"We will pay for delays" - ICC clampdown on its award scrutiny process

On 13 July 2016, the International Chamber of Commerce ("ICC") issued its revised Practice Note allowing for a reduction in ICC administrative fees of up to 20% for unjustified delays in the ICC's award scrutiny process. The revised Practice Note also sets out the exact steps the scrutiny process entails. Reflecting on the amendments, ICC Court President Alexis Mourre noted that "as a world leader in commercial dispute resolution, it is imperative for ICC to lead by example and take steps to improve transparency and accountability wherever appropriate".

An overview of both the scrutiny process and the changes are provided below.

The scrutiny process

Draft arbitral awards are submitted by tribunals to the ICC Court for scrutiny before parties are notified of the final result. The rationale is that an objective review of the draft award by the ICC Court (which consists of experienced counsel and arbitrators) can help spot errors and identify gaps or a lack of clarity in the tribunal's reasoning, leading to higher quality awards (and may reduce the risk of challenge or non-enforcement). The scrutiny process does not affect "the arbitral tribunal's liberty of decision-making" or usurp the tribunal's substantive decision-making power (see Article 33 of the ICC Rules 2012). 

The scrutiny process has, however, been criticised on the basis that it leads to delays in issuing awards. Furthermore, some users were not familiar with the ICC process and had different expectations as to the length of the process.

An overview of the changes

The Practice Note aims to address these criticisms by explaining the steps involved in the scrutiny process and providing for a reduction in the ICC's administrative fees if the process is delayed by the ICC Court. It explains that:

1. The first step is of course for the tribunal's draft award to be submitted to the ICC Court for scrutiny;
2. the ICC Secretariat will then inform the parties and tribunal that the draft award will be scrutinised at one of the ICC Court's next sessions;
3. the draft award will be scrutinised at: (a) a Committee Session (by three ICC Court members); (b) a monthly Plenary Session of the full ICC Court (most appropriate for matters, among others, involving a state or state entity, where there is a dissenting arbitrator so involving policy issues); or (c) at both if the draft award is referred from a Committee Session to be dealt with by Plenary review;
4. the ICC Court will complete the scrutiny process between three and four weeks from receipt of the draft award (extended to between five and six weeks for Plenary review);
5. after the scrutiny process is complete, the ICC Secretariat will inform the parties and tribunal that the draft award is either approved or requires further scrutiny; and
6. any departure from this timetable "not attributable to exceptional circumstances beyond the [ICC] Court's control" will result in a reduction on the amount of administrative fees due to the ICC Court of up to 20% depending on the length of the delay. Decisions regarding the percentage reduction will be made by the ICC Court.

Comments

This year has seen a surge in innovative arbitral institution policies to promote transparency and accountability in response to user demands. These revisions are a direct response to sentiment of users of ICC arbitration and other stakeholders in the process. For example, following the ICC's announcement this January that tribunals would face fee penalties for delays in issuing draft awards (see here for more details), Paula Hodges QC, Herbert Smith Freehills' Global Head of Arbitration expressed industry sentiment commenting in GAR that "It is to be hoped that the encouragement of speed will also apply to the scrutiny process undertaken by the ICC Court".

The latest changes are to be welcomed as the most recent indication of the ICC's desire to adapt and improve the arbitration process.

For further information, please contact Chris Parker, Partner, Dominic Kennelly, Senior Associate, Hannah Ambrose, Professional Support Consultant, or your usual Herbert Smith Freehills contact.