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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
In an increasingly global marketplace, the need for services suited to international commerce is crucial. Those services must be not only accessible to businesses in different parts of the world but also capable of addressing the requirements of cross-border relations. ICC's strength and status derives from its ability to answer both of these needs. In all fields of economic activity, businesses have recognized that ICC offers an approach fully attuned to the needs of worldwide trade. Nowhere is this more apparent than in relation to dispute resolution.
The dispute resolution mechanisms offered by ICC are specifically designed for resolving difficulties in an international setting, where parties are usually of different nationalities, may speak different languages and often belong to different legal and cultural traditions. This may at the best of times lead to ignorance, causing misunderstanding and mistrust under the pressure of conflict. In such circumstances, parties are reluctant to submit to foreign authorities and procedures and for this reason seek a more neutral alternative to litigation in national courts.
Arbitration has traditionally provided that alternative, as it gives parties the freedom to shape proceedings to suit their case. They may, for example, choose the arbitrators who will rule on the dispute, the applicable rules of law, and the place and language of the proceedings. While offering flexibility, arbitration is also a source of security and predictability, for arbitral awards are widely enforceable and only exposed to challenge on limited grounds, thanks notably to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. For these reasons, ICC has championed arbitration as vital to international business and perfected a procedure that is used worldwide.
Arbitration is not, however, the only alternative to litigation. Various additional procedures exist, which may be chosen for cultural reasons or due to the nature of the dispute or the objective pursued. Aware of the importance these procedures may have for business, ICC offers a range of complementary services covering amicable dispute resolution, expertise and Dispute Boards, as well as two ancillary arbitration services: appointing arbitrators in ad hoc proceedings and ordering urgent measures through the pre-arbitral referee procedure. These services are increasingly used in conjunction with each other, as attested by the growing recourse to multi-tiered dispute resolution clauses.
The purpose of the present report is to provide a statistical overview of each of these services in 2007. Arbitration, as the leading service, will be dealt with at greatest length. The players involved in the proceedings, the nature of the disputes, and other aspects of procedure will be described and analysed. A shorter section will follow on each of the complementary services.
Arbitration
The scope of ICC arbitration is reflected in the very nature and composition of the institution. At the end of 2007, the International Court of Arbitration (hereafter the Court) had a membership of 126 lawyers, academics and business professionals from 88 countries and territories. The Court's Swiss Chairman was seconded by nine Vice-Chairmen from Australia, Austria, Egypt, France, Japan, Mexico, Singapore, the United Kingdom and the USA. The remaining 116 members and alternate members were from all parts of the world.
The Court is responsible for ensuring the application of the ICC Rules of Arbitration. To this end, it met weekly throughout the year in committee form and once each month in plenary formation. It was assisted by a Secretariat comprising over 60 persons of some 20 different nationalities, including more than 30 lawyers. New cases filed with the Court were assigned to one of the 6 case-management teams [Page6:] within the Secretariat. In 2007, 599 new cases were filed, which was a record for a single year and brought the total number of ongoing cases at the end of the year to 1,285. Since the year 2000, the number of ongoing cases has remained consistently above 1,000 and has now topped 1,300. During the same period, the yearly number of cases filed has averaged 569, compared with 408 during the previous decade. This increase in activity is reflected in a rise in the number and diversity of the players involved in ICC arbitration proceedings.
Parties
While the overall number of parties in new cases filed in 2007 remained similar to 2006 (1,611 in 2007 and 1,613 in 2006), the breakdown of those parties revealed a number of notable developments highlighted below.
The 1,611 parties involved in the new cases registered in 2007 came from 126 countries and independent territories. The breakdown by continent reveals an increase in the number of parties from the Asia-Pacific region and from Western Europe, as compared with 2006.
Americas: The shift in the balance between North and South America that was observed in 2006 continued in 2007, with the proportion of parties from Latin America and the Caribbean rising to 56% of the total number of parties from the Americas. The British Virgin Islands confirmed their prominence in the Caribbean, while Brazilian and Mexican parties once again proved to be the biggest users of ICC arbitration in Latin America.
Africa: Parties from 21 African States were involved in proceedings commenced in 2007. These 57 parties included 12 States and parastatal entities, 10 of which were from Sub-Saharan Africa. This is traditionally the region in which the proportion of public entities is highest, averaging 28% of the total number of parties from the region over the last five years.
Asia: The number of parties from Central and Western Asia rose by 6.5% compared with 2006, reaching a total of 98, equally divided between claimants and respondents. 11% of these parties were States or parastatal entities. The biggest increases were seen in the numbers of parties from Iran and Israel, which were double those recorded in 2006. The number of parties from CIS countries also continued to grow. Parties from the United Arab Emirates confirmed their position as the most frequent users of ICC arbitration in Western Asia. In South Asia this position was held by India and in Eastern Asia by South Korea.
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* Claimant ** Respondent *** Includes Hong Kong, representing 3 of the Claimants and 2 of the Respondents.
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Europe: The parties came from a wider range of European countries than previously. The 46 countries and independent territories represented included a newcomer: San Marino. Germany was the most highly represented country, not only in Europe but worldwide, with an unprecedented total of 158 parties in 2007, up by 40% on 2006. As far as Eastern Europe is concerned, Polish parties were again strongly present, as in 2006, while Turkish parties maintained their lead in Central Europe. The rising trend in the number of Czech and Ukrainian parties continued.
Oceania: Australian and New Zealand parties are traditionally the principal users of ICC arbitration in this region. This was again the case in 2007, with an increase in the numbers of parties from both countries.
Of the 1,611 parties involved in the cases submitted to ICC arbitration in 2007, 78 (4.8%) were States or parastatal entities. These parties originated chiefly from Central and Eastern Europe, Sub-Saharan Africa, Latin America and Asia. The percentage of cases involving a State or parastatal entity rose to 11.4% of all cases filed in 2007 (from 10.5% in 2006).
The proportion of cases involving more than two parties remained similar to previous years, representing some 31% of all cases filed during the year. Of the 186 cases concerned, 161 involved between two and five parties, 21 between six and ten parties, and 4 more than ten parties. Multi-respondent cases were more frequent than multi-claimant cases or cases involving both several claimants and several respondents.
According to Article 1 of the ICC Rules of Arbitration (hereafter the Rules), '[t]he function of the Court is to provide for the settlement by arbitration of business disputes of an international character in accordance with [Rules]. If so empowered by an arbitration agreement, the Court shall also provide for the settlement by arbitration in accordance with these Rules of business disputes not of an international character.' Although the great majority of cases submitted to ICC arbitration involve parties of different nationalities, the number of arbitrations involving parties of the same nationality has been increasing over recent years. In 2007 almost one fifth (19%) of the cases filed with the Court involved parties of the same nationality. The largest rise was seen in Europe, with 43 such cases in 2007 as compared with 29 in 2006. The countries from which most of these cases originated were France (12 cases), Brazil, Germany and Mexico (10 cases each), Poland and Spain (7 cases each). As many as two thirds of all cases involving Brazilian parties were single-nationality disputes, while 45% of all cases involving Mexican parties were single-nationality disputes and 39% of all cases involving Polish parties.
Arbitral tribunals
Arbitration gives parties the possibility of choosing the persons who will judge their dispute. The ICC system fully recognizes this principle, while including comprehensive fallback procedures to prevent the proceedings from stalling and ensure balance and neutrality in a multicultural setting.
Arbitrators are assigned to ICC proceedings upon (i) confirmation by the Court (or its Secretary General) of nominations made by parties or arbitrators, or (ii) appointment directly by the Court. The number of confirmations and appointments made during 2007 rose to 1,039, from 949 in 2006. This 9.5% rise is explained by the larger number of cases filed and an increase in the number of three-member tribunals chosen by the parties. Of these 1,039 confirmations and appointments, 209 (20.1%) were for one-member tribunals. The remaining were confirmations and appointments of co-arbitrators (564 [Page9:] or 54.3%) and chairs (266 or 25.6%) for three-member tribunals. Below is a breakdown of the number of arbitrators in each category according to the manner in which they were selected.
The number of nominations not confirmed by the Court fell to 17 in 2007, bringing the total over the last ten years to 186, compared with a total of 9,124 confirmations and appointments during the same period.
The composition of an arbitral tribunal may be affected by three kinds of incidents occurring after the commencement of the proceedings.
Challenge
In 2007, challenges 'for an alleged lack of independence or otherwise' (Rules, Art. 11(1)) were introduced in 22 cases against a total of 26 arbitrators. All but one were rejected by the Court, after giving the arbitrator concerned, the other party or parties and any other members of the tribunal an opportunity to comment.
Resignation
A total of 28 resignations were tendered by ICC arbitrators during 2007. All were accepted by the Court.
Replacements on other grounds
In addition to the replacements made following the acceptance of a challenge or a resignation, 4 replacements were made due to death and 2 at the request of all the parties pursuant to Article 12(1) of the Rules, while 3 replacements were made upon the Court's own initiative pursuant to Article 12(2) of the Rules, due to the arbitrator's inability or failure to fulfil his functions. [Page10:]
The arbitrators confirmed and appointed in 2007 came from 66 different countries. The two regions that displayed especial growth were Central/Eastern Europe and Latin America. As far as Central and Eastern Europe was concerned, both the number of arbitrators and the range of nationalities were greater than ever before. In 2007, these arbitrators represented 12.7% of all European arbitrators, due notably to large increases in the numbers of Czech and Polish arbitrators. Latin America's rise to greater prominence was due largely to an increase in the number of Brazilian arbitrators, who in 2007 accounted for 36.4% of arbitrators from Latin America and the Caribbean and over 4% of all arbitrators confirmed or appointed during the year. Elsewhere, the numbers of arbitrators from Austria, Canada, Australia, South Africa and Iran exceeded previous records.
* Both from mainland China
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Places of arbitration
The Rules allow the parties to choose the place of arbitration. This they did in 85.2% of the cases commenced in 2007. In the remaining 14.8% of cases, where there was disagreement between the parties or their choice was unclear, the Court fixed the place of arbitration.
Europe continued to be the most favoured region for the place of arbitration (74.7% of cases). Paris maintained its position as the leading city, while London moved into second position, ahead of Geneva and Zurich. Vienna was also frequently selected, accounting for Austria's greater prominence as a place of arbitration than in previous years. Poland also emerged as an increasingly frequent choice, reflecting the recent rise in the involvement of Polish parties in ICC arbitrations. Another country that rose to greater prominence in 2007 was Chile, while Cuba and Malta appeared as places of arbitration in ICC proceedings for the first time since statistics have been kept.
*In a number of these cases, the Court merely fixed the city, the parties having chosen the country.
**All Hong Kong
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In the USA, ICC proceedings were seated in 10 different states. These were New York (16 cases), Florida (8 cases), Washington D.C. and California (3 cases each), Arizona, Colorado, Connecticut, Minnesota, Pennsylvania and Texas (1 case each)
Choice of law
Article 17(1) of the Rules asserts the parties' freedom to choose the substantive rules of law applicable to the dispute. In 79.8% of the contracts giving rise to disputes referred to ICC arbitration in 2007, the parties had specified the law applicable to the merits. They opted for State laws in all but three contracts. The three exceptions provided for the application of the UNIDROIT Principles of International Commercial Contracts, the United Nations Convention on Contracts for the International Sale of Goods (CISG), and the law of the Organization for the Harmonization of Business Law in Africa (OHADA).
English law was the most frequent choice (11.9% of the contracts), followed by Swiss law (10.2%), German law (7.2%), US laws (7.1%) and French law (6.7%). The range of laws chosen encompassed 69 different nations and independent territories. In those contracts where parties chose US laws, almost half provided for the application of the law of the State of New York. The other choices were the laws of Pennsylvania, Florida, Texas, California, Delaware, Michigan, Virginia, Arizona, Connecticut, Kansas, New Jersey, North Carolina, Washington and Wisconsin.
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 do they include negative choices, whereby parties exclude the application of a given law.
Nature of the disputes
Further analysis of the contracts underlying the new cases filed in 2007 confirms the multifariousness of the disputes referred to the Court.
ICC arbitration was used to resolve disputes from all sectors of the economy. Construction and engineering, where ICC arbitration has a strong tradition, was once again the most prominent sector, accounting for 14.3% of cases. Energy and information technology were also to the fore, representing respectively 10.8% and 10.2% of cases. There were increases in the numbers of cases from several other sectors, including finance and insurance, general trade and distribution, and the health and food industries.
The nature of the contracts underlying the disputes referred to arbitration in 2007 was as varied as in previous years. They covered operations as wide-ranging as sales and purchases, distribution, construction, share transfers, business structures, services and intellectual property. The breakdown between different kinds of contracts followed a similar pattern to previous years, with the most common types of contracts being sales agreements (23.9% of all contracts), followed by agreements relating to construction (13.3%), distribution (9.4%) and shareholdings (8.3%). The proportion of intellectual property agreements fell slightly to 5.5% of all contracts.
There was an increase in the proportion of disputes arising out of newly concluded contracts. Nearly one fifth of the contracts giving rise to proceedings commenced in 2007 (see table below) had been made the previous year. Conversely, a decrease was seen in the proportion of disputes arising out of contracts more than ten years old. [Page13:]
The amounts in dispute in cases filed in 2007 ranged from less than 50,000 dollars to over one billion dollars. While the breakdown followed a similar pattern to previous years, 2007 saw a rise in the number of very high-value disputes (see table above).
Awards
During 2007, a total of 349 awards were approved by the Court. Of these, 223 were final awards, 96 partial awards and 30 awards by consent.
The range of languages in which awards were rendered was wider in 2007 than previously. Although the great majority of awards continue to be made in English (some 70%), other languages used for drafting awards in 2007 were, in decreasing order of frequency: French, Spanish, German, Italian and Portuguese, followed by Chinese, Greek and Polish, then Arabic, Russian and Japanese. Three awards were made in more than one language, respectively English and Mandarin, English and Portuguese, and English and Spanish.
Pursuant to Article 25(1) of the Rules, awards rendered by three-member tribunals are made by a majority decision or, if no majority can be reached, by the chairman of the tribunal alone. Most awards made by three-member tribunals in 2007 were unanimous decisions. In 29 awards, the decision was made by two of the three arbitrators and in 1 award by the chairman of the tribunal alone.
Draft awards made by ICC arbitral tribunals are submitted to the Court for approval pursuant to Article 27 of the ICC. In 2007, the Court laid down modifications as to the form of the award and/or drew the arbitral tribunal's attention to points of substance when approving 317 awards, leaving 32 awards approved without commentary by the Court. On a further 35 occasions, the Court requested that the tribunal resubmit its award for approval.
If, after an award has been rendered, it proves necessary to correct or interpret any part of the award, the tribunal may draw up an addendum pursuant to Article 29 of the Rules. During 2007, 18 addenda [Page14:] were issued by ICC arbitral tribunals correcting and/or interpreting an award. On 15 occasions, arbitral tribunals issued decisions rejecting an application for correction and/or interpretation.
Pre-Arbitral Referee Procedure
This procedure offers a means of obtaining provisional measures without recourse to national courts prior to the constitution of an arbitral tribunal. For this purpose, a 'referee' is chosen or appointed, who has the power to order conservatory measures, payments, the execution of contractual acts and the preservation of evidence. The procedure is governed by the Rules for a Pre-Arbitral Referee Procedure, which may be used alone or in conjunction with the Rules of Arbitration.
In 2007, ICC received 1 request for a pre-arbitral referee to order the payment of sums of money. The case arose out of a construction contract between British and Nigerian parties, which included a dispute resolution clause providing for ICC arbitration and the application of the pre-arbitral referee procedure in the event of urgency. A Belgian referee was appointed. The case was withdrawn before an order was made.
ICC as Appointing Authority
Parties involved in ad hoc proceedings may call upon ICC to assist in constituting the arbitral tribunal. ICC offers a special set of rules for this purpose, entitled the Rules of ICC as Appointing Authority in UNCITRAL or Other Ad Hoc Arbitration Proceedings. The functions carried out by the Court under those rules cover not only appointments but also challenges and other services upon which the parties may agree.
In 2007, 10 requests were filed for ICC to act as appointing authority. Of these requests, 5 concerned UNCITRAL and 5 non-UNCITRAL ad hoc proceedings. Appointments were sought in 7 of the requests and a decision on a challenge in the other 3. These cases involved a total of 23 parties from 13 countries.
ADR
ICC ADR stands for amicable dispute resolution. It offers a procedure for settling disputes consensually, with the assistance of a third party known as a neutral. The procedure is governed by the ICC ADR Rules, which accommodate various settlement techniques including mediation, neutral evaluation, and mini-trial. ICC ADR proceedings are based on mutual consent and therefore presuppose the involvement of all parties. Without their involvement, the proceedings cannot proceed.
In 2007, ICC received 12 requests under its ADR Rules. They involved a total of 29 parties from 19 countries and independent territories (as listed [below]).
Neutrals were selected for 7 of these cases. The neutral was designated by the parties in 1 case and by ICC in the other 6 cases. The countries from which these neutrals originated were Côte d'Ivoire, France, the United Kingdom and the USA. In the remaining 5 cases, the proceedings were aborted prior to the selection of a neutral, due to the case being withdrawn or stayed or on account of a party's refusal to participate.
The cases filed in 2007 covered a variety of economic sectors, requiring specialized knowledge on the part of the neutrals involved. They [Page15:] included the oil, gas and energy sector, information technology and telecommunications, banking and insurance, air transport, distribution, industrial activities and education.
Two of the ADR cases commenced in 2007 were abandoned in favour of ICC arbitration. In such instances, half of the administrative expenses paid for the ADR proceedings is credited to the administrative expenses of the arbitration (see Article 2(8) of Appendix III to the ICC Rules of Arbitration).
Expertise
The ICC International Centre for Expertise administers three distinct services for use by persons seeking expert opinions: the proposal of experts, the appointment of experts, and the administration of expertise proceedings. The most frequently used of these services is the proposal of experts (more than 75% of all requests received by the Centre over the last five years).
In 2007, 14 requests were filed with the International Centre for Expertise under the ICC Rules for Expertise. All were for the proposal of experts. In 10 cases, the request was made in the context of ICC arbitration proceedings and in 1 case in the context of ICSID (International Centre for Settlement of Investment Disputes) arbitration proceedings. Pursuant to Article 1 of Appendix II to the Rules for Expertise, proposals made in response to a request from an ICC arbitral tribunal are free of charge.
A total of 22 experts were proposed. They originated from France, the Netherlands, Switzerland, the United Kingdom and the USA. The matters on which they were required to give an expert opinion concerned the price of coal; the conformity of equipment and products with contract specifications; the design, construction, operation and deterioration of industrial facilities; mine clearance procedures; IT applications; and financial services.
The parties involved in the proceedings for which experts were sought came from Europe, Asia, North Africa, and North and South America. German parties were the most numerous, appearing in no less than 5 of the 14 cases.
DOCDEX
DOCDEX is a special service proposed by ICC for resolving disputes related to letters of credit and other documentary instruments incorporating ICC banking rules. It is a fast, document-based expertise procedure leading to a decision by a panel of three experts drawn from a list maintained by ICC's Banking Commission. The procedure is administered by the ICC International Centre for Expertise.
In 2007, 7 DOCDEX cases were filed with the International Centre for Expertise under the ICC DOCDEX Rules. Asian parties were strongly present, with 4 of the cases initiated by parties from China and 1 case by a Japanese party. The remaining 2 cases were initiated by Greek parties. The respondents came from Bulgaria, Greece, Libya, Malaysia, South Korea, Switzerland, Tunisia and the United Kingdom.
The 21 experts appointed in these 7 cases came from Austria, Belgium, China, the Czech Republic, Denmark, France, Germany, Greece, Italy, Jordan, Luxembourg, Malaysia, the Netherlands, Switzerland, Turkey and the United Kingdom.
The amounts of the instruments to which these cases related ranged from just over 50,000 US dollars to 1,660,000 US dollars. All of the disputes were decided within two and a half months.
Dispute Boards
Dispute Boards are independent standing bodies whose function is to help resolve disagreements and disputes as and when they arise during the performance of a contract. ICC has drawn up a set of rules governing the creation and operation of Dispute Boards, which parties are free to use without necessarily having recourse to ICC. However, they may call upon ICC to assist at specific stages of the [Page16:] proceedings, namely for the purpose of appointing Dispute Board members, deciding on challenges against Dispute Board members and reviewing decisions issued by Dispute Boards. In 2007, ICC received 3 requests for the appointment of Dispute Board members. All three cases involved construction contracts providing for the creation of a Dispute Adjudication Board. The parties to the contracts were from Germany, Romania and Slovakia.