Complex Arbitrations: An Overall View of the ICC Rules - I
Complex arbitrations are one of the most complicated issues in the arena of international arbitration. The need to resolve complex disputes that arise out of commercial transactions with multiple contracts and multiple parties, on the one hand, and the consensual nature of arbitration agreements, on the other hand, raise several procedural and jurisdictional problems.
One of the topics of the ICC Young Arbitrators’ Forum’s event that was held in Istanbul on 21 March 2019 focused on complex arbitrations. This article series summarize the discussions that took place during that event.
The Reasons Underlying Adoption of the ICC Rules on Complex Arbitrations
In 2012, the International Chamber of Commerce (“ICC”) updated its arbitration rules (“ICC Rules”) to regulate complex arbitrations. The rules adopted in 2017 preserved the perspective that had been adopted in 2012.
Prior to entry into force of the 2012 ICC Rules, the ICC International Court of Arbitration (“Court”) already had extensive and established practices on these issues. However, these issues were dealt with using the broad interpretation of arbitration agreements, particularly with extensions of arbitration agreements to non-signatories, using the Court’s discretion on prima facie assessments as to jurisdiction. The 2012 ICC Rules codified the existing practices of the Court under the 1998 ICC Rules. These rules brought predictability to the arbitration community, and also provided the Court, the arbitral tribunals, and the parties, with a procedural framework.
The main reason for these complex arbitrations provisions is the rise in the amount of cases extending beyond the classic bipolar model of arbitration. This is a natural consequence of rapidly increasing complex transactions in which multiple parties are involved, and the parties to transactions concluding more than one contract. In such relations, the outcome of these types of arbitrations may affect third parties. Also, there may be direct claims, counterclaims, cross claims, as well as recourse claims between the parties.
According to the 2017 statistics of the ICC, greater than one-third (37%) of their cases involved multiple parties. Out of these multiparty cases, 13% were comprised of more than five parties; whereas, this rate was 3% for cases involving more than ten parties. The most common configuration in multiparty cases was one claimant versus several respondents (54%), with one case involving as many as 36 respondents.
The Structure of the ICC Rules Related to Complex Arbitrations
The ICC Rules cover complex arbitrations that fall into the provisions as set forth, below:
- Article 7 as to the joinder of additional parties;
- Article 8 as to the claims between multiple parties;
- Article 9 as to arbitrations that are based on multiple contracts; and
- Article 10 concerning the consolidation of arbitrations.
Articles 7 and 8 may be referred to as the basis for multi-party arbitrations; whereas, Article 9 may be classified as the basis of multi-contract arbitrations. Article 10 covers both of these matters.
The ICC Rules’ provisions on complex arbitrations make clear reference to Article 6 of the ICC Rules that regulate the effect of arbitration agreements. Although the ICC Rules regulate provisions on “multi-party arbitrations” and “arbitration with multiple contracts,” the alternative dispute resolution nature of arbitrations, based on the consent of the parties, should not be forgotten. For this reason, when the rules of complex arbitrations are examined (namely Articles 7-10), Article 6 and its subparagraphs 3 to 7, should always be taken into consideration, as well.
Under the provisions of complex arbitrations, Article 10, which regulates the consolidation of arbitrations, stands alone by not making any reference to Article 6(3)-6(7). This is conceivable as Article 10 covers the period after the prima facie assessment as to jurisdiction is made by the Court, and the subject matter concerning consolidations concerns arbitrations that are pending.
In addition to Articles 7-10 and 6(3)-(7) of the ICC Rules, Article 4(3) on Request for Arbitration, Article 5(5) on Answer to the Request for Arbitration, Article 12 on Appointment of Arbitrators, and Article 36 on Advance on Costs, are also influenced by the provisions on complex arbitrations. However, in this article series, only Articles 7-10 and 6(3)-(7) of the ICC Rules will be examined.
Articles 6(3)-(7) of the ICC Rules
The consensual nature of arbitration as a dispute resolution mechanism is emphasized again via the references to Article 6(3)-6(7) in Articles 7-10. Moreover, these references reiterate two basic principles of arbitration: prima facie assessment of the Court and competence-competence. Article 6(3) and 6(5) set forth that the jurisdictional issues are decided by the Court on a prima facie basis, and will finally be resolved by the arbitral tribunal.
The provisions of Article 6(3)-(7) follow a specific order. Article 6(3) and Article 6(5) regulate the authorities in assessing matters of jurisdiction. This article grants a gatekeeping role to the Secretary General. Unless the Secretary General refers the matter to the Court, jurisdictional issues do not prevent arbitrations from proceeding, and the arbitral tribunal decides, in its sole discretion, either in the final award, or in a separate preliminary award, its findings as to jurisdiction. The Secretary General shall not refer the matter to the Court, unless he/she is unclear as to the prima facie jurisdiction of the arbitral tribunal. With this authority, the Secretary General’s rendering of a positive decision is the first step as to prima facie jurisdiction of the arbitral tribunal. However, the Secretary General is not authorized to render a negative decision with respect to jurisdiction.
Article 6(4) regulates the authority of the Court to decide as to jurisdiction, and to what extent the arbitration shall proceed in cases the matter is referred to the Court. If the Court renders a negative decision, the arbitration shall not proceed, and Articles 6(6)-(7) of the ICC Rules will be applicable; otherwise, the arbitration shall proceed. In such case, the Court’s decision is only administrative and temporary, and any arguable questions as to jurisdiction are to be dealt with by the arbitral tribunal (Article 6(5)). What is remarkable in Article 6(4) is that unlike the 1998 ICC Rules, the Court may decide to allow arbitrations only for some parties and for some claims, rather than declaring a negative jurisdictional decision for all of the parties and claims.
Article 6(4)(i) relates to multi-party arbitrations; whereas, Article 6(4)(ii) sets forth the requirements for multi-contract arbitrations if there are multiple arbitration agreements. It should be underlined that “multiple contracts” and “multiple arbitration agreements” are separate issues and have different legal effects. Article 6(4)(ii) applies only in cases where there are multiple arbitration agreements. If there are multiple contracts but only one arbitration agreement, only Article 9 applies, and the requirements set forth under Article 6(4)(ii) will not be sought.
As a reflection of the competence-competence principle, Article 6(5) states that the arbitral tribunal is the final authority to decide on jurisdictional issues, except in cases where the Court has granted a negative decision that prevents the arbitration from proceeding. As mentioned above, upon the Court’s negative decision as to jurisdiction, the arbitration shall not proceed, the proceedings shall be concluded, and the file shall not be transmitted to the arbitral tribunal.
Article 6(6) and Article 6(7) regulate the stages following the Court’s negative decision. Article 6(6) relates to the parties that are excluded from the arbitration by the Court’s negative decision as to jurisdiction; whereas, Article 6(7) relates to claims excluded by the Court. Pursuant to Article 6(6), where the Court has decided that the arbitration cannot proceed in respect of some or all of them, any party retains the right to ask any court having jurisdiction whether or not, and in respect of which of them, whether there is a binding arbitration agreement. Article 6(7) sets forth that where the Court has decided that the arbitration cannot proceed in respect of any of the claims, such decision shall not prevent a party from reintroducing the same claim at a later date in other proceedings.
In this first article of the article series on complex arbitrations, the structure of the ICC Rules on complex arbitrations is examined. The details of the ICC Rules, and the requirements thereto, will be examined in the upcoming articles.