The International Centre for Dispute Resolution (ICDR), the international division of the American Arbitration Association (AAA), and the Australian Centre for International Commercial Arbitration (ACICA) have each recently released updated rules of arbitration. The updated rules are aimed at increasing the efficiency and effectiveness of international arbitration and modernising the institutional response to issues faced by parties in arbitration, including those highlighted by the COVID-19 pandemic. This article is a practical discussion about the key changes in the amended rules and what practitioners need to be aware of when drafting ICDR or ACICA arbitration agreements or participating in arbitrations administered by these institutions.
The new ICDR International Dispute Resolution Procedures (including Mediation and Arbitration Rules) came into effect on March 1, 2021 (2021 ICDR Rules). For parties that have agreed to arbitrate disputes under the ICDR rules, or that have provided for arbitration of an international dispute by either the ICDR or the AAA without designating particular rules, the 2021 ICDR Rules apply to any arbitration commenced on or after March 1, 2021 (Article 1(1)).
Under the 2021 ICDR Rules, the rule on joinder has been expanded so that an additional party can now be joined not only in circumstances where all parties agree but also where, after constitution of the arbitral tribunal, (a) the tribunal determines that joinder is appropriate, and (b) the additional party consents (Article 8(1)). The previous version of the rules (effective June 1, 2014) permitted joinder only where all parties agree.
The power to consolidate arbitrations also has been expanded so that it includes not only situations where arbitrations under more than one arbitration agreement involve the “same parties” but also where they involve “related parties” (Article 9(1)). Additionally, consolidation under the 2021 ICDR Rules is available not only at the request of a party but also on the ICDR’s own initiative.
These changes provide increased flexibility for tribunals to deal with the joinder of third parties and for the ICDR to efficiently manage multiple related arbitrations commenced under separate arbitration agreements.
Whereas the previous ICDR rules were silent on the issue of third-party funding, the 2021 ICDR Rules empower a tribunal to require parties to identify any third party that has agreed to pay or contribute to the cost of a party’s participation in the arbitration and the nature of that undertaking (Article 14(7)(a)). Likewise, a tribunal will have the power to require parties to identify any third party that has an economic interest in the outcome and the nature of that interest (Article 14(7)(b)). These new rules are intended to protect the integrity of arbitration proceedings by safeguarding the impartiality and independence of arbitrators where insurance or third-party funding arrangements apply.
The 2021 ICDR Rules clarify how decisions are made on challenges to the appointment or continuing service of an arbitrator, as well as other administrative determinations such as deciding disputes regarding the number of arbitrators and making an initial determination as to the place of arbitration (Article 5). This new article codifies the ICDR’s existing practice of involving the International Administrative Review Council, which is comprised of current and former ICDR executives, in such determinations but provides transparency around the Council’s role in decision-making.
Use of technology
In the wake of recent and ongoing restrictions imposed during the COVID-19 pandemic, the 2021 ICDR Rules specifically address the use of video, audio, and other electronic means for conducting preliminary matters and final hearings (Articles 22, 26). Tribunals are given broad discretion to conduct arbitration proceedings in whatever manner is appropriate, subject to the guiding principle that the parties are treated equally and each party has the right to be heard and is given a fair opportunity to present its case (Article 22(1)). Significantly, tribunals can decide, after allowing the parties to comment (but without requiring the parties’ agreement), that a hearing should be held virtually where doing so would be appropriate and would not compromise the rights of any party to a fair process (Article 26(2)). These provisions will empower tribunals and parties to continue to take advantage of the efficiencies afforded by video and audio hearings in appropriate circumstances, even after pandemic restrictions ease.
Tribunals are also now required to discuss with parties at the procedural hearing issues of cybersecurity, privacy, and data protection in order to ensure an appropriate level of security and compliance (Article 22(3)).
There has been some uncertainty recently regarding whether, as a matter of U.S. law, the reference in a contract to a set of arbitration rules constitutes a delegation to the tribunal of the issue of arbitrability. In particular, the American Law Institute’s most recent restatement of U.S. law on international arbitration raises questions about whether such a reference satisfies the test of “clear and unmistakable evidence” of an intention to delegate as set down by the U.S. Supreme Court in First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995).
While the ICDR views the Restatement’s position as contrary to the weight of U.S. case law, the 2021 ICDR Rules address this issue by providing expressly that a tribunal has the power to rule on any objections with respect to arbitrability “without any need to refer such matters first to a court” (Article 21(1)). Although the former ICDR Rules included the competence-competence principle, there was no explicit mention that court involvement is unnecessary.
Although failure by a party to pay fees or deposits still results in the withdrawal of that party’s claim (or counterclaim), the 2021 ICDR Rules clarify that in no event shall a non-paying party be precluded from defending itself against another party’s claim (or counterclaim) (Article 39(3)). Additionally, a party that pays the deposit for a non-paying party will be able to request that the tribunal render a separate award for recovery of the deposit plus interest (Article 39(4)).
The new ACICA Arbitration Rules incorporating Emergency Arbitrator Provisions came into effect on April 1, 2021 (2021 ACICA Rules). Where parties have agreed in writing to refer disputes to arbitration under the ACICA rules, the new rules apply to any arbitration commenced from April 1, 2021 unless the parties have specifically agreed to apply a prior version of the rules (Article 2.4).
However, unless otherwise agreed by the parties, the amended provisions dealing with consolidation and joinder (Articles 16, 17) and the new provisions dealing with single arbitration under multiple contracts (Article 18) will only apply if the arbitration agreement was concluded after April 1, 2021. This means existing ACICA arbitration agreements do not automatically incorporate the new provisions relating to these issues (Article 2.5).
The rule on joinder in the 2021 ACICA Rules has been expanded so that an additional party can now be joined by the tribunal in circumstances where all parties, including the additional party, expressly agree even if the additional party is not bound by the same arbitration agreement (Article 17.1(b)). However, if a request for joinder is made before the tribunal is constituted, there is no change to the rule that ACICA may only join an additional party that is prima facie bound by the same arbitration agreement as the existing parties (Article 17.8). The 2021 ACICA Rules expressly require both the tribunal and ACICA to give all parties, including the additional party, an opportunity to be heard before exercising the power of joinder (Articles 17.1, 17.8).
The rule on consolidation also has been expanded to remove the requirement, in the case of arbitrations under more than one arbitration agreement, that the arbitrations are between the “same parties” (Article 16.1). In other words, where arbitrations arise under multiple arbitration agreements, ACICA can consolidate if (a) a common question of law or fact arises, (b) the rights to relief are in respect of the same transaction, and (c) the arbitration agreements are compatible – regardless of whether the arbitrations are between the same parties. However, ACICA can only exercise its power of consolidation after it has consulted with the parties and with any confirmed or appointed arbitrators (Article 16.1). The 2021 ACICA Rules provide also that a party wishing to consolidate must submit a request for consolidation including a number of specified matters (Articles 16.2, 16.3).
For the first time, the 2021 ACICA Rules expressly permit claims arising out of multiple contracts to be made in a single arbitration (Article 18). Claimants can file a single notice of arbitration for claims arising out of multiple contracts, which will be deemed to commence multiple arbitrations alongside an application to consolidate (Article 18.2). A single arbitration will be permitted to proceed where ACICA decides that any one of the grounds for consolidation is met (Article 18.1). Where ACICA rejects an application to consolidate, the claimant must file separate notices of arbitration in respect of all proceedings that have not been consolidated (Article 18.3).
The 2021 ACICA Rules also allow a tribunal, after consulting with the parties, to conduct two or more arbitrations at the same time, or one immediately after another, or suspend any of those arbitrations until after the determination of any other of them where the same tribunal is constituted in each arbitration and a common question of law or fact arises in all the arbitrations (Article 19). This new provision empowers a tribunal to effectively case manage multiple related arbitrations even where those arbitrations are not formally consolidated or do not meet the criteria for consolidation.
The 2021 ACICA Rules introduce new provisions dealing with the disclosure of third-party funding arrangements (Article 54). The Rules require parties to disclose the existence of third-party funding and the identity of the funder at the time of submitting a Notice of Arbitration or Answer or as soon as practicable after third-party funding is provided or a third-party funding arrangement is entered into (Article 54.2). Further, there is a continuing obligation to disclose any changes to the arrangements. Additionally, a tribunal now has the power to order that a party disclose the existence and identity of any funder (Article 54.3).
The 2021 ACICA Rules clarify that the powers of a tribunal include the power to make an award granting early dismissal or termination of any claim, defence, or counterclaim (Article 25.7). This amendment is made in the context of recent debate about the extent to which different arbitral institutions’ rules permit the early dismissal of claims or defences that are clearly unmeritorious. For example, whereas the Singapore International Arbitration Centre rules effective August 1, 2016 (SIAC Rules) include a dedicated procedure for early dismissal of claims or defences (SIAC Rule 39), the International Chamber of Commerce rules effective January 1, 2021 (ICC Rules) provide more generally that a tribunal must make every effort to conduct the arbitration in an “expeditious” manner (ICC Article 22(1)).
Arbitrator nomination and appointment
The 2021 ACICA Rules are amended to stipulate that, in the case of both sole arbitrators and co-arbitrators on a three-member panel, the parties’ preferred candidates are nominated for confirmation by ACICA rather than appointed directly to the tribunal (Articles 12, 13). ACICA’s Secretary-General has the power to confirm a nomination, including the nomination of a Chairperson by two arbitrators, if either (a) the nominee has not disclosed circumstances likely to give rise to justifiable doubts as to availability, independence, or impartiality, or (b) the nominee has disclosed such circumstances but no party has raised an objection (Article 14.1). Alternatively, if the Secretary-General declines to exercise the power to confirm, the nomination will be submitted to ACICA itself (Article 14.3).
Use of technology
In light of COVID-19 disruptions, virtual hearings, both preliminary and final, are expressly permitted under the 2021 ACICA Rules (Articles 25.3, 25.4, 25.5, 35.5). Hearings attended virtually are deemed to have been held at the seat, unless otherwise agreed by the parties or directed by the tribunal (Article 27.2). The tribunal is afforded full discretion to establish the conduct of a hearing, including its form, in consultation with the parties (but without requiring their agreement) (Article 35.5).
The 2021 ACICA Rules also introduce an express power for the tribunal, in consultation with the parties and where appropriate ACICA, to adopt any measure to protect information shared in the arbitration and to ensure that any personal data is processed and/or stored in light of any applicable law (Article 26.6).
Time limit for award
The 2021 ACICIA Rules introduce a time limit for the tribunal to render a final award. Unless a shorter period is specified by law or the parties otherwise agree, the final award must be made no later than 9 months from the date the file was transmitted to the tribunal or no later than 3 months from the date the proceedings close, whichever is earlier (Article 39.3). ACICA may extend this time upon a reasoned request from the tribunal or if it otherwise deems it necessary.
No arb-med provisions
The 2021 ACICA Rules do not include specific provisions for the conduct of “arb-med”, which is a hybrid process whereby an arbitrator assumes the role of mediator during the course of arbitration. This is despite specific arb-med provisions appearing in the consultation draft rules published last year. Instead, new provisions in the 2021 ACICA Rules require the tribunal to raise for discussion with the parties the possibility of using mediation (or other ADR) (Article 55.1), and empower the tribunal to suspend the tribunal to allow for mediation (or other ADR) (Article 55.2).
Recent amendments to the rules of both the ICDR and ACICA grapple with the challenges posed by multi-party disputes, management of related disputes arising under separate arbitration agreements, potential risks to arbitrator impartiality and independence raised by undisclosed third-party funding arrangements, and the increasing use of technology in arbitration in circumstances of increased data regulation and cybersecurity risk. The amendments are aimed at providing users with modern rules that facilitate increasing efficiency and transparency in the arbitration process, and offer more effective mechanisms for resolving complex disputes.