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ICC's New Arbitration Rules: Cheaper, Better, Faster?

Published on Sat, Nov 05,2011 | 09:58, Updated at Sat, Nov 05 at 10:20Source : CNBC-TV18 |   Watch Video :

International arbitration clauses are ubiquitous in most contracts. And research shows that the international chamber of commerce or ICC is the most popular arbitration center. So for those of you who go by the ICC – here’s some good news. it has made several unique changes to its arbitration rules – for instance allowing consolidation of claims and the provision of an emergency arbitrator. This not only puts ICC ahead of others such as the Singapore International Arbitration Centre or the London Court of International Arbitration; it, more importantly, cuts down time and cost of dispute resolution. Payaswini Upadhyay gets you the details.

A 2010 survey says that 70% of companies include an alternative dispute resolution mechanism in contracts to avoid court delays. This alternative dispute resolution or arbitration is often governed by international rules to provide neutrality especially in contracts with foreign parties. Of the half a dozen International Arbitration Centres, the International Chamber of Commerce or the ICC is the most commonly used one.

To keep pace with the growing needs of business, the ICC has made several unique changes in its arbitration rules that will become effective next year.

Marie Berard
Senior Associate, Clifford Chance

“Generally, from arbitration users, the main criticisms are that it is quite costly, it takes a while, lawyers are taking control of the process and it doesn’t really address the business needs of the users. And really what the new rules are trying to do now is to address these concerns of the users.”

The 3 most important changes that the ICC has made are in:

Tackling Jurisdictional Challenges
Emergency Arbitrator Procedure
And most importantly- Multi-Party and Multi-Contract Disputes

On the jurisdictional challenge front, the changes are designed to save time. Under the current rule, if a party to the contract questions the ICC's jurisdiction in spite of the contract specifying it as the arbitrator, the challenge proceeds in 4 steps

Procedural Step Time

Claimant's Request for Arbitration                                 Day ‘X’
Respondent's Answer                                                Day ‘X’+ 30 days
ICC Court Hearing                                                  10 days- 5 weeks
Appointment of Tribunal                                            2-3 months


In the new rules, ICC has done away with Step 3. Now, jurisdictional challenges will be heard by the tribunal directly.

Sanjay Asher
Partner, Crawford Bailey & Co.

“If it was referred to ICC court, it would’ve delayed the process whereas by giving this power to the arbitral tribunal itself, it would, in that sense expedite the process. And the examples why this was needed was one of the parties could always challenge the jurisdiction of ICC to administer the particular dispute in order to delay the process of resolving the dispute.”

Marie Berard
Senior Associate, Clifford Chance

“Just to give you an idea of the challenges, I think between 2006-2010, about a third of cases were challenged but only 4% of those were successful jurisdiction challenges – so as you can see there are a lot of unmeritorious challenges out there and it amounts to a waste of time. So under the new rules, the tribunals can decide these jurisdiction challenges, except if, the ICC Secretariat decides otherwise in rare cases and that is really the main change and that will speed up the process and is also consistent with the general principle of Kompetenz Kompetenz i.e. the tribunal can decide of its own jurisdiction.”

The second business need that the ICC’s new rules address is for situations where a party may require urgent relief. Under the current rule, if a party cannot wait for the approximately 2-3 months it takes to set up an arbitral tribunal, it has to approach a national court for relief. The new rule will allow parties to request for an emergency arbitrator who will be appointed by the ICC Court President within 2 days of the request. The emergency arbitrator has 15 days to deliver a decision.

Sanjay Asher
Partner, Crawford Bailey

“There are, in these fast growing world, emergency situations and the examples that i can give you is transfer of shares in case there is a share holder’s agreement or a joint venture agreement or asset stripping – in order to prevent asset stripping or transfer of shares, it is extremely necessary to have these emergency orders or emergency awards to be included in the Rules so that the parties’ interests are protected rather than, at a later date, make a claim for damages.”

Rajinder Sharma
Director Corporation Affairs & General Counsel - South Asia
Dupont

“By bringing in this clause, what has happened is – you know there is a risk when you got to the court. The Court can throw you out immediately saying that this is an arbitration matter, it is governed by an arbitration provision- so you go to the arbitration courts and get the benefits of interim injunctions. Now with this sort of clause in the arbitration rules itself, there will not only be saving of cost and time but the dependency on those external courts or the judicial courts in India would get reduced.”

But most importantly, the ICC’s new rules deal with the growing complexity of business disputes- by making provision for multi party and multi contract disputes. Companies will now be able to resolve disputes arising from multiple contracts with one party in one hearing. Also, the ICC Courts are now empowered to consolidate claims. For instance if there is considerable overlap between two claims being heard before the court at the same time, they can be clubbed to avoid the risk of contradictory judgments.

Sanjay Asher
Partner, Crawford Bailey

“It does make the life of corporates simple in as much as if there are more than one contract which a corporate has entered into with the same party, then it helps to resolve the issues rather than having multiple arbitration proceedings and getting the matters delayed; there could be inconsistencies as well.”

Rajinder Sharma
Director Corporation Affairs & General Counsel - South Asia
Dupont

“It’s a good provision. It allows a party the flexibility of bringing multi-parties under one arbitral tribunal. Let me give you an eg. Say I have given an EPC contract to L&T and L&T has sub contracted it to various other suppliers – civil contractors etc. Now if I have a dispute with L&T and though L&T is responsible as a principal employer or a principal contractor, it would be far more helpful for me, an as aggrieved party, to bring in those parties also into the dispute foray so that I have a complete disclosure of what transpired between L&T and its sub contractor. So it’s a good thing from an Indian perspective because most of the Indian EPC contracts, the project contracts- there is multiple sub contraction.”

Marie Berard
Senior Associate, Clifford Chance

“Same applies to joint ventures where, may be, you have one contract but more than two parties or in the insurance industry where quite often, there is re-insurance with the risk passing on for a series of contract-so nowadays there are so many cases of multi party contracts or multi contract situations and this is what the new rules have tried to address.”

Cheaper, faster, better- that’s what at least the ICC hopes its new rules would do to arbitration proceedings. But will it do wonders to dispute resolution in the Indian context is debatable because the endemic problem here is that the disgruntled party, in most cases, ends up challenging the arbitration award in the courts – which not only increases the pressure on the judiciary but also makes the arbitration process redundant.

 
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