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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
At a recent session of the ICC International Court of Arbitration, the Court's Chairman Dr Robert Briner remarked, in connection with an issue that had arisen during the session: 'Ah, yes, this raises the age-old issue of the mandatory nature of the ICC Rules of Arbitration-whether and to what extent the parties may derogate from the Rules.' The more I thought about it, the more intrigued I became with the issue flagged by Dr Briner because it directly concerns which of the Rules, the ICC Court considers, or should consider, to be most essential to ICC arbitration. It also struck me as an issue of practical importance insofar as the ICC Court may refuse to administer an arbitration if, in their arbitration agreement, the parties have purported to dispense with or modify features of ICC arbitration that the Court considers to be mandatory, and if, when a dispute arises, they decline to abandon those derogations from the ICC Rules upon the Court's request. And yet, for such an 'age-old', intriguing and significant issue, I found surprisingly little guidance as to the mandatory nature of the Rules in either the Rules themselves or in any published commentaries. Indeed, the most useful guidance I found on the topic was in passing references by former Secretary-Generals Yves Derains and Eric Schwartz in their commentary on the ICC Court's practices under the Rules, 1 reflecting the fact that the debate concerning the mandatory nature of the ICC Rules has to date remained largely within the confines of the ICC Court. I thought it might be useful, both for parties considering less than wholesale adoption of the ICC Rules and for the Court itself, to air this debate more publicly. I also could think of no better occasion to do so than in honor of the man who has chaired the ICC Court through one of the periods of greatest expansion, innovation and transparency in ICC arbitration. [Page845:]
The first part of this article sets forth a framework for justifying and identifying the mandatory nature of particular ICC Rules of Arbitration. 2 It addresses three questions: First, if arbitration is a creature of consent and contract, why should any of the ICC Rules be deemed mandatory? Put another way, by what authority can the ICC Court refuse to honor parties' agreements as to which Rules they wish to govern their arbitration? 3 Second, assuming the Court can and should hold certain of the ICC Rules inviolate, should it identify those mandatory Rules for the benefit of parties drafting their arbitration agreements? Third, what criteria should be used to determine whether a particular Rule should be deemed mandatory? The second part of the article examines which particular ICC Rules should, in fact, be deemed mandatory. I focus on Rules that, in practice, parties are most likely to consider eliminating or modifying, as well as Rules that present the issue in a particularly interesting way. And I have never stopped asking: what would Dr Briner say?
I. A framework for the analysis of mandatory arbitration rules
A. Justification for mandatory Rules
Since arbitration is a creature of contract and the ICC Rules only apply in the first place because parties agree to have them apply, why should parties be required to accept any arbitration rules that they agree should not apply? Indeed, several of the leading sets of international arbitration rules appear to allow unlimited party derogations from those rules. 4 The ICC Rules, by contrast, do[Page846:]
not contain a similar general provision giving the parties seemingly unlimited power to derogate from them. Instead, certain provisions within the Rules expressly contemplate possible derogations by the parties. 5 All of the other Rules are silent as to the possibility of derogations by the parties, leaving the ICC Court free to refuse to administer an arbitration where the parties have agreed to modifications of the Rules that are not foreseen in the Rules themselves. 6 By what authority can the Court do this? Even if authorized in theory, should the Court in practice really refuse to administer arbitrations just because the parties have, in the Court's view, impermissibly modified the Rules?
The answer to both questions, in my view, is yes. As Derains and Schwartz have written:
Insofar as the ICC, by issuing its Rules, can be said to make an offer to the public to administer arbitrations in accordance therewith, the ICC can reasonably also take the position that it is not obligated to accept to administer cases where the parties have made alterations of the Rules that the Rules do not contemplate. 7
Thus, basic offer-and-acceptance contract principles vest the ICC Court with authority to determine that any of its Rules of Arbitration that do not expressly permit party derogations are, in fact, effectively mandatory. 8 Authorized in theory, the Court's practice vis-à-vis mandatory arbitration rules is also desirable in practice. As any arbitration lawyer who has advised parties with respect to their arbitration clauses knows, parties can agree to the most pathological things. Indeed, in my experience, parties frequently provide for ICC arbitration but then prescribe specific procedures for the arbitration that are either completely unworkable or threaten the enforceability of the award. The Court serves a useful function in protecting the parties from themselves and the Court from[Page847:]
the potentially disastrous consequences of the parties' pathological derogations from the ICC Rules. The question remains, however, as to how and where to draw the line as between mandatory and non-mandatory rules of arbitration.
B. How to draw the line: express black-letter rules or case-by-case determinations
The text of the ICC Rules does not identify which of the Rules are mandatory. Rather, the ICC Court makes that policy determination on a case-by-case basis. The principal disadvantage of this approach is its lack of transparency: parties considering modifying the Rules do not know in advance whether those modifications will be accepted by the Court. 9
On balance, however, the advantages of the Court's case-by-case approach outweigh its disadvantages. Most importantly, this approach gives the Court flexibility in determining whether to accept a derogation from the Rules in any particular case. In that connection, the issue as it arises in practice is not always (or even usually) whether a Rule is entirely inviolate in principal, but rather whether a particular modification to the Rule agreed by the parties is acceptable to the Court in light of the specific nature and extent of the modification and the circumstances of the case. A 'black-letter'approach that expressly identifies which Rules are mandatory would, in fact, likely result in fewer modifications being permitted since partial modifications would be precluded by the express and inflexible mandatory nature of the Rule in question. The Court's flexibility in policing derogations would similarly be hampered if, conversely, the Rules[Page848:]
expressly identified every provision that is open to modification by the parties, as the Court would be bound to respect such derogations no matter how pathological. 10 Black-letter provisions identifying which of the Rules either are or are not mandatory would also likely tempt parties more frequently to take liberties with the non-mandatory Rules, which would be unfortunate because party derogations from the Rules are almost always ill-advised. The better approach is to encourage parties to consult the Secretariat of the ICC Court if they have any uncertainties when considering a particular derogation from the Rules.
Indeed, the Working Party principally responsible for the 1998 revisions to the Rules specifically considered this issue, and concluded that the mandatory nature of the Rules was best resolved on a case-by-case basis by the Court rather than in the Rules themselves. 11 Nevertheless, some general criteria for determining which and to what extent particular Rules may be deemed mandatory may be useful both for parties considering whether to derogate from those Rules and for the ICC Court in deciding whether to accept party derogations.
C. Where to draw the line: criteria for determining mandatory rules and permissible derogations
What criteria should guide the ICC Court in determining, on a case-by-case basis, which ICC Rules are mandatory and which derogations are permissible? The statement of the Court's mission in Article 1(1) of the Rules provides a starting point for developing appropriate criteria:
The function of the Court is to provide for the settlement by arbitration of business disputes of an international character in accordance with the Rules of Arbitration of the International Chamber of Commerce (the 'Rules').
Thus, the Court must provide not only for arbitration of business disputes, but for ICC arbitration in particular. From this twin duty, two corresponding general considerations in determining which Rules should be deemed mandatory may be extrapolated: first, whether a Rule is essential to the fairness, efficacy and enforceability of arbitration as a means of dispute resolution generally and, second, whether the Rule constitutes an essential and distinctive feature of ICC arbitration in particular. These general considerations may be broken down into the following particular criteria:
General arbitration criteria
(i) Is the Rule necessary to ensure the integrity of the arbitral process? Rules concerning the independence of arbitrators are obvious examples of Rules implicated by this criterion.
(ii) Is the Rule necessary to ensure the quality of the arbitral process? This criterion implicates Rules concerning how the arbitration is conducted and the due process and other quality controls in place for that process. [Page849:]
(iii)Is the Rule necessary to safeguard the enforceability of the award? This criterion implicates Rules ranging from the requirement of a reasoned award to those requiring compliance with mandatory procedural law.
ICC-specific criteria
(iv)Does the Rule constitute an essential and distinctive feature of ICC arbitration in particular? The Rules concerning the Terms of Reference and the Court's scrutiny of the award are the most obvious examples of Rules unique to ICC arbitration that distinguish it from other forms of international arbitration.
(v)Is the Rule necessary for the ICC Court to perform its essential administrative functions under the Rules? It may be argued, for example, that the Terms of Reference and the requirement of a reasoned award are necessary for the Court to perform its scrutiny of awards.
(vi) Finally, is the Rule necessary to provide the requisite finances and immunity for the ICC and ICC arbitrators? The Rules concerning arbitration costs and arbitral immunity are indicated by this criterion.
The general criteria concerning the integrity, quality and enforceability of the arbitral process could be applied to determine the mandatory nature of any set of arbitration rules, not just those of ICC. The ICC-specific criteria, by contrast, are relevant only to ICC arbitration. Although the latter may indeed relate to and enhance the integrity, quality and enforceability of the arbitral process too, they can hardly be deemed indispensable to those ends, as they are not found in any other arbitration rules, which are also designed to ensure the fairness and efficiency of the arbitral process. Finally, some Rules may involve more than one of these criteria, and may not only be essential to the integrity, quality and enforceability of the arbitral process but also constitute distinctive features of ICC arbitration. Other Rules may not sufficiently implicate any of these criteria, and therefore should not be deemed mandatory. The challenge, to which the remainder of this article turns, is to determine which Rules are of which kind. [Page850:]
II. Potentially mandatory ICC Rules
As noted, the Court considers on a case-by-case basis whether to accept to administer an arbitration where the parties' arbitration agreement purports to derogate from the ICC Rules. Applying the criteria outlined in the preceding section, certain of the ICC Rules will likely be deemed inviolate in all cases because they are absolutely essential to the fairness and efficacy of the process and/or constitute a distinctive and essential feature of ICC arbitration. The Court's scrutiny of awards is probably the best example of such an inviolate feature of ICC arbitration. Other Rules, although mandatory in principle, may nevertheless admit some derogation provided the essential function of the Rule is preserved. Finally, the remaining Rules may freely be modified or eliminated altogether by the parties. The following focuses on those Rules most likely to be deemed mandatory, in whole or in part.
A. Rules concerning the functioning of the Court and commencement of arbitration (Articles 1-6)
The provisions of Article 1(2)-(5) describe the role and functioning of the Court and its constituent parts. Article 1(2) explains that the Court does not itself settle disputes, but rather that its function is to ensure the application of the ICC Rules. While it is clear that parties may not require the Court itself to settle disputes-a role it is neither prepared nor well-suited to perform-parties may nevertheless seek to reallocate responsibility for the Court's various administrative tasks among the constituent organs of the Court. In an effort to speed up the arbitral process, for example, parties may seek to transfer responsibility for certain tasks that are ordinarily performed by the full Court (in either plenary or committee session)-such as the appointment of arbitrators or, less likely, the scrutiny of the award-to the Chairman or the Secretary General of the Court. Can they do this?
The short answer should be: to a limited extent. In the past, parties have sought to use Article 1(3), which authorizes the Chairman to take 'urgent' decisions on behalf of the Court, to insist that the Chairman, rather than the full Court, appoint arbitrators or scrutinize an award. 12 This typically happens in so-called 'fast track' arbitrations. The Court and its Chairman, however, have always retained ultimate authority and discretion to determine which matters the Chairman alone may decide as a matter of urgency under Article 1(3), and which matters may be delegated to a committee under Article 1(4). The same case-by-case consideration will likely be accorded where any party attempts to delegate the Court's responsibilities. Any attempt to delegate all or substantially all of the Court's functions to its Chairman or Secretary General will not and[Page851:]
should not succeed as the role of the Court is generally perceived to be vital to the ICC arbitral system and the allocation of administrative responsibilities within the Court essential to its proper performance of that role. 13
But what if, rather than delegating responsibility from the full Court down to its constituent parts, the parties try to reallocate responsibility upwards from one of the Court's constituent parts (for example, a committee of the Court or the Secretariat) to a plenary session of the Court? Such a reallocation would not threaten the vital role the Court plays in ICC arbitration; on the contrary, it would presumably be intended to take even greater advantage of the full Court's diversity of composition and breadth of experience. Nevertheless, the Court's powers of delegation under Article 1(4)-which, together with Article 4(5)(a) of the Court's Internal Rules, authorizes the Court to delegate decisions to a committee-should be deemed absolute. 14 Parties may request that certain decisions ordinarily taken by a committee or the Secretariat be taken by the Court at a plenary session, but the Court will always retain (and should usually exercise) discretion to deny that request. The mandatory nature of the Court's powers of delegation is necessary as a practical matter, for it is only through such delegation of its less essential or more ministerial responsibilities that the Court can fulfill all of its administrative functions.
Article 6(1) provides that the version of the Rules in effect when the arbitration is commenced applies unless the parties have agreed to the version in effect on the date of their arbitration agreement. But why should parties be limited to the Rules in effect at the time of the arbitration or their arbitration agreement? What if the parties want to agree to the Rules in effect prior to 1998, which did not require the claimant to make a preliminary advance on costs, or to the pre1975 Rules, which did not require Terms of Reference? 15 One commentator[Page852:]
has described the ICC's attempt to prescribe the applicable version of the Rules as going 'to the heart of the issue of derogation'. 16 The fact is, however, that an arbitral institution should not be required to administer a set of rules that have been replaced and that it is no longer prepared to continue administering. The principal problem is largely practical: administering arbitrations under a version of the Rules other than that currently in effect requires the Secretariat and the Court to follow a different set of Rules from usual and therefore imposes an additional administrative burden on those bodies. The problem is only compounded when the chosen version of the Rules impacts either the financial aspects of the arbitration or affects one of the essential features of ICC arbitration, such as the Terms of Reference. Article 6(1) strikes a balance between the respective interests of the ICC and the parties in relation to the Rules to be applied when changes have been made to those Rules. 17 It is a balance that the parties should not be able to upset without the ICC's concurrence.
Article 6(2) provides that if a party challenges arbitral jurisdiction, the ICC Court may nevertheless set the arbitration in motion if it is prima facie satisfied that an arbitration agreement may exist, subject to the arbitral tribunal's ultimate responsibility to decide challenges to its jurisdiction. May the parties, with a view to speeding up the arbitral process, dispense with the Court's gate-keeper prima facie jurisdictional determination? Conversely, may parties increase the Court's role vis-à-vis jurisdiction-for example by providing that the Court alone shall decide any jurisdictional challenges, thereby depriving the respondent of two bites at the jurisdictional apple? The answer to both questions will likely be no, although the first question is a closer call.
The Court is not likely to agree to abandon its Article 6(2) function because its prima facie review of jurisdiction is a distinctive feature of ICC arbitration. In practice, it also serves the useful function of avoiding setting an arbitration in motion in the absence of any evidence of an arbitration agreement. The fact that Article 6(2) decisions of particular difficulty are submitted to a plenary session of the Court evidences the importance ascribed to Article 6(2) by the Court. Nevertheless, one may legitimately question whether this threshold prima facie inquiry into jurisdiction is absolutely essential. Other arbitral institutions[Page853:]
do not perform a similar jurisdictional gate-keeping role, 18 and the ICC Court only infrequently in fact declines to set an arbitration in motion, so the absence of the prima facie jurisdictional inquiry would not affect the large majority of arbitrations. Finally, parties who wish to challenge jurisdiction would retain the full opportunity to do so before the tribunal once it is constituted.
On the other hand, parties clearly should not be able to expand the Court's jurisdictional role to encompass the arbitral tribunal's authority to finally decide jurisdictional challenges. While prior to 1955, the Rules provided that, in the event of a disagreement between the parties as to 'whether or not they are bound by an arbitration clause', this issue would be decided by the ICC Court itself, 19 the Court, as an administrative body, simply is not well-suited to address and resolve the kind of contested issues of fact and law that frequently arise in jurisdictional challenges. In particular, neither the parties, their lawyers nor any witnesses appear in person before the Court and the Court does not issue reasoned decisions as arbitral tribunals do.
Article 6(3) provides that if any of the parties fails to take part in the arbitration, 'the arbitration shall proceed notwithstanding such refusal or failure'. 20 By providing that the arbitration shall proceed, Article 6(3) reflects the general rule in international arbitration that arbitrators may not issue default awards. Default awards are frequently available in common law countries, however, and allowing default awards may save claimants the time and expense of going through the motions of full arbitral proceedings to obtain awards whose enforceability may be uncertain where respondents are domiciled. May the parties modify Article 6(3) so as to authorize the issuance of default ICC awards? The Court's principal concern would likely be with the enforceability of the award. But such concerns of enforceability should not, at least in theory, be paramount where the parties have agreed in advance to the issuance of default awards. Thus, I think that the Court and arbitrators should accept party agreements on default awards, at least where such default awards do not contravene mandatory law at the place of arbitration or likely enforcement, in order to avoid forcing the Court, arbitrators and parties to go through the motions of an arbitral proceeding where one party has refused to participate. [Page854:]
B. The arbitral tribunal (Articles 7-12)
The ICC Rules allow the parties considerable autonomy in constituting the arbitral tribunal. But what are the limits to that autonomy? It is useful to distinguish between Articles 7, 11 and 12 concerning the independence, challenge and replacement of arbitrators-which are silent as to party autonomy-and Articles 8, 9 and 10 concerning the number and appointment of arbitrators and multiple party situations-which, by Article 7(6), are specifically made subject to contrary agreement by the parties. 21 But neither the apparently mandatory nature of Articles 7, 11 and 12, nor the apparently permissive nature of Articles 8, 9 and 10, is absolute.
The first and second paragraphs of Article 7 require that all ICC arbitrators be independent and impose various disclosure obligations on them with respect to potential conflicts of interest. Can the parties dispense with these independence and disclosure obligations altogether? Can they dispense with them for party-nominated arbitrators in particular, as historically was the case in the United States? Can the parties define how ICC should assess and determine independence; more specifically, can the parties provide for the new IBA Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines) to be applied in ICC arbitration?
It is quite clear that parties may not dispense with the independence requirement altogether. The independence of arbitrators is essential to both the integrity of the arbitral process and the enforceability of the award. 22 Nor will or should the ICC Court allow parties to waive the independence requirement for party-appointed arbitrators. While some commentators have suggested that parties may agree to waive the independence requirement for the party-nominated[Page855:]
arbitrators in ICC arbitration, this is not, in fact, the policy of the Court. Indeed, the Court has occasionally refused to confirm the appointment of party-nominated arbitrators whom it has not considered to be independent even though the parties had no objection to those arbitrators. Based on my own experience, the US system of partisan party-appointed arbitrators infects the integrity of the arbitral process, effectively reduces a tribunal of three members to one, and puts inordinate pressure on the chairman to compromise in order to obtain a majority award. An award rendered by a tribunal that includes partisan party-appointed arbitrators will also be unenforceable in many jurisdictions where independence is required of all arbitrators. 23
The parties also probably cannot insist that the ICC Court adopt any particular definition of independence for the purpose of confirming, appointing, challenging or replacing arbitrators, including wholesale adoption of the IBA Guidelines. ICC has made clear that it has not adopted the IBA Guidelines, although parties, of course, remain free to cite them in their submissions to the ICC Court concerning challenges. The ICC has also made clear that it will not be bound by the IBA Guidelines even if the parties, in their arbitration agreement, purport to require their application. Indeed, one of the principal reasons for leaving the requirement of independence undefined in Article 7 was to afford the Court flexibility to determine, on a case-by-case basis, whether the requirement was satisfied. 24 On the other hand, the IBA Guidelines (apart from the 'Green List' discussed below) do not appear to differ so radically in content from the principles and practices adhered to by the Court with respect to independence as to warrant the Court's refusal to administer an arbitration where the parties have stipulated the application of those Guidelines. The one area where the IBA Guidelines are (justifiably) not palatable to the Court is the IBA's 'Green List' of facts and circumstances that do not warrant disclosure. The Court undoubtedly will not (and should not) agree to immunize from disclosure any[Page856:]
facts or circumstances which the prospective arbitrator considers 'might be of such a nature as to call into question the arbitrator's independence in the eyes of the parties', as provided in Article 7(2). 25
Another interesting issue under Article 7 is whether parties may require that the Court issue reasoned decisions for its rulings on the appointment, confirmation, challenge or replacement of an arbitrator notwithstanding Article 7(4), which specifically states that 'the reasons for such decisions shall not be communicated'. Requiring reasoned decisions concerning independence could enhance the transparency and hence legitimacy of the process of constituting the arbitral tribunal, as well as develop a body of decisional law on the topic that would promote greater uniformity in defining independence generally. In particular, dissemination of ICC Court decisions on challenges could help reduce unnecessary challenges by forewarning the parties as to the likely fate of those challenges. There are, however, several arguments explaining why Article 7(4) expressly prohibits communication of the reasons for the Court's decisions: to preserve the confidential nature of the Court's internal administrative duties; to ensure that challenges are resolved expeditiously without the need to prepare and achieve consensus on written decisions; to avoid causing embarrassment or offence to the arbitrators being challenged; and to circumvent disputes with the parties about the grounds for the challenge, which could subject the award to attack in the courts. For all these reasons, it is hard to imagine the Court ever agreeing to provide reasons for its decisions with respect to the independence of arbitrators.
Articles 8, 9 and 10 of the ICC Rules-which deal with the number, appointment and confirmation of arbitrators as well as the constitution of the tribunal in multi-party arbitrations-are expressly stated, in Article 7(6), to apply '[i]nsofar as the parties have not provided otherwise'. Even if subject to party derogation, however, how much is too much derogation from these Rules? [Page857:]
For example, can the parties agree to a number of arbitrators other than the one or three arbitrators prescribed by Article 8(1)? The answer in most cases should be yes. 26 Indeed, the standard ICC arbitration clause published with the Rules specifically provides for arbitration 'by one or more arbitrators appointed in accordance with the said Rules' (italics added). In the past, moreover, the Court has permitted an arbitral tribunal comprising four members to be constituted. 27 The parties' ability to dictate the number of arbitrators is not absolute, however. For example, the Court has taken the position that parties cannot agree to arbitration before two arbitrators with an 'umpire' designated to resolve disputes in the event of disagreement between the two arbitrators, as this would be inconsistent with the basic scheme of the Rules for the constitution of the tribunal. 28
To what extent may parties derogate from the requirements in Articles 8 and 9 that the ICC Court confirm any arbitrators nominated by the parties, appoint any arbitrators on which the parties cannot agree, and use the national committee procedure to appoint such arbitrators? Notwithstanding the fact that the appointment of arbitrators has long been considered one of the ICC Court's most important functions, the Court has not objected where parties have provided for other arbitral institutions or judicial authorities to designate arbitrators for ICC arbitrations. In those instances, however, the Court has nevertheless taken the position that the designation of arbitrators by an entity other than the Court is subject to the Court's confirmation, and that the Court remains competent to rule on challenges to all ICC arbitrators. 29 The Court's authority to confirm arbitrators designated by others to serve as ICC arbitrators has therefore been deemed mandatory as a distinctive feature of ICC arbitration that serves a conflicts/quality-control function. [Page858:]
By virtue of Article 7(6), the parties should also be free to dispense with the national committee procedure for appointing arbitrators prescribed in Article 9(3). This is so even though the national committee procedure for appointing arbitrators is a distinctive feature of ICC arbitration and provides a valuable international network for the identification of appropriate candidates around the world. Thus, the parties may by-pass the national committees and designate the Chairman or Secretary General of the Court to appoint arbitrators as a means of accelerating the appointment process.
What, then, are the limits to the parties' power to derogate from the provisions of Articles 8-10? One possible limitation may lie in the third and fourth paragraphs of Article 8, which provide for appointment by the Court of any arbitrator that the parties fail to nominate. It may be asked, for example, whether the parties may agree that, if one party refuses to participate in the arbitration and/or nominate its arbitrator, the non-defaulting party may designate the arbitrator or arbitrators to sit on the tribunal. Such a provision could encourage a recalcitrant party to participate in the arbitration and avoid delays caused by the recalcitrant party's refusal to participate. However, allowing one party unilaterally to designate the tribunal to resolve its claim potentially threatens the integrity of the arbitral process and enforceability of any award ultimately rendered by that tribunal. Nevertheless, on balance, I think the Court should accept such a provision, provided it does not contravene a mandatory law at the place of arbitration or likely place of enforcement. 30 The Court, however, should retain its authority to refuse to confirm an arbitrator selected unilaterally by one party where there is reason to believe the arbitrator lacks the independence required under Article 7. [Page859:]
The proviso in Article 7(6) permitting party derogations does not extend to Articles 11 and 12, which concern the challenge and replacement of arbitrators, respectively. Thus, in principle, Articles 11 and 12 are mandatory. The parties,
for example, cannot authorize anyone other than the ICC Court-including a different arbitral institution, a national court or the arbitral tribunal itself-to rule on challenges to arbitrators. 31 The Court's powers of removal are likely to be deemed necessary quality controls, although one may legitimately ask why, if parties are allowed to choose a different appointing authority, they cannot also vest that appointing authority with responsibility for ruling on challenges (at least on grounds of independence) to the arbitrators it appoints.
Notwithstanding the ostensibly mandatory nature of Articles 11 and 12, parties may be able to nibble around the edges of those Rules. Parties, for example, have express authority under Article 32(1) to shorten the time limits for raising challenges prescribed by Article 11. There is also no reason why parties should not be able to derogate from the fourth and fifth paragraphs of Article 12, which provide that, when an arbitrator is removed, the Court has discretion to decide whether or not to follow the original nominating process to replace that arbitrator, or, subsequent to the closing of the proceedings, to allow the remaining arbitrators to continue the arbitration without replacing the removed arbitrator. Thus, parties should be able to require that the original nominating process be followed, require the recommencement of the proceedings after an arbitrator has been replaced, and/or require that the remaining arbitrators complete the arbitration without replacing the removed arbitrator. Whether any of these possible derogations from the Rules would be well-advised is, of course, another question (and dubious at best).
C. The arbitral proceedings (Articles 13-23)
Articles 13-23 govern the conduct of the arbitral proceedings, which, consistent with basic principles of party autonomy, should be subject to modification by the parties if they so choose. Thus, for example, parties should be able to authorize the tribunal to fix the place of arbitration, even though Article 14(1) vests that authority with the Court. Parties should also be able to preclude the tribunal from appointing its own experts even though Article 20(4) allows it to do so. Similarly, parties should be able to divest the tribunal of authority under Article 20(5) to require any party to provide additional evidence. Articles 15 and 18, which govern the applicable procedural rules generally and the Terms of Reference specifically, may be a different story, however. [Page860:]
Article 15(1) establishes a hierarchy among the procedural rules to govern the arbitration: first, the Rules themselves apply; second, where none of the Rules applies, any rules agreed by the parties apply; lastly, any rules the arbitral tribunal may prescribe apply. This hierarchy flows from the consensual nature of arbitration generally: the Rules apply because the parties have chosen them; the parties may agree on any additional rules they wish; and, in the absence of party agreement, the arbitrators whom the parties have vested with authority may designate appropriate rules. An interesting issue is whether parties may alter that hierarchy by vesting the arbitrators with primary authority to determine the rules of procedure, subject to any mandatory ICC Rules, failing which the parties may agree on such rules of procedure. In effect, may the parties use their autonomy to divest themselves of that very autonomy in favor of the arbitrators' authority over the procedural conduct of the arbitration? I can think of no reasons why not (and of a number of arbitrators who would welcome such an arrangement). 32 After all, whose arbitration is it anyway?
Article 15(2) requires that the arbitral tribunal 'act fairly and impartially and ensure that each party has a reasonable opportunity to present its case'. Integrity and quality concerns dictate that parties may not derogate from the requirement that the tribunal act fairly and impartially. But to what extent may the parties define, limit or dispense with the 'reasonable opportunity to present [their] case' otherwise guaranteed by the Rules? When drafting arbitration clauses, parties all too often seek to 'fast track' their contemplated arbitration procedure by providing unworkably short deadlines for different phases of the proceedings or for the final award, 33 or by dispensing with such things as disclosure, witnesses, hearings and/or any form of argument before the tribunal. How far can parties go in curtailing their own due-process rights? Ultimately, the Court should retain discretion to determine, on a case-by-case basis, what derogations from the parties' 'reasonable opportunity to present [their] case' may be acceptable. This is necessary both for the quality of the arbitral process and the enforceability of the award. 34[Page861:]
The Terms of Reference are undoubtedly one of the most distinctive features of ICC arbitration. No other leading set of international arbitration rules requires Terms of Reference. The advantages of Terms of Reference-which enable parties and arbitrators to identify the issues to be resolved and define the scope of the arbitrators' mandate, and the Court to verify that all of the parties' claims have been decided when scrutinizing arbitrators' draft awards-have long been extolled by the ICC and commentators. 35 More recently, the Working Group on the 1998 Rules considered whether the Rules should continue to require Terms of Reference or, alternatively, make the Terms of Reference optional. 36 The Working Group ultimately reconfirmed the Terms of Reference as a requirement and declined to make them optional. For all these reasons, the Terms of Reference have long been considered a mandatory feature of ICC arbitration that the parties may not contract away. 37
But is this right? Even if the Terms of Reference are not expressly made optional in the Rules-which might tempt parties to dispense with what many, if not most, believe to a useful feature of ICC arbitration-should they, in fact, be mandatory? Terms of Reference certainly are not indispensable to the integrity, quality and enforceability of the arbitral proceedings and award, and some commentators criticize them for adding delay and expense to the proceedings without commensurate benefits. Moreover, several of the teeth of this requirement have already been removed: the requirement that the Court approve the Terms of Reference was eliminated (except where one of the parties does not sign them) in 1975; the requirement that the Terms of Reference define the issues to be resolved in the arbitration-arguably the most important function of Terms of Reference-was made optional in 1998; and the Court's current role vis-à-vis Terms of Reference is limited to 'taking note' of them at a committee session. Exceptions have also been developed in practice. For example, the Court does not require Terms of Reference where the parties have agreed to dispense with them for the purpose of settling the case by means of a consent[Page862:]
award. Nor are Terms of Reference required prior to the arbitral tribunal ordering any necessary interim relief. In short, while the Terms of Reference serve many useful functions, one may wonder whether they are so essential to the quality of proceedings or nature of ICC arbitration as to be deemed mandatory.
D. Awards (Articles 24-29)
Article 25(1) provides that the award in a case involving a three-member tribunal must be given by a majority decision or, in the absence of a majority, by the chairman alone. Both the majority requirement and the chairman's authority to decide in the absence of a majority are likely to be deemed mandatory by the Court, but for different reasons. Parties should not be able to derogate from the majority requirement by insisting on a unanimous award because unanimity may not be possible to achieve-particularly by tribunals that include party-nominated arbitrators-and could therefore present an insuperable obstacle to the issuance of an enforceable award. 38 The power of the chairman to decide absent a majority, on the other hand, is not indispensable to the tribunal's ability to render an enforceable award. 39 Rather, the power of the chairman to decide alone has been considered by some to be mandatory precisely because it is a distinctive characteristic of ICC arbitration and because it serves to promote the integrity of decision-making under the ICC Rules. 40 While I personally[Page863:]
view the chairman's power to decide alone as a very desirable feature of the ICC Rules, one may legitimately ask whether it is so unique to ICC arbitration41or so indispensable to the integrity of the decision-making process as to permit no derogation. 42
Article 25(2) requires that the award state the reasons upon which it is based. The requirement that awards be reasoned is consistent with modern international arbitration practice and serves several useful functions: as a quality control against unprincipled compromise awards, as a basis for reviewing awards in judicial confirmation or annulment proceedings, and as justification for awards that the losing party might otherwise decide to challenge. In ICC arbitration, the award's reasoning also provides the principal basis for the Court's scrutiny of the award.
Notwithstanding these benefits of reasoned awards, I do not think the reasoning requirement should be mandatory. The requirement that the award be reasoned can make arbitration more expensive and slow. The reasoning, if flawed, can also potentially encourage losing parties to challenge awards. It is principally for the latter reason that, as a general rule, US courts do not require reasoned awards in domestic arbitrations. 43Moreover, before Article 25(2) was added to the Rules in 1998, the Court generally required awards to be reasoned, but did not require reasons where the parties agreed that no reasons should be given and this was permitted by the law at the place of arbitration. 44I see no reason to deviate from the Court's prior practice in that regard. 45[Page864:]
The Court's scrutiny of draft awards is a fundamental and distinctive feature of ICC arbitration. It is a valuable means of quality control that serves to enhance the enforceability of awards. For these reasons, and notwithstanding any criticisms of the Court's scrutiny of awards, the Court would in all likelihood refuse to administer any arbitration where the parties sought to dispense with that scrutiny process. Indeed, when the Working Party was charged with responsibility for preparing the 1998 Rules, preservation of the scrutiny process was an express part of its mandate. 46
This is not to say, however, that no modification of the Article 27 scrutiny process is possible. Interesting potentially open issues include: may the parties limit the Court's scrutiny to matters of form and not substance? 47 Can they dispense with scrutiny of interim or otherwise non-final awards? May they agree that awards need only be scrutinized by a committee of the Court rather than at a plenary session of the Court? 48
Just as parties may not eliminate the Court's scrutiny of awards, so they should not be able to expand the scope of the Court's scrutiny. Parties concerned about the absence of any substantive recourse or appeal against an arbitration award may be tempted to try to convert the Court into an arbitral appellate body by conferring upon it more substantive powers of review and appeal. It is hard to imagine the Court ever agreeing to assume such an expanded role in scrutinizing awards, however, not only because it is a bad idea but also because the Court is neither positioned nor equipped to assess any contested issues of fact or law addressed in arbitrators' awards. 49[Page865:]
Article 28(6) provides that every award 'shall be binding on the parties', and that the parties are 'deemed to have waived their right to any form of recourse insofar as such waiver can validly be made'. May parties derogate from this provision by providing for rights of recourse beyond those that cannot validly be waived? For example, may parties provide that awards shall not be binding until confirmed by a national court and/or that a national court may review awards for errors of law or other grounds beyond those limited grounds ordinarily available under national arbitration law?
Contractual attempts to expand judicial review of arbitration awards are almost always a bad idea because they undermine the speed and finality of arbitration. It is also doubtful that courts would honor such attempts to expand judicial review of awards since, among other things, the scope of
State judicial review is the exclusive province of the State's legislature and judiciary. 50 Nevertheless, the waiver of recourse provisions of Article 28(6) should not be deemed mandatory from the Court's perspective because the Court completes its functions under the Rules when it issues the award-the subsequent treatment and fate of that award before national courts is beyond the ICC's responsibility and control. If the parties unwisely wish to subject that award to greater judicial review than is normally prescribed under national law, that should be their problem, not the ICC's.
E. Costs/miscellaneous (Articles 30-35)
Articles 30 and 31 concern ICC administrative costs, arbitrators' fees and expenses and the parties' legal fees and costs. Both the ICC's administrative expenses and the arbitrators' fees are fixed by the Court, which does so by applying the ICC cost scales keyed to the sum in dispute in the arbitration. The ICC costs system-most notably, the notion of basing administrative and arbitrator fees on the amount in dispute rather than on an hourly or daily rate- is a distinctive feature of ICC arbitration.
Indeed, it is hard to imagine that the Court would accept party efforts to reduce ICC administrative fees, which finance the ICC's operations. As for arbitrators' fees, Article 2(4) of Appendix III to the Rules specifically states (italics added): [Page866:]
The arbitrator's fees and expenses shall be fixed exclusively by the Court as required by the Rules. Separate fee arrangements between the parties and the arbitrator are contrary to the Rules.
Nevertheless, some party agreements concerning arbitration costs may be permissible, provided they do not unduly compromise the integrity of the arbitral process or the ICC's finances. It is conceivable, for instance, that parties be allowed to dispense with the Article 30(1) requirement that the claimant pay a provisional advance on costs until the Terms of Reference have been drawn up. 51 Parties should also arguably be able to stipulate that the claimant bear the entire advance on arbitration costs notwithstanding Article 30(3), which provides that such advances 'shall be payable in equal shares by the Claimant and the Respondent'. 52 Finally, parties may be tempted to agree that the respondent will be precluded from participating in the arbitration if it does not pay its share of the advance on costs. 53 Such a derogation from the Rules, however, would not be consistent with prevailing international arbitration practice and could raise concerns about the enforceability of the award.
Perhaps most importantly, parties should arguably have some flexibility in determining arbitrators' fees, notwithstanding the fact that such fees are said to be fixed 'exclusively' by the Court. While separate fee arrangements-e.g. between a party and an arbitrator nominated by that party-could impermissibly infect the integrity of the arbitral process, parties arguably should be allowed to agree that the arbitrators be paid their ordinary rates rather than those[Page867:]
prescribed by the ICC cost scales. 54 While I suspect that the ICC Court would not accept such an agreement, paying arbitrators their hourly rates would eliminate any perceived risk that the parties' preferred candidates will decline to serve as arbitrators because ICC rates are less than their standard hourly rates, and would ensure that the chosen arbitrators devote the time necessary to the case knowing they are being paid by the hour. 55 The problem with allowing parties to agree with the arbitrators that the latter be paid their hourly rates, however, is that it may encourage arbitrators to try to negotiate favorable fee arrangements with parties rather than settle for the ICC scale-determined fee, thereby both putting parties in the awkward position of negotiating the arbitrators' fees with them and increasing the cost of the arbitration to the parties. On the other hand, this risk does not exist if the parties have, prior to the dispute, already agreed in their arbitration agreement that the arbitrators are to be paid their ordinary hourly rates (admittedly, an unlikely thing for parties to agree in their arbitration clause).
Article 32(1) allows parties to shorten the various time limits prescribed by the ICC Rules, which include the six-month deadline for the final award. Article 32(2), however, reserves for the Court the right to extend any time limit that has been shortened by the parties when necessary in the interests of fairness and efficiency. Is there a limit to how much parties may shorten the relevant deadlines in an effort to 'fast track' their arbitration? And, to ensure their arbitration remains fast track, can parties contract away the Court's power to extend their shortened deadlines?
At the outset, it is important to note that Article 32(1) does not allow parties to require that the Court perform its functions-including the appointment of arbitrators or scrutiny of draft awards-within any particular time periods. [Page868:]
This is because Article 32(1) only applies to time limits 'set out in these Rules', and the Rules do not prescribe time limits for the Court to fulfill its functions. 56
Where the parties have unreasonably shortened the deadlines that they are allowed to modify, the Court should probably insist on maintaining its power to extend those deadlines under Article 32(2), where necessary, to safeguard the enforceability of the award. Otherwise, the arbitral tribunal might deny the parties due process in an effort to meet unworkably short deadlines (subjecting the award to challenge on due-process grounds) or, alternatively, fail to meet the immovable deadlines (subjecting the award to challenge on untimeliness grounds). 57 Under the pre-1998 Rules, which did not contain Article 32(2), the Court did accept fast-track arbitration clauses that appeared to preclude extensions by the Court, but always took the precaution of obtaining the parties' consent to Court extensions, if necessary. 58 As Derains and Schwartz observe, with the introduction of Article 32(2) in the 1998 Rules: 'It would therefore not be unreasonable to expect the Court in the future to insist upon acceptance by the parties of Article 32(2) as a condition to administering "fast track" arbitrations under the Rules". 59
Article 34 excludes the liability of the ICC and its Court, Court members, employees, national committees and arbitrators for any act or omission in connection with the arbitration. The exclusion is very broad, encompassing deliberate as well as inadvertent wrongdoing. As such, it may not be effective in all jurisdictions, particularly those that prohibit exclusions of liability for conscious wrongdoing.
Parties unaware that the ICC Rules contain an exclusion of liability occasionally draft their own liability exclusions in their arbitration clauses, which may be narrower than the exclusion in Article 34. Because the liability exclusion can[Page869:]
impact the integrity of the arbitral process-e.g. by shielding arbitrators from inappropriate party threats to sue them-as well as the functioning of the administration, the ICC Court should adopt a critical view of party attempts to narrow or otherwise derogate from Article 34. One approach would be for the Court to refuse to administer any arbitration subject to a narrower liability exclusion if the law at the place of arbitration (or other applicable procedural law) would recognize the broader exclusion prescribed by Article 34. A less aggressive (and more reasonable) approach would be for the Court to accept narrower exclusions of liability-typically, liability exclusions that carve out deliberate wrongdoing from the scope of the exclusion60 -provided that they are reasonable and do not threaten the integrity of the arbitral or administrative process.
Conclusion
Exploring the mandatory nature of the ICC Rules is a fascinating exercise in identifying the Rules most essential to the ICC arbitration process. Indeed, as the foregoing undoubtedly demonstrates, the questions raised by the exercise are often more interesting than the proposed answers are satisfying or conclusive. Reasonable people can certainly differ as to which particular ICC Rules should be mandatory. One can only wonder which Rules Dr Briner would identify as so essential to the arbitral process or so distinctive of ICC arbitration as to permit no derogation. On one thing, however, I am reasonably certain Dr Briner would agree: regardless of the mandatory nature of any of the ICC Rules, party attempts to modify those flexible and time-tested Rules are almost always a very bad idea. [Page870:]
1 Y. Derains & E.A. Schwartz, A Guide to the New ICC Rules of Arbitration (Kluwer Law International, 1998).
2 The proposed framework for justifying and identifying mandatory arbitration rules could apply equally to types of arbitration other than ICC arbitration, although different arbitral institutions may have different views on which of their rules are mandatory and the analysis itself may differ in some respects when it comes to ad hoc arbitration.
3 I address in this article the permissibility and consequences of derogations from the ICC Rules contained in the parties' arbitration agreements, not agreements by parties (or arbitrators) to deviate from the ICC Rules made during the course of an ICC arbitration. Where the parties' arbitration agreement deviates from ICC Rules that the ICC Court considers to be mandatory, the Court may refuse to administer the arbitration unless the parties agree to modify or abandon those deviations from the Rules. Where, on the other hand, parties (or arbitrators) seek to deviate from the Rules during the course of a pending arbitration, the Court has already undertaken the administration of the arbitration but may (in appropriate circumstances) refuse to give effect to the proposed deviation from the Rules.
4 See e.g. AAA International Arbitration Rules, Article 1(1) (providing that the AAA Rules shall apply 'subject to whatever modifications the parties may adopt in writing'); UNCITRAL Arbitration Rules, Article 1(1) (providing that the UNCITRAL Rules shall apply 'subject to such modification as the parties may agree in writing'). Whether in practice other arbitral institutions will honor, and national courts will enforce, party derogations from essential provisions of those arbitration rules is, of course, another question.
5 Those provisions are Articles 6(1) (concerning which version of the Rules shall apply), 6(4) (concerning the separability of the arbitration clause), 7(6) (concerning the constitution of the arbitral tribunal), 8(4) (concerning the procedures for appointing a three-member tribunal), 14(2) (concerning the location of hearings and meetings), 23(1) (concerning the tribunal's authority to grant interim relief) and 32(1) (concerning a party's power to shorten time limits prescribed in the Rules).
6 In practice, rather than refusing to administer an arbitration, the ICC Court will first endeavor to have the parties agree to modify or abandon the offending derogations from the ICC Rules. Parties almost invariably agree to do so, mooting the issue.
7 Y. Derains & E.A. Schwartz, supra note 1 at 15.
8 Some textual authority for this proposition may also be found in Article 1(1) of the Rules-which states that the function of the ICC Court is to provide for the settlement of disputes 'in accordance with these Rules'-suggesting that the Court need not administer any arbitrations where the parties have altered those Rules.
9 See R.H. Kreindler, 'Impending Revision of the ICC Arbitration Rules: Opportunities and Hazards for Experienced and Inexperienced Users Alike' (1996) 13 J. Int. Arb. 45 at 56: 'the extent of permissible derogation is unclear, and the issue requires clarification. Indeed the revised Rules should also affirmatively state that the parties are free to derogate from certain provisions of the Rules, and equally affirmatively state which provisions, if any, are not subject to derogation.'
10 The Court's obligation to honor expressly permitted derogations from the Rules has been affirmed by national courts. See Y. Derains & E.A. Schwartz, supra note 1 at 129, n. 260.
11 See Y. Derains & E.A. Schwartz, supra note 1 at 15.
12 See generally Y. Derains & E.A. Schwartz, supra note 1 at 27 (describing the Chairman's discretion and authority under Article 1(3)).
13 As Derains and Schwartz explain, during the work on the 1998 ICC Rules, there was widespread resistance within both the ICC Court and the ICC Commission on International Arbitration (as it was then known) to the suggestion that certain decisions required under the Rules to be taken by the Court might be delegated to the Secretariat. The Court's role as decision-maker was perceived to be essential because of the Court's more diverse composition, the breadth of experience within the Court and the collective character of its decisions. See Y. Derains & E.A. Schwartz, supra note 1 at 19.
14 See Y. Derains & E.A. Schwartz, supra note 1 at 31: 'given the Court's powers of delegation under Article 1(4), no party has a right to request the submission to a plenary session of any matter that the Court is not explicitly required to refer to that session under its Internal Rules'.
15 These queries are perhaps more hypothetical than real insofar as, in practice, parties drafting arbitration agreements ordinarily do not consider designating versions of the Rules other than those in effect at the time of contracting or when the arbitration is commenced. Moreover, as a practical matter, after an arbitration is commenced and upon ICC's request, most parties agree to application of the 1998 Rules regardless of which version of the Rules has been prescribed in their arbitration agreement.
16 R. Kreindler, supra note 9 at 80.
17 On an arbitral institution's obligations with respect to the applicable version of its rules, see Ch. Jarrosson, 'Le rôle respectif de l'institution, de l'arbitre et des parties dans l'instance arbitrale' Rev. arb. 1990.381 at 384; Y. Derains & E.A. Schwartz, supra note 1 at 77-78.
18 The AAA International Arbitration Rules and the LCIA Arbitration Rules, for example, do not contain a similar prima facie jurisdiction provision.
19 See Y. Derains & E.A. Schwartz, supra note 1 at 79.
20 See also Article 21(2): if any party inexcusably fails to appear at a hearing, the arbitral tribunal may 'proceed with the hearing'.
21 Article 7(6) states (italics added): 'Insofar as the parties have not provided otherwise, the Arbitral Tribunal shall be constituted in accordance with the provisions of Articles 8, 9 and 10.' Significantly, prior to the 1998 revisions, the italicized proviso preceded all of the Rules concerning the constitution of the tribunal, and therefore arguably encompassed and conferred greater party autonomy with respect to the establishment of the tribunal. The Working Party on the 1998 Rules decided, however, to limit the proviso explicitly to Articles 8, 9 and 10, thereby positing Articles 7, 11 and 12 as, at least in theory, mandatory. See Y. Derains & E.A. Schwartz, supra note 1 at 129-30.
22 J.-J. Arnaldez, 'Reflexions sur l'autonomie et le caractère international du règlement d'arbitrage de la CCI' J.D.I. 1993.861: 'Si les parties sont libres de désigner en qualité d'arbitre la personne de leur choix, elles ne peuvent, pas plus que la Cour, s'affranchir de l'indépendance exigée de tout arbitre.' Indeed, as noted above, the proviso in the former Rules allowing derogations from the Rules concerning the constitution of the tribunal was specifically amended in 1998 not to encompass the general independence and disclosure provisions of Article 7.
23 Such is the case, for example, in countries that have adopted the UNCITRAL Model Law on International Commercial Arbitration. See H.M. Holtzmann & J.E. Neuhaus, A Guide To The UNCITRAL Model Law On International Commercial Arbitration: Legislative History and Commentary (Kluwer Law and Taxation, 1989) at 409.
24 When the requirement of independence was added to the Rules in 1975, Jean Robert, then the rapporteur to the ICC Commission on International Arbitration, explained that 'the notion of independence is not explained, for the Court must be left free to judge' (Report delivered at the ICC Madrid Congress, 17 June 1975, ICC Doc. No. 420/179, p. 3).
25 This is not to say that the Court will (or should) refuse to apply any independence standards other than those it applies internally. When acting as appointing authority under the UNCITRALArbitration Rules, for example, the Court applies the relevant 'impartiality or independence' standards for disclosure and challenges prescribed in Articles 9 and 10 of the UNCITRAL Rules, rather than the ICC Court's own principles and practices with respect to independence. But again, the Court does so in the context of an UNCITRAL arbitration, not an ICC arbitration.
26 See Y. Derains & E.A. Schwartz, supra note 1 at 131: 'Article 8(1) is not a mandatory rule, and the parties are therefore free to agree on another number of arbitrators.' See also J.-J. Arnaldez, supra note 22 at 868-69.
27 Where parties agree to more than three arbitrators, however, they should designate a chairperson to fulfill the functions of the chairman under the ICC Rules.
28 J.-J. Arnaldez, supra note 22 at 869; Y. Derains & E.A. Schwartz, supra note 1 at 129 and 132. Indeed, neither the provisions concerning the Terms of Reference nor the fixing of the costs of arbitration contemplate the two-tier format of two arbitrators and an umpire. In practice, where the parties' arbitration agreement provides for an 'umpire', the ICC has construed (and, where appropriate, obtained the parties' agreement to construe) the reference to the 'umpire' to mean the 'chairman' within the scheme of the ICC Rules.
29 See Y. Derains & E.A. Schwartz, supra note 1 at 140.
30 There is some case law to suggest that national courts will enforce awards rendered by arbitral tribunals selected by only one of the parties pursuant to the parties' arbitration agreement. See F. Mantilla-Serrano, 'Towards a Transnational Procedural Public Policy' (2004) 20 Arbitration International 333 at 343-44, describing a 1986 decision of the Federal Supreme Court of Germany holding that German procedural public policy is not violated in a case where a sole arbitrator was appointed by only one of the parties; J.-J. Arnaldez, supra note 22 at 870, discussing the effect of an arbitration clause that provided for the appointment of the claimant's party-nominated arbitrator as the sole arbitrator in the event that the respondent failed to nominate an arbitrator for a three member tribunal.
31 This is true, even where a different appointing authority has been chosen by the parties to appoint arbitrators; the Court retains the power to remove the arbitrators so appointed. See Y. Derains & E.A. Schwartz, supra note 1 at 140, n. 287.
32 In the past, the Court has not objected to Terms of Reference that effectively altered the hierarchy of Article 15 by providing that, in the silence of the Rules, all rules of procedure would be prescribed by the arbitrators at their discretion. See Y. Derains & E.A. Schwartz, supra note 1 at 210, n. 434.
33 The parties' authority over time limits is discussed infra at notes 56-59 and accompanying text.
34 See e.g. F. Mantilla-Serrano, supra note 30 at 339: 'one could think of due process violations so egregious (e.g., a procedure that prevents a party from submitting any evidence whatsoever) that although waived or even expressly accepted by a party, the court would rate such a violation, sua sponte, under Article V.2(b) of the New York Convention'.
35 On the pros and cons of Terms of Reference, see generally R.H. Smit, 'An Inside View of the ICC Court' (1994) 10 Arbitration International 53 at 66-68; J. Gillis Wetter, 'The Present Status of the International Court of Arbitration of the ICC: An Appraisal" (1990) 1 The American Review of International Arbitration 91; S.R. Bond, 'The Present Status of the International Court of Arbitration of the ICC: A Comment on An Appraisal' (1990) 1 The American Review of International Arbitration 108.
36 R. Kreindler, supra note 9 at 98.
37 See Y. Derains & E.A. Schwartz, supra note 1 at 25, n. 44, observing that the Court would likely refuse to administer any case if the parties sought to exclude the Terms of Reference.
38 On the related but distinct issue of the permissibility of dissenting opinions, see A. Redfern, 'The 2003 Freshfields Lecture-Dissenting Opinions in International Commercial Arbitration: The Good, the Bad and the Ugly' (2004) 20 Arbitration International 223. Mr Redfern points out that, in the civil law tradition, it was thought that a court's decision should appear as a decision of the court as a whole, and there is thus no tradition of dissenting opinions (ibid. at 225). The fact that civil law courts maintain an appearance of unanimity and have no tradition of published dissenting opinions does not necessarily suggest, however, that a requirement of unanimity is workable in the very different context of arbitration awards rendered by three-member tribunals, at least two of whom have been nominated by the parties.
39 Indeed, many leading sets of rules do not authorize the chairman to decide in the absence of a majority. The AAA International Arbitration Rules (Article 26(1)) and the UNCITRAL Arbitration Rules (Article 31(1)), for example, require a majority in all circumstances.
40 See Y. Derains & E.A. Schwartz, supra note 1 at 284-85, noting that the power of the chairman to decide alone in the absence of a majority 'has been regarded as a such a fundamental provision of the ICC Rules that the Court has, in the past, refused to accept derogations from it'; J.-J. Arnaldez, supra note 22 at 868, identifying the chairman's power to decide alone as one of the Rules from which the parties may not derogate. As Derains and Schwartz explain, the power of the chairman to decide alone enhances the integrity of the decision-making process because it 'permits the chairman to maintain a completely independent position and discourages partisan conduct on the part of the co-arbitrators, who know that the chairman is not required to agree with either of them in order to issue an award' (Y. Derains & E.A. Schwartz, supra note 1 at 285).
41 The LCIA, Stockholm Chamber of Commerce and WIPO arbitration rules all contain similar provisions authorizing the chairman to decide in the absence of a majority. See LCIA Arbitration Rules, Article 26.3; Stockholm Chamber of Commerce Arbitration Rules, Article 30; WIPO Arbitration Rules, Article 61.
42 ICC cases where the chairman has, in fact, decided alone are 'extremely rare'; see Y. Derains & E.A. Schwartz, supra note 1 at 285.
43 See United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 598 (1960); Bernhardt v. Polygraphic Co., 350 U.S. 198, 203 (1956); Craig v. Barber, 524 So.2d 974 (Miss. 1998); see AAA Commercial Arbitration Rules, Article 44(b) (no requirement for a reasoned award unless the parties request or the tribunal deems a reasoned award appropriate).
44 See Y. Derains & E.A. Schwartz, supra note 1 at 286.
45 Most national arbitration laws that require reasoned awards also allow the parties to dispense with that requirement. See e.g. UNCITRAL Model Law on International Commercial Arbitration, Article 31(2): 'The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given . . .' Most other arbitration rules also permit parties to contract out of the reasoning requirement. See e.g. AAA International Arbitration Rules, Article 27(2); LCIA Arbitration Rules, Article 26.1; UNCITRAL Arbitration Rules, Article 32(3).
46 Y. Derains & E.A. Schwartz, supra note 1 at 289.
47 The Court's scrutiny of the substance of awards is arguably less essential than its scrutiny of form. The Court's scrutiny of form is intended specifically to enhance the enforceability of the award, which is the principal and an indisputably appropriate administrative function for the Court to serve, whereas the Court's scrutiny of substance is designed principally to address the quality of decision-making in the award, for which the arbitral tribunal rather than the Court is responsible. This is why the tribunal is required to incorporate any modifications of form laid down by the Court, whereas it is free to disregard the Court's suggestions as to substance.
48 Currently, the Secretariat of the Court initially determines whether an award should be submitted for scrutiny to the Court's monthly plenary session or to one of the Court's four-monthly committee sessions. Ordinarily, only awards of particular importance or difficulty are submitted to a plenary session of the Court. It might be argued that, in the interest of expediting the scrutiny process and since a majority of awards are already submitted only to a committee, the parties should be able to agree that their awards be submitted only to a committee.
49 Any expansion of the Court's substantive scrutiny of awards would also undoubtedly revive the types of criticisms previously leveled at the validity of the Court's scrutiny of awards. It has been argued in the past that the Court's scrutiny of awards unduly interferes with the arbitrators' liberty of discussion, violates the secrecy of their deliberations and deprives the parties of due process since they have no opportunity to appear before the Court. See e.g. A. Kassis, Réflexions sur le règlement d'arbitrage de la Chambre de commerce internationale - Les deviations de l'arbitrage institutionnel (LGDJ, 1988).
50 See Kyocera Corp. v. Lapine Technology Corp., 341 F.3d 987 (9th Cir. 2003); T.J. Brewer, 'U.S. Courts Split Over Arbitration Clauses Providing For Expanded Judicial Review of Arbitral Awards - Without Addressing The Implications For International Arbitration' (2003) 18:11 Mealeys International Arbitration Report 31.
51 Arguments in favor of allowing such a derogation include: the provisional advance Rule was only added to the ICC Rules in 1998; even under the new Rule, Article 30(1) permits (i.e. 'may'), but does not require, the Secretary General to fix a provisional advance; and, at least for contracts entered into before 1998, the parties could accomplish the same thing-i.e. dispensing with the provisional advance-by agreeing to application of the version of the ICC Rules in effect prior to the introduction of the provisional advance requirement, as allowed under Article 6(1).
52 The rationale for such a derogation would be to discourage contractual counterparties from pursuing arbitration rather than making every effort to resolve the dispute amicably, or to discourage would-be respondents from commencing pre-emptive arbitrations for the sole purpose of positioning themselves as claimants. Moreover, requiring the claimant to pay the entire advance yields the same result as if the respondent had refused to pay its share of the costs under Article 30(3): in that event, the claimant likewise would be constrained to pay the entire advance on costs should it wish the arbitration to proceed.
53 In favor of such a result, see H. Smit, 'The New International Arbitration Rules of the American Arbitration Association' (1991) 2 The American Review of International Arbitration 1 at 31-32. Professor Smit's son views that result as somewhat draconian.
54 In that regard, Craig, Park and Paulsson have written: 'If, with the agreement of the arbitrators, the parties themselves propose to the Court a fee arrangement different from . . . the ICC scale, the Court tends to adopt the agreed scheme. But it retains absolute discretion to do so, and as a formal matter will nevertheless establish the fees itself. The ICC does not encourage such arrangements and few are in fact made.' (W.L. Craig, W.W. Park & J. Paulsson, ICC Arbitration, 2d ed. (Oceana, 1990) at 352, § 21.01). Derains and Schwartz note, however, that 'whether the Court would accept such an arrangement in a particular case is highly uncertain' (Y. Derains & E.A. Schwartz, supra note 1 at 304, n. 703).
55 In my experience, however, the ICC arbitrator fee system rarely deters even the most renowned arbitrators from accepting ICC arbitrator appointments, and has no impact on the time and attention quality arbitrators devote to a case.
56 See Y. Derains & E.A. Schwartz, supra note 1 at 347: 'The Court has never accepted that it should be bound, in performing its own responsibilities, by expedited deadlines to which the parties (and possibly the arbitrators) may agree, which partly serves to explain the addition to the rules of Article 32(2).'
57 I describe these fast-track enforceability issues in 'International Fast-Track Commercial Arbitration in the United States' (1995) 17 Comparative Law Yearbook of International Business 434; see also F. Mantilla-Serrano, supra note 30 at 347, describing the Paris Court of Appeal's refusal to enforce an award rendered after the three-month time limit imposed by the parties' arbitration agreement. A successful challenge of the award may require that the arbitration be conducted anew, defeating the very purpose of the parties' fast-track arbitration clause.
58 See Y. Derains & E.A. Schwartz, supra note 1 at 348-49.
59 Y. Derains & E.A. Schwartz, supra note 1 at 349.
60 Most international arbitration rules carve out deliberate wrongdoing from the scope of the liability exclusion; see e.g. AAA International Arbitration Rules, Article 35; LCIA Arbitration Rules, Article 31.1; WIPO Arbitration Rules, Article 77.