On 1 March 2017, the new rules of the ICC International Court of Arbitration (the « ICC Rules ») will enter into force with a major innovation, the automatic application of an expedited arbitration procedure for all disputes under USD 2 million. This revision of the 2012 ICC Rules is part of a series of measures taken by the ICC to make the arbitration procedure faster and more efficient (see, for example, our latest posts on the subject here and here).
Contrary to the ICC’s former guidelines for “small claims” in arbitration, whereby the « fast track » required to “opt-in”, i.e. an express reference in the arbitration clause, the new expedited procedure will apply automatically to all the arbitration agreements concluded after the 1st of March 2017, except where the parties have agreed to “opt-out”, i.e., explicitly exclude this accelerated procedure in the arbitration clause.
If the principle of this procedure is embodied in a new Article 30 of the ICC Rules, the procedure in itself is detailed in Appendix VI, created for its inclusion.
What are the conditions for the application of the expedited procedure?
The expedited procedure will be automatically implemented when the amount in dispute does not exceed USD 2 million at the time of receipt of the Answer to the request for arbitration (Article 30(2)(a) of the ICC Rules and Appendix VI, Article 1(2)):
- The amount will be calculated on the basis of the principal claims and counterclaims;
- If the amount in dispute changes during the proceeding the Court may, on its own motion or upon the request of a party, at any time and after consultation with the arbitral tribunal and the parties, decide that the provisions relating to the expedited procedure no longer apply; in this case the « classic » procedure will then be implemented (Appendix VI, Article 1(4)), including notably the signature of the Terms of Reference;
If the parties’ claims are not quantified, it would appear that the expedited procedure is not applied.
The amount limit of USD 2 million corresponds to approximately one third of the disputes submitted to the ICC.
This procedure may also be implemented by agreement of the parties (Article 30(2)(b) of the ICC Rules), even if the amount in dispute exceeds the USD 2 million threshold or if the arbitration agreement was concluded before 1 March 2017.
Conversely, if the parties do not want the expedited procedure to be applied, even if the amount in dispute is less than USD 2 million, then they will have to stipulate it explicitly in the arbitration agreement, i.e., « opt-out » (Article 30(3)(b) of the ICC Rules).
If, on the other hand, they have not excluded it from the arbitration agreement, the ICC Rules provide that the Court, either upon the request of a party before the constitution of the arbitral tribunal or on its own motion, may determine that it is not appropriate in the circumstances to apply the expedited procedure provisions (Article 30(3)(c) of the ICC Rules): this could occur, for example, in complex cases in which the amount in dispute is relatively low.
What are the key points of the expedited procedure?
- Disputes resolved in principle by a sole arbitrator
In principle, the disputes will be resolved by a sole arbitrator, even if the arbitration clause provides for three arbitrators (Appendix VI, Article 2(1)).
The parties retain the right to nominate the sole arbitrator, but within a limited time period to be fixed by the Secretariat of the Court; in the absence of a nomination, the Court shall appoint the sole arbitrator within as short a time as possible (Appendix VI, Article 2(2)).
- No Terms of Reference
Article 3(1) of Appendix VI expressly provides that Article 23 of the ICC Rules on the Terms of Reference does not apply. Two important consequences follow:
- No new claims may be made after the arbitral tribunal has been constituted, except with the authorization of the arbitral tribunal (Appendix VI, Article 3(2));
- The case management conference, which should normally be held « when drawing up the Terms of Reference or as soon as possible thereafter » in the « classic » arbitration proceedings (Article 24 of the ICC Rules), must take place no later than 15 days after the file was transmitted to the arbitral tribunal in the expedited procedure (Appendix VI, Article 3(3)).
- Flexible procedure
The arbitral tribunal has express discretion to adopt all procedural measures it deems appropriate after consultation with the parties (Appendix VI, Article 3(4)). For example, it can decide the dispute solely on the basis of the documents submitted by the parties, without holding a hearing or examining the witnesses. It may also conduct a hearing by videoconference or telephone (Appendix VI, Article 3(5)).
- 6 month time-limit to render the award
The arbitral tribunal must render its final award within six months from the date of the case management conference, time-limit which may be extended by the Court in accordance with Article 31(2) of the ICC Rules (Appendix VI, Article 4(1)). Beware, this period includes the the Court’s scrutiny of the award, so that in practice the arbitral tribunal has about 5 months to conduct the proceedings and render the award.
How much does the expedited procedure cost?
If the administrative costs remain unchanged, the arbitrators’ fees are subject to a special scale included in Appendix III of the ICC Rules (Appendix VI, Article 4(2)), which reduces them by approximately 20% compared to a « classic » arbitration.
While many questions remain about the application of the expedited procedure (in particular, whether the Court’s decisions will be published or the extent to which a tribunal of 3 arbitrators can be requested), this new procedure confirms the willingness of institutions to reduce the overall costs and duration of the procedure, the two evils of arbitration.
In addition to this major change, other changes have been made to the ICC Rules:
- Deadline of one month to transmit the signed Terms of Reference to the Court (Article 23(2) of the ICC Rules);
- The motivation of the Court’s decision on the appointment, confirmation, or replacement of an arbitrator may be communicated to the parties at the request of one party (Article 11(4) of the ICC Rules): it is the codification of a practice already announced here;
- The filing fee to request the commencement of an arbitration (Appendix III, Article 1(1) of the ICC Rules) is increased from USD 3,000 to USD 5,000.
The amended Rules are available here.