Drafting ICC arbitration agreements

Publication November 2013


Introduction

In States, State Entities and ICC Arbitration, the ICC suggests that certain provisions be considered for inclusion in ICC arbitration agreements in contracts where one party is a state or state entity. We examine that idea.

When drafting arbitration clauses, parties should keep in mind the type of dispute that may arise from the contract for which the clause is being drafted. Omitting to include a provision or agreeing to a standard ICC clause could prove costly.

Number of arbitrators

While the standard arbitration clause recommended by the ICC provides for settlement of disputes by “one or more arbitrators”, the ICC recommends that this be modified in agreements with states and state entities to provide for a three-member tribunal in all circumstances.

This recommendation is based on ICC statistics confirming that states and state entities prefer three-member tribunals. According to the ICC, 85 per cent of cases involving states and 86 per cent of those involving state entities were referred to three-member tribunals, compared to only 57.5 per cent of ICC cases in general.

The recommendation also follows the usual practice of the ICC Court, which submits disputes involving states or state entities to three-member tribunals. Exceptions to this practice may occur when the state or state entity specifically requests a sole arbitrator.

In addition, under articles 12(4) and 12(5) of the 2012 ICC Rules, and in the absence of an agreement by the parties to the contrary, in three-member tribunals each party nominates one arbitrator for confirmation by the ICC Court. The third arbitrator, who is to act as president, is appointed by the ICC Court unless the parties have agreed on another procedure for appointing a president, in which case the nomination will be subject to confirmation by the ICC Court.

If states or state entities wish the party-nominated arbitrators to nominate the president of a three-member tribunal, the recommendation is to add the following clause in the underlying agreement (as appropriate):

The third arbitrator, who shall act as president of the arbitral tribunal, shall be jointly nominated by [the other two arbitrators/the parties] within [30] days of the [confirmation/appointment] of the second arbitrator. If the president of the arbitral tribunal is not nominated within this time period, the Court shall appoint such arbitrator.

Time limit to appoint an arbitrator

Article 5(1) of the 2012 ICC Rules requires the respondent, as part of an Answer, to nominate an arbitrator within 30 days from the receipt of the claimant’s Request for Arbitration. Should the parties wish to allow for extra time to do so, the recommendation is to modify the standard ICC clause as to additionally provide that, “The time limit set forth in Article 5(1) of the Rules shall be [60] days”.

Such an extended time limit may be particularly desirable to state parties. States and state entities more often than not appear as respondents in arbitral proceedings, and in any arbitration, be it commercial or investor-state, the claimant is the party dictating the procedural timetable. By the time the Request for Arbitration is filed, the claimant may have already instructed lawyers, gathered supporting documents and pre-selected witnesses of fact and experts, selected an arbitrator – necessary steps which can take weeks, if not months, to complete.

In addition, there may be a need to accommodate time-intensive obligations placed by domestic legislation on government departments to conduct a tender process to select counsel, whose advice on selection of arbitrators may be required.

Emergency arbitrator provisions

Unless the parties opt out of the emergency arbitrator provisions (article 29 of the 2012 ICC Rules, under which urgent relief can be granted by an emergency arbitrator prior to the constitution of the arbitral tribunal), these provisions will apply automatically if:

  • the arbitration agreement was concluded before January 1, 2012
  • the parties have not agreed to another pre-arbitral procedure that provides for the granting of conservatory, interim or similar measures.

Accordingly, where states and state entities wish to avoid the application of the emergency arbitrator provisions to their disputes, it is recommended that the parties specify that “the Emergency Arbitrator Provisions shall not apply”.

It should be noted that the 2012 ICC Rules confirm that the emergency arbitrator provisions do not apply to investment treaty arbitrations.

Confidentiality

ICC arbitrations are not automatically confidential unless the laws of the seat of the arbitration so provide; for states or state entities and their counterparties under private commercial contracts seeking to protect the confidentiality of the ICC proceedings, it is recommended that the following be added to the standard ICC clause:

The parties agree to keep confidential the existence of the arbitration, the arbitral proceedings, the submissions made by the parties and the decisions made by the arbitral tribunal, including its awards, except as required by the applicable law and to the extent not already in the public domain.

Article 22(3) of the 2012 ICC Rules gives tribunals the power to make orders concerning the confidentiality of the arbitration proceedings and to take measures for protecting trade secrets and confidential information upon the request of any party. However, it should not be presumed that tribunals will automatically exercise their discretionary powers in situations where the underlying arbitration agreement does not expressly deal with confidentiality issues.

The confidentiality provisions suggested above would not necessarily prevent an investor making the dispute public prior to filing a Request for Arbitration. Parties should therefore consider including language providing for confidentiality from the outset of a dispute.

Immunity from enforcement

Article 34(6) of the 2012 ICC Rules provides that:

Every award shall be binding on the parties. By submitting the dispute to arbitration under the Rules, the parties undertake to carry out an award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.

Previously, some national courts have interpreted this provision as a waiver of a state’s immunity from enforcement of arbitral awards as well as from suit. States may therefore wish to include wording concerning immunity from enforcement in their arbitration clause.

Pre-arbitration ADR procedure

The ICC Commission on Arbitration suggests that states and state entities and their private contractual counterparties consider submitting the dispute to alternative dispute resolution prior to arbitration, by providing an obligation to do so in their arbitration clause, as follows:

In the event of any dispute arising out of or in connection with the present contract, the parties agree to submit the matter to settlement proceedings under the ICC ADR Rules [Amicable Dispute Resolution Rules prepared by the ICC to facilitate negotiated settlements with the assistance of an independent neutral]. If the dispute has not been settled pursuant to the said Rules within 45 days following the filing of a Request for ADR or within such other period as the parties may agree in writing, such dispute shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules of Arbitration.

Conclusion

Parties are largely free to add to and/or modify existing ICC arbitration provisions. When drafting arbitration clauses, parties should always keep in mind the type of potential dispute that may arise from the contract for which the clause is being drafted. Omitting to include a provision or agreeing to a standard ICC provision could prove costly.

Any arbitration clause should first and foremost take into account the needs of the parties, the particular circumstances of their relationship, the potential nature of future disputes and all applicable laws.


Footnotes

1 Authors: Deborah Ruff is a partner and Charles Golsong is an associate in the London office of Norton Rose Fulbright


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