An International Overview
This blog is inscribed by Anshika Sharma.
Introduction to Parallel Arbitration Proceedings:
The corporate evolution in the modern world has created an impact at an international level. This evolution has increased the procedural complexity in the contemporary international dispute resolution mechanism. This procedural complexity can be observed in the form of parallel arbitration proceedings specially in the field of investment arbitration. A proceeding that becomes pending before two or more arbitral tribunals, where the parties and the legal issue to the matter are the same or substantially the same gives rise to parallel arbitration. The origin of parallel arbitration at an international level can be traced from the various practices of parties by entering into multiple instruments for the same transaction or project. It arises when one party starts in parallel, a contract and a treaty claim against the host country, or when the shareholders of a company having foreign investment bring several parallel claims against the host countries and lastly when different companies of the same parent group start parallel claims against the host country.
Parallel arbitration arises in the following circumstances:
- when the claims have the same purpose;
- the claims are based on the same factual matrix;
- the claims substantially, deals with the same legal basis; and
- involves identical parties, or represent the same centres of interest.
Parallel arbitration proceedings have various repercussions as it can result in inconsistent decisions and multiple judgements on the same facts and issues which hampers the smooth and efficient functioning of arbitral tribunals and leads to inordinate delays in dispute resolutions. Hence eradicating this problem becomes essential for the survival of international arbitration.
Solutions As Per Legal Principles:
There are various customary legal principles that have been used to curb the possibility of parallel arbitrations. These solutions are knitted with the principles of competence- competence as the solution to this issue shall be found at the admissibility stage of the proceedings i.e., the stage at which the arbitrators decide on whether it is appropriate to exercise a validly conferred jurisdiction to the dispute.
Res Judicata:
One of the traditional ways to combat the issue of parallel arbitration is to analyse the same through the lens of res judicata and other related doctrines like ne bis in idem (no legal action can be instituted twice for the same cause). The principles of res judicata and ne bis in idem have the potential to avoid repetition of proceedings in relation to the same issue between the same parties or multiple parties related to the same transaction. For a case to be made within the principle of res judicata, it is necessary that in parallel arbitral proceedings, the thing that is claimed be the same, the claim is based on the same grounds, the claim is between the same parties and brought by them and against them in the same capacity.
A similar view has been urged by the Chartered Institute of Arbitrators in ‘International Arbitration Practice Guideline – jurisdictional challenges’[1] It states that when parallel arbitral proceedings are begun before two arbitral tribunals on the same dispute, then the tribunal first seized with the dispute shall decide on its jurisdiction while the second arbitral tribunal stays the arbitral proceedings pending the decision of the first tribunal.
Collateral Estoppel:
The doctrine of ‘Collateral Estoppel’ which is applied by the common law system is extremely resourceful in aiding the issue of parallel arbitration proceedings. This doctrine is similar to that of Res Judicata, however principally there exists a difference between the two. This doctrine helps in preventing re-litigation of the same legal issue. Unlike the case of Res Judicata, it doesn’t have to be the same parties to the dispute/ claim, the main focus lies in a particular issue that has been already decided. This principal has been also applied in the case of RSM v. Grenada[2].In this case the tribunal had applied the doctrine of ‘Collateral Estoppel’ in investment arbitration to prevent the case of parallel arbitral proceedings.
Abuse Of Process:
It is pertinent to recognize that the principle of ‘Good Faith’ also plays a pivotal role in preventing parallel arbitration proceedings. Duplicative claims of existing arbitration proceedings are seen as a violation of the principle of good faith because it amounts to abuse of process. This principal has been used in international investment arbitration in a number of international cases to prevent or stop parallel arbitral proceedings. In Ampal v. Egypt [3] case the tribunal while deciding on its jurisdiction had held that the mere fact that two parallel investment claims arising from the same facts existed against Egypt is a circumstance that per se was to be seen as abusive, regardless of the existence of bad faith on the side of the Claimants. Further in the recent case of Orascom v. Algeria [4], the tribunal had declared that the treaty claims initiated in parallel to other two treaty claims is inadmissible due to its abusive nature.
These cases have contemplated as per their facts and circumstances that a case of abuse of process can arise when a parallel arbitral proceeding is initiated. Under these cases, the tribunal has reasoned that the claimant cannot claim for the same loss in other arbitrations as that would amount to an abuse of their rights.
Solutions Under Institutional Arbitration Rules:
The institutional arbitration rules provide for certain solutions in the form of joinder of parties and consolidation of multiple arbitration proceedings to eradicate the problems that arises in parallel arbitration proceedings. For example, the ICC Rules of Arbitration provides for Joinder of additional parties under Article 7[5] and for Consolidation of arbitrations under Article 10.[6]
Joinder of Additional Parties under Article 7 lays down the procedure to add an additional party to the arbitration proceeding, this helps in curbing additional arbitration proceeding by multiple parties having the same claim in the dispute. Furthermore, Article 10 provides for Consolidation of two or more arbitration proceedings pending under the ICC Rules into a single arbitration in the following circumstances:
- When the parties mutually agree to consolidate;
- All the claims arising in the arbitration are made under the same arbitration agreement; or
- Where the claims in the arbitration proceedings arises from more than one arbitration agreement, the arbitration proceedings are between the same parties, the disputed matter is connected with the same legal relationship and the court finds the all arbitration agreements to be compatible.
The rules of other arbitrations on consolidation of arbitration proceedings are comparable to that of the ICC Rules. For example, the arbitration rules of the Stockholm Chamber of Commerce (SCC), SIAC and SCAI have similar provisions for consolidation of arbitration proceedings, however there is no requirement of the parties to the two proceedings to be identical.
It is pertinent to clarify that such consolidation of proceeding can only materialize when both the arbitration proceedings are governed under the same institutional arbitration rules. Hence the issue of parallel arbitration proceeding isn’t completely eradicated by these arbitration Rules.
Siac Memorandum – Future Of Parallel Arbitration Proceeding:
In good light, it is important to acknowledge the Singapore International Arbitration Centre’s (SIAC’s) proposal[7] to combat the issue of cross -consolidation. It has introduced a memorandum in December 2017 to eradicate the lacunae created by all the institutional arbitration rules in cross- institution consolidation proceedings. This Memorandum introduces a Protocol called as ‘Cross – Institutional Consolidation protocol’ which aims to introduce a mechanism through which there can be consolidation of two arbitration proceedings governed under different institutional arbitration rules.
The implementation of this proposal will be revolutionary as it would allow related disputes that are governed by different institutional rules to be resolved in a single proceeding, which would thus promote consistency in decision making and will save the cost and time of the concerned parties. Leading arbitration institutions can adopt SIAC’s proposal on cross-institutional consolidation and can incorporate it in their own arbitration rules. This protocol will be the only mechanism to look into the timing of a consolidation application, and the applicable criteria to determine when arbitral proceedings are sufficiently related to provide for cross consolidation. Once the proceeding is consolidated, the proceedings would be administered only by one institution which will apply its own institutional rules.
Conclusion:
In the midst of the growing need for alternate dispute resolution mechanism, it becomes vital to acknowledge that such need is not at the cost of sacrificing the basic legal principles of res judicata, good faith and other norms. Thus, it becomes necessary to avoid parallel arbitration proceedings for related disputes between the concerned parties. Hence, there is a need for a mechanism that can eradicate the issue of parallel arbitral proceedings. The SIAC’s Proposal is not binding upon other arbitration institutions, however it is strongly recommended that this proposal is adopted by all the institutions, as cross- institutional consolidation will be the best-case solution to the current problem which is faced in investment arbitrations.
[1] Jurisdictional Challenges – International Arbitration Practice Guideline, Chartered Institute of Arbitrators,https://www.ciarb.org/media/4192/guideline-3-jurisdictional-challenges-2015.pdf.
[2] RSM Production Corporation & Ors v. Grenada, ICSID Case No. ARB/10/6.
[3] Ampal-American Israel Corporation & Ors v. Arab Republic of Egypt, ICSID Case No. ARB/12/11.
[4] Orascom TMT Investments S.a.r.l. v. People’s Democratic Republic of Algeria, ICSID Case No. ARB/12/35.
[5] Article 7, ICC Rules of Arbitration.
[6] Article 10, ICC Rules of Arbitration.
[7] Memorandum regarding proposal on Cross-Institution Consolidation Protocol, SIAC, https://siac.org.sg/images/stories/press_release/2017/Memorandum%20on%20Cross-Institutional%20Consolidation%20(with%20%20annexes).pdf.
