The KSLR Forum

latest post 14/11/2021

Joinder Provision under the 2021 ICC Arbitration Rules: A Nail in the Coffin of Party Autonomy

 

Aarushi Gupta and Prajakta Pradhan[1]

 

Introduction

Due to a rampant increase in international trade in recent years, multi-party and multi-contract disputes are now prevalent in international arbitration. The International Chamber of Commerce (ICC) 2019 Dispute Resolution Stats[2] reveals that out of the 869 total cases filed in 2019, one third of them involved multi-party disputes. Similarly, the London Court of International Arbitration (LCIA) 2019 Annual Casework Report reveals that 22% of the total arbitrations initiated under the LCIA Rules involved more than two parties, and 1% of arbitrations involved ten or more parties.[3]

To resolve these complex multi-party, multi-contract, cross-border disputes, the ICC Arbitration Rules are used around the globe since these rules provide a neutral framework for the resolution of cross-border disputes. On 1 January 2021, a revised version of ICC’s 2017 Arbitration Rules entered into force.

The 2021 Rules amended Article 7 of the 2017 ICC rules, and it introduced amendments on the provision of joinder of parties after the formation of the composition of the arbitral panel. A joinder provision means joining an additional party to a pending arbitration either at the request of an existing party to the arbitration or of the third parties’ own volition. Under the new rules, the arbitral tribunal is requested to consider the following points:

  1. Whether it has prima facie jurisdiction over the additional party
  2. The timing of the request
  • The possibility for conflicts of interest
  1. Any potential procedural effect that said joinder might have on the arbitral procedure.

Furthermore, the additional party (which is being joined to the ongoing arbitration proceedings) must also accept the composition of the arbitral tribunal and the Terms of Reference.

Problems associated with the revised Joinder Provision

1. Consent of existing parties vitiated

The freedom of the parties to consensually execute the arbitration proceeding according to their will is known as the principle of party autonomy. It is a guiding principle as the entire process of arbitration depends upon the consent of the parties committed to arbitration for its validity. In the case of PT First Media TBK vs. Astro Nusantara International BV[4], the Singapore Court of Appeal stated that the reason why an arbitral award binds the parties to the arbitration is that the parties have consented to be bound by the consequences of agreeing to arbitrate their dispute. Hence, party autonomy is one of the basic principles of arbitration.

The significance of consent in arbitration proceedings can also be assessed by the observation made by the United States Supreme Court in the case of Stolt-Nielsen vs. Animal Feeds[5] The same was reaffirmed in the case of GE Energy Power Conversion France SAS vs. Outokumpu Stainless USA LLC[6] wherein the United States Supreme Court stated that “arbitration is a matter of consent and not coercion.” This means that while enforcing and construing an arbitration clause, courts and arbitrators must give effect to the rights and expectations of the parties. However, the new arbitration rules undermine this principle of party autonomy.

The old ICC Rules would only allow additional parties to join arbitration after the arbitral tribunal was confirmed that the existing parties consented to it. However, Article 7(5) of the 2021 rules[7] provides that a request for a joinder can be made after confirmation or appointment of an arbitral tribunal upon the request of one party – this is a “forced joinder”. Under this concept, the consenting third party joins arbitration proceedings on an application by a party even if other parties do not consent (or object) to it. Recently, Singapore High Court in CJD v CJE[8] stressed the importance of consent and held that forced joinder should only be allowed in those cases where it is explicitly mentioned in the agreement. Thereby, realising the importance of parties’ will, the Singapore International Arbitration Centre (SIAC) and the Hong Kong International Arbitration Centre (HKIAC) require the express consent of all parties.

The practical significance of all this is that claimants and respondents can now freely join willing co-parties irrespective of what any other party to the arbitration thinks. The only safeguard available here is that the arbitral tribunal will have to consider certain criteria (as mentioned in the introductory paragraph) before allowing a joinder of additional parties. But it is an insufficient safeguard because it still violates the principle of party autonomy.

Article 7(5) of the new rules is an erosion of the party autonomy principle and provides a possible basis for challenging awards made following non-consensual joinders on grounds such as controversial party equality and natural justice. Arguably the safeguard which is provided in this Article also stops willing co-parties from freely joining arbitration proceedings because it is not an unfettered right. Hence, the authors believe that this rule will act as a double-edged sword.

 

2. Parties facing unequal treatment

Arbitration conventions, rules and national laws unanimously require that all the parties to an arbitration proceeding be treated equally throughout the process. Article 6 of ECHR[9] and Article 18 of the UNICITRAL Model Law[10] provide that each party shall be given an opportunity to present their case and have the right to be heard in the proceedings. Abiding by the preceding rights, joinder is also part of the arbitration proceeding. Hence, a plethora of arbitral institutions provide the opportunity to hear statements from all of the parties before authorising joinder. For example: Article 7.10  of Singapore Court of International Arbitration (SCIA)[11],  Article 4(2) of the Swiss Rules of International Arbitration[12], Article 36(3) of  Portuguese Voluntary Arbitration Law[13] explicitly provide that each party (including the additional party) has the opportunity to comment and present its case on the joinder. All parties can express their view and control the joinder process, which satisfies party autonomy.

Under ICC Joinder Rule 2021- Article 7(5), the filing party has an opportunity to be heard as the request of joinder is submitted, which includes the reasons and description behind its claims. However, parties other than the filing party (from now on referred as other parties) like the opposite, third parties are not provided with the opportunity to counter-argue/ comment on the request filed. Thus, the other parties are deprived of the right to present their views on issue of joinder.[14] The rule violates the right that each party has a reasonable opportunity to present its views on the opponent’s submissions.[15] Furthermore, Cour d’appel de Paris[16] (French Jurisdiction) also requires “each party be given an opportunity to make its arguments known to the other party and to challenge the other party’s arguments.” Thus, the other parties do not have any freedom to influence, determine or express their views in the joinder proceedings (part of the arbitral process), which undermines the principle of party autonomy.

The Swiss Federal Supreme Court (consistent with international arbitration rules[17]) in 4A_156/2020   laid down conditions for establishing the violation of the right to be heard. The party has to show: (1) it was not given the equal opportunity to present its case, and (2) the award could have been different had the right not been violated. The first part of the test is satisfied from the immediate preceding paragraph (para 10), which establishes that other parties are not given the equal opportunity to present their case. The second part of the test is proven if the party can show it would have raised objections such as breach of confidentiality, conflict of interests, prejudicing the existing party’s right to arbitrate without the presence of third parties, to name a few. These substantial issues, which may have a bearing on the outcome, may go unnoticed by the arbitral tribunal if the party is not allowed to present its case.

 

Conclusion & the Way Forward

Multi-party arbitration has multi-fold benefits such as reducing the multiplicity of proceedings for the same subject-matter dispute and enhancing the parties’ sense of justice. However, these benefits should not be earned at the expense of the bedrock principle of arbitration. Thus, a middle path needs to be reached so that joinder in arbitration is conducted without violating party autonomy.

The authors would like to put forth one of the approaches, which ICC could adopt on similar lines. The Netherland Arbitration Act[18] requires the views of all the concerned parties, and the final decision is vested with the arbitral tribunal. Further, the arbitral tribunal also observes the compatibility and success rate of such proceedings.[19] Unlike the ICC rules, all parties exercise the freedom to express a view that satisfies party autonomy, with the arbitral tribunal making the final decision which acts as an important objective safeguard.

The authors have endeavoured to showcase that ICC Joinder Rules 2021 are formulated at the expense of party autonomy. Two primary arguments have been put forth. Firstly, the consent of the parties is crucial to uphold party autonomy. Yet, the consent of the existing parties has been vitiated for authorising the joinder. The principle of party autonomy has been further limited as other parties are not allowed to control or influence the joinder by presenting their views. It also violates the principle of providing equal opportunities to the parties.

 

[1] 3rd-year Law Students at Dr. Ram Manohar Lohia National Law University, Lucknow, India.

[2] International Chamber of Commerce, ‘2019 ICC Dispute Resolution Statistics’ (International Chamber of Commerce 2019) <https://iccwbo.org/publication/icc-dispute-resolution-statistics/> accessed 3 July 2021.

[3] London Court of International Arbitration, ‘Annual Casework Report 2019 – The LCIA Records its Highest Number of Cases| (LCIA 2019) <https://www.lcia.org/News/annual-casework-report-2019-the-lcia-records-its-highest-numbe.aspx/> accessed 3 July 2021.

[4] PT First Media TBK v Astro Nusantara International BV and others [2014] 1 SLR 372.

[5] Stolt-Nielsen S.A v AnimalFeeds International Corp 559 US 662 (2010).

[6] GE Energy Power Conversation France SAS v Outokumpu Stainless USA 590 US (2020).

[7] ICC Joinder Rules 2021, art 7(5).

[8] CJD v CJE [2021] SGHC 61

[9] European Convention on Human Rights 1953, art 6.

[10] UNICITRAL Model Law on International Commercial Arbitration 1985, art 18.

[11] Singapore Court of International Arbitration  2016, art 7.10.

[12] Swiss Rules of International Arbitration 2006, art 4(2).

[13] Portuguese Voluntary Arbitration Law 2011, art 36(3).

[14] George Vlavianos, ‘The 2021 ICC Rules: Presentation and Commentary ’ (DLA Piper, 2020) < https://www.dlapiper.com/en/qatar/insights/publications/2020/10/the-2021-icc-rules-presentation-commentary/ > accessed 3 July 2021.

[15] English Arbitration Act 1996, Section 33.

[16] Prakash Steelage Ltd. v. Uzuc S.A. [2020] 14 Rom. Arb.J.137.

[17] Simon Gabriel, ‘The new Swiss approach to the right to be heard-balancing challenging fairness and efficiency concerns’(Gabriel Arbitration Dispute Resolution, 2020) < https://www.gabriel-arbitration.ch/en/publications-and-speaking/right-to-be-heard-swiss-approach > accessed 3 July 2021.

[18] Netherland Arbitration Act 1986, art 1045.

[19] Natalie Volemans, ‘International Arbitration Laws and Regulations 2021 I Netherlands’ (Global Legal Insights, 2021) < https://www.globallegalinsights.com/practice-areas/international-arbitration-laws-and-regulations/netherlands > accessed 3 July 2021.