Australia: Party autonomy and the new regime of institutional arbitration

Last Updated: 12 February 2019
Article by Bronwyn Lincoln

In recent years, there has been much criticism of the cost and extended timetables of international commercial arbitration.

International arbitral institutions have responded in a variety of ways. Common amongst these are expedited arbitration rules, increased scrutiny of awards and accountability of arbitrators and tribunals and, increasingly, imposts on arbitrators who do not publish awards within specified time periods.

The domestic courts of many jurisdictions have also made a contribution – with decisive judgments in aid of arbitration, including enforcement both of arbitration agreements and of foreign arbitral awards.

Whilst these developments have been welcomed by the arbitration community, the publication of the updated ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (ICC Notes) on 1 January 2019 invites further reflection.

The arbitral process, when it results from a private arbitration agreement between two or more parties, 'belongs' to the parties. Arbitration has long been recognised as providing flexibility to accommodate the parties' specific needs in resolving any particular dispute and, when the arbitration agreement or clause is carefully drafted, providing a private and confidential means of resolving a commercial dispute.

This is not inconsistent with the powers of the arbitrator or tribunal appointed to determine the dispute – those powers will always be subject to the agreement of the parties. And the parties are free, at the time they enter into their arbitration agreement, to impose fetters on the arbitrator or tribunal and to set out in detail how the arbitration proceedings will be conducted. The fact that most parties do not do so does not change the position in theory.

A consequence of the publication of the ICC Notes is that parties choosing arbitration under the ICC Rules will now also have their arbitration administered in accordance with the ICC Notes. Section 1 of the ICC Notes (sub-paragraph 2) provides that '[u]nless otherwise indicated, this Note applies to all ICC arbitrations regardless of the version of the Rules pursuant to which they are conducted'.

This article contains a discussion on key aspects of the ICC Notes.

Arbitrator impartiality and independence

To the extent that the ICC Notes provide guidance as to the availability, impartiality and independence of arbitrators, the ICC Notes are beneficial to parties.

Part III (A) of the ICC Notes emphasises the continuing obligation of an arbitrator to disclose circumstances which might call into question independence or impartiality and provides examples of matters which constitute potential circumstances of that kind. Specifically, paragraph 24 of the ICC Notes refers to 'relationship [of an arbitrator or prospective arbitrator] with non-parties having an interest in the outcome of the arbitration'. The Secretariat offers to assist arbitrators by identifying 'relevant entities'.

Part III (A) also clarifies the duty imposed on arbitrators 'to devote to the arbitration the time necessary to conduct the proceedings as diligently, efficiently and expeditiously as possible'. The unavailability of arbitrators or tribunal members in the past has caused significant delay to the determination of disputes. The scope of party autonomy may not extend to the replacement of an arbitrator due to tardiness or unavailability. The ICC Notes make it clear that it is not just desirable that the arbitrator or tribunal member have appropriate availability, but it is incumbent on him or her to do so.

One wonders whether, as a result of the ICC Notes and the increasing scrutiny on arbitrators, an arbitrator might seek to voluntarily withdraw from a dispute when a scheduling conflict arises (and if so, how the parties and the institution might deal with such a request).

Publication of information about the arbitration

More controversially, Part III (C) of the Notes covers the publication of information regarding arbitral tribunals. The ICC Notes emphasise transparency, stating that '[t]ransparency provides greater confidence in the arbitration process, and helps protect arbitration against inaccurate or ill-informed criticism'. Pursuant to the ICC Notes, the ICC Court will (for arbitrations commenced from 1 July 2019, in addition to information about the arbitrators) publish the names of counsel in the arbitration and the sector of industry involved. This information will ordinarily remain on the ICC website after the arbitration concludes.

ICC Awards made from 1 January 2019 may also be published. Publication will not occur until at least two years after the date of notification of the final award and parties have the right to object to the publication of the award or require redaction or an anonymised version. Further, '[i]n case of a confidentiality agreement covering certain aspects of the arbitration or of the award, publication will be subject to the parties' specific consent'. This caveat is important: one of the key reasons parties have traditionally chosen arbitration is to keep the dispute confidential. If a prospective arbitration party does not want a final ICC award published (whether or not it is redacted or anonymised), that party should consider including in its arbitration agreement a categorical statement to that effect.

However, whilst publication of a final award may not be consistent with the intent of the parties involved in the arbitration, others who are looking to appoint an arbitrator would likely welcome the disclosure. The Queen Mary University of London 2018 International Arbitration Survey reported that '[r]espondents would like to have access to arbitrators' previous awards, know more about their approach to procedural and substantive issues and have a clear picture of their availability to take on new cases'. The procedure provided for in the ICC Rules will meet this requirement.

'Manifestly Unmeritorious Claims or Defences'

The ICC Rules do not have a specific provision for early dismissal of claims (akin to a summary judgment in the domestic courts). In this regard, the ICC Rules differ from rules of other leading institutions such as the Singapore International Arbitration Centre and the Stockholm Chamber of Commerce.

However, Part VI (C) of the ICC Notes is entitled 'Expeditious Determination of Manifestly Unmeritorious Claims or Defences'. The opening paragraph states that this section 'includes guidance as to how an application for the expeditious determination of manifestly unmeritorious claims or defences may be addressed within the broad scope of Article 22 (which obliges the tribunal and the parties to make every effort to conduct the arbitration in an expeditious and cost-effective manner)'. The effect of the ICC Notes is to confirm the availability within the ICC Rules for what is effectively an application for summary dismissal.

Paragraphs 75 to 79 of the ICC Notes set out the process which is available in any ICC arbitration after 1 January 2019. An application may be made to a tribunal in accordance with the ICC Notes 'on grounds that such claims or defences are manifestly devoid of merit or fall manifestly outside the arbitral tribunal's jurisdiction' (paragraph 75). The application must be made promptly (paragraph 75), but '[t]he arbitral tribunal has full discretion to decide whether to allow the application to proceed' (paragraph 76). The tribunal has an obligation to decide any application 'as promptly as possible and may state the reasons for its decision in as concise a fashion as possible' (paragraph 78). The decision can be made either as an award or an order (paragraph 78); Court scrutiny is only available for an award and will be undertaken 'in principle within one week of receipt by the Secretariat' (paragraph 79).

It is not unlikely that a party negotiating an arbitration clause or agreement prior to the publication of the ICC Notes chose to use an institution other than the ICC to avoid a 'summary dismissal' process. And yet, without amending the ICC Rules, the ICC Court has now incorporated into an arbitration agreement containing the ICC Rules, just that procedure. Whilst guidance notes for parties are useful and increasingly common, the question must be asked whether a party choosing the rules of a particular international arbitral institution intends to sign up for additions and amendments to those rules which might come into existence pursuant to instruments such as the ICC Notes.

Data protection

Part VI (D) of the ICC Notes discusses data protection and, specifically, the General Data Protection Regulation of the European Union and the European Economic Area (GDPR).

In this area, the ICC Notes also amend the parties' arbitration agreement so as to ensure compliance with the GDPR and impose obligations on any persons engaged in the arbitration. The obligations come into force when the individual 'accept[s] to participate in an ICC arbitration' (paragraph 82). This includes parties, their representatives, the arbitrators, the tribunal secretary and lay and expert witnesses.

Parties have an obligation, amongst other things (paragraph 83), to 'ensure that their representatives, as well as their witnesses, party-appointed experts and any other individual appearing on their behalf or in their interest in the arbitration, are aware and accept that their personal data may have to be collected, transferred, published and archived for purposes of the arbitration'. Tribunal members also have an obligation '[a]t an appropriate time' to remind parties of the application of the GDPR (paragraph 84).

The ICC Notes are also prescriptive as to the handling and retention of personal data, including at the end of the arbitration proceedings (paragraphs 85 to 91). Data protection is without doubt an important issue, but the ICC Notes do not offer any suggestion as to how a party or a tribunal might react if a witness, advised of the data protection requirements, refuses to participate in the arbitration because to do so would constitute an accession to the collection, transference and archival of personal data.

The ICC Notes also do not address the position of a witness ordered by subpoena to appear at the arbitration and the question of whether that witness will be deemed to have acceded to use of his or her personal data by complying with the court order.

Time limits and expedition

The ICC Notes reinforce the time limits contained in the ICC Rules (Part VI (E)).

They also prescribe expedition. Paragraph 93 provides that:

'By agreeing to the Rules, the parties agree that Article 30 of the Rules and Appendix VI (collectively, the "Expedited Procedure Provisions") shall take precedence over any contrary terms of the arbitration agreement.'

Article 30 is consistent with paragraph 93. However, whereas under Article 30, the Expedited Procedure Rules (as they are called in the ICC Rules) apply where the amount in dispute does not exclude US$2,000,000 or the parties so agree, the ICC Notes (paragraph 94) mandate arbitration under the Expedited Procedure Provisions where the arbitration agreement was concluded after 1 March 2017, the amount in dispute does not exceed US$2,000,000 1 or:

'the parties have not opted out of the Expedited Procedure Provisions in the arbitration agreement or any time thereafter. Agreements to opt out should express in specific terms the parties' intention not to subject themselves to the Expedited Procedure Provisions. It is not sufficient, to that effect, that the parties have referred in the arbitration agreement to a three-member arbitral tribunal, or have adopted time limits that depart from those provided by the Expedited Procedure Provisions. It is recommended that parties wishing to opt out of the Expedited Procedure Provisions use the standard clauses contained in the Rules.'

The effect of the ICC Notes may therefore again effect an amendment to existing an arbitration agreement without any step required of the parties to that agreement.

It is important to note that the ICC Notes give the Court the power at any time (either on request of a party or on its own motion) to decide that the Expedited Procedure Provisions no longer apply (paragraph 96).

The arbitral tribunal

The decision by parties entering an arbitration agreement as to the constitution of the tribunal, including whether their disputes should be determined by a sole arbitrator or a tribunal of three is often informed by strategic concerns. Factors which might be taken into account include:

  • the complexity of the dispute (and, in particular, whether there is likely to be a technical issue);
  • the governing law of the underlying contract;
  • the level of trust between or amongst the parties;
  • cultural diversity; and
  • the likely impact of the constitution of the tribunal on time and cost.

Irrespective of the outcome of the decision making process, it is rare that parties who have agreed to a specific constitution would vary that constitution when a dispute arises.

But that was the old world.

The ICC Notes confirm the Court's power, when the Expedited Procedure Provisions apply, to appoint a sole arbitrator notwithstanding that the parties may have chosen a tribunal of three. Absent a contrary agreement of the parties, this will of course only apply where the quantum of the dispute does not exceed US$2,000,000. The difficulty with this power and the new 'opt out' procedure is that disputes can arise which will have significant commercial or other impacts on a party but which do not involve significant quantum. In fact the parties may have recognised this at the time they negotiated their arbitration agreement. The ICC Rules and the ICC Notes now make it clear that a three-member tribunal will be the exception for disputes which fall under the threshold. Parties wedded to a three-person tribunal irrespective of the likely quantum of a dispute may need to amend their arbitration agreement so as to avoid a sole arbitrator.

The ICC Notes further accommodate the appointment of a three member tribunal in place of (or including) the sole arbitrator for proceedings which are commenced under the Expedited Procedure Provisions, but later proceed under the general ICC Rules.

Sealed offers

The ICC Notes set out in some detail the services available from the Secretariat in the conduct of arbitration proceedings under the ICC Rules.

Part XXII (C) of the ICC Notes covers 'sealed offers'. Paragraphs 227 and 228 state:

227. The Secretariat may assist the Parties to put information relating to certain unaccepted settlement offers, and related correspondence (commonly referred to as "Sealed Offer(s)"), before an arbitral tribunal. The Secretariat may also assist with any counter-offer(s) made as Sealed Offer(s) by the offeree.

228. The arbitral tribunal should consider consulting the parties at an early stage (e.g. at the first case management conference pursuant to Article 24) and inviting them to agree on a procedure for the possible use of Sealed Offer(s) in the arbitration. Absent initiative by the arbitral tribunal in this respect, any party is free to raise this issue.

This reflects the current call for arbitrators and institutions to play an active role in encouraging settlement of international commercial disputes.

The purpose of the 'sealed offer(s)' procedure is to enable the tribunal to be provided with any offer made during the proceeding 'without prejudice as to costs'. Under the procedure (which is outlined in detailed in the ICC Notes), the Secretariat has the duty of informing the tribunal '[a]t an appropriate stage in the proceedings' that it is holding correspondence on behalf of the parties. It is up to the tribunal to decide if it wishes to see the correspondence before apportioning costs. A consequence of the parties using the procedure is that costs cannot be determined until after the substantive award on liability (and in a separate award). In many cases this will not differ from the usual practice.

Looking ahead

At first glance the ICC Notes present as guidance to parties who choose to have their disputes determined by arbitration under the ICC Rules. But the ICC Notes are of greater import.

In addition to providing clarification as to some of the procedures available under the ICC Rules (such as Article 22), the ICC Notes (without further steps required by the parties to any existing arbitration agreement) will vary that existing arbitration agreement. A party to an arbitration agreement to resolve future disputes in accordance with the ICC Rules may need to re-visit the agreement and make amendment. This is particularly the case if the parties wish to 'opt out' of an expedited procedure.

The ICC Notes also make it important for parties who are negotiating an arbitration agreement to thoroughly read the ICC Rules in conjunction with the ICC Notes to ensure that the arbitration agreement which references the ICC Rules is an accurate reflection of the parties' agreement. Where the dispute resolution is a last minute consideration (which is often the case), the parties may be better served by ad hoc arbitration under the UNCITRAL Arbitration Rules which are well recognised, highly regarded and comprise the full set of rules in one publication. Most of the key arbitral institutions around the world will administer arbitration under the UNCITRAL Arbitration Rules when requested by the parties to do so.

Footnote

1 Part VII (B), Section B provides guidance as to how to calculate the amount in dispute for the purpose of the Expedited Procedure Provisions

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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