Innovations in the New 2021 Swiss Rules: How Do They Fare Against the ICC and LCIA Rules?

Introduction

The Swiss Rules of International Arbitration (hereinafter “Swiss Rules”) apply to all relevant proceedings in which the Notice of Arbitration was filed after 1 June 2021.  They replace the 2012 version of the Swiss Rules and have been drafted to improve the efficiency, flexibility and cost effectiveness in the resolution of international and domestic disputes.  The first version of the Swiss Rules, which came into force on 1 January 2004, was based on the UNCITRAL Rules with several innovations being introduced to the 2012 Rules and now in the latest 2021 version of the Swiss Rules. The 2021 revision of the Swiss Rules achieves its goal in modernizing and clarifying the Swiss Rules without affecting their key elements which have played a major part in making Switzerland a successful and attractive place for international arbitration.

The latest revision of the Swiss Rules coincided with the conversion of the Swiss Chambers’ Arbitration Centre (hereinafter “SCAI”) to the new Swiss Arbitration Centre (hereinafter “SAC”), a joint venture between SCAI and the Swiss Arbitration Association (hereinafter “ASA”). The new Swiss Rules therefore replace the 2012 Swiss Rules and are part of an overhaul of the Swiss arbitration system, and more generally, a revision of the Swiss International Private Law Act (hereinafter “PILA”). The revised PILA has become more arbitration user friendly, including by allowing parties to submit challenges to an international arbitration award in English, alongside Switzerland’s official languages German, French, Italian and Romansh.  Despite the scale of the overhaul, the amendments to the Swiss Rules in 2021 are limited to specific improvements which were considered necessary after consultation with practitioners and users. The 2021 Swiss Rules focus on party autonomy and reflect Switzerland’s long-standing strong support for international arbitration, with strengthened provisions on multiparty arbitrations, and an emphasis on efficiency. The relatively light, although increasing case load of the SAC and the increased power given to the Secretariat for management activities, means that matters of the SAC are unlikely to face administrative delays.

This article seeks to explore how the new developments in the Swiss Rules compare to other recent revisions of main international commercial arbitration rules, namely the International Chamber of Commerce (hereinafter “ICC”) rules of 2021 (hereinafter the “ICC Rules”)^[1] and those of the London Court of International Arbitration (hereinafter “LCIA”) of 2020 (hereinafter the “LCIA Rules”).^[2]

Main Changes in the new Swiss Rules

1. In relation to the default number of arbitrators: Under the 2012 Swiss Rules the SAC court (hereinafter “the “Court”) would, as a rule, refer a case to a sole arbitrator where the parties have not agreed on the number of arbitrators, unless the complexity of the subject matter and the amount in dispute justify referral to a three-member tribunal (Article 6). The new Swiss Rules have deleted the preface “as a rule” contained in the 2012 Swiss Rules and added “other relevant circumstances” to the existing grounds, thereby signifying that the SAC Court enjoys more discretion than was previously the case (Article 9). Similarly, the ICC Rules (Article 12.2) and the LCIA Rules (Article 5.8) contain a preference for the appointment of a sole arbitrator if the parties have not agreed otherwise, unless the circumstances of the dispute warrant the appointment of a three-member tribunal (ICC Rules Article 12.2; LCIA Rules Article 5.8). The new Swiss Rules have retained a provision allowing the Court to invite the parties to agree to refer the case to a sole arbitrator, if the parties’ agreement to refer the case to a three-member tribunal appears inappropriate in view of the amount in dispute (Article 9.3). Notably, the Swiss Rules do not provide any restriction on the nationality of the arbitrators, while the ICC Rules and the LCIA Rules do provide that the nationality of any sole or presiding arbitrator to be appointed by the respective courts should be different to that of any of the parties, unless the parties agree otherwise (ICC Rules Article 13.5; LCIA Rules Article 6).
2. Multi-party disputes: one of the main developments in the new Swiss Rules are the provisions for cross claims, joinder, intervention (Article 6) and the consolidation of claims (Article 7).
   1. Cross-claims: while the 2012 version of the Swiss Rules makes no mention of cross-claims, the new Swiss Rules refer to the possibility of cross-claims; that is, claims between co-claimants or between co-respondents to the main dispute (Article 6). The LCIA Rules similarly make specific reference to cross-claims, while the ICC Rules do not explicitly identify cross-claims using such terminology, but provide for the possibility of claims being made by any party against any other party to the arbitration as long as those new claims are brought prior to the signing of the Terms of Reference (or their approval by the ICC court) (ICC Rules Article 8.1).
   2. Joinder: the LCIA Rules grant the arbitral tribunal the power, upon the application of a party, to allow the joinder of one or more third parties to the arbitration as long as their written consent is obtained (LCIA Rules Article 22.1(x)). The ICC Rules allow the joinder of an additional party to take place before the confirmation or appointment of an arbitrator (ICC Rules Article 7.1). Since 2021, the ICC Rules also provide for the possibility of the joinder of a third party after the confirmation or appointment of any arbitrator, which is to be decided by the arbitral tribunal, albeit on a more restrictive basis and only if the party to be joined agrees to the Terms of Reference (ICC Rules Article 7.5). The new Swiss Rules provide for the joinder of third parties by way of issuing a Notice of Claim, which resembles a Notice of Arbitration, from the requesting party to the party to be joined (Articles 6 & 3). The new Swiss Rules are more liberal in providing the arbitral tribunal the discretion to admit the joinder of the third party without a requirement for the agreement of the party to be joined, but upon consulting with all parties and by taking into account all relevant circumstances (Article 6). It is yet to be seen whether tribunals will fully exercise their discretion in circumstances where the party to be joined does not acquiesce to the joinder, and if so, whether this would withstand subsequent scrutiny by national courts.
   3. Intervention: an innovation unique to the new Swiss Rules is the ability of a third party to request to intervene in the proceedings by asserting a claim against a party to the proceedings (Article 6.1), or even by allowing a third person to request to participate in the proceedings in a capacity other than an additional party, such as through amicus curiae briefs (Article 6.4). As is the case in relation to joinder, the tribunal retains significant discretion to decide on this request upon consulting with the parties and the third persons.
   4. Consolidation: one of the most apparent differences between the three rules is in how they address the consolidation of proceedings:

      Unlike joinder and intervention, the decision to consolidate different proceedings under the Swiss Rules rests with the Court, not one of the arbitral tribunals involved. This is because in deciding to consolidate different arbitration proceedings, the Court may reconstitute the remaining tribunal, including by revoking the confirmation or appointment of arbitrators.  Consolidation requires the request of a party and consultation with all other parties and any confirmed arbitrator (Article 7) and consideration of all relevant circumstances, including the links between the claims and the progress already made in the respective proceedings (Article 7.2). Notably, the new Swiss Rules explicitly provide that “the parties to all proceedings shall be deemed to have waived their right to designate an arbitrator” in cases where ongoing proceedings are consolidated (Article 7.3), an approach which may raise some concerns at the enforcement stage of arbitral awards in connection with the exercise of party autonomy.^[3]

      By contrast, the provisions on consolidation under the ICC Rules and particularly the LCIA Rules are more conservative.  Under the ICC Rules, the consolidation of two or more arbitrations may only occur with the agreement of the parties, or if the claims arise under the same arbitration agreement or agreements, or if the arbitrations are between the same parties or they arise in connections with the same legal relationship and the Court finds the arbitration agreements to be compatible (ICC Rules Article 10).

      The LCIA Rules provide for two consolidation scenarios. First, the LCIA court can consolidate arbitrations where the parties so agree, or where two or more arbitrations are commenced under the same or compatible arbitration agreements, which either involve the same parties or arise out of the same or related transactions, but only if no arbitral tribunal has been formed (LCIA Rules Article 22.8). Second, an arbitral tribunal may decide to consolidate two proceedings with the approval of the LCIA court where the parties agree in writing or the second tribunal has not yet been formed, or the two arbitrations are composed of the same arbitrators (LCIA Rules Article 22.7).

   5. Appointment of arbitrators in multi-party proceedings: while the 2012 Swiss Rules provided that in multiparty proceedings each side shall designate an arbitrator within thirty days (Article 8), the new Swiss Rules have left it for the Court to set a time limit (Article 11.4).The LCIA Rules take a different approach. Unless the parties have agreed that they represent two separate “sides” for the purposes of appointments, the LCIA Court shall appoint the Tribunal itself (LCIA Rules Article 8). The ICC Rules allow for multiple claimants or multiple respondents to jointly nominate arbitrators (ICC Rules Article 12.6 and 12.7) following the usual process for the appointment of arbitrators (in principle, in the request for arbitration or answer), otherwise and in the absence of an agreed method of nomination, the ICC Court will appoint all arbitrators on behalf of the parties (ICC Rules 12.8).
3. Confidentiality: The confidential nature of arbitration is a significant consideration for many parties who elect to resolve disputes by way of arbitration. The ICC Rules contain no provisions on confidentiality, leaving the matter to be agreed by the parties or to be decided by the tribunal. In an effort to introduce greater transparency to international arbitrations, since 1 January 2019 there is a presumption that ICC awards may be published in some form, unless a party objects to such publication. By contrast, the LCIA Rules provide that all matters related to the arbitration shall be unpublicized and confidential, unless the parties explicitly agree otherwise (LCIA Rules Article 30). The 2020 version of the rules extends obligations to all persons involved in the arbitration, including the parties’ authorized representatives, fact and expert witnesses, and service providers, by imposing a positive duty on parties to obtain confidentiality undertakings from them (LCIA Rules Article 30). Under the new Swiss Rules, the confidential nature of arbitration is retained, and the award is not a matter of public record unless the parties agree otherwise and information which would allow the identification of the dispute is redacted (Article 44). Arbitrators also have an obligation to keep award deliberations confidential, unless the parties explicitly consent to an award or order being made available for publication (Article 44).
4. Time limit for issuing award: With the exception of expedited proceedings (see below) the new Swiss Rules do not contain a specific time limit for the tribunal to render an award. The ICC Rules provide for a time frame of six months from the establishment of the Terms of Reference (also with the exception of expedited proceedings), although this is very often extended by the Court (ICC Rules Article 31). The ICC also expects three member-tribunals to submit draft awards for approval within three months of the filing of the last written submissions or the last substantive hearing on matters to be decided in the award. This period is reduced to two months for sole arbitrators and is enforced through the possibility of reducing the arbitrators' fees.^[4] In practice, the average duration of proceedings in ICC cases that reached a final award in 2020 was 26 months.^[5] By contrast, the LCIA Rules do not bind tribunals to a time limit for rendering the award, however, Tribunals are guided to endeavor to issue an award within three months of final submissions (LCIA Rules Article 15.10).
5. Expedited / Summary procedures: Expedited arbitrations can eliminate the need for an oral hearing, mandate fewer and shorter submissions, and implement more efficient time and cost procedures. The new Swiss Rules provide for expedited procedure upon agreement of the parties or where the amount in dispute does not exceed CHF 1,000,000, unless the Court decides otherwise (Article 42.1). The award is expected to be rendered within six months from receipt of the file, a time limit which may only be extended in exceptional circumstances (Article 42). This short time frame conveys the expectation of the parties and the Court that matters be resolved expeditiously. The expedited procedure provisions default to the appointment of a sole arbitrator and reduce the number of written submissions. Unless the parties agree that the dispute may be decided based on documentary evidence only, there will be only one hearing (Article 42.2).These are not innovations per se, as the 2012 Swiss Rules already contained provisions in relation to the expedited procedure, although they were restructured for clarity and the new Swiss Rules no longer provide the possibility for the parties to agree that no reasons need to be given by the arbitral tribunal in the award (2012 Swiss Rules Article 42.1). However, the tribunal is permitted to reduce the reasoning of the award to summary form (Article 42.2(f)).Again, it remains to be seen to what extent this right is exercised by tribunals who may be wary of a potential judicial challenge to their award.The new Swiss Rules also now specifically permit the parties to agree to discontinue the application of the expedited procedure provisions at any time during the arbitration proceedings (Article 42.3). This allows the parties flexibility as the case progresses.The expedited procedure under ICC Rules applies where the amount in dispute does not exceed US $3,000,000 or the parties mutually agree on an expedited procedure (ICC Rules Articles 30.2 and 30.3). As the ICC’s Expedited Procedure Rules forego the Terms of Reference, the six months period for rendering the award starts to run from the date of the case management conference (Article 4(1) of the Expedited Procedure Rules) and it is only rarely and exceptionally extended.In contrast, the LCIA rules do not contain a specific framework for expedited procedures. Instead, they permit the expedited formation of an arbitral tribunal in cases of “exceptional urgency” upon application to the LCIA court (LCIA Rules Article 9.1) without an express restriction as to the amount in dispute.If there is insufficient time to wait for an arbitral tribunal to be put in place, a temporary sole arbitrator may be appointed in the meantime (Article 9.4). Expedited proceedings are fundamental in providing parties with a faster and more affordable alternative to traditional arbitration proceedings where appropriate.
6. Mediation: Article 19.5 of the new Swiss Rules expressly empowers the tribunal, with the parties’ agreement, to facilitate the settlement of the dispute before it. Moreover, at any time during the arbitration proceedings, the parties are free to resort to mediation, including under the Swiss Rules of Mediation, or any other form of alternative dispute resolution. In such circumstances, unless otherwise agreed by the parties, the arbitration proceedings will be stayed (Article 19.6). By expressly including a provision which actively encourages settlement at the behest of the tribunal and facilitates mediation, the SAC hopes that more arbitrations could end by way of a mediation/settlement. Practice will show whether this will have a measurable effect. Appendix IV – Case Management Technique of the ICC Rules also includes mediation as a case management technique that can be used by the Tribunal to control time and costs. The LCIA Rules do not specifically encourage tribunals to facilitate a settlement between the parties, or to resort to mediation during the course of arbitral proceedings, although this is permitted.
7. Paperless filing: The new Swiss Rules adopt paperless filings as the new standard, with the Secretariat requiring hard copies of the Notice of Arbitration and other communications only in special circumstances (Article 3.1). Likewise, the LCIA Rules have also adopted electronic communications as the standard (see for example LCIA Rules Article 4), whereas the 2021 ICC Rules have watered-down the previous presumption of physical documents in acknowledgment of the trend towards paperless filings. The increased use of electronic documents is a welcome change that promotes efficiency, facilitates automated document management, reduces printing and overall costs for parties and tribunals, and reduces the environmental impact of printing and shipping.
8. Data Protection: The speed at which arbitrations transitioned to online platforms, fueled by global constraints of the COVID-19 pandemic, has increased concerns relating to cybersecurity in virtual arbitrations. The new Swiss Rules now provide that issues of data protection and cybersecurity shall be discussed in the first case management conference in order to ensure an appropriate level of compliance and security (Article 19.2). Similarly, the LCIA Rules provide that the tribunal and the parties should consider whether any protective measures on cybersecurity should be adopted (LCIA Rules Article 30.5). Whereas the ICC Rules themselves do not address issues of cybersecurity, the Note to Parties and Arbitral Tribunals contains a Checklist for a Protocol on Virtual Hearings and Suggested Clauses for Cyber-Protocols and Procedural Orders Dealing with the Organisation of Virtual Hearings.
9. Cost: In order to reflect the increased workload of the SAC's Secretariat under the new Swiss Rules, the revised Schedule of Costs in Appendix B provides for slightly higher administrative costs which are only charged for amounts in dispute above CHF 300,000 and are capped at an amount of CHF 75,000 for disputes above CHF 250 million. This increase in administrative costs is however counterbalanced by a scale providing for slightly reduced fees for arbitrators. Like the ICC, the SAC assesses costs depending on the amount in dispute and the number of arbitrators. There has been no increase in the cost of arbitration under the new ICC rules, although as of 1 January 2021 the ICC charges VAT at the rate of 20% on its administrative fees.^[6] This can amount to a serious increase on arbitration costs for certain parties who would be unable to recover the amount of VAT paid, such as private individuals. The LCIA revision, which came into effect on 1 October 2020, also saw an increase of costs to parties by 10% to 12.5% compared to the previous rules. Contrary to the ICC and the SAC, LCIA fees are based on hourly billable rates for arbitrators and the Secretariat.

Conclusion

The new Swiss Rules are a significant albeit incremental improvement on the 2012 Swiss Rules in the spirit of the full revamp of the Swiss arbitration framework. The new Swiss Rules have been refreshed in a manner which makes them an attractive alternative to the ICC Rules and the LCIA Rules.

^[1] “The Launch of the 2021 ICC Rules of Arbitration”, Orrick International Arbitration Insights, December 2020: https://media.orrick.com/Media%20Library/public/files/insights/launch-of-2021-icc-rules-of-arbitration-orrick.pdf

^[2] “New LCIA and ICC rule updates: increased flexibility and virtual hearings”, 19 October 2020: https://www.orrick.com/en/Insights/2020/10/New-LCIA-and-ICC-rule-updates-increased-flexibility-and-virtual-hearings

^[3] Article V.1 of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards provides “Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: […] (b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or […] (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; […]”

^[4] Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration dated 1 January 2021, paras. 153 – 156.

^[5] ICC Dispute Resolution 2020 Statistics, p. 19.

^[6] Explanatory Note on Vat Applicable on ICC Administrative Expenses, dated 1 January 2021, https://iccwbo.org/publication/explanatory-note-on-vat-applicable-on-icc-administrative-expenses/