The ICDR's International Arbitration and Mediation Rules 2021: key amendments including four novel changes not seen in other recently released institutional rules

In 2020 and early 2021, we witnessed the publication of revised arbitration and mediation rules by a number of well-known arbitral institutions, including the LCIA, the DIFC-LCIA and the ICC.  The International Centre for Dispute Resolution ("ICDR") – the international wing of the American Arbitration Association ("AAA") – is the latest reputable international arbitration institution to revise its rules.  Following a year-long review of the International Dispute Resolution Procedures, the ICDR released revised International Arbitration and Mediation rules, effective 1 March 2021. They apply to any arbitration or mediation commenced after that date, unless agreed otherwise.

Following our previous updates concerning the key changes to the ICC Rules 2021 and the DIFC-LCIA's 2021 Rules, this update will highlight the key amendments to the ICDR's International Arbitration Rules 2021 (the "ICDR Rules"). It will begin with novel changes not seen in the LCIA Arbitration Rules 2020 (the "LCIA Rules"), the DIFC-LCIA Arbitration Rules 2021 (the "DIFC-LCIA Rules") and the ICC Arbitration Rules 2021 (the "ICC Rules"). While this is an arbitration-focused update, it will also touch on the key changes to the ICDR's International Mediation Rules 2021 (the "Mediation Rules").

Novel Amendments

1. The ICDR's big mediation drive

There is now a presumption under the ICDR Rules that the parties will mediate under the Mediation Rules concurrently with the arbitration. However, the parties can opt out of this requirement or elect not to participate in mediation (Article 6). When filing the notice of arbitration and the answer, the claimant(s) and the respondent(s) are required to state whether they are "willing to mediate the dispute prior to or concurrently with the arbitration" (Article 2(3)(g) and Article 3(4)), so this could be an ideal time to opt out, if appropriate. Previously, a party was simply required to state if it had any interest in mediating the dispute.

With the updated Mediation Rules at their disposal, parties may be incentivised by this new approach. So now is time for a brief detour to take a look at the headline changes under the Mediation Rules.

The latest Mediation Rules:

• emphasise the ICDR's role in assisting the parties' endeavours to find a mutually agreeable mediator (Rule M-4);
• reinforce each party's responsibility to ensure the attendance (at the mediation) of a representative with the authority to commit to the execution of a settlement agreement (Rule M-10);
• highlight the mediator's responsibility to help the parties reach a satisfactory resolution of their dispute (and not to impose any settlement) (Rule M-8); and
• require the mediator to conduct the case with a view to expediting such resolution, expressly referencing the possibility of a "preparatory conference" promptly after appointment (Rule M-9).

Importantly, the Mediation Rules also make reference to the need to address cybersecurity, privacy and data protection issues early on (Rule M-9), something which should already be happening. But being enshrined in the Mediation Rules serves as a useful reminder to parties and mediators not to forget such issues. 

Another useful addition is a default language which applies if the parties have not agreed the language of the mediation, namely the language of the documents containing the mediation agreement (Rule M-7). 

Perhaps most significantly, the Mediation Rules now also refer to the ability of the mediator or the ICDR to issue an attestation for the purpose of enforcing the settlement agreement under the Singapore Convention on Mediation (the "Singapore Convention") (Rule M-14(e)). Hailed to be the next New York Convention for the world of mediation, the newly in-force Singapore Convention provides a process for directly enforcing cross-border settlement agreements between parties resulting from mediation. This allows the party seeking enforcement to apply directly to the courts of the member State where the assets are located. To date, 53 States have signed the Singapore Convention, including the world's two largest economies, the United States and China.  While the UK has not yet signed it, UK disputants may still be able to use the Singapore Convention because it applies where two parties based in Europe mediate and the place: (i) where the settlement agreement is to be performed; or (ii) where the subject matter of the settlement agreement is most closely connected, is in a State that has signed the Singapore Convention. Hence, unlike the New York Convention, it is not based on reciprocity.

Turning back to the second "novelty" of the ICDR Rules:

2. Disclosure of Third-Party Funders and Insurers

The ICDR's former rules were silent on third-party funding, but this is no longer the case.  Now the tribunal may – on its own initiative or on an application from a party – require parties to disclose:

• whether any non-party (such as a third-party funder or an insurer) has undertaken to pay or to contribute to the cost of a party's participation in the arbitration, and if so, to identify the person/entity concerned and to describe the nature of the undertaking (Article 14(7)(a)); and
• whether any non-party has an economic interest in the arbitration's outcome and if so, to identify the person/entity concerned and to describe the nature of such interest (Article 14(7)(b)); such non-party expressly includes funders, insurers, parent companies and ultimate beneficial owners.

The LCIA Rules and the DIFC-LCIA Rules contain no provisions in relation to the disclosure of third party funding. While the ICC's 2021 rules expressly provide for disclosure of third party funding, the ICDR disclosure provisions are broader than the ICC Rules since they expressly cover all insurance arrangements and entities like parent companies and ultimate beneficial owners who have an economic interest in the case outcome. 

Various stakeholders are likely to raise questions and potential concerns about these provisions.  For example, insurers may now be less comfortable insuring contracts subject to the ICDR Rules and prefer the 2014 version of the ICDR Rules, which allows the confidentiality of their arrangement to be safeguarded.  In turn, this may cause some parties (particularly those who regularly seek legal risk insurance) to draft their arbitration clauses to expressly cater for the 2014 version of the ICDR Rules. 

The rationale behind this provision is a sound one (the need to preserve arbitrators' impartiality and independence), but given its breadth, it runs the risk of parties using this to issue more time-consuming and costly disclosure applications that might not be strictly justified or necessary. It will be interesting to see how this provision is applied in practice.

3. Focus on arbitrators' ethical obligations

Arbitrators' independence and impartiality remains a hotly debated topic in international arbitration and often forms the basis for challenges in arbitration. The ICDR Rules reconfirm an arbitrator's obligation to be "impartial and independent" - an obligation which is also reflected in the ICC Rules, LCIA Rules and the LCIA-DIFC Rules. Importantly, they now also expressly require arbitrators to comply with The Code of Ethics for Arbitrators in Commercial Disputes in addition to the ICDR Rules and the terms of their Notice of Appointment.  The express requirement of compliance with a specific ethical code is a positive change, not seen in the other institutional rules noted above. However, it remains to be seen whether adherence to this code will serve not only to maintain high standards of integrity but also to reduce arbitral challenges.

4. New basis for arbitrator challenges

Staying on the topic of challenges, the ICDR Rules, the ICC Rules, the LCIA Rules and the DIFC-LCIA Rules all permit a challenge to arbitrators on the basis of an alleged lack of impartiality or independence.  Interestingly though, the ICDR Rules introduce an additional new ground for challenging arbitrators: namely, where the arbitrator fails to perform his or her duties (Article 15).  While this broadly worded addendum could lead to increased arbitrator challenges under the ICDR Rules, it could also spur arbitrators to act with greater efficiency and responsibility.  Time will tell how this plays out.

Other noteworthy changes (which feature similarly in other institutional rules)

5. Decision-making on arbitrability is for arbitrators

Article 21 gives the tribunal the authority to decide issues of arbitrability and jurisdiction without any need to refer such matters first to a court.  Why was there seen to be a need to strengthen the concept that the tribunal has the jurisdiction to determine arbitrability objections without court involvement? According to this ICDR and AAA statement: "The reason for this change is to counteract any doubt about the effect on this rule by the recently adopted Restatement of the U.S. Law of International Commercial and Investor State Arbitration (ALI 2019) (Restatement). The Restatement adopted a position, contrary to the weight of case law, concerning when the incorporation of arbitration rules into an arbitration agreement may constitute the “clear and  unmistakeable evidence” of an intention to delegate questions of arbitrability to arbitrators, rather than to courts, as required by the Supreme Court in First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)." 

One of our authors, Charles Harris, moderated a session at the ICDR America’s Conference late last year about these revisions to Article 21 before their adoption. While there was some confusion among the international lawyers in the session about the reason for the change, the change can be considered prudent in light of the patchwork of judge-made law in the United States that controls when a threshold issue of arbitrability is for judicial determination or for an arbitrator to decide. In short, Article 21 is intended to avoid any doubt that, under the principle of competence-competence incorporated into the ICDR Rules, arbitrators have the jurisdiction to rule on their own jurisdiction and proceed with arbitration if they uphold it, without a court ruling on the jurisdictional objections.

It will be interesting to see what, if any, effect revised Article 21 has on parties’ conduct, given that arbitrators cannot preclude a party from raising its jurisdictional objections to arbitration in court and requesting that the court stay arbitration pending the judicial decision.

6. New consequences related to deposit payments

One common tactic seen in international arbitration is a respondent's refusal to pay the deposit requested by the institution to exert pressure on the other side to do so.  With some institutions, like the LCIA and the DIFC-LCIA, it is a matter of discretion whether such failure will lead to the withdrawal of the defaulting party's claim or counterclaim. However, similar to the ICC Rules, the ICDR Rules have gone further and proclaim that failure to pay "will result in withdrawal" of that party's claim or counterclaim (Article 39(3)).  While such party could still defend a claim or counterclaim, this rule will likely reduce such tactical behaviour where a respondent has a counterclaim it seeks to pursue.

On a related issue (but not a novelty compared to the other institutional rules), Article 39(3) also now expressly permits a paying party who has paid any deposit or fees on another party's behalf (for example in the scenario referred to above) to seek a separate debt award from the tribunal.  This clarity is useful: paying parties can therefore apply for recovery of the deposit, together with any interest, and it appears they can do so during the arbitration as soon as they have made the payment. If more than one party has paid, the tribunal may make an award as to each paying party. This solution helps reduce the chance of the case being suspended or terminated by the tribunal, which it is entitled to do "if no party is willing to make the requested deposits" (Article 39(5)). 

7. Expanded scope of the Expedited Procedures

The Expedited Procedures will now apply by default to cases in which no claim or counterclaim exceeds USD 500,000 (exclusive of interest and arbitration costs), which is double the threshold under the previous rules (USD 250,000).  However, the ICDR Rules remain flexible, allowing parties to opt for the Expedited Procedures "on matters of any claim size."  This could be canvassed in the parties' arbitration agreements (and the ICDR has a recommended clause for doing so), or agreed post-dispute.  

In view of the benefits of the Expedited Procedures, arbitral users are likely to welcome this change. The benefits include:

• an expedited arbitrator appointment process (with party input),
• typically an early procedural hearing,
• an expedited case timetable (with limited, if any, hearing days and a presumption that cases involving claims or counterclaim of up to USD 100,000 will be decided based on documents only); and
• an award within 30 calendar days of the close of the hearing or the date established for the receipt of the parties’ final statements and proofs.

8. Early disposition of issues

The ICDR Rules seek to promote increased efficiency and cost savings by addressing early disposition of issues, a trend seen in the rules of other major arbitral institutions.  Specifically, parties may seek permission to submit an early disposition application, which will be allowed if it has a reasonable possibility of success, will dispose of or narrow one or more issues, and add economy when compared to determining the issue(s) at the merits phase (Article 23(1)).  Both parties have the right to be heard on the issue of whether leave to file the application should be granted and, if leave is granted, whether early disposition should be granted (Article 23(2)). 

In May 2019 we published an article (available here) on the impact of summary disposition on international arbitration, and we correctly predicted that the ICDR (and the LCIA) were likely to take this step.  According to a statement issued by members of the ICDR Committee, this rule was "thoroughly analysed to accommodate and balance practice styles amongst practitioners in jurisdictions and legal systems around the world."

Overall, we are in favour of this new option being available to users.  The strict three-pronged legal standard and the tribunals' authority to award any order or award in connection with the early disposition of an issue (Article 23(3)), including a costs order, should help protect against this mechanism being used as a dilatory tactic. However, Article 23 does not protect fully against arbitral delays since it does not set timeframes for completion of the summary disposition process.

9. Expanded application of joinder and consolidation

Similar to the ICC Rules, Article 8(1) has now been amended to permit a tribunal, once constituted, to join an additional party if that additional party consents and provided it is appropriate to do so. Since non-joining parties no longer need to agree, joinder should be easier to achieve than it was under the previous rules. While, unlike the ICC Rules, there is no express requirement that the joining party needs to accept the tribunal that has been constituted, this is implicit in the additional party’s consent.

The circumstances for consolidation have also been expanded under Article 9(1) in two ways. Firstly, consolidation of arbitrations involving "related parties" is now possible (previously it was only for the "same parties") provided other conditions are met, namely the disputes in the arbitrations arise in connection with the same legal relationship and the "arbitration agreements may be compatible".

This is quite different than the ICC's position, because the ICC Court can only consolidate arbitrations involving different parties where the claims are made under the same arbitration agreement(s). Further, where the claims are not made under the same arbitration agreement(s), the ICC Court can only consolidate if different arbitrations involve the same parties, the disputes arise in connection with the same legal relationship and the arbitration agreements are found to be compatible (by the ICC Court). By way of additional comparison, the LCIA Rules require the same or compatible arbitration agreements if a tribunal (or the LCIA Court) is to consolidate arbitrations arising out of the same transaction or series of related transactions (or between the same parties).

Having adopted the phrase "arbitration agreements may be compatible", it is not clear why the ICDR has chosen to use the word "may".  It could signal that the compatibility of the agreements should be less important in determining any consolidation application and that instead, the focus will be on the relationship between the parties. The more permissive consolidation rules should, in any event, help parties avoid the “consolidation dilemma”, in which multi-contract transactions between principal and ancillary parties are broken into separate arbitrations.  This, too, is a subject that we have previously addressed in a publication available here.

Secondly, the ICDR Administrator may now appoint a consolidation arbitrator on its own initiative.  This is in addition to a party being able to request a consolidation arbitrator, which was the only option available under the predecessor rules. A consolidation arbitrator may be needed where parties seek to consolidate two or more cases under any arbitration rules issued by the ICDR.

The power of the institution to be able to propose and appoint a consolidation arbitrator of its own accord, without any suggestion being made by the parties to do so, is a bold one.  While this should, as noted above, help to avoid the “consolidation dilemma”, it also provides less predictability for parties who now need to be alive to the risk that they may end up arbitrating with related parties under different arbitration agreements. 

10. New rules adapted to our digital world

Last updated in 2014, the ICDR Rules have now been revised to take account of the increased digitalisation of international arbitration.  Articles 22 and 26 both recognise that procedural and final hearings (including witness testimony) may be conducted by video, audio or other electronic means and the same applies to expedited proceedings in which there is an oral hearing (Article E-9) and to mediations under the Mediation Rules. 

As a corollary, the ICDR Rules also oblige the parties and the tribunal to discuss data protection, privacy and cybersecurity and hence work to ensure adequate compliance and security for their case. The ICDR also sends the parties useful resources in each case (AAA-ICDR Best Practices Guide and AAA-ICDR Cybersecurity Checklist).  The parties should also consider the adoption and use of online case management platforms early on, with the above issues in mind, and are free to make use of other tools, such as the recently launched Protocol for Online Case Management in International Arbitration designed to assist with an arbitration (regardless of jurisdiction, subject matter or applicable rules).

Also aimed at meeting the challenges forced on the arbitral world by the COVID-19 pandemic, Article 32(4) permits electronically signed awards and orders. However this general position is subject to three sensible exceptions namely,

• the applicable law requires a physical signature;
• the parties agree that a physical signature is necessary; or
• the tribunal or the institution determines that a physical signature is appropriate.

11. Tribunal secretaries

New Article 17 confirms that the tribunal may, if it has the parties' consent, appoint a tribunal secretary, who will act in accordance with ICDR guidelines.  Exclusion of liability has also been extended to any arbitral tribunal secretary under Article 41. This is significant because the immunity from claims that cloaks arbitrators has not applied with the same universality to tribunal secretaries, despite the fact that institutional guidelines could provide them with some protection in this sense.

12. ICDR's publication of awards

The rules relating to the publication of awards have not only been moved (they are now addressed as a matter of confidentiality under Article 40 rather than under the article entitled "Time, Form and Effect of Award") but they are now more specific.  In particular, unless any party provides a written objection to publication within 6 months from the date of the award, the ICDR may publish selected awards, orders, decisions and rulings which have been redacted to conceal party names and other identifying details (Article 40(4)).  This provides useful clarity for parties and promotes increased transparency of arbitral decision-making under the ICDR Rules.

Other minor changes under the ICDR Rules

• Codification (for transparency) of the ICDR's existing practice of having the International Administrative Review Council decide arbitrator challenges and other administrative disputes, including those concerning: (i) the number of arbitrators to be appointed; (ii) compliance with the administrative requirements to file a case; and (iii) the place of arbitration (subject to the tribunal's final determination) (Article 5). 
• Clarification and expansion of the requirements needed in an application for emergency relief from an emergency arbitrator (Article 7). Now, such an application must not only specify (i) the nature of the relief sought and (ii) the reasons why such relief is required on an emergency basis before the tribunal's appointment, but also (iii) the reasons why the party is likely to be found to be entitled to such relief and (iv) what injury or prejudice the party will suffer if such relief is not provided (the bold words reflect the new changes). 
•  A specific statement that the emergency arbitrator has the jurisdiction to rule on the emergency arbitrator’s jurisdiction (Article 7(3)) thereby removing any scope for doubt on this issue.
• Recognition, at Article 13(4), that in addition to making a direct appointment, the Administrator may send a list of potential arbitrators to the parties. 
• New presumption at Article 26 that witness statements "should" be used (as opposed to "may" be used), understood as a tool to promote efficiency and the more common practice of using witness statements to capture direct testimony.
• Express provision for the tribunal to make such order that it deems appropriate in the event a witness (whose appearance has been requested) fails to appear without a valid excuse. Such order may include "reducing the weight to be given to the statement(s) or disregarding the statement(s)" (Article 26(4)).
• Renaming of the preparatory conference to “procedural hearing,” emphasizing the importance of this meeting to both advocates and users since it is at this meeting that important procedural matters are discussed for inclusion in the first procedural order.
•  Express provision for parties to be able to object to two arbitrators continuing the arbitration if the third arbitrator failed to participate (Article 16(3)).
• Clarification that arbitrators' fees and expenses, including applicable taxes, form part of the costs of the arbitration (Article 37(a)).

Concluding remarks on the ICDR Rules

While they are not a wholesale re-write, the new ICDR Rules will impact the way in which arbitrations are conducted. The ICDR has been bold in including some novel provisions that have not been adopted in other institutional rules. Some of these are important, particularly the presumption that parties will mediate, the ICDR Administrator's power to appoint a consolidation arbitrator on its own initiative, and the very broad disclosure requirement under Article 14(7).