New ICC Expedited Procedure: balancing efficiency with party autonomy

The ICC updated its rules on 8 December 2016, introducing an expedited procedure for "small" claims. We consider the advantages of this new procedure, and question whether it impairs party autonomy. We also provide tips for taking this into account when drafting an arbitration agreement.

2 January 2017

The International Court of Arbitration of the International Chamber of Commerce (ICC) launched its updated rules on 8 December 2016. The revised rules, which come into force on 1 March 2017, are designed to increase the efficiency and transparency of ICC arbitrations. The most significant change is the introduction of an expedited procedure for "small" claims of under US$2 million.

The establishment of an expedited procedure follows, and perhaps was made necessary by, the adoption of similar procedures by other arbitral institutions, including the Hong Kong International Arbitration Centre, the Singapore International Arbitration Centre, the Stockholm Chamber of Commerce, the Japan Commercial Arbitration Association, the Swiss Chambers of Commerce and the American Arbitration Association’s International Centre for Dispute Resolution.  

The ICC's 2015 statistics indicate that in 23% of new arbitrations submitted in 2015 the amount in dispute was under US$1 million. This represented a significant reduction in low value ICC arbitrations over the course of the preceding decade, with 44.5% of new cases submitted in 2006 having a value of under US$1 million. This suggests that ICC arbitration is more likely to be chosen in high-value, complex disputes, with parties likely to choose a different institution to resolve lower value disputes, possibly due to the perception that ICC arbitration tends to take longer and cost more than arbitrations in other arbitration institutions. The ICC Court intends that the newly adopted expedited procedure will encourage parties to adopt ICC arbitration in lower value disputes. Alexis Mourre, President of the ICC Court, commented that "Disputes will now be resolved on a very expeditious and cost-effective manner, providing an effective answer to the legitimate concerns of the business community as to time and costs."

The expedited procedure rules will automatically apply to ICC arbitrations in respect of disputes with a value of US$2 million or less, except: (1) where the arbitration agreement predates 1 March 2017; (2) where the parties have expressly agreed to opt-out of the expedited procedures; and (3) where the

ICC Court exercises its discretion to determine that the expedited procedure is not appropriate for the particular dispute. Additionally, parties can agree to opt-in to the expedited procedure where the value in dispute exceeds US$2 million.

The key features of the expedited procedure are:

  1. a sole arbitrator will be appointed by the ICC Secretariat, regardless of any agreement by the parties to appoint a three-member tribunal;
  2. the tribunal will not need to establish agreed Terms of Reference;
  3. the tribunal has discretion to adopt certain procedural measures such as prohibiting requests for document production, limiting the number and length of the parties' written submissions and witness statements, holding the hearing by videoconference or telephone, or alternatively dispensing with the hearing and making a decision on the basis of documents only;
  4. unless the Court grants an extension, the award must be given within six months of the case management conference which must be held within 15 days of the tribunal receiving the file. Extensions will only be granted in "limited and justified circumstances" either on the Court's own initiative or at the request of the tribunal; and
  5. the administrative and arbitral fees will be calculated on a reduced scale compared to non-expedited cases.

Each of these features is designed to reduce costs and improve efficiency, with some of the most expensive aspects of the arbitration process either limited or eradicated, namely document production, written submissions, witness statements and the oral hearing. Therefore, parties will be reducing their own legal costs as well as the administrative and arbitral fees being on a reduced scale. Additionally, the tribunal has a high level of discretion, enabling it to tailor the procedure to best suit each particular dispute.

Whilst the appointment of a sole arbitrator is more cost effective and leads to decisions being reached more quickly, the ICC Court's discretion to appoint a sole arbitrator, regardless of any agreement by the parties to the contrary, could be perceived as a restriction on the parties' autonomy. This could be a cause for concern for parties who want to utilise the expedited procedure but intend on there being a three member tribunal, as the ICC has said that "the ICC Court will normally appoint a sole arbitrator", suggesting that it will use its discretion in most cases.  

Other institutions with expedited procedures have taken different approaches in balancing expeditiousness with party autonomy. 

The Swiss Chambers of Commerce and the Hong Kong International Arbitration Centre give priority to party autonomy, by inviting parties to modify their agreement and appoint a sole arbitrator, failing which "low value" disputes (those worth below CHF 1 million and HK$25 million respectively) are resolved under the expedited procedure but with three arbitrators. The Japan Commercial Arbitration Association also allows party autonomy to prevail, with the expedited procedure automatically applying to disputes worth below ¥20 million, but becoming unavailable if the parties agree on more than one arbitrator. 

Conversely, under the Singapore International Arbitration Centre (SIAC) expedited rules which apply to disputes worth below S$6 million, a case is referred to a sole arbitrator unless the SIAC President determines otherwise, thereby overriding party autonomy.  This led to AQZ v ARA [2015] SGHC 49, a case before the Singapore High Court relating to an arbitration in which the SIAC President had determined that a sole arbitrator should be appointed, despite the parties' express agreement that disputes would be determined by three arbitrators. The court was asked to decide upon an application to set aside the resulting award on the basis that the arbitral procedure was not in accordance with the parties' agreement. The SIAC Rules 2007 were in force when the arbitration agreement was entered into and did not contain the expedited procedure provisions. However, the court applied the presumption that reference to rules containing primarily procedural provisions is a reference to the rules that are applicable at the date of commencement of arbitration, therefore the SIAC Rules 2010 (which applied at the time the arbitration commenced and which contain the expedited procedure provisions) governed the arbitration. The Court therefore held that the Rules chosen by the parties contained the expedited procedure provision so it was consistent with party autonomy for the expedited procedure involving a sole arbitrator to override the parties’ agreement for arbitration before three arbitrators.

Although the question of which set of Rules to apply will not be an issue in ICC arbitration, given that the expedited procedure will not apply where the arbitration agreement predates 1 March 2017, this case is useful in suggesting how courts may react when asked to balance the interests of party autonomy against the ICC expedited procedure. 

Under Article II of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (New York Convention), courts are required to refer parties to arbitration in actions where an arbitration agreement has been made, but not where the agreement is "null and void, inoperative or incapable of being performed." In low value disputes, where ICC arbitration has been agreed between the parties but so has a three-member tribunal, it could be argued that the agreement is "incapable of being performed" if the ICC Court chooses to appoint a sole arbitrator. 

Furthermore, Article V of the New York Convention allows courts to deny recognition and enforcement of awards where the party against whom the award was invoked was unable to present his case or the arbitral procedure was not in accordance with the agreement of the parties. Therefore, as well as the appointment of a sole arbitrator creating potential challenges to enforcement, the tribunal's power to limit document production and dispense with the oral hearing could also result in difficulty enforcing arbitration awards.

Following the judgment in AQZ v ARA, it is likely that a court faced with such a challenge under the New York Convention would consider that by agreeing to the new ICC Rules, the parties expressly agree that the expedited procedure rules take precedence over any contrary terms contained in the arbitration agreement, and therefore agree to the overriding of party autonomy. 

The expedited procedure introduced by the new ICC Rules is a welcome innovation, allowing lower value disputes to be dealt with more speedily and cheaply, and giving the tribunal discretion to ensure the procedure is appropriate for each individual case. Whilst it may be argued that the procedure diminishes party autonomy, the parties will be at liberty to opt out of the expedited procedures in any contract entered into from 1 March 2017.  

In line with the persuasive judgment of the Singapore High Court, it is likely that courts will take the view that by submitting to the ICC Rules, parties have accepted the ICC Court's discretion to appoint a sole arbitrator and the tribunal's power to dispense with procedural aspects such as the hearing and limiting document production. Nevertheless, in order to avoid any uncertainty and ensure an award is enforceable, drafters of arbitration agreements should ensure they are familiar with the features of the expedited procedure and either draft the agreement consistently with those features or expressly opt-out of the procedure. The difficulty will be in ensuring that parties take into account the potential for high-value contracts to give rise to low-value disputes in certain circumstances, and to consider accordingly whether to opt out of the expedited procedure.