Author: Harshal Morwale*
| Jurisdiction: International |
Topics: ICC International Institutions and Rules Dispute Resolution and Litigation |
The ICC has recently published its new Rules, which are set to enter into force on 1 January 2021. The new Rules have various interesting amendments which purport to make the arbitral process more efficient.[1] The new Rules have added a dispute resolution clause (Article 43) incorporating a jurisdiction clause and a choice of law clause to resolve claims arising out of the “administration of arbitration” between the parties and the ICC Court.[2] This is the first provision of its kind in any of the major institutions’ rules. It is also an interesting update coming right after the jurisdiction clause in the now operative LCIA Rules 2020.[3]
By adding Article 43 to the ICC Rules 2021, the ICC has specified the applicable law to the Rules. The new provision confers exclusive jurisdiction upon the Tribunal Judiciaire de Paris (Paris Judicial Tribunal) to decide the dispute between the parties and the ICC Court. While the new provision certainly attempts to cover all the bases, there is a potential issue that could arise in relation to the new provision, which this post attempts to address.
According to the ICC’s recent dispute resolution statistics, more ICC arbitrations were seated in London than in Paris.[4] While the new Article 43 could lead to Brexit-related issues, it could also potentially conflict with the lex arbitri. The conflict would not be limited to arbitrations seated in London, but would also extend to arbitrations seated in Singapore, one of the top four chosen seats in the ICC arbitrations.[5]
CHOICE OF LAW CLAUSE
Traditionally, the ICC Rules did not choose any applicable law.[6] The institutional Rules have been characterized as a contract for organization of arbitration between the parties and the institutions.[7] Hence, in the absence of an express choice of law in the contract, the deciding court would either apply the most common conflict of law rule – “the closest connection test” or look at any operative treaties that there may be covering the applicable law issues. The closest connection test has been equated to the objective test as prescribed by the English Court of Appeal in the landmark Assunzione case.[8] In the Assunzione case, the contract (bill of lading) was concluded in Paris.[9] The freight and demurrage were payable in the Italian currency, and the cargo was to be delivered in Italy.[10] The Court of Appeal ruled that the Italian law was the governing law of the contract since both parties had to perform the contract in Italy.[11] Similarly, since an arbitral institution (e.g. the ICC) can administer an arbitration anchored into the seat (London, Paris or elsewhere), the lex arbitri would double down as lex contractus (the law governing the institutional rules). However, the answer as to what law has the closest connection to the institutional rules might differ depending upon different approaches that could be taken by the courts.
There is an argument to be made that it is better to have a choice of law clause in the institutional rules than to leave it as it currently is. Such a choice of law clause would avoid uncertainty and inconsistent outcomes. The new ICC Rules have chosen these advantages in adding a choice of law clause providing for French law as the applicable law. This clause is enforceable under Article 3 of the Rome I Regulation, which states that the law chosen by the parties shall govern the contract.[12] Nevertheless, the choice of French law is in line with Article 4(1)(b) of the Regulation, which would apply in the absence of choice.[13] Article 4(1)(b) states that the applicable law in a service provider contract would be the law of the habitual residence of the service provider. This approach is also in line with the SNF SAS case, where the Paris Court of Appeal applied French law to decide upon the question of liability of the ICC, arising out of two arbitrations seated in Belgium.[14]
APPEALING THE ICC COURT’S DECISIONS ON ARBITRATOR CHALLENGES: ARTICLE 43 AND LEX ARBITRI
The new Article 43 extends its scope to “any claims arising out of or in connection with the administration of the arbitration proceedings […].”[15] Further, it confers jurisdiction upon the Tribunal Judiciaire de Paris ( Paris Judicial Tribunal ) to decide such disputes.[16] The phrases “any claims” and “administration of arbitration proceedings” appear to be a catch-all, covering not only liability lawsuits against the institution, but also challenges regarding institutional functions such challenges against arbitrators.
According to Article 14(3) of the ICC Rules 2017 and 2021, the ICC Court decides the challenges against the arbitrators.[17] Article 11(4) of the ICC Rules further provide that “decisions of the [ICC] Court as to the appointment, confirmation, challenge or replacement of an arbitrator shall be final.”[18] While the Rules do not expressly exclude the appeals against the decisions under Article 14(3), they also do not provide for a right of appeal. In the absence of any right of appeal or revision, the decisions of the ICC court would indeed be final and without recourse. This would not be a problem if the arbitration was seated in Paris because, under Article 1456 of the French Civil Procedure Code, the administering institution is empowered to decide upon the challenge conclusively.[19] However, if the arbitration is seated in London or in Singapore, the situation changes.
Under Section 24(2) of the English Arbitration Act, the parties can approach the relevant court and appeal the arbitral institution’s decisions on challenges against the arbitrators.[20] Articles 13(1) and (3) of the UNCITRAL Model Law, part of the First Schedule of the Singapore International Arbitration Act, provides parties with recourse against the institutional decision on the challenge within 30 days of such decision on the challenge.[21]
Hence, if an ICC arbitration is seated either in London or Singapore, two questions come up vis-à-vis the new Article 43. First, would the new provision override the jurisdiction of courts of the seat? If no, then would the new provision be inapplicable in the cases where the lex arbitri is English Law or Singaporean Law?
The answer to the first question is no. Firstly, since the aforementioned provisions under the English Arbitration Act and Singapore International Arbitration Act are mandatory provisions of the lex arbitri, they cannot be overridden by the institutional rules.[22] Secondly, the ICC Rules, being a contractual instrument, confer jurisdiction upon the Paris Judicial Tribunal through the contract (i.e., the institutional rules). On the other hand, the jurisdiction of the English Courts and Singaporean Courts emanates from their respective statutes. It is true that France (through the EU), the UK and Singapore are parties to the Hague Convention on Choice of Court Agreements.[23] However, the Convention does “not apply to arbitration and related proceedings.”[24] Hence, it is difficult to imagine how contractual jurisdiction would prevail over statutory jurisdiction,[25] particularly when it conflicts with mandatory provisions of English and Singaporean Law.[26]
This leads us to the second question – would the new Article 43 become inapplicable in the English-seated and Singaporean-seated arbitrations? The answer would be yes and no. If one applies a corollary of the blue-pencil test,[27]then Article 43 would be inapplicable, however only in the cases where the ICC Court’s decision on arbitrator challenges is at stake. Article 43 would still apply to the disputes arising out of other administrative functions of the ICC for which there is no jurisdiction in the lex arbitri.
Beyond a doubt, Article 43, as a dispute resolution provision covering jurisdiction and choice of applicable law, is an innovative addition to the ICC Rules. However, its scope and the potential issues emanating from it remain to be seen.
CONCLUSION
After the LCIA’s recent addition of a jurisdiction clause to its new Rules, the ICC went one step further to specify the applicable law to disputes against the ICC. Article 43 is undoubtedly an exciting and innovative addition. However, there is an argument to be made that the ICC should consider specifying the scope of the disputes or even the scope of the term “administration of arbitration” under Article 43 to prevent any inadvertent conflicts with the rights conferred upon parties by mandatory provisions of popular leges arbitri.
Having said that, this step by the ICC and the LCIA certainly signal winds of change in the process of making the system more balanced while providing clarity to the relevant actors.
[1] ICC unveils revised Rules of Arbitration, The ICC (Oct. 8, 2020), https://iccwbo.org/media-wall/news-speeches/icc-unveils-revised-rules-of-arbitration.
[2] ICC Rules 2021, art. 43.
[3] LCIA Rules 2020, art. 31.3; Harshal Morwale, Jurisdiction Clause in the Liability Limitation Provision of the New LCIA Rules 2020: Reactive to Proactive, But is That Enough?, Kluwer Arb. Blog (Aug. 29, 2020), http://arbitrationblog.kluwerarbitration.com/2020/08/29/jurisdiction-clause-in-the-liability-limitation-provision-of-the-new-lcia-rules-2020-reactive-to-proactive-but-is-that-enough/.
[4] ICC Dispute Resolution 2019 Statistics, The ICC 28 tbl. 8, https://iccwbo.org/publication/icc-dispute-resolution-statistics/.
[5] Id.
[6] Elie Klieman, Paris Court of Appeal Decides on Application of ICC Rules, International Law Office (Apr. 30 2009),https://www.internationallawoffice.com/Newsletters/Arbitration-ADR/France/Freshfields-Bruckhaus-Deringer-LLP/Paris-Court-of-Appeal-Decides-on-Application-of-ICC-Rules/.
[7] Emmanuel Gaillard and John Savage, Fouchard Gaillard Goldman on International Commercial Arbitration 602 (1999).
[8] Dicey et al., The Conflict of Laws 1162 (11th ed. 1987); Pacific Recreation Pte Ltd v S Y Technology Inc, [2008] SGCA 1 at [49] (Sing.).
[9] The Assunzione, [1954] P. 150.
[10] Id. at 156
[11] Id. at 177, 186.
[12] Regulation 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I), art. 3, 2008 O.J. (L 177) 6, 10 (EC).
[13] Id., art. 4(1)(b) at 11.
[14] Cour d’appel [CA] [regional court of appeal] Paris, civ., Jan. 22, 2009 07/19492.
[15] ICC Rules 2021, art. 43.
[16] Id.
[17] Id., art. 14(3); ICC Rules 2017, art. 14(3).
[18] ICC Rules 2021, art. 11(4); ICC Rules 2017, art. 11(4).
[19] Code de Procédure Civile [C.P.C.] [Civil Procedure Code] art1456 (Fr.).
[20] Arbitration Act 1996, c. 23, § 24(2) (Eng., Wales & N. Ir.).
[21] International Arbitration Act 1994, revised ed. 2002, c. 143A, sch. 1, art. 13 (Sing.).
[22] Maxi Scherer et al., Arbitrating under the 2014 LCIA Rules: A User’s Guide 9 (2015); John Choong et al., A Guide to the SIAC Arbitration Rules 158 (2d ed. 2018).
[23] Status Table – 37: Convention of 30 June 2005 on Choice of Court Agreements, HCCH, https://www.hcch.net/en/instruments/conventions/status-table/?cid=98 (last visited Nov. 8, 2020).
[24] Convention on Choice of Court Agreements, art. 2(4), June 30, 2005, https://assets.hcch.net/docs/510bc238-7318-47ed-9ed5-e0972510d98b.pdf.
[25] The Hollandia, [1983] 1 AC 565, 576.
[26] See generally Binnaz Topaloğlu, The Validity of Jurisdiction and Arbitration Clauses as Against Third Party Holders of Bills of Lading – a Comparative Study Under French, English and Eu Law, XLIV Annales de la Faculté de Droit d’Istanbul 453, 473-75 (2012).
[27] Blue-Pencil Test, Black’s Law Dictionary (11th ed. 2019).
*Harshal Morwale is an India-qualified lawyer, and he holds the Geneva LLM in International Dispute Settlement (MIDS) (2019-2020), a program jointly offered by UNIGE and IHEID.