ICC publishes note on early dismissal of manifestly unmeritorious claims or defences

On 30 October 2017, the International Chamber of Commerce ("ICC") published guidance designed to provide greater clarity on the scope for "immediate dismissal of manifestly unmeritorious claims or defences" under Article 22 of the 2017 ICC Rules (the "Rules"). The updated practice note follows the introduction by several leading arbitral institutions of express 'early dismissal' provisions in their latest rules. The ICC did not follow this trend in March 2017, but confirms in its updated practice note that it considers that Tribunals' general case management powers under Article 22 of the Rules already include such tools.

To read the practice note in full, please click here. Herbert Smith Freehills has produced a Step by Step Guide to Arbitration under the ICC Rules. To request a copy, please contact Arbitration.Info@hsf.com.

Background

The debate surrounding the summary disposal of claims in the context of international arbitration is not a recent development. Certain arbitral frameworks have long included express provisions for the summary disposal of claims (e.g. ICSID, JAMS International, CIArb/IMPRESS). Other institutional rules bestow broad discretionary procedural powers on Tribunals, which are often interpreted to encompass the ability to use summary disposal as part of general case management powers.

The topic has, however, come into renewed focus since August 2016, when the Singapore International Arbitration Centre ("SIAC") introduced in its rules an express provision for the early dismissal of claims and defences (Rule 29). An application for early dismissal can now be made under the SIAC rules on the basis that a claim or defence is: (i) manifestly without legal merit; or (ii) manifestly outside the jurisdiction of the Tribunal.

Since then, several arbitral institutions have included similar provisions in their rules. For instance, in January 2017, the Stockholm Chamber of Commerce introduced a "summary procedure" which a Tribunal may adopt (at a party's request) in relation to allegations of fact or law that are "manifestly unsustainable" or are "for any other reason, suitable to determination by way of summary procedure" (Rule 39).

Other institutions, including the London Court of International Arbitration and the ICC, have issued updated arbitral rules in recent years without introducing express summary procedures. There has been significant debate, as a result, about whether or not the summary disposal of claims and defences is permitted under those rules. It is, in any event, also important to consider whether the arbitration agreement or the law of the seat of arbitration expressly provides the Tribunal with such powers.

The ICC's latest amendment to its practice note provides welcome clarification to parties and Tribunals on the intended scope of the Rules.

The ICC's guidance

The key point arising from the ICC's amended practice note is the confirmation that Article 22 of the Rules (Conduct of the Arbitration) provides – in its current form – for "expeditious determination of one or more claims or defenses, on grounds that such claims or defenses are manifestly devoid of merit or fall manifestly outside the arbitral tribunal’s jurisdiction".

The practice note suggests that an application for "expeditious determination" of a claim or defence must be made "as promptly as possible" after the relevant claim or defence is filed. It suggests that the Tribunal is required to consult the parties on the appropriate procedure for determining the application (including whether or not a hearing is required, in person or by other means of communication) but that "[f]urther presentation of evidence will be allowed only exceptionally".

The practice note anticipates that the Tribunal will "as promptly as possible" determine the application and state the reasons for its decision in "as concise a fashion as possible" in an order or award. If the decision is recorded in an award, the ICC Court will scrutinize the award "in principle within one week of receipt".

Comment

The main purpose of the new guidance from the ICC is to provide greater certainty for parties and Tribunals on the case management tools available to them under the Rules. However, the ICC appears to have been reluctant to be too prescriptive about when or how an "expeditious determination" can be implemented in practice.

Neither does the guidance note confirm the type of procedure envisioned in the context of an "expeditious determination". This language leaves room for debate in a context where Tribunals are already under an obligation pursuant to the Rules to "make every effort to conduct the arbitration in an expeditious and cost-effective manner" (Article 22(1)).

However, the press release published by the ICC with the amended practice note (available here) refers to the "immediate dismissal" of claims or defences. On that basis, it is understood that the practice notes anticipates the summary dismissal or strike out of a claim or defence (in full or part).

The guidance also fails to clarify what substantive criteria would inform a Tribunal's decision on whether or not a claim or defence is "manifestly devoid of merit" or "manifestly outside the tribunal's jurisdiction". However, this wording mirrors the terms of Article 29 of the SIAC rules, which in turn borrows language from civil procedure rules and case law from certain common law jurisdictions. As a result, it appears that the ICC is seeking to encourage a consistent approach to the implementation of summary procedures in arbitrations across jurisdictions and under the rules of the leading arbitral instructions.

The high-level guidance provided by the ICC also reinforces the ICC's attitude of affording Tribunals the widest possible discretion to conduct arbitrations in whatever manner they deem most appropriate, having regard to the complexity and value of the dispute and any agreement between the parties.

As a result, the new guidance may help to avoid disagreements on whether or not it is within a Tribunal's jurisdiction under the Rules to apply a summary procedure to the determination of certain claims or defences (including arguments on jurisdiction). In turn, this may help to avoid challenges, for want of jurisdiction, to any awards made on a summary basis. On the other hand, however, as the exercise of this power increases, aggrieved parties will scrutinise closely whether they have suffered procedural unfairness as a result of being 'shut out' early in their claim or defence.  It is not difficult to imagine an increase in challenges to ICC awards on the basis that the Tribunal allegedly reached a decision too early on an important merits issue, without affording the aggrieved party a full opportunity to present its case in due course. This consideration is also likely to inform the approach of Tribunals, who may consider that in marginal cases – particularly any situation in which the claim or defence might possibly improve with the benefit of future evidence, no matter how unlikely the emergence of such evidence may seem – that it is preferable to allow the claim or defence to proceed, rather than to generate a challenge risk.

In practice, the extent to which there is summary dismissal of claims and defences under the Rules will depend heavily upon the composition of the Tribunal in any given arbitration, and in particular the procedural robustness of the Tribunal in question. There is considerable latitude for parties and Tribunals to interpret the scope and application of Article 22 differently, and it shall be very interesting to follow the exercise of this particular Article 22 power in practice.

For more information, please contact Craig Tevendale, Partner, Charlie Morgan, Associate, or your usual Herbert Smith Freehills contact.