New year, new rules: International arbitration rules updated to reflect new challenges

By Frank Bannon, Xara Kaye
04 Feb 2021
Greater efficiency and transparency in arbitral processes is a likely result of the trends appearing across these new institutional rules and guidelines.

The London Court of International Arbitration (LCIA) and the International Chamber of Commerce (ICC) have both updated their procedural rules for arbitration, and the International Bar Association is due to release its revised guidance on taking evidence in arbitration.

While the changes to the institutional rules are not identical, they are clearly responding to the same developments and challenges. Many of the amendments respond to circumstances created by the COVID-19 pandemic – which has resulted in an increase in virtual hearings and increased dependency and reliance on technology – while other changes seek to codify recent trends and best practices that have emerged in the practice of international arbitration. Further updates are expected across other institutions; currently neither the Singapore International Arbitration Centre nor Hong Kong International Arbitration Centre make express provision for virtual proceedings. 

The result will likely be positive for both participants and practitioners, as changes promote efficiency and transparency in the arbitral process.

LCIA Arbitration and Mediation Rules

The LCIA revised Arbitration and Mediation Rules entered into force on 1 October 2020, with changes purporting to acknowledge the reality of modern practice, particularly during the pandemic.

Responding to conditions exacerbated by the pandemic, the Tribunal is granted the fullest authority to establish the conduct of a hearing, including to decide whether to hold a hearing in person or "virtually by conference call, videoconference or using other communications technology" (Article 19.2). The provision expressly acknowledges that parties may be in numerous geographic locations. Further, all written communication to LCIA must be made electronically (Article 4).

Other notable updates reflect the goal of improving efficiency of arbitration including:

  • early consolidation of arbitrations (whether against one or more respondents and under one or more Arbitration Agreements) (Article 1.2);
  • power of Tribunal to order consolidation (even where no mutual agreement of parties) (Article 22A);
  • power for Tribunal to summarily dispose of unfounded claims and defences which manifestly lack merit, at a preliminary stage of an arbitration (Article 22.1 (viii));
  • requirement that the LCIA must appoint the tribunal within 28 days (rather than previous 35) (Article 5.6); 
  • clarification of the role of Tribunal Secretary (generally codifying existing norms, in particular that Tribunal must not delegate its function).

These revisions are relatively uncontroversial. However, the process for consolidation of arbitrations may prove interesting, particularly where proceedings arise out of the same transaction rather than simply between the same parties. In such circumstances due consideration will need to be given to a party’s right to equal treatment and party autonomy in the appointment of the Tribunal. While the LCIA did previously allow consolidation, the process has been made more efficient, and no longer requires all individual proceedings to be commenced separately; a composite request may be filed.

ICC Arbitration Rules

The ICC 2021 Arbitration Rules came into force on 1 January 2021. Given these rules were last revised in 2017, the changes are relatively minor. As with the LCIA, updates and are intended to recognise current practice or to clarify interpretation of the rules.

In line with the LCIA, the ICC revisions facilitate virtual hearings, and allow for pleadings and any written communication simply to be "sent", contemplating virtual communication (Article 3(1)). The ICC rules similarly empower the Tribunal to mandate the format of hearing, including a virtual hearing "by videoconference, telephone or other appropriate means of communication" (Article 26(1)). While the discretion to determine the form of hearing already existed, codification clarifies the Tribunal's mandate, and should operate to limit ongoing contention between the parties on that matter.

Other updates relate to the expedited procedure requirements and changes limiting party autonomy in specific ways to avoid unfairness and abusive procedural tactics. These include:

  • ICC has power to appoint the whole Tribunal in "exceptional circumstances" (Article 12(9));
  • broader availability of consolidation of arbitrations; may occur for any claims between the same parties that "arise in connection with the same legal relationship", and for all claims under the same arbitration agreement (including between non-identical parties) (Article 10);
  • new option to request joinder of a party even after the confirmation or appointment of an arbitrator (Article 7(5));
  • requirement that parties disclose any third party funding (Article 11.7);
  • for the Expedited Procedure Rules to apply the value in dispute must be $3m (previously $2m) for any arbitration agreement concluded on or after 1 January 2021 (Appendix VI Article 1(2) and Article 30(2)).

Perhaps most notable is the power of ICC to appoint the whole Tribunal; this allows the institute to depart from the arbitration agreement "to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award”. This power could be used to address the issue of equal treatment raised under both the LCIA and ICC rules with respect to consolidation; in multi-party arbitration the ICC may appoint the whole Tribunal. Notwithstanding its practicality, it is likely that this discretion will only be exercised in exceptional circumstances, as the right of parties to appoint the Tribunal is considered fundamental.

Upcoming changes: IBA Rules on the Taking of Evidence in International Arbitration

The IBA is in the process of finalising a revision of the IBA Rules on the Taking of Evidence in International Arbitration. While the IBA previously anticipated the rules would come into force early in 2021, there has been no update on the process since November 2020.

These rules provide guidance to fill the gap left by institutional rules, such as those of LCIA and ICC, which generally provide the framework of arbitration. The rules provide guidance on methods for gathering and presentation of evidence. This process can cause problems between parties with different jurisdictional backgrounds. The framework aims to promote efficiency, economy and conservation of resources, while preserving fairness and the flexibility of arbitration.

The rules were last revised in 2010, and extensive changes are not anticipated. Expected changes include provisions to accommodate giving evidence in remote hearings, introducing consideration of data protection and cyber security in initial consultation on evidentiary issues, and granting power to the Tribunal to exclude illegally obtained evidence. The commentary to the IBA Rules of Evidence is also being revised.

The forthcoming update to these rules may hold relevance for arbitration in Australian, as the Australian Centre for International Commercial Arbitration incorporates these IBA rules (to be used as non-binding guidelines) under its Arbitration Rules, and Expedited Arbitration Rules.

Key takeaways for parties and arbitrators

Greater efficiency and transparency in arbitral processes is a likely result of the trends appearing across these new institutional rules and guidelines. Updated provisions have embraced the necessary uptick in virtual proceedings and communication, as well as facilitating consolidation of arbitrations. Many of these are also factors that will reduce the cost of arbitration.

These changes which will ensure the LCIA and ICC remain attractive choices when parties select the rules to govern an arbitration.

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