On 1 July 2001, ICC issued a new set of rules entitled ICC ADR Rules. The new Rules are designed for parties who wish to arrive at a negotiated settlement of their disputes or differences with the aid of a neutral person acting within the institutional framework of ICC. The new Rules replace the ICC Rules of Conciliation that were in force as from 1 January 1988.

The Rules may be used for any and all business disputes, whether of an international or domestic character. The ICC ADR process is intended to be speedy and relatively inexpensive. It is party-controlled to the largest possible extent. The Rules also provide for the confidentiality of the proceedings. Being amicable dispute resolution rules, they do not apply to situations in which the parties wish to obtain a decision or award that is enforceable at law, as is the case under the ICC Rules of Arbitration.1

Since the users of ICC dispute resolution services come from all over the world, the Rules are not limited to a single ADR technique. Rather, they permit the parties to choose an appropriate technique from the range of non-binding ADR techniques that exist in different commercial cultures. These include mediation, neutral evaluation, and mini-trial in their various forms. If the parties do not agree upon a particular technique, the Rules provide that mediation shall be used.

ICC has created a separate ADR Secretariat which is available to advise the parties on the ADR process and help set it in motion.

The Rules are accompanied by (i) four suggested ICC ADR clauses, any one of which may be inserted by parties in their underlying contracts and (ii) the Guide to ICC ADR, which provides a brief layman's explanation of the Rules. The Rules, clauses and Guide are published in a separate brochure (ICC Publication No. 809) and are available either directly from ICC or on the ICC ADR web site (www.iccadr.org), which also contains additional information concerning ICC ADR.

Since the ICC ADR Rules are a new ICC product containing a number of original features, it is useful to place the Rules in context and provide practical advice for their use. [Page8:]

I. Background of the ICC ADR Rules

This section provides a brief overview of modern dispute resolution mechanisms, describes ICC's dispute resolution services prior to the new ADR Rules, outlines the reasons for and process of adoption of the new Rules, and explains how they relate to ICC's other dispute resolution services.

A. Overview of modern dispute resolution mechanisms

The era of globalization has increased the international business community's need for a broad range of dispute resolution mechanisms. The number of international contracts of all kinds is steadily increasing along with the desire for faster, more informal and less expensive methods for resolving disputes.

The modern approach to dispute resolution includes many methods in addition to the traditional one of litigation in national courts. The most salient thereof, running from the least to the most formal, are the following:

Negotiation between the parties without third-party or institutional assistance

Procedures in which a neutral third party assists the parties in arriving at a negotiated settlement in the absence of any decision or opinion that is enforceable at law:

- Conciliation/mediation

- Neutral evaluation

- Neutral expert evaluation

- Mini-trial

- Dispute Review Boards (DRBs)

Procedures resulting in a decision that is provisionally binding:

- Dispute Adjudication Boards (DABs)

Procedures resulting in a decision or award that is enforceable at law:

- Arbitration

- Litigation in national courts

The parties thus have available to them a dispute resolution 'toolbox' from which they can select the most appropriate tool for resolving their disputes or differences.

B. ICC dispute resolution services and the development of the ICC ADR Rules

ICC has long provided the business community with a wide range of dispute resolution services. Since 1923, ICC has been a leader in the field of arbitration through the ICC International Court of Arbitration and its Secretariat. ICC has also provided conciliation services pursuant to its Rules of Conciliation, which have existed in different versions since the 1920s. Furthermore, ICC has developed dispute resolution services in the area of neutral expert evaluation2 and [Page9:] documentary credit dispute resolution3 through its International Centre for Expertise created in 1976. In addition, ICC has acted as an appointing authority for naming members of DABs and DRBs, notably through its International Centre for Expertise.

More recently, ICC, through its various business contacts, has perceived an increasing worldwide demand for amicable dispute resolution services. As a result, ICC instituted a review of the Rules of Conciliation and sought recommendations as to how ICC could be more responsive to the ADR needs of the international business community.

In early 1999 the ICC Commission on International Arbitration established the Working Party on the Promotion, Adaptation and/or Extension of ICC ADR Services. In June of that year, the Commission mandated the Working Party to make recommendations as to the advisability of increased involvement of ICC in the field of ADR.

Following the Working Party's favorable recommendation, the Commission mandated the Working Party in December 1999 to propose a framework for ADR activities within ICC through the amendment, transformation, or replacement of the then existing Rules of Conciliation. The Working Party in its studies and deliberations determined that the existing Conciliation Rules no longer fully suited the ADR needs of the international business community. It was found that the only explicit way of commencing a conciliation under the Conciliation Rules was for a party to file unilaterally with ICC a request for conciliation. ICC would then forward the request to the other party who could accept or reject the conciliation process. There was no provision for clauses in underlying contracts by which the parties could submit to conciliation in advance, and no suggested conciliation clauses. The Working Party concluded that this commencement procedure was too narrow and not in line with current practice. In addition, the Working Party found that the Conciliation Rules, being limited to conciliation, did not permit the parties to use other non-binding ADR techniques, which might be better suited to their dispute or more common in their region. Finally, the Working Party considered that the Rules concerning ADR should be published in a separate booklet and not included with the Rules of Arbitration. Doing so would highlight ICC's ADR services and signal their independent, although complementary, status.

In March 2000, the Commission accepted the above recommendations and accordingly mandated the Working Party to draft the ICC ADR Rules, a series of suggested ICC ADR clauses for insertion in underlying contracts, and the Guide to ICC ADR. The Working Party proceeded first to draft the Rules and suggested clauses. They were circulated to the ICC National Committees for their comments and observations and were debated and approved at the Commission meeting in November 2000. The Executive Board of ICC then adopted the ICC ADR Rules and suggested clauses on 16 March 2001. Thereafter the Working Party produced the Guide to ICC ADR, which was circulated to the National Committees and approved by the Commission in April 2001. These documents are presently available from ICC.4

The adopted texts have benefited from the review and suggestions of highly qualified practitioners throughout the world. Detailed observations were received from National Committees from six continents and individual comments were made by Commission members from over thirty different countries. The Working Party itself was composed of some thirty members with extensive ADR experience and diverse backgrounds. Thus, there is good reason to believe that the new ICC [Page10:] ADR Rules will meet the present and future needs of the international business community.

C. Complementarity of ICC ADR and other ICC dispute resolution services

The new ICC ADR Rules and the other dispute resolution services offered by ICC are complementary. Such is the case with ICC ADR and ICC arbitration. While ADR has shown high success in resolving disputes, it does not guarantee a resolution of the dispute. Ultimately, the parties may not agree upon a negotiated settlement at the end of the ADR proceedings. Arbitration, on the other hand, does, in principle, guarantee that the dispute will be resolved via an enforceable award of the arbitral tribunal. Hence, if ADR proceedings, which are relatively fast and inexpensive, do not yield a satisfactory outcome, the parties may turn to arbitration. In addition, the parties may realize during the course of an arbitration or during litigation before national courts, that ADR proceedings might lead them to a settlement. In that event, the parties can submit to the ICC ADR Rules during the pendency of the arbitration or litigation, whether or not those proceedings are stayed. Moreover, in the case of a pending arbitration, the parties can request the arbitral tribunal to render an award by consent if the ADR proceedings result in a settlement agreement. This would transform the settlement into an enforceable award. With the addition of the new ICC ADR Rules, ICC is in a position to provide the parties with a 'one-stop shop' for both ADR and arbitration.

The new ICC ADR Rules and the rules currently administered by the ICC International Centre for Expertise are also complementary. Many disputes concern issues whose amicable resolution calls for the assistance of an expert in the relevant field, be it technical, financial or other. The ICC Rules for Expertise respond to this need by setting up a process in which an expert makes findings or recommendations that are not binding upon the parties unless they agree otherwise. The ICC DOCDEX Rules provide for the appointment of an expert in the field of documentary credits who renders a similar type of decision. When parties have a documentary credit dispute or a dispute calling for expertise in another field, they should consider referring it to the appropriate rules of the ICC International Centre for Expertise rather than to the more all-encompassing ICC ADR Rules. However, parties with a technical dispute who wish to use a mediation technique, in which the Neutral does not make findings, decisions or recommendations but facilitates a negotiated settlement, may prefer to submit the dispute to mediation under the ICC ADR Rules. In that case, they could designate a technical expert with mediation experience to act as the Neutral.

The availability of a wide range of dispute resolution tools enables counsel to advise clients as to the most appropriate tool for resolving their dispute. When considering ADR, the following features should be kept in mind. ICC ADR is relatively rapid and inexpensive. Being a non-contentious and voluntary tool, it tends to better preserve the relationship between the parties. This may be important, for example, when a dispute arises in the course of a long-term contract. When an ICC ADR is successful, it can not only result in great savings to the parties, but also provide a creative solution to the dispute, which no court or arbitral tribunal could order. For example, a settlement agreement could involve entering into a new contract covering future business along with a payment by one party to the other. The parties can agree to additional elements such as payment over time or the transfer of manufacturing rights. The only limitations are the [Page11:] interests of the parties and the creativity of the parties and the Neutral. Quite often the Neutral can help the parties find a solution that is genuinely satisfactory to them since it can be tailored to their real interests.

In many situations, however, negotiated settlement may simply not be possible. The issue at stake may require establishing a precedent through a decision that is enforceable at law. One of the parties may have no interest to settle or may even have an interest not to settle. The relationship between the parties may have so deteriorated as to make settlement impossible. In addition, the parties may prefer to have a decision that definitively determines their rights and liabilities under applicable law rather than pursuing negotiations. In those and other cases, arbitration would be a more appropriate dispute resolution tool than ADR.

In other situations, it may be desirable to provide for submission of disputes to ICC ADR followed by ICC arbitration if the ADR does not result in a successful outcome within a defined time period. The fourth suggested ICC ADR clause puts this procedure into place.

Finally, counsel should remain aware that the parties are free at any time to agree to submit their dispute to arbitration or ADR proceedings, even if this requires amending their underlying contract. Moreover, with a sharpened awareness of the different mechanisms offered by the dispute resolution 'toolbox' and how they can be used separately or together, counsel will be in a position to provide clients with various options and useful advice.

In adopting the new ICC ADR Rules, ICC has firmly re-asserted its commitment to providing the international business community with a range of dispute resolution services that are adapted to their needs.

II. Practical considerations for using the new ICC ADR Rules

Set out below are a series of considerations that are intended to assist parties and counsel alike in making the best use of the new ICC ADR Rules.

A. The name of the Rules

The first particularity of ICC ADR concerns ICC's use of the term 'ADR' itself. ICC has chosen to refer to ADR as 'amicable dispute resolution' rather than the more traditional 'alternative dispute resolution'. The latter usage was developed many years ago when the business community, initially in the United States of America, was searching for dispute resolution mechanisms other than litigation in national courts. Litigation in such courts was perceived by many as being too expensive, too lengthy and too demanding on company resources. Since the goal was to find an alternative to court litigation, the term 'alternative' dispute resolution was born. As a result, arbitration, which is also an alternative to court litigation, is often grouped together with other 'alternative' techniques such as mediation, neutral evaluation, and mini-trial.

There is, however, a significant difference between arbitration and those other techniques. Arbitration typically results in an award that is binding on the parties. By contrast, mediation, neutral evaluation, and mini-trial do not lead to such a [Page12:] result. A successful outcome of such procedures is typically a settlement agreement between the parties that resolves their dispute and is binding upon them in accordance with the law applicable to that agreement. Even the technique of neutral evaluation, in which the Neutral makes a recommendation or informs the parties as to how he or she would decide a given issue, does not result in an opinion or recommendation that is enforceable at law. Such a recommendation could bind the parties contractually, subject to applicable law, if they expressly agree so to be bound. A failure by one party to comply with the recommendation would then constitute a breach of contract; however, the recommendation itself could not be enforced at law. The enforceability under applicable law of a contractual agreement to be bound by the recommendation of the Neutral should of course be verified.

In light of that distinction, ICC has preferred to clearly separate arbitration from techniques such as mediation, neutral evaluation and the like. Arbitration is covered by the ICC Rules of Arbitration, and the non-binding techniques are covered by the new ICC ADR Rules and the rules administered by the International Centre for Expertise. 5 As a consequence, it seemed appropriate to avoid having the acronym ADR stand for 'alternative dispute resolution', an expression that is often thought to include arbitration. ICC has preferred to refer to ADR in the Rules as 'amicable dispute resolution', which corresponds well to the spirit of assisting parties toward a negotiated settlement, avoids the confusion with arbitration, and avoids the question 'alternative to what?'. 'Amicable dispute resolution' describes what the process is, as opposed to merely indicating that it is an alternative to something else.

B. Use of suggested ICC ADR clauses

ICC has provided four alternative ICC ADR clauses that parties may include in their underlying contracts. These clauses run from a purely optional clause, recognizing the possibility of submitting to ADR, to mandatory clauses requiring disputes to be so submitted.

One may at first question the value of a purely optional ADR clause. After all, it has no binding effect whatsoever. However, foreseeing the possibility of ADR proceedings in the underlying contract encourages the parties to consider ADR after a dispute arises. Moreover, it may well be easier for a party to propose ADR proceedings when the possibility is specifically mentioned in the contract.

One may also question the significance of a mandatory ADR clause in light of the fact that ADR is a voluntary, informal process centered on negotiation. What is mandatory, however, is the submission of the dispute to ICC ADR. After the first discussion with the Neutral, pursuant to article 5(1) of the Rules, either party is free to terminate the ADR proceedings. This system preserves the voluntary nature of ICC ADR, while allowing the parties to commit themselves to commencing ICC ADR proceedings. It should be noted, however, that the enforceability of mandatory ADR clauses may vary in different jurisdictions.

It should also be stressed that the four proposed clauses are indeed suggested and not model clauses. They can thus be adapted by the parties to suit their needs. For example, at the time of entering into their underlying contract, the parties may know which ADR technique they want to use in any future dispute. In such case, they can add a provision to that effect in the suggested clause of their choice. This [Page13:] should be done with great caution, however, since it is often difficult to choose an appropriate technique before a dispute has arisen.

In addition, the parties are free to extend or reduce any time periods provided for in the suggested clauses. They can also agree upon the place where ADR meetings will occur and the language or languages in which the ADR will be conducted.

The clauses can be modified to deal with specific situations. For example, the fourth suggested clause provides for mandatory ICC ADR followed by arbitration if the dispute has not been resolved through ADR within 45 days from the filing of the Request for ADR. The parties, however, may be concerned that an applicable statute of limitations may foreclose an action in arbitration before the end of the 45-day period. The parties could resolve this problem by adding a provision to the fourth clause allowing a claimant to commence arbitration during the pendency of the ADR proceedings when there is a risk that the claim could be foreclosed by an applicable statute of limitations.

Finally, it is useful to highlight the interplay between the provision in the fourth clause stating that an arbitration may not be brought until the expiration of the 45day period and the right to terminate the proceedings at any time after the first discussion with the Neutral pursuant to article 5(1) of the Rules. In effect, a party remains free to withdraw from the ADR at any time after the first discussion, but the 45-day period must expire before an arbitration can be commenced. This encourages the parties to take full advantage of the 45-day period to seek a settlement of their dispute. The parties could, of course, provide for a shorter fixed time period in the suggested clause. They could also agree to shorten the time period during the ADR proceedings.

C. Scope of the ICC ADR Rules (article 1 of the Rules)

In accordance with article 1, the Rules apply exclusively to business disputes. This means that they cannot be used for disputes such as personal injury claims.

The Rules may be used for both international and domestic business disputes. Consequently, two entities from the same country may submit their business disputes to the ICC ADR Rules.

Article 1 of the Rules also provides that the Rules themselves may be modified by agreement of all of the parties, subject to the approval of ICC. This provision is in line with the notion that ICC ADR proceedings should be party-controlled to the greatest possible extent. The requirement for approval by ICC of any modifications desired by the parties is designed to ensure the integrity of the system set up in the Rules.

Indeed there are certain modifications that ICC would be unlikely to accept. For example, the parties should not be able to modify the scope of the Rules as set out in article 1. In addition, the Neutral must in all cases provide a statement of independence pursuant to article 3(2) of the Rules. The faculty of the Neutral to terminate the proceedings pursuant to article 6(1)(d) of the Rules, when he or she believes that the proceedings will not resolve the dispute, should be maintained, as should the requirement of holding a first discussion with the Neutral pursuant to article 5(1) of the Rules. The parties should also not be able to vary the provisions concerning fees and costs in article 4 of the Rules. Nevertheless, the parties are free to propose to ICC any modifications of the Rules that they believe would enhance the proceedings in their particular situation. [Page14:]

There are also numerous modifications that ICC would be likely to accept. For example, the parties could agree to limit the number of times a party can object to a Neutral appointed by ICC (See article 3(3) of the Rules). The parties could agree to increase or decrease certain time limits in the Rules, such as the 15-day period in which a party can object to the appointment of a Neutral by ICC or the 15-day minimum period after which ICC may terminate the proceedings for any non-payment by a party. The parties could also propose additional provisions that might suit their needs.

Since the Rules are flexible as written, it should not be useful or necessary to modify them in the vast majority of cases; however, the possibility of modification has been retained in the spirit of providing maximum flexibility to the parties.

D. Commencement of ICC ADR proceedings (article 2 of the Rules)

The ICC ADR Rules provide for two alternative methods for commencing ADR proceedings (see article 2.A of the Rules, first method, and article 2.B of the Rules, second method). In any given ICC ADR, only one of those methods will apply. The first method applies when an agreement between the parties to submit their dispute to ICC ADR already exists. That agreement may be found in the underlying contract between the parties or in a subsequent agreement made before or after the dispute arises. If either of the mandatory suggested ICC ADR clauses is inserted in the parties' underlying contract, it will constitute such an agreement. The optional suggested ICC ADR clauses, however, will not constitute such an agreement. In that case, the parties may agree to submit the dispute to ICC ADR after it has arisen and would then commence ADR proceedings using the first method.

The second method applies when there is no prior agreement to submit the dispute to ICC ADR. In that case, a party may file with ICC a unilateral Request for ADR. That Request is forwarded by ICC to the other party for its acceptance or rejection. Acceptance by the other party constitutes an agreement to submit the dispute to ICC ADR, which has the same force as a prior agreement. In the event of a rejection of the Request, ICC ADR proceedings will not commence due to the absence of an agreement to submit the dispute to ICC ADR (see article 2.B). If an optional ADR clause has been inserted in the underlying contract, and if no specific agreement to submit the dispute to ICC ADR has been made, a party may use the second method to invite the other party to accept ICC ADR proceedings.

It follows from the existence of two methods for commencing ICC ADR proceedings that the commencement date will be different in each case. With respect to the first method, the ICC ADR can be said to commence on the date ICC receives the Request for ADR. This applies regardless of whether the Request is filed jointly or unilaterally. Since there exists an agreement between the parties to submit to ICC ADR, the mere filing of the Request commences the proceedings. This is similar to article 4(2) of the ICC Rules of Arbitration under which an arbitration, based on a prior agreement to arbitrate, commences upon the filing of the Request for Arbitration.

By contrast, under the second method, the ICC ADR proceedings do not commence upon the filing of a unilateral Request for ADR, but rather can be said to commence on the date ICC receives the other party's notice of agreement to [Page15:] participate in the ADR proceedings. As provided in article 2.B(2) of the Rules, when a party does not reply to the Request within 15 days or provides a negative reply, the proceedings shall not be commenced. The idea is that no ADR proceedings can reasonably be said to have commenced in the absence of an agreement between the parties.

One consequence is that the termination provisions in article 6 of the Rules do not apply when a unilateral Request under the second method has been rejected. In that case there is no need for a termination procedure since the proceedings never commenced. On the other hand, the article 6 termination provisions do apply upon the filing of any Request for ADR under the first method. This has significant implications. For example, if ADR proceedings are commenced based upon a prior agreement of the parties, the proceedings cannot be terminated by either party prior to the first discussion with the Neutral (see article 6(1)(b)). This is the mechanism under the Rules that makes the first discussion with the Neutral mandatory in any case where the parties have entered into an agreement to submit their dispute to ICC ADR.

Finally, a few words should be said about the Request for ADR itself. Under the first method for commencing ADR proceedings, the Request for ADR may be filed jointly by the parties or unilaterally by one party. The preparation of a joint Request permits the parties to begin a process of cooperation in the spirit of seeking a settlement. Within a joint Request, it is perfectly permissible, and may well be desirable, for each of the parties to provide its own description of the dispute as required by article 2.A(1)(b) of the Rules. Of course, if the parties can agree on a joint description of the dispute, that is just as well. In the case of a unilateral Request, the filing party will necessarily provide its own description of the dispute. In that case nothing in the Rules prevents the other party from subsequently filing its own description of the dispute, and this may well be desirable insofar as it will help ICC and the Neutral to better understand the issues at an early stage. The same can be said with respect to the unilateral filing of a Request, pursuant to the second method. In that case, a party who decides to accept the ICC ADR proceedings may similarly submit its own description of the dispute, either along with its acceptance or soon thereafter.

It should be stressed that it is generally in the interest of the parties and the ADR process to keep the descriptions of the dispute very short, ideally only a few pages. The Request for ADR or any other document containing a description of the dispute should be viewed as a simple summary of the issues in dispute.

E. Selection of the Neutral (article 3 of the Rules)

The Rules provide for two alternative methods for choosing the Neutral. The Neutral may be 'designated' by joint agreement of the parties or 'appointed' by ICC. ICC will appoint a Neutral when the parties do not agree on a joint designation. Confidence in the Neutral is an important aspect of ICC ADR. Thus, it is often preferable for the parties themselves to agree upon a Neutral whom they trust. However, they may not be able to do so, or they may simply prefer to have the Neutral appointed by ICC. For example, they may prefer a Neutral with whom neither party has had any prior contact. In those cases ICC is available to appoint a qualified Neutral for the proceedings.

There is an important distinction between a Neutral designated by the parties and a Neutral appointed by ICC. A Neutral designated by the parties does not have to [Page16:] be independent of the parties. They may prefer, for example, to designate a Neutral with whom they have worked, either in connection with their underlying contract or in the past. It is perfectly acceptable under the Rules to designate such a Neutral so long as all parties are aware of the facts. That is why all prospective Neutrals must submit a statement of independence. It follows that any designation of a Neutral by the parties is subject to their approval of the statement of independence. In practice, the parties would be well-advised to verify the qualifications and independence of the Neutral before making any formal designation.

On the other hand, Neutrals appointed by ICC must be independent of the parties, as reflected in the statement of independence. If a Neutral has filed a qualified statement of independence, ICC will not appoint such a Neutral unless the parties indicate in writing that they do not object to the appointment.

The Rules also provide that if a designated Neutral refuses to serve, ICC will appoint a Neutral. The purpose of this provision is to gain time. However, the parties could agree, subject to ICC's approval, to modify that provision to allow them to designate another Neutral.

When ICC appoints a Neutral, it will take into consideration any qualifications or attributes that the parties have agreed the Neutral should have. ICC will make all reasonable efforts to appoint such a Neutral. This provision covers the situation in which the parties cannot agree on a specific individual to act as the Neutral but can agree on certain qualifications or attributes. For example, the parties may want the Neutral to be a lawyer or to have expertise in the subject matter of the dispute.

The Rules allow any party to object to a Neutral appointed by ICC within 15 days of receipt of notification of the appointment. In that case, ICC will appoint another Neutral. The Rules do not limit the number of times a party can object to an appointed Neutral. However, the parties could agree, subject to ICC approval, upon a limitation thereof. In addition, pursuant to article 6(1)(g) of the Rules, ICC can terminate the proceedings if it determines that it has not been reasonably possible to appoint a Neutral. This provision is designed to avoid excessive objections. It should be noted however that the objecting party is required to state reasons for the objection. The objecting party must therefore think through and communicate the basis for an objection. In practice, ICC ADR is intended to be a cooperative process. The parties are expected to apply the Rules in good faith.

Finally, the Rules permit the parties to designate more than one Neutral or request ICC to appoint more than one Neutral. While having more than one Neutral is more expensive, it may be justified depending upon the circumstances. The parties may wish to have both a lawyer and a technical expert acting jointly as Neutrals. Under certain ADR techniques such as mediation, it is not uncommon for the Neutral to have an assistant. Nevertheless, the Rules provide that there will be only one Neutral unless the parties specifically agree otherwise. Under no circumstances can ICC require that there be more than one Neutral. ICC may propose more than one Neutral to the parties when it believes this could be beneficial, but the choice is always left to the parties.

F. Fees and costs (article 4 of the Rules)

The fees and costs of ICC and the Neutral are dealt with in article 4 of the Rules and the accompanying schedule of ADR costs. ICC's fees consist of administrative [Page17:] expenses comprising (i) a non-refundable registration fee, currently set at US$ 1,500, which covers the processing of the Request for ADR and (ii) administrative expenses for the ADR proceedings, which depend upon the tasks performed by ICC, and are presently capped at US$ 10,000.

Article 4(5) of the Rules provides that all deposits and costs shall be borne in equal shares by the parties unless they agree otherwise. It should be noted, however, that article 4(5) can apply only after the parties have agreed to submit their dispute to the ICC ADR Rules. Thus, when there is no agreement to submit to the Rules and one party files with ICC a unilateral Request for ADR pursuant to article 2.B of the Rules, it will not have grounds under the Rules to recover half of the non-refundable registration fee if the other party chooses to reject the Request. In all other situations, the provisions of article 4(5) will apply.

The administrative expenses will be determined strictly in relation to the extent of ICC's involvement in the ADR proceedings. Its tasks may include appointment of a Neutral, replacement of a Neutral if a party objects to an appointed Neutral, correspondence with the parties and the Neutral pursuant to the Rules, and so forth. ICC staff is available to answer questions from the Neutral or the parties and seeks to ensure that the ADR proceedings proceed smoothly. The cap on administrative expenses is designed to avoid an open-ended cost structure for ICC's services.

Remuneration of the Neutral consists of two elements: fees based on an hourly rate for time spent by the Neutral and expenses of the Neutral. The hourly rate is fixed by ICC in consultation with the Neutral and the parties. It must be reasonable in light of the complexity of the dispute and other relevant circumstances. The amount of time spent by the Neutral is reviewed for reasonableness by ICC. Under these provisions, the parties are spared having to negotiate fees directly with the Neutral at the beginning of the ADR proceedings. This contributes to a good relationship between the parties and the Neutral. The Neutral's fees are always determined by ICC in full consultation with all concerned.

Finally, the Rules provide that the parties, after the filing of the Request for ADR, must pay a deposit in an amount likely to cover the administrative expenses of ICC and the fees and expenses of the Neutral. The proceedings will not go forward until such payment has been made. In addition, ICC may readjust the amount of the deposit at any time when it considers that the deposit is not likely to cover the total costs of the ADR proceedings, and may stay the proceedings until such further payment is made. In all cases, under article 6(1)(f) of the Rules, ICC can terminate the proceedings if a payment has not been made within 15 days of its due date. These provisions are designed to give the parties maximum predictability as to costs and to assure the Neutral that his or her reasonable fees and expenses will be covered.

G. Conduct of the ADR procedure (article 5 of the Rules)

Perhaps the most original feature of the new ICC ADR Rules is that they do not impose a particular ADR technique upon the parties but allow them to choose the technique that is best adapted to their particular dispute. Thus, the parties may choose mediation, neutral evaluation, mini-trial, or any other non-binding ADR technique. They may also choose a combination of techniques. For example, mediation may be the chosen technique, but the Neutral could be asked to give his or her evaluation of a particular issue. [Page18:]

Agreement on the technique to be used is normally reached during a first discussion with the Neutral to be held as soon as possible after the Neutral has been designated or appointed (see article 5(1) of the Rules). As seen above, the parties may have agreed on the technique to be used for the ADR in their underlying contract. Even in that case, such agreement can be reviewed with the Neutral and modified if desired by both parties. In the absence of any prior agreement on the technique to be used, which is likely to be the typical situation, the parties should seek to reach agreement during that first discussion in light of the precise nature of their dispute.

The choice of the most appropriate ADR technique will depend upon the facts of the case, the relationship between the parties, and the business culture of the respective parties, among other factors. For example, a dispute concerning exclusively the interpretation of a particular contractual provision could be resolved quickly via neutral evaluation. A complex dispute with claims and counterclaims might best be handled through the mediation technique, which could lead the parties to an interest-based solution.

Since ADR is a voluntary and informal process centered upon negotiation, it should be able to take whatever form is useful to the parties, in consultation with the Neutral. Thus, the new Rules say hardly anything about how the Neutral and the parties actually carry out the ADR process. Rather, the Rules are limited to what is necessary for putting the process in place and terminating it properly when it is over. This makes the Rules flexible and adaptable to the needs of the parties. In addition, it is often difficult for the parties to determine the best ADR technique before a dispute has arisen or even before the first discussion with the Neutral. This is particularly true for parties without any significant experience with ADR. The Rules are designed to permit the parties to agree on the technique to be used at the time that is most appropriate to them.

The Guide to ICC ADR contains its own description of mediation, mini-trial and neutral evaluation. But even these descriptions can be developed or modified by the parties in consultation with the Neutral during the first discussion under the Rules. The idea is to avoid creating artificial boxes that are inappropriate for a negotiation process. For example, the Guide describes mini-trial in a way which suggests that the parties will be corporations rather than natural persons. While this is typically the case, the Rules fully permit natural persons to hold a mini-trial if they agree to do so. The details, such as who sits on the panel and who presents the position of the natural person (e.g. the natural person or a duly authorized representative) can be worked out during the first discussion with the Neutral.

In this context, it is worth commenting on the terms 'mediation' and 'conciliation'. Some authors assert that 'mediation' and 'conciliation' are simply two different words that refer to the same process. Others claim that there are differences between them, saying that conciliation is more formalistic and never includes separate meetings with each of the parties, while mediation is more facilitative. The fact is that none of the terms used to describe ADR techniques is defined by any universally applicable statute or binding source of law. As a result, it is up to each set of rules or up to the parties to describe these techniques for their own purposes. The ICC ADR Rules and the Guide implicitly treat 'mediation' and 'conciliation' as synonymous, while allowing maximum flexibility.

Mediation is described in the Guide as the settlement technique in which the Neutral acts as a facilitator to help the parties try to arrive at a negotiated settlement of their dispute. Mediation often includes separate confidential meetings between [Page19:] the Neutral and each party, commonly called caucuses. In these meetings, a party can speak freely and confidentially to the Neutral and explain the issues and its needs. The Neutral does not convey any of this information to the other party unless expressly authorized to do so. In mediation, as so described, the Neutral is not requested to provide any opinion as to the merits of the dispute.

This description distinguishes mediation from neutral evaluation where the Neutral is requested to provide a non-binding opinion or evaluation on issues of fact, technical issues, issues of law, interpretation of a contractual provision or the like. Mini-trial involves the setting up of a panel comprising the Neutral and an authorized executive of each party. The panel hears presentations of each party, after which it or the Neutral can act to mediate a solution to the dispute or can express an opinion on the merits. That opinion can be totally non-binding, or the parties, subject to applicable law, can agree contractually in advance to be bound by it. The Rules permit the parties to agree on any other settlement technique or upon a combination of settlement techniques.

Article 5(2) of the Rules provides that, if the parties do not come to an agreement on the technique to be used, mediation, the most common form of ADR, will be used. This added feature gives the parties certainty as to the applicable ADR technique if they do not reach agreement on another technique.

Another originality of the new Rules is that by submitting to them the parties agree to follow the ADR procedure through the first discussion with the Neutral. While ADR is a voluntary process, meaning that one or both parties can terminate it at any time, it was felt that when the parties have agreed to submit their dispute to the ICC ADR Rules, they should give the process its best chance to succeed. The first discussion with the Neutral will give the parties their first opportunity to get acquainted with the Neutral and to focus on the potentialities of the process. Without this first step, the parties would not reasonably be in a position to evaluate the pros and cons of terminating the procedure. In sum, this provision is intended to provide some substance to the parties' agreement to submit their dispute to ICC ADR, while preserving the essence of the voluntary nature of ICC ADR.

In addition to seeking agreement on the ADR technique, the parties, pursuant to article 5(1) of the Rules, must also seek agreement during the first discussion with the Neutral on the specific procedure to be used. The term 'procedure' refers to the process to be used for carrying out the adopted settlement technique. It follows that the specific procedure will vary with the settlement technique that has been adopted. For example, in a neutral evaluation, where the Neutral makes a finding or recommendation, it may well be necessary for the parties to submit adequately detailed memoranda to the Neutral so that he or she can make an informed recommendation. In mediation, the Neutral typically plays a facilitative role and is unlikely to need such memoranda. In general terms, the parties should consider the following possibilities: establishing a procedural calendar; exchanging documents, if useful; exchanging memoranda, as appropriate; establishing meetings with the Neutral; and identifying the persons participating in the procedure and their authority to bind the entities they represent. It is important that corporate parties be represented in the ADR proceedings by individuals who are fully authorized to bind them. Otherwise, the representatives will not be able to sign a binding settlement agreement during the proceedings. This can be very detrimental to the ADR process. If the representatives, after much effort, arrive at a solution which can be rejected by persons at the home office, the whole process will have to be reopened and may well collapse. [Page20:]

As to the manner in which the first discussion with the Neutral is held, a number of members of the Working Party were concerned that requiring a physical meeting of parties from different countries or even continents with the Neutral might be too onerous. It is for this reason that the Rules do not require a physical meeting. The first discussion could be held by videoconference, telephone or any other appropriate means through which all concerned can communicate simultaneously in real time. Nevertheless, as a practical matter, a physical meeting is preferable because it provides the best way for the parties and the Neutral to become acquainted and to move the process forward. In each case, those benefits must be weighed against the costs and logistics that a physical meeting can involve.

Article 5(3) of the Rules permits the Neutral to conduct the procedure as he or she sees fit. That article does not mean that the Neutral can ignore the needs and wishes of the parties. On the contrary, article 5(3) specifically requires the Neutral to be guided by the principles of fairness and impartiality and by the wishes of the parties. The settlement must be the parties' own settlement, and they must be comfortable with it.

Finally, article 5(5) of the Rules exhorts the parties to cooperate with the Neutral in good faith. It cannot be overstressed that ICC ADR proceedings should be conducted and experienced as a good faith effort of the parties to find their own solution to the dispute.

H. Termination of the ADR proceedings (article 6 of the Rules)

Article 6 of the Rules sets out the various ways in which ICC ADR proceedings can be terminated. This article applies to ADR proceedings that have actually been commenced, i.e. when a Request for ADR has been filed based upon a prior agreement to submit to ICC ADR pursuant to article 2.A of the Rules, or when a unilateral Request has been accepted by the other party pursuant to article 2.B of the Rules. Article 6 provides that, depending upon the circumstances, the proceedings can be terminated by the parties, by the Neutral, or by ICC. The proceedings can also terminate upon the occurrence of certain specified events.

Any party can terminate the proceedings at any time after the first discussion with the Neutral (article 6(1)(b)). The parties are expected to understand that it is in their interest to give the process its best chance of succeeding, and given their agreement to submit the dispute to ICC ADR, they should see the process through. However, since the process is voluntary, each party is free to terminate the proceedings after the first discussion if it genuinely believes that there is little or no chance of success.

The proceedings can be terminated by the Neutral at any time he or she believes that the proceedings will not resolve the dispute between the parties. This could occur, for example, if the Neutral believes that one of the parties has no serious intent to pursue the proceedings in good faith. In theory, this could happen even before the first discussion with the Neutral but after his or her designation or appointment. In exceptional cases, it may appear to the Neutral that a party is willfully putting off or refusing to hold the first discussion with the Neutral for whatever reason. Although this should not happen, the Rules provide a safeguard for that circumstance. [Page21:]

The proceedings can be terminated by ICC if the parties have not made the required payments of costs and fees, if there has been a failure to designate a Neutral, or if it has not been reasonably possible for ICC to appoint a Neutral. The first possibility speaks for itself. The second possibility could apply, for example, when the parties have agreed in their underlying contract that the Neutral shall be designated by them but nevertheless they are unable to agree upon a Neutral or to agree that the Neutral shall be appointed by ICC. The third possibility can occur if a party rejects several Neutrals appointed by ICC, and ICC does not reasonably believe that it can appoint a Neutral who will be acceptable to the parties.

In addition, the ICC ADR proceedings terminate automatically upon the signing of a settlement agreement by the parties. They can also terminate upon the completion of the procedure established pursuant to article 5. As seen above, the agreed settlement technique may simply be a neutral evaluation of a particular issue in dispute without any binding effect and without further settlement discussions occurring within the ICC ADR proceedings. In such a case, the proceedings will terminate when the Neutral has rendered his or her evaluation and has notified the parties thereof. Finally, the proceedings can terminate upon the expiration of any time limit set for the proceedings. For example, the parties may agree that the proceedings will terminate if no settlement agreement has been reached within 30 days following the first discussion with the Neutral. Any such time period could of course be extended by agreement of the parties.

I. Confidentiality (article 7 of the Rules)

Confidentiality is an essential feature of ICC ADR, as it typically is in any situation in which parties are seeking to negotiate a settlement. Parties should be encouraged to speak freely during the proceedings with the understanding that any offers or statements that are made therein cannot be used in other proceedings unless the parties specifically agree otherwise or unless required by applicable law. Article 7 of the Rules is designed to ensure the confidentiality of ICC ADR proceedings to the greatest possible extent. It also provides that the Neutral shall not give testimony in other proceedings unless all of the parties agree otherwise or applicable law so requires.

One issue with respect to confidentiality should be specifically pointed out. Once the parties have agreed to submit their dispute to ICC ADR, they are bound by the confidentiality provisions of the Rules. However, in the case of the filing of a unilateral Request for ADR in the absence of such an agreement, pursuant to article 2.B of the Rules, the other party is not yet bound by the Rules. If that party accepts the Request, the confidentiality provisions will apply to the Request as well as to the entire proceedings. If that party rejects the Request, the Rules cannot require the confidentiality of such a unilateral Request since the Rules have not yet been agreed to. A party filing a unilateral Request for ADR under article 2.B should have this in mind and avoid including any confidential material in the Request. This problem can also be alleviated if the parties include an optional suggested ADR clause in their underlying contract and add a provision to the effect that any unilateral Request for ADR filed with ICC will be kept confidential.

In addition, article 7(3) of the Rules provides that the Neutral, unless all of the parties agree otherwise in writing, may not act as a judge, arbitrator, expert or representative of a party in any judicial, arbitration or similar proceedings relating to the dispute that is the subject of the ICC ADR proceedings. In a number of [Page22:] business cultures, it is in fact common for a Neutral to be named as sole arbitrator or chairman of an arbitral tribunal to resolve the dispute that was not settled in the ADR proceedings. It is also common for a sitting arbitrator to be asked to stay the arbitral proceedings and act as a Neutral in the same dispute. The ICC ADR Rules fully permit Neutrals to act as arbitrators and vice versa so long as all of the parties agree. This is entirely appropriate since a Neutral may obtain information or may be aware of settlement offers made by the parties, to which an arbitrator would not normally have access. As a result, the change of roles between Neutral and arbitrator should not occur against the will of any party. However, if all parties are in agreement therewith, there is no reason to prevent it. The Rules, as drafted, simply ensure that the change of roles cannot occur without the full agreement of all of the parties.

Finally, over and above the confidentiality protections within article 7, ICC has put in place an ADR Secretariat that is entirely distinct from the Secretariat of the International Court of Arbitration. The ADR Secretariat has its own separate staff, and there is no contact between the two Secretariats. Thus, confidentiality is assured in cases where ADR proceedings are followed by an ICC arbitration or occur during an ICC arbitration. In those cases, the Secretariat of the Court will have no knowledge of the conduct of the ADR proceedings.

III. Conclusion

This article, after placing the new ICC ADR Rules in context, has reviewed and analyzed the various provisions of the Rules. While much has been written in the style of statutory interpretation, we must never lose sight of the spirit of ADR. ADR is par excellence a non-legalistic tool in the dispute resolution 'toolbox'. It is founded on cooperation, negotiation and good faith. ICC ADR provides an opportunity for parties to arrive at a rapid, inexpensive and non-contentious solution to their disputes and differences. The Rules were designed to be used in that spirit. Legalistic battles over the meaning and application of the Rules should have no place in ADR.

The ICC ADR Rules are short, simple and open-ended. They do not attempt to regulate or cover every possible situation. Rather, they provide a framework for the ADR process. It is the hope of the ICC's Working Party on ADR that these Rules, as the latest addition to ICC's dispute resolution services, will provide the international business community with an effective tool for resolving their disputes and differences in a rapid, creative and relatively inexpensive manner.

1
See ICC Publication No. 808. Also available on the web site: www.iccarbitration.org

2
ICC Rules for Expertise. See ICC Publication No. 520. Also available on the web site: www.iccexpertise.org

3
ICC DOCDEX Rules. See ICC Publication No. 577. Also available on the web site: www.iccdocdex.org

4
For information, please write to: ICC Dispute Resolution Services - ADR, 38 cours Albert 1er, 75008 Paris, France; fax +33 1 49 53 29 29; e-mail adr@iccwbo.org

5
The ICC Rules for Expertise and the ICC DOCDEX Rules. See supra notes 3 and 4.