Consolidation of proceedings in international arbitration
Consolidation
General introduction
Consolidation is the process by which two or more arbitration proceedings are combined into a single arbitration proceeding: (i) based on the same arbitration agreement, or (ii) based on different but compatible arbitration agreements, or (iii) between the same parties, or (iv) involving one or more parties. several different sides.
One of the key tools for improving efficiency in international arbitration is the consolidation of individual proceedings.
For example, consolidation reduces the total costs associated with the proceedings [1].
In addition, consolidation reduces the likelihood of conflicting decisions in cases with common factual or legal circumstances. This is especially true in cases where several interrelated agreements have been concluded between the parties, each of which contains an arbitration clause [2].
In the absence of consolidation, there is a risk of divergence in the conclusions of the various arbitrators, which undermines the uniformity and predictability of arbitration practice.
There are also risks associated with consolidation.
One of the key tools for improving efficiency in international arbitration is the consolidation of individual proceedings.
For example, consolidation reduces the total costs associated with the proceedings [1].
In addition, consolidation reduces the likelihood of conflicting decisions in cases with common factual or legal circumstances. This is especially true in cases where several interrelated agreements have been concluded between the parties, each of which contains an arbitration clause [2].
In the absence of consolidation, there is a risk of divergence in the conclusions of the various arbitrators, which undermines the uniformity and predictability of arbitration practice.
There are also risks associated with consolidation.
First of all, consolidation of arbitration proceedings involving several parties may cause significant difficulties related to the formation of an arbitration tribunal. In some cases, the arbitration costs of some parties may actually increase due to consolidation, even though the legal costs of other parties will decrease [3].
One of the most serious difficulties is the possibility that a party may become involved in arbitration proceedings involving a counterparty with whom it has not entered into an arbitration agreement. The absence of a proper expression of will may lead to disputes over the jurisdiction of the tribunal and would be contrary to the fundamental requirements of the parties' consent to arbitration.
In cases where there is no agreement on arbitration, forced consolidation may be challenged as a violation of the principle of the autonomy of the will of the parties. International arbitration practice emphasizes that arbitration is possible only with the clear and unambiguous consent of all parties. Thus, in the Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp case, the U.S. Supreme Court ruled that parties should not be forced to participate in collective arbitration without their explicit consent [4]. Similarly, in the case of First Options of Chicago, Inc. v. The Kaplan court emphasized that the issues of arbitrability should be decided by the courts, unless the parties explicitly transferred this right to the arbitrators [5].
One of the most serious difficulties is the possibility that a party may become involved in arbitration proceedings involving a counterparty with whom it has not entered into an arbitration agreement. The absence of a proper expression of will may lead to disputes over the jurisdiction of the tribunal and would be contrary to the fundamental requirements of the parties' consent to arbitration.
In cases where there is no agreement on arbitration, forced consolidation may be challenged as a violation of the principle of the autonomy of the will of the parties. International arbitration practice emphasizes that arbitration is possible only with the clear and unambiguous consent of all parties. Thus, in the Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp case, the U.S. Supreme Court ruled that parties should not be forced to participate in collective arbitration without their explicit consent [4]. Similarly, in the case of First Options of Chicago, Inc. v. The Kaplan court emphasized that the issues of arbitrability should be decided by the courts, unless the parties explicitly transferred this right to the arbitrators [5].
Consolidation in accordance with international conventions
International arbitration conventions do not explicitly address consolidation issues. There are no provisions in the New York, European, or Inter-American Conventions that specifically address the consolidation mechanism [6].
Nevertheless, some rules of the New York Convention can be applied to consolidation issues in the context of the recognition of arbitration agreements and awards.
For example, articles II (1) and II (3) of the New York Convention require recognition of the rights to hear claims in consolidated arbitration or in the presence of a specific party as an integral part of the parties' arbitration agreement. Conversely, if a party has a contractual right to arbitration in unconsolidated proceedings or without the presence of specific additional parties, articles II (1) and II (3) re-guarantee these rights.
In the context of the recognition of arbitral awards, article V (1)(d) of the New York Convention allows for the refusal of recognition and enforcement of an award if the composition of the arbitral tribunal or the arbitration procedure did not comply with the agreement of the parties.
Nevertheless, some rules of the New York Convention can be applied to consolidation issues in the context of the recognition of arbitration agreements and awards.
For example, articles II (1) and II (3) of the New York Convention require recognition of the rights to hear claims in consolidated arbitration or in the presence of a specific party as an integral part of the parties' arbitration agreement. Conversely, if a party has a contractual right to arbitration in unconsolidated proceedings or without the presence of specific additional parties, articles II (1) and II (3) re-guarantee these rights.
In the context of the recognition of arbitral awards, article V (1)(d) of the New York Convention allows for the refusal of recognition and enforcement of an award if the composition of the arbitral tribunal or the arbitration procedure did not comply with the agreement of the parties.
Consolidation in accordance with national arbitration legislation
The UNCITRAL Model Law does not contain any specific regulations regarding the consolidation of arbitration proceedings. As a result, the national legislation of the States that have implemented the Model Law also leaves the problem of consolidation without detailed consideration. However, a number of States with legislation other than the Model Law have established some provisions at the national level regarding the consolidation mechanism. Such countries include Australia, England, British Columbia, Hong Kong, Ireland, New Zealand, Singapore, among others [7].
The regulation of the consolidation mechanism may vary from country to country. For example, the main issue that arises in the context of consolidation is the permissibility of consolidation if there are objections from one of the parties. And while in Singapore, the consent of the parties is required for consolidation, in England and France, the consent of the parties is not a prerequisite if the proceedings meet certain criteria. In the United States of America, however, practice proceeds from the need to assess the circumstances of a particular dispute.
The regulation of the consolidation mechanism may vary from country to country. For example, the main issue that arises in the context of consolidation is the permissibility of consolidation if there are objections from one of the parties. And while in Singapore, the consent of the parties is required for consolidation, in England and France, the consent of the parties is not a prerequisite if the proceedings meet certain criteria. In the United States of America, however, practice proceeds from the need to assess the circumstances of a particular dispute.
Consolidation provisions in the leading arbitration rules
The most common form of agreements that allow for consolidation is an arbitration agreement that includes institutional rules that explicitly provide for such procedural actions. The latest versions of the arbitration rules of a number of institutions, including the rules of the ICC, SIAC, LCIA, HKIAC, SCC and CIETAC, contain provisions explicitly allowing consolidation in certain categories of cases [8]. At the same time, arbitration rules often establish various criteria under which consolidation of proceedings is possible.
Resource
- Chiu, Consolidation of Arbitral Proceedings and International Commercial Arbitration, 7(2) J. Int’l Arb. 53, 55 (1990).
- Level, Joinder of Proceedings, Intervention of Third Parties, and Additional Claims and Counterclaims, 7(2) ICC Ct. Bull. 36 (1996)
- Gary B. Born, International Commercial Arbitration (Third Edition),Chapter 18 (© Kluwer Law International; Kluwer Law International 2021)
- Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995)
- Restatement of the U.S. Law of International Commercial and Investor-State Arbitration §3.6 comment b (2023); A. van den Berg, The New York Arbitration Convention of 1958 168 (1981) (New York Convention “make[s] no provisions for multi-party disputes”).
- Лысов С.В. Консолидация разбирательств в международном коммерческом арбитраже, Третейский суд. 2016. №2
- Smith, Comparative Analysis of Joinder and Consolidation Provisions Under Leading Arbitral Rules, 35 J. Int’l Arb. 173 (2018)