LAUNCH OF AIAC ARBITRATION RULES 2023

The Asian International Arbitration Centre (AIAC) has released its latest update to the AIAC arbitration rules, following their last update in 2021. The new rules came into effect on 24 August 2023 and apply to all arbitrations under the AIAC, unless otherwise agreed by parties.

The latest update reflects AIAC's aim of further modernising its arbitral rules and will bring improvements to both efficiency and cost-effectiveness of AIAC arbitration.

Notably, changes to the structure of the rules and procedures give more flexibility to parties, and AIAC's focus on UNCITRAL aligns it closer to global standards. Parties who want to keep their arbitrations fully confidential, however, should note that they now need to take active steps to retain confidentiality as the latest rules now allow AIAC to disclose, produce or publish the award after 2 years, unless the parties or tribunal disagree.

Our fuller comments on the key changes for the 2023 Rules are set out below.

Notable Amendments in the 2023 AIAC Rules

Re-separation of UNCITRAL Rules and Fast Track Procedures

A notable feature to the 2023 update is the re-separation of the UNCITRAL Rules (the procedural provisions) from the AIAC Arbitration Rules (the administrative provisions). Both now sit as separate schedules and closely follow the AIAC's previous 2018 Rules.

With the latest 2023 Rules, parties can expect a clearer distinction between administrative and procedural aspect of the arbitral rules. This also means that the 2023 UNCITRAL Rules are now applied in full, although Rule 1(3) provides that where there is a conflict between the UNCITRAL Rules and AIAC Rules, the AIAC Rules will prevail.

The fast-track procedures have also now been separated into a new and separate schedule 4. This is an evolution from past versions where, in 2018, the Fast Track Rules were separated into a standalone set of rules, and in 2021, the Fast Track Rules were wholly amalgamated with the AIAC rules. The latest 2023 reiteration gives more clarity. We address the content of the new fast track procedures below.

UNCITRAL Rules on Transparency

Given increased investments in the APAC region, investor-state treaties are growing in importance. In support of investor-state type arbitrations, the latest rules have now incorporated the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration. AIAC's strong overall focus on UNCITRAL incorporation is a welcome adoption of global standards.

Fast track Procedure

As noted above, the 2023 Rules move the Fast Track procedure to a Schedule. This split now distinguishes the standard arbitration process from the Fast Track Procedure, while retaining flexibility for parties to either apply or do away with the Fast Track Procedure.

The 2023 Rules have ushered in some notable changes to the Fast Track Procedure:

• First, a lowering of the ceiling dispute value for fast-track cases. Under Schedule 4 clause 1.2 (b), the ceiling for fast-track disputes has been reduced to USD$300,000 (previously USD$500,000) for international arbitrations and RM1,000,000 (previously RM2,000,000) for domestic arbitrations. It is still possible for disputes of any value to proceed by the Fast Track Procedure if the parties have so agreed.
• Secondly, the new rules have removed the ability for parties to access the fast track for 'exceptional urgency'. This reduction means the scope of the Fast Track Procedure no longer overlaps with emergency arbitrations.
• Thirdly, the introduction of a shorter wait for awards by default. Schedule 4, Clause 15(1) now requires awards to be issued within six months from the date of the constitution of the Arbitral Tribunal, with any extension capped at nine months, unless otherwise agreed by the Parties. This is in contrast to the previous rules which did not have specific timings for the issuance of the award. This is a welcome change.

Default Transparency of Awards after 2 years

Parties should be conscious that new Rule 21 now deems the parties to have consented to the disclosure of the award by AIAC two years after the award's release. AIAC then will have the ability to disclose, produce or publish the award in any manner. Parties who are mindful of the confidentiality of the award can however opt-out of the provision by expressly writing to the AIAC director before an award is made.

This is a change from the position in the 2021 AIAC Rules, which only allowed awards to be published with the express written consent of parties and only in specified forms.

Tribunal-facilitated Settlements

A notable addition to the 2023 Rules is the provision of tribunal-facilitated settlement negotiations. New Rule 14 now allows for the tribunal to act as the facilitators for negotiations upon agreement by parties. Parties should however note that doing so will constitute a waiver to future challenges to the tribunal's impartiality in the proceedings if the settlement negotiations ultimately fail.

More Recognition of Third-Party Funding

New Rule 12 now places an affirmative duty on a party using third-party funding to disclose the existence of the funding and the identity of the funder. This duty persists and will continue to run throughout the arbitral proceedings. This is a change from the 2021 Rules where the arbitral tribunal had discretion (but not a positive obligation) to enquire about any third-party funding.

Vacancy of Director Seat

The Rules also provide contingencies to address any vacancy for the role of AIAC director. Rule 24 now sets out an order of precedence if the director's seat becomes vacant. The sequence begins with the deputy director, followed by the assistant director, and finally the head of legal services.

As the director holds a major role within the AIAC rules, this change is important in ensuring the smooth flow of arbitration proceedings.

Simplification of Interlocutory Procedures

The procedures for joinders, consolidation and summary determination have been greatly simplified in the 2023 Rules. The new Rules have done away with fixed timelines and have allowed greater party and tribunal autonomy to determine procedures. This is a welcome change which supports greater flexibility for parties.

Default Number of Arbitrators

The 2023 Rules have introduced a more robust way of deciding the number of arbitrators to be appointed. Where the number of arbitrators cannot be agreed upon by parties, Rule 3 now requires the Director of the AIAC to first consult the parties and consider relevant circumstances prior to making a decision on whether to appoint 1 or 3 arbitrators. This marks an improvement from the 2021 Rules, which had a rigid approach of 3 arbitrators for international arbitrations, and a sole arbitrator for domestic arbitrations.

Comment

As a whole, the 2023 Rules are a forward step for AIAC. The AIAC's reassertion of the UNCITRAL rules combined with increasing tribunal and party autonomy / involvement is a step towards aligning with more global standards.

For further information, please contact Craig Shepherd, Partner, Arnold Hoong, Associate (Malaysia), and Lee Mei Xian, Associate (Malaysia), or your usual Herbert Smith Freehills contact.