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Copyright © International Chamber of Commerce (ICC). All rights reserved.
( Source of the document: ICC Digital Library )
A common refrain heard in discussions on the advantages of international arbitration over litigation is that international arbitration is a faster and less expensive way of resolving disputes. For this reason, many users, especially in Russia and other former Soviet Union republics, ask for a comparison of the costs and duration of proceedings under different institutions before opting for one or other of them. Arbitration under the Rules of Arbitration of the International Chamber of Commerce ('ICC Rules') does not come out of this comparison well. Not only is it more expensive (Figure 1), but also leads to lengthier proceedings than under the rules of other international arbitration institutions. In our experience, it takes at least one and a half to two years from the date the case is filed to obtain an ICC award.
If the cost and duration of the proceedings were the only criteria considered by the parties when choosing an arbitration institution, the ICC International Court of Arbitration ('ICC Court') would have long been discounted as a realistic option, at least in CIS countries. Yet this has not been the case: despite growing competition among arbitration institutions, the ICC Court has held its own, as seen in Figure 2. Furthermore, the 2015 International Arbitration Survey by the School of International Arbitration, Queen Mary, University of London, showed that two-thirds of the corporations polled named the ICC as one of their top three choices.2
Costs of sole arbitrator proceedings under different institutions
A number of factors set the ICC Court apart from other arbitration institutions and make it more attractive to potential clients despite the length and cost of the proceedings (for which there are objective and subjective reasons, as will be discussed below). These factors include (1) the truly international character and neutrality of the ICC Court; (2) highly qualified and neutral arbitral tribunals; and (3) the ICC Court's active role in the administration of the arbitration process, including the scrutiny of awards.
Number of cases filed with the ICC Court
2. Truly international character and neutrality of the ICC Court
The international character and neutrality of the ICC Court are evidenced by:
(a) the global reach of the International Chamber of Commerce ('ICC'), under whose auspices the ICC Court was established and operates;
(b) the absence of a single predominant nationality among arbitrators;
(c) the absence of a single predominant place as the seat of the arbitration;
(d) multinational users leading to a wide variety of applicable laws; and
(e) range of nationalities represented and languages spoken among ICC Court members and the staff of the Secretariat of the ICC Court, and the diversity of their individual legal backgrounds.
(a) Global reach of the ICC
Even though many arbitration institutions label themselves as 'international', more often than not the term refers to the institution's ability to administer international disputes rather than the truly international character of the institution itself in terms of its organization and management.
Unlike institutions created under the aegis of national chambers of commerce, such as the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation [Page218:] ('ICAC (Moscow)') or the Arbitration Institute of the Stockholm Chamber of Commerce ('SCC'), the ICC Court is not tied to any specific country. Although formally a legal entity organized under French law, the ICC in its work operates with and through National Committees and Groups situated in some ninety countries across the entire world.
(b) No one predominant place of arbitration
According to the ICC Court's statistics, arbitrations commenced in 2014 were seated in 110 different cities in 57 countries.3 The most frequent locations were as listed below.
Although Paris was the most popular seat, it accounted for only 12% of all proceedings in 2014.
By contrast, under the rules of international arbitration institutions in CIS countries, the seat is systematically the place where the institution is located, and the parties cannot choose otherwise. Although the SCC and the LCIA do give parties the freedom to choose the place of arbitration, this in fact coincides in most cases with the location of the institution.
(c) No one predominant nationality among arbitrators
Many arbitral institutions are characterized by the nationality of their arbitrators, which is usually that of the country where the institution is located. For example, the overwhelming majority of arbitrators in cases under the Rules of the ICAC (Moscow) are Russians, while the arbitrators in cases under the Rules of the ICAC at the Chamber of Commerce and Industry of Ukraine ('ICAC (Kiev)') are for the most part Ukrainians, and under the Rules of the International Arbitration Court at the Chamber of Commerce and Industry of Belarus Belarussians.
A similar trend, although not as pronounced, can be seen in other European arbitration institutions. Data from the London Court of International Arbitration ('LCIA') shows that of the 372 arbitrators appointed in 2013 234 (almost 63%) were UK nationals, and of these 51.3% were nominated by the parties, 34.6% by the LCIA Court and 14.1% by co-arbitrators.4 In the case of the Arbitration Institute of the Stockholm Chamber of Commerce, the overriding majority of arbitrators are Swedes: in 2009 269 arbitrators were of Swedish nationality, with the next most frequently nationalities being Russian (12 arbitrators), British and Finnish (9 arbitrators each).5
By contrast, arbitrators in ICC proceedings are of many different nationalities and spread more evenly between those nationalities, as indicated in the table below, which covers just the most frequent nationalities of arbitrators appointed or confirmed in 2014.6
(d) Multinational client base
The international character of ICC arbitrations is also demonstrated by the absence of a predominant nationality among the parties involved in disputes.
By way of comparison, parties in cases filed with ICAC (Moscow) are predominantly Russian. In 2012 92% of cases involved a Russian company as one of the parties, and in only 7.9% of cases did both parties come from a country other than Russia.7 In 2014, approximately 51% of the cases conducted under the SCC Rules were international, meaning that at least one party was not Swedish. Most of the parties who file cases with the SCC are from Sweden, followed by Russian, English, Chinese, German and French parties.8
In ICC arbitration, no one nationality can be singled out as predominant, as shown by the list of most frequent nationalities below.
Nor are parties in ICC cases concentrated in one specific region: in 2014, 43.3% of parties were from Europe, 28.3% from North and South America, 21.1% from the Asia-Pacific region, and 7.3% from Africa:9
The diverse nationalities of parties in ICC arbitration are matched by the diversity of the laws applicable to the cases. In 2014, the number of different national laws chosen in the parties' contracts rose to over one hundred for the first time. The most popular are shown in the table below:10
Under the ICC Rules, if the parties cannot agree on the language of the arbitration, it will be chosen by the arbitral tribunal, taking into account 'all relevant circumstances, including the language of the contract' (Art. 20). The majority of awards rendered under the ICC Rules are in English, which reflects the fact that English is the primary language of international business. However, several other languages are used, too. In 2014, for example, alongside the 80% of awards in English, several awards were drafted in French, German, Spanish and Portuguese and a smaller number in Italian, Chinese, Czech, Greek, Romanian, Serbian, Turkish and Ukrainian.11
By contrast, the rules of virtually all arbitration institutions in CIS countries provide for Russian as the language of arbitration (or, for cases in Ukraine, Russian and Ukrainian), unless otherwise agreed by the parties. In practice, however, the choice of English tends to be an exception rather than the rule.
(e) Diverse nationalities, languages and legal expertise among staff and Court members
The Secretariat of the ICC Court has a staff of approximately 80, half of whom are lawyers. They come from some 30 countries, speak more than 20 different languages, and have extremely diverse legal backgrounds - all of which greatly facilitate the administration of the cases in the languages chosen by the parties and communications with parties and arbitrators.
The ICC Court itself currently has 131 members, who come from approximately 80 different jurisdictions. Being so diverse, it is uniquely placed to administer international proceedings. Although English and [Page222:] French are the traditional languages of the Court, sessions are also held in Spanish, German and Portuguese for the purpose of scrutinizing awards in those languages.
No other arbitration institution can boast such a rich blend of nationalities, languages and legal backgrounds.
Arbitration under the ICC Rules enjoys a geographical independence that makes it particularly attractive to parties looking for a neutral arbitration institution. Although founded and headquartered in France, the ICC Court is not confined to a particular country or culture, but administers cases in all parts of the world.
3. Highly qualified and neutral arbitral tribunals
Another refrain heard in discussions on arbitration is that arbitration is only as good as the arbitrators. The disputes are indeed resolved by the arbitrators (the institution's role being to administer the dispute resolution process), so, at least in theory, the same arbitrators could be found sitting in cases under different institutions. Our impression, however, is that out of all arbitral institutions currently operating and competing in the market, arbitrators have a preference for the ICC Court. This is for a number of reasons.
(a) Arbitrators' fees
The fact that the cost of arbitration at the SCC and the ICAC (Moscow) is lower for the parties than at the ICC has a flip side: arbitrators' fees paid under the rules of those institutions are lower, too.
As a result, many well-known practitioners prefer to act as arbitrators in ICC cases rather than those administered by other institutions. In extreme situations, nominees have even refused to accept appointments under the rules of certain other institutions because they believed that the remuneration offered by those institutions was unacceptably low.
(b) Confirmation of arbitrators nominated by parties
Parties to ICC arbitrations do not 'appoint' arbitrators, as they do under other rules. In the ICC system the parties merely 'nominate' arbitrators, and those nominations are subject to confirmation by the ICC Court or its Secretary General. This procedure serves two important purposes.
First, the ICC Court will normally not confirm an arbitrator where there are reasonable doubts as to his or her independence and impartiality. In practical terms this means that each party is given an opportunity to comment on the person nominated by the other party or parties [Page223:] prior to confirmation by the Court. Any valid objections will be duly considered by the Court and, if they are justified, confirmation will be withheld.
Second, the ICC Court may also withhold confirmation if there are doubts about the nominee's availability to conduct the arbitration expeditiously. This is likely to happen, for example, where the Court is aware that a nominee has in the past failed to perform his or her duties properly and, in particular, that the person in question has a record of deliberately and unreasonably dragging out proceedings.
(c) Neutrality of the tribunal president/sole arbitrator
Under the ICC Rules, a sole arbitrator or the president of an arbitral tribunal is required to be of a different nationality from the parties, unless they have agreed otherwise. This rule helps to ensure that the tribunal is truly neutral. With one exception (the Russian Arbitration Association), arbitration institutions in CIS countries have no similar rule.
(d) Recourse to ICC National Committees and Groups
Another important and unique feature of arbitration under the ICC Rules is that in cases where a party fails to nominate an arbitrator, or where the parties cannot agree on the president of the tribunal or the sole arbitrator, the ICC Court will normally approach an appropriate ICC National Committee or Group with an invitation to propose an arbitrator on behalf of the defaulting party or parties. In deciding which National Committee or Group to refer to, the ICC Court considers various criteria including the nationalities of the parties and the other arbitrators, the place and language of the arbitration and the applicable law.
No other arbitration institution can reach out to such a vast pool of professionals worldwide.
4. High degree of sophistication in the administration of proceedings
The administration of arbitration proceedings under the ICC Rules has a number of distinctive features, of which the following are particularly noteworthy:
(a) prima facie decisions by the ICC Court regarding the parties' arbitration agreement;
(b) Terms of Reference;
(c) case management conference; and
(d) the scrutiny and approval of draft arbitral awards by the ICC Court.
(a) Prima facie decisions on the parties' arbitration agreement
The ICC Rules authorizes the ICC Court to decide that a case cannot proceed in full or in part (e.g. with respect to certain parties or claims) if it finds, on the basis of a prima facie assessment, that there is no binding agreement between the parties to submit to ICC arbitration. Before the ICC Court takes such a decision, the parties are invited to state their respective positions.
Prior to 2012 such a decision was necessary in all cases in which there was a non-participating party or in which a party had raised a plea with respect to the existence, validity or scope of the arbitration agreement. Now, however, under the 2012 ICC Rules the presumption is that all questions of jurisdiction will be decided by the arbitral tribunal, unless the Secretary General considers that the circumstances call for a prima facie decision by the ICC Court. Questions of jurisdiction in multiparty and multi-contract cases are commonly submitted to the ICC Court for such a decision.
(b) Terms of Reference
The very first version of the ICC Rules, which entered into force in 1923, provided for the preparation, at the start of the proceedings, of a document containing details that set parameters for those proceedings. Initially called a 'form of submission', it developed into what since 1955 has been known as 'Terms of Reference'.
The Terms of Reference identify the parties and their representatives, the members of the arbitral tribunal, the place and language of the arbitration, procedural rules and the law applicable to the substance of the dispute. Most importantly, the Terms of Reference contain a list of the issues to be resolved by the arbitral tribunal. This encourages the parties and arbitrators to specify at the outset of the proceedings the precise issues over which the parties have disagreements, so as to ensure efficiency in the dispute resolution process. The arbitral tribunal prepares a draft of the Terms of Reference, on which the Secretariat of the ICC Court will provide comments. Once signed, the document is submitted to the ICC Court for information. If any of the parties refuses to take part in drawing up the Terms of Reference or does not sign the document, it will be submitted to the ICC Court for approval.
The Terms of Reference give the players in ICC proceedings - i.e. the arbitral tribunal, the parties and the ICC Court - a yardstick by which to control the progress and outcome of the arbitration. For instance, once the Terms of Reference have been signed or approved, the parties are precluded from bringing any new claims without the tribunal's authorization. Also, a list of issues to be resolved helps the arbitral tribunal, and later the Court when scrutinizing the arbitral award, to ensure that all claims raised by the parties have been addressed in the award.
The fact that terms of reference are regularly used in cases conducted under the rules of other institutions, especially complex cases, testifies to the many benefits they may bring.
(c) Case management conference
To optimize the efficiency of the proceedings, the ICC Rules require the arbitrators and the parties to hold a case management conference at which the tribunal consults the parties on possible procedural measures and case management techniques and establishes the procedural timetable for the conduct of the arbitration. Case management techniques may include, for example, bifurcation of the proceedings and/or the rendering one or more partial arbitral awards on key issues; or the identification of issues that could be resolved by mutual agreement between the parties or their experts or on the basis of documents alone.
The underlying aim of the case management conference is further reinforced by the power ICC arbitral tribunals have to sanction parties who cause undue delay in the proceedings by ordering them to bear a higher share of the arbitration costs.
(d) Scrutiny of draft arbitral awards
The fourth, and arguably the most important, feature of ICC arbitration is the scrutiny and approval of draft awards by the ICC Court. All awards - whether final, partial, interim or by consent - are subject this rule. In practice, it means that every draft award is read by at least two members of the Secretariat (including the Secretary General or Deputy Secretary General) and by a minimum of three members of the ICC Court. Such multilevel scrutiny incentivizes the drafting of high-quality awards that are resistant to challenges in national courts.
The scrutiny process may lead to three kinds of decisions by the ICC Court: it may approve the award, not approve the award, or approve the award 'subject to comments'. Decisions of the third kind are the most common. The Court's decision is communicated to the arbitral tribunal, together with any comments, so that these can be taken into account before the award is signed. In 2014, the ICC Court issued comments on 452 of the 459 awards it approved during the year and sent 44 awards back to arbitral tribunals for resubmission.12
The various administrative measures discussed above explain why arbitration proceedings conducted under the ICC Rules may be more cumbersome compared with those conducted under the rules of other institutions and also why they may be lengthier and more costly. [Page226:] However, in complex arbitrations, which account for a large portion of ICC arbitrations, considerations of time and cost are secondary to the desire for a high-quality award that fully sets out the arbitral tribunal's reasoning and, as a result, is able to withstand challenges in national courts. For such disputes, arbitration under the ICC Rules is the most appropriate option. Statistics indeed show that parties prefer to send high-value disputes to the ICC, while smaller disputes are usually decided by local arbitration institutions (e.g. those in CIS countries referred to earlier in this article), where awards tend to rendered in a shorter time and at less cost than at the ICC. This is clearly apparent from the comparison drawn between the ICC and the ICAC (Moscow) below.13
Comparison between the ICC and ICAC (Moscow) caseloads based on the amounts in dispute
Vladimir Khvalei is a partner with Baker & McKenzie in Moscow and Vice-President of the ICC Court; Vladimir.Khvalei@bakermckenzie.com. Galina Zukova is an associate with White & Case in Paris, former counsel at the Secretariat of the ICC Court and associate professor at the Riga Graduate School of Law, Latvia; firstname.lastname@example.org.
2015 International Arbitration Survey: Improvements and Innovations in International Arbitration, Queen Mary University of London, page 17, http://www.arbitration.qmul.ac.uk/docs/164761.pdf. This compares with 50% of respondents who named the ICC as their preferred institution in 2010; see 2010 International Arbitration Survey: Choices in International Arbitration, Queen Mary University of London, page 23, http://www.arbitration.qmul.ac.uk/docs/123290.pdf (Russian translation available in Tretejskij Sud 2011, 89).
Ibid. at 14. The number of different countries was similarly vast in the preceding years (2008: 50; 2009 and 2010: 53; 2011: 63; 2012: 59).
See LCIA Registrar's Report 2013, http://www.lcia.org/LCIA/reports.aspx.
See 'Arbitration in Sweden and the role of the SCC', presentation by J. Lundstedt, SCC legal counsel, http://www.arbitrationacademy.org/wp-content/uploads/2012/07/Swedish-Arbitration-Presentation_EN.pptx.
'2014 ICC Dispute Resolution Statistics', [2015:1] ICC Dispute Resolution Bulletin 7 at 13.
'2014 ICC Dispute Resolution Statistics', [2015:1] ICC Dispute Resolution Bulletin 7 at 9.
Ibid. at 15.
Ibid. at 16.
'2014 ICC Dispute Resolution Statistics', [2015:1] ICC Dispute Resolution Bulletin 7 at 16.
For statistics on the value of disputes filed with the ICAC (Moscow) in 2013 see http://mkas.tpprf.ru/ru/Stat/, and with the ICC Court in 2014 see '2014 ICC Dispute Resolution Statistics', [2015:1] ICC Dispute Resolution Bulletin 7 at 15.