Comment on the Draft SCC Arbitration Rules 2017

Comment to the Draft SCC Arbitration Rules 2017

Joel Dahlquist, Doctoral Candidate and Lecturer, Uppsala University

[email protected]

 Introduction

 The Draft SCC Arbitration Rules 2017 (“the Draft 2017 Rules”) were made available for public consultation on April 26, 2016. The SCC has invited comments, which will be discussed at a public hearing in Stockholm on June 9, 2016.

Below, a few comments are attached. They are restricted to the Rules’ application in investment treaty disputes.

The SCC Rules’ Temporal Applicability

 The preface of the Draft 2017 Rules provides that

 Under any arbitration agreement referring to the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce (the “Arbitration Rules”) the parties shall be deemed to have agreed that the following rules, or such amended rules, in force on the date of the commencement of the arbitration, or the filing of an application for the appointment of an Emergency Arbitrator, shall be applied unless otherwise agreed by the parties.

 This scope of application is unchanged from the 2010 version of the Rules and uncontroversial for cases based on contracts. In my opinion, however, there is room to discuss its appropriateness when the consent to arbitration is based on a treaty, which may have been concluded decades before the claimant requests arbitration.

 By way of comparison, the same issue was discussed when the 1976 UNCITRAL Arbitration Rules were updated in 2010. The outcome of that discussion, which largely centered on the difference between contract-based and treaty-based arbitration, was to distinguish treaty-based cases from those in which the parties agree directly to arbitration in a contract. Inspired by Article 1(2) of the 2010 UNCITRAL Arbitration Rules, I would propose to alter one word and add a second sentence to the current preface of the Draft 2017 Rules so that it reads:

Under any arbitration agreement referring to the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce (the “Arbitration Rules”) the parties shall be deemed presumed to have agreed that the following rules, or such amended rules, in force on the date of the commencement of the arbitration, or the filing of an application for the appointment of an Emergency Arbitrator, shall be applied unless otherwise agreed by the parties. That presumption does not apply where the arbitration agreement has been concluded by accepting after [X date] 2017 an offer made before that date, or when the application for the appointment of an Emergency Arbitrator is based on such an offer.

 The basic premise for the proposed changed is that many of the treaties that refer to SCC arbitration are old; for example, the vast majority predates 2010, when emergency arbitration (“EA”) was introduced for the first time. It is not necessarily reasonable that a state which consented to arbitration in 1994 should be subjected to arbitration rules updated in 2017, when the investor “accepts” the offer by commencing the arbitration. Admittedly, there might be similarly old contracts with SCC arbitration clauses but in those cases both parties are direct signatories to the clause, whereas a state in a treaty gives an open, irrevocable consent to a wide class of potential claimants. Simply put, with the current solution the investor has a much larger ability to analyze the currently applicable Rules before “consenting” to use them, than did the state when it consented (most commonly) decades ago.

 The proposed change states that it is presumed that the Rules in force at the commencement of the arbitration or EA proceeding apply, but that this presumption does not apply to cases where one party commences the proceedings based on an offer to arbitrate that predates the 2017 Rules. The suggested second sentence of the preface would therefore grant the tribunal or emergency arbitrator a certain flexibility to determine which version of the Rules are to apply to any given situation, if the parties have not agreed on this question. For example, if the treaty relied upon was concluded after 2010 but before 2017 – and the request for arbitration or application for EA comes after 2010 – the suggested solution would allow for an application of the 2010 SCC Rules. It would also be possible for the 2017 Rules to apply to disputes based on a treaty concluded in the 20th century. The point is that such an application would not be presumed but rather left to the tribunal or emergency arbitrator to decide, in accordance with the facts as presented in the individual case.

Perhaps most importantly, a more flexible temporal application of the Rules would indirectly impact the availability of the EA rules in treaty disputes. Arguably, the introduction of the EA Rules is the biggest change in the 2010 SCC Rules – at least with respect to treaty cases – and they remain largely unchanged in the Draft 2017 Rules. The treaty-specific policy reasons mentioned above are especially visible in the availability of the EA Rules, since this mechanism did not exist when the vast majority of the treaties referring to SCC arbitration were concluded. Given the specifics of the EA procedure, it is not apparent that arbitration consents located in treaties concluded in the 20th century should be automatically construed so as to allow for EA. The suggested change would instead leave it to the individual emergency arbitrator to decide if the state’s consent encompasses emergency arbitration.

By comparison, Article 29(5) of the ICC Rules states that emergency arbitration “[…] shall apply only to parties that are either signatories of the arbitration agreement under the Rules that is relied upon for the application or successors to such signatories”. This phrasing arguably excludes disputes based on investment treaties from the application of emergency arbitration: at least to the extent that one considers an investor and a state in such cases not to be “signatories” to an arbitration agreement.

Furthermore, the ICSID Convention (and its associated ICSID Arbitration Rules) does not provide for emergency arbitration and neither do the UNCITRAL Rules.[1] The SCC Rules are therefore the only arbitration rules regularly used in investment treaty disputes that automatically allow for treaty-based emergency arbitration. Although this is presumably the intention of the Committee, it is suggested that some flexibility is called for and that the temporal approach used in the 2010 version of the UNCITRAL Rules is preferable. 

Transparency in SCC Treaty Arbitrations

 In the proposed new Annex III, two provisions dealing with transparency in treaty-based cases have been introduced. The justification for these provisions – which seemingly constitute the first example of the SCC Rules regulating treaty-based disputes and contract-based disputes differently – is presumably that the public interest in the former outweighs that in the latter. This distinction is also the justification for the 2014 UNCITRAL Transparency Rules (“Transparency Rules”), which only apply to treaty-based cases and may very well be applied in an SCC case.

The proposed two provisions are largely in line with the Transparency Rules, which enjoy a wide support in the investment arbitration community and have been invoked in public statements from the Committee. The SCC was also active in the drafting process leading up to the Transparency Rules. It is therefore a welcome development that a significant step towards increased transparency has been taken, by expressly allowing for submissions by non-disputing treaty parties and third parties under certain circumstances. Compared to the Transparency Rules, Article 3(10) is particularly welcome, since a frequent argument against third parties intervening in arbitrations is the extra costs incurred by the disputing parties.

There are, of course, still areas in which the Draft 2017 Rules are less transparent than the Transparency Rules. To a certain extent, it might not be realistic to expect a commercial arbitration institution to, for example, provide for public hearings (like Article 6 of the Transparency Rules) or consistently publish documents from arbitrations (like Article 3 of the Transparency Rules).

 However, the Draft 2017 Rules could arguably go somewhat further without compromising core values of the SCC Rules; especially given the already-proposed separation of treaty cases from contractual cases when it comes to transparency. The UNCITRAL Rules are arguably also firmly anchored in principles of commercial arbitration but by separating the Transparency Rules from the “standard” rules, a larger degree of transparency has been allowed to seep into treaty-based cases without affecting arbitrations based on contracts.

 One such example of where the Draft 2017 Rules could go further would be to allow the SCC to publish the existence of a dispute, which is already the practice under post-2014 UNCITRAL treaty cases, as well as in ICSID cases. Another example would be to expressly mandate the tribunal to deviate from the in camera rule in Draft Article 32(3), if it is deemed to be appropriate in the individual case. Admittedly, these two examples would in principle mean departing from long-established notions of private and confidential proceedings. At the same time, however, there is a general move in this direction in the international arbitration community. Perhaps such departures from longstanding principles are the price that has to be paid in order to ensure a larger degree of transparency in treaty-based arbitrations.

[1] Although it should be noted that Rule 39 of the ICSID Arbitration Rules provides for ”briefing” of an application for provisional measure prior to the constitution of a full tribunal, which then has to address this application as a matter of priority.