The International Centre for Dispute Resolution (the ICDR), the international division of the American Arbitration Association has released a new version of its Mediation Rules and its Arbitration Rules (the Rules), effective 1 May 2014.
Many of the changes concern issues which have been the focus of many of the recent institutional rule changes – reducing the time and costs involved in resolving a dispute pursuant to the Rules, dealing with multi-party and multi-contract issues, and providing for emergency measures of protection before constitution of the tribunal. However, the revised Rules also contain some novel aspects. In particular:
- The adoption of the “international” approach to document production in arbitration into the Rules themselves and confirmation that depositions, interrogatories and other US “discovery” procedures are “generally not appropriate” in an ICDR arbitration (Article 21);
- Provision for joinder and the appointment of a “consolidation arbitrator” to determine whether multiple arbitrations should be consolidated;
- An express description of the ICDR list procedure at Article 12(6) for the appointment of arbitrators (barring party agreement to an alternative method); and
- Express inclusion of a default position on the question of privilege in international arbitration, adopting a highest standard of protection test (Article 22).
Document production/Exchange of information
The Rules are intended for international arbitration. Article 21 of the revised Rules demonstrates this and will go some way to alleviate any residual concerns of non-US parties that ICDR arbitration involves US domestic litigation processes. While the ICDR has previously directed the adoption of an international approach to document production (through the ICDR Guidelines on the Exchange of Information), the revision has brought this approach within the Rules themselves. Article 21 now requires that the parties exchange all documents upon which they intend to rely. Article 21(4) adopts the same approach as the IBA Rules on the Taking of Evidence in International Arbitration, by allowing parties to make requests for specific documents or classes of documents which are in the other party’s possession and that “are reasonably believed to exist and to be relevant and material to the outcome of the case”. Article 21(2) confirms the importance of this international approach by clarifying that the parties may only depart from this procedure “by written agreement and in consultation with the tribunal”. The revised rules also confirm in article 21(10) that depositions, interrogatories and other US discovery procedures are “generally not appropriate” in an ICDR arbitration.
Consistent with other recent changes to arbitration rules and procedures, the changes to the Rules recognise the increased use of arbitration clauses in multi-party and multi-contract transactions. In this regard, the Rules include:
- An express provision dealing with cross-claims against co-Respondents (Article 3(7))
- Joinder provisions which provide for joinder of any additional party before constitution of the tribunal by submission of a Notice of Arbitration against the additional party to the ICDR and the additional party. Joinder after constitution of the tribunal will require the consent of all parties and the additional party.
- Consolidation provisions which allow the ICDR, at the request of a party, to appoint a “consolidation arbitrator” who will have the power to consolidate two or more arbitrations pending under the Rules, or the Rules and other arbitration rules administered by the AAA or ICDR. Consolidation may be ordered when:
- the parties have expressly agreed to consolidation; or
- all of the claims (counterclaims and set offs) are made under the same arbitration agreement; or
- all of the claims (counterclaims and set offs) are made under more than one arbitration agreement, the arbitrations involve the same parties, the disputes in the arbitrations arise in the same legal relationship, and the consolidation arbitrator finds the arbitration agreements to be compatible.
- The consolidation arbitrator is obliged to consult the parties, may consult the arbitral tribunal(s) already appointed and may take into account a number of factors including progress made in the arbitrations, whether the arbitrations raise common issues of law and/or facts and whether the consolidation would serve the interests of justice and efficiency.
- When arbitrations are consolidated, they are consolidated into the arbitration commenced first unless all parties otherwise agree or the consolidation arbitrator finds otherwise.
- On consolidation, all parties to those arbitrations shall be deemed to have waived its right to appoint an arbitrator and the consolidation arbitrator may revoke the appointment of any arbitrators and may select one of the previously appointed tribunals to serve in the consolidated arbitration.
While consolidation has been tackled by many of the arbitration institutions in their arbitration rules, the consolidation provisions in the Rules are novel in the sense that, as a default position, the arbitrator deciding on the issue of consolidation is not one which has already been appointed in the existing arbitrations, but a new arbitrator appointed by the ICDR.
The default position for arbitrator appointment, independence and impartiality
The revised Rules expressly refer at Article 12(6) to the ICDR’s “list procedure” as the default process for appointment of arbitrators in the absence of agreement between the parties to the contrary. Usefully, it sets out the process by which arbitrators will be selected from an identical list of possible arbitrators submitted to the parties by the ICDR Administrator. A “list system” is occasionally used by other mainstream arbitral institutions when appointing arbitrators. However, the revision clearly sets the ICDR apart from other mainstream institutions in confirming this as the default process in the rules themselves.
The revised Rules also contain more detailed provisions on the independence and impartiality of arbitrators, including:
- An on-going duty on both the arbitrator and the parties to disclose circumstances which may give rise to justifiable doubts as to the arbitrator’s impartiality or independence
- A party which does not promptly disclose such information is deemed to have waived its right to challenge the arbitrator based on those circumstances
- Confirmation that disclosure by an arbitrator does not necessarily indicate a belief that the disclosed information gives rise to justifiable doubts
Whilst it has not issued any code of conduct for party representation (see, for example the IBA Rules on Party Representation and the annex to the draft LCIA Rules, the ICDR has included in Article 16 a provision that “the conduct of party representatives shall be in accordance with such guidelines as the ICDR may issue on the subject”. This leaves the door open for the ICDR to issue its own guidelines which would bind parties (and their representatives) when they pursued arbitration proceedings under the Rules. The ICDR is currently studying this issue.
Another novel provision is the ICDR’s reference to privilege in Article 22, which recognises that, due to the international nature of the parties, their counsel, and their transaction, as well as the different laws which may be applicable, privilege can be a complex issue. Article 22 grasps the nettle in that it provides for a highest threshold test. The tribunal “shall take into account applicable principles of privilege…When the parties, their counsel or their documents would be subject under applicable law to different rules, the tribunal should, to the extent possible, apply the same rule to all parties, giving preference to the rule that provides the highest level of protection”.
Expediency, case management and costs
Other changes focussing on expediency, case management and costs include:
- Express confirmation that a failure to submit an Answer shall not preclude the arbitration from proceeding (Article 3(6))
- An obligation the parties to take into account the arbitrators’ availability to serve when selecting an arbitrator (the same to be taken into account by ICDR when making appointments)
- Online filing of the Notice of Arbitration and Answer
- On appointment of a substitute arbitrator, the tribunal may determine whether all or part of a case shall be repeated
- Power of two arbitrators to continue an arbitration notwithstanding failure of a third arbitrator to participate
- Expanded provision on the tribunal’s “preparatory conference”, including a reference to considering with the parties how the use of technology could be used to “increase the efficiency and economy of the proceedings”
- A general obligation on the parties to “make every effort to avoid unnecessary delay and expense in the arbitration”, further the tribunal “may allocate costs, draw adverse inferences and take such additional steps as are necessary to protect the efficiency and integrity of the arbitration” (Article 20(7)).
- A requirement that the fees and expenses of the arbitrators shall be “reasonable in amount, taking into account the time spent by the arbitrators, the size and complexity of the case, and any other relevant circumstances.
International Expedited Procedure
The Rules provide for International Expedited Procedures which apply to any case in which no disclosed claim or counterclaim exceeds $250,000 or in any case which the parties have agreed to application for the Expedited Procedures. Features of the Expedited Procedures include:
- An expedited appointment process with party input by way of a list process
- Appointment from a pool of arbitrators prepared to serve on an expedited basis
- A presumption that cases involving claims of up to $100,000 will be decided on a documents-only basis (unless the arbitrator determines otherwise)
- An expedited schedule and limited hearing days (if any)
- A limited time period for the award (30 days from close of the hearing or receipt of final written submissions)
Emphasis on mediation
The Rules propose an interventionist approach to the issue of settlement discussions, including a provision which permits the ICDR to invite the parties to mediate in accordance with the ICDR’s Mediation Rules (the Mediation Rules). The parties are also able to agree to mediate in accordance with the Mediation Rules and unless otherwise agreed, the mediation will run concurrently with the arbitration and the mediator shall not be a member of the tribunal.
Emergency Measures of Protection
The Rules now contain a provision which deals with the appointment of an emergency arbitrator by the IDCR, on written application by a party for emergency relief before constitution of the tribunal. On receipt of an application, ICDR will appoint an emergency arbitrator within one business day and Article 6 contains a process and powers of the emergency arbitrator.
This provision differs from emergency arbitrator provisions in other sets of institutional rules, in which the institution has discretion to refuse the application for appointment of an emergency arbitrator.
Since an application must be made on notice to the other party, recourse to the courts of the seat for interim relief may nonetheless be appropriate in cases where the relief is required on an ex parte basis for it to be effective. A request for interim measures from a judicial authority is deemed not incompatible with the emergency arbitrator provisions or the agreement to arbitrate (Article 6(7)).
For further information, please contact Larry Shore, Partner; Chris Parker, Partner; Hannah Ambrose, Professional Support Lawyer; or your usual Herbert Smith Freehills contact.