On March 1, 2017, the new Arbitration Rules of the International Chamber of Commerce (“ICC-Rules”) come into force. In Art. 30 and Annex VI, they contain specific provisions for an Expedited Procedure (“Fast-Track Arbitration”). The characteristic features of the new Expedited Procedure are that a sole arbitrator with extended powers shall render an arbitral award within six months after a limited establishment of the facts and optionally without a hearing.
Expedited Procedures by which disputes can be settled faster and more cost-efficiently are not new in arbitration. For example, the Swiss Rules, the SIAC-Rules, the HKIAC-Rules or the ICDR-Rules have been providing such a procedure for a number of years. The new rules will thus bring the ICC in line with other leading arbitration institutions.
1. “Automatic” Application to Disputes up to USD 2 million
By agreeing to arbitration under the new ICC-Rules, the parties also agree to the Expedited Procedure Provisions. One of the core features of the new ICC-Rules is that all ICC arbitrations with an amount in dispute of US-$ 2 million or less will “automatically” be governed by the Expedited Procedure Rules if the arbitration agreement was concluded after March 1, 2017 (Art. 30 paras. 2 a, 3 a ICC-Rules, Art. 1 para. 2 Annex VI ICC-Rules). In these “smaller” disputes, the ICC assumes that the case is suitable for the Expedited Procedure and that the parties are interested in conducting the arbitration proceedings in a more cost- and time-efficient manner. If the parties do not want to apply the Expedited Procedure, they can “opt out” of the new rules in the arbitration agreement (Art. 30 para. 3 b ICC-Rules). If a dispute involves amounts exceeding the US-$ 2 million threshold, the parties can likewise agree to the application of the Expedited Procedure pursuant to Art. 30 para. 2 b ICC-Rules.
The “automatic” application of the Expedited Procedure in “smaller” disputes has been proven in practice. Already in 2004, the Swiss Rules introduced this “opt-out” mechanism for disputes up to CHF 1 million. The feedback was very positive. In 2015, 43% of all new arbitrations filed with the Swiss Chambers were conducted as Expedited Procedures based on the “automatic” application of the Rules or express agreement of the parties. Since almost one third of the arbitration proceedings brought before the ICC each year have a value in dispute below US-$ 2 million, it is to be expected that a significant number of future ICC arbitration proceeding will be conducted as Expedited Procedures.
2. Appointment of a Sole Arbitrator vs. Agreement on Three-Member Tribunal
In the Expedited Procedure, Art. 2 para. 1 Annex VI ICC-Rules gives the International Court of Arbitration (“Court”) the power to appoint a sole arbitrator, even if the arbitration agreement provides for a three-member tribunal. Pursuant to Art. 30 para. 1 ICC-Rules, the power of the Court to appoint a sole arbitrator takes precedence over the parties’ individual agreement on the number of arbitrators in the arbitration agreement. The appointment of a sole arbitrator is intended to significantly reduce the costs and to accelerate the proceedings. The time that is needed to select an arbitrator, the risk of objections to the constitution of the tribunal, the increased availability problems of three-member tribunals as well as the extra time needed to deliberate and discuss the award often delays arbitration proceedings.
However, even in “smaller” cases parties often prefer three arbitrators. The main question in practice will thus be how to agree on a three-member tribunal in the Expedited Procedure. It is clear that the power of the Court to appoint a sole arbitrator pursuant to Art. 2 para. 1 Annex VI ICC-Rules is discretionary (“The Court may (…) appoint a sole arbitrator”). The appointment of a sole arbitrator shall be the rule in the Expedited Procedure, but this is not mandatory. Therefore, even in the Expedited Procedure the parties can agree on a three-member tribunal. An express party agreement on the number of arbitrators in the Expedited Procedure should limit the Court’s discretionary power with the effect that it has to deviate from the rule and must appoint a three-member tribunal. The supplement to the arbitration agreement could e.g. read as follows: “The number of arbitrators is three – also in the Expedited Procedure”. On the other hand, where the parties have not entered into a specific agreement on the number of arbitrators in the Expedited Procedure, the Court’s discretionary power to appoint a sole arbitrator remains.
3. Time Limit of Six Month to Render the Award
Pursuant to Art. 4 para 1 Annex VI ICC-Rules, the time limit for the arbitral tribunal to render the award is six months including the scrutiny of the award by the Court (Art. 34 ICC-Rules). The time limit starts to run with the case management conference which shall take place no later than 15 days after the transmission of the file to the arbitral tribunal (Art. 3 para. 3 Annex VI ICC-Rules). In order to save time and costs, Terms of Reference are excluded in the Expedited Procedure (Art. 3 para 1 Annex VI ICC-Rules). The Court will only grant extensions of the six month time limit in limited and justified circumstances. For the Court, compliance with the time limit is an essential duty of the arbitral tribunal and the Court will closely monitor the management of the case to ensure that the time limit is respected. As in regular ICC-proceedings, the Court may apply financial penalties if there is a delay in the submission of the draft award (Art. 2 para 2 Annex III ICC-Rules).
4. Procedural Rules vs. Parties’ Agreements
To safeguard compliance with the strict time limit, the Expedited Procedure Provisions give the arbitral tribunal extended powers to determine the procedural rules. Pursuant to Art. 3 para. 4 Annex VI ICC-Rules, the arbitral tribunal has discretion to adopt such procedural measures as it considers appropriate. In doing so, the arbitral tribunal may limit the number, length and scope of written submissions and of written witness statements and expert opinions. Moreover, it may decide not to allow requests for document production. Pursuant to Art. 2 para. 5 Annex VI ICC-Rules, the arbitral tribunal may also decide the dispute solely on the basis of the documents submitted by the parties with no hearing and no examination of witnesses or experts. Alternatively, the arbitral tribunal may conduct hearings by video or telephone conference.
Nevertheless, party autonomy takes priority: if the parties agree on specific procedural rules to conduct the Expedited Proceedings, the arbitral tribunal is bound by them. If however the procedural agreements deviate too much from the Expedited Procedure Rules so that the conduct of a time- and cost-efficient arbitration is not possible, the Court may determine that the Expedited Procedure Provisions shall no longer apply to the case and that the proceedings have to be continued as regular ICC arbitration proceedings (Art. 30 para. 3 c ICC-Rules, Art. 1 para. 4 Annex VI ICC-Rules).
5. Consequences for the Drafting of ICC Arbitration Agreements
With the new Expedited Procedure, disputes can be resolved faster and more cost-effective. Because of the limited possibilities and limited time to present the facts of the case and the legal arguments, the Fast-Track Procedure is not suitable for every dispute. Due to the “automatic” application of the Expedited Procedure to disputes of US-$ 2 million or less, the parties should only agree on the ICC standard arbitration clause if they deem the Expedited Procedure appropriate for disputes up until the threshold, are interested that the dispute is decided in a more cost- and time-efficient manner by a sole arbitrator and accept the potential risks associated with the Expedited Procedure. Alternatively, the Expedited Procedure Provisions offer the parties a range of opportunities to decide when and how the Expedited Procedure should be applied:
- Agreement on a Deviating Threshold
Pursuant to Art. 30 para. 2 b ICC-Rules, the parties are free to agree on a higher or lower threshold up until which the Expedited Procedure is to be applied “automatically”. It depends on the individual case which threshold value is appropriate. General statements in this regard are hardly possible, since the complexity of a dispute does not depend on the amount at issue. Whether a claim of USD 1 to 2 million is founded or not can also have an existential meaning for one company, but not for another.
- Agreement on Expedited Procedure for Certain or All Disputes
Art. 30 para. 2 b ICC-Rules also allows the application of the Expedited Procedure to all or certain disputes if the parties are willing to settle these disputes within approx. six to nine months. The parties should take into account the risks associated with a procedure that is limited in time. Moreover, if a dispute is not suitable for the Expedited Procedure, the Court may decide pursuant to Art. 30 para. 3 c ICC-Rules or Art. 1 para. 4 Annex VI ICC-Rules respectively that the regular ICC arbitration proceedings apply.
- General Exclusion of Expedited Procedure
If it is foreseeable when concluding the contract that future disputes will require an extensive clarification of facts or of technical issues, it can be useful to exclude the Expedited Procedure in the arbitration agreement in accordance with Art. 30 para. 3 b ICC-Rules. The same applies if the parties are of the opinion that the Expedited Procedure is not suitable for a diligent dispute resolution.
- Individual Amendment of the Expedited Procedure Rules
Finally, the parties may consider individual changes or amendments to the Expedited Procedure Rules. The parties can exclude the appointment of a sole arbitrator by expressly agreeing on a three-member tribunal for the Expedited Procedure. Of course, in this case the cost saving will be significantly less compared to regular ICC arbitration proceedings. Another example is to extend the period specified for rendering the arbitral award provided for in Art. 4 para. 1 Annex VI ICC-Rules from six to nine months.