The Asian International Arbitration Centre (AIAC) recently launched the 2021 edition of the AIAC Arbitration Rules (2021 Arbitration Rules), which took effect from 1 August 2021.
The amendments seek to reflect “contemporary international standards and practices on the global stage”. The AIAC underwent a rigorous drafting process, releasing the draft AIAC Arbitration Rules 2021 for public consultation in June 2021.
The 2021 Arbitration Rules will apply to arbitrations commenced after the commencement date of the Rules, unless parties agree otherwise.
The changes reinforce the flexibility and efficiency of the arbitral process, important factors in promoting arbitration as the preferred dispute resolution procedure for cross border disputes.
Consolidation of rules
One of the most notable changes in the 2021 Arbitration Rules is the consolidation of the UNCITRAL Arbitration Rules 2013 into the 2021 Arbitration Rules. The earlier 2018 Arbitration Rules consisted of the AIAC rules in Part I of the Rules and the UNCITRAL Arbitration Rules in Part II.
To the extent that there was any conflict between Part I and Part II, the provisions of Part I would prevail. The consolidation of the UNCITRAL Arbitration Rules into the AIAC Arbitration Rules is a welcome approach; it both simplifies the rules and obviates the need for parties to consider inconsistencies.
Additionally, the Rules consolidate the previous AIAC Fast Track Arbitration Rules 2018, which were published as a standalone document, into a Fast Track Procedure within the AIAC Arbitration Rules.
In 2020, in response to travel restrictions and border closures, the world saw the move from face-to-face hearings to virtual hearings in almost all arbitration proceedings (at least for a short period).
Arbitral institutions around the world played a significant role in promoting and implementing this practice. The move to virtual hearings continues and the 2021 Arbitration Rules recognize this shift.
Rule 2.3, amongst other things, now includes a definition of ‘virtually’ which means:
“… the use of technology to remotely participate in the arbitral proceedings, including attending or appearing at meetings, conferences, deliberations or hearings by using a video conferencing platform, telephone or any other appropriate means.”
Virtual platforms are contemplated by the 2021 Arbitration Rules:
- for meetings, conferences, deliberations and hearings other than at the seat (Rule 14.3);
- for emergency arbitration proceedings (Rule 18.4); and
- for examination of witnesses (Rule 28.7).
Significantly and relevantly, Rule 28.7 provides that the tribunal may direct, after consultation with the parties, that the entire hearing be conducted virtually.
In a similar vein, and recognising the move to digitalisation, Rule 3.7 specifically authorizes the AIAC to use electronic signatures in communications with the parties.
Potential arbitrator’s statement
The obligation of disclosure by arbitrators under the previous rules relied on Article II of the UNCITRAL Arbitration Rules. The 2018 AIAC Arbitration Rules expand on and strengthen this obligation and introduce the AIAC Code of Conduct for Arbitrators.
Potential arbitrators must disclose any circumstances likely to give rise to justifiable doubts about their impartiality and independence and must also consider whether they have ‘capacity’, including sufficient competency and availability, to determine the case in a prompt and efficient manner. The duty to disclose is specifically stated to be continuing.
The new Rule 19 introduces a procedure for summary determination and expressly grants the tribunal the power to dismiss (in whole or part) a claim, counterclaim or defence, where it is manifestly without merit or manifestly falls outside the tribunal’s jurisdiction.
An application for summary determination must be made within 30 days after the filing of the statement of defence and counterclaim with responses due within a further 15 days.
It is the tribunal’s decision, once it is satisfied that the parties have no further submissions to present in respect of the application, whether to allow or dismiss the request (either in whole or in part). The decision must be made within 45 days of receipt of the final submission and must be in the form of an award.
The summary dismissal procedure reflects amendments to the rules of other leading institutions in recent years, including the Singapore International Arbitration Centre (SIAC Rules) Hong Kong International Arbitration Centre (HKIAC), the London Court of International Arbitration (LCIA), the Stockholm Chamber of Commerce (SCC) and more recently, the Australian Centre for International Arbitration (ACICA).
Fast track procedure
The rules for the Fast Track Procedure under the previous AIAC rules were contained in a standalone document. They are now incorporated into the 2021 Arbitration Rules under Rule 8. A party may submit a request to the AIAC for the application of the Fast Track Procedure in the following circumstances:
- Where the parties have agreed to adopt the Fast Track Procedure (or any edition of the Fast Track Arbitration Rules) (Rule 8.2(a));
- If the amount in dispute at the time of registration of the arbitration is quantified at less than US$500,000 for an international arbitration or less than RM2,000,000 for a domestic arbitration (Rule 8.2(b)); or
- There is exceptional urgency (Rule 8.2(c)).
The Director of AIAC will determine any request submitted pursuant to Rules 8.2(b) or (c), having regard to the relevant circumstances.
Agreements made between parties pursuant to Rule 8.2(a) may be done in the form of an arbitration clause, or mutual submission to the AIAC following the commencement of the arbitration.
If the Fast Track Procedure applies to an arbitration, the arbitration will be heard by a sole arbitrator and proceed as a documents-only arbitration unless otherwise determined by the tribunal, after consulting the parties.
The mandate to proceed ‘on the papers’ and without a hearing ensures that the dispute is conducted efficiently. It is also a matter which needs to be evaluated carefully by any party considering the Fast Track Procedure.
Whilst some cases are perfectly suited to proceeding as documents-only, others are not. The decision will not rest entirely on the quantum in dispute (the strategic value may be high) or on the urgency of the resolution of the dispute.
Joinder and consolidation
Whilst the 2018 Rules contained a provision for joinder of parties, the 2021 Arbitration Rules seek to refine and clarify the tribunal’s power to order joinder. Under the 2021 Arbitration Rules a joinder request must be made no later than the filing of the statement of defence and counterclaim, except where there is an exceptional circumstance.
Joinder is available where:
- All parties to the arbitration and the additional party consent to the joinder in writing (Rule 21.1(a));
- The additional party is prima facie bound by the arbitration agreement that gives rise to the arbitral proceedings (Rule 21.1(b)); or
- The participation of the additional party is necessary for the efficient resolution of the dispute and directly affects the outcome of the arbitral proceedings (Rule 21.1(c)).
The application for joinder will be determined by the AIAC if the tribunal is yet to be constituted and by the tribunal after its constitution.
In deciding whether to allow the joinder, the tribunal (or AIAC, depending on when the request is made) must consult all the parties, including the additional party, and have regard to all the relevant circumstances, including the three considerations noted in Rule 21.1.
The 2021 Arbitration Rules also refine the procedure for consolidation (Rule 22). Unlike a joinder request which is considered and determined by the tribunal where the tribunal has already been constituted, any consolidation request will be considered and determined by the Director.
Article 22.1 provides that the Director may consolidate two or more proceedings where:
- all Parties agree in writing to consolidate;
- the claims and counterclaims in the arbitrations are made under the same arbitration agreement; or
- the claims and counterclaims are made under different arbitration agreements, provided that the dispute arises from the same legal relationship and the arbitration agreements are compatible.
In determining whether or not to consolidate two or more proceedings, the Director must consult all of the parties and the tribunal, and give consideration to the following (amongst other) relevant factors (Rule 22.5):
- the stage of the pending arbitrations and whether any arbitrator has been appointed;
- whether the disputes under each arbitration concern the same legal relationship;
- whether the rights or relief claimed arise out of the same transaction or series of transactions; and
- any prejudice that may be caused to any of the parties.
Following an order for consolidation, if parties cannot agree on the appointment of arbitrators, the Director may reconstitute the entire tribunal to the exclusion, and release of, any arbitrators nominated or appointed as at the date of the decision to allow the consolidation request.
Consolidation and joinder are important procedures where proceedings involve disputes amongst multiple parties or arising out of a suite of transaction documents. The amendments in the 2021 Arbitration Rules make clear the steps available to add parties, or consolidate proceedings, and the circumstances in which each will be considered. They have the potential to streamline arbitral proceedings and lead to greater efficiency in the resolution of these disputes
The changes to the consolidation provisions are reflective of procedures introduced to rules of the International Chamber of Commerce (ICC), SIAC, HKIAC, LCIA and ACICA.
Emergency arbitrator powers
The 2021 Arbitration Rules clarify the emergency arbitration procedure for arbitration conducted under those rules.
The procedure for the appointment of an emergency arbitrator is set out in a new Rule 17.
New Rule 18 addresses, amongst other things, the powers of the arbitrator and the conduct of the emergency arbitration.
The emergency arbitrator must conduct the emergency arbitration in such manner as it deems appropriate and so as to provide a reasonable opportunity for the parties to present their case, but is specifically empowered to conduct virtual hearings or to proceed on a documents-only basis.
Emergency arbitrators are vested with the same powers vested in the tribunal in accordance with the relevant law and AIAC Arbitration Rules, including the power to rule on his or her own jurisdiction and to proceed in the absence of a party (that is, conduct proceedings in absentia). Emergency arbitrators can adjourn all or part of a claim for urgent interim measures for determination by the tribunal.
Closure of proceedings
Closure of proceedings is an important formal procedural step in arbitration.
The 2021 Arbitration Rules provide a clear mandate for the tribunal, including where the relevant proceeding is bifurcated or where the proceeding involves multiple parties. In both cases, a tribunal may choose to issue several final awards.
The new Rule 32.1 provides that following delivery of final submissions, the tribunal must promptly declare the closure of proceedings, provided it is satisfied that the parties have not further relevant and material evidence or submissions to present.
Where the tribunal is issuing more than one award, the tribunal should declare the proceedings closed in respect of each award. In all cases, a declaration must be notified in writing to the parties and the AIAC.
The tribunal may still, on its own initiative, reopen proceedings at any time before the final award is made, provided that exceptional circumstances exist.
Rule 44 of the 2021 Arbitration Rules provides for confidentiality in all matters relating to the arbitral proceedings except where:
- Disclosure is necessary for implementation or enforcement of an award;
- To the extent disclosure is required at law;
- To protect or pursue a legal right; or
- To challenge an award in legal proceedings.
Rule 44.2 introduces a new definition of ‘matters relating to the arbitral proceedings’. This term means the existence of the proceedings, the deliberations of the tribunal, the pleadings, evidence and other materials and documents produced in the arbitration and the award (except to the extent that these are in the public domain).
The obligation of confidentiality extends to the tribunal, the Director, the AIAC and any tribunal secretary or expert appointed by the tribunal.
The arbitration provisions in the 2021 Arbitration Rules require that parties to a proceeding seek the same confidentiality undertaking imposed by the rules from all persons involved in the arbitration, including authorised representatives, witnesses, experts and service providers.
Rule 44.6 provides that an award may be published by the AIAC (subject to redaction) where the parties expressly consent in writing.
Third party funding
Third party funding is not yet permitted under Malaysian law. The 2021 AIAC Arbitration Rules nonetheless contemplate that one or more parties involved in arbitration administered by the AIAC might do so with third party funding.
Amongst other things, the tribunal is expressly empowered, in conducting the proceedings, to make necessary enquiries on the existence of third-party funding arrangements, including the third-party funder’s economic interest in the outcome of the arbitral proceedings.
This power is consistent with the powers vested in the tribunal under the recently published 2021 ACICA Arbitration Rules which enable it to order, at any time during the arbitration proceedings, disclosure as to the existence of third party funding or the identity of the third party funder.
Importantly, the 2021 AIAC Arbitration Rules make it clear that the use of third-party funding to finance arbitration, does not affect or preclude the adoption of these rules.
The AIAC accurately describes the 2021 Arbitration Rules as ‘comprehensive, harmonious and … coherent’. The new approach which incorporates both the original AIAC provisions and the UNCITRAL Arbitration Rules as one set of procedural rules removes the burden on parties to work between what was essentially two complimentary, but at times, inconsistent documents. Parties choosing the 2021 AIAC Arbitration Rules can now be certain of the applicable procedures and confident that those procedures are consistent with or exceed best practice.
Through the introduction of new and improved processes for joinder and consolidation, the 2021 AIAC Arbitration Rule recognise, and respond to, the increased complexity of commercial transactions, often involving multiple contracts and multiple parties.
The express powers vested in arbitrators to conduct case management conferences and other hearings virtually reflects the developments in arbitration practice over the past two years and the growing move to environmentally sustainable options. The important amendments to the Fast Track Procedure and the availability of emergency arbitrators demonstrate AIAC’s commitment to cost effective and efficient arbitration.
This article was originally co-authored by Bronwyn Lincoln.
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