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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
ICC provides a range of dispute resolution services adapted to the various needs of international business. Foremost amongst these is arbitration, under the auspices of the International Court of Arbitration ('the Court'). The Court, whose members come from over 85 countries, holds weekly committee meetings and monthly plenary sessions throughout the year. The day-to-day administration of the Court's caseload is handled by a Secretariat, based in Paris, staffed by lawyers and support personnel representing more than 20 nationalities. Distinct from the Court and its Secretariat are the ADR Secretariat, the International Centre for Expertise and the Dispute Board Centre, which handle ICC's other dispute resolution services, namely amicable dispute resolution, expertise and Dispute Boards.
2006 was a year of intense activity for ICC dispute resolution services, both in Paris and elsewhere in the world. During the year, 593 new cases were filed with the Court, matching the previous record set in 2002 and bringing the total number of ongoing cases at the end of the year to over 1,200. In addition to its core activity of case management, the Court is also deeply committed to the advancement of international commercial arbitration. To this end, it regularly receives delegations of lawyers at its Paris offices, and members of the Court and the Secretariat travel widely to participate in conferences and seminars across the world and to meet lawmakers, judges and businesses. Education is also a high priority, and in this field 2006 was marked by the launch of the first ICC International Commercial Mediation Competition.
The present report offers a glimpse into ICC dispute resolution services during 2006 and shows the scope and diversity that today characterizes all aspects of their use.
Arbitration
Arbitration has long been recognized as being particularly suited to the resolution of international business disputes. It enjoys wide statutory and international recognition and at the same time leaves parties free to shape important aspects of the proceedings in accordance with their needs. Arbitration under the ICC Rules offers a structured, yet flexible procedure that provides for party autonomy while including the safeguard of the Court's presence for key decisions. The results of these decisions, the parties' choices and other aspects of cases handled in 2006 are described and analysed below.
Parties
In 2006, the number of parties involved in the cases filed with the Court during the year reached 1,613, which represents a rise of over 13% compared with 2005. The increase in numbers also brought greater diversity.
Although the majority of cases filed with the Court still involve two parties (one claimant and one respondent), the growth in multiparty cases that has been observed over recent years continued in 2006, with 188 of the 593 cases filed (31.7%) involving more than two parties. Of those 188 cases, 163 (86.7%) involved between three and five parties, 19 (10.1%) involved between six and ten parties, and six (3.2%) involved more than ten parties. [Page6:]
The 1,613 parties in the cases filed in 2006 came from a total of 125 countries and independent territories across the entire world. The number of African countries represented rose by 20% from the previous year. The range of European countries and territories represented was wider than in previous years and included the Vatican City State for the first time in the history of Court statistics.
Africa: The number of sub-Saharan African parties rose to represent 69% of all African parties. Nigerian and South African parties continued to be the most frequent users of ICC arbitration in sub-Saharan Africa. The number of parties from both countries more than doubled between 2005 and 2006. In North Africa, the number of Algerian parties rose sharply to reach double figures for the first time.
Americas: In 2006, the number of parties from South and Central America for the first time exceeded the number of parties from North America. Although the USA maintained its position as world leader in terms of the number of parties to ICC proceedings, the figures for several Latin American and Caribbean countries rose, bringing the total for that region to an unprecedented 203, which corresponds to an increase of almost 20% over 2005. The most striking increase was seen in Brazil, where the number of parties was almost twice as many as in the previous year, making Brazil the fourth most frequent nationality in 2006 (see table above).
Asia: The number of parties from Central and West Asia rose once again in 2006 to represent 34% of all Asian parties. The rise was due partly to large increases in the number of parties from Armenia and Uzbekistan, where figures for 2006 alone exceeded the aggregate for the preceding ten years. In South and East Asia, China (including Hong Kong) was for the first time the most frequently represented nationality, alongside the Republic of Korea.
Europe: In Europe, the striking development in 2006 was the great increase in the number of Central and East European parties, which for the first time made up more than a quarter of all European parties. This increase was due to across-the-board growth concerning almost all nationalities. Although the number of North and West European parties was up by 5% on the previous year, they represented a smaller percentage of all parties than ever before (39%).
Oceania: The number of Australian and New Zealand parties returned to levels more consistent with past trends, while Papua New Guinea was again present for the second consecutive year.
The table below shows the numbers of parties in cases filed in 2006, by region and by country.
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Although the Court chiefly handles disputes of an international character, an increasing proportion of the disputes brought before it involve parties of the same nationality. In 2006, this proportion rose to 18.2% from 17.3% in 2005 and 13% five years earlier. Brazil was the country from which the largest number of domestic cases was filed (12), followed by France (10), USA (9), Mexico (8), Poland (7) and Germany (6).
In 62 (10.5%) of the cases filed in 2006, one or more of the parties was a State or a parastatal entity. A total of 80 States and parastatal entities were involved in those cases. Almost half of those 80 parties were from Central and East Europe, slightly less than a fifth from South and East Asia, 15% from sub-Saharan Africa and 10% from Central and West Asia.
The parties to the cases filed in 2006 also included five intergovernmental organizations.
Arbitral tribunal
Parties in ICC arbitration proceedings are free to nominate the arbitrators who will constitute the tribunal that decides their dispute. Arbitrators who are nominated-whether by the parties or the other arbitrators in the case-must be confirmed by the Court or its Secretary General. If no nomination is made, the arbitrator will be appointed by the Court, for which purpose it usually seeks a proposal from an ICC National Committee.
In 2006, a total of 949 arbitrators were confirmed or appointed in ICC proceedings. Of these, 689 were nominated by the parties or the other arbitrators, and the remaining 260 were appointed by the Court. For 239 of these appointments the Court sought proposals from 41 ICC national committees. The choice of national committee to which the Court refers for a proposal depends on the circumstances in which the appointment is to be made, as described in Article 9 of the ICC Rules of Arbitration. In certain circumstances the Court may make an appointment directly without a proposal from a National Committee.
Full text of the Rules of Arbitration available in ICC Publication 838 and at www.iccarbitration.org
Of the 949 arbitrators confirmed or appointed in 2006, 187 acted as sole arbitrators and 762 as members of a tripartite tribunal (529 as co-arbitrators and 233 as chairmen).
On 27 occasions during the year the arbitrator nominated by a party was not confirmed.[Page9:]
Sole arbitrators
Over three-quarters of sole arbitrators (144 or 77%) were appointed by the Court on the proposal of a National Committee, leaving slightly more than a fifth (41 or 21.9%) nominated by the parties and confirmed by the Court or its Secretary General. There were two direct appointments of sole arbitrators by the Court.
Co-arbitrators
The great majority of co-arbitrators (503 or 95.1%) were nominated by the parties and confirmed by the Court or its Secretary General, leaving 14 appointed on the proposal of a National Committee and 12 appointed directly by the Court.
Chairmen
Slightly more than half (133 or 57.1%) of the chairmen of arbitral tribunals were nominated by the co-arbitrators, while approximately a third (81 or 34.8%) were appointed by the Court on the proposal of a National Committee. Of the remaining 19, 12 were nominated directly by the parties and confirmed by the Court or its Secretary General, and seven were appointed directly by the Court.
Occasionally, the composition of an arbitral tribunal changes in the course of the proceedings owing to a challenge made against one or more of its members, or the resignation or replacement of a member.
Challenges
During 2006, challenges were introduced in 18 cases. The total number of challenges made in these cases was 38, as there were multiple or repeated challenges in four cases. In one case, all three members of the tribunal were challenged four times and the chairman was challenged on two further occasions.
Under the procedure for challenges set out in Article 11 of the ICC Rules of Arbitration, the Court decides on the admissibility and, if necessary, the merits of a challenge after giving the arbitrator concerned, the party or parties and the other members of the arbitral tribunal the opportunity to comment. Only two of the challenges introduced in 2006 were accepted by the Court.
Resignations and replacements
In 2006, ten arbitrators tendered their resignation. In all cases, the Court decided to accept the resignation. An additional eight arbitrators were replaced, five due to death and three on the Court's initiative because of the arbitrator's inability or failure to fulfil his functions.[Page10:]
The arbitrators confirmed or appointed in 2006 came from an unprecedented 71 different countries spread throughout the world. There was a shift in the balance between different regions, with a slight drop in the proportion of arbitrators from Europe, due to increases in the number of arbitrators from other regions. The largest increase was in the Americas, with a rise in figures for the US and Brazil, which respectively hold the second and eighth position in the list of the most frequent nationalities of arbitrators (see [below]). Switzerland once again occupied the leading position. Other significant increases were observed elsewhere. In sub-Saharan Africa, for instance, the number of arbitrators appointed or confirmed reached double figures and included, for the first time, an arbitrator from Sao Tomé and Principe.
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Economic sectors
ICC arbitration was used to resolve disputes relating to a very wide range of economic sectors, including both light and heavy industry, services, agriculture and public interest activities such as security and the environment. In 2006, the predilection for ICC arbitration in construction and engineering disputes was once again evident, with 14% of all cases filed concerning this sector. Other sectors strongly represented in the new cases brought during the year were energy (12.5%) and information technology (10.4%). Also prominent were industrial equipment and services (8.3%), metals and raw materials (7.1%), finance and insurance (6.7%) and transport (5.2%).
Types and dates of contracts
The disputes referred to ICC arbitration in 2006 arose out of all sorts of contracts, ranging from straightforward sales contracts, through various kinds of servicing agreements, to complex joint venture and cooperation arrangements. 25% of all contracts were sale and purchase agreements; 17% related to business structures (joint ventures, share transfers, etc.) and 8% concerned intellectual property.
Well over half of the disputes referred to ICC arbitration in 2006 arose out of contracts less than five years old (see table [below]). The second year of a contract would appear to be the time most prone to conflicts, although the risk of disagreements can never be discounted, as evidenced by the dispute arising out of a contract almost fifty years old.
Choice of law
84.7% of the contracts underlying the disputes referred to ICC arbitration in 2006 contained a choice-of-law clause in which the parties specified the applicable substantive law. In all but a handful of cases, they chose national laws. In 2006, Swiss law was the most frequent choice, followed by US laws, then, in decreasing order of frequency, the laws of France, England, Brazil, Mexico, Italy and Poland. The range of laws chosen covered all regions of the world.
In those contracts in which the parties chose US laws, slightly more than half opted for the law of the State of New York. The other State laws chosen were those of Arizona, California, Delaware, Florida, Illinois, Minnesota, Ohio, Pennsylvania, Texas, Virginia and Wisconsin.
In 2% of the contracts in the cases filed in 2006, the parties had chosen rules other than State law. In half of these cases, they had opted for the United Nations Convention on Contracts for the International Sale of Goods. Other choices included EEC law, international law, international trade law, international arbitration law and general principles of equity.
The above figures reflect the positive choices made by parties when drafting their contracts. They do not take account of the decisions on the applicable law made by arbitrators after the proceedings have begun. Nor, of course, do they include negative choices, where parties exclude the application of a given law, as occasionally happens.[Page12:]
Place of arbitration
In 86.6% of the cases filed in 2006, the parties themselves decided where their arbitration would be seated. In the remaining 13.4% of cases, where the parties disagreed or had made no clear choice, the Court fixed the place of arbitration.
A total of 89 different cities in a record 52 countries were selected for ICC arbitrations in 2006. France and Switzerland continued to be the most commonly chosen countries. In Central and East Europe, the range of countries chosen continued to widen, as was also the case in sub-Saharan Africa, where for the first time ICC arbitrations were seated in Mali and Togo.
As far as the cities are concerned, those most frequently selected have remained the same since 2000 (Paris, London, Geneva, Zurich, New York, Singapore), although the order of frequency has varied from year to year. As in previous years, Paris was by far the preferred place of arbitration in 2006, followed by Geneva, Zurich and London, and then New York and Singapore. A notable development was the emergence of São Paulo and Rio de Janeiro in Brazil
With regard to the arbitrations located in the USA, 17 were seated in the State of New York, three in Washington D.C., two each in California, Florida, Minnesota, Texas and Virginia, and one each in Colorado, Illinois and Ohio.
Awards
A total of 293 awards were approved by the Court in 2006. They included 179 final awards, 82 partial awards and 32 awards by consent. The last twenty years have seen an increase in the proportion of partial awards from 24% of all awards approved during the period 1987-1996 to 28% of all awards approved during the period 1997-2006. Whilst the proportion of final awards remained relatively stable over the same periods, the percentage of awards by consent dropped from 13% between 1987 and 1996 to 10% between 1997 and 2006.
Around three-quarters of the awards rendered in 2006 were in English. French and Spanish were the next most common languages, followed by German, Italian and Portuguese. In the course of the year an award was also rendered in each of the following languages: Arabic, Serbian, Swedish and Turkish.
The great majority of awards rendered by three-member tribunals were made unanimously. In 2006, the number of awards in which the arbitrators failed to reach unanimity was 23. All of these were majority awards; on no occasion was it necessary for the award to be rendered by the chairman of the tribunal alone.
Awards made by ICC arbitral tribunals are submitted to the Court for approval pursuant to Article 27 of the ICC Rules of Arbitration. When scrutinizing awards for purposes of approval, the Court may lay down modifications as to the form of the award or draw the arbitral tribunal's attention to points of substance. This it did when approving 248 awards in 2006, leaving just 45 awards approved without commentary by the Court. On a further 29 occasions, the Court requested that the tribunal resubmit its award for approval.
If, after an award has been rendered and notified, it proves necessary to correct or interpret any part of the award, the tribunal may issue an addendum pursuant to Article 29 of the ICC Rules of Arbitration. A total of 23 addenda were issued by ICC tribunals in the course of 2006. Seventeen decisions were issued by arbitral tribunals rejecting applications for the correction or interpretation of their awards. [Page14:]
Amounts in dispute
The table [below] provides further evidence of the wide diversity of the cases filed with the Court in 2006. Disputes involving sums of all sizes were referred to ICC arbitration during the year. The breakdown remains similar to previous years, with a concentration of cases in the middle of the range. At the same time, however, there was a slight increase in the numbers of cases at each extremity, including cases in which the amount in dispute exceeded one billion US dollars.
ICC as Appointing Authority
In addition to overseeing ICC arbitration proceedings from start to finish, the Court also acts as appointing authority in ad hoc proceedings. For this purpose, it applies a specific set of rules covering both proceedings conducted under the UNCITRAL Arbitration Rules and other ad hoc proceedings. In 2006, a total of 18 requests were filed pursuant to these Rules, eight of which concerned appointments in proceedings under the UNCITRAL Arbitration Rules and ten other ad hoc proceedings.
Six of the requests filed were for the appointment of a sole arbitrator (four in UNCITRAL and two in other ad hoc proceedings), two for the appointment of a co-arbitrator (both in UNCITRAL proceedings), six for the appointment of the chairman of an arbitral tribunal (one in UNCITRAL and five in other ad hoc proceedings) and four for the appointment of all three members of a tribunal (one in UNCITRAL and three in other ad hoc proceedings).
The 18 cases in which the Court acted as appointing authority involved a total of 47 parties from 16 different countries.
Expertise
ICC offers three distinct services to parties in need of an expert opinion: the proposal of an expert, the appointment of an expert, and the administration of expert proceedings. All three services are performed by the ICC International Centre for Expertise in accordance with the ICC Rules for Expertise.
In 2006, ten requests were filed with the International Centre for Expertise. Seven of these were for proposals, two for appointments and one was for both the appointment of an expert and the administration of expertise proceedings. Three of the requests for the proposal of an expert were made by ICC arbitral tribunals, which benefit from this service free of charge.
The parties involved in these expertise cases came from Australia, Egypt, Finland, France, Georgia, Germany, Italy, Kenya, Norway, Romania, Switzerland, Tunisia, Ukraine and the USA. The experts proposed or appointed were British, Canadian, French, German and Swiss nationals.
The issues for which expert opinions were sought were highly diverse. They included the determination of shareholders' equity for accounting purposes, the allocation of liability between different suppliers, compliance with technical specifications, and the verification of documents and processes. They related to various sectors, including energy, construction, and industrial design and manufacture.[Page15:]
DOCDEX
ICC DOCDEX is a specific form of expertise relating to letters of credit and other documentary instruments. This service, which is governed by the ICC DOCDEX Rules, is made available through the International Centre for Expertise in liaison with the ICC Commission on Banking Technique and Practice. Disputes submitted to the Centre are referred to a panel of three experts selected from a list maintained by the Banking Commission, and the decision made by the panel is scrutinized by the Technical Adviser of the Banking Commission before being issued.
In 2006, the International Centre for Expertise received five requests under the ICC DOCDEX Rules. These cases were initiated by parties from Belgium, China, Chinese Taipei and Switzerland. The respondents were from China, Cyprus, Germany and Singapore. The 15 experts appointed in these cases were nationals of Bangladesh, Canada, Finland, France, Germany, Italy, Lebanon, Pakistan, Singapore, Syria, Turkey, the United Kingdom and the USA.
All of the DOCDEX disputes referred to ICC in 2006 concerned letters of credit. Although the scope of the DOCDEX Rules was expanded in 2002 to encompass collections and demand guarantees as well as letters of credit, practice has shown that the Rules are still applied primarily to letters of credit. 2006 saw the launch of the revised Uniform Customs and Practice for Documentary Credits (UCP 600), whose impact on DOCDEX disputes will become apparent in the years to come.
ADR
ICC ADR proceedings offer a means of resolving disputes amicably with the assistance of a neutral within the framework of a tried and tested set of rules. The ICC ADR Rules can accommodate various settlement techniques, including mediation, neutral evaluation and mini-trial. If the parties have not expressed a choice for a specific technique, mediation will be employed.
In 2006, ICC received 12 requests under its ADR Rules. The cases involved a total of 28 parties of 19 different nationalities (see table [below]).
The neutral chosen to act in an ICC ADR case may be designated by the parties or, failing this, will be appointed by ICC. In two of the cases filed in 2006, the parties designated the neutral, and in four cases the neutral was appointed by ICC. The neutrals in question came from six different countries: Belgium, France, Italy, Japan, Switzerland and the United Kingdom. No neutral was designated or appointed in the remaining six cases, either because the case did not proceed due to the parties' decision to withdraw or the respondent's refusal to participate, or because the case was in abeyance.
The contracts underlying the disputes referred to ADR were of various kinds. They included sales, supply, consultancy and partnership agreements. They also covered a variety of economic activities, including heavy industry, engineering, construction and energy. The amounts at stake were similarly diverse, ranging from just under US$ 37,000 to more than US$ 27 million.[Page16:]
Dispute Boards
Dispute Boards differ from the aforementioned services in that they are not usually set up for a specific dispute, but are rather intended to accompany the performance of a contract and help resolve disagreements and decide disputes as and when they arise. In 2004, ICC launched a new set of rules for establishing and operating Dispute Boards. Under these Rules, the ICC's role in relation to Dispute Boards is limited to appointing Dispute Board members, deciding on challenges made against Dispute Board members and reviewing decisions made by Dispute Boards. Although the Dispute Board Rules have already been successfully used on many occasions, ICC was itself required to intervene in only one case in 2006. The services requested of ICC in this case were the appointment of a Dispute Adjudication Board member and the reviewing of the DAB's decision.