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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
The Commission on International Arbitration is one of the ICC's Commissions charged with preparing policy on general and technical issues concerning world trade and investment. Chaired by Professor Ottoarndt Glossner, it is composed of international specialists appointed by ICC National Committees and Councils throughout the world. The reports it issues from time to time do not entail or impose any obligation whatsoever on the ICC International Court of Arbitration, which is a completely independent body.
The Working-Group on Terms of Reference established by the Commission was composed of the following members:
Chairman of the Group: Mr S. Lazareff (France); Members of the Working Group: Dr W. Melis (Austria); Prof. Dr H. van Houtte (Belgium); Mr E.C. Chiasson QC (Canada); Dr F. Ramirez Vasco (Colombia); Mr A. Fadika (Ivory Coast); Mr P. R. Meurs-Gerken (Denmark); Justice G. Miller (Finland); Mr R. Pichard du Page (France), Prof. Dr B. von Hoffmann (Germany); Dr A.A. Baramuli (Indonesia); Dr R. Morera (Italy); Prof. Dr A.J. van den Berg (Netherlands); Mr S. Jarvin (Sweden); Dr P. Karrer (Switzerland); Dr S. Sarkis (Syria); Mr Hsien Li (Taiwan); Dr O. Azizoglu (Turkey); Mr H. LLoyd QC (United Kingdom); Mr J. Paulsson (U.S.A.); Alternate members of the group: Dr A. Kassis (Syria); Mr J. Uff QC (United Kingdom); Secretariat: Mr S.R. Bond; assistant: Mr E.G.W. Schäfer.
Note
The opinions and conclusions expressed in this report are those of the Working Group. They do not amend or supersede the ICC Rules of Arbitration or bind the ICC International Court of Arbitration or its Secretariat. [Page25:]
(The numbers refer to paragraphs)
Preface 1
Part I: The drafting procedure 13
Introduction 15
A. General considerations 20
B. Specific points relevant to drawing up Terms of Reference 40
(a) Procedure by correspondence or meeting? 40
(b) How to agree on a date for a meeting 49
(c) Who drafts the Terms of Reference? 50
(d) What to do if a party is not cooperative 58
(e) Procedure for signing Terms of Reference by correspondence 69
(f) Authority to sign Terms of Reference 74
(g) Dealing with situations where a party questions the jurisdiction
of the arbitral tribunal 76
(h) How to overcome common misconceptions about the scope of the
Terms of Reference which delay their drawing up and signature 80 [Page26:]
Part II: The contents of the Terms of Reference (Article 13(1)
of the ICC Rules) 82
Article 13(1)(a) 82
Article 13(1)(b) 87
Article 13(1)(c) 96
Article 13(1)(d) 118
Article 13(1)(e) 125
Article 13(1)(f) 127
Article 13(1)(g) 132
Article 13(1)(h) 170
Part III: Other aspects 180
A. Dealing with new claims or counterclaims 180
B. Financial aspects 200
(a) Financial aspects in general 200
(b) Financial aspects prior to drawing up Terms of Reference 210
(c) Financial aspects subsequent to drawing up Terms of Reference 213
(d) Impact on the powers of the arbitral tribunal 216
C. Relationship between the arbitral tribunal and the Secretariat
of the International Court of Arbitration 231 [Page27:]
Preface
1. This guide is intended to facilitate the drafting and use of Terms of Reference so that the advantages of Terms of Reference can best be realized. It is neither an interpretation of the ICC Rules of Arbitration (hereinafter: 'Rules') nor an authoritative modus operandi; it does not impose rules, but simply offers guidance. It must not be construed as derogating from or amending the Rules. Its sole objective is to alert users to essential questions, to facilitate the tasks of the arbitrators and to enhance the comprehension of parties.
2. Terms of Reference have been a characteristic feature of ICC arbitration since the first version of the Arbitration Rules in 1923.
3. Parties entering into an agreement to arbitrate can hardly be expected. to determine the details of proceedings which, at the time, they surely neither desire nor foresee. However, once a dispute has arisen and the arbitral tribunal has been seized of the case, appropriate procedures should be established which are best suited to the efficient resolution of that dispute.
4. Terms of Reference are designed to focus the arbitral proceedings on the essential issues at the earliest possible date and to allow the arbitrators, in cooperation with the parties, to establish a framework for the proceedings. However, Terms of Reference do not as such prevent the parties from developing further arguments nor does their signature imply an implicit admission of the contentions of the opposing party. This is particularly important in an arbitration system in which parties, lawyers and arbitrators from diverse legal and cultural backgrounds are involved.
5. To those familiar with procedures in common law countries, the essential elements of the Terms of Reference resemble what takes place at some stage in most proceedings when the parties' respective claims are examined and the issues are defined. In some countries this will occur at a pre-trial conference or pre-trial review; in other countries the arbitrator or court will hold a meeting or hearing for the same purposes. These occasions are especially useful in complex cases. Under the Rules the Terms of Reference provide an early opportunity for such a review without prejudicing the tribunal or the parties from further refinements of the arguments during the proceedings.
6. Furthermore, the Terms of Reference make it easier to determine whether the arbitral tribunal has fulfilled, exceeded or fallen short of its mission. This point is relevant not only for the arbitral tribunal, but also for the International Court of Arbitration (when scrutinizing the final award) and, where necessary, national courts (when called upon to consider the enforcement or annulment of an arbitral award).
7. Depending on circumstances, Terms of Reference may have the following additional advantages:
8. Terms of Reference assist in structuring the procedure and the substance of the dispute in a rational manner and thereby facilitate throughout the arbitral proceedings the parties' and arbitrators' verification that all issues relevant to a final award are being covered by the oral and written pleadings. An early summary is especially useful in complex cases and where initial submissions are incomplete or unclear.
9. Terms of Reference may cure defects in the original agreement to arbitrate, or reinforce it.
10. The process involved in the preparation of Terms of Reference requires the parties to reassess the strengths and weaknesses of their cases. Such reassessment may facilitate agreement on certain issues or claims, or even occasionally contribute to the settlement of the entire dispute.
11. The ever-increasing variety of factual, legal, and cultural settings in which arbitral proceedings take place makes it impossible to devise an approach to the drawing up and use of Terms of Reference which would be suitable for all ICC arbitrations. Consequently, no standard answers to users' questions can be provided.
12. The order in which the different topics are addressed follows the structure of Article 13 of the Rules (hereinafter: 'Article 13'; all Articles cited are those of the 1988 ICC Rules of Arbitration). Other aspects of the ICC Rules relevant to drawing up Terms of Reference and the proceedings are also examined. [Page28:]
1. The drafting procedure
13. Article 13(1): 'Before proceeding with the preparation of the case, the arbitrator shall draw up, on the basis of the documents or in the presence of the parties and in the light of their most recent submissions, a document defining his Terms of Reference.'
14. Article 13(2): '... Within two months of the date when the file has been transmitted to him, the arbitrator shall transmit to the Court the said document signed by himself and the parties. The Court may, pursuant to a reasoned request from the arbitrator or if need be on its own initiative, extend this time limit if it decides it is necessary to do so.'
Introduction
15. Terms of Reference should be drawn up in an efficient and cost-effective manner.
16. Article 13(1) allows the arbitral tribunal to proceed by correspondence or to hold a meeting at which the Terms of Reference are discussed with the parties, and then signed. It is up to the arbitral tribunal to determine which of the two methods is appropriate, and to do so without delay.
17. In drawing up Terms of Reference, the arbitral tribunal should to the extent permitted respect any common wishes of the parties and take into consideration the expectations they might have concerning the conduct of the proceedings. Such expectations can vary depending on the system of litigation with which each party is most familiar.
18. Where no converging expectations exist, the arbitral tribunal should not give either party the impression that the system of its adversary is given preference. Moreover, international arbitrators will not seek to impose their expectations based purely on the legal system with which they happen to be most familiar, unless it is also the legal system of the parties.
19. The following section will first examine the procedure for drawing up Terms of Reference. It will then address several important issues.
A. General considerations
20. The arbitral tribunal should in all cases endeavour to have the Terms of Reference established within the two-month time limit provided for in Article 13(2). The ICC Court will extend this time limit where the circumstances of the case justify it. The Court expects the arbitral tribunal to inform it of the need and reasons for each extension.
21. Therefore, upon receipt of the file, the arbitral tribunal should immediately determine the steps required to draw up and sign the Terms of Reference.
22. Where the arbitral tribunal is composed of three arbitrators, the chairman should immediately establish contact with the other arbitrators in order to obtain their views on these questions and to agree on the procedure. Whether or not a meeting with the parties is initially envisaged, the chairman should determine the dates at which the members of the arbitral tribunal would be available if such a meeting should become necessary.
23. The following points should be examined at the outset:
24. - Are the parties' submissions sufficient for drafting useful Terms of Reference?
25. - May the Terms of Reference be agreed upon and signed by correspondence without calling a meeting?
26. Following these steps, the chairman should write to the parties to inform them of what the arbitral tribunal has envisaged.
27. A sole arbitrator should write to the parties immediately after having examined the file.
28. If the tribunal concludes that the documents in its possession are insufficient to proceed, it should in the first letter request further submissions from the parties. Moreover, the first communication from the arbitral tribunal should set forth the procedure envisaged for drawing up Terms of Reference and propose a timetable. In general, and especially when it requests further submissions or comments from the parties, the arbitral tribunal should fix time limits in order to observe the two month deadline (Article 13(2)). It should make it clear that comments or further submissions must be filed by a fixed date prior to the preparation of a final draft of the Terms of Reference.
29. The first letter to the parties should also indicate the means of communication to be used during this stage of the proceedings (e.g., fax confirmed by mail, private courier, or registered mail). [Page29:]
30. At the same time as it sets out the procedure to be followed, the arbitral tribunal should commence drafting Terms of Reference. Where a party has been invited to make further submissions, the draft should be advanced as far as possible while awaiting such submissions.
31. The arbitral tribunal should endeavour to submit draft Terms of Reference to the parties for comments as early as possible, whether or not a meeting has been envisaged. All parties should be invited to comment on the draft and to send a copy of such comments to all concerned. Again, a time limit should be fixed. These comments will be examined by the arbitral tribunal to determine to what extent they should be reflected in the second draft.
32. Where a meeting with the parties has been called, the revised draft should be communicated to the parties far enough ahead of time to enable them to prepare for the discussions which will lead to the final text.
33. At any such meeting, facilities should be available to make changes in the draft so that the final text can be signed on the spot. A word processor may facilitate this process.
34. Terms of Reference are typically signed first by the parties and then by the arbitral tribunal. Where there are three arbitrators, the chairman usually signs last and indicates the date of signature.
35. Where no meeting is to take place, the arbitral tribunal, having taken into consideration the comments made by the parties, should circulate a second draft for further comments or signature within a set time limit. The final version of the Terms of Reference is sent to all concerned for signature.
36. When signatures are complete, the Terms of Reference are transmitted to the ICC Court in accordance with Article 13(2).
37. If a party has refused to take part in drawing up Terms of Reference or to sign them and the ICC Court is thus required to take '... such action as is necessary for [their] approval' (Article 13(2)) by default, it pays particular attention to the requirement of a complete summary of the parties' respective claims and a clear description of the issues to be determined (see also paragraph 96-124 below). Furthermore, the Court ascertains whether the procedure up to this stage has been properly carried out (see also below paragraph 68). If the Court is satisfied that the Terms of Reference conform to the requirements of the Rules, it will approve them.
38. When all parties have signed Terms of Reference which conform with the requirements of Article 13(1), the Court will take note thereof and then verify whether the advance on costs previously fixed is still adequate (see Article 9(4) and paragraphs 213-219 below.)
39. Whether the Court approves the document submitted by the arbitral tribunal in default of one party or simply takes note of it, it must comply with the requirements of Article 13.
B. Specific points relevant to drawing up Terms of Reference
40. When considering whether to have a meeting to draw up and sign the Terms of Reference, the arbitrators should consider the following:
41. - The complexity of the dispute. Where the factual complexity of the matter might require discussion and where it appears that a firm timetable can be fixed only in the presence of the parties, it is advisable to hold a meeting.
42. - Where there is disagreement between the parties regarding procedural issues, such as the language(s) of the arbitration, the place of arbitration, the location of any hearing on the conduct of the proceedings (e.g. discovery of documents, cross-examination, conduct of hearings by the arbitral tribunal, or procedure for appointing an expert and defining his mission.), it is advisable to hold a meeting.
43. - Where it appears useful for the arbitral tribunal and the parties or their counsel to get to know each other, especially if the arbitral tribunal senses that a face-to-face meeting could facilitate amicable settlement, a meeting should be contemplated.
44. - Where the above elements are not relevant or can be disposed of by correspondence, then drawing up the document by means of a written procedure may be preferable.
45. - Furthermore, where the cost of a meeting is not justified by the amount at stake, proceeding by correspondence is preferable.
46. As a general rule, a meeting should be convened whenever there is a reasonable expectation that it may resolve any difficulties which may otherwise delay signature of the Terms of Reference or if unnecessary friction [Page30:] and preliminary disputes may thereby be avoided.
47. If necessary, the arbitral tribunal should not hesitate to change its mind and call a meeting instead of trying to reach agreement by correspondence. Conversely, where anticipated difficulties do not materialize, the arbitral tribunal might decide that a meeting is not required.
48. Meetings should be held at the place of arbitration (see Article 12), unless the parties have expressly agreed that they may be held at another place.
49. The suggested procedure is for the chairman to propose several dates for a meeting. The co-arbitrators then indicate which dates would be equally suitable for them. This allows the chairman to propose suitable dates to the parties. If no date can be agreed upon by this procedure, then the least inconvenient one should be chosen unless there are imperative reasons against such a date. It should be noted that in certain circumstances, where counsel for one party is unavailable, he or she may have to be replaced by another duly empowered one (e.g., a member of the same law firm), since the unavailability of counsel alone may not necessarily justify an extension of time (see above paragraph 20).
50. Article 13(1) provides that 'the arbitrator shah draw up...' the Terms of Reference. The preparation of draft Terms of Reference by the arbitral tribunal is intended to ensure that it has familiarized itself with the contents of the file at an early stage and to clarify any misunderstandings which could adversely affect the proceedings at a later stage. Where there are three arbitrators, the chairman will normally be in charge of the drafting. In most cases there is no reason for the parties to draft any part of the document except perhaps for the summary of the respective claims. This participation sometimes gives each party the assurance that its case has been correctly summarized (for the importance of the summary see paragraphs 96-117, 180-199). The arbitral tribunal should decide whether to propose that the parties do so by considering whether it would contribute to the swift preparation and signature of Terms of Reference.
51. The following factors are relevant to the decision whether to request each party to summarize its claims:
52. - Is the dispute of such complexity and volume that the parties, who best know the facts, will be able to summarize their respective positions faster and better than the arbitrators?
53. - Are the initial submissions of all parties sufficient for a useful summary? If not, the arbitral tribunal must decide whether one or more parties should be invited to make further submissions and thereby perhaps delay the procedure for drawing up Terms of Reference, or whether clarification will come from the respective summaries drawn up by the parties.
54. - Are the parties and/or their respective counsel sufficiently familiar with the ICC procedure so that they would be able to submit a draft which meets the expectations of the arbitral tribunal and the requirements of Article 13?
55. - To what extent are the parties likely to cooperate with the arbitral tribunal and is their participation in the drafting likely to ease such cooperation?
56. - Is it likely that there will be argument between the parties as to their respective drafts?
57. In any event the arbitral tribunal should not leave the drafting of any passages of the document to the parties without maintaining a tight control over the procedure.
58. Parties who wish to obstruct an arbitration will either fail to participate or provoke needless argument.
59. Where a party has not yet taken part in the arbitration, the arbitral tribunal should first consider whether it would be appropriate in the circumstances to invite it to submit its answer to the request within a reasonably short time. If it complies with this invitation, the normal procedure as described above should be followed. If it does not, the arbitral tribunal will have to draw up the Terms of Reference on the basis of the documents before it. In such a situation, special care should be taken to ensure that the party concerned is duly notified of all submissions and orders, as provided for in Article 6(2) (see also Article 8(2)).
60. When argument arises, the arbitral tribunal should determine when and how to bring it to an end. One way this can be done is to convene a meeting at which the final version of the Terms of Reference is established and signed, by all [Page31:] parties if possible, but at least by one party. Particular care should be taken to make the necessary arrangements for last-minute changes in Terms of Reference at this meeting.
61. Where Terms of Reference are to be drawn up and signed by correspondence and there are indications that a party may not sign, the arbitral tribunal should endeavour to obtain a clear statement to that effect from that party within a short time period. The arbitral tribunal should inform the party that unless it indicates within that time limit that it has signed or will sign, the Terms of Reference will be communicated to the ICC Court for approval in accordance with Article 13(2).
62. Occasionally a party does not observe a time limit fixed by the arbitral tribunal for comments or submissions regarding Terms of Reference. Given that Article 13(1)provides that Terms of Reference shall be drawn up 'in the light of..[the parties] most recent submissions', the question may arise whether last minute submissions should be reflected in the document.
63. There is no simple answer to this problem. It is of particular importance where new claims or counterclaims have been submitted. Once Terms of Reference are signed, such new claims may have to be covered by a Rider signed by all parties (see below paragraphs 180-199).
64. But in view of the consensual nature of arbitration and of the right to be heard, most arbitral tribunals tend to include such submissions in the Terms of Reference.
65. Such an approach may cause unacceptable delays where a party repeatedly presents late submissions. A practical solution might be the following: the arbitral tribunal decides to hold a meeting and orders that all claims or counterclaims and any other proposals for the contents of the document shall be submitted by a given date so that they may be taken into account and, where appropriate, reflected in Terms of Reference, which will then be signed at the meeting.
66. In exceptional situations, some arbitrators have ruled that late submissions are inadmissible and have refused to take them into account.
67. Where one party does not sign, it should be reminded that pursuant to Article 13(2), Terms of Reference which are not signed by a party are submitted to the Court in order for it to '... take such action as it is necessary for [their] approval' (Article 13(2); see paragraph 37 above).
68. If it is likely that a party will not sign the Terms of Reference, the arbitral tribunal should ensure that no provisions are contained in the document which would require the consent of all parties, because the ICC Court is not likely to approve Terms of Reference which contain such passages. Examples encountered in practice are declarations regarding the uncontested nature of the constitution of the arbitral tribunal, freedom to convene hearings at a place different from the place of arbitration, decisions as to applicable law, and authorization to act as amiable compositeur. If it is not clear whether the Terms of Reference will be signed by each party, paragraphs that treat these points may be drafted in the conditional sense, i.e. 'should all parties sign the Terms of Reference, it is agreed that...'.
69. In current practice there are various approaches regarding the signature of Terms of Reference by correspondence. On rare occasions the arbitral tribunal signs first and then sends the document to the parties for their signatures. In most instances, however, the parties will be asked to sign prior to the arbitral tribunal. Nevertheless, a different approach may be appropriate for reasons of practicality and cost. For example, where some of the arbitrators and parties live in the same or adjacent countries and others reside in more distant locations, it may be preferable for the former to sign one after the other, regardless of their role in the arbitral proceedings. In the majority of cases Terms of Reference are circulated and all concerned sign each original. In some cases copies of the document are dispatched concurrently for signature: copies of the agreed Terms are dispatched at the same time to all concerned for signature. The signed documents are then directly returned to the chairman or sole arbitrator. However, this procedure requires the sending of a great number of copies, and the parties and the arbitral tribunal will have signed identical, but not the same, documents. Finally, it is recommended that all pages of the Terms of Reference be initialled.
70. The following ancillary points should be borne in mind:
71. - For correspondence the fastest available means, such as private courier services, should be used. Safe receipt should be assured or, [Page32:] alternatively, an effort should be made to effect delivery at the last known address.
72. - There should always be sufficient originals for the arbitral tribunal, the parties and the ICC Secretariat. A spare copy should also be kept by the arbitral tribunal (e.g. 2 parties, 3 arbitrators: 7 copies; 2 parties, 1 arbitrator: 5 copies).
73. Whenever Terms of Reference are signed by correspondence, the arbitral tribunal (or, as the case may be, the chairman) should closely monitor the procedure. It may invite all concerned to notify it as soon as they have signed and forwarded the document. It may ask for a telecopy of the signature page.
74. It is the responsibility of each party, and in particular of the relevant opposing party, to ensure that the persons signing on behalf of a party are duly empowered to do so. Consequently, except where the rules or law applicable to the proceedings provide otherwise or if the arbitral tribunal has doubts regarding the authority to sign, the arbitral tribunal will normally have to address the issue and order the production of the relevant document only if an objection is raised.
75. The arbitral tribunal may stress in its first letter to the parties that the Terms of Reference should be signed by a person having the necessary authority. Where appropriate the tribunal may ask that such authority be expressly confirmed. Where powers of attorney are produced, it may be made clear that any objection is to be made without delay. If the Terms of Reference in a particular case reinforce the jurisdiction of the arbitral tribunal or modify the terms of the agreement to arbitrate, specific provisions of a national law, such as regulations concerning a special authorization of the person that enters into an agreement on such a point, may have to be considered.
76. When a defendant objects to the jurisdiction of the arbitral tribunal and fails to submit any defense regarding the merits of the claim(s), it often also states that it will submit its full defense and introduce counterclaims or set-off claims only should the arbitral tribunal find that it has jurisdiction.
77. Where the objection stems from an assertion that, for example, there is no arbitration agreement or that conditions precedent to the proceedings have not been fulfilled, the Terms of Reference must not only include these points as issues to be decided, but it should also set forth the issues that would arise if the arbitral tribunal decides to reject the objection.
78. In general, there appears to be no reason why a defendant party should not summarize its conditional claims by way of defense, set-off, or counterclaims which it would introduce should the arbitral tribunal find that it has jurisdiction. A statement covering such claims may be broadly worded. The Terms of Reference could then provide that, should the arbitral tribunal find that it has jurisdiction, all parties will submit full pleadings on the remaining issues.
79. A provision may be included in the Terms of Reference according to which any issue relating to jurisdiction and other preliminary issues may be decided in one or several partial awards.
80. Especially where parties are not familiar with Terms of Reference, they may fear that by signing the document they would be deemed to have accepted statements of law or fact made by the other side or be precluded from further developing their case. The arbitral tribunal may therefore choose to make it clear that, except where statements of fact or law made by one party are expressly identified as admitted-either in the Terms of Reference or in a submission by a party-such statements are to be regarded merely as contentions or allegations. Furthermore, where appropriate, the arbitral tribunal may wish to inform the parties, at the time the draft Terms of Reference are communicated, that it is the purpose of the document to define the framework of the arbitration and that it will not preclude them from developing their case in subsequent written and oral submissions.
81. Modifications of their cases by the parties are, however, subject to Article 16 of the ICC Rules, which provides that new claims or counterclaims not 'within the limits fixed by the Terms of Reference' require a Rider to the Terms of Reference (this issue is dealt with below). Nevertheless, Article 16 does not automatically apply to new allegations of fact or of law as such. The admissibility of such new allegations will be [Page33:] governed by the procedural rules and/or law applicable to the arbitral proceedings and decisions of the arbitral tribunal (see paragraphs 105-106,121 and 180-199 below for further details and practical solutions).
II. The contents of the Terms of Reference
82. Article 13(1): 'This document shall include the following particulars:
a) the full names and description of the parties,'
83. While in the vast majority of ICC arbitrations the inclusion of the parties' particulars will be a routine exercise it may in certain instances draw the attention of all concerned to questions related to the locus standi of a party. Moreover, the proper identification of the parties may be important for the enforceability of the award.
84. The responsibility for including the proper names and description of the parties in the Terms of Reference lies with the parties. It is the Claimant's responsibility to describe Defendant(s) in its request for arbitration in the proper way. This applies mutatis mutandis to Counterclaimants. The parties are also fully responsible for the communication of any subsequent change of their name and/or description to all concerned. Where appropriate, the parties should be advised of this responsibility at the time the Terms of Reference are drafted (see paragraph 93).
85. It is recommended to provide in the Terms of Reference that any change in name or description has to be communicated to the arbitral tribunal and the Secretariat.
86. Generally speaking, the arbitral tribunal is neither authorized nor obliged to initiate a correction of the names and description of the parties.
87. Article 13(1): 'This document shall include the following particulars:
(...)
b) the addresses of the parties to which notifications or communications arising in the course of the arbitration may validly be made,'
88. Where Terms of Reference have been signed by all parties and for some reason a party does not appear during the proceedings, the address which figures in the document is valid for notifications as provided in Article 6(2).
89. Article 13(1)(b) is to be read together with Article 15(5) which provides that 'The parties may appear in person or through duly accredited agents' and that 'in addition, they may be assisted by advisers'.
90. In ICC arbitration, most parties are represented by counsel, to whom all correspondence is normally addressed. In some cases, a party may designate an office or a representative near the place of arbitration for convenience in handling the matter.
91. Where a party has not indicated in writing that a mandate has been given and doubts arise during the course of the proceedings as to the authority of a representative, or if new counsel unexpectedly appears, the arbitral tribunal may be concerned as to whether the actions taken by that person have been validly authorized. In general, the arbitral tribunal is not authorized or obliged by the applicable procedural rules to verify authority to act. It is therefore imperative for the interested party to raise the issue with the arbitral tribunal which will then take the necessary action.
92. The addresses which are to be used for notifications and communications should give all useful details, such as telephone, fax and telex numbers relevant for any specific provisions regarding the methods of communication to be used during the proceedings which may be set forth in the part of the document covered by Article 13(1)(g).
93. If the arbitral tribunal is uncertain whether a communication has been validly received by a party (for example where a letter is returned as undeliverable; but see Article 6(2) and (3)) it should at once inform the concerned party before deciding what course of action to take.
94. A practical way of providing for any changes of address would be to insert a paragraph such as the following in the Terms of Reference:
95. "The arbitrators and counsel and/or parties are to notify immediately all parties to and signatories of the present Terms of Reference and the Secretariat of the ICC Court of any change of names, description, address, telephone, fax or telex number; failing such notification, procedural measures such as communications sent in accordance with the present provisions shall be valid.'
96. Article 13(1): "This document shall include the following particulars:
c) a summary of the parties' respective claims,' [Page34:]
97. The summary of the parties' respective claims is a key part of the Terms of Reference. As will be seen below, they are not to be confused with the issues to be determined which are dealt with under Article 13(1)(d).
98. In some instances drawing up of the summary can be a delicate matter. In order that it is done properly, its legal and practical aspects must be considered.
99. Legal aspect: The scope of the jurisdiction of the arbitrators is primarily defined by the agreement to arbitrate and by applicable national law regulating the capacity of parties to arbitrate or the arbitrability of certain issues. As soon as a dispute arises, the potential scope of jurisdiction of the arbitral tribunal will be further defined by the submissions of the parties. The arbitral tribunal cannot deal with claims or counterclaims unless they have been submitted by a party.
100. National procedural laws designed for local courts contain rules governing the admissibility of further or new submissions and claims. The objective of such rules concerning new submissions is to avoid delaying tactics and to safeguard the orderly progress of the proceedings. In most countries arbitral proceedings do not automatically have to be conducted in accordance with municipal procedural law. This is a distinctive feature of international arbitration as compared to national court proceedings. However, in international commercial arbitration, as in domestic court proceedings, the admissibility of new submissions must be regulated in some fashion.
101. The ICC Rules are designed to operate in all types of legal systems. By agreeing to their application, the parties contract out of an overly formalistic procedural approach to the extent permitted while at the same time establishing a workable degree of certainty.
102. The solution adopted in the Rules is characterized by the following elements:
103. - New claims or counterclaims, i.e., those that have not been summarized in accordance with Article 13(1)(c) and which are not within the limits of the Terms of Reference, have to be admitted and recorded in a Rider to the Terms of Reference pursuant to Article 16.
104. - The admissibility of all other submissions is governed by the applicable rules as determined under Article 11.
105. As in practice parties do not always fully realize the precise scope of these provisions it may be appropriate to insert in the Terms of Reference a provision along the following lines:
106. 'The purpose of the above (or following) summary is to satisfy the requirement of Article 13(1)(c) of the ICC Rules, without prejudice to any other or further allegations, arguments, and contentions contained in the pleadings or submissions already filed and in such submissions as will be made in the course of this arbitration. Accordingly, the Tribunal shall be entitled, subject to Articles 11 and 16 and other applicable procedural requirements such as, inter alia , procedural time limits, to take into consideration further allegations, arguments, contentions, and oral or written submissions.'
107. The summary of the parties' claims ensures that the arbitral tribunal will accomplish its mission and not exceed its powers. It serves as a point of reference to the arbitrators during the proceedings and when making their award. In addition it assists the International Court of Arbitration in the later scrutiny of the award provided for in Article 21. The summary may be used as evidence should an award be attacked before a state court on grounds of infra or ultrapetita .
108. Practical aspect: A summary of the parties' claims provides them with a clear view of the nature and extent of the dispute, especially where the initial submissions are ambiguous. Together with the identification of the issues to be determined (see Article 13(1)(d)) such summary will allow them to identify the central contentious points as they exist at the beginning of the proceedings.
109. Further, the summary permits the arbitrators to obtain a preliminary view of the likely issues at stake and thus allows them to direct the proceedings in the most efficient manner.
110. The above general considerations may be supplemented by the following suggestions:
111. - It may be useful to describe briefly any uncontested factual and legal background out of which the dispute has arisen.
112. - The parties' respective prayers for relief (petita) should be fully and clearly set out. This should include ancillary petita such as interest claimed and the allocation of costs.
113. - The factual allegations which support these prayers for relief should be sufficiently identified. [Page35:]
114. The uncontested factual and legal background should be set forth in a separate section of the Terms of Reference while the prayers for relief and the factual allegations that support them may be set forth in one section. Nevertheless, some Terms of Reference also have separate sections for these points.
115. While the parties' claims must be clearly identified, it is necessary to avoid narrow wording that would unnecessarily restrict the arbitral tribunal. The appropriate level of detail depends on the nature of the dispute. The Terms of Reference should be a self-contained document; therefore, a mere reference to the parties' submissions is not sufficient.
116. Where each party has been invited by the arbitral tribunal to formulate a summary of its claims, the arbitral tribunal should provide beforehand a clear indication of its expectations to the parties. In this context, the arbitral tribunal may wish to indicate that new allegations of fact or law are allowed by the ICC Rules within the limits fixed by Article 16 and that the admissibility of such submissions is governed by the rules otherwise applicable to the proceedings under Article 11 as well as the directions issued by the arbitral tribunal in this regard.
117. It follows that the summary of the parties' respective claims must directly derive from the facts alleged by each party as well as the prayers for relief in support of which the factual allegations are made. This should be done in a manner broad enough to encompass all claims and counterclaims, but limited to the requirements of the dispute. (For cases where a party refuses to take part in drawing up the Terms of Reference or is likely not to sign see paragraphs 37, 39 above.)
118. Article 13(1): 'This document shall include the following particulars:
d) definition of the issues to be determined,'
119. Because the summary of the parties' respective claims consists of an outline of the parties' allegations and the remedies sought, as described in the previous section, the issues to be determined are distinct from the parties' respective prayers for relief.
120. The list of issues to be determined identifies the questions of fact and substantive or procedural law which at the time of drafting appear to be relevant to the adjudication of the parties' claims. Since in most arbitrations further submissions will be made after the signature of the Terms of Reference, some issues may dissolve while new issues will arise. Provided that such new issues do not arise out of claims or counterclaims requiring a Rider (see paragraphs 180-199 below), Article 16 of the ICC Rules does not restrict the arbitral tribunal from addressing such new issues. The Terms of Reference need not be amended for it to do so, and no Rider is required.
121. A practical solution to clarify the matter would be to insert a paragraph such as the following in the Terms of Reference:
'The issues to be determined shall be those resulting from the parties' submissions and which are relevant to adjudication of the parties' respective claims and defenses. In particular, the arbitral tribunal may have to consider the following issues (but not necessarily all of these and only these, and not in the following order):'
122. The determination of the issues to be decided has, in the first place, a practical function. It will shape the subsequent proceedings by focusing the attention of the parties and the arbitral tribunal on the essential points for decision; thus enhancing the efficiency of the proceedings and the cogency of pleadings. For example, issues which relate to jurisdiction, the locus standi of a party, the applicable law, or the admissibility of claims may be clearly and separately identified. This is especially helpful where such issues may be decided in a partial award.
123. The variety of substantive issues to be found in Terms of Reference is countless. Normally they are organized by heads of claim and identify the points which are relevant for their adjudication. For example, if the consequences of a termination notice given by one of the parties without having observed the contractually agreed time limit are contentious, one of the issues to be decided may be whether proper notice was given. If the party wishing to terminate the agreement would purport to justify the non-observance of the time limit by asserting the other party's breach of contract, subsidiary issues may be whether the alleged acts took place and in law constitute breaches which gave the right to terminate the contract. All this could be set forth in more or less detail.
124. Therefore, no general rule indicates how detailed the list of issues should be. The appropriate level of detail depends on the nature [Page36:] of the dispute and of the parties' submissions. (For cases where a party refuses to take part in drawing up the Terms of Reference or is likely not to sign see paragraphs 37, 39, 58-68 above.)
125. Article 13(1): 'This document shall include the following particulars:
e) the arbitrator's full name, description and address,'
126. This section should not present particular difficulties. It identifies who the arbitrators are and indicates their respective functions (chairman, co-arbitrator, sole arbitrator). The Terms of Reference should include the telephone, fax, and telex numbers which may be used to communicate with the members of the arbitral tribunal. It is advisable to mention the dates of confirmation and/or appointment of the arbitrators. It may be appropriate to state that the parties confirm that the arbitral tribunal has been properly constituted and that they do not, as of the date of signing, have any objection to any of the arbitrators (but see paragraphs 58-68 for the case where a party is likely not to sign).
127. Article 13(1): 'This document shall include the following particulars:
f) the place of arbitration,'
128. The place of arbitration is of great importance, since the arbitral tribunal will have to observe any local mandatory rules applicable to international arbitration. Also any request for assistance during the arbitral proceedings or an application to set aside an award would probably but not necessarily always be filed with the local courts.
129. According to Article 12 the parties are free to agree on the place of arbitration. Only where they have not done so prior to the submission to the ICC Court does the latter fix the place. Even thereafter the parties may change the place by common agreement. Where the members of the arbitral tribunal have already been nominated or appointed the parties should, however, be aware that their acceptance might have depended on the place of arbitration. A subsequent change should therefore be made by the parties only with the agreement of the arbitrators. The place to include such a subsequent agreement is in the Terms of Reference. Where no agreement exists and, consequently, the ICC Court has fixed the place, a statement to this effect should be included in the Terms of Reference. The arbitrators are not authorized by the Rules to change the place of arbitration without the agreement of the parties.
130. However, in certain situations it may be convenient to hold meetings or hearings elsewhere than at the place of arbitration. The Terms of Reference may make express provision for such a situation. Even where such provision is included in the document, it should be borne in mind that, as a general rule, the arbitral tribunal should decide to hold hearings at another place only if there is a reasonable and objectively justifiable need to do so.
131. If the arbitral tribunal wishes to hold a hearing at a location other than the place of arbitration, it should solicit the views of the parties before making a decision in this regard.
132. Article 13(1): 'This document shah include the following particulars:
g) particulars of the applicable procedural rules and, if such is the case, reference to the power conferred upon the arbitrator to act as amiable compositeur,'
133. Articles 11, 14 and 15 contain certain basic provisions for the conduct of the proceedings. They are complemented by Article 6.
134. The basic rule is set forth in Article 11 which provides: 'The Rules governing the proceedings before the arbitrator shall be those resulting from these Rules and, where these Rules are silent, any rules which the parties (or, failing them, the arbitrator) may settle, and whether or not reference is thereby made to a municipal procedural law to be applied to the arbitration.'
135. The ICC Rules are designed to be a comprehensive but flexible set of rules to govern the arbitration. By agreeing to their application, the parties disconnect the rules governing the arbitral proceedings to the greatest possible extent from the municipal procedural law of the place of arbitration, which may otherwise fully govern the arbitration. The ability to do so is recognized by a vast number of modern arbitration laws and is embedded in the New York Convention of 1958 and the Geneva European Convention of 1961.
136. However, the free choice of the parties or, in its absence, the determination of the arbitral tribunal is limited by any mandatory procedural rules applicable to international arbitral proceedings under the law of the place of [Page37:] arbitration. The failure to observe such rules may lead to annulment of the award by a national court at the place of arbitration. Consequently, the arbitral tribunal should, first, take cognizance of the mandatory rules in force at the place of arbitration and, second, take special care that the procedure envisaged in the Terms of Reference does not conflict with those rules. In certain instances, it may also be appropriate to take into consideration rules of public policy which may become relevant in the context of the enforcement of an award.
137. The following are basic approaches with regard to the rules which may apply to the arbitral proceedings where the ICC Rules are silent:
138. - The Terms of Reference simply make reference to Article 11. This provision implies that a procedural rule is devised for specific situations on an ad hoc basis' as soon as a procedural issue arises which cannot be settled by common agreement. It should be borne in mind that, once an arbitration is fairly advanced, parties tend to be more unlikely to agree on procedural issues and it will thus be up to the arbitrators to decide. A simple reference to Article 11 is frequently used and provides the arbitral tribunal with maximum flexibility.
139. - The Terms of Reference refer to Article 11 and, in addition, contain particular rules governing certain aspects of the proceedings. This approach couples the flexibility of the preceding approach with predictability for certain procedural questions which are thought to be important (see paragraphs 153-168).
140. - The Terms of Reference refer to a municipal law of procedure which will be applicable in the absence of any other rules. In rare instances, the parties have included such a reference in their agreement to arbitrate. Such a choice should be respected in accordance with the hierarchy of Article 11.
141. - If one or more of the arbitrators or the parties suggest such a reference when the Terms of Reference are drafted, the following should be borne in mind:
142. • Municipal procedural laws are drafted for the use of national courts. Some of their provisions are therefore not capable of being applied to or are unsuitable for arbitral proceedings. Others can be applied only by adapting their meaning to the circumstances. At first sight they appear to provide for virtually all procedural situations. On subsequent examination, they may provide inadequate solutions for situations which had not been anticipated.
143. • Municipal laws of procedure are complex. Therefore, if it has been settled that the arbitral proceedings are to be conducted under municipal rules for commercial or civil matters, it may happen that these rules are not applied as strictly as might be advisable to prevent a successful challenge of the regularity of the proceedings. This risk is particularly prominent where, as often is the case in international arbitration, one or more of the arbitrators are from other jurisdictions and do not have occasion to observe or apply the chosen procedural law on a regular basis. The same applies to parties and their counsel.
144. • To choose a municipal procedural law other than that in force at the place of arbitration may add undesired complexity to the procedure. It may also result in the award being challenged in the jurisdiction whose rules of procedure are made applicable.
145. In sum, this solution is appropriate only if the arbitral tribunal and the parties are familiar with the municipal law of procedure chosen, and if this law is that of the place of arbitration. Where this solution is chosen, special care should be taken to state clearly whether the specifically drafted rules or the municipal law prevail in case of conflict. Of course, such priority must be in conformity with the applicable mandatory municipal rules of law. The practicability of this approach in international arbitration is doubtful.
146. Whenever the arbitral tribunal envisages including specifically drafted rules for the conduct of the proceedings in the Terms of Reference, it should consider the following questions:
147. Is the situation of such a nature as to warrant acceptance by all parties of such rules? To what extent can one expect disagreements which would delay or block drafting and signing the Terms of Reference?
148. The arbitral tribunal should not include detailed procedural provisions in the Terms of Reference if doing so would jeopardize their swift preparation and signature, unless it appears that there are key issues in the particular case that must first be handled, such as how to deal with confidential documents. Where the municipal procedural laws under which the parties normally operate are markedly different, rules which could be perceived as leaning towards the system favoured by one party are likely to meet objections from the other.
149. Where the arbitral tribunal does not anticipate such problems, or where it wishes to be certain which objections are likely to be raised, it may try to include specific procedural rules in its first draft. Should it appear from the [Page38:] reactions of the parties that there will be a controversy with regard to certain points, the arbitral tribunal may wish to simply include a reference to Article 11. In such an event the procedural rules could be discussed and settled in agreement with the parties, or determined by the arbitral tribunal immediately after the signature of the Terms of Reference during the meeting which has been called for this purpose.
150. Some tribunals prefer not to include specific procedural rules in the Terms of Reference. Instead, once the Terms of Reference have been signed, they may devote a part of the first meeting to agreeing to such rules with the parties.
151. In all these cases, where a precise timetable for the sequence of submissions is to be established, it may be contained in a separate document and need not be included in the Terms of Reference.
152. Which types of specific rules may be included in the Terms of Reference for a particular case?
153. Inter alia, the following procedural issues may be dealt with by specific rules:
154. - The language of the arbitration. In principle any agreement between the parties in this regard is binding on the arbitrators. Only in the absence of such agreement should the arbitral tribunal make use of the power conferred upon it by virtue of Article 15(3).
155. For reasons of practicality and cost it is normally preferable to conduct the arbitration in only one language. In some rare instances, where it appears to be important for the equality of the parties and the fairness of the procedure, two languages may be used. Even in the latter event, it is recommended that the Terms of Reference provide that all correspondence, procedural orders and awards which emanate from the arbitral tribunal be in only one language. When bilingual documents are unavoidable, one version only should be defined as legally binding.
156. In certain instances, even where the oral and written submissions of the parties and the proceedings as such are in one language, the question may arise whether oral testimony or written evidence may be presented with or without translation. Where such questions arise, specific rules should be devised to resolve them. These may also usefully establish who should provisionally bear the relevant costs. The final apportionment of such costs is to be made in the final award (see Article 20(1) and (2)).
157 In many cases it is advisable to provide that oral testimony and written evidence in a language different from the language of the arbitration must be translated, unless all concerned otherwise agree.
158. - The sequence and number of the written submissions by the parties. As stated above, the precise timetable for such submissions may be contained in a separate document and need not be included in the Terms of Reference. This is particularly true where a hearing date is envisaged, as the hearing will depend on full satisfaction of the advance on costs (see the explanations concerning Article 9(4) below at paragraphs 213-215). In any event, it should be made clear in the Terms of Reference that the arbitral tribunal has the right to modify the timetable.
159 - It may be appropriate to establish rules for production of documentary evidence, the procedure for taking oral evidence and the procedure to be followed with regard to such experts as may be presented by the parties or appointed by the arbitral tribunal. Where the parties come from different legal backgrounds and have different expectations, these rules may be crucial to their procedural strategy.
160. However, as this issue can be rather delicate, such rules should be settled in the Terms of Reference only where the parties are cooperative and likely to agree to the rules envisaged by the arbitral tribunal. Practice varies. Some arbitral tribunals prefer not to settle the issue in the Terms of Reference; others find it appropriate to do so. Where this question is not settled in the Terms of Reference, the arbitral tribunal will have to decide if and when the issue arises.
161. Even without such specific rules, the powers of the arbitral tribunal are ample, as can be seen from Articles 14(1), (2) and 15(4).
162. - If there are three arbitrators, provisions as to formal aspects of decisions on procedural matters other than awards may be useful. While the Terms of Reference are not the place to set forth the internal procedure by which the arbitral tribunal arrives at its decisions, it may be appropriate to provide for signature by the chairman of the arbitral tribunal only, especially where the arbitrators reside in countries distant from each other. Such a rule may further differentiate between orders which are to be signed by all arbitrators (or the majority) and orders which may be signed by the chairman alone.
163. For certain procedural issues, such as the extension of time limits or urgent matters, a chairman may also be authorized to make the decision alone. In these cases, special attention should be given to the compatibility of such provisions with the mandatory law of the place of arbitration. [Page39:]
164. - A provision which allows or prohibits partial or interim awards may also be included. The Rules do not prohibit partial or interim awards. Subject to possibly applicable mandatory provisions of a municipal law, the question is governed by Article 11. Arbitrators who wish to render an interim or partial award may request the Court's Secretariat to send them the report of the ICC's Commission on International Arbitration on this subject.
165. - The arbitral tribunal has the implicit power to make conservatory orders under the ICC Rules (Article 8(5)). If the parties are satisfied that the arbitral tribunal has the power to make such orders, this may be stated in the Terms of Reference. The topic is to be examined with great caution, as there might be mandatory rules which govern the arbitrators' powers and which would affect the enforceability of such orders.
166. - In a few cases, but only where agreed to by the parties, the arbitral tribunal may be authorized in the Terms of Reference to render a decision on the basis of the relevant documents alone without a hearing (Article 14(1) and (3)).
167. - If an administrative secretary to the arbitral tribunal is to be appointed, it is preferable for this appointment to be authorized in the Terms of Reference, with due regard to the practice established by the ICC. Advice on this subject may be requested beforehand from the Secretariat.
168. - If the arbitral tribunal is authorized to act as amiable compositeur , it has to be mentioned in the award independently of whether agreed to before or at the time the Terms of Reference are drawn up. If agreed to subsequent to the drawing up of the Terms of Reference, no Rider thereto is needed. Such an agreement should be made in writing and mentioned in the award.
169. The above list is indicative only and is not exhaustive of the topics which the Terms of Reference might specifically address.
170. Article 13(1): 'This document shall include the following particulars:
h) such other particulars as may be required to make the arbitral award enforceable in law, or may be regarded as helpful by the International Court of Arbitration or the arbitrator.'
171. Subsection h) implicitly refers to Article 26. In principle, there are several aspects which should be taken into consideration by the arbitrators:
172. - The powers of the arbitrators flow from the agreement to arbitrate. Therefore the Terms of Reference should never contain provisions which depart from the agreement to arbitrate, except where all parties consent thereto in writing. If the parties have already departed from the agreement to arbitrate or from the Rules (for example, with regard to the constitution of the arbitral tribunal), it may be useful to state expressly in the Terms of Reference that the parties accept what has been done and accept the tribunal as constituted. As mentioned earlier, this may be achieved in the context of Article 13(1)(e). Furthermore, where the original agreement may give rise to doubts with regard to the jurisdiction of the arbitral tribunal over one or more of the parties, but where ICC arbitration has been accepted, this fact should be recorded in the Terms of Reference. However, the arbitral tribunal should generally take great care not to raise jurisdictional or other questions which neither of the parties has submitted for its consideration. Any attempt to strengthen or extend the arbitral tribunal's jurisdiction in the Terms of Reference should therefore be made with great caution.
173. - Some municipal laws allow parties to enter into an agreement excluding challenges to the award, but they differ as to the requirements which have to be met for such an agreement to be valid. Accordingly, the Terms of Reference may address this issue.
174. - Mandatory rules as to the requirements which must be met in order to assure that the award will be considered valid are normally formal in nature. There are countries which require the award to be deposited with a municipal court, recorded by a notary public, or read aloud to the parties. Even where such rules exist, they may not be applicable to international arbitration. It may also be that they are not mandatory and can be waived by express agreement. The arbitral tribunal should carefully examine this matter and may wish to include an appropriate provision in the Terms of Reference.
175. As to particulars which 'may be regarded as helpful by the International Court of Arbitration or the arbitrator', the ICC Court virtually never exercises this power, especially where the Terms of Reference are in conformity with Article 13 and the arbitrators and parties have signed them.
176. There is no comprehensive list of particulars considered helpful by the arbitral tribunal. However, the following items are frequently included in the Terms of Reference:
177. - Where the parties have agreed on the law applicable to the merits, it is strongly recommended that such choice be restated in the Terms of Reference. Where no such choice has been made, it may be appropriate to mention the question as an issue to be determined (Article 13(2)(d)). [Page40:]
178. - Where all or some of the claims put forward by the parties are not quantified, the parties and the arbitral tribunal should endeavour, to the extent feasible and allowed by the relevant applicable rules, to include a quantification in the Terms of Reference.
179. Where there is no quantification, the Court will fix the initial advance on costs at its discretion (Article 2(c)(d) Appendix III to the ICC Rules). Further and substantial increases may be required up to the final stages of the proceedings, depending on the complexity of the matter, the rapidity of the proceedings, the time spent by the arbitrators and the then-quantified amount in dispute. Leaving quantification of the amounts in question until very late in the proceedings may jeopardize the Court's ability to secure an advance on costs adequate to pay appropriate arbitrators' fees, which may lead to the procedure being delayed or suspended.
III. Other aspects
A. Dealing with new claims or counterclaims
180. Article 16: 'The parties may make new claims or counterclaims before the arbitrator on condition that there remain within the limits fixed by the Terms of Reference provided for in Article 13 or that they are specified in a rider to that document, signed by the parties and communicated to the International Court of Arbitration.'
181. Article 16 comes into play in only a minority of ICC arbitrations. The number of cases where the arbitral tribunal has to rule on an issue related to Article 16 is even smaller. Some elements relevant for understanding its function have been set forth above in the discussion of Article 13(1)(c) (see paragraphs 99-107, 115). Therefore, this section will limit itself to some complementary observations.
182. Article 16 is intended to ensure that the arbitral tribunal decides only those claims and counterclaims (in this section claims, counterclaims, and set-off claims are referred to as 'claims') for which it was constituted and which it accepted to decide when it signed the Terms of Reference. It also operates to deter a party from delaying the proceedings by seeking to introduce claims or counterclaims which are not within the limits fixed by the Terms of Reference.
183. Article 16 allows the introduction of claims outside the limits of the Terms of Reference whenever the parties wish to cooperate and agree to a Rider. In such cases the signing of a Rider clarifies the situation and avoids subsequent disputes with regard to the scope of the jurisdiction of the arbitral tribunal.
184. Article 16 does not automatically preclude a party from modifying its case. If, however, an objection is made to such a reformulation, the arbitral tribunal will have to decide whether the reformulation involves the introduction of a claim which falls outside the limits fixed by the Terms of Reference or, on rare occasions, the arbitration agreement.
185. In practice, it is not always easy to determine whether a claim requires a Rider.
186. Additional factual allegations are generally not precluded by the Terms of Reference and the provisions of Article 16. This non-preclusion can be expressly confirmed in the Terms of Reference (see paragraph 106 above).
Other situations are less simple and are peculiar to the individual arbitration:
187. - It may be that a party modifies its prayer for relief, but the reformulated prayer remains based on the same factual allegations.
188. - Occasionally, a party leaves its prayer for relief unchanged but bases it on entirely new allegations of fact.
189. The determination of whether any of these situations would require the drawing up of a Rider does not only depend on the meaning the notion claim is given, which may vary depending on the legal setting in which the proceedings take place. Such a determination will also normally depend to a certain extent upon the parties' submissions on the issue. For example, some practitioners are of the view that an increase of the amount in dispute not based on a modification of the factual allegations should not be considered a new claim. Another example can be found in an unpublished award in which the arbitral tribunal held that the change from a request that an amount be awarded in the contractually stipulated currency to a request that it be awarded in another currency represented the introduction of a new claim. However, the arbitral tribunal also decided that the new claim remained within the limits fixed by the Terms of Reference. While this decision must and cannot be generalized, it illustrates that the examination of an Article 16 issue consists of two steps, i.e., a determination of whether the claim is new and, where the answer is positive, a decision as to whether the [Page41:] new claim remains within the limits fixed by the Terms of Reference. The second step implies a construction of the Terms of Reference in light of the intention and understanding of the parties at the time the document was established.
190. As a result of the above, this guide will not offer examples of solutions for specific issues related to Article 16 but provide the following practical advice:
191. Throughout the proceedings, the arbitral tribunal should remain alert to the possibility that claims requiring a Rider may be raised even though they are not always easily detectable in complex and lengthy pleadings. As this can be relevant for the adjudication of the claims in the award, the arbitral tribunal should make sure that the right of both parties to be heard is safeguarded, especially in the final stages of the arbitration.
192. If it is clear to the arbitral tribunal that no claim requiring a Rider has been raised, and the other parties do not raise an objection based on Article 16, the arbitral tribunal may simply proceed and provide appropriate reasoning when dealing with the claim in its award.
193. The absence of a Rider could give rise to complaints at a later date even though no party objected at the time, although there may then be an argument that the contesting party has implicitly waived the right to raise the argument that a Rider was necessary.
194. Thus, if the arbitral tribunal has any doubt whether a claim requiring a Rider has been raised, or if a party requests a Rider or makes the point that a Rider would be necessary to consider that claim, the arbitral tribunal may invite the parties to comment and, where appropriate, prepare and submit to the parties a Rider to the Terms of Reference, but it should avoid giving the impression that it has already decided whether such a Rider is required by the Rules.
195. If the proposed Rider is then signed by all parties, the problem will have been resolved in a practical way.
196. If a party objects to signing a proposed Rider, the arbitral tribunal will have to hear all parties and decide whether the claim may be considered. In making its decision the arbitral tribunal may be guided by the purpose of Article 16 and by the intention of the parties at the time the Terms of Reference were signed.
197. If the arbitral tribunal concludes that there is no claim requiring a Rider , it should consider making this decision known before the final award, since it must take care that the objecting party is duly heard on the merits of the claims considered admissible without a Rider. The reasons should be fully explained in the award.
198. If, to the contrary, the arbitral tribunal concludes that a Rider would have been required for the claim to be considered, the decision may in exceptional circumstances be made known as late as in the final award, but again it should be fully explained there. In most cases, however, such a decision will best be made prior to the final award.
199. Since an erroneous decision on this point may have implications for the validity or enforceability of the award, it is strongly recommended that arbitral tribunals proceed with caution and with due regard for the expectations of the parties. This concern is particularly valid when deciding whether the arbitral tribunal should, on its own initiative, raise questions in this regard.
B. Financial aspects
200. The progress of any ICC arbitration depends inter alia on the satisfaction by the parties of their respective shares of the advance on costs at the appropriate stage of the proceedings. In ICC arbitrations there is normally only one advance on costs, which covers both claims and counterclaims; in exceptional situations, however, separate advances on costs may be fixed when there are principal claims and counterclaims.
201. The ICC Rules relating to advances on costs can be summarized as follows:
202. When the case is first submitted, the ICC Court fixes an advance on costs (Article 9(1)) which is subject to later readjustments. Where the claims are quantified, the advance on costs is fixed on the basis of the amounts claimed and an estimated forecast of the costs of the procedure. This forecast is made by reference to Appendix III to the Rules.
203. According to Article 9(3), 'the Secretariat may make the transmission of the file to the arbitrator conditional upon the payment by the parties or one of them of the whole or part of the advance on costs to the International Chamber of Commerce.' [Page42:]
204. The present practice is to request that 50% of the advance on costs be paid by the parties in equal shares. Where one party does not satisfy its share in full or on time, the other is invited to pay the amount due from the defaulting party.
205. Where, in exceptional circumstances, separate advances on costs are fixed at this early stage of the arbitral proceedings (Article 9(1) and Articles 14 and 16 of Appendix II to the Rules) because there are claims and counterclaims and the share due on the global advance on costs was not paid, each party will have to pay half of the separate advance on costs fixed for its claim(s) or counterclaim(s).
206. Article 10 provides that, upon receipt of the required amount(s) and upon the expiration of the time limits set forth in Articles 4 and 5, the file shall be transmitted to the arbitral tribunal. Where there are separate advances on costs, the payment of half of one of the advances is sufficient for the transmission of the file to the arbitrators. This sets in motion the time limit of two months within which the Terms of Reference are to be drawn up.
207. When the Terms of Reference are communicated to the Court, it checks the financial aspects of the case (Article 9(4)). Where appropriate, it will readjust the advance(s) on costs in view of new amounts in dispute or a new evaluation of the nature of the dispute, bearing in mind the elements relevant to the expected final costs of the proceedings (expenses of the arbitral tribunal and the factors described in Article 18 of Appendix II to the Rules).
208. Under Article 9(4), the further progress of the dispute depends on the satisfaction in full of the advance(s) on costs (see paragraphs 213-215 below).
209. If reconsideration of the advance(s) on costs takes place at a later stage of the proceedings, the arbitrators may have to suspend further work if the requested amount(s) is/are not paid within a reasonable time.
210. As soon as the Secretariat has transmitted the file to the arbitral tribunal in accordance with Arts. 10 and 9(3), the Terms of Reference are to be established in light of the parties' most recent submissions (Article 13(1)).
211. Consequently, the Terms of Reference encompass all claims and counterclaims and the related allegations of the parties regardless of whether all parties have satisfied their financial obligations under the Rules at that time, except in the rare circumstances where Article 15 of the Internal Rules has been applied and the concerned claims or counterclaims are considered withdrawn. Even in such circumstances, however, the arbitral tribunal should exercise special care to ensure that all defenses raised by the concerned party are duly summarized in the Terms of Reference.
212. Where a party has not participated in the payment of the advance on costs but has submitted claims or counterclaims, it may be useful to state in the Terms of Reference that the arbitral tribunal shall proceed with these claims or counterclaims only if the conditions of Article 9(4) are satisfied.
213. Article 9(4) (2nd subparagraph): 'The Terms of Reference shall only become operative and the arbitrator shall only proceed in respect of those claims for which the advance on costs has been duly paid to the International Chamber of Commerce.'
214. The arbitral tribunal may proceed with regard to the merits of only those claims for which the global or separate advance on costs has been fully satisfied. Such satisfaction sets in motion the time limit of six months for the making of the final award as provided in Article 18. This is intended to ensure that the advance on costs is still adequate to compensate the arbitrators for work done after the Terms of Reference have been drawn up.
215. This means that a hearing cannot be convened unless the global advance on costs or at least one of the separate advances on costs has been satisfied. In the latter case the claims or counterclaims for which the advance fixed has not been paid may not be considered at the hearing.
216. The question is which decisions the arbitrators may take in the period between the signing of the Terms of Reference and their [Page43:] becoming (even only partially) operative in accordance with Article 9(4).
217. The arbitral tribunal has full jurisdiction once it has been seized with the file, albeit in some cases only by virtue of Article 8(3).
218. The Rules do not curtail or suspend the arbitral tribunal's powers with regard to decisions and orders which are necessary to establish the Terms of Reference. Such powers are inherent in Article 13.
219. As stated above, the Terms of Reference are not operative (even if they have been signed and communicated to the Court) and the arbitral tribunal may not proceed in respect of those claims unless the respective advances on costs have been paid in full (Article 9(4)).
220. In practice, and especially where a timetable for submissions has been separately fixed, the arbitral tribunal may order the parties to exchange further submissions even though part of the advance is outstanding, as this does not require the arbitral tribunal to make any decision or do other work. This is particularly the case where the parties have agreed to the timetable. The arbitral tribunal should endeavour to obtain such an agreement.
221. Nevertheless, the arbitral tribunal may be requested by a party to extend time limits or issue other directions, particularly where the full satisfaction of the advance on costs is delayed.
222. Simple extensions of time do not necessarily have a bearing on the substantive issues, nor do they cause the arbitral tribunal significant expense, as they generally do not require a meeting of the arbitrators or a hearing of the parties.
223. However, if the tribunal is requested to grant interim relief, such as an order for conservatory measures or measures for the preservation of evidence, the following factors may be taken into consideration:
224. - The content of the procedural rules applicable independently of the Terms of Reference.
225. - Whether or not all parties have agreed that the arbitral tribunal may make a decision with regard to the requested order.
226. - Whether, if such an order were to be made, it could permit a party to object to the regularity of the arbitral proceedings and possibly lead to an annulment of the award or to the refusal of leave for enforcement.
227. - Whether, pursuant to the applicable rules, a party may be estopped from raising objections with regard to the procedure under certain circumstances, such as the lapse of a certain time limit for objection.
228. Similar considerations also apply to orders for the production of documents.
229. Arbitral tribunals must abstain from making any orders which could jeopardize the enforceability of their award.
230. They may wish to bear in mind that the remuneration of any work done during this interval, and expenses incurred, can be covered only up to an amount equal to 50% of the advance on costs. The criteria used by the Court to fix arbitrators' fees are set forth in Article 18 of the Internal Rules.
231. From the transmission of the file to the arbitral tribunal onwards, the Secretariat of the Court and in particular the counsel in charge of the file is available to the arbitrators to provide information regarding current practice of the Court or arbitral tribunals. This includes questions regarding the drafting of Terms of Reference.
232. Moreover, the Secretariat may also be approached for assistance in the organization of meetings or hearings, such as arrangements for room rental and secretarial support. Such requests should be made several weeks in advance.