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Article
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Dispute Resolution Library
o Author : Erik Schafer
oAbout Author: Mr Schafer was Counsel at the ICC Court during the past four years. He is presently
working in the legal department of Esselte Meto International Gmbh, Germany.
o Published in: ICC International Court of Arbitration Bulletin vol. 3 No. 1
o Reference page : 8
oPublication date: 1992
oPublished title: The ICC Arbitral Process - Part II: Terms of Reference in the Past and at Present
o Keywords [ICC arbitration] [Terms of Reference] [Arbitrage CCI] [Acte de mission]
a Language : English
o Related doc(s) : See below
The ICC Arbitral Process-Part II: Terms of Reference in the Past and at
Present
Table of Contents
Introduction
I. The evolution of Terms of Reference
II. Terms of Reference at present
a. Recording existing information in respect to the parties
b. Defining the subject matter of the arbitration and subsequent evolutions
C. The determination of procedural rules
Conclusion
This article is the second in a series describing various aspects of the ICC arbitration process.
Introduction ._1.
It is often stated that Terms of Reference have been a characteristic feature of ICC arbitration since
the first Rules were put into service in 1923. This is both true and false. It is true in that a document
with contents corresponding approximately to those of the present Terms of Reference was already
required under the first Rules. It is false in that the functions of this document within the framework
of the ICC Rules (and, hence, its role in arbitral proceedings) have been subject to major changes.
These changes shed light on the evolution of the ICC Rules. Indeed, these changes probably would
not have taken place had international arbitration failed to evolve. It is hoped that a review of this
development will enhance the understanding of the purposes of the Terms of Reference. This essay
does not endeavour to be comprehensive; rather it will focus in an eclectic fashion on those matters
that appear to this author to be most significant with respect to Terms of Reference.
The context in which the ICC Rules of 1923 were meant to operate is quite distinct from the situation
international arbitration is facing today. When the first ICC Rules were conceived, municipal law
exclusively governed arbitration. This applied to the rules governing arbitral proceedings as well as to
the enforcement of arbitral awards even when made in foreign countries. It was not until the 1920s,
i.e., when the first version of the ICC Rules was put into service, that two multilateral conventions
dealing with international arbitration became ready for ratification by interested governments. These
Conventions were the Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on
the Execution of Foreign Awards of 1927. While the limited number of signatory states did not
fundamentally change the scene, these two conventions and the effort invested in their elaboration
advanced the recognition of international arbitration as a valid method for the settlement of
international commercial disputes within a framework of common legal standards. This movement,
which has not yet come to an end, has taken place (in simple terms) on two levels: first, the
development of bilateral or multilateral conventions which facilitate the recognition and enforcement
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of arbitral awards by limiting the grounds on which an award can be successfully attacked; second,
the liberal move by a considerable number of legislators to free international or even national
arbitration from mainly formal requirements that riddled the recourse to arbitration with obstacles.
The LJNCITRAL Model Law for international arbitration of 1985, which would operate on both these
levels, is currently awaiting a breakthrough.
Despite this progress, best evidenced by successful multilateral conventions such as the New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, there still exists
a large variety of arbitration laws and arbitration practices. This is not an evil as such, but it implies
that the predictability of factors that may become important in a given arbitration is far from being
ideal. Today, therefore, just as during the first decades of this century, the following questions are
being put and answered over and over again in all possible variations:
(i) Under which circumstances, if at all, will an agreement to submit disputes to arbitration be
binding in law?
(U) Under which circumstances, if at all, would a national court annul the arbitral award or refuse to
recognize and enforce it?
These questions are crucial because those involved in international arbitration know well that the
high rate of arbitrations that take place without any major procedural difficulty and in which the
award is voluntarily honoured also exists because the legal framework in which the arbitration took
place forestalls any unjustified attempt to attack the award or to avoid execution. The starting point
for achieving this [age9: result is to secure that the agreement to arbitrate is given full effect. This
having been done, the conduct of the arbitral proceedings must be devised so as to guarantee a fair
trial. However, seeking to attain this goal by excessively regulating procedural menus is likely to
produce adverse results. The considerable differences between procedural traditions rather point
towards simple solutions that represent the smallest common denominator and are readily
apprehensible.
I. The evolution of Terms of Reference S
The early draftsmen of the ICC Rules adapted a bold attitude. They were aware that international
arbitration as they understood it was not yet sufficiently recognized as a viable alternative and it
seems that they relied in part on the reputation of the ICC to compensate for this lack of stability
and predictability. In face, at one time, the ICC Rules provided that the name of parties that did not
honour an arbitral award be made public. This practice was soon abandoned. However, the solutions
adopted by the ICC to stabilize, through the Rules, arbitral proceedings in hazardous legal
environments did not lose sight of legal realities, focussing to a large extent on countries with
restrictive legislation.
The response of the ICC Rules in respect to a need for stabilization or reinforcement of the
agreement to arbitrate was the requirement that before the commencement of any ICC arbitration
the parties sign a document denominated form of submission that was drawn up by the Secretary
of the Court of Arbitration and contained the following elements:
- the names of the parties and their addresses;
- the subject of the arbitration;
- the names of the arbitrators;
- the place of arbitration;
- a brief statement of the claims by the parties;
- any other particulars required by law.
The contents of the form of submission remained essentially unchanged until 1955. The only
noteworthy points are that as of 1q27 the form of submission was drawn up by the 1CC Court and
it became necessary to mention if the arbitral tribunal was vested with the powers of an amiable
compositeur. Moreover, a problem that had not arisen under the first version of the Rules was
disposed of: if the parties had previously agreed to submit their dispute to ICC arbitration, the Court
was authorized to order that the award would be rendered by default despite the refusal to sign the
form of submission by a defaulting party. A further change made with the view to stabilize ICC
arbitrations was that as of 1939 an undertaking by the parties to consider the award as final, to
waive any right of appeal that they can validly invoke in this respect and to comply with the award
was required to be included in the document.
As indicated, the form of submission had first of all the function of stabilizing international
arbitrations in which the laws of a relevant, country would only recognize the agreement to arbitrate
as binding on the parties and e<cluding state court jurisdiction if it was made after the dispute had
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arisen (comproinis). Early in this century the letter of the French law (the governing law at the seat
of the 1CC) did require such subsequent agreement. However, French case law had abandoned this
requirement rather early with respect to international arbitrations. The Geneva Protocol of 1923
provided for a first remedy to this difficulty on an international level. Nevertheless, countries which,
influenced by French legislation, also required a comprom!s neither automatically incorporated
French case law nor ratified the Protocol.
From a practical viewpoint the ICCs draftsmen reckoned that the form of submission helped
concentrate the attention of the arbitral tribunal on the central points of the dispute. This seemed to
be helpful in a context in which it was considered normal to confer the solution of a commercial
dispute to an expert in the subject matter rather than to a trained lawyer.
However, where a party would not sign the form of submission and a relevant country would not
recognize the validity of an agreement to arbitrate that was entered into before the dispute did arise,
the effect of the form of submission and the arbitral award depended above all on the
psychological strength of the institution, which at that time retained the right to decide on the
question whether or not the parties were bound to arbitrate,
The revision of the ICC Rules that came into force in 1955 has to be considered as fundamental
because a re-definition of the powers of the 1CC Court took place. This revision of the Rules used for
the first lime the expression Terms of Reference to which the following provisions applied:
[?a gel 0:
(1) Before beginning the hearing of a case, the arbitrator shall draw up, on the documents or in
presence of the parties, a statement defining his Terms of Reference which shall include the
following:
a) Names in full of the parties;
b) Addresses of the parties to which all notifications and communications shall be made during
the arbitration;
c) Brief statement of the parties claims;
d) Terms of Reference, statement of the case, indication of the points at issue to be determined;
e) Name in full of the arbitrator with his address etc.;
f) Place of the arbitration proceedings;
g) All other matters required in order that the award when made shall be enforceable at law, or
which in the opinion of the Court of Arbitration and the arbitrator, it is desirable to specify.
(2) The statement referred to in paragraph I above must be signed by the parties and by the
arbitrator, who shall submit it to the Court of Arbitration, for approval.
If one of the parties refuses to join the drawing up of the aforesaid statement, or refuses to sign
although such party is bound by a clause stipulating arbitration by the International Chamber of
Commerce, the award shall be made notwithstanding, after the expiry of a period granted by the
Court to the arbitrator for obtaining the signature of the party concerned,
The centre-piece of the 1955 revision is the withdrawal of powers from the Court that relate to the
administration of justice, This is characterized by the first sentence of the provisions governing the
constitution of the arbitral tribunal: The Court of Arbitration does not itself settle disputes, The
most important change was the introduction of the power of the arbitral tribunal to rule on its own
jurisdiction (Kompeteriz-Kompetenz). Formerly, the ICC Court decided whether there was a clause
providing for the solution of a dispute under its rules. From 1955 onwards it could still refuse to
organize an arbitration but jurisdictional issues were decided by the arbitral tribunal. Furthermore,
the Court no longer played a role in the decision on how many briefs the parties would be allowed to
submit, This became the exclusive domain of the arbitral tribunal. This change reflects the evolution
of international arbitration because it was only possible in view of the consolidation of the legal
environment that became evident with the adoption of the New York Convention in 1958.
As to our topic, the 1955 Rules substituted the term Terms of Reference for
:form
of submission.
This change was no mere formality, as henceforth the arbitral tribunal drew up the Terms of
Reference which were only communicated to the Court for approval. The other, less substantial
changes shall be discussed in the context of the 1975 Revision of the Rules which provided:
Terms of Reference
1 Before proceeding with the preparation of the case, the arbitrator shall draw up, on the basis
of the documents or in the presence of the parties and in the light of their most recent
submissions, a document defining his Terms of Reference. This document shall include the
following particulars:
a) the full names and description of the parties,
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b) the addresses of the parties to which notifications or communications arising in the course of
the arbitration may validly be made,
c) a summary of the parties respective claims,
d) definition of the issues to be determined,
e) the arbitrators full name, description and address,
1) the place of arbitration,
g) particulars of the applicable procedural rules and, if such is the case, reference to the power
conferred upon the arbitrator to act as amiable compositeur,
h) such other particulars as may be required lo make the arbitral award enforceable in law, or
may be regarded as helpful by the Court of Arbitration or the arbitrator,
2 The document mentioned in paragraph 1 of this Article shall be signed by the parties and the
arbitrator. Within two months of the date when the file has been transmitted to him, the
arbitrator shall transmit to the Court the said document signed by himself and by the parties.
Upon the arbitrators request the Court may, in exceptional circumstances, extend time limit.
Should one of the parties refuse to take part in the drawing up of the said document or to sign
the same, the Court, if it is satisfied that the case is one of those mentioned in paragraphs 2 and
3 of Article 8, shall take such action as is necessary for its approval. Thereafter the Court shall
set a time limit for the signature of the [Pageil] statement by the defaulting party and on the
expiry of that time limit the arbitration shall proceed and the award shall be made.
Since 1975 the provisions of the Rules in respect of Terms of Reference have not changed.
II. Terms of Reference at present
..t
At first sight the changes in the requirements set forth by the Rules for the contents of Terms of
Reference seem to prove that, as is also often the case with state legislation, very broad and general
provisions have evolved towards a more narrow and detailed solution that does not, however,
require substantial changes in their implementation. A closer examination shows that this evolution
reflects the shift in respect of the elements that may be relevant to stabilize a given international
arbitration in the Terms of Reference.
a. Recording existing information in respect to the parties .1
While, as explained above, in virtually all matters submitted to ICC arbitration, the question as to
whether an agreement to arbitrate concluded before the dispute arose is valid is no longer relevant,
the increasing complexity of company structures and commercial transactions has given rise to new
potential difficulties that materialize in individual cases. For example, it is considered that the names
and description of the parties merit a specific subsection because the restructurings of enterprises or
eventual transfers of contractual rights and obligations frequently lead to situation where the party to
a contract containing the agreement to arbitrate has been replaced by another party to the contract,
or for other reasons has no locus standi. Also, simple changes of name occur rather frequently. The
Terms of Reference are the place to clarify such points or, at a minimum, to raise the question of
whether or not the proper party is participating in the proceedings. In the latter event such questions
generally figure among the issues to be determined.
That notifications must be made to a valid address needs no explanation. However, the increasing
recourse by parties to legal counsel makes it necessary to clarify to which address communications
and notifications are to be made because the partys address under these circumstances is no longer
automatically identical to the proper address to be used during the proceedings.
b. Defining the subject matter of the arbitration and subsequent evolutions
The summary of the parties claims defines the scope of the dispute and has been required since
1923. However, in 1975 it appeared appropriate to clarify that the Terms of Reference should only
contain a summary of the claims and not a full statement of claims. In the 1923 Rules the summary
was, together with the mention of the subject of the arbitration, the centre-piece of the form of
submission, It defined which dispute the parties had agreed to submit to arbitration, To the extent
the claims filed by parties today fall within the scope of the agreement to arbitrate contained in the
original contract, the need for such a definition generally no longer exists. However, it allows
arbitrators and parties to check easily whether all claims are being covered during the arbitral
proceedings and the award. tf an award is challenged on the ground of ultra or infra pet/ta, Terms of
Reference may serve as a readily available means or proof in a national court.
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The fact that the vast majority of national arbitration laws have abandoned the requirement that the
dispute may only be submitted by the parties to arbitration in a subsequent agreement made the
initial goal of stabilizing the arbitration clause to a large extent obsolete. Today only in very few
cases do signed Terms of Reference have contents that establish or enlarge the jurisdiction and
powers of the arbitral tribunal. This does not make them obsolete. Terms of Reference have evolved
towards being an instrument to devise and structure the procedure followed by the arbitral tribunal.
This is necessary because-regardless of the question as to what extent the arbitration law at the
place of arbitration automatically applies where the ICC Rules are silent or if its mandatory provisions
are concerned-a perusal of the great majority of arbitration laws does not reveal provisions that
control crucial issues such as the procedure for the taking of evidence, the rejection of submissions
that were not made within the fixed lime limit or the admission of further or new allegations or
claims at a late stage of the proceedings. Concerning such late submissions, the ICC Rules sought
until 1955 to regulate the issue by limiting the number of submissions each party could make. As of
1947 the ICC Court of Arbitration could allow more [Pagel2:] submissions than were foreseen in the
Rules (two for each party). This rather formal approach was inappropriate where the admissibility of
new claims was at issue. In 1939 the Rules mentioned new claims and new counterclaims for the
first time. However, it was only provided that such claims would have to be made in writing and
recorded by the arbitral tribunal. Upon request from a party the matter was to be suspended to allow
the ICC Court to draw up a Rider to the form of submission. Again, the crucial change took place in
1955. As of this date the number of submissions was no longer mentioned in the Rules but the
admissibility of new claims and counterclaims was tied to the limits of the Terms of Reference. If
such new claims were not within said limits, they could be addressed only by the arbitral tribunal
when the party against which the claim was submitted had agreed. Since 1975 such an agreement
has to be recorded in a Rider to the Terms of Reference. In summary, the present Rules do not
impede the parties to unilaterally modify and amend their claims or to introduce new ones up to the
drawing up of the Terms of Reference (see Article 13(1) of the 1988 Rules). Nor does such an
impediment exist in the case of modifications and amendments that may occur after the signature of
the Terms of Reference, provided that they are not qualified as new claims not within the limits fixed
by the Terms of Reference. The latter need agreement by the opposite party, to be recorded in a
Rider. As one can imagine, the number of ICC cases in which the admissibility of new claims or the
modification of claims in respect to the provisions of the Rules is at issue remains very limited.
Given that the Rules only address the question of new claims or counterclaims, they do not prevent
new issues from being determined to arise or old issues to become obsolete at any stage of the
arbitral proceedings. The contrary would be absurd, since the parties positions will and must evolve
during the arbitration, One could therefore question why they have to be included in the Terms of
Reference. Indeed, in simple matters their practical advantage may not be significant. However, in
more complex matters-and most ICC arbitrations today are quite complex-their early identification
can allow the parties and the arbitral tribunal to concentrate their efforts on the points that are
essential to decide the matter, A thorough identification of the issues to be decided may therefore
contribute to the speedy resolution of the dispute, provided that all other elements necessary to
achieve this goal (such as the parties will to cooperate) are present.
c. The determination of procedural rules -S
As mentioned above, national arbitration laws do not generally-even if one of them would fully apply
to a given arbitration-contain detailed provisions in respect to numerous points which are important
for the actual conduct of the arbitral proceedings. Older arbitration laws probably refrained from
doing so because when they were enacted arbitration was still the nearly exclusive domain of expert
laymen. Recent legislation has reckoned that (especially with respect to international) arbitration-
even if handled as occurs ever more frequently, by lawyers-will not adequately function if it is
submitted to regulations that are based on the model of a specific procedural tradition. For the same
reason, even where national rules of procedure would apply, the parties are allowed by the municipal
arbitration law to agree on different rules, mandatory provisions excepted.
The solution adopted in the Rules is to include a few broadly drafted provisions that deal with the
most essential questions for the conduct of an arbitration. (sec Articles 6, 14, 15, 19, 22). They
refrain from being excessively specific to allow parties and arbitrators to adapt the handling or the
given case to the actual needs, The instrument for this adaptation is the present Article 11, which
provides that if the Rules are silent, procedural rules are agreed by the parties, or where there is no
such agreement, by the arbitral tribunal which is free to refer itself to a municipal law or not. This
should mean that the choice of the 1CC Rules implies that the parties have contracted out of the law
applicable to arbitration at the place of arbitration to the extent said law allows them to do so. This
solution was adopted in 1975. Interestingly, only in 1939 did the Rules for the first time address the
issue of procedural rules, providing that the law of the place of arbitration should apply if the Rules
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were silent. Since 1947, the parties could choose the law of procedure.
Parties that feel a need to agree on more specific rules for the conduct of the arbitration can in
principle do so as early as in the agreement to arbitrate. However, this may be too early not
[Pagel3:1 only because the choice of such rules requires particular attention and effort but also in
view of still unforeseeable factors such as who the arbitrators and counsel for the parties will be in
the event of a dispute. In some cases, even the place of arbitration would not yet be known.
Consequently, if it is desired to agree upon specific rules for the proceedings which go beyond the
points addressed in the Rules, the drawing up of the Terms of Reference appears to be the
appropriate moment because the factors that have to be taken into consideration are then known.
This does not, however, mean that additional rules must be agreed upon. In practice, many parties
do not insist on the insertion of such rules in the Terms or Reference, They seem to be of the view
that if they can entrust the decision on their dispute to the arbitral tribunal they may as well also
leave the tribunal the task of settling procedural rules from time to time as the need arises.
In any event, procedural matters that may be relevant to arrive at an enforceable award should be
dealt with in the Terms of Reference.
Conclusion
t
Terms of Reference were originally conceived to stabilize the agreement to arbitrate. While in
exceptional cases they may, even today, remedy defects or reinforce the agreement to arbitrate, the
evolution of the legal environment for international arbitration has rendered this function secondary.
Today the primary function of Terms of Reference is to contribute to the efficiency of the resolution
of the dispute by causing the parties and the arbitrators to precisely define its scope and the issues
that are crucial for a decision. Moreover, the Terms of Reference and the provision that controls the
introduction of new claims seek to guarantee that all claims or counterclaims are submitted at an
initial stage of the arbitration. This is intended to contribute towards efficiency and to forestall
procedural tactics that result in the delaying of the arbitral award, Finally, Terms of Reference may
be used to establish specific rules for the conduct of the arbitration that are to be applied to
questions in respect to which the ICC Rules are silent. Such specific procedural provisions may also
be devised to safeguard the validity and enforcement of the award,
Related Documents
The 1992 Practical Guide on Terms of Reference Revisited
Terms of Reference under the 1988 ICC Arbitration Rules - A Practical Guide
Terms of Reference
Terms of Reference: The function of the International Court of Arbitration and Application of Article
16 by Arbitrators
The Terms of Reference
The Terms of Reference in ICC Arbitration
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