Incoterms_® and Commercial Contracts

Introduction

4-1 The world of international trade and investment has in recent decades faced an increasing need for a broad range of dispute resolution procedures. While arbitration is the binding dispute resolution procedure of choice for most international commercial disputes, companies and governments in search of greater flexibility, efficiency or simply a better outcome sometimes wish to complement or even replace arbitration with other dispute resolution procedures. Depending on the nature and circumstances of the dispute, parties may prefer to settle their dispute amicably with the help of a neutral third party; have an adjudicator provide a rapid binding decision; obtain an expert opinion on a specific legal, technical or financial question; or establish a standing panel of dispute resolution specialists to follow a project from start to finish.¹

4-2 The ICC meets users’ varied needs by adopting a holistic and integrated approach to dispute resolution. The institution has taken significant steps over the past decade to provide parties with a number of alternatives to arbitration that can either stand on their own or be applied to disputes already subject to arbitral proceedings. The wide range of available options provides parties with flexible institutional support to help them resolve disagreements and disputes in a cost-efficient and timely manner.

4-3 Key to this multi-pronged approach to dispute resolution was the introduction, at the start of the new millennium, of four new sets of rules that can be used either separately from or in conjunction with litigation or arbitration:

• 2001: ICC Amicable Dispute Resolution Rules (“ADR Rules”);
• 2002: revision of the ICC Rules for Documentary Instruments Dispute Resolution Expertise (“DOCDEX Rules”);
• 2003: revision of the ICC Rules for Expertise (“Expertise Rules”);
• 2004: ICC Dispute Board Rules (“DB Rules”).

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4-4 The above-listed Rules establish three distinct administering entities—the ADR Secretariat, the International Centre for Expertise and the Dispute Board Centre—now regrouped under the ICC International Centre for ADR (“Centre”). The Centre is separate from the ICC International Court of Arbitration but collaborates with the latter where needed. Together, they constitute the ICC’s dispute resolution services. The Centre has its own administrative staff, comprising a team of international lawyers of different nationalities.

4-5 While the specificities of each set of rules will be discussed in paragraphs 4-10–4-42, the table below provides a comparative overview of certain basic characteristics of each procedure²

4-6 This chapter provides a concise overview of the ICC’s dispute resolution services other than arbitration. It also highlights the range of possibilities available to users in combining these services with arbitration. For users wishing to learn about the concrete steps involved in initiating and participating in ADR and expertise proceedings, or in benefitting from the

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ICC’s services for the proposal or appointment of experts, paragraphs 4-54 and following briefly outline how the ADR Rules and Expertise Rules are applied.

Why seek alternatives to arbitration?

4-7 While arbitration is an effective and flexible form of dispute resolution, it remains fundamentally adversarial. This adversity can be detrimental in many disputes insofar as it may result in a zero outcome and even cause setbacks or damage to all parties, irrespective of any amounts they may be awarded. In their application of rules of law, and even when deciding as amiables compositeurs or ex aequo et bono, arbitrators will take a primarily rights-based approach and determine what is just or fair, rather than an approach based on the parties’ interests.

4-8 Yet, interest-based solutions can be considerably more advantageous to each party, in particular from a business perspective. The proceedings leading to such solutions are, in the vast majority of cases, less timeconsuming and costly than adversarial proceedings, which generally call for the investment of considerable resources. The ICC has sought to provide dispute resolution services that enable willing parties to explore such solutions as a means of overcoming their differences.

4-9 Proceedings administered pursuant to the four aforementioned sets of rules involve the introduction of neutral third parties to facilitate negotiations, provide opinions or recommendations and/or issue binding decisions. The aim of these procedures is to encourage parties to resolve their disputes as efficiently as possible and in a manner that is sensitive to their interests. This goal is achieved either by having the neutral facilitate the parties’ settlement negotiations with a view to finding an interestbased solution (e.g. mediation) or through the conduct of proceedings that help the parties to focus on possible settlement. A binding decision by an expert or dispute adjudication board, while being primarily rights-based, can have the effect of providing a new starting point for settlement talks. Avoiding strongly adversarial proceedings such as arbitration or litigation is likely to make the parties more open to such talks.

ADR

Introduction

4-10 The ICC issued the ADR Rules for parties wishing to resolve their disputes amicably with the assistance of a third party, the “neutral”, within an institutional framework analogous to that of ICC arbitration. Within the ICC, “ADR” stands for amicable dispute resolution rather than alternative dispute resolution and, therefore, does not include arbitration. The ADR Rules are extremely flexible and allow parties to opt for a culturally appropriate settlement technique tailored to their needs. The most commonly chosen technique is mediation.

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4-11 The ADR Rules are simple and concise, containing only seven articles. They guide the parties and the neutral through the major milestones of ADR proceedings: (1) commencement, (2) designation or appointment of the neutral, (3) fixing of the fees and costs, (4) conduct of the ADR proceedings, and (5) termination. The ADR Rules also include provisions on confidentiality and the liability of the ICC and the neutral. For more information on the application of the ADR Rules and on how to initiate proceedings under these Rules, see paragraphs 4-54 and following.

4-12 Between 2001 and 2012, the ICC administered ADR proceedings involving parties from over sixty-five countries across the globe and disputes from a vast range of economic sectors, including construction, intellectual property, information technology, general trade, investment and insurance. Amounts in dispute have ranged from some tens of thousands of US dollars to over US$ 400 million. Over 80 per cent of ICC ADR cases have involved cross-border transactions, often among more than two parties. ADR proceedings also boast an impressive success rate.⁴

Why choose ICC ADR?

4-13 Effectiveness. Over 80 per cent of ICC ADR cases in which the file was transferred to the neutral have resulted in a settlement between the parties. As discussed above in paragraphs 4-7–4-9, such a settlement is more likely to reflect the parties’ respective interests than might otherwise be the case.

4-14 Scope of applicability. ADR proceedings are characterized by their versatility. They can be used to resolve all kinds of controversies, from fullblown disputes in areas as wide-ranging as commerce, investment and trusts, to small differences during the early stages of a deal or project (e.g. the interpretation of a contractual provision).

4-15 Compatibility with other dispute resolution techniques. The ADR Rules can be paired with and complement other dispute resolution techniques such as arbitration. If the parties do not succeed in resolving their dispute through ICC ADR, they are free to refer it to arbitration (provided that they have agreed or agree to do so). Conversely, ICC ADR proceedings can be resorted to in the course of an arbitration (e.g. by suspending the arbitration or by seeking mediation on a specific aspect or aspects of the dispute while the arbitration proceeds). For more information on combining ICC ADR proceedings with other forms of dispute resolution, see paragraphs 4-43 and following.

4-16 Flexibility. ICC ADR proceedings are flexible and controlled by the parties to the greatest extent possible. The parties can choose the most appropriate dispute resolution technique compatible with the ADR Rules. The ADR Rules themselves can even be adapted to the parties’ needs and wishes

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4-17 Limited costs and time. Proceedings under the ADR Rules are intended to be rapid and inexpensive. In the ICC’s experience, this promise holds true for the vast majority of cases, and certainly for those in which the parties participate in good faith and make efforts to structure the process as efficiently as possible. The average cost of ICC ADR proceedings is below US$ 20,000 (including the neutral’s fees and expenses and the ICC administrative expenses but excluding the cost of outside counsel), which represents less than 0.1 per cent of the average amount in dispute of US$ 20 to 30 million (see paragraphs 4-69–4-72). The average duration of ICC ADR proceedings is less than four months, from the time the file is transferred to the neutral until a settlement is reached or the proceedings are terminated.

4-18 Confidentiality. ICC ADR proceedings are confidential, unless the parties choose otherwise (Article 7 of the ADR Rules). The safeguards provided in the ADR Rules are intended to create conditions in which parties can disclose information helpful to reaching a negotiated settlement without fear of that information being produced outside the ADR proceedings other than in compliance with legal requirements or their own agreements.

4-19 Institutional support. All procedures filed pursuant to the ADR Rules are administered by the Centre, so cannot be ad hoc. For some aspects of the procedure, the ICC’s role is essential (e.g. notification of the Request for ADR, fixing the financial aspects of the procedure, appointing or replacing the neutral where needed), while for others the parties themselves may determine the amount of support to be provided by the ICC.

Selecting a settlement technique

4-20 The parties may, but are not required to, decide on a settlement technique when writing an ADR clause (e.g. providing for “a mediation procedure pursuant to the ICC ADR Rules”) into a contract, or when filing a Request for ADR. They may also wait until the dispute has fully crystallized before opting for a settlement technique. If the parties fail to agree on a technique, they may discuss the matter with the neutral, once appointed (Article 5(1) of the ADR Rules). In the event that these talks are unsuccessful, Article 5(2) of the ADR Rules provides for mediation as the default technique.

4-21 A wide range of ADR settlement techniques are available to parties. It is in their interests to reach agreement on the technique(s) they wish to adopt in order to avoid later disputes on procedure. Parties will often find common ground in the techniques listed below, which are widely used.

4-22 Mediation. For the purposes of the Rules, mediation is where the neutral (here, the mediator) acts as a facilitator in the parties’ attempts to negotiate a settlement. The mediator generally holds joint meetings with all of the parties and may also hold separate meetings (often called “caucuses”) with each of them. The mediator does not provide an opinion on the merits of the dispute. The mediator’s job is rather to take charge of the procedure

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and help the parties to arrive at a mutually acceptable solution. During the mediation, the mediator will ensure that the parties do not merely take into account the other side’s legal position but, more importantly, their broader commercial interests.

4-23 Conciliation. Here, the neutral takes an evaluative role in helping the parties arrive at a settlement. The neutral may inform the parties of his or her opinion and suggest different settlement options.

4-24 Neutral evaluation. This technique allows the neutral to provide either a binding or non-binding opinion on, or evaluation of, one or more matters, such as an issue of fact, a technical issue of any kind, an issue of law, an issue concerning the application of the law to the facts, an issue concerning the interpretation of a contractual provision, or an issue concerning the modification of a contract.

4-25 Mini-trial. The parties form a panel comprising a representative from each party and the neutral, who serves as a facilitator. A party’s representative should have the authority to make binding decisions on behalf of that party and should not be directly involved in the dispute. Each party presents its position to the panel concisely and briefly. The panel may then seek to negotiate a solution acceptable to all of the parties or express an opinion on the parties’ positions.

4-26 Combining settlement techniques. It may be helpful to use a combination of settlement techniques. For example, upon the joint request of the parties, a mediator could be asked to give his or her opinion on a specific issue in the course of mediation proceedings.

Expertise

4-27 Introduction. Through its Expertise Rules, the ICC assists parties, arbitral tribunals and state courts in finding experts. Benefitting from a vast network of experts, the Centre can fill the information gap which parties and dispute resolution specialists often encounter when they are looking for an independent, qualified and internationally renowned expert to help them solve a specific technical, financial or legal question.

4-28 The services provided by the Centre are designed to give users complete freedom and autonomy in determining the work an expert is to perform, from limited tasks such as determining the current value of a machine to more extensive input. An expert may even be sought to provide procedural assistance, for example as a mediator to conduct mediation proceedings or as a member of a dispute board.

4-29 Under the Expertise Rules, the Centre provides three distinct services, as listed below. The extent of the ICC’s involvement varies according to the service provided.

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4-30 Proposing the name of one or more expert(s). The Centre’s role can be limited to proposing a particular expert (Section II of the Expertise Rules). It will not inform other parties of the request or proposal, unless otherwise indicated by the requesting party (Article 3 of the Expertise Rules). Whether or not the requesting party calls upon the services of the expert who has been proposed is a matter for that party alone to decide. In ICC arbitrations, the proposal of an expert for appointment by the arbitral tribunal may be sought from the Centre free of charge (see paragraphs 3-969–3-978).

4-31 Appointing one or more expert(s). In addition to finding a suitable expert, the Centre may also be requested to appoint an expert (Section III of the Expertise Rules). Parties usually take advantage of this service when they have contractually agreed that a specific issue will be resolved with the help of an expert or that an expert should conduct a specific procedure. The following are examples of such situations:

• The parties have provided for ad hoc expertise proceedings to assist them in resolving a dispute.
• The parties require the appointment of a chairman for an ad hoc dispute board.
• The parties require the appointment of a financial expert to determine the value of shares prior to finalizing a share purchase agreement.
• The parties require an expert opinion on a specific technical question.
• The parties require the appointment of a mediator to conduct an ad hoc mediation.

4-32 Any request for appointment must be based on an agreement between all parties (e.g. a dispute resolution clause or a subsequent agreement of the parties) that identifies the Centre as the appointing authority.

4-33 Administering expertise proceedings. The Centre can also administer expertise proceedings where the parties so agree. Section IV of the Expertise Rules sets out a procedural framework for expertise proceedings in their entirety, from the designation or appointment of the expert to final notification of the expert’s report to the parties. The Centre will proceed with a Request for Administration only if it is based on an agreement between the parties to submit their dispute to an administered expertise proceeding under the Expertise Rules. Some parties agree to have the ICC administer the proceeding after initially requesting the Centre only to appoint the expert.

4-34 The ICC could administer similar proceedings within the framework of its ADR Rules by designating or appointing an expert as a neutral evaluator. However, the Expertise Rules contain some key differences:

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• Confidentiality. Under the ADR Rules, the neutral’s findings are confidential and cannot be used in any subsequent proceedings unless agreed otherwise by the parties (Article 7(1) of the ADR Rules). In contrast, an expert’s report submitted in an administered procedure under the Expertise Rules can be produced in judicial or arbitral proceedings (Article 12(4) of the Expertise Rules).
• Review. Under the Expertise Rules, the expert’s report must be in writing and is reviewed by the Centre as to its form (Articles 12(3) and 12(6) of the Expertise Rules). The ICC does not review the outcome of ADR proceedings, which need not take the form of a written settlement agreement (but almost always does).
• Termination. While ADR proceedings can be terminated by one party unilaterally after the procedural meeting, expertise proceedings cannot. As a result, proceedings under the Expertise Rules can proceed even if one party does not participate.

4-35 For more information on the application of the Expertise Rules and on how to initiate proceedings under these Rules, see paragraphs 4-74 and following.

Dispute boards

4-36 The ICC issued its DB Rules in 2004. Dispute boards are standing dispute resolution panels that are commonly associated with mid- or long-term contracts in a large range of economic sectors (and are particularly common in large construction projects). They are normally set up at the outset of a contract and remain in place throughout its duration. One or three experts thoroughly acquainted with the contract and its performance usually make up a dispute board (the default number under Article 7(2) of the DB Rules is three). Together, these experts may issue a determination, in the form of either a recommendation or a decision, whenever the parties call upon their assistance. The parties can also request the dispute board to provide informal assistance to help resolve any disagreement or dispute amicably (Article 16 of the DB Rules).⁵

4-37 If a party does not accept the dispute board’s finding, it can submit the dispute to arbitration or take it to a state court for a final settlement, depending on the parties’ agreement.

4-38 The DB Rules allow for three different types of dispute board (Article 3 of the DB Rules):

• Dispute Review Board (“DRB”). A DRB issues “recommendations” on the resolution of any disputes referred to it (Article 4(1) of the DB Rules). If the parties fail to express dissatisfaction with a recommendation within thirty days of receiving it, the recommendation becomes binding (Article 4(3) of the DB Rules).

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• Dispute Adjudication Board (“DAB”). A DAB issues “decisions” with respect to any dispute referred to it. By contractual agreement, the parties must comply with a decision without delay as soon as they receive it (Articles 5(1) and 5(2) of the DB Rules). If a party expresses dissatisfaction with a decision within thirty days of receiving it, it may submit the dispute to final resolution by arbitration (if the parties have so agreed) or by a state court (Article 4(6) of the DB Rules). The parties nonetheless remain contractually bound to comply with the decision until an arbitral tribunal or court rules otherwise. If no party expresses dissatisfaction with a decision within the stated time period, the parties contractually agree to remain bound by it (Article 5(3) of the DB Rules).
• Combined Dispute Board (“CDB”). A CDB normally issues recommendations with respect to any dispute referred to it but may issue a decision if a party so requests and no other party objects (Articles 6(1) and 6(2) of the DB Rules). In the event of an objection, the CDB will decide whether to issue a recommendation or a decision on the basis of the criteria set forth in Article 6(3) of the DB Rules.

4-39 In contrast with proceedings conducted under the ADR Rules and the Expertise Rules, the ICC does not administer dispute boards. Its intervention is limited to appointing dispute board members, deciding on challenges if need be, and scrutinizing dispute board determinations where requested to do so. More information on the DB Rules can be found at www.iccdisputeboards.org.

DOCDEX

4-40 Documentary Instruments Dispute Resolution Expertise (DOCDEX) is an expert-based dispute resolution system for documentary credits and other documentary instruments. The ICC established this very specific dispute resolution procedure in response to a call from the international banking community to provide a quick, low-cost, reliable and expertise-driven resolution procedure for disputes that arise in connection with documentary credits. All DOCDEX procedures are administered by the Centre under the auspices of the ICC Commission on Banking Techniques and Practice.

4-41 The DOCDEX Rules are available to users for any dispute relating to:

1. a documentary credit incorporating the ICC Uniform Customs and Practice for Documentary Credits (UCP);
2. the application of the ICC Uniform Rules for Bank-to-Bank Reimbursement under Documentary Credits (URR);
3. a collection incorporating the ICC Uniform Rules for Collections (URC); or
4. a demand guarantee incorporating the ICC Uniform Rules for Demand Guarantees (URDG).

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4-42 A prior agreement of the parties to submit their dispute to a DOCDEX procedure is not necessary. As long as the dispute concerns one of the above-mentioned sets of ICC banking rules, one party can decide to initiate a DOCDEX procedure. More information about DOCDEX can be found at www.iccdocdex.org.

Combining ADR with arbitration and other proceedings

4-43 As mentioned above, the ICC takes a holistic approach to dispute resolution and makes available a wide range of services for resolving disagreements and disputes efficiently in terms of both time and cost. These services can be easily combined, which gives users the freedom and flexibility to move from one procedure to another in the interests of efficiency and in accordance with the circumstances of their dispute.

ADR and arbitration

4-44 ADR can appeal to many users of ICC arbitration. In addition to being a separate alternative, it can be combined with and complement arbitral proceedings. This possibility is clearly acknowledged in the ICC Rules of Arbitration, which in Appendix IV entitled Case Management Techniques mentions the ADR Rules as a potential means of settling a dispute.

4-45 ADR before arbitration. When a matter is referred to arbitration, this is usually a sign that negotiations between the parties have broken down. These negotiations could in many circumstances be put back on track with the assistance and support of a neutral third party. The neutral can determine the parties’ respective interests and help them recognize constructive common ground that would otherwise have been overlooked. In that respect, attempting ADR before moving on to potentially more divisive and expensive arbitral proceedings can be mutually beneficial to the parties.

4-46 Despite its high success rate, ADR cannot guarantee the resolution of a dispute. In the absence of an agreement between the parties to the contrary, it will not lead to a binding decision by the neutral. Also, ADR may not be appropriate for all disputes. The parties are free, therefore, to turn to arbitration if ADR proceedings fail.

4-47 The decision to resort to ADR as a first step can be made at several stages. The most straightforward option is to agree upon the initiation of ADR proceedings after a dispute has arisen and negotiations have failed. Indeed, appealing to a neutral can often allow some of the positive or constructive elements of those negotiations to be preserved. Parties can initiate ADR in one of two ways. First, one party may file a Request for ADR or both parties may file a joint Request (Article 2A of the ADR Rules). Alternatively, the ADR Rules permit a single party to file a Request for ADR where there is no pre-existing agreement between the parties to resort to ADR (Article 2B of

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the ADR Rules). In this case, the ADR Secretariat will then notify the Request to the other party to obtain its consent to the proceedings. Once agreement is reached, the parties are required to participate until the initial procedural meeting (Article 5(1) of the ADR Rules).

4-48 Parties can also decide on ADR as the initial method for resolving disputes before a dispute arises. They will often do so by including a multi-tiered dispute resolution clause in their contract binding them to initiate ADR proceedings before resorting to arbitration. The ICC offers model multitiered clauses to help users draft an effective clause. The ADR/arbitration clause places a time limit of forty-five days on the ADR proceedings, although parties are free to modify that time limit if necessary (forty-five days may be too short in many cases; parties may also wish to specify that the time limit begins upon the transfer of the file to the neutral). Setting a limit to the duration of the proceedings can encourage parties to act more efficiently (they may of course agree to extend the deadline if they wish to continue the procedure). Failing a settlement within that time limit or an agreed extension of the time limit, the parties are free to commence arbitration. The clause reads as follows:

In the event of any dispute arising out of or in connection with the present contract, the parties agree to submit the matter to settlement proceedings under the ICC ADR Rules. If the dispute has not been settled pursuant to the said Rules within 45 days following the filing of a Request for ADR or within such other period as the parties may agree in writing, such dispute 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 of Arbitration.

4-49 For more information on drafting clauses, see Chapter 5.

4-50 ADR during arbitration. ADR proceedings may also be initiated during an arbitration or litigation, regardless of whether those proceedings have been stayed. The parties may recognize that, in the circumstances, ADR might help them to arrive at a settlement. Although the dispute is not always fully settled, ADR proceedings remain an effective means of finding as much common ground as possible, rendering the arbitral proceedings more efficient as a result. The parties can even decide at the outset of the arbitration proceedings that at a given time during the proceedings they will attempt to settle the dispute by ADR proceedings. This option is commonly referred to as an “ADR window”. It can prove successful when used after the completion of a milestone in the arbitration, such as the Terms of Reference, a hearing or a partial award. If the parties do not settle their dispute during the ADR window, the arbitration proceedings will resume.

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4-51 Parties are free to resort to ADR at any point during the arbitration, and the ICC encourages them to do so. When notifying a Request for Arbitration, the Secretariat will remind the parties of the ICC ADR services at their disposal. Appendix IV to the Rules of Arbitration, which relates to case management techniques, also explicitly encourages arbitrators to control the time and costs of arbitrations by, among other things, informing the parties that they are free to settle all or part of the dispute by negotiation or through amicable dispute resolution. Even partial settlements are likely to reduce the time and cost of arbitration. If, when a settlement is reached, the case file has already been transmitted to the arbitral tribunal pursuant to Article 16 of the Rules of Arbitration, the parties may request that the arbitral tribunal integrate the settlement or aspects of it into an award by consent (Article 32 of the Rules of Arbitration). The settlement thereby becomes enforceable as an arbitral award, providing the parties with greater assurance that its terms will be respected.

Arbitration, expertise and dispute boards

4-52 ICC expertise services and dispute boards are also closely related to ICC arbitration. Parties to an arbitration may use the ICC expertise services to obtain the proposal of an expert. If ICC arbitral tribunals wish to seek the proposal of an expert from the Centre, this service is made available to them entirely free of charge. As with ADR, parties may agree to undertake expertise proceedings before resorting to arbitration. However, undertaking expertise proceedings in the course of an arbitration is not usually an option.

4-53 ICC dispute boards are often closely linked to ICC arbitration. Most clauses making reference to the ICC DB Rules provide for ICC arbitration in the event that the parties object to the dispute board’s recommendation or decision.

Using the dispute resolution rules

4-54 This section briefly describes the operation of ADR and expertise proceedings and serves as an introduction to the structure of the ADR and Expertise Rules.

ADR Rules⁶

4-55 Commencing ICC ADR proceedings (Article 2). The parties must agree to use the ICC ADR Rules. Such agreement can occur:

1. prior to filing a Request for ADR, either in the parties’ underlying contract or in a later agreement. Such an agreement may even be made after the dispute has been referred to arbitration or a state court; or
2. through a Request for ADR filed with the ICC by one party and accepted by the other party. A prior agreement is in this case not required.

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4-56 The requesting party can file a Request that falls under both Articles 2(A) and 2(B) (e.g. if the Request relates to a dispute involving several related contracts, some of which contain an ADR clause and some not). In such instances, the Centre will distinguish those aspects of the dispute for which the parties have already agreed to ADR proceedings from those for which they have not.

4-57 How to file a Request for ADR proceedings. The first step in all ADR proceedings is to submit a written Request for ADR. The note below may assist parties in filing such a Request.

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4-58 Initiating the proceedings. Upon receipt of the Request and the registration fee, the Centre notifies the Request to the other party if the Request was filed pursuant to Article 2(B). In all instances it will invite the responding party to submit its comments on the Request. If needed, it will also seek additional comments on outstanding procedural questions from the requesting party. Where the Request is based on Article 2(B), the other party can then accept or decline to participate in the ADR proceedings. If it declines or does not respond to the Request within fifteen days, the proceedings are not commenced. The Centre will in such instances keep the registration fee.

4-59 Once a Request has been received or, in the case of Article 2(B), once the other party has consented to participate in the ICC ADR proceedings, participation is obligatory and a party’s withdrawal prior to the first meeting with the neutral (Article 5(1)) would represent a breach of the parties’ agreement (see paragraph 4-66).

4-60 Selecting the neutral. The next step in ADR proceedings is to select the neutral. In the vast majority of cases, only one neutral will be appointed. However, Article 3(4) allows the parties to designate, and the ICC to propose, more than one neutral. For example, two neutrals who have different professional backgrounds can complement each other’s expertise, leading in some cases to more rapid and effective proceedings. Comediation is a recognized form of ADR involving two neutrals. Proceedings involving more than two neutrals do not arise in practice and could present serious challenges.

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4-61 According to Article 3(1), the neutral can be selected in one of the following ways:

1. joint designation by all of the parties;
2. agreement of the parties on the qualifications or attributes of the neutral and appointment by the ICC; or
3. appointment by the ICC without the parties’ agreement on the neutral’s qualifications or attributes. The ICC will nonetheless consider any comments the parties may have made.

4-62 Joint designation of the neutral by the parties can be advantageous as it ensures that all parties are comfortable from the outset with the neutral. Requesting the ICC to appoint the neutral also has its advantages, as it frees the parties from the task of finding and agreeing on a suitable candidate, which in some cases may require extensive research.

4-63 Where the ICC is to appoint a neutral, it will contact one or more of its National Committees or Groups and ask them to propose one or more suitable candidates. However, it can also appoint the neutral directly and is not bound by the suggestion of a National Committee or Group. To assist in this task, and although the ICC does not require any specific accreditation, the Centre maintains an open database of neutrals for identifying candidates who meet specific requirements. Any trained and experienced professional interested in being added to the database can simply send his or her curriculum vitae to the ICC International Centre for ADR. If the parties wish to provide some input into the appointment process, they may request the ICC to prepare a short list of candidates usually containing no more than five names. Upon receiving the list, the parties will then be asked to rank the candidates. The ICC will appoint the candidate who is ranked highest on all the parties’ lists.

4-64 Criteria for selecting a neutral. The success of ADR proceedings depends in large part on the neutral’s skills and level of engagement. In a mediation or conciliation, for example, it is in the parties’ best interests to have a capable neutral who will effectively and diligently assist them with their negotiations and support them in arriving at a settlement. Accordingly, when nominating a neutral, the parties should as far as possible seek to ensure that the neutral:

1. has training and experience in the chosen settlement technique;
2. holds any specific qualifications the parties may require or that may be appropriate (e.g. legal or other forms of expertise, such as knowledge of the relevant industry sector);
3. can conduct proceedings in the language of the proceedings and understands any other necessary language(s);
4. understands the parties’ cultural backgrounds; and

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5. is independent of the parties (every prospective neutral must file a curriculum vitae and declaration of acceptance and statement of independence with the ICC before being confirmed or appointed).

4-65 When appointing a neutral, the ICC will take into account the above and the following additional factors:

• Nationality. Unless specifically requested by the parties or in cases where all parties are of the same nationality, no neutral holding the nationality of one of the parties will be appointed.
• Languages. The ICC will appoint a neutral who can conduct the proceedings in the language agreed upon by the parties and, if possible, also speaks each party’s language.
• Procedural knowledge. The Centre places great importance on the candidate’s training, national or international accreditation, and experience in the requested settlement technique.
• Place of residence. The ICC will attempt to appoint a neutral who is at or close to the place of the proceedings in order to reduce the potential cost of the proceedings.
• Independence. If one of the parties objects to the neutral’s appointment in light of a qualified statement of independence, or if the ICC considers the candidate’s actual or perceived independence to be compromised, the ICC will not proceed with the appointment and will seek another candidate.

4-66 Conducting the proceedings. Upon receiving the case file, the neutral’s first responsibility is to organize and hold an initial meeting with the parties to discuss any outstanding procedural issues and to decide on the further conduct of the proceedings (Article 5(1)). By agreeing to submit their dispute to ICC ADR proceedings, parties are required to participate in this meeting to fulfil their obligation under Article 6(1), subparagraph (b), of the ADR Rules. A distinctive feature of ADR proceedings, this initial meeting is somewhat akin to the early case management conference in ICC arbitration, insofar as one of its main purposes is to tailor the proceedings to the parties’ needs (see paragraphs 3-912 and following).

4-67 The meeting can persuade reluctant parties to participate in the proceedings. The compulsory nature of the meeting justifies their attendance without giving the impression that they are conceding any weakness in their case. Given that few cases are withdrawn after this initial meeting, it clearly convinces even reluctant parties of the benefits of proceeding.

4-68 Thereafter, the ADR Rules provide the parties and the neutral with considerable flexibility to shape the proceedings according to their needs and preferences, while respecting a number of core requirements.⁷

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4-69 How much does ICC ADR cost? The fees and costs (excluding a party’s individual costs such as the fees and expenses of lawyers and any experts upon whom they may call) consist of:

1. the neutral’s remuneration, i.e. fees and reasonable expenses; and
2. the ICC administrative expenses, which include a non-refundable registration fee to be paid when submitting the Request, currently set at US$ 1,500. These expenses are currently capped at US$ 10,000 and vary depending on the amount of work done (see Article 4(2) and Appendix, § B).

4-70 In contrast to ICC arbitration, these fees and costs are not calculated on the basis of the amount in dispute, but rather depend on the amount of time spent on the case by the neutral and the ICC. The neutral’s fees are based upon an hourly rate fixed by the ICC in consultation with the neutral and the parties (Article 4(2) and Appendix, § C) at the outset of the proceedings. When informing the parties of the neutral’s confirmation or appointment, the ICC will advise them of the hourly rate proposed by the neutral and invite their comments. The ICC will then fix the hourly rate, taking into consideration the neutral’s proposal, the parties’ comments (if any) and the hourly rates of neutrals in similar cases. This process saves the parties from having to discuss fees directly with the neutral.

4-71 The hourly rates of neutrals can vary considerably depending on the neutral’s background and experience, the settlement technique employed and the particularities of the case. Rates usually range between US$ 200 and US$ 600 per hour. The number of hours required to help the parties arrive at a settlement also varies. In mediations, it is typically between twenty and forty hours. Other techniques, such as adjudication and combinations of techniques, tend to be more time-consuming. When fixing neutrals’ fees, the ICC will take into account only time that is “reasonably” spent on the case (Appendix, § C).

4-72 The parties generally pay the fees and costs in several steps. Initially, the requesting party must pay the non-refundable registration fee of US$ 1,500 (Article 4(1) and Appendix, § A). The ICC then fixes a provisional deposit to cover the work required from the neutral up to and including the first meeting. The deposit usually consists of an amount to cover fees for ten to twenty hours of work and administrative expenses of about US$ 5,000. The deposit is split equally between both sides. Once the initial meeting has taken place, the ICC invites the neutral to estimate the total amount of time needed to complete the proceedings and readjusts the deposit to cover the total cost of the proceedings. The ICC can stay the proceedings or terminate them if the deposit remains unpaid (Article 4(2)). This deposit must again be paid by the parties in equal shares.

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4-73 How do ADR proceedings end? Article 6 lists the various ways in which ADR proceedings can be terminated:

• The parties may sign a settlement agreement that puts an end to their dispute.
• After the procedural meeting, a party may notify the neutral in writing that it does not wish to pursue the ADR proceedings.
• The neutral may also notify the parties in writing that the procedure decided on during or after the procedural meeting has been completed.For example, if the parties have simply agreed to obtain an opinion from the neutral pursuant to a neutral evaluation, the proceedings will end upon the neutral’s notification of that opinion.
• The neutral may notify the parties in writing that, in his or her opinion, the ADR proceedings will not result in an amicable settlement.
• Where a time limit for completion of the proceedings has been set by the parties, the expiry of that time limit will cause the proceedings to terminate.
• The ICC may also terminate proceedings where (i) payments due from the parties have not been made, or (ii) it notifies the parties in writing that, in its opinion, the parties are incapable of designating a neutral or the ICC is unable to appoint a neutral.

Expertise Rules

4-74 A detailed discussion of the Expertise Rules can be found at www.iccexpertise.org.

4-75 How to file a Request. The following checklist may assist parties in filing a Request under the Expertise Rules, whether for the proposal or the appointment of an expert or the administration of expertise proceedings.

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4-76 How does the Centre identify and propose/appoint experts? If a Request for Appointment or a Request for Administration has not been filed jointly by all parties, the Centre notifies the other parties and invites their comments on the Request, where necessary. The Centre then proceeds to search for an expert. When requesting the administration of expertise proceedings, the parties are free to agree beforehand on an expert, in which case the Centre will contact the expert and confirm the parties’ designation.

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4-77 The Centre does not maintain a closed list of experts. Rather, it uses the information provided in the Request to run searches on the basis of criteria specific to the case. For this purpose, it draws on its rich database of experts all over the world and its relations with other expert organizations and institutions. Any expert or institution wishing to be included in the Centre’s database may send a curriculum vitae or professional résumé to the International Centre for Expertise. Additionally, the Centre can rely on the help of its Standing Committee—whose members from various backgrounds (e.g. consultants, in-house counsel, attorneys, engineers, accountants) review the qualifications of the experts proposed or appointed by the Centre—as well as the ICC’s National Committees and Groups. The Centre will invite one or more National Committees or Groups to submit proposals for suitable experts in each case, but is not bound to accept the proposals they make.

4-78 Upon finding a suitable expert, the Centre appoints the expert if need be or, in the case of proposals, simply provides the requesting party with the expert’s name, contact details, curriculum vitae and declaration of acceptance and statement of independence. For proposals and appointments, the Centre’s work ends there. However, as already indicated, the Centre may also administer the subsequent expertise proceedings.

4-79 Administering expertise proceedings. Where the Centre has been asked to administer expertise proceedings, it transfers the file to the expert, who then promptly contacts the parties and establishes the expert’s mission (Article 12(1)) and a provisional timetable (Article 12(2)). Both documents serve as the basis for the proceedings. The Centre will review both documents while still in draft form and inform the expert of any suggestions it has on the drafting.

4-80 The expert then conducts the proceedings and sets out his or her findings in a written expert’s report in accordance with the expert’s mission (Article 12(3)). Article 13(1) authorizes the expert to render the expert’s report even if a party fails to participate in the proceedings, so long as that party has been given the opportunity to participate.

4-81 Upon receiving a draft of the expert’s report, the Centre scrutinizes it for errors of form, such as missing procedural information or any typographical or clerical mistakes (Article 12(6)). Once this step is completed, the expert prepares signed copies, which the Centre then notifies to each party (Article 12(8)).

4-82 Pursuant to Article 12(3), the expert’s report is not binding upon the parties, unless agreed otherwise.

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4-83 How much do expertise services cost? The Centre currently charges US$ 2,500 per expert proposed or appointed. There is no charge for a proposal made at the request of an ICC arbitral tribunal.

4-84 The total cost for the administration of expertise proceedings (apart from each party’s individual costs such as legal costs) is made up of (i) the expert’s fees, (ii) the expert’s expenses and (iii) the ICC’s administrative expenses. The expert’s fees depend on his or her daily rate—which an expert will propose upon being appointed and the Centre will fix after giving the parties an opportunity to comment—and the amount of time spent on the proceedings. The Centre will fix a provisional advance when fixing the expert’s fee. After receiving the case file, the expert will be invited to estimate the duration of the proceedings and the Centre will reconsider the advance accordingly. The Centre will also reimburse the expert for any reasonable expenses incurred in connection with the expertise. The amount due to the Centre for administrating expertise proceedings depends on the scope of the services rendered. The minimum is US$ 2,500 and the maximum is 15 per cent of the expert’s total fees.

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