The new ICC rules: What is next for the Mainland arbitration community?

One of the most notable changes of the new Rules is the introduction of the procedure to appoint an Emergency Arbitrator, who may be appointed at the request of a party applying for urgent interim or conservatory measures that cannot wait for the constitution of the arbitral tribunal.

Prior to the above change, other major arbitration institutions around the world have introduced similar procedures. For example, the Singapore Institution of Arbitration introduced similar powers in the revision of their Rules effective from July 1 2010, and others such as the Stockholm Chamber of Commerce, American Arbitration Association, and the International Centre for Dispute Resolution prior to that.

However, under PRC law, arbitration commissions do not have such powers. For example, under Article 46 of the PRC Arbitration Law (中华人民共和国仲裁法) (Arbitration Law), such powers are given to the PRC Courts:

Under circumstances where evidence may be destroyed or lost, or difficult to obtain afterwards, a party may apply for protection of evidence. Where a party applies for protection of evidence, the arbitration commission shall submit the party's application to the lower level People's Court of the place where the evidence is collected.

A similar provision is Article 68 of the Arbitration Law dealing with foreign-related arbitration:

Where a party to a foreign-related arbitration applies for protection of evidence, the foreign-related arbitration commission shall submit the party's application to the Intermediate People's Court of the place where the evidence is collected.

China is currently revising its civil procedure law and it is possible that the above restrictions may be relaxed. Given the success of the emergency provisions of the other institutions, and the recent introduction of such provisions in the new ICC Rules, this is an area which merits consideration by the Mainland arbitration community.

Multi-party and multi-contract arbitrations

The new ICC Rules contain a detailed set of new provisions that deals with the issue of complex arbitrations (for example, arbitrations where there are more than two parties or which deal with disputes arising under more than one contract) and mostly codify some of the practices already applied by the Secretariat of the ICC.

The main points of these new provisions are:

n Joinder of additional parties: Any party may request that an additional party joins the arbitration, before any of the arbitrators have been confirmed or appointed.

n Claims between multiple parties: In arbitrations with more than two parties, any party may make claims against any other party.

n Multiple contracts: Claims arising out of several contracts may be made in one single arbitration.

n Consolidation of arbitrations: The Court may consolidate arbitrations under certain circumstances, including the agreement of the parties, that claims are made under the same arbitration agreement or made under different arbitration agreements which are “compatible”.

Provision for the consolidation or hearing together of arbitrations has been a feature of the domestic arbitration regime in Hong Kong for many years. Although arbitrators have been involved in references which have been the subject of such orders, the general experience is that orders under these provisions are less frequently sought than one might initially imagine. The Rules represent something of a compromise between the rejection of consolidation and the provision of a broad discretion. Joinder of additional parties must occur before the appointment of the Tribunal. Consolidation thereafter can only occur by consent or if the disputes arise under the same agreement or involve the same parties. In practice these provisions will be only of limited use. If the parties wish to provide for consolidation in a wider set of circumstances, it is prudent that they continue the current practice of making an express provision for this in their arbitration agreement.

Administration of arbitration

The new ICC Rules provide that the ICC Court will be the only entity authorised to administer arbitrations under the Rules and that, by agreeing to arbitration under the Rules, the parties accept that the arbitration is to be administered by the ICC.

These provisions are intended to avoid the “mix and match” situations occurring where parties agree to arbitration under the Rules of the ICC, but administered by another institution; or to non-administered (ad hoc) arbitration under the Rules of the ICC, which were considered in the Singapore Court of Appeal decision in Alstom v Insigma [2009] SGCA 24.

Whether the provisions will achieve the desired effect remains to be seen, particularly where some rules expressly allow an arbitration commission to administer arbitrations under other arbitration rules so long as the parties' agreement does not conflict with the mandatory law of the seat. For example, Article 14.2 of the Cietac Arbitration Rules provided as follows:

The parties shall be deemed to have agreed to arbitrate in accordance with these Rules whenever they have provided for arbitration by the Cietac. Where the parties have agreed on the application of other arbitration rules, or any modification of these Rules, the parties' agreement shall prevail except where such agreement is inoperative or in conflict with a mandatory provision of the law of the place of arbitration.

Moreover, rules can inevitably only go a certain distance in addressing this issue and no doubt where parties run into difficulties with mix and match provisions, courts and tribunals will continue to try and give effect to the parties' intention to arbitrate their dispute. Having said that, it is generally advisable for parties to avoid using mix and match provisions altogether; there must always remain a risk that they will be found unworkable and thus pathological by a court or tribunal.

Arbitration in the Mainland

In deciding whether to take advantage of the new features under the new ICC Rules or not, parties should consider whether there is a “foreign-related relationship”, which is defined by Article 178 of the Supreme People's Court Opinion on Certain Issues relating to Thoroughly Implementing the General Principles of Civil Law (GPCL SPC Interpretation) (关于贯彻执行＜中华人民共和国民法通则＞若干问题的意见) issued on April 2 1988 as follows:

“Any civil law relationship where (i) one party or both parties are foreign individuals, stateless persons, or foreign legal persons; (ii) the underlying subject matter of the civil law relationship is overseas; (iii) the legal facts giving rise to the creation, modification or destruction of the civil law relationship rights and obligations take place overseas, shall be deemed to be foreign-related civil law relationships.”

Pursuant to Article 126 of the PRC Contract Law (中华人民共和国合同法), parties may choose foreign law where there is a foreign-related relationship, in which case pursuant to the agreement between the parties, the arbitration may be seated outside the Mainland.

However, if there is no foreign-related relationship, application of PRC law is mandatory, and the parties must choose the Mainland as the seat of the arbitration.

Further, there are other types of contracts whereby application of PRC law is mandatory, regardless of whether there is a foreign-related relationship. Examples include sino-foreign joint venture contracts, as well as sino-foreign agreements relating to exploration of natural resources in the Mainland.

Where application of PRC law is mandatory, PRC law such as the Arbitration Law will be applicable. According to Article 16 of the Arbitration Law, one of the conditions of a valid arbitration agreement is that the parties have chosen a valid arbitration commission. Few would dispute that the ICC, as a foreign arbitration commission, is not within the scope of Article 16 of the Arbitration Law.

In the light of the above, if there is no foreign-related relationship, or if the contract is of a type whereby application of PRC law is mandatory, it would be prudent not to adopt the new ICC Rules as a means to resolve disputes between the parties. If the choice of PRC law is mandatory but the parties have failed to follow this, the choice of foreign law will be ineffective under PRC law.

Terence Wong, Hogan Lovells, Shanghai