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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Hong Kong’s funding code published

As noted in our earlier post, Hong Kong published its long-awaited Code of Practice for Third Party Funding of Arbitration on 7 December 2018.

Publication of the Code has removed the final hurdle to third party funding of Hong Kong arbitrations. The law that allows such funding will come into effect on 1 February 2019, via sections 98K – 98O of the Arbitration Ordinance (Cap. 609). These sections abolish the criminal and tortious offences of champerty and maintenance in relation to third party funding of arbitration, as well as arbitration-related court and mediation proceedings. For more detail on the law, click here.

The Code was published by Hong Kong’s Secretary for Justice, Teresa Cheng SC, in her capacity as the “authorized body” under Part 10A Arbitration Ordinance. Compliance with the Code will be overseen by an “advisory body”, consisting of three senior Hong Kong lawyers, whose powers derive from s.98X Arbitration Ordinance.

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Security for costs granted by English Court in investment treaty award challenge in which claimants are receiving third-party funding

In its recent judgment in Progas Energy Limited and ors v Pakistan [2018], the English High Court (the Court) granted Pakistan’s request for security for their costs in defending a challenge to an investment treaty award. The Court declined Pakistan’s application for security for its unpaid costs in the arbitration awarded to them by the tribunal. The case is of particular interest because the Court considered the relevance to the applications of the fact that the Claimants were funded by a third-party funder.

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ICSID tribunal rules that it is neither necessary nor urgent to grant security for costs from a claimant with the benefit of third-party funding

An ICSID tribunal has rejected a State's application for security for costs in circumstances in which the other party had third-party funding in the form of ATE insurance which specifically provided for cover of the State's costs.

Italy's request for security for costs

The application formed part of arbitral proceedings brought by Eskosol S.p.A. in liquidazione ("Eskosol") under the Energy Charter Treaty and the ICSID Convention against the Italian Republic ("Italy"). Italy sought security for costs in support of its ICSID Arbitration Rule 41(5) application for summary dismissal of Eskosol's claims on the basis that they are manifestly without legal merit. 

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Hong Kong allows third party funding for arbitration and mediation

Hong Kong's Legislative Council today passed a law allowing third parties to fund arbitrations seated in the territory, as well as work done in Hong Kong for arbitrations seated elsewhere, and for mediations. This development has been long anticipated, and will be widely welcomed by Hong Kong's thriving arbitration community, which views it as essential to Hong Kong maintaining its status as one of the world's most popular arbitral seats.

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UPDATE: Singapore passes law to legalise third-party funding of international arbitration and related proceedings

On 10 January 2017 the Singapore Parliament passed amendments to the Civil Law Act legalising third-party funding in arbitration and related proceedings in Singapore (the "Amendments"). Following a year of positive developments for arbitration in Singapore, this latest development will open up a significant new market for funders worldwide, further asserts Singapore's eminence as an arbitral centre and paves the way for further and deeper reform.

Overview

We previously reported on the introduction of the Civil Law (Amendment) Bill in our blog posts of July 2016 and November 2016. The key features of the Bill were to:

  • abolish the common law torts of champerty and maintenance (which currently restrict the use of third party funding);
  • confirm that third party funding is not contrary to public policy or illegal, if used by eligible parties in prescribed categories;
  • confirm that the prescribed categories of proceedings in which third party funding can be used include international arbitration proceedings and court litigation and mediation arising out of international arbitration; and
  • prescribe the qualifications that a third party funder must satisfy in order to fund an arbitration, including a proviso that the funding of dispute resolution proceedings must be the "principal business" of the third party funder.

While the legislation makes the broad legal amendments necessary to facilitate third-party funding, the finer details – such as the precise scope of the permitted arrangements and accompanying regulatory changes – will be dealt with by subsidiary legislation and regulations by the Minister of Law.

Interestingly, early reports of Ministers' comments on the legislation, indicate that the Amendments – currently limited to international arbitration and related proceedings – are very much a first step toward broader reform. Singapore's Senior Minister of State for Law, Ms Indranee Rajah, reportedly stated that "We want to have [third-party funding] tested in a limited sphere … If the framework works well, as and when appropriate, the prescribed categories of proceedings may be expanded". This will be of significant interest to funders and practitioners alike, as it clearly positions Singapore as a growth market.

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English court upholds arbitrator’s decision to award claimant the costs of third party funding

The English court has refused a challenge under s68(2)(b) of the Arbitration Act 1996 (the Act) and held that a sole arbitrator did not exceed his powers in including the costs of third party funding within a costs award (Essar Oilfields Services Limited v Norscot Rig Management PVT Limited [2016] EWHC 2361 (Comm)). The principle of recovering funding costs has caused significant controversy since it first came to light on 15 September 2016. The transcript of the judgment, and therefore the court's reasoning, was released on 30 September 2016.

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Singapore arbitration update: Third Party Funding and New SIAC Rules 2016

This week has seen two major developments in Singapore arbitration. First, Singapore's Ministry of Law has published draft legislation to legalise and regulate third party funding for arbitration (and arbitration-related litigation and mediation) in Singapore. Second, the Singapore International Arbitration Centre (SIAC) confirmed the release of the sixth edition of its Rules: the SIAC Rules 2016, to come into effect on 1 August 2016.

Below we explain briefly the effect of the proposed legislation and the SIAC Rules 2016.  More in-depth analysis will follow.

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