Source: https://library.iccwbo.org/Content/dr/ARTICLES/ART_0600.htm
Timestamp: 2019-09-22 17:25:07
Document Index: 177149674

Matched Legal Cases: ['ART_0600', 'Art. 12', 'Art. 1', 'Art. 29', '§ 3', '§ 2']

﻿ Article: Some Practical Reflections on the ICC's Model Dispute Resolution Clauses Author: Christopher Newmark Published in: ICC Dispute Resolution Bulletin 2015, Issue 2 Link: http://library.iccwbo.org/content/dr/ARTICLES/ART_0600.htm?l1=Bulletins&l2=ICC+Dispute+Resolution+Bulletin+2015%2c+Issue+2
Chris Newmark is a partner with Spenser Underhill Newmark LLP, a London-based niche practice specialising in international arbitration and ADR. He has wide experience as both an arbitrator and a mediator. He sits regularly as chairman, panel and sole arbitrator under the rules of the leading arbitral institutions and in ad hoc proceedings, and was the first emergency arbitrator to be appointed under the 2012 ICC Rules of Arbitration. He conducts his mediation practice through CEDR Chambers, one of the UK’s leading groups of mediators.
Mr Newmark is the current Chair of the ICC Commission on Arbitration and ADR, a position to which he was appointed in January 2014, after six years as Vice-Chair. During his term as Vice-Chair he participated in the drafting of the 2012 ICC Rules of Arbitration and chaired the task force set up to revise the ICC ADR Rules, Expertise Rules and Dispute Board Rules, whose work has recently been completed with the launch in 2014 of the ICC Mediation Rules and, in 2015, the ICC Expert Rules and new Dispute Board Rules. He also co-chaired the ICC task force on reducing time and cost in arbitrations, whose work led to the much-hailed report, ‘Techniques for Controlling Time and Costs in Arbirtration’.
Mr Newmark writes and lectures regularly on arbitration and ADR and has contributed to leading publications on these subjects. He is a Senior Visiting Lecturer at the School of International Arbitration, Centre for Commercial Law Studies, Queen Mary, University of London, as well as a member of the teaching faculty of the Centre for Effective Dispute Resolution (CEDR). cnewmark@sunlaw.co.uk
ICC Dispute Resolution Bulletin 2015, Issue 2
[Arbitration clause] [Emergency arbitrator] [Mediation] [Expert] [Dispute board] [Pre-arbitral referee procedure]
Final Award in Case 12602
Final Award and Dissenting Opinion in Case 13323
Final Award in Case 13889
Final Award in Case 14005
Final Award in Case 14633
Final Award in Case 14823
Final Award in Case 14946
Final Award in Case 17487
Final Award in Case 17824
Final Award in Case 18643
Final Award in Case 19149
How to Draft an Arbitration Clause (Revisited)
Multi-Tiered Dispute Resolution Clauses in ICC Arbitration: Introduction and Commentary
b) Clarity and certainty
c) Conformity with applicable law
d) Dispute boards
e) Pre-arbitral referee procedure
Appendix: ICC Model Dispute Resolution Clauses
Expert proceedings administered by the ICC
'All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.'
This simple contract clause is all that is required to refer disputes to arbitration, the ICC's core dispute resolution service administered by the ICC International Court of Arbitration. It is a standard clause, published by the ICC alongside its Rules of Arbitration. Some users may need to look no further than this clause in order to complete the dispute resolution provisions in their contract. However, two developments in recent years have made the drafting of dispute resolution clauses a potentially far more complex task.
Firstly, alongside arbitration there are now several other dispute resolution procedures that are regularly used to settle international disputes outside the courts. Mediation, expert proceedings and dispute boards are the main examples, all three of which are provided by the ICC through its International Centre for ADR. Users who are considering recourse to one of these alternative dispute resolution procedures may be assisted by the standard clauses that the ICC publishes for each procedure.
Secondly, it has become common for parties to provide for more than one dispute resolution procedure in the same contract. This is done because the dispute resolution procedures provide different services and result in different outcomes. For example, mediation is a process that facilitates the negotiated settlement of a dispute. If terms of settlement are agreed, then the dispute will be resolved, but if they are not, the dispute will need to be determined through another procedure, typically arbitration or litigation. So a dispute resolution clause that provides for mediation will usually also provide for arbitration or litigation as the forum for final and binding adjudication of the dispute. Similarly, the findings of an expert may or may not finally resolve a dispute. If they are non-binding, then, like mediation, their purpose will be to promote settlement. If the parties have agreed to be contractually bound by the expert's findings, then the specific issues referred to the expert should be resolved by those findings, but any other issues in dispute will still need resolving. Consequently, as with mediation, it will be necessary to provide for a fallback forum for final and binding adjudication by arbitration or litigation.
The complexities outlined above mean that drafters of dispute resolution clauses have several decisions to take. Not only do the right clauses need to be selected, but they then need to be combined in such a way as to provide for a coherent and efficient scheme for resolving disputes under the parties' contract(s). The ICC facilitates this task not only by providing numerous alternative model clauses, but also by accompanying those clauses with notes offering guidance on how they might be used. These model clauses and notes can be found in the booklets in which the various Rules are published and on the ICC's website.
The purpose of this article is to bring together in one place all of the model ICC dispute resolution clauses and notes, and to look at some of the practical issues the use of the clauses is likely to raise. The article also provides an opportunity to expand on the notes by identifying some underlying points and principles that should assist those tasked with drafting the dispute resolution provisions of a contract.
Before turning to the clauses and notes, there are three general principles applicable to the drafting of dispute resolution clauses that are worth noting.
It is not uncommon to see dispute resolution clauses in commercial contracts running to several paragraphs, if not pages. Nor is it uncommon to find that when a dispute arises, such long and complex clauses give rise to problems. The accepted wisdom, as reflected in the ICC's model clauses and their accompanying notes, is that dispute resolution clauses should be kept as simple as possible. Notwithstanding the benefits of simplicity, two factors above all typically tempt contract drafters into constructing long and complex clauses.
The first is the desire to prescribe in some detail the procedure that is to be followed during the chosen dispute resolution process. For example, if arbitration is chosen, the clause might specify the scope of any document production that is to take place, the length and timing of written submissions, the nature of expert evidence that is to be admissible, and the time by which a final award must be rendered. This sort of prescription is designed to lock in a procedure that, at the time [Page72:] the contract is concluded, the parties consider to be appropriate. In this way, the parties aim to create certainty and predictability with regard to the procedure that will be used and the time and cost that will be involved. It also avoids the risk that when a dispute arises, one or other of them seeks to gain a tactical advantage by persuading the tribunal that a different procedure (e.g. far more extensive document production) is necessary.
While there are clear and understandable reasons for such an approach, it faces a significant challenge - namely, the difficulty of predicting in advance the nature of the dispute that will actually arise under the contract. Will it be a minor issue of low monetary value that does not involve disputed evidence or upset the contract as a whole? Or will it be a major dispute going to the heart of the contract, requiring large volumes of documentary and witness evidence to be considered, and of considerable monetary value for one or more parties?
An arbitral procedure that is prescribed in detail in advance is unlikely to be appropriate for either type of dispute. It is of course possible that the parties will know with some certainty what sort of dispute is likely to arise. It is also possible that they are willing to take the risk of prescribing a procedure that may turn out to be disadvantageous when a dispute arises. But the alternative approach, which is considered by many to be the most prudent course, is to resist the temptation to prescribe the procedure in advance and to keep the dispute resolution clause simple. When doing this, parties will be placing their trust in the arbitral tribunal's ability to adopt a procedure that befits the particular circumstances of the dispute. If a skilled and experience tribunal is appointed, that trust should be well placed.
The second temptation is the number of different dispute resolution procedures that can be chosen and combined in a single contract. Aware of the extensive palette of procedures to choose from, drafters may endeavour to use several, for example by providing for expert proceedings, mediation and arbitration all in the same contract. Although this can result in a sophisticated and effective scheme for the efficient resolution of the different types of disputes that may arise, it creates additional drafting challenges as it must be clear and certain how any particular type of dispute is to be dealt with. Where such clarity and certainty is missing, there is a real risk that procedural disputes will arise. And what is more galling for a commercial enterprise seeking a speedy resolution to a dispute than to be caught up in litigation about litigation, which only serves the interests of a recalcitrant respondent and the parties' lawyers?
It perhaps goes without saying that in contract drafting generally clarity and certainty are essential. There are two reasons why these principles nonetheless warrant special mention here.
The first is that when it comes to dispute resolution clauses, contract drafters who have been painstaking in their attention to detail throughout the remainder of the contract, sometimes appear to take their eye off the ball. This may be because dispute resolution clauses are rarely the subject of intense commercial negotiation and may not have the close attention of the lead negotiators and senior legal drafters. Dispute resolution clauses are proverbially drafted late at night once all of the other contractual provisions have been finally settled. Let us give a typical example.
Shortly before a contract is signed, attention turns to the dispute resolution provisions of the draft for the first time. At the request of party A, party B's lawyers agree to include mediation prior to arbitration. In exchange, party A agrees to use expert determination for the resolution of certain technical disputes that may arise but which party B believes will not warrant the time and expense of arbitration proceedings to resolve. The tired commercial lawyers responsible for the drafting look for some standard wording to insert into the contract to provide for both mediation and expert determination. They are not themselves dispute resolution experts and may not have access to input from such experts at short notice. The result can be that the clauses that are used are not adequately tailored to fit with the existing dispute resolution clauses and other contractual provisions. And that can spell disaster when a dispute arises and there is uncertainty as to whether mediation is a mandatory step before arbitration can be commenced, whether mediation must also be used prior to any referral of a technical dispute to expert determination, and whether the non-binding findings of the expert can be referred to in the course of subsequent arbitration proceedings.
The second reason why certainty and clarity warrant special attention here is that some minor differences in drafting can make a fundamental difference to the procedure that comes into play [Page73:] when a dispute arises. Some of these minor differences have already been alluded to in the late-night drafting example given above. A clause that refers to the use of mediation may impose very different obligations on the parties depending on the way it is drafted. It may simply remind the parties to consider mediation as a possible tool. Such a reminder can be useful, but does not create any binding contractual obligation. Or it may require the parties to discuss using mediation, which will make the discussion obligatory but not the use of mediation. Or it may obligate the parties to use mediation, and if so, it may or may not specify that mediation must be used before arbitration proceedings can be commenced.
In terms of the wording used, the differences between these clauses may be minor, but the effect is significant. If the drafters are not certain as to the outcome they are seeking, or their drafting is unclear, then their clients may be in for an unpleasant surprise when recourse is had to the clause.
As international arbitration practitioners will appreciate, several different systems of national law may have an impact on the resolution of a cross-border contractual dispute. The obvious candidates are the law that governs the contract, the law of the place of arbitration, the law of the place of performance and the laws of the states where the parties to the contract are resident. Given the number of options, the best general advice that can be given is that set out in the notes accompanying the ICC's model clauses: parties should take into consideration any requirements under applicable law that may affect the enforceability of the clause.
The specific example given in the ICC model clauses is that of an ICC arbitration in Mainland China. Here, local law and decisions of local courts dictate that in order to make sure that the agreement to arbitrate is enforceable, it is advisable to include an express reference to the ICC International Court of Arbitration. In this one case, the ICC offers an alternative model clause that makes such reference.
But this is just one example and the fact that the ICC does not offer other alternative clauses should not be taken as an indication that the standard arbitration clause or the clauses proposed for other procedures are suitable for use under different systems of law without variation. Examples of other areas where parties are well advised to consider the impact of applicable law include (without limitation, of course):
• What requirements are imposed by the applicable law to make mediation a mandatory pre-condition to arbitration or litigation?
• Will a provision making an expert's findings contractually binding on the parties be respected by local courts if those findings are challenged?
• Will a provision that provides for the allocation of the costs of arbitration (for example, that each party bear its own costs irrespective of the outcome) be enforceable at the place of arbitration or the place of enforcement?
• Will an order of an emergency arbitrator granting interim or conservatory measures be enforced by the local courts?
Although national laws on the recognition and enforcement of arbitration agreements are now fairly predictable and settled, the same cannot be said for laws relating to mediation, expert proceedings, emergency arbitrator proceedings and dispute board decisions. All of these processes are still relatively new, and national laws are still adapting to accommodate them within their legal systems, sometimes through legislation, sometimes through the decisions of the courts. It is therefore risky to make any assumptions as to how a particular system of law will deal with agreements to use particular dispute resolution processes and with the decisions that emanate from them.
3. ICC model clauses
The remainder of this article comments on the ICC model clauses for each dispute resolution process in turn, providing some selected additional thoughts to supplement the notes that accompany those clauses. These thoughts are certainly not intended to cover all of the issues that parties should take into account when using the clauses. They are simply a selection of points considered worthy of note by the author.
The reader may wish to review the relevant clauses and notes in the Appendix before continuing with one of the sections below.
i) Emergency Arbitrator Provisions
The notes to the ICC model arbitration clause provide some suggested wording that can be used if the parties wish to exclude any recourse to the Emergency Arbitrator ('EA') Provisions in the ICC Rules of Arbitration. Those Provisions were introduced for the first time in the 2012 version of the ICC Rules of Arbitration and it was only after extensive debate within the ICC Commission on Arbitration and ADR that it was decided that they should, as a general rule, apply unless the parties expressly choose to opt out. The possibility to opt out is foreseen in Article 29(6)(b) of the Rules of Arbitration.
The EA procedure has to date proved at least as popular, and perhaps more so, than was anticipated when the Rules of Arbitration came into force in 2012. At the time of writing, a total of 23 EA applications covering a broad range of jurisdictions and industry sectors had been received by the ICC. Given that the EA Provisions are proving useful in practice, drafters may wish to be cautious about including wording in their arbitration agreement that would exclude their application. It is worth noting that parties will be considered to have opted out not only when they expressly do so in their arbitration agreement, but also de facto if their contract provides for another pre-arbitral procedure for granting conservatory, interim or similar measures (see Article 29(6)(c) of the Rules of Arbitration).
One of the reasons that some legal counsel have given for electing to include the opt-out wording is a concern that the availability of the EA procedure might limit or exclude their client's ability to seek urgent interim or conservatory measures from a state court. Article 29(7) of the Rules of Arbitration seeks to avoid this consequence,1 but for some the concern remains. For example, English lawyers have noted that section 44(5) of the 1996 English Arbitration Act2 could in certain circumstances be used to exclude an application to the English courts for interim relief where the ICC EA Provisions are applicable. This is an area where practitioners will need to keep an eye on developments in applicable local law. The decision to opt out or not to do so may well depend on whether, in the circumstances of the case, national courts provide a viable option for obtaining urgent interim relief in support of arbitration proceedings.
ii) Specifying the number of arbitrators and how they are to be appointed
The model ICC arbitration clause refers to the appointment of 'one or more arbitrators'. Unless this wording is amended or added to, or a subsequent agreement is reached between the parties, the number of arbitrators will be determined by the ICC Court under Article 12 of the Rules of Arbitration once an arbitration has been commenced. It will be presumed that one arbitrator should be appointed unless 'the dispute is such as to warrant the appointment of three arbitrators'.
The notes accompanying the model clause refer to the possibility of specifying in the arbitration agreement whether the parties want one or three arbitrators. This option is frequently taken up. In general terms, parties tend to opt for a sole arbitrator where they are concerned to manage costs and time and do not anticipate any 'bet-the-company' disputes, whereas parties opt for three arbitrators when they feel it is important to be able to nominate their own arbitrator or if they anticipate disputes for which they would prefer to have the benefit of three minds rather than one.
As already noted, it can be difficult to anticipate in advance what type of dispute will arise under any given contract. For example, a high-value and complex contract can give rise to a small dispute. Although it may be tempting to provide for three arbitrators in such a contract, consideration should be given to staying with the model ICC clause and providing for one or more arbitrators. As noted in a report of the ICC Commission on Arbitration and ADR,3
This will enable the ICC to appoint, or the parties to agree on, a sole arbitrator where the specific nature of any subsequent dispute does not warrant a three-member tribunal (Rules, Article 12(2)).
The Commission Report goes on to suggest some additional wording that is not included in the notes to the model clause:
'All arbitrators shall be selected and appointed by the ICC International Court of Arbitration.'
Allowing the ICC to select and appoint all members of the tribunal will generally be the quickest way to constitute the arbitral tribunal if parties are unable to agree on the identity of the arbitrators, and will also reduce the risk of challenges.
As many arbitrators will acknowledge, the dynamic within a tribunal whose members have been selected by the arbitral institution can be very different from the dynamic within a tribunal that includes arbitrators chosen by the parties. If the parties wish to have input into the selection of the tribunal by the ICC, they can request that the ICC provide a list of possible arbitrators to be selected in accordance with a procedure to be agreed upon by the parties in consultation with the ICC. The requirement that a list procedure be used can be set out in the arbitration agreement.
i) Why four model clauses?
Whilst there is only one principal ICC model clause providing for arbitration, the ICC offers four different model clauses for mediation. Given that mediation is designed to be a short, simple and informal procedure, this is perhaps surprising. The reason lies both in the essential difference between arbitration and mediation and in the different stages of development the two processes have reached around the world.
Unlike arbitration, mediation is a settlement tool and not a process that results in a final adjudication of the parties' dispute. At the time of entering into their contract, the parties will not have difficulty in deciding definitively whether or not arbitration is their preferred procedure for finally determining their dispute. If they decide that they want to use arbitration, then a simple clause is usually all that is required. By contrast, they may be far less certain as to whether, and if so when, they will want to use mediation or another settlement technique to seek a consensual resolution of a dispute. Whether or not parties are able to agree on terms of settlement through mediation can depend upon when in the life-cycle of the dispute mediation is deployed. It can also depend on the positive willingness of the parties to engage in the process, and such positive intent is not necessarily the product of a contract clause that compels mediation at a specific point in time. And even if one party is committed to the use of mediation, the other, perhaps from a jurisdiction where mediation is currently less used, may be more hesitant. Mediation is now very well known in some jurisdictions, where it is seen as a default process to be used prior to a final hearing or court trial to see if settlement is possible. In other jurisdictions, however, it remains a mysterious process, viewed with some suspicion and not regularly practised.
As a consequence of these differences, one cannot expect a single model clause to suit the needs of all cross-border contracts. The ICC therefore offers four different model clauses, which offer different levels of commitment to mediate, and different interaction between the mediation and arbitration processes.
Clause A offers a softly-softly approach. It does no more than remind the parties that they can seek to settle their dispute under the ICC Mediation Rules at any time. Given what has been said earlier in this article about the need for clarity and certainty in drafting dispute resolution clauses, it may be asked how a clause that creates no obligations and is so obviously unenforceable might be useful. The answer is that, when the contract is executed, one or more of the parties (for whatever reason) may not be willing to enter into any greater commitment regarding the use of mediation. The other party or parties may nonetheless be reassured by the inclusion of this clause, because they will know that if and when a dispute arises, the lawyers and party representatives that are considering how to deal with the dispute will at least be reminded about using mediation. That reminder may significantly increase the chances of mediation actually being used and an early and cost-effective settlement being achieved.
Clause B is perhaps the most powerful of all of the four model clauses. It does impose an obligation on the parties, although it is not an obligation to use mediation, but an obligation, in the first instance, to discuss and consider referring the dispute to the ICC Mediation Rules.
Why is this powerful? Firstly, it obliges the parties to confer over the way in which a dispute will be resolved. Secondly, it requires that discussion to take place 'in the first instance', in other words before engaging in other dispute resolution procedures. Thirdly, it leaves open the timing of the mediation, rather than committing the parties to an early pre-arbitration mediation procedure. There remains a question mark as to whether the [Page76:] obligation to 'discuss and consider referring the dispute to the ICC Mediation Rules' could be enforced, and what the possible sanction could be if a party failed to engage in such a discussion. That said, the inclusion of this clause will create opportunities for the parties to agree on an efficient process for the resolution of their dispute, while not binding them to any particular course, which, in the context of the dispute or their particular circumstances, may be considered inappropriate.
Clause C goes a step further in terms of creating obligations. It obliges the parties to begin by referring a dispute to proceedings under the ICC Mediation Rules. However, what the clause expressly does not do is prevent any party from commencing arbitration proceedings at any time. In other words, it does not require mediation to have been tried and failed before arbitration can be commenced. Instead, it leaves open the possibility that arbitration proceedings may be commenced at any time after the mediation proceedings have begun. This clause may be attractive to users for a number of reasons:
• First, as has already been noted, national laws regarding the circumstances in which a mediation clause will create a condition precedent to the commencement of arbitration vary and are developing. By making it clear that mediation and arbitration can run in parallel, this potential area of uncertainty and disagreement is removed.
• Second, a party may be reluctant to agree to be bound to use mediation if it knows that this will prevent it from commencing arbitration proceedings until the mediation has been completed (or at least for a specified period). If a party does not have great confidence in the mediation process, it may fear that it will be committing to a process that will add cost and time but may not resolve the dispute. If the party knows that it can get on with arbitration while the mediation is running (as it can if Clause C is used), then this may encourage it to agree to be bound to use mediation.
• Third, the parties may consider that, given the time it generally takes for an arbitration to be up and running (i.e. time needed to constitute the tribunal, etc.), there will be sufficient time to complete a mediation before significant resources have to be committed to the arbitration. In terms of time (if not cost), commencing mediation and arbitration in parallel may therefore be the most efficient approach.
Clause D offers the standard tiered approach. Mediation is the obligatory first step, and only if the dispute has not been settled within a specified number of days (the model clause refers to 45) can a party refer the dispute to arbitration. For companies that have confidence in the ability of early mediation to resolve disputes and want to ensure that this possibility is explored before the costs and distraction of arbitration are incurred, this clause is the default choice. These companies consider that the advantages of a compulsory early mediation outweigh the potential disadvantage of engaging in mediation at a time that is sub-optimal for achieving a resolution of the dispute (for example, because the parties have insufficient information at this early stage to conduct the risk assessment that they consider necessary before engaging in settlement negotiations).
The popularity of each of these clauses is likely to change over time, as the use of mediation in cross-border disputes continues to develop. Indeed, there may even come a time when the express reference to mediation in a dispute resolution clause is considered unnecessary because the parties and their advisers will, in any event, use mediation whenever appropriate. This is largely the position that has been arrived at in those countries where the national courts expect parties to mediate, and parties do so routinely, recognising that mediation offers a real opportunity to arrive at an acceptable outcome that they can control, without the uncertainty associated with leaving their fate in the hands of judges or arbitrators.
ii) Settlement procedures other than mediation
The ICC Mediation Rules, which came into force in 2014, supersede the ICC ADR Rules, which were introduced in 2001. One of the principal changes is apparent in their title: they became 'Mediation' rather than 'ADR' Rules. However, that change does not exclude the use of settlement procedures other than mediation under these Rules. Whilst mediation is the default procedure, the parties are free to agree to use a different settlement procedure. One of the places where they might choose to do just that is in their dispute resolution clause. However, although this option exists, it is unlikely to be used very often in practice, for a number of reasons. [Page77:]
• Mediation is by far the most commonly used settlement procedure for commercial disputes and, in the majority of cases, will be the procedure the parties will want to use.
• Mediation is flexible, as explained in the Mediation Guidance Notes published alongside the ICC Mediation Rules. The Guidance Notes state that mediation under the Rules is a sufficiently broad concept to encompass both mediation and conciliation (although the difference between these two procedures is far from universally understood).4 They also state that it is possible for parties to agree, for example, that the mediator should provide the parties with a non-binding evaluation of the merits of the dispute in order to assist them in reaching a negotiated settlement agreement.5
• If parties are looking for the input of an expert to assist with settlement, then they are likely to be better served using the ICC Expert Rules than the Mediation Rules.
• Lastly, even if the parties can envisage using some procedure other than mediation to settle the dispute, this is something that can be agreed once a dispute has arisen.
If the parties do wish to modify one of the ICC model clauses so as to provide for a procedure other than mediation, they should ensure that their preferred procedure is clearly described so that there is no uncertainty as to what it involves. A number of names that have been given to settlement procedures over the years, and they often mean different things to different people. For example, as mentioned above, what is meant by 'conciliation' may be understood differently in different parts of the world. Similarly the term 'mini-trial' is known by some to involve a mediation procedure that is preceded by formal presentations and legal argument in front of a tribunal comprising the parties' senior executives and the mediator, while for others it may mean something different or nothing at all. If the dispute resolution clause is to provide for an unusual procedure, then it is best that such procedure be described in some detail.
iii) Emergency Arbitrator Provisions
The notes that follow the model clauses include variants that may be applied when using Clauses C or D, both of which include a reference to ICC arbitration. For both Clauses C and D, standard wording is offered if the parties wish to exclude recourse to an EA altogether. This is the same wording as that offered for the model arbitration clause.6 For Clause D alone, two variants are offered to enable the parties to specify whether or not recourse to an EA should be possible during the mediation phase and before it is possible to refer the dispute to arbitration. Use of one or other of these variants is advisable to avoid any uncertainty. Depending on the nature of the contract and the type of dispute that is likely to arise, the parties will have different views as to whether it is more or less likely to be helpful to the resolution of the dispute if they are able to have recourse to an EA while a mediation is pending. In some circumstances, such recourse may be helpful. For example, if the interim measures sought are designed to preserve the status quo (e.g. prevent a bond from being called or a ship from leaving harbour), it may well be that settlement is more likely to be possible with the status quo preserved by way of an EA order. In other circumstances, the parties' priority may be to avoid the cost and adversarial nature of all arbitration procedures, including an EA procedure, until all settlement avenues have been explored via mediation.
The ICC launched its revised Expert Rules in 2015. The new Rules are composed of three separate sets of Rules: ICC Rules for the Proposal of Experts and Neutrals; ICC Rules for the Appointment of Experts and Neutrals; and ICC Rules for the Administration of Expert Proceedings. The reason for this division is that the three services offered (proposal, appointment, administration of expert proceedings) are actually very different from each other and are each best served by stand-alone Rules.
As far as dispute resolution clauses are concerned, only the Rules for the Appointment of Experts and Neutrals and the Rules for the Administration of Expert Proceedings lend themselves to inclusion in model clauses, and these are perhaps the hardest clauses to offer in model form as they inevitably need to be closely adapted to the needs of the particular contract into which they are being inserted. [Page78:]
Each of the model clauses starts as follows:
In the event of any dispute arising out of or in connection with [clause X of the present contract], the parties agree to submit the dispute …
The notes to the clauses explain that the parties will need to replace the phrase '[clause X of the present contract]' with a reference to the relevant contractual provision(s), so as to identify clearly the type of dispute(s) concerned. In practice, it is unlikely that simply referring by number to one or more clauses of the contract will identify the disputes with adequate precision. For example, if the contract is a long-term supply contract, and the parties have decided that adjustments to the price during the term of the contract should be determined by an expert if they cannot be agreed between themselves, it may be necessary to set out in some detail in the dispute resolution clause the precise nature and scope of the issue that is to be referred to the expert and the required form and effect of the expert's findings on the parties' continuing supply and purchase obligations under the contract. The need to be clear as to exactly what type of dispute is to be submitted to the expert makes these clauses more challenging than an arbitration or jurisdiction clause, which simply refers any and all disputes arising out of or relating to the contract to either arbitration or the jurisdiction of certain national courts. Where a clause is not clear as to what matters are to be referred to an expert, and what matters are not, disputes can easily arise over the scope of the expert's mandate. As already mentioned, litigation about litigation defeats the entire purpose of designing an efficient scheme for resolving different types of disputes.
i) ICC as appointing authority for ad hoc expert proceedings or neutrals
The ICC Rules for the Appointment of Experts and Neutrals enable parties to have an expert or neutral appointed to act in either ad hoc expert proceedings or some other dispute resolution process that is not administered by the ICC.
The model clause offered in conjunction with these Rules provides for the ICC to appoint an expert for ad hoc expert proceedings. Where parties have opted for such proceedings, rather than administered expert proceedings under the ICC Rules for the Administration of Expert Proceedings, it is likely that they will wish to include in their contract a full description of the ad hoc proceedings. Unlike ad hoc arbitration, there is unlikely to be a framework provided by national legislation that will dictate how the ad hoc expert proceedings will be conducted. They will therefore be a product of the parties' agreement, which will need to be set out clearly. In many cases, the clause that provides for the ICC to act as appointing authority will cross-refer to the provisions of the contract that describe the ad hoc expert proceedings, rather than simply to 'ad hoc expert proceedings'.
No model clause is offered for the ICC to act as appointing authority for neutrals. This is because a neutral may be required for a wide variety of different procedures, such as mediation, neutral evaluation or a dispute board. There is therefore no shorthand phrase such as 'ad hoc expert proceedings' that can be used. The essential ingredients of a clause are set out in the notes, which once again stress the need for clarity when it comes to describing both the type of dispute covered by the clause and the type of proceedings to be used for the dispute.
ii) Administered expert proceedings
Four different model clauses are offered, all referring to the ICC Rules for the Administration of Expert Proceedings. Before considering these clauses, it is worth noting that these Rules can be used in two very different ways:
• The default approach, which will apply unless the parties agree otherwise, is that the expert proceedings will result in non-binding findings, which the parties will then use as a basis for reaching an agreed settlement of the dispute that was the subject of the proceedings. When this approach is taken, the expert proceedings become a settlement procedure that can be used in advance of or during arbitration or litigation, with a view to avoiding the need to proceed to a final award or judgment.
• The alternative approach is for the parties to agree that the expert's findings will be contractually binding upon them. Where this approach is adopted, the procedure becomes adjudicative, with the expert's findings (subject always to applicable law) providing a final resolution of the issue in dispute. If, as is often the case, the dispute that is referred to the expert is part of a larger dispute arising under the contract between the parties, then that larger dispute will not be resolved in its entirety by the expert's findings, and arbitration or litigation may be required for that purpose.
Of the model clauses, Clauses A, B and D take the default approach, where the expert's findings are non-binding and the expert proceedings are [Page79:] designed to assist the parties settle their dispute.
Clause A acts as a simple reminder to the parties of the availability of proceedings under the Rules at any time. It works in much the same way as the model mediation Clause A.7
Clause B creates an obligation to submit a specific type of dispute to non-binding administered proceedings. Parties need to be aware that if this clause is used, then, pursuant to Article 8(3) of the Rules for the Administration of Expert Proceedings, the expert's report will be admissible in any judicial or arbitral proceedings in which all of the parties thereto were parties to the administered expert proceedings in which the report was prepared. This may or may not be seen as a helpful tool to promote settlement. If the parties prefer to make the report 'without prejudice', so that it cannot be referred to in subsequent judicial or arbitral proceedings, then additional wording to this effect needs to be added to Clause B (and indeed Clause D).
Clause D starts in the same way as Clause B, but then goes on to provide that if the dispute has not been resolved after the termination of the administered expert proceedings, the dispute shall be finally settled under the ICC Rules of Arbitration. A contract that contains a clause referring disputes to non-binding administered expert proceedings will always also require a clause that sets out how such disputes, and any other disputes arising under the contract, will be finally resolved if not settled by agreement. It may therefore be appropriate to adapt Clause D so that there is provision for all disputes, not just disputes that have been referred to administered expert proceedings, to be finally settled by arbitration.
Under Clause D, if the dispute has not been resolved, referral to arbitration is possible as soon as the ICC International Centre for ADR notifies the termination of the administered expert proceedings, which, according to Article 10 of the Rules for the Administration of Expert Proceedings, occurs when the expert's report is notified to the parties. In practice, the parties will need time after they have received the expert's report, to consider its implications and then, if possible, negotiate a settlement of their dispute. It is therefore unlikely that any referral to arbitration will be made until sometime after the termination of the expert proceedings, even though the right to do so will have accrued earlier. If parties wish to ensure that no party commences arbitration until a certain period has elapsed following receipt of the expert report, then additional wording could be added to Clause D to this effect.
Clause C deals with the alternative approach, where the parties agree that the findings of the expert are to be contractually binding upon them. This approach is often referred to as expert determination. Although non-binding and binding expert proceedings have significantly different effects, it merely requires a simple drafting change to move from one to the other: the only difference between Clauses B and C is the addition of the words:
The parties agree that the findings of the expert shall be contractually binding upon them.
As the notes accompanying Clause C state, a more complex tailor-made clause providing for expert determination may be needed in certain cases. The notes give the example of a price adjustment procedure in an M&A contract, but there are others.8 However, the fact that a more complex clause may be needed in such situations should not deter parties from using the ICC Rules for the Administration of Expert Proceedings.
When using Clause C, the parties will need to take particular care to ensure that disputes that are to be referred to the expert for a binding determination are excluded from the description of all other disputes arising under or relating to the contract that are to be referred to arbitration (or litigation). It may be that parties will wish to provide for mediation as well as expert proceedings in the same contract. If this case, it is important to make it clear whether any requirement to use mediation applies to disputes that are to be referred to an expert, or only to other disputes that will, if not settled, be referred to arbitration or litigation. As already noted, whenever several dispute resolution procedures are provided for in the same contract, great care needs to be taken to ensure that they provide for a dispute resolution system that is coherent, without any ambiguity as to how any particular type of dispute is to be dealt with. [Page80:]
Although the three ICC model clauses relating to dispute boards are by far the longest of all ICC model dispute resolution clauses, they are in many ways the simplest. This is because there are few choices to be made by the parties when incorporating one of these clauses into their contract. The wording of the clauses is linked very closely to the provisions of the Dispute Board Rules, as revised in 2015. It highlights one of the improved features of the revised Rules, namely the ability to resort to arbitration to enforce a Recommendation or Decision that has become final and binding, without the party that has failed to comply with such Recommendation or Decision being able to raise any issue on the merits as a defence to its failure to comply without delay. Three model clauses are provided as there are three different types of Dispute Board to choose from: a Dispute Review Board (DRB); a Dispute Adjudication Board (DAB); or a Combined Dispute Board (CDB).
One of the few choices that does need to be made in the clause that provides either for a DAB or a CDB (both of which can issue Decisions) is whether the parties wish to provide for a review by the Centre of the DB's Decision before it is communicated to the parties. Such a review, which is the subject of Article 23 of the Dispute Board Rules, operates in a similar way to the scrutiny of draft arbitral awards by the ICC International Court of Arbitration.
Another choice that needs to be made in all clauses is the number of members that are to sit on the dispute board. The model clauses offer the choice of either one or three members. If no choice is made, then, according to Article 7 of the Dispute Board Rules, three members will be appointed. In rare cases, parties may wish to have five members on their dispute board. The model clauses can accommodate this, but it will also be necessary to provide a mechanism for the selection and appointment of those five members, as the default mechanisms in the Dispute Board Rules relate only to the appointment of one or three members.
Notwithstanding the introduction of the Emergency Arbitrator Provisions in the 2012 ICC Rules of Arbitration, the ICC pre-arbitral referee procedure remains available if parties wish to select it. Historically, this procedure has been little used, and that trend is unlikely to change now that the EA procedure has been made available. Unlike the EA Provisions, the pre-arbitral referee procedure must be opted into, so parties wishing to be able to have access to it must make express provision for this in their contract. The ICC offers a model clause for this purpose, the wording of which is straightforward and unlikely to require modification. As is mentioned in the notes accompanying the clause, it is important to be aware that, by opting into the pre-arbitral referee procedure, the parties are effectively opting out of the EA procedure by virtue of Article 29(6)(c) of the ICC Rules of Arbitration.9
Although dispute resolution clauses are often the last to be drafted into a commercial agreement, they are the first to be reviewed when a dispute arises, as they provide the gateway to the procedures that can be used to resolve the dispute. If that gateway is ineffective, procedural mayhem can result, leading to extra cost, time and business disruption. The ICC model dispute resolution clauses and their accompanying notes will in very many cases provide the parties with all they need to ensure that their contract contains a clear, simple and effective gateway for dispute resolution. It is hoped that this article will assist users in their understanding of those model clauses and some of the choices that may need to be made to adapt them, as necessary, to their specific requirements.
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ICC Model Dispute Resolution Clauses
This appendix lists the complete set of standard and suggested dispute resolution clauses recommended by the International Chamber of Commerce (ICC), together with information and guidance on how they are to be used.
The clauses listed below may be used as they are or modified to meet the particular wishes of the parties or any requirements under applicable law. When adapting a clause, care must be taken to avoid any risk of ambiguity. Unclear wording in the clause will cause uncertainty and delay and can hinder or even compromise the dispute resolution process.
When including a dispute resolution clause in their contract, parties should take account of any factors, especially any mandatory requirements, that may affect the enforceability of the clause under applicable law.
ICC dispute resolution procedures may be used singly or in combination with each other. Combining procedures in a multi-tiered dispute resolution clause may help to facilitate dispute management and reduce time and costs. For instance, arbitration may be used as the forum for final determination of a dispute following an attempt at settlement by other means such as mediation.
• ICC arbitration without emergency arbitrator
• ICC arbitration in Mainland China
It is prudent for parties wishing to have an ICC arbitration in Mainland China to include in their arbitration clause an explicit reference to the ICC International Court of Arbitration. The following language is suggested for this purpose:
All disputes arising out of or in connection with the present contract shall be submitted to the International Court of Arbitration of the International Chamber of Commerce and shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.
When using any of the above clauses, parties may wish to consider specifying:
• the place of arbitration
• the language of the arbitration
• the number of arbitrators.
The ICC Arbitration Rules do not limit the parties' free choice of the place and language of the arbitration or the law governing the contract (see Arts. 18, 20 and 21). As they contain a presumption in favour of a sole arbitrator (see Art. 12), parties wishing to have a three-member tribunal may care to specify this in their arbitration clause.
Parties to multilateral contracts may wish to include in their clause special provisions addressing the possibility of multiple claimants and/or respondents.
Four clauses covering different situations and needs are proposed. Parties are free to adapt whichever clause they choose to their particular circumstances. They may wish to specify the use of a settlement procedure other than mediation (as allowed by the ICC Mediation Rules, Art. 1(3)), and to stipulate the language and place of any mediation and/or arbitration proceedings.
Notes: By including this clause, the parties acknowledge that proceedings under the ICC Mediation Rules are available to them at any time. This clause does not commit the parties to do anything, but the presence of the clause is designed to remind them of the possibility of using mediation or some other settlement procedure at any time. In addition, it can provide a basis for one party to propose mediation to the other party. One or more parties may also ask the ICC International Centre for ADR for its assistance in this process.
Notes: This clause goes a step further than Clause A and requires the parties, when a dispute arises, to discuss and consider together referring the dispute to proceedings under the ICC Mediation Rules. One or more parties may ask the ICC International Centre for ADR for its assistance in this process.
This clause may be appropriate where the parties do not wish to commit to referring a dispute to proceedings under the Rules at the outset but prefer to retain flexibility as to whether to use mediation to try and settle a dispute.
Obligation to refer dispute to the ICC Mediation Rules while permitting parallel arbitration proceedings, if required
(x) In the event of any dispute arising out of or in connection with the present contract, the parties shall first refer the dispute to proceedings under the ICC Mediation Rules. The commencement of proceedings under the ICC Mediation Rules shall not prevent any party from commencing arbitration in accordance with sub-clause (y) below.
Notes: This clause creates an obligation to refer a dispute to proceedings under the ICC Mediation Rules. It is designed to ensure that when a dispute arises, the parties will attempt to settle the dispute using proceedings under the Rules.
The clause also makes it clear that the parties do not need to conclude the proceedings under the ICC Mediation Rules, or wait for an agreed period of time, before commencing arbitration proceedings. This is also the default position under Article 10(2) of the Rules.
The clause provides for ICC arbitration as the forum for final determination of the dispute. If desired, the clause can be adapted to provide instead for a different form of arbitration, or for judicial or other similar proceedings.
Obligation to refer dispute to the ICC Mediation Rules, followed by arbitration, if required
Notes: Like Clause C, this clause creates an obligation to refer a dispute to proceedings under the ICC Mediation Rules.
Unlike Clause C, this clause provides that arbitration proceedings may not be commenced until an agreed period has elapsed following the filing of a Request for Mediation. The lapse of time suggested in the model clause is 45 days, but parties should select a period that they consider to be appropriate for the contract in question.
Clause D changes the default position under Article 10(2) of the ICC Mediation Rules allowing judicial, arbitral or similar proceedings to be commenced in parallel with proceedings under the ICC Mediation Rules.
Like Clause C, Clause D provides for ICC arbitration as the forum for final determination of the dispute. If desired, the clause can be adapted to provide instead for a different form of arbitration, or for judicial or other similar proceedings.
• Mediation followed by ICC arbitration without emergency arbitrator
If the parties wish to exclude any recourse to the Emergency Arbitrator Provisions, the following wording should be added to Clause C or D:
• Mediation followed by ICC arbitration with emergency arbitrator
If the parties wish to have recourse to the Emergency Arbitrator Provisions, and want that recourse expressly to be available prior to expiry of the 45-day or other agreed period following filing of the Request for Mediation, the following wording should be added to Clause D:
The requirement to wait [45] days, or any other agreed period, following the filing of a Request for Mediation, before referring a dispute to arbitration shall not prevent the parties from making an application, prior to expiry of those [45] days or other agreed period, for Emergency Measures under the Emergency Arbitrator Provisions in the Rules of Arbitration of the International Chamber of Commerce.
If the parties wish to have recourse to the Emergency Arbitrator Provisions, but only after expiry of the 45-day or other agreed period following filing of the Request for Mediation, the following wording should be added to Clause D:
The parties shall not have the right to make an application for Emergency Measures under the Emergency Arbitrator Provisions in the Rules of Arbitration of the International Chamber of Commerce prior to expiry of the [45] days or other agreed period following the filing of a Request for Mediation.
ICC as appointing authority for ad hoc expert proceedings
Notes: The above clause may be used where the parties have provided in their contract for ad hoc expert proceedings (i.e. expert proceedings that are not administered by the ICC) but wish to have the ICC International Centre for ADR appoint the expert. In order to use the above clause, the parties will need to replace the phrase "[clause X of the present contract]" with a reference to the relevant contractual provision(s), so as to identify clearly the type of dispute(s) to be referred to the expert proceedings.
ICC as appointing authority for neutrals
Parties may wish to have the ICC appoint a neutral for ad hoc mediation, neutral evaluation, dispute boards or other similar dispute resolution proceedings. Given the broad range of situations in which parties may wish to have a neutral appointed, it is not possible to offer a suggested clause that easily fits every situation. Below are some recommendations to assist parties in drafting their tailor-made clause.
• clearly describe the type of dispute which is to be the subject of the proceedings (e.g. any dispute arising out of or in connection with the present contract or disputes arising under specific provisions of the contract);
• clearly describe the type of proceedings that the neutral and the parties are to use (e.g. mediation, neutral evaluation or dispute board); and
• state that the neutral shall be appointed by the ICC International Centre for ADR in accordance with the Rules for the Appointment of Experts and Neutrals of the International Chamber of Commerce.
Optional administered expert proceedings
In order to use Clause A, the parties will need to replace the phrase '[clause X of the present contract]' in the suggested clause with a reference to the relevant contractual provision(s), so as to identify clearly the type of dispute(s) that may be referred to expert proceedings.
Obligation to submit dispute to non-binding administered expert proceedings
Notes: Under the ICC Rules for the Administration of Expert Proceedings, the expert's findings are not binding upon the parties unless the parties expressly agree to be bound by them. Clause B, by referring generally to the Rules, creates an obligation to refer a dispute to non-binding expert proceedings under the ICC Rules for the Administration of Expert Proceedings. It is designed to ensure that when a dispute of a specified type arises, the parties will attempt to resolve the dispute by submitting it to expert proceedings under the Rules. [Page85:]
Clause B may be appropriate, for example, where the parties intend to use the expert's non-binding findings as a basis for reaching an agreed settlement of the dispute that is the subject of the proceedings.
In order to use Clause B, the parties will need to replace the phrase '[clause X of the present contract]' in the suggested clause with a reference to the relevant contractual provision(s), so as to identify clearly the type of dispute(s) to be referred to the expert proceedings.
Obligation to submit dispute to contractually binding administered expert proceedings
Clause C is appropriate where the parties want to be contractually bound by the expert's findings.
In order to use Clause C, the parties will need to replace the phrase '[clause X of the present contract]' in the suggested clause with a reference to the relevant contractual provision(s), so as to identify clearly the type of dispute(s) to be referred to the expert proceedings.
When Clause C is used, the parties should determine the effect under applicable law of their agreement to be contractually bound by the expert's findings.
Obligation to submit dispute to non-binding administered expert proceedings, followed by arbitration, if required
In the event of any dispute arising out of or in connection with [clause X of the present contract], the parties agree to submit the dispute, in the first instance, to administered expert proceedings in accordance with the Rules for the Administration of Expert Proceedings of the International Chamber of Commerce. After the International Centre for ADR's notification of the termination of the administered expert proceedings, the dispute, if it has not been resolved, shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules of Arbitration.
Notes: Clause D is appropriate where the parties intend to use the expert's non-binding findings as a basis for reaching an agreed settlement of the dispute that is the subject of the administered expert proceedings. If no settlement is reached, then the dispute is referred to ICC arbitration.
In order to use Clause D, the parties will need to replace the phrase '[clause X of the present contract]' in the suggested clause with a reference to the relevant contractual provision(s), so as to identify clearly the type of dispute(s) to be referred to the expert proceedings and subsequently to ICC arbitration proceedings.
• Expert proceedings followed by ICC arbitration without emergency arbitrator
• Expert proceedings followed by ICC arbitration with emergency arbitrator
The parties shall not have the right to make an application for Emergency Measures under the Emergency Arbitrator Provisions in the Rules of Arbitration of the International Chamber of Commerce prior to the International Centre for ADR's notification of the termination of the administered expert proceedings.
Below are three clauses, each providing for a different type of dispute board, followed by arbitration as the ultimate recourse if a dispute is not resolved through the dispute board. The parties should choose whichever kind of dispute board is most appropriate, given the nature of their contract and their relationship. The ICC does not favour any one type of dispute board over the others. It may be necessary or desirable for parties to adapt the chosen clause to their particular circumstances, e.g. by specifying the number of arbitrators, language and place of the arbitration and the law applicable to the merits, in the event of arbitration.
ICC Dispute Review Board followed by ICC arbitration, if required
The Parties hereby agree to establish a Dispute Review Board ('DRB') in accordance with the Dispute Board Rules of the International Chamber of Commerce (the 'Rules'), which are incorporated herein by reference. The DRB shall have [one/three/X] member[s] appointed in this Contract or appointed pursuant to the Rules.
ICC Dispute Adjudication Board followed by ICC arbitration, if required
The Parties hereby agree to establish a Dispute Adjudication Board ('DAB') in accordance with the Dispute Board Rules of the International Chamber of Commerce (the 'Rules'), which are incorporated herein by reference. The DAB shall have [one/three/X] member[s] appointed in this Contract or appointed pursuant to the Rules.
ICC Combined Dispute Board followed by ICC arbitration, if required
The Parties hereby agree to establish a Combined Dispute Board ('CDB') in accordance with the Dispute Board Rules of the International Chamber of Commerce (the 'Rules'), which are incorporated herein by reference. The CDB shall have [one/three/X] member[s] appointed in this Contract or appointed pursuant to the Rules.
[*The Parties may, if they wish, provide for review by the Centre of a CDB's Decisions by inserting the following text in place of the asterisk above: The CDB shall submit each Decision to the ICC for review in accordance with Article 23 of the Rules. ]
Unlike the ICC emergency arbitrator procedure, which forms part of the parties' agreement to use the ICC Rules of Arbitration unless they opt out, the ICC pre-arbitral referee procedure is separate from the ICC Rules of Arbitration and requires a specific agreement. For this purpose the following clause is recommended:
An agreement to use the ICC pre-arbitral referee agreement will automatically exclude the application of the ICC Emergency Arbitrator Provisions (Art. 29(6), ICC Rules of Arbitration).
The extent to which the ICC Rules for a Pre-Arbitral Referee Procedure are recognized and accepted may vary from one country to another depending on the applicable law(s). Parties wishing to have recourse to these Rules should ensure that they conform with the law(s) applicable to each case.
Translations of ICC dispute resolution clauses can be found at www.iccwbo.org.
Article 29(7) reads as follows: 'The Emergency Arbitrator Provisions are not intended to prevent any party from seeking urgent interim or conservatory measures from a competent judicial authority at any time prior to making an application for such measures, and in appropriate circumstances even thereafter, pursuant to the Rules. Any application for such measures from a competent judicial authority shall not be deemed to be an infringement or a waiver of the arbitration agreement. Any such application and any measures taken by the judicial authority must be notified without delay to the Secretariat.'
Section 44(5) reads as follows: 'In any case the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively.'
'Techniques for Controlling Time and Cost in Arbitration', 2d ed. (2012), § 3
ICC, 'Mediation Guidance Notes', § 2, footnote 2.
See section 3(a)(i) above.
See section 3(b)(i) above.
For example, price reviews in oil and gas supply contracts, quality disputes in commodity contracts, or rent review disputes in property leases.