consent will elicit a stronger moral commitment from them, which may make it easier to insist on compliance with time-limits and dates for hearings and thereby guard against unnecessary delay.

The duty imposed on the arbitral tribunal to inform the International Court of Arbitration of any subsequent modifications to the provisional timetable is intended to enable the Court to extend the period allowed for making the final award by the time required (Article 18(2) of the 1998 Rules), rather than extend it for standard periods of three months as was usual under the 1988 Rules.

In our view, the mandatory provisional timetable is one of the key elements introduced into the 1998 Rules to make ICC arbitral proceedings more efficient and give the arbitrators an active part in the management thereof. This clearly counters inefficient case management, which sometimes occurred under the former Rules when neither the parties nor the arbitrators really 'planned' at the outset how proceedings should develop.

The provisional calendar may include an indication of the date on which the draft award will be submitted to the International Court of Arbitration. (See, for example, Article 22(2) of the Rules that provides: 'When the Arbitral Tribunal has declared the proceedings closed, it shall indicate to the Secretariat an approximate date by which the draft Award will be submitted to the Court for approval pursuant to Article 27. Any postponement of that date shall be communicated to the Secretariat by the Arbitral Tribunal.') However, the authors have certain doubts that it will always be possible to provide a reasonably precise indication of such date at the time the provisional calendar is being established. In many cases it would appear to be sufficient to cover the proceedings up to the closure of such proceedings. Therefore, it is our understanding that Article 22(2) of the Rules implies that the date on which the draft award will be submitted to the International Court of Arbitration is normally not to be included in the provisional calendar. [Page18:]

D. Elimination of Article 13(1)(h) of the 1988 Rules in Article 18 of the 1998 Rules

Article 13(1)(h) of the 1988 Rules provided for the possibility of inclusion of other particulars in the Terms of Reference as could be required to make the arbitral award enforceable in law, or be regarded by the International Court of Arbitration or the arbitrator as helpful. This provision was functionally redundant insofar as it is difficult to imagine what the 'other particulars' referred to could be, as such 'particulars' would normally be part of 'procedural rules'. Moreover, Article 18(1) of the 1998 Rules sets forth the obligatory, i.e. minimum, contents of the Terms of Reference. This means that any additional provisions may be included, if necessary. The elimination of the former Article 13(1)(h) is a wise step making it clear that the ICC International Court of Arbitration will usually not cause the parties and the arbitrators to include in the Terms of Reference provisions which they had not contemplated.

At the same time, however, the ICC Court retains its power to ensure compliance with the Rules in this respect, especially if it is required to approve the Terms of Reference pursuant to Article 18(3) of the 1998 Rules. In this connection, problems may arise if the arbitral tribunal includes in the Terms of Reference procedural rules requiring the agreement of all parties. For example, the language of the arbitration may not be determined in the Terms of Reference if the parties do not agree thereto. More generally, a commitment from all parties cannot be included, if one of them refuses to sign the Terms of Reference. If a party refuses to sign in such a case, the International Court of Arbitration will request the arbitral tribunal to remove provisions of this kind from the Terms of Reference and suggest that the arbitral tribunal determine such procedural rules by way of an order or other appropriate means in accordance with Article 15(1) of the 1998 Rules. Arbitral tribunals are therefore advised to be cautious if it becomes likely that one of the parties will refuse to sign the Terms of Reference. In such a case, the arbitral tribunal should include in the Terms of Reference only the minimum contents laid down by Article 18(1) for which specific consent from all parties is not required and which therefore may be approved by the ICC International Court of Arbitration.

E. Disjunction of the operative date of the Terms of Reference and the payment of the advance on costs (Articles 18(2) and 30(4) of the 1998 Rules)

Pursuant to Article 9(4) of the 1988 Rules, the Terms of Reference became operative and the arbitrators were authorized to proceed only in respect of those claims for which the advance on costs had been duly paid to ICC. At that time, it was ICC practice to make the transmission of the file to the arbitral tribunal conditional upon payment of half of the advance on costs. The remainder, after any readjustment that might be necessary, became due only after the Terms of Reference had been submitted to the International Court of Arbitration. This led to delays and made it possible for unwilling parties to hinder the progress of the proceedings, even if the paid advance was sufficient fully to cover the costs beyond the Terms of Reference. Article 18(3) of the 1998 Rules now provides that the arbitration shall proceed as soon as the Terms of Reference have been signed or approved by the International Court of Arbitration, and [Page19:] thus avoids the potential delay that existed under the old Rules. It allows a considerable amount of time to be saved and the practical recommendations of the 1992 Commission Report in this regard14 to be obviated. Today, non-payment of the remaining advance on costs by one or all of the parties gives the Secretary General the right to suspend the arbitral proceedings after consulting with the arbitral tribunal (Article 30(4) of the 1998 Rules).

III. The practical impact of the 1998 changes

When one thinks of the criticism made of the Terms of Reference and especially the list of issues to be determined prior to the 1998 revision, it is remarkable that there has been no substantial change of practice in connection with this document and that the vast majority of parties and arbitrators identify and agree on the contentious issues despite the possibility of opting out.

The new requirement that the arbitral tribunal establish and adhere to a provisional timetable for the following proceedings seems to increase the expediency and foreseeability of ICC arbitration. We believe that such a timetable is part of 'good practice' for any arbitral proceedings. However, a few more years' experience is necessary to evaluate in detail the practical impact of this requirement. The viability of the provisional timetable is guaranteed by the described disjunction between the coming into operation of the Terms of Reference and the full payment of the advance on costs. This is helped by the current practice of the Secretariat of the International Court of Arbitration for the advance on costs to be normally paid in full or guaranteed when the Terms of Reference are submitted to the International Court of Arbitration.

The Terms of Reference continue to be a useful tool of 'process management', particularly when all parties participate. The degree to which elaborate procedural rules supplementing the ICC Rules are to be included in the Terms of Reference depends on the requirements of the particular case. We believe that arbitral proceedings should not be 'over-killed' by specific rules and that, consequently, the general provisions of the ICC Rules will normally be fully sufficient, unless there is a manifest need for specific rules. This may be the case where the guarantee of confidentiality is an important issue. Specific provisions regarding the taking of evidence15 might be advisable, if the parties come from markedly different procedural cultures.

1
ICC International Court of Arbitration Bulletin, vol. 3/no. 1, May 1992, pp. 24-43 (hereinafter referred to as 'the 1992 Report').

2
Erik Schäfer, 'The ICC Arbitral Process - Part II: Terms of Reference in the Past and at Present', ICC International Court of Arbitration Bulletin, vol. 3/no. 1, May 1992, pp. 8-13, esp. p. 13; Michael E. Schneider, 'The Terms of Reference', ICC International Court of Arbitration Bulletin Special Supplement 'The New 1998 ICC Rules of Arbitration', 1997, pp. 26-37.

3
This article is not the outcome of a Working Party of the ICC Commission on International Arbitration.

4
Article 18(1)(d) of the 1998 Rules provides that the Terms of Reference shall include a list of issues to be determined, unless the arbitral tribunal considers it inappropriate.

5
The 1992 Report, nos. 118-124; Schneider, op. cit., pp. 28-29.

6
An internal study carried out at the Secretariat of the International Court of Arbitration revealed that there appears to be no significant change in practice, regarding the inclusion or exclusion of the list of issues to be determined, if one compares practice under the 1988 Rules with that under the 1998 Rules. It should be said that at the time the survey was carried out the number of Terms of Reference submitted under the 1998 Rules was not sufficient to arrive at a statistically meaningful result. However, Secretariat staff have more recently confirmed this observation.

7
These are the figures for cases which were withdrawn after the transmission of the file to the arbitral tribunal: 1994=66, 1995=76, 1996=73, 1997=76, 1998=99, 1999=75 (Source: ICC International Court of Arbitration Bulletin, vol. 10/no. 1 for 1994-98; Secretariat for 1999).

8
See, for example, Edward de Bono, De Bono's Thinking Course, revised edition 1993, pp. 35-51 on perception and patterns, pp. 55 et seq. on pattern changing, and pp. 85-100 on other people.

9
William Ury, Getting past No. - Negotiating your way from confrontation to co-operation, New York 1993, pp. 9-14 and 78-104.

10
Schneider, op. cit., pp. 28 et seq.

11
The 1992 Report, p. 35, no. 121: 'The issues to be determined shall be those resulting from the parties' submissions and which are relevant to adjudication of the parties' respective claims and defenses. In particular, the arbitral tribunal may have to consider the following issues (but not necessarily all of these and only these, and not in the following order): '

12
The 1992 Report, no. 148.

13
The 1992 Report, nos. 151 and 158.

14
The 1992 Report, nos. 200-230.

15
See, for example, the IBA Rules for the taking of evidence, which endeavour to establish a fair compromise between concepts cherished in traditional continental European proceedings and US procedural traditions.