Past Event – Report: Disputes for Breakfast | Arbitration: Friederike Schäfer on ICC Arbitration in 2020 and Beyond

Event Report

In our latest Disputes for Breakfast event, we had the pleasure of having Friederike Schäfer, Counsel at the ICC International Court of Arbitration, as our guest speaker, to explore recent trends and developments at the ICC. The event was moderated by our Gerold Zeiler, currently a member of the ICC Court, as well as Lisa Beisteiner and came in perfect timing to give a tour d’horizon of the new ICC Rules 2021.

Adapting to the Pandemic and Growing Case Load

As Friederike Schäfer reported, the ICC as an institution reacted swiftly to the rise of COVID, switching its operations to online and paperless to the extent possible: In the face of the pandemic and the strict confinements imposed in France and elsewhere, the ICC Secretariat and Court quickly adapted. The changes ranged from working-from-home arrangements, to an increase in paperless case administration. Notably, the ICC endeavoured to minimize the dispatch of hard copies around the globe where achievable within the framework of the parties’ agreement.

Also, we learnt that the ICC is doing well despite the pandemic, cases continue to be coming in with part of them already prompted by the pandemic. The tendency is clearly positive. Overall, the 2020-case load seems to match or even exceed the high numbers of 2019 (i.e. 851 cases in 2019).

Remote Hearings: Routine Is Settling in

Already In late spring 2020, the ICC had encouraged tribunals to continue the path of efficient case management despite the evolving pandemic, and promoted conducting remote hearings where appropriate (please see the ICC’s Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-10 Pandemic). Indeed, a large number of ICC users seem to have embraced and adopted the suggested measures and checklists.

Whilst at the outset of COVID-19, the ICC had observed a general tendency towards the postponement of hearings, more and more cases are now conducted virtually. Arbitral tribunals have become increasingly accustomed to the idea and set-up of virtual hearings. Virtual hearing protocols drawn up by ICC tribunals are becoming ever more sophisticated and tailored. Remote hearings would now not be confined to organizational hearings or short hearings focusing mainly on legal pleading and discussion anymore, but would increasingly extend to more complex cases: At least telling from the feedback from ICC tribunals, virtual hearings are generally perceived to work well, even where they involve heavy witness- and expert- examination; the views of counsel – as opposed to arbitrators – in this respect are, evidently, less accessible to the ICC. The key, as always, is to prepare a detailed protocol with contingency plans and organize several test-runs in advance. Virtual hearings under the ICC Rules would include such administered by professional virtual hearing managers as well as hearings organized in a DIY-manner, and in terms of virtual hearing platforms range from the usual suspects as Zoom or MS Teams, to little known platforms. Confidentiality of virtual hearings would frequently be set out in confidentiality agreements signed by all participants. Also, virtual hearing protocols would provide for different measures to preserve the integrity of witness evidence given remotely, including the installation of several cameras, including 360° cameras. In times of social distancing and travel restrictions, reliance on physically present (neutral) hearing assistants appears to become more difficult.

As a bottom line, whilst some hearings were postponed in light of the first wave, postponed a second time several months later and ultimately held remotely, others are still being held in abeyance, to be conducted in person once possible again. Some degree of routine is settling in when it comes to remote hearings, as this new normal is here to stay at least for part of the cases.

Via its ICC Hearing Centre, the institution also provides assistance and guidance to parties and tribunals in setting up virtual hearings. The launch of a virtual platform for digital case administration is currently in preparation.

When it comes to the conduct of virtual hearings, one focal question is whether a hearing can be conducted remotely despite the objection of one party. Under the ICC Rules, some tribunals have conducted hearings virtually not only where all parties consented, but also in cases where one party (mostly the Respondent) had opposed the remote conduct. At the same time, objections by Respondent have also prompted tribunals to uphold the in-person format and (further) postpone the scheduled hearing, especially in cases where arbitrators were themselves doubtful whether a remote format could grant all parties an adequate opportunity to present their case. Much depends on the seat of arbitration. In this respect, a recent Austrian Supreme Court decision taking a positive stance towards the remote conduct of arbitral hearings and upholding such virtual hearings despite one party’s objection has attracted considerable attention.

The 2021 Rules Go Paperless and Virtual

In response to the questions raised by the pandemic as regards the remote conduct of hearings, the revised Rules of 2021 confirm that it is upon the arbitral tribunal to decide, after having heard the parties, whether to hold the hearing in person or virtually: Article 26(1) of the 2021 Rules provides that the arbitral tribunal may decide that “any hearing will be conducted by physical attendance or remotely by videoconference, telephone or other appropriate means of communication”. This broad language clarifies the ICC’s intention to facilitate virtual hearings and to qualify remote hearings as oral hearings.

Also, the new 2021 Rules reduce the scope of paper-filings – a practically important factor in times of wide-spread home office work: The parties are no longer required to file paper copies of the Request for Arbitration and the Answer to the Secretariat. The Request and the Answer will only be served in hardcopies upon the request of the filing party (Articles 3 and 4 ICC Rules 2021). As for the execution of the Terms of Reference, whilst the Rules have not changed, the possibility to sign those electronically and in counterparts is being increasingly encouraged and used (see para. 161 of the ICC Note).

Updated Rules on Multi-Party Proceedings

Unrelated to the pandemic, adjustments are made to the rules on joinder and consolidation, geared towards making the ICC even more attractive for multi-party proceedings: So far, joining a new party to the proceedings after the constitution of the tribunal was only possible if agreement of all parties could be obtained (Article 7 (1)), which at times was not possible and practicable. A newly introduced sub-paragraph 5 in Article 7 now authorizes the tribunal to decide to join a party, provided that this additional party accepts the constituted tribunal and, if established already, the Terms of Reference. Crucially, the tribunal may decide to join a party even absent the consent of the remaining parties. In practice, this would mostly relate to willing co-respondents which might be joined against the will of the Claimant.

Further, the rules on consolidation set out in Article 10 were amended to clarify the scope of application of consolidation, which is one of the three: agreement; all claims made under the same arbitration clause (those mirroring arbitration clauses need not necessarily be contained in one and the same contract); claims between the same parties based on compatible arbitration agreements.

Party Representation and Tribunal’s New Powers

Under the amended Article 17(1), parties must henceforward promptly inform the tribunal and the ICC of any changes in their representation. According to Article 17 (2), the tribunal is now expressly vested with the power to exclude a newly appointed counsel, if necessary to avoid a conflict of interest of an arbitrator which might arise from such change in party representation. The provision is designed to preserve the integrity of the arbitral tribunal, protecting it against party attempts at derailing the proceedings by tactically appointing counsel. Even absent an express provision to this effect, tribunals acting under the ICC rules have already previously interpreted the rules so as to authorize them to exclude counsel under specific circumstances. This power effectively curtails the parties’ right to freely select their representative in the interest of preserving the tribunal and the efficiency of proceedings.

Expedited-Success Story is Given Greater Scope

The Expedited Procedure Provisions (EPP) have been a success story ever since their introduction in 2017, with a stark increase in cases over the last years, from 15 (2017) to 86 (2019). As a rule, tribunals succeed in providing the same quality of proceedings parred with a considerably expedited schedule, turning the EPP into one important selling argument for the ICC Rules. It is against this background that the ICC decided to extend the scope of their application to an increased threshold amount in dispute of USD 3 million. This applies to arbitration agreements concluded after 1 January 2021. The exact threshold amount has been the subject of considerable debate and suggestions had been made to increase the amount even further. The EPP provisions under the ICC Rules rest on an opt-out model. Whilst the ICC would see such opt outs in the parties’ arbitration agreements (and upon the initiation of proceedings), as well as decisions of the ICC Court disapplying the EPP proceedings (mostly upon Respondent’s request in its answer), some parties would also be opting into the EPP despite an amount in dispute above the threshold. At times, parties would agree on procedural schedules which are at variance with the EPP provisions, in which case the Court would formally determine to disapply the EPP.

Increased Transparency in Third Party Funding

In view of the increasing use of Third Party Funding (TPF) in ICC arbitration, the 2021 Rules take a step towards more transparency, making explicit what had previously been the practice of the ICC already: A new Article 11(7) requires each party to “promptly inform the ICC Secretariat, the arbitral tribunal and the other parties, of the existence and identity of any non-party which has entered into an arrangement for the funding of claims or defences and under which it has an economic interest in the outcome of the arbitration”. The ICC Guidance Note had already addressed the arbitrator’s obligation to disclose relationships with any entity having a direct economic interest in the dispute or an obligation to indemnify a party for the award. The upcoming adaptation of Article 11(7) in the 2021 Rules will now expressly and unequivocally establish a respective disclosure obligation of the parties, which helps increase the transparency and integrity of the arbitral proceedings at large.

Whilst the 45 minutes of discussion covered most of the upcoming changes in the ICC 2021 Rules, there was no time to comprehensively address all adjustments (such as Article 12(9) by which the ICC Court is granted the power to disapply the parties’ agreed procedure for appointing the arbitral tribunal in extraordinary cases; various amendments regarding the application of the ICC Rules to investment arbitrations; Article 5 of Appendix II, putting into writing the existing practice of the Court to give reasons for certain Court decisions, if one party so requests; etc). We thank Friederike Schäfer for sharing her insights and our attendees for their active participation and questions.

(Report prepared by Lisa Beisteiner and Innhwa Kwon)