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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
a. Introduction
The ICC International Court of Arbitration (“ICC Arbitration”) is the world’s leading forum for international arbitration. In 2010, an International Arbitration Survey of corporate counsel by the University of London identified ICC Arbitration as the preferred and most widely used form of institutional international arbitration.
ICC arbitration is distinguished by certain key features:
b. Universality
Unlike many other arbitration or ADR institutions, ICC is global in scope and open to the management of virtually any conceivable kind of dispute. ICC arbitral proceedings may involve parties from any industry and from all corners of the globe (including private and government entities). Although the International Court of Arbitration (the “Court”) is based in Paris, ICC arbitral proceedings may take place anywhere. In fact, the majority of proceedings take place outside of Paris. ICC arbitrators and proceedings are also global-more than 60 nationalities were represented among ICC arbitrators in 2007, and arbitrations were conducted in over 40 different countries.
c. Supervision
Compared with ad hoc arbitration (where the parties must conceive and supervise their own arbitration procedure), ICC Arbitration offers the assistance and guidance of a professional support staff.
ICC Arbitration is professionally supervised. The Court employs approximately 60 staff members, more than half of whom are attorneys. This staff relieves the arbitrators of the need to oversee case management issues, such as supervising payment of fees and expenses. The ICC Secretariat also distributes much of the necessary documentation. The Court carefully scrutinizes the arbitral awards prior to their approval - a unique and important feature of ICC Arbitration. Finally, it is the Court, rather than the arbitrators, that notifies the parties of the[Page96:]ultimate award. The Court relies on a state-of-the-art computer system to file and track all arbitration documents.
d. Stature
After nine decades as the world’s pre-eminent arbitral institution, ICC has acquired a reputation for neutrality and integrity. Even in difficult negotiations, parties will not have to convince their counterparties of the neutrality of ICC Arbitration.
ICC recommends the use of the following standard clause:
“All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.”
This clause can be complemented by the addition of stipulations as to the:
Sophisticated international traders wishing to craft an efficient dispute resolution process should consider incorporating such precise stipulations into the standard arbitration clause. Thus, if the parties can agree in advance on applicable law, it will save time wrangling about this issue later in the event of a dispute. A common solution is to stipulate the applicable law of a neutral country. The stipulation of a sole arbitrator is the easiest way to make sure that the cost of arbitration is kept to a minimum.
However, additions or modifications to the ICC standard clause should only be drafted by experienced arbitration attorneys. Parties should take care that additions to it do not create ambiguity. Parties have been known, for example, to add the words “in Paris” after “International Chamber of Commerce”. This may cause confusion as to whether they mean that the place of arbitration should be Paris.
Although it is possible for parties to mutually decide on submitting a case for ICC Arbitration after the dispute has arisen, it is more common for the choice of ICC Arbitration to be made in the arbitration clause in the contract. After a dispute arises, one party may wish to delay the process - and that party is therefore less likely to agree to an expedited procedure such as arbitration.
The ICC International Court of Arbitration (the “Court”) consists of a Chairman, several Vice-Chairmen and more than 120 members from over 85 different countries. The Court is an administrative body attached to ICC but independent from it. The function of the Court is not to decide the case submitted to arbitration, but rather to verify the application of the ICC Rules of Arbitration (the “Rules”).
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The Court does not decide disputes (which is the role of the arbitrator or arbitrators). Rather, the Court oversees the conduct of proceedings and ensures that they conform to the ICC Rules. The Court’s main tasks are to:
The Secretariat (the ICC administrative body which actually oversees arbitrations) is composed of a Secretary General, Deputy Secretary General, General Counsel and seven teams, each headed by a Counsel (an attorney specialized in arbitration procedure). There Court also employs special Counsel and support staff.
In ICC Arbitration, the parties may nominate the arbitrators (though confirmation by the Court is required). If the parties do not choose the arbitrators, the Court will appoint a neutral arbitrator from a neutral country. The Court requires all arbitrators to be completely independent from all parties; arbitrators must make an initial statement to this effect. “Independent” means free of any bias or conflict of interest. Arbitrators must remain independent from the parties throughout the entire arbitration proceedings. Parties may challenge the arbitrator’s independence by submitting the matter to the Court. If the Court finds that the arbitrator is not independent, or is not otherwise properly fulfilling his or her duties, the arbitrator will be replaced.
Most disputes are decided by one or three arbitrators. If the parties do not specify the number of arbitrators, the Court will appoint a sole arbitrator, except when it appears to the Court that the dispute is such as to warrant the appointment of three arbitrators. In deciding the number of arbitrators, the Court takes into account factors such as the complexity of the case and the amount of money in dispute. The contractual choice of three arbitrators is very common, in part because it allows each party to nominate one arbitrator. However, parties should also keep in mind that stipulating three arbitrators will increase the overall administrative costs, and may cause delay.
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A large degree of flexibility is built into the ICC Arbitration procedure. Pursuant to the ICC Rules of Arbitration, the sequence of events is generally as follows:
a. REQUEST FOR ARBITRATION
At least one party (“Claimant”) must send a written Request for Arbitration (the “Request”) to the Secretariat of the Court accompanied by a non-refundable advance of USD 2500 for administrative expenses. The Rules require that the Request identify all the relevant parties and describe the case. The Secretariat will then notify the other party or parties “Respondent(s)” of the Request, forwarding all relevant documents. The Respondent(s) must submit an “Answer” to the Request within 30 days, setting forth its defence, any counterclaims and any comments on the constitution of the arbitral tribunal. The Claimant is allowed 30 days to reply to any counterclaim. After receipt of the Respondent’s Answer, the Secretariat submits the case to the Court. The Court reviews the relevant documents and, unless the parties have made specific provisions, fixes the place of arbitration and chooses the arbitrator(s).
b. TERMS OF REFERENCE
A key feature of ICC Arbitration is the use of “Terms of Reference”, a summary document drafted by the Arbitral Tribunal in consultation with the parties, which describes the case, defines the issues and indicates the place and applicable rules for the arbitration.
The Terms of Reference are submitted to the parties for comment (the Arbitral Tribunal may or may not amend the document according to the parties’ input), then submitted to the parties for signature and ultimately to the Court. If any of the parties refuses to sign the Terms of Reference, the Court will decide whether or not to approve them. If all parties sign, the Court will only take note of the Terms of Reference. The arbitration can go forward regardless of the refusal by a party to sign the Terms of Reference.
The use of Terms of Reference in arbitral proceedings has been the subject of a long-standing debate within the international arbitration community. Some experts believe that the benefits derived from the Terms are not sufficient to justify the time spent on their preparation. However, the international consensus has been that some form of preliminary procedure is useful.
ICC considers that Terms of Reference are an essential part of the ICC procedure and that they contribute significantly to refining the issues in dispute, thereby increasing the effectiveness of later hearings and, in a significant number of instances, showing the parties that their legal positions are not so different, thus creating the conditions for a possible settlement negotiation. Moreover, the Terms of Reference can be prepared very quickly when the parties cooperate.
c. TIME LIMITS
The Terms of Reference must be submitted to the Court within two months after the Arbitral Tribunal receives the case file, and the Arbitral Tribunal must make its award within six months after the signature of the Terms of Reference. However, the Court may authorize extensions of the time limits following a reasoned request or on its own initiative.
d. PROCEEDINGS
The ICC Rules are designed to be very flexible, allowing the parties to agree on their own procedural rules if they wish. If the parties fail to agree, however, the procedure will be[Page99:]determined by the Arbitral Tribunal, which will further decide on the need for hearings (although the parties have a right to be heard if they so request), examination of witnesses or the appointment of experts.
e. APPLICABLE LAW
If the parties do not agree on the applicable law, it will be decided by the Arbitral Tribunal. Parties and arbitrators enjoy a large degree of liberty in choosing the applicable law. It can be a national law as well as a set of general principles of law, such as the UNIDROIT Principles of International Commercial Contracts and the new law merchant, often referred to by its Latin terminology (the lex mercatoria).
f. AWARD
Final or interim decisions by the Arbitral Tribunal are called awards. Awards must be in writing and rendered by unanimous decision, by majority or, failing these, by the Chairman. In cases with three arbitrators, dissenting opinions may also be rendered. If the parties are able to work out a settlement, they may wish to have it formalized as an award, thereby facilitating enforcement. Such awards are called “awards by consent”. The award also determines the apportionment of the costs of the arbitration, including legal costs.
The award is first submitted in draft form to the Court, which may modify the form of the award and, without affecting the Arbitral Tribunal’s authority, make suggestions as to the substance of the award. The parties are then notified of the award, but only after they have fully paid the costs of the arbitration.
If one of the parties refuses to comply with the award, the other party may seek enforcement in a competent court. Such recourse is simplified by the existence of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which has been signed by more than 140 countries.
g. COSTS
Costs include the arbitrators’ fees and expenses, ICC’s administrative expenses, the fees of any experts and lawyers’ fees and expenses.
Upon receipt of the Request for Arbitration, the Secretary General determines an appropriate provisional advance to cover the Arbitral Tribunal’s fees and expenses and the ICC’s administrative expenses until the Terms of Reference have been drawn up. The file will not be transmitted to the parties until this provisional advance is paid. When the case is first submitted to the Court, the Court sets the amount for the required advance against costs. Each side (i.e., Claimant(s) and Respondent(s)) is required to pay 50% of the advance on costs. ICC’s administrative expenses and the range of possible fees for the arbitrators are calculated depending on the amount in dispute and according to a fixed Schedule of Costs and Fees contained in the ICC Rules.
An arbitration cost calculator for estimating the costs of a future arbitration proceeding can be found on the International Court of Arbitration’s website (www.iccarbitration.org). If one party fails to pay its share of the advance on costs, the other party is given the opportunity to pay it, or to supply a bank guarantee, so that the arbitration can proceed.
h. ICC “FAST-TRACK” ARBITRATION
A fast-track arbitration is one in which both parties have agreed to expedited proceedings. Care should be taken in drafting a fast-track arbitration clause, and it is recommended that parties engage experienced counsel for this purpose.
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Some fast-track practitioners set deadlines for every step in the arbitral procedure, e.g., answering the request for arbitration, constitution of the arbitral tribunal, filing of challenges, rendering of the award, limits to any possible extensions, submissions and hearings, etc. A simpler alternative is to set a single deadline for the rendering of the final decision.
When both parties are sophisticated and committed to expedited proceedings, disputes can be resolved rapidly. ICC has reported handling large, complex cases under fast-track provisions in 60 to 80 days.
On 1 January 2012, the new Rules of Arbitration of the International Chamber of Commerce (the “Rules”) came into force. These new Rules were the result of a three-year process involving contributions from arbitration professionals in over 40 countries.
The new Rules adapted and revised the previous 1998 Rules to reflect the changing demands of international arbitration, to address the growing complexity of disputes (and the increasing need for urgent interim remedies), and to improve cost-effectiveness and efficiency.
Key changes
a. Emergency Arbitrator
Under Article 29 and Appendix V of the new Rules, parties may seek “urgent interim or conservatory measures that cannot await the constitution of an arbitral tribunal” from a specially appointed temporary Emergency Arbitrator even before arbitration has commenced. Parties may also “opt-out” of this rule by agreement if they do not wish to allow for appointment of an Emergency Arbitrator.
Following an application by a party, an Emergency Arbitrator will be appointed by ICC within two working days. The appointment can be challenged within short-time limits. The Emergency Arbitrator is required to issue an order within 15 days, extendable at the discretion of the President of the ICC Court. The emergency order does not bind the Arbitral Tribunal, which may modify, terminate or annul any order made by the Emergency Arbitrator.
ICC will charge a minimum fee of USD 40,000 for Emergency Measures, regardless of the amount of the claim. These costs may be increased at the discretion of the President of the ICC Court.
This rule does not preclude any party from seeking urgent interim relief from a competent judicial authority.
b. Multiple Parties
Several new provisions facilitate the management of complex and multi–party arbitrations:
c. Constitution of the Arbitral Tribunal: impartiality and ICC direct appointment
Under Article 11, arbitrators are required to remain impartial as well as independent of the parties involved in the arbitration (previous rules did not expressly refer to impartiality). Furthermore, arbitrators must inform the Secretariat of ICC of any circumstances that might call into question their independence or impartiality.
The new Rules permit the ICC Court to appoint arbitrators directly in certain circumstances, as for example, where the ICC national committee fails to make an appointment within the time allocated.
As an increasing number of arbitrations involve states or state entities, the new Rules provide that the ICC Court can directly appoint as an arbitrator any person whom it considers suitable where one or more parties is a state or claims to be a state entity (Article 13).
d. Procedure to consider prima facie existence of ICC Arbitration Clause
The new Rules allow objections to the existence, validity and/or scope of an arbitration agreement to be referred directly to the Arbitral Tribunal rather than necessarily to the ICC Court (Article 6).
e. Challenges to jurisdiction
Whereas previously jurisdictional challenges went to the ICC Court from the Secretary General, the new Rules expedite this process because, by default, any question of jurisdiction is normally decided by the Arbitral Tribunal.
f. Confidentiality
Prospective arbitrators must sign a statement of confidentiality before being appointed. The Arbitral Tribunal may issue confidentiality orders tailored to the specific needs of the case before them. This can include confidentiality as to the existence of the arbitration and/or measures being taken to protect trade secrets and confidential information (Article 22).
g. Communication technology
To accommodate modern methods of communication (which ICC has already done in practice), the new Rules reflect the usage of email as a means of communication by both the Secretariat and the Arbitral Tribunal.
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h. Management of the arbitration
Under the new Rules, the parties (and tribunal) are required to make every effort to conduct arbitrations in an expeditious and cost-effective manner, having regard for the complexity and value of the dispute. This duty encompasses a number of case management techniques set forth in an appendix to the new Rules, which include:
i. Only ICC Court may administer arbitrations pursuant to ICC Rules
The new Rules provide that the ICC Court will be the only entity authorized to administer arbitrations under the Rules. By agreeing to arbitration under the Rules, the parties accept that the arbitration will be administered by ICC.
The ICC International Centre for Expertise administers the ICC Rules for Documentary Credit Instruments Resolution Expertise (DOCDEX) (www.iccdocdex.org). DOCDEX was established in 1997 by the ICC Commission on Banking Technique and Practice to facilitate the rapid settlement of disputes arising under the Uniform Customs and Practice for Documentary Credits (UCP), the Uniform Rules for Bank-to-Bank Reimbursement under Documentary Credits (URR), the Uniform Rules for Collections (URC) and the Uniform Rules for Demand Guarantees (URDG), the latter of which was added in a later amendment to the DOCDEX rules.
DOCDEX is an expedited dispute settlement mechanism providing for a document–based expert decision made by three experts, scrutinized by the technical adviser of the ICC Banking Commission and issued by the Centre for Expertise. The DOCDEX decision is not binding unless the parties have agreed otherwise. In most instances, the parties can expect the final opinion six to twelve weeks after ICC has received the request, but exceptionally complex cases may take longer.
Mediation and conciliation (sometimes generally referred to as Alternative Dispute Resolution or ADR) are amicable methods of resolving disputes with the assistance of a neutral third party. Mediation/conciliation is theoretically a cheap and fast form of dispute resolution, but[Page103:]unlike arbitration, it is non-binding- the parties may choose to ignore the decision of the mediator. The parties are usually not obliged to take part in the ADR proceedings unless otherwise agreed by them, so they can simply walk away from the mediation/conciliation if they are unhappy with the process.
Whether ADR succeeds will depend on such factors as the commitment of the two sides to a friendly resolution and the personal skills and dedication of the mediator/conciliator. In most legal systems, the agreement reached by the parties to a mediation/conciliation has the nature of a contract and not of a judgement.
7.8.1 ICC ADR Rules
ICC has been receiving mediation/conciliation proceedings since 1923 under specific rules, the ICC ADR Rules (www.iccadr.org), which provide a flexible framework for the amicable resolution of business disputes through the services of a third party known as a Neutral. The ICC ADR Secretariat handles proceedings under the ICC ADR Rules.
7.8.2 Commencing ICC ADR proceedings
ICC ADR procedures require the agreement of the parties to submit the dispute to the ICC ADR Rules. The simplest method is to include an ICC ADR clause in the parties’ contract. The parties may also agree to ICC ADR after the dispute has arisen.
ICC ADR proceedings are commenced by the filing of a mutual or a unilateral request of the parties with the ICC ADR Secretariat. In this latter scenario, the ICC ADR Secretariat then notifies the Request to the other party (or parties). If the other party accepts to engage in ICC ADR proceedings, the proceedings can begin. If there is no agreement, the proceedings cannot commence.
Four alternative ICC ADR clauses are suggested by ICC for the parties to insert into their contracts. These are not model clauses the parties are required to incorporate into their contract without modifications, but rather suggestions that may be adapted to the parties’ needs. They are presented in the order of increasing obligations on the parties to resort to ADR, from purely optional ADR to a binding obligation to submit a dispute to the ICC ADR Rules, and according to whether or not the ADR proceedings are combined with ICC arbitration proceedings.
7.8.3 The procedure in ICC ADR proceedings
The ICC ADR Rules allow the parties to choose a dispute–resolution technique appropriate to the circumstances. Possibilities include: a) mediation, where the Neutral acts as facilitator to help the parties reach an agreed solution; b) referral to the Neutral for an opinion on one or more matters; c) mini-trial, whereby a panel comprising the Neutral and an executive of each party renders an opinion; or d) a combination of various techniques. Under the Rules, mediation is the default choice if the parties do not express a preference for a particular method.
Whatever technique is adopted, the success of the procedure will depend greatly on the Neutral’s professionalism and inter-personal skills. The parties may jointly designate the Neutral or agree upon the qualifications or attributes required of the Neutral to be appointed by ICC. In appointing the Neutral, ICC will appoint a person who is independent of the parties.
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A party dissatisfied with the appointment of the Neutral can submit a reasoned objection to the appointment within 15 days of receipt of the notification of her/his appointment, and ICC will appoint another Neutral.
Once the proceedings have begun, an initial discussion takes place between the parties and the Neutral in order to define the procedure to be followed.
7.8.4 Result of ICC ADR proceedings
ICC ADR proceedings aim for a final settlement or compromise agreement on some or all of the disputes between the parties. If the parties do not reach a settlement agreement, ADR proceedings do not result in a binding outcome. This is in sharp contrast to arbitration, which results in a final award enforceable against the opposing party.
ADR may, however, be structured so as to complement binding procedures like arbitration. For instance, parties may turn to ADR in the course of arbitration proceedings if it seems likely that their dispute could be settled amicably. Alternatively, parties may choose a dispute resolution method which provides first for ADR and, in the event of failure to reach an amicable settlement, for arbitration.
Confidentiality is a key characteristic of ICC ADR, as it is of ICC Arbitration.
In long-term contracts, disputes may arise due to changes in the parties’ circumstances over the life of the contract. In order to prevent interruption or deterioration of the relationship, parties may consider setting up a Dispute Board (DB) as an alternative to arbitration or litigation. ICC has elaborated a series of documents for these kinds of situations: the ICC Dispute Board Rules, three standard DB clauses and a Model Dispute Board Member Agreement.
Although it is preferable to set up a DB at the outset of a contract, parties sometimes establish it after the dispute has arisen. DBs are standing bodies comprising one or three independent members thoroughly conversant with the contract and its performance. The role of the DB members varies according to the different types of DBs envisaged by the ICC Dispute Board Rules (www.iccdisputeboards.org):
ICC does not administer these proceedings but plays a subsidiary role, which may include appointing and deciding on a challenge of DB Members and reviewing the form of DB decisions at the parties’ request.
Parties who need the services of an expert may request the ICC International Centre for Expertise (the “Centre”) to nominate an expert in the particular field concerned. The Centre, established in 1976, operates under the ICC Rules for Expertise (available at www. iccexpertise.org). The Centre deals with technical, financial, legal or other questions calling for specialized knowledge. The parties may refer to the Centre’s Rules for Expertise in their contracts or at a later date.
Any party or Arbitral Tribunal may request the Centre to propose the name of an expert. The requesting party or the Arbitral Tribunal will not be obliged to call on this expert’s services. A party could require an expert’s opinion in various situations either inside or outside a dispute. For example, outside a dispute, a party may seek advice on technical matters before entering into a contract. An Arbitral Tribunal, in resolving a dispute, may seek an expert opinion on a technical matter or a specific point of law.
As an alternative to seeking the proposal of an expert, parties may agree to apply to the Centre for the appointment of an expert to provide an analysis of a question often embodied in a written report or recommendation. The choice of the expert made by the Centre will bind the parties, who will be required to call on this specific expert to help them resolve questions amicably or to establish certain facts.
Among the services provided by the Centre, the Rules include the basic procedures applicable from the request to appoint an expert up to the notification of a complete expert’s report. Examples of the Centre’s cases include: assessing the operational capacity of a product unit, assessing corrosion of materials, the financial audit of a company during a takeover, revaluation of a contract price and assistance relating to dispute adjudication boards in international construction projects.