The International Centre for Dispute Resolution ("ICDR"), the international branch of the American Arbitration Association, recently revised its 2014 arbitration rules and 2008 mediation rules, issuing a revised set of rules that entered into force on March 1, 2021. This note focuses on the amendments to the ICDR Arbitration Rules (the "2021 Rules"). The revisions follow recent rule updates by other major arbitral institutions as they respond to users' desire for more speedy and cost-effective dispute resolution procedures, the growth of third-party funding in arbitration, the increasing use of remote hearings, risks related to data protection and cybersecurity, and enforcement risks related to the role played by tribunal secretaries.
Key Features of the ICDR 2021 Rules
Enhancing Efficiency and Flexibility
Early Disposition of Issues
The 2021 Rules introduce a new provision in Article 23 that expressly permits the arbitral tribunal to decide any issue presented by any claim or counterclaim in advance of the hearing on the merits.
A party that seeks early disposition of any issue must first obtain permission from the tribunal to submit an application for early disposition. The tribunal must allow the application to be heard if it determines that (i) the application has a reasonable probability of success, (ii) the application will dispose of or narrow an issue, and (iii) consideration of the application is likely to be more efficient or economical than leaving the issue to be determined with the merits of the case. The 2021 Rules grant the tribunal broad discretion to decide on the early disposition of "any issue presented by any claim or counterclaim" that the tribunal "deems necessary or appropriate."1 The tribunal is required to give all parties a right to present their case both on whether the application should be heard and on whether it should be granted, which should reduce the risk of due process challenges to any award.2
The new rule, which is consistent with rule revisions by the London Court of International Arbitration ("LCIA") in 2020 and the Singapore International Arbitration Centre ("SIAC") in 2016 allowing for early disposition of certain claims or defenses, is likely to encourage disputing parties to bring dispositive motions in an effort to accelerate the issuance of an award in their favor.3
Extended Scope for Joinder and Consolidation
The 2021 Rules expand the application of rules on joinder and consolidation while preserving the keystone requirement of party consent.
Whereas the previous iteration of the ICDR Arbitration Rules did not permit an additional party to be joined to a pending arbitration after the appointment of any member of the tribunal absent the consent of all parties, Article 8(1) now permits an additional party to be joined to a pending arbitration, notwithstanding the opposition of other parties, provided that the additional party consents and the tribunal determines that the joinder is "appropriate."
The 2021 Rules also make it easier to consolidate pending arbitrations. Under the previous iteration of the ICDR Arbitration Rules, (Article 8(1)(c)), a consolidation arbitrator had the power to consolidate two or more arbitrations administered by the ICDR or the AAA where "the claims, counterclaims, or setoffs in the arbitrations are made under more than one arbitration agreement; the arbitrations involve the same parties; the disputes in the arbitrations arise in connection with the same legal relationship; and the arbitration agreements may be compatible." The 2021 Rules do away with the requirement that the parties to the different arbitrations be the "same parties," by allowing consolidation when the arbitrations involve the same or "related parties." This amendment would permit consolidation of arbitrations involving multiple related parties under distinct but closely connected contracts (as often arises, for example, in M&A disputes).
These rule revisions reflect a more liberal approach to joinder and consolidation, both of which can increase efficiency and eliminate the risk of conflicting decisions by avoiding situations where different tribunals decide separately on common factual and legal issues.
Raised Ceiling for Expedited Procedures
The ICDR has extended the application of its expedited procedures, which were introduced in 2014 to reduce the time and cost of an arbitration, by doubling the ceiling amount for claims that qualify for adjudication under such procedures from US$ 250,000 to US$ 500,000.4 This change is consistent with recent rule revisions introduced by other major arbitral institutions.
Safeguarding the Impartiality and Independence of Arbitrators
The 2021 Rules expressly address the issue of third-party funding, which has become increasingly common in international arbitration proceedings, and which can raise issues of arbitrator independence and impartiality. Under Article 14(7), the tribunal may, on application by a party or on its own initiative, require the parties to disclose whether any non-party has undertaken to cover in full or in part the cost of that party's participation in the arbitration, to identify the non-party concerned, and to describe the nature of the undertaking. In addition, the tribunal may request that the parties disclose the existence and identity of any non-party with an economic interest in the outcome of the arbitration, such as a funder, insurer, parent company, or ultimate beneficial owner.6This rule is in line with the now widely held view that mandatory disclosure of the existence and identity of a third-party funder is necessary to reduce the risk of conflicts of interest, particularly between arbitrators and the third-party funder.
Other amendments to protect the impartiality and independence of arbitrators include an obligation on arbitrators to maintain standards of impartiality and independence, to act in accordance with the 2021 Rules and the terms of the notice of appointment, and to comply with the AAA's Code of Ethics for Arbitrators in Commercial Disputes.7
Encouraging Use of Technology and Mitigating Related Risks
Use of Video and Teleconferencing for Hearings
Consistent with the need to embrace the use of technology to enable remote hearings, particularly during the pandemic, Article 26(2) of the 2021 Rules allows for "a hearing or a portion of a hearing" to be held "by video, audio or other electronic means" if "the parties consent or agree," or if the tribunal determines that doing so "would be appropriate and would not compromise the rights of any party to a fair process." In allowing virtual hearings even without the consent of all parties, the ICDR joins institutions such as the LCIA and the International Chamber of Commerce ("ICC") that introduced similar revisions to their rules.8 This move by the major arbitral institutions suggests that, subject to the needs of each case, virtual hearings are here to stay, even if they may not be the default in all instances.
Cybersecurity, Privacy, and Data Protection
The use of technology in arbitration has heightened concerns about privacy and data security. Article 22(2) addresses these concerns for the first time by requiring the tribunal to discuss "cybersecurity, privacy and data protection" with the parties during the first procedural hearing, with the aim of providing "an appropriate level of security and compliance." The AAA-ICDR has issued guidance regarding cybersecurity measures that parties, their representatives and arbitrators should consider adopting.9 Further guidance and resources are likely to follow.
Effect of a Party's Failure to Pay Deposits
Article 39 clarifies the effects of a party's failure to pay deposits to cover the costs of the arbitration. Under Article 39(3), failure to pay shall be "deemed a withdrawal of [a party's] claim or counterclaim," although that party will not be precluded from defending a claim or counterclaim. New Article 39(4) allows a party that pays the deposit for the party that has failed to pay to request a separate award for recovery of the payment with interest. Under Article 39(5), if no party pays the deposit for the party that has failed to pay, the tribunal may suspend or terminate the proceedings.
Role of the Tribunal Secretary
New Article 17 expressly permits a tribunal to appoint a tribunal secretary if the parties consent, and requires that the tribunal secretary serve in accordance with any "ICDR guidelines." This addition to the rules, and any associated guidelines that the ICDR may offer, may help reduce the risk of improper delegation of authority to a tribunal secretary and thereby mitigate the risk of non-enforcement of resulting awards. The 2021 Rules also extend the exclusion of liability of tribunal members in Article 41 to cover tribunal secretaries.
Clarifying Arbitral Jurisdiction
Article 21(1) of the 2021 Rules clarifies that the arbitral tribunal has jurisdiction to rule on questions of arbitrability without court involvement. This change was made to counter doubts that may arise as a result of the position adopted by the proposed final draft of the Restatement of the U.S. Law of International Commercial and Investor State Arbitration (approved in 2019), which questioned whether the incorporation of arbitration rules into an arbitration agreement constitutes "clear and unmistakable" evidence of the parties' intention to delegate arbitrability to the arbitrators, rather than to courts.10 The U.S. Supreme Court decided in First Options of Chicago, Inc. v. Kaplan, that where the parties have not "clearly agree[d] to submit the question of arbitrability to arbitration" such question is "subject to independent review by the courts."11
Conclusion
The rule revisions, with their focus on efficiency, fairness, and flexibility, are likely to be welcomed by users of international arbitration. Overall, they demonstrate the AAA-ICDR's responsiveness to users' needs for fair, flexible and efficient procedures in the evolving international disputes landscape.
1 2021 ICDR Arbitration Rules, Art. 23(3).
2 2021 ICDR Arbitration Rules, Art. 23(2).
3 The scope for early disposition is arguably wider under the 2021 ICDR Arbitration Rules that than under the 2020 LCIA Rules or the 2016 SIAC Rules. Unlike the 2021 ICDR Arbitration Rules, which permit early disposition of "any issue presented by any claim or counterclaim," the 2020 LCIA Rules only permit early disposition of "any claim, defence, counterclaim, cross-claim, defence to counterclaim or defence to cross-claim" (Art. 22.1(viii)) and the 2016 SIAC Rules, of "a claim or defence" (Rule 29(1)). In addition, the 2021 ICDR Arbitration Rules give the tribunal broad discretion to decide on the early disposition of any issue that it "deems necessary or appropriate." By contrast, the 2016 SIAC Rules state that the claim or defense must be "manifestly without legal merit" or "outside the jurisdiction of the Tribunal" (Rule 29(1)), and the 2020 LCIA Rules state that a claim or issue must be "manifestly outside the jurisdiction of the Arbitral Tribunal," or be "inadmissible or manifestly without merit" (Art. 22(1)(viii)).
4 2021 ICDR Arbitration Rules, Art. E-5.
5 The ceiling for application of expedited procedures remains significantly higher under the rules of several other major arbitral institutions. For example, the threshold amount is US$ 3 million under the 2021 ICC Rules, US$ 3.2 million under the 2018 Hong Kong International Arbitration Centre Rules, and US$ 4 million under the 2016 SIAC Rules. An outlier is the Stockholm Chamber of Commerce 2017 Expedited Procedure Rules, which apply regardless of the value of the dispute, provided that both parties consent.
6 2021 ICDR Arbitration Rules, Art. 14(7)(b)
7 2021 ICDR Arbitration Rules, Art. 14(1).
8 The 2020 LCIA Arbitration Rules establish that the tribunal has "the fullest authority" over the "form" of the hearing, including whether it "take[s] place in person, or virtually by conference call, videoconference or using other communications technology with participants in one or more geographical places (or in a combined form)" (Art. 19(2)). The 2021 ICC Arbitration Rules likewise authorize the tribunal to "decide, after consulting the parties, and on the basis of the relevant facts and circumstances of the case, that any hearing will be conducted by physical attendance or remotely by videoconference, telephone or other appropriate means of communication" (Art. 26(1)).
9 AAA-ICDR® Best Practices Guide for Maintaining Cybersecurity and Privacy
10 See Restatement of the U.S. Law of International Commercial and Investor State Arbitration, Proposed Final Draft 147 (April 24, 2019) Enforcement of the Arbitration Agreement, § 2.9(c), Illustrations, pp. 215-216.
11 First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947 (1995).
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