2021 AMENDMENTS TO THE ICDR ARBITRATION AND MEDIATION RULES: A RESPONSE TO EVOLVING PRACTICE

The International Centre for Dispute Resolution (ICDR) of the American Arbitration Association (AAA) has released its revised Arbitration and Mediation Rules, which came into force on March 1, 2021 (the 2021 ICDR Rules). The 2021 ICDR Rules will apply to any arbitration or mediation commenced after such date unless agreed otherwise.

The Arbitration Rules were last revised in 2014, and the Mediation Rules in 2008. The changes introduced are therefore a comprehensive update, responding to issues that have arisen in both arbitration and mediation over the past decade. They reflect discussions held by the ICDR management and administrative teams, a specific ICDR Committee of practitioners, and feedback from ICDR’s users. Following the trend of recent changes implemented by other major institutions such as the London Court of International Arbitration and the International Chamber of Commerce, the 2021 ICDR Rules include changes relating to third-party funding, joinder and consolidation, data protection, and  the effects of COVID-19 on the arbitral process.

Key takeaways for parties and practitioners

The key changes to be aware of in the 2021 ICDR Rules for parties and practitioners are as follows:

  • The new Arbitration Rules:
    • Permit joinder after the constitution of the tribunal with the consent of the joining party, when the arbitral tribunal considers it appropriate;
    • Allow consolidation when the arbitration involves related parties – as opposed to the more limited “same” parties requirement under the prior rules;
    • Embrace early disposition of issues;
    • Introduce a provision on the disclosure of third-party funding and “undisclosed economic interests;”
    • Acknowledge the use of video, audio, or other electronic means for conducting preliminary matters and final hearings;
    • Require tribunals to discuss cybersecurity, privacy, and data protection with the parties to provide an appropriate level of security and compliance.
  • The new Mediation Rules:
    • Emphasize the importance of party involvement and the obligation of the ICDR to assist the parties in finding an agreeable mediator;
    • Set out best mediation practices by comprehensively outlining how a mediation should proceed;
    • Recognize that all or part of a mediation proceeding may be conducted via video, audio, or other electronic means;
    • Reinforce that it is the responsibility of each party to have present at the mediation a representative with authority to execute a settlement agreement;
    • Allows the parties to request from the ICDR or mediator an attestation that a settlement was reached to assist in enforcing settlement agreements according to the United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Convention) or other applicable law.

The most significant of these changes are discussed in more detail below.

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NEW ICC RULES 2021 AND NEW ICC NOTE TO PARTIES AND ARBITRAL TRIBUNALS COME INTO FORCE

The revised International Chamber of Commerce (ICC) 2021 Arbitration Rules have now come into force, applying to all ICC arbitrations commenced on or after 1 January 2021. The new rules are accompanied by a revised Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (dated 1 January 2021) (the “Note to Parties”).

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PODCAST: ICC RULES 2021 – WHAT YOU NEED TO KNOW

Following the release of the ICC’s new 2021 Arbitration Rules in draft on 9 October 2020, Craig Tevendale (Partner and UK Head of International Arbitration), Thierry Tomasi (Partner) and Vanessa Naish (Professional Support Consultant) have recorded a podcast discussing the top 5 changes to be aware of in the new Rules, being:

  • Amendments to the consolidation provision, and to the joinder provision to allow for joinder after the confirmation or appointment of a tribunal in certain limited circumstances;
  • Provision for virtual hearings and a shift away from paper filings;
  • Allowing for the Tribunal to limit changes to party representation where it causes conflicts of interest;
  • A requirement that parties disclose certain third party funding agreements; and
  • ICC Court discretion in “exceptional circumstances” to deviate from party agreement on the method of constitution of the arbitral tribunal and appoint the entire tribunal to avoid unequal treatment.

The podcast can be listened to via SoundCloud, Spotify and iTunes.

Once the 2021 Rules have been confirmed as “final”, Herbert Smith Freehills’ Global Arbitration Team will produce a updated Step by Step Guide to Arbitration under the ICC Rules and an interactive PDF table comparing the Rules of Key Arbitral Institutions and the UNCITRAL Rules. To receive an electronic copy of these documents in due course, please contact arbitration.info@hsf.com and we will be in touch in December.

For more information, please contact Craig Tevendale, Partner, Thierry Tomasi, Partner, Vanessa Naish, Professional Support Consultant, or your usual Herbert Smith Freehills contact.

Craig Tevendale
Craig Tevendale
Head of International Arbitration, London
+44 20 7466 2445

Thierry Tomasi
Thierry Tomasi
Partner
+33 1 53 57 70 92

Vanessa Naish
Vanessa Naish
Professional Support Consultant
+44 20 7466 2112

PODCAST: THE LCIA RULES 2020 – WHAT YOU NEED TO KNOW

Following the launch of the new LCIA rules earlier this month, Vanessa Naish, Professional Support Consultant and Arbitration Practice Manager, and Andrew Cannon, Partner and councillor on the LCIA European Users’ Council, have recorded a podcast discussing the branding of the rule change as an “update” rather than a “re-write” and the headline changes, being:

  1. Tribunal secretaries;
  2. Keeping the annex on counsel conduct and the change to “authorised representatives” rather than “legal representatives”;
  3. Increased clarity on the ability to issue a composite request (and a response) for multiple arbitrations;
  4. Expansion of the circumstances in which consolidation may be available;
  5. The wide tribunal discretion throughout the process, and clarity around the ability to summarily dismiss certain claims.

The podcast can be listened to on SoundCloud, iTunes, and Spotify.

For more information, please contact Andrew Cannon, Partner, Vanessa Naish, Professional Support Consultant, or your usual Herbert Smith Freehills contact.

Andrew Cannon
Andrew Cannon
Partner
+44 20 7466 2852

Vanessa Naish
Vanessa Naish
Professional Support Consultant
+44 20 7466 2112

NEW LCIA RULES IN FORCE ON 1 OCTOBER 2020: REFRESHING THE LCIA’S APPROACH?

The London Court of International Arbitration (LCIA) has announced changes to its rules which will come into force on 1 October 2020.

The revisions to the LCIA Rules have been couched in terms of an ” update ” rather than a wholescale rewrite. Nonetheless, some changes of note have been made. The new Rules allow for the commencement of multiple arbitrations in a “composite Request” and expand the circumstances in which consolidation may be available. They also confirm the wide discretion of the Tribunal in all aspects of arbitral procedure, including the ability to order Early Determination of claims or counterclaims for being manifestly without legal merit. In addition, the revision seeks to codify within the Rules themselves the LCIA’s approach to Tribunal secretaries (previously contained within a Guidance Note to arbitrators) and to address some slight quirks introduced by the 2014 rule revision. More generally, it feels as though a red pen has been taken to extraneous clause fragments and phraseology and a more “Plain English” drafting style to the whole set of Rules has been introduced. This modernisation also extends to the way the LCIA operates, with a move to the use of electronic submission and communication as the default. We also see a recognition of the reality of current practice, with express drafting included to allow the Tribunal discretion to order a virtual hearing, or a combination of remote and in person attendance.

  1. Breadth of Tribunal Discretion

There have been some fairly substantial changes to Articles 14 (Conduct of Proceedings) and 22 (Additional Powers) of the Rules. On one view, these are not changes per se, but rather a confirmation of powers that arbitrators have always had under the LCIA’s Rules, but which, through lack of express inclusion within the Rules themselves, arbitrators have been reluctant to exercise.

In terms of Article 14, this is certainly a sustainable position. The new Rules have moved around the existing provisions in Article 14, moving up the general duties of the Tribunal from old 14.6 to the beginning of the Article at new 14.1, but leaving them unchanged. New Article 14.2 mirrors old 14.7 in making it clear that the Arbitral Tribunal shall have the widest discretion to discharge these general duties and is, again, unchanged. What follows at new 14.5 and 14.6 seeks to clarify (but not necessarily limit) what this “widest discretion” entails in terms of procedure, including shortening timescales, limiting evidence, restricting pleadings, and adopting technology. Few would disagree that these fall within the existing parameters of arbitrator discretion, exercisable in pursuit of efficient and expeditious conduct. These wide powers would enable a bespoke expedited procedure if required. This all sits well with the changes in Article 15 of the Rules which confirm the Tribunal’s overall control of the written procedure, its extent and timescales.

Whether the changes to Article 22 also fall within that same confirmatory category will very much depend on your view of how far Tribunal discretion extends in terms of summary dismissal. The provisions at 22 (viii) allow for a tribunal to determine that any claim, defence, counterclaim, cross-claim, defence to counterclaim or defence to cross-claim is manifestly outside the jurisdiction of the Arbitral Tribunal, or is inadmissible or manifestly without merit; and where appropriate to issue an order or award to that effect (an “Early Determination”).

Other institutions (e.g. SIAC, HKIAC) have already provided for summary dismissal or early determination in their rules or confirmed (ICC) that such a power exists in a practice note. It was therefore a very obvious addition for the LCIA in any rule change, particularly given the rising use of LCIA Rules by financial institutions who have historically chosen English court jurisdiction over arbitration for the ability to apply for summary judgment.

  1. Composite Requests and Responses

The English court’s decision in A v B [2017] EWHC 3417 (Comm) (21 December 2017) confirmed that the LCIA Rules 2014 did not permit a party to commence a single arbitration in respect of disputes under multiple contracts. Rather, parties instead needed to issue multiple separate Requests for Arbitration and then seek to have the separate arbitrations consolidated.

Other arbitral institutions have allowed for the issue of single requests for multiple disputes in certain circumstances for a number of years, and this court decision made the LCIA seem at odds with what clients and the arbitral community expected. The changes to Article 1.2 allow for composite Requests for Arbitration to be issued in order to commence multiple arbitrations (under certain circumstances) at once. This is then followed at 2.2 by the ability for a Respondent to file a composite Response. While the issuance of a composite Request may be accompanied by a request for consolidation of those disputes, consolidation is not automatic. Whether or not those multiple arbitrations are then consolidated and resolved together will be determined by the tribunal and/or the LCIA.

  1. Widening the circumstances for the consolidation of disputes

The LCIA Rules have historically been viewed as being quite restrictive in terms of the circumstances in which consolidation could be sought under the Rules themselves. Unless multiple arbitrations were taking place under the same arbitration agreement or under compatible agreements with the same parties, consolidation had to be provided for in free-hand drafting in the arbitration clause itself.

The 2020 rule change introduces a new Article 22A called “Power to Order Consolidation/Concurrent Conduct of Arbitrations”. Much of the language here is unchanged, providing for both the Arbitral Tribunal and the LCIA to order consolidation in certain circumstances. However, the tweaks and additions that have been made have changed the LCIA’s approach quite considerably. 22.7(ii) now allows for the Tribunal to consolidate arbitrations under compatible arbitration agreements between “the same disputing parties or arising out of the same transaction or series of related transactions“. Being able to argue that arbitration agreements are compatible and arising out of the same transaction or related transactions opens up opportunities for consolidation in a far wider set of circumstances. This expansion has also been applied to the powers of the LCIA Court under Article 22.8(ii) to consolidate prior to the appointment of a tribunal in similar circumstances. Also new is Article 22.7(iii) which provides for a Tribunal to conduct arbitrations concurrently in similar circumstances and where the same arbitral tribunal is constituted in respect of each arbitration. In practice, this is likely to occur where parties have already agreed to concurrent arbitrations in their contract or where it is standard market practice in the relevant industry.

These apparently small alterations provide for a far more modern and flexible provision that will be very useful, particularly alongside the new provision for composite Requests.

  1. Tribunal Secretaries

Arbitration moves very quickly as a practice area. Since the last LCIA rule change in 2014 it has become standard practice for the role of tribunal secretary to be formalised and placed on a similar footing to arbitrators in terms of conflicts and independence and impartiality. The LCIA responded to that shift in practice by providing some quite detailed guidance in 2017 in its Guidance Note to Arbitrators. However, the rule refresh was an obvious chance to put that guidance on a more formal footing.

The LCIA’s approach to tribunal secretaries came under some scrutiny in the case of P v Q and others [2017] EWHC 194 (Comm). P v Q involved an application to remove an entire Tribunal under s24 of the English Arbitration Act on the basis of alleged “over-delegation” of their duties to their secretary. The Court’s decision was based on a review of the Act and, importantly, the LCIA Rules 1998. The decision gave judicial backing to the LCIA’s approach in that case, and provides judicial support to the LCIA Court’s decision-making process on arbitrator challenges.

Given this support, particularly following the LCIA updated approach in its 2017 Guidance, it is not surprising to see that new 14A is not “new” per se, but rather formalises LCIA current practice within the Rules. The provision makes it clear that parties have to agree to the use of tribunal secretaries and that Tribunal members must not delegate decision-making powers. There is also clarity about the need for Tribunal secretaries to disclose any conflicts of interest and also that the obligation of confidentiality under Article 30 applies to any tribunal secretary.

  1. “Authorised Representatives” and the Annex on Conduct

The introduction of the LCIA’s Annex on Counsel Conduct in the 2014 Rules was an extremely innovative move and remains so. It is noteworthy that there have been no efforts to remove or limit the Annex in the 2020 Rules revision. This shows continued confidence from the LCIA in its approach to this issue.

What has been addressed in this latest revision is a change that was introduced in 2014 and caused considerable discussion. In Article 18 of the 1998 LCIA Rules it was clear that a party could be represented by legal practitioners or by any other representative, whether legally qualified or not. However, in 2014 that language shifted to “one or more authorised legal representatives”. It was not clear at the time whether the LCIA had intentionally restricted party representation in LCIA arbitration to lawyers only. The rule change in 2020 has reverted to clarifying that representation can be legal or non-legal, but that, legal or non-legal, the Annex on Conduct still applies.

  1. Refreshing and modernising

The 2014 amendments introduced some important new concepts into the LCIA Rules. But they also introduced a few quirks that needed to be rectified. Moreover, the bedrock of the 1998 Rules was largely unchanged, meaning that some of the turns of phrase have started to seem a little archaic.

The 2020 update is exactly that. A red pen has been taken to unnecessary additional words and to spare sub-clauses throughout. The fax machine has been removed from the equation and the Rules now require that the Request and Response be submitted electronically unless prior written approval is given by the LCIA Registrar. The default throughout is that correspondence will be through electronic means unless the LCIA Court or the Tribunal direct otherwise (under Article 4). This modernisation also extends to the process of signing and distributing awards, with Article 26.2 now permitting an award to be signed electronically and/or in counterpart and assembled into a single instrument unless the parties agree or the Tribunal or LCIA Court directs otherwise. We also see a recognition of the reality of current practice, particularly during the COVID-19 pandemic, with express drafting included in Article 19 to allow the Tribunal discretion to order a virtual hearing, or a combination of remote and in person attendance. In doing so, the LCIA has chosen to “future-proof” its Rules with the use of the term “other communications technology” to allow for remote hearings technology to continue to evolve over time.

There has been some tightening in the timescales, with 28 days rather than 35 days for the LCIA to appoint the Tribunal in Article 5.8 and an assumed three-month timescale for the release of the Award in 15.10. We also see the acceptance that the blanket use of the term “cross-claim” in the 2014 Rules to cover both counterclaims and cross-claims against co-respondents has caused confusion. Using both terms in the new Rules here has added length but added hugely to logic. We also see some more clarity in the division of roles between parties, authorised representatives, Registrar, Court, Tribunal and tribunal secretary and more guidance in areas such as correspondence between any and all of those participants.

  1. The challenge of addressing Gerald Metals

It had been widely anticipated that the revised Rules would address the 2016 case of Gerald Metals SA v The Trustees of the Timis Trust and others [2016] EWHC 2327 (Ch). Gerald Metals was about the availability of court-ordered interim relief in support of arbitration. The English court found that the test of “urgency” under s44(3) of the English Arbitration Act 1996 (the “Act”) would not be satisfied unless:

  • the matter was so urgent that there was insufficient time to form an expedited tribunal or appoint an emergency arbitrator; or
  • an expedited tribunal or emergency arbitrator could not exercise the necessary powers.

Leggatt J held that if an expedited tribunal could be constituted or an emergency arbitrator appointed within the relevant timeframe, and the expedited tribunal or emergency arbitrator could practically exercise the necessary powers, the test of “urgency” under s 44(5) of the Act will not be satisfied and the court will not have power to grant urgent relief.

Whether and how to deal with this case in the Rules has been much discussed at Tylney Hall and, no doubt, by the LCIA drafting committee. Article 9B of the Rules clearly states that the availability of an emergency arbitrator shall not prejudice any party’s right to apply to a state court or other legal authority for any interim or conservatory measures before the formation of the Arbitral Tribunal; and it shall not be treated as an alternative to or substitute for the exercise of such right.

Leggatt J dealt with this provision in his judgment. He found that, while the Rules make it clear that Article 9B is not intended to prevent a party from exercising a right to apply to the court (for example under section 44 of the Arbitration Act),  this does not prevent the powers of the court from being limited as a result of the existence of Article 9B.

The LCIA has taken a light touch in its changes to the Rules to address the case. In particular, it has made some small alterations to old Article 9.12 (now article 9.13) and to Article 25.3 (relating to interim relief before an arbitral tribunal rather than before an emergency arbitrator specifically) to simplify the language and to confirm the availability of court-ordered interim relief in certain circumstances. However, the relatively limited changes demonstrate the challenge this case poses for any arbitral institution. The institution can attempt more clearly to signpost how its rules should be interpreted, but it remains up to the court to decide how it applies or construes the Act alongside those rules. S44 provides for the court’s discretion in this area – not for the institution. While the changes are welcome, their impact remains uncertain and will depend entirely on how the court approaches the interaction between the new LCIA Rules and the Act on this point.

Comment

The LCIA 2020 rule change will be widely welcomed by the arbitral community. This is a modern set of rules which has sought to go back to arbitration at its roots and retain ultimate flexibility. We see confirmation that a full arsenal of procedural techniques fall within Tribunal discretion, from limiting pleadings and evidence, to Early Determination and the recognition that a Tribunal may order the use of remote hearing technology. The new provisions of consolidation introduce far wider scope, but without adding levels of complexity, while the introduction of a Composite Request is a practical response to user need and demand. The Rules have refreshed and modernised their approach but have retained their essential LCIA character. It just remains to be seen whether the LCIA’s approach to Gerald Metals will be successful.

Fore more information, please contact Andrew Cannon, Partner, Vanessa Naish, Professional Support Consultant, or your usual Herbert Smith Freehills contact.

Andrew Cannon
Andrew Cannon
Partner
+44 20 7466 2852

Vanessa Naish
Vanessa Naish
Professional Support Consultant
+44 20 7466 2112

English court sets aside tribunal’s award on jurisdiction, finding that the LCIA Rules do not permit a party to bring claims under multiple contracts in a single arbitration

In its recent decision in the case of A v B [2017] EWHC 3417 (Comm) (available here), the English Commercial Court (the “Court“) set aside the tribunal’s award upholding its own jurisdiction, on the grounds that the LCIA Rules 2014 do not permit a party to commence a single arbitration in respect of disputes under multiple contracts.  As a result, the Claimant’s Request for Arbitration was invalid. The Court also held (contrary to the tribunal’s award) that the Respondent had not lost its right to object to the tribunal’s jurisdiction by failing to raise its jurisdictional challenge until shortly before filing its Statement of Defence.

This is a rare instance of the English court setting aside a tribunal’s award and a significant reminder to parties to transactions involving multiple related contracts to consider efficient resolution of disputes at the contract drafting stage. Continue reading

SIAC issues proposal for consolidation of arbitral proceedings between institutions

On 19 December 2017, the Singapore International Arbitration Centre (SIAC) released a proposal on cross-institution cooperation and consolidation of arbitral proceedings conducted under different arbitral rules (the SIAC Proposal).

SIAC has invited comments on its Proposal by 31 January 2018. The memorandum enclosing the SIAC Proposal can be accessed here.

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The new LCIA rules

The London Court of International Arbitration (“LCIA”) Court has unveiled its new arbitration rules (the “2014 Rules”), which come into force on 1 October 2014 and are to apply to any arbitration commenced after that date.  

Overview of the changes

The LCIA has retained the distinctive character of the institution and rules, whilst modernising its provisions to meet user demand.

Like the revisions to the UNCITRAL Arbitration Rules (in 2010), ICC Arbitration Rules (in 2012) and HKIAC Administered Arbitration Rules (in 2013), the most substantial changes to the current LCIA Rules are those intended to make the LCIA arbitration process less costly and more efficient, for example including an emergency arbitrator provision, whilst other revisions are designed to improve the handling of complex multi-party disputes. A key innovation is an annex of general guidelines on the conduct of party representatives and a power for the arbitral tribunal to impose sanctions for breach of those guidelines. There have been some changes to terminology to modernise the rules (for example, the “chairman” of the arbitral tribunal is now called the “presiding arbitrator”).

Further details of the key changes are provided below. We will shortly hold a webinar discussing the implications of the changes to the LCIA Rules on drafting of arbitration clauses.

For further information, please contact Paula Hodges QC, Partner, Vanessa Naish, Professional Support Lawyer, Hannah Ambrose, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.

Paula Hodges QC
Paula Hodges QC
Partner, head of global arbitration practice
+44 20 7466 2027
Hannah Ambrose
Hannah Ambrose
Professional Support Lawyer
+44 20 7466 7585
Vanessa Naish
Vanessa Naish
Professional Support Lawyer
+44 20 7466 2112

 

 

 

 

 

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