Terms of reference: Theory and practice

By Beijing Arbitration Commission/Beijing International Arbitration Center (BAC/BIAC)
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The Terms of Reference (TOR) is a documentary framework initially formulated by the International Court of Arbitration of the International Chamber of Commerce (ICC Court). The TOR was at least explicitly enshrined in the 1927 ICC Rules of Arbitration, and remains in practice today. The original intention of the TOR was to fulfil the demands of countries such as France, which only recognize arbitration agreements reached after the actual occurrence of a dispute.

Under the ICC rules, the drafting of the TOR used to lie with the institution, and has now become a task for arbitral tribunals. The content of the TOR includes the address and contact information of the parties and their representatives, a summary of claims and the relief sought, a list of issues to be determined, the contact information of arbitrators, the place of arbitration, and applicable procedural rules.

Pros and cons of TOR

Defining claims and issues at an early stage of arbitral proceedings. Defining claims and counterclaims through TOR promotes the efficient conduct of procedural matters. The TOR reduces procedural repetition by clarifying claims and enabling the respondent to prepare a more focused defence. The TOR also allows parties to clarify procedural issues by raising concerns and resolving challenges in a timely manner. Unsurprisingly, TOR could become a defence of one party when the other party challenges an award on grounds beyond the scope of the arbitration agreement, as an arbitral award can be cross-referenced with the issues identified in a signed TOR.

However, a signed TOR may also prevent tribunals from accepting new claims, and limit the capacity of parties to freely consent to the other way of conducting the arbitration. This is especially problematic in cases concerning multi-layered legal relationships, where it is particularly challenging for the parties and the tribunal to accurately capture the essence of disputes and thus clarify claims and issues.

Joint drafting and consent. Drafting the TOR is the result of joint efforts by both parties and the tribunal. This does not only fulfil the requirement of ex post arbitration agreements in some jurisdictions, but also encourages the tribunal to be fully prepared at an earlier stage of proceedings. In addition, it could be argued that such joint efforts may encourage amicable dispute resolution, or even facilitate early settlement. The TOR also serves as a reference for the drafting of awards.

Nonetheless, joint drafting can pose problems once the process of writing, transferring and signing the TOR becomes a cause for delay. Additionally, there is a risk of the TOR eroding parties’ rights to raise jurisdictional and procedural objections later in the proceedings.

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