Over the past year, Watt Tieder has received several inquiries regarding ICC arbitrations. This has resulted in an outline of the ICC process which we regularly provide. We thought it might be interesting to a broader audience so we have expanded it into this Primer, which addresses typical two-party arbitration. Issues related to multiple parties, joinder, consolidation, jurisdiction, etc., have too many variables for an introductory explanation. If, of course, more detailed questions arise as to these or other issues, please contact us.
In summary, International Chamber of Commerce (ICC) arbitration sounds somewhat exotic, but differs very little from other forms of administered arbitration, e.g., the American Arbitration Association (AAA) or its international counterparts: the International Centre for Dispute Resolution (ICDR); the London Court of International Arbitration (LCIA); or the Singapore International Arbitration Centre (SIAC). The major differences will be noted below.
- What Is The ICC?
The International Chamber of Commerce (ICC) is a private organization that promotes sound international business practices. It functions on a worldwide basis in a fashion similar to other Chambers of Commerce. Its best known service is the International Court of Arbitration of the ICC (ICC Court). Its headquarters are in Paris, France, with several other branches around the world. It also has established national committees in many countries, which can provide the names of potential arbitrators from their jurisdictions.
The ICC Court is not a judicial court and is not authorized to function as a court by any statute or international agreement; rather, it is a private body which administers arbitration. The reason for its prevalence in international arbitration is its long experience in the field, and its now well known procedures, which are a blend of civil and common law dispute resolution processes. Like other arbitral administrative bodies, its authority can only be invoked by agreement of the parties. It is funded by fees paid by the parties who invoke its use.
- Invoking The ICC Rules
As with any other reference to arbitration, the ICC’s administration of a dispute is invoked by the parties’ agreement either in the contract under which the dispute arises or by a separate agreement reached after a dispute has arisen. The current procedures are governed by the ICC Arbitration and ADR Rules in effect as of January 1, 2012 (the “ICC Rules”). They are readily available online at email@example.com. The agreement to arbitrate can be quite simple, e.g.,: “All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with such Rules.”
In practice, an arbitration agreement is typically more detailed setting forth the place of the arbitration, number of arbitrators, applicable law, etc. For purposes of this introduction, however, it will be assumed that the clause simply involves the ICC Rules without elaboration.
- When Is The Arbitration Commenced?
Like most other arbitration rules, the ICC Rules do not address when an arbitration can be commenced. Most commercial contracts address an event or time period, e.g., at the conclusion of the contract, after certain other dispute resolution procedures such as negotiation or mediation have been exhausted, the project engineer has reached a decision on an issue, etc., which must occur before the arbitration can be commenced. If the underlying contract does not set forth the outside deadline for filing, the limit is the applicable statute of limitations.
The arbitration is deemed commenced on the date the Request for Arbitration is received by the ICC Secretariat. (See Section 4 below, Rule 4(2)).
- Commencing The Arbitration
The arbitration is commenced by submitting a Request for Arbitration to the Secretariat of the ICC Court of Arbitration at one of its offices, although most parties send it to the head office in Paris, France along with an initial filing fee of USD 3,000 (Rule 4(2)).
The contents of the Request for Arbitration are quite simple:
– Name and contact details of all parties;
– Name and contact details of party representatives;
– Brief description of the matter in dispute;
– Statement of relief sought;
– Copy of the arbitration clause or separate agreement to arbitrate;
– Proposal regarding the number of arbitrator(s) and the process for their selection; and
– Proposal regarding the place, applicable law, and language of the arbitration.
A party is free to provide full details and supporting evidence of its position in the Request for Arbitration, but it is not necessary.
The number of copies includes one for the ICC, one for each party, and one for each arbitrator. (Rule 3(1)). Even with a single adverse party and three arbitrators, five copies are needed. It is also common practice to provide the adverse party and/or its representative with a courtesy copy although no obligation to respond is imposed, nor is the arbitration deemed commenced, until the copy of the Request for Arbitration is received by the Respondent from the ICC.
Before the arbitration will be actively administered, the parties must deposit with the ICC an administrative fee and the projected fees of the arbitrator(s). (Rule 36). These fees are based on the amount in dispute and can be calculated from Appendix III to the ICC Rules. In general, ICC fees are higher than other arbitral administrative entities.
- Answer To Request For Arbitration
Upon receipt of the Request for Arbitration from the ICC, the Respondent must file an Answer and any Counterclaim within 30 days. The Answer and Counterclaim must address the claims of the Claimant and if a Counterclaim is filed, it must contain the same information as the Request for Arbitration (Rule 5(1) through (5)). A reply to the Counterclaim must be filed within thirty (30) days. (Rule 5(6)).
- Selection Of Arbitrator(s)
One of the “myths” of ICC Arbitration is that its pool of arbitrators is significantly different from those available from other administrative entities. The true part of this myth is that the ICC does have access to a more diverse panel of potential arbitrators, but this is due to the fact that the ICC administers arbitrations from many different countries with many different languages. This is actually quite beneficial to parties who do not have access to or knowledge of experienced arbitrators from different countries. The untrue part of the myth is that by agreeing to ICC Arbitration, a party is somehow limited to this group and is not free to pick its own arbitrator.
If the arbitration clause is silent as to the method of selecting the arbitrator(s), the ICC Court will appoint a single arbitrator, or in substantial cases, direct that the matter be heard by a panel of three arbitrators. (Rule 12). In practice, and unless the matter is quite small in terms of the monetary relief sought, the ICC will direct that a panel of three be appointed. In a typical case, the Claimant will be given fifteen (15) days to appoint an arbitrator. (Rule 12(2)). The Respondent has fifteen (15) days after appointment of the Claimant’s arbitrator to appoint its arbitrator. (Rule 12(2)). If either party fails to appoint an arbitrator within the allotted time, the ICC Court will make the appointment. (Rule 12(2)). The ICC will also appoint the President (Chair). (Rule 12(5)). Unless otherwise agreed by the parties, the President cannot be of the same nationality as either party. (Rule 13(5)).
The ICC does not circulate lists of potential arbitrators and seek the parties’ input, but appoints from a list maintained internally or after consultation with the ICC national committees. (Rules 13(3) and (4)).
Most arbitration clauses provide that each party selects its own arbitrator and the two party selected arbitrators then agree upon the third or the “President” (Rule 13). It is only in cases where the parties have not agreed to appoint arbitrators or if they have failed to do so that the ICC will make appointments.
As long as the parties reserve to themselves the right to name their arbitrator, it makes little difference which organization is administering the arbitration. A party can appoint any qualified person and the appointment is almost always confirmed.
The ICC Rules regarding arbitrator impartiality, disclosure of potential conflicts and any other potentially disqualifying information are much the same as any other arbitration. A useful resource is the “IBA Guidelines on Conflicts of Interest in International Arbitration” (2004).
- Determination Of Jurisdiction
Challenges to the jurisdiction of the Tribunal are passed on by the ICC Court in the first instance. (Rule 6(4)). The ultimate decision as to jurisdiction, however, is decided by the Tribunal (Rule 6(5)). If the Tribunal determines it has jurisdiction of the dispute, it will hear the case regardless of allegations that the underlying contract is invalid. (Rule 6(9)). This is consistent with virtually all arbitration proceedings.
- Terms Of Reference
A unique aspect of the ICC Rules is the preparation of the Terms of Reference. (Rule 23). The Terms of Reference are prepared by the Tribunal in conjunction with the parties. It is required to be completed within two months of the transmission of the file to the Tribunal from the ICC. The transmission to the Tribunal takes place as soon as the full Tribunal is constituted.
The Terms of Reference set forth the details of the arbitration, i.e., names and contact information of the parties and their representatives, a summary of the claims and counterclaims, the place of the hearing and usually a summary of the issues to be resolved. Its significance is that once it is concluded, no new claims can be asserted without the permission of the Tribunal.
In addition to the Terms of Reference, Rule 24 requires an early meeting of the parties with the Tribunal to establish a Procedural Order. The Procedural Order sets forth the details of the proceeding such as dates for the exchange of pleadings, the exchange of documents, location and date of the hearing and related administrative issues. This is much the same as the ICDR’s requirement for an early case management conference.
The signing of the Terms of Reference is also significant because the Award in the matter must be issued within six months of the date of the last signature on the Terms of Reference. (Rule 30). The ICC Court has the authority to extend their time and in complicated cases, this regularly occurs.
- Discovery (Disclosure)
The ICC Rules do not specifically provide for discovery, not even the exchange of documents. Rather, Rule 25 gives the Tribunal the authority to establish the facts of the case by “all appropriate means.” This has been interpreted to provide for limited exchange of documents. A party seeking documents must describe them with particularity, state why they are necessary to support its claim or defense, and state whether it has access to the requested information from any other source. The Tribunal often requires the preparation of a “Redfern Schedule.” A Redfern Schedule lists the documents requested, the reason they are needed, and their lack of availability from other sources. The party to whom the request is directed replies and states whether it will provide the requested information. The Tribunal uses this information to decide which requests will be allowed. The rigor of this process has proven quite useful in forcing parties to limit discovery requests to essential materials.
Discovery in the form of depositions, interrogatories, or requests for admission are virtually unknown. On a construction project, site visits are not uncommon and typically include the Tribunal.
- Statements Of Claim, Defense, And Counterclaim
Although not specifically required by the ICC Rules, it is common practice for each party to submit a detailed statement of its claim, counterclaim, and defense in advance of the hearing. These statements should include all documents, witness statements, expert opinions and legal authority in support of a party’s case.
In general, it is recommended that the Original Request for Arbitration, Statement of Defense, and Counterclaim be as detailed as possible. This makes the preparation of the subsequent Statements much easier.
With the filing of the detailed Statements addressed in paragraph 10 above, the actual hearing can be quite efficient. The key factor is that all direct witness testimony is presented in the form of detailed witness statements. This process is derived from English court practice. A direct witness presents all of his or her testimony in a Statement with reference to the documents or other evidence upon which he/she relies. This is, of course, read in advance by the Tribunal and opposing counsel. At the hearing, the witness does not present any direct testimony, but is immediately subject to cross-examination and questioning by the Tribunal and opposing counsel.
Although witness statements are not mandatory pursuant to the ICC Rules, they are a common feature of not only the ICC, but most international arbitrations. Many U.S. trial litigators react negatively to this concept because they are accustomed to “their witnesses telling their story.” Assuming that the Arbitral Tribunal is experienced in the subject matter of the dispute, there is little to be gained by direct testimony. Indeed, it is easier for most witnesses to set forth their “story” in writing and without the pressure of a hearing.
Another presentation technique which is common in international arbitration is the “hot-tubbing” of experts. Opposing experts on the same subject appear before the Tribunal at the same time. The Tribunal then questions them simultaneously on each point in contention between them. Counsel for the parties are then given an opportunity to question. The technique has proven quite successful in at least narrowing the issues in dispute between the experts. Indeed, it is being regularly adopted in domestic U.S. arbitration.
Both the witness statement and the “hot-tubbing” techniques significantly reduce the length of the actual hearing. This, in turn, makes the scheduling of the hearing easier because fewer schedules have to be coordinated. It also reduces the expenses of the hearing. It probably does not reduce the overall cost of the arbitration because the time saved at the hearing is transferred to preparation time.
- The Award
As set forth above, pursuant to Rule 30, the Award is to be completed within six months of the conclusion of the Terms of Reference. The award is reasoned, i.e., it sets forth the bases of the Tribunal’s decision much like a court decision. It is submitted in draft to the ICC Court for “scrutiny.” (Rule 33). The ICC Court does not and cannot modify the decisions of the Tribunal, but it does assure that it is in the proper form, correctly calculates all monetary amounts, and other non-substantive details. After any corrections required by this process, the Award is issued to the parties by the ICC Court.
- Costs And Legal Fees
Pursuant to Rule 37, the Tribunal is authorized to allocate the costs of the arbitration. Cases include the ICC administrative fees, the Tribunal’s fee, Tribunal experts, and legal fees and expenses incurred by the parties. The costs are allocated based on the relative success of the parties in the arbitration and the Tribunal’s assessment of whether a party caused unnecessary expenses to be incurred during the process, e.g., by filing frivolous motions.
- Challenges To Award
ICC Arbitrations are typically held between parties of different nationalities. This means that legal actions to challenge or enforce the award are pursuant to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
The grounds for challenge are as follows:
1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of that country.
These are very similar to the grounds for challenging domestic awards under the Federal Arbitration Act, 9 USC § 1 et seq. or any of the U.S. State Arbitration Acts.
The New York Convention has been signed by more than 160 countries. Thus, enforcement proceedings can be instituted in virtually any commercially active jurisdiction.
Arbitration proceedings, whether foreign or domestic can, of course, be subject to a variety of complexities. The purpose of this Primer, however, is to demonstrate that, although there are differences from other arbitration rules, there is nothing particularly unusual or exotic about the ICC. Companies should not be concerned if a foreign party insists on its use. Of much greater importance is to draft an arbitration clause which, regardless of the arbitral administrative entity, gives as many decisions as possible to the parties, e.g., the applicable law, place of arbitration, language, selection of arbitrators, extent, if any, of discovery, etc. These decisions are contract specific and need to be addressed on a case-by-case basis.