Multiparty Arbitration
• Several parties involved in a Dispute – Desirable to settle issues in
same proceedings.- Very Common under International Commercial
Transactions.
• Helpful – save money and time + Avoiding the possibility of conflicting
decisions on same issues of law and fact.
• Arbitration based on Arb agreement – contractual basis – only the
common will of the contracting parties.
Multiparty Arbitration
1. Several Parties to one Contract (who have a bearing on the matter
in the dispute)
2. Several contracts with different parties(who have a bearing on the
matter in the dispute)
Several Parties to one Contract
• Indiv/ Corpo/State entities join together – Joint Venture/ Consortium/
other legal relationship ---enter into contract with other party or parties.
BKMI & Siemens V Dutco Case (1992) –
arbitration proceedings against Siemens and BKMI under the International
chamber
of Commerce (ICC) Arbitration Rules. Each of the two respondents wanted to
chooseits own arbitrator.
This request was not granted by the ICC, which instead asked thetwo
companies to jointly appoint an arbitrator. The respondents went ahead to
makethe joint appointment but later challenged the award of the ICC on the
basis that theyhad not been given equal opportunities with the claimant in
the appointment of the
tribunal. The Cour in France held in favour of the respondents, annullingthe
award on the ground of inequality in the appointment of the tribunal.
Current Situation
Art 12.6 of ICC Rules – To ensure the Fairness in Multiparty
arbitration
• In multi-party arbitrations, all claimants or all respondents may jointly
appoint an arbitrator.
• If there is no joint nomination, or if the parties can't agree on how to
form the arbitral tribunal, the court may appoint each member of the
tribunal.
• The court may choose anyone it thinks is suitable to be an arbitrator.
• If a party doesn't nominate an arbitrator, the court will appoint one.
• If the parties agree to resolve the dispute with a sole arbitrator, they
can nominate that arbitrator for confirmation.
Appointment of arbitral tribunal when there are more than two
parties to a dispute Article 8 of LCIA Rules
• When there are more than two parties to a dispute
• When the parties have not agreed to represent two separate sides
for formation of arbitral tribunal (as claimants on one side and
Respondents on the other side)
• When each party has the right to nominate an arbitrator
---------The LCIA Court will appoint the arbitral tribunal without
considering any party's nomination.
---------The arbitration agreement is treated as a written agreement for
the LCIA Court alone to appoint the arbitral tribunal.
Recognised Solution
Problem – Constituting the arbitral tribunal where there are 3 or more
parties who are unable to agree amongst themselves
Solution –
• The right of parties to nominate the member of the arbitral tribunal if
they are able to agree BUT
• If they cannot do so , takes this right away from all the parties equally
and vests with the institution
Tribunal established for the parties and not by the parties –Recognising
and Enforcing such award can be questioned by the losing party on the
basis of composition of arbitral tribunal.
Party seeking the enforcement – argue – composition WAS in
accordance– by adopting the institutional rules they had agreed
Multi contract disputes – Several contracts with different
parties
When several entities have entered into various interrelated contracts.
It is well-known that each contract containing an arbitration clause is a
separate arbitration agreement and therefore, absent the consent of all
parties, requires a separate reference.
Issue ---Procedural complications can arise
• Each party operating under separate contract
• Each contract has – different arbitration clause – different choice of
law
• All bearing on the same issue – Inconsistent decisions
• Problem of enforcement.
ABU DHABI GAS LIQUEFACTION CO. LTD. v. EASTERN BECHTEL
CORPORATION - Adgas Case
Issue - The case raised questions about whether the disputes should be
handled by two separate arbitrations.
Facts –
• The Plaintiff in this case was the owner of an LNG producing plant in
the Arabian Gulf. The plaintiff commenced arbitration proceedings. In
England against the main contractor under an international
construction contract for the construction of a defective tank.
• The main contractor denied liability alleging that any defects in the
tank would be the fault of the sub-contractor, a Japanese firm.
• The main contractor therefore instituted a separate arbitration
against the sub-contractor.
Adgas Case---
Lord Denning really wished---- to consolidate the two set of arb proceedings
– To save money , time and avoid the risk of inconsistent awards.
---court recognized that it was powerless to order consolidation without the
consent of all parties.
As we have often pointed out, there is a danger in having two
separate arbitrations in a case like this. You might get
inconsistent findings if there were two separate arbitrators. This
has been said in many cases … it is most undesirable that there
should be inconsistent findings by two separate arbitrators on
virtually the selfsame question, such as causation. It is very
desirable that everything should be done to avoid such a
circumstance.
• The case had come before the Court on an application for the
appointment of an arbitrator.
• The Court decided that it could appoint the same arbitrator in each
case, if that arbitrator was ready to accept the appointment (as
indeed he was).
• With two separate arbitrations with same dispute.
• Lord Denning said: ‘It seems to me that there is ample power in the
court to appoint in each arbitration the same arbitrator. It seems to
me highly desirable that this should be done so as to avoid
inconsistent findings.’
Court- Ordered consolidation
A scenario where national courts order consolidation of two or more
separate arbitrations revolving around the same or similar issues of law
and fact.
• Process of uniting several pending arbitrations into one hearing
• Before the same panel of arbitrators.
• Although the parties may not necessarily be the same
• The same or similar subject matter, common questions of law and
fact, and substantially similar issues and defenses.
No Provision in Model Law on Consolidation – States adopted the
provisions – Necessary to consider the relevant legislation of the state
concerened.
Court- ordered consolidation – a Jurisdictional Issue
Some jurisdictions have express legislative provisions allowing such
consolidation while others have no such express provision.
Hong Kong Arbitration Ordinance expressly permits the compulsory
court-ordered consolidation if:
(a) a common question of law or fact arises in both proceedings;
(b) the disputes arise out of the same
transaction or series of transactions; or
(c) The court considers it desirable to do so for any other reason.
Shui On Construction Co. ltd V. Moon Yik Company(1987) – court
appointed single arb to preside over separate arbitrations.
Ming Kee Shipping Service Co. Ltd V. Autogain Ltd.
Other Jurisdictions –
Some provinces of Canada also allow for court-ordered consolidation
of connected proceedings.
Netherlands Arbitration Act 2015– Courts have the implied power to
consolidate unless parties expressly excludes it.
USA, the Federal Arbitration Act is silent ---issue of compulsory
consolidation.
English Arb Act 1996 Section 35 -, the compulsory consolidation by courts
not allowed.
Respects the party autonomy--and the parties have been given the exclusive
right to decide whether to resort to tribunals orcourts to consolidate the
proceeding or not.
In California, the court may order consolidation on such terms as it considers
just and necessary.
• If the parties cannot agree upon the arbitrators, the court will appoint
them.
• The court will also determine any other matters on which the parties
cannot agree and which are necessary for the conduct of the arbitration.
Question
• Is Court ordered consolidation ---Most powerful
solution to ensure consistent decisions?
Challenges
• Consent
• Selection of arbitrators – number and method
• Issues of Procedure – actual conduct of arbitration
• Recognition and Enforcement of the awards
Article V(1)(d) of the New York Convention -- thecomposition of the
arbitral authority, and the arbitral procedure, must be in accordance
with the agreement of the parties.
Therefore , award may be refused – as it is imposed.
Strongly supported View
• Where a court has ordered a consolidated arbitration,
• the award will be enforceable under the New York Convention
• provided that the parties have at least agreed to arbitration and to
the same arbitral jurisdiction.
Anderson Consulting V Arthur Andersen and Anderson wrorldwide.
(1999) – dispute involved 140 Parties
Consolidation By Consent
1. Under arb Agreement
The ICC Commission on International Arbitration’s Final Report on
Multi-arty Arbitrations
Parties to agree in advance that any dispute between them would be
referred to a multiparty arbitration.
The report stated that, ‘[i]n a multilateral relationship, whether
involving a single contract or separate related contracts, it may be
appropriate or necessary to have a multi-party arbitration clause’.
2. Under institutional rules
• Neither the Model Law nor the UNCITRAL Rules contain any provision
for theconsolidation of different arbitrations.
ICC and the LCIA --careful consideration.
• Under Article 10 of the ICC Rules, the ICC Court may, at the request of
a party, consolidate two or more pending arbitrations where:
• (a) the parties agree; (b) all claims are made under the same
arbitration agreement; or (c) in the case of claims under multiple
contracts, the arbitrations are between the same parties, the
disputes arise in connection with the same legal relationship,
• and the Court considers that the terms of the arbitration agreements
are compatible.
Concurrent Hearings
To appoint the same arbitrator to both arbitrations.
Where applicable --
• a national court appoints the arbitrator ----the procedures to be
followed need to be considered carefully.
• The arbitrator may direct that (subject to any necessary provisions as
to confidentiality) documents disclosed in one arbitration should be
made available to the parties in the other, and that a transcript of the
witness evidence should be made, so that evidence given in one
arbitration may be used in the other (with the parties being given the
opportunity to question or comment upon it).
Class Arbitration
A ‘class’, or ‘representative’, action is a legal proceeding that enables
the claims of a number of persons with the same interest (the ‘class
members’) to be brought---- by one or a number of claimants (the
‘representative claimant(s)’) against the same respondent.
• only the representative claimant(s) is a party to the action,
• although the class members do not take an active part in the
proceedings, BUT they are bound by the outcome.
Green Tree Financial Corporation v Bazzle (2003)
US Supreme Court – Landmark Case
Arb Clause - the contracts contained an arbitration clause, referring all
disputes to ‘binding arbitration by one arbitrator selected by us [the lender]
with the consent of you’.
• Both lawsuits were referred to arbitration at the lender’s demand, and in
both cases the sole arbitrator (who was, in fact, the same individual in both
cases) administered the cases as class-wide arbitrations and issued class
awards in favour of the borrowers.
• As required by the express terms of the arbitration agreement, it was not
selecting an arbitrator to determine its dispute with its other customers.
• On this basis, Lender argued that the terms of the arbitration agreement
did not accommodate, but rather forbade, class-wide arbitration.
Decision
• Unable to arrive at a majority opinion,
• the US Supreme Court affirmed the judgment by The South Carolina
Supreme Court which upheld the class awards, reasoning that there
was nothing in either the contracts or the Federal Arbitration Act to
preclude class-wide arbitration.
Effects
1. Consumer businesses—modified their standard arbitration clauses
to add an express prohibition on class-wide proceedings.
2. This led to another wave of litigation challenging the enforceability
of such class-action waivers.
3. In 2003, US arbitral institutions The American Arbitration
Association (AAA) promulgated Supplementary Rules made new
rules that deal with class-action scenarios.
Supreme Court’s decision in Stolt-Nielsen SA v Animal feeds
International Corporation.(2010) The Court overturned an arbitral
award that determined issues on a class basis on the ground that the
tribunal had exceeded its powers,
Stolt-Nielsen SA v Animal feeds
International Corporation.(2010)
Supreme Court ---overturned an arbitral award that determined issues
on a class basis on the ground that the tribunal had exceeded its
powers.
• A class-action arbitration involved ‘fundamental changes’,
• larger number of parties, lack of privacy and confidentiality,
• the adjudication of rights of absent parties, and
• high-value awards are subject to only minimal judicial review on the
merits.
The parties’ mere silence on the issue of class arbitration doesnot
constitutes consent
Current Scenario
Lamps Plus V Varela (2019) – Set position
• Issue – whether the ambiguous agreement can provide the necessary
contractual basis for compelling class arbitration?
• Held, It Cannot. There is a requirement of more than ambiguity to
ensure that the parties actually agreed to arbitrate on a class wide
basis.
EU published “Directive on representative actions for the protection
of the collective interests of the consumers”(2020).
