New Demands for the Drafting of ICC Arbitration Agreements as from 1 March 2017
On 1 March 2017, the new Arbitration Rules of the International Chamber of Commerce (ICC-Rules) come into force. In Art. 30 and Annex VI, they contain specific provisions for an Expedited Procedure. The characteristic features of the new Expedited Procedure are that a sole arbitrator with extended powers shall render an arbitral award within six months after a limited establishment of the facts and optionally without a hearing. The ICC thus also offers expedited proceedings by which disputes can be settled faster and more cost-efficiently.
"Automatic" Application to Disputes up to USD 2 million
All ICC arbitrations with an amount in dispute of USD 2 million or less will "automatically" be governed by the Expedited Procedure Rules if the arbitration agreement was concluded after 1 March 2017 (Art. 30 paras. 2 a, 3 a - ICC-Rules, Art. 1 para. 2 Annex VI ICC-Rules). In these "smaller" disputes, the ICC assumes that the case is suitable for the Expedited Procedure and that the parties are interested in con-ducting the arbitration proceedings in a more cost- and time-efficient manner. If the parties do not want to apply the Expedited Procedure, they can "opt out" of the new rules in the arbitration agreement (Art. 30 para. 3 b ICC Rules). If a dispute involves amounts exceeding the USD 2 million threshold, the parties can likewise agree to the application of the Expedited Procedure pursuant to Art. 30 para. 2 b ICC-Rules.
Appointment of a Sole Arbitrator by the Court
In the Expedited Procedure, Art. 2 para. 1 Annex VI ICC-Rules gives the International Court of Arbitration ("Court") the power to appoint a sole arbitrator, even if the arbitration agreement provides for a three-member tribunal. This is intended to reduce the costs and to accelerate the proceedings. Pursuant to Art. 30 para. 1 ICC-Rules, the power of the Court to appoint a sole arbitrator takes precedence over the parties’ individual agreement on the number of arbitrators in the arbitration agreement.
The power of the Court to appoint a sole arbitrator is discretionary. The appointment of a sole arbitrator shall be the rule in the Expedited Procedure, but this is not mandatory. Thus, even in the Expedited Procedure the parties can agree on a three-member tribunal. The party agreement on the number of arbitrators in the Expedited Procedure limits the Court’s discretionary power with the effect that it has to deviate from the rule and must appoint a three-member tribunal. The supplement to the arbitration agreement could e.g. read as follows: "The number of arbitrators is three – also in the Expedited Procedure".
Procedural Rules vs. Parties' Agreements
The Expedited Procedure Provisions give the arbitral tribunal extended powers to determine the procedural rules. Pursuant to Art. 3 para. 4 Annex VI ICC-Rules, the arbitral tribunal has discretion to adopt such procedural measures as it considers appropriate. In doing so, the arbitral tribunal may limit the number, length and scope of written submissions and of written witness statements and expert opinions. Moreover, it may decide not to allow requests for document production. Pursuant to Art. 2 para. 5 Annex VI ICC-Rules, the arbitral tribunal may decide the dispute solely on the basis of the documents submitted by the parties with no hearing and no examination of witnesses or experts.
Nevertheless, party autonomy takes priority: if the parties agree on specific procedural rules to conduct the Expedited Proceedings, the arbitral tribunal is bound by them. However, if the procedural agreements deviate too much from the Expedited Procedure Rules so that the conduct of a time- and cost-efficient arbitration is not possible, the Court may determine that the Expedited Procedure Provisions shall no longer apply to the case and that the proceedings have to be continued as regular ICC arbitration proceedings (Art. 30 para. 3 c ICC-Rules, Art. 1 para. 4 Annex VI ICC-Rules).
Consequences for the Drafting of ICC Arbitration Agreements
Because of the limited possibilities and limited time to present the facts of the case and the legal arguments, the Expedited Procedure is not suitable for every dispute. Due to the "automatic" application of the Expedited Procedure to disputes of USD 2 million or less, the parties should only agree on the ICC standard arbitration clause if they deem the Expedited Procedure appropriate for disputes up until this amount, are interested that the dispute is administered and decided in a more cost- and time-efficient manner by a sole arbitrator and accept the potential risks associated with the Expedited Procedure.
Alternatively, the Expedited Procedure Provisions offer the parties a range of opportunities to decide when and how the Expedited Procedure should be applied:
- Agreement on a Deviating Threshold
Pursuant to Art. 30 para. 2 b ICC-Rules, the parties are free to agree on a higher or lower threshold up until which the Expedited Procedure is to be applied "automatically". It depends on the individual case which threshold value is appropriate. General statements in this regard are hardly possible, since the complexity of a dispute does not depend on the amount at issue.
- Agreement on Expedited Procedure for Certain or All Disputes
Art. 30 para. 2 b ICC-Rules also allows the application of the Expedited Procedure to all or certain disputes if the parties are willing to settle these disputes within approx. six to nine months. The parties should take into account the risks associated with a procedure that is limited in time. Moreover, if a dispute is not suitable for the Expedited Procedure, the Court may decide pursuant to Art. 30 para. 3 c ICC-Rules or Art. 1 para. 4 Annex VI ICC-Rules respectively that the regular ICC arbitration proceedings apply.
- General Exclusion of Expedited Procedure
If it is foreseeable when concluding the contract that future disputes will require an extensive clarification of facts or of technical issues, it can be useful to exclude the Expedited Procedure in the arbitration agreement in accordance with Art. 30 para. 3 b ICC-Rules. The same applies if the parties are of the opinion that the Expedited Procedure is not suitable for a diligent dispute resolution.
- Individual Amendment of the Expedited Procedure Rules
Finally, the parties may consider individual changes or amendments to the Expedited Procedure Rules. The parties can exclude the appointment of a sole arbitrator by expressly agreeing on a three-member tribunal for the Expedited Procedure. Of course, in this case the cost saving will be significantly less compared to regular ICC arbitration proceedings. It is also possible to extend the period specified for rendering the arbitral award provided for in Art. 4 para. 1 Annex VI ICC-Rules from six to nine months.