Expert Opinion (#9-10 September-October 2021)

Changes to Arbitration Rules During the Pandemic

by Olena Perepelynska

International arbitration has historically developed together with international trade and their correlation and mutual impact have many interesting angles. After exponential growth of both during the era of expanding globalism we are now witnessing the effects of rising nationalism. In international arbitration we are seeing multiple changes at local level in many jurisdictions: growth of the arbitration community, reforms of arbitration-related legislation, creation of new arbitral institutions and development of existing local arbitration centers aiming to become/remain regional arbitration hubs. All these factors have resulted in tightening competition among arbitral institutions and instigated them to promptly adapt their rules and practices to changing reality and the challenges of our time. During the last two years COVID-19 has accelerated many institutional changes, both related and unrelated to the pandemic. Certain changes, those most relevant for Ukrainian business, are considered in this article.

ICC Rules 2021

New ICC Rules came into force on 1 January 2021. According to the statement issued by the ICC some of the 2021 amendments reflect established practice of the Court while others aim to increase the flexibility, efficiency and transparency of ICC Arbitrations. The Note to Parties and Arbitral Tribunals on the Conduct of Arbitration has also been updated in line with the new rules. Top changes include the following.

General efficiency: new ICC Rules provide for virtual/hybrid hearings and allow electronic filings in full, thus making a shift away from traditional paper filings to digitalization and greener arbitration.

Expedited procedure: this procedure appeared for the first time in the 2017 version of the ICC Rules and initially applied to the cases with less than USD 2 million at stake. New ICC Rules have changed this threshold and now the expedited procedure applies to all cases up to USD 3 million. This change might be of particular interest for Ukrainian business, traditionally sensitive to the cost and time factors of dispute resolution.

Complex arbitrations: new ICC Rules introduced amendments to provisions on the consolidation and joinder of additional parties allowing the joinder of additional parties in the course of the arbitration (after constitution of a tribunal) and allowing the consolidation of cases in the presence of different parties.

Transparency: the new ICC Rules also establish unique standards of transparency. From the institutional perspective the changes the cover constitution, quorum and decision-making by the ICC Court as well as communication to the parties concerned of the reasons for the decision. From the case perspective the changes require that parties disclose third-party funding arrangements. These changes are in line with other recent initiatives of the ICC aimed at achieving a greater degree of transparency. In 2019 the ICC Court took a step forward to publication of documents by the ICC, including arbitral awards. In 2020 the ICC also expanded the scope of publishable key information on its arbitration cases without compromising the expectations of confidentiality. Now, in addition to information about the constitution of arbitral tribunals and status of a case (publishable since 2016), the ICC website contains information about the sector of industry involved and counsel representing the parties in a case. Such initiatives not only provide parties with useful information about the experience and availability of counsel and arbitrators, but will also stimulate the latter to disclose any conflict in a timely manner.

Protecting the integrity of the proceedings: the new ICC Rules empower the arbitral tribunal to exclude from the proceedings new counsel where it causes conflicts of interest and allow the Court to disregard in exceptional circumstances the agreement of the parties on the method of constitution of the arbitral tribunal, which may pose a risk to the validity of the award.

LCIA Rules 2020

The 2020 LCIA Rules came into force on 1 October 2020. As the LCIA itself has noted, the revisions reflect a light touch. Top changes could be summarized as follows.

Composite request and consolidation: the new Rules allow for the commencement of multiple arbitrations in a composite Request and grants the Respondent the corresponding right to file a composite Response to such a request. The Rules have also broadened the power of the LCIA Court and arbitral tribunal to order consolidation and concurrent conduct of arbitrations.

Early dismissal determination: the new LCIA Rules grant additional power to an arbitral tribunal, enabling it to make an Early Determination that any claim or defence is manifestly outside the jurisdiction of the Arbitral Tribunal, or is inadmissible or is manifestly without merit.

Expedition of proceedings and award drafting: the new provisions of LCIA Rules encourage tribunals to take a more active role in case management and expressly empowers them to adopt various measures aimed at expediting the proceedings. For example, to limit the length and/or number of submissions, to dispense with a hearing, etc. The Rules encourage the tribunals to make their award no later than three months following the parties final submissions.

Remote hearings and electronic communications: the new LCIA Rules accommodated increased use of virtual hearings, confirmed the primacy of electronic communication with the LCIA and facilitation of electronically signed awards.

Tribunal secretaries: the new LCIA Rules include explicit provisions addressing the role of tribunal secretaries that reflect guidance previously provided in the LCIAs 2017 Guidance Note to Arbitrators.

VIAC Rules 2021

The Vienna Investment Arbitration Court has not only adopted the new version of the VIAC Rules of Arbitration and Mediation, but also a complete new set of the VIACs Investment Arbitration and Mediation Rules 2021. Both came into force on
1 July 2021. They aim, inter alia, to attract new types of cases to VIAC.

Investment treaty arbitration: as mentioned by VIAC, with the adoption of the Vienna Investment Arbitration Rules, the Vienna Investment Arbitration Court is now able to offer a set of specialized arbitral rules to accommodate the unique features of investment arbitration, including the involvement of sovereign parties and the implication of issues of public interest and public policy.

Inheritance disputes: as explained by the VIAC, new provisions of the rules respond to new developments in the market, namely inheritance disputes. They take into account the peculiarities of arbitral proceedings regarding a disposition of property upon death.

Functions of appointing authority: the new provisions include detailed regulation for cases in which VIAC is requested to act as appointing or administering authority in ad hoc proceedings (such as the UNCITRAL Arbitration Rules).

Third-party funding: the rules provide for a definition of third-party funding and contain further provisions regulating this tool, including the obligation of the parties to disclose any such funding.

Technical innovations and the introduction of the VIAC Portal: new Rules expressly allow issuing an award in electronic form and conducting the oral hearing not only in person, but by other means too. Such other means include remote hearing using videoconference. After the outbreak of the Coronavirus pandemic VIAC was the first institution to offer some guidance on this issue. In June 2020 VIAC issued The Vienna Protocol a practical checklist for remote hearings aimed at providing guidance for arbitrators and parties in determining whether the conduct of a remote hearing is reasonable and appropriate in the specific circumstances of a case.

ICAC Rules

Amendments to the ICAC Rules came into force on 1 November 2020. Technically, the ICAC at the UCCI has updated its 2017 version of the Rules (in force since 1 January 2018).

As ICAC has explained, the amendments made to the ICAC Rules aim to address the impacts of quarantine restrictions on business processes, which have been changed irreversibly around the world, and at enhancing the effectiveness of arbitrating disputes and the enforceability of arbitral awards. The changes concerned improvement of arbitral proceedings, remote hearings via video conferencing systems, gradual transition to 100% digitalization of arbitration and certain other issues.

Individuals as parties to arbitration: the amendments to ICAC rules clearly confirmed the right of an individual to be a party to international arbitration, as this issue had earlier been disputable.

Counsel to a party: amendments made to ICAC rules clarify the right of parties to enlist the right to engage a counsel at their choice, including foreign nationals and law firms. At the same time, they established certain limits for change of counsel after constitution of the tribunal, when such change could create a conflict of interest for an arbitrator or jeopardize future arbitral award. In addition, the rules provide for liability of the counsel for abuse or violation of the applicable procedural rules.

Remote hearings: The ICAC Rules now expressly allow remote or hybrid oral hearings and regulate their conduct. They also enhanced the powers of the arbitral tribunal and now expressly enable all issues related to the organization of the oral hearing including their procedure, form, etc., to be decided.

Adverse inference: following amendments to the Law of Ukraine On International Commercial Arbitration in 2017, the ICAC rules now empower an arbitral tribunal to draw adverse inference if a party fails to produce evidence requested by the arbitral tribunal.

Transition to 100% digitalization: new rules require that parties submit their documents in electronic form too. Earlier on electronic submission was optional, and many parties preferred to make paper filing only. Now the parties should be minded of this new rule and file all their submission in electronic form as well.

* * *

To sum up, these changes introduced by arbitral institutions definitely respond to Covid-related challenges and have a positive impact on the duration and costs of arbitral proceedings. At the same time, each institution tries to offer some specific new rules and distinct features of arbitral proceedings to arbitration users. And given the speed of the changes the parties should better double check the applicable version of the rules before commencing any actions or making their choice in arbitration agreements.

Olena Perepelynska is a partner, head of International Arbitration at INTEGRITES
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