Week 3: Complex Arbitration

Multi-parties:

• Cases with more than two parties, which may include non-signatories or parties involved via contract.

Multiple contracts:

• Cases involving more than one contract, which might feature a single arbitration agreement covering all contracts, or multiple contracts, each with its own arbitration agreement.

Key Issue: CONSENT

• Form of Consent: It must be determined what form of consent is necessary (e.g., a "true" or formal form, like required by the New York convention).

• Scope of Consent: The scope must be checked: Is the consent explicitly expressed or is it implied (particularly for a third party or many contracts)?.

• Timing of Consent: Consent for multiparty arbitration can exist from the ONSET, or it can occur later when parties not originally part of the dispute are brought in (e.g., as a respondent).

• First Check for Consent: Always check if consent is found in the arbitration agreement itself, in the applicable rules, or through a post-dispute agreement.

Joinder

• Definition: The process of adding additional parties to a pending or upcoming arbitration who were not part of the original request for arbitration.

• Conditions: The condition for joinder, depending on the rules, must be met.

• Triggers: Joinder can be initiated by the application of one of the parties, or when one party wishes to intervene.

• Rules Examples: ICC Art. 7 rules and NAI Art. 43.

Consolidation (Combining Proceedings)

• Definition: The combination of two or more already PENDING arbitrations into a single arbitration proceeding.

• Initiation: Consolidation requires checking for CONSENT (in the agreement, applicable rules, or post-dispute agreement) or through an application by the parties.

• Considerations when deciding whether to consolidate:

  • Whether there is an agreement to consolidate.

  • Whether claims are made that result from the same or compatible arbitration agreements.

  • Whether disputes arise from one contract or a series of related contracts, as well as the parties' course of dealing.

• Rules Examples: ICC Art. 10 (decision made by the ICC COURT); NAI Art. 44 (involving a third party consolidation).

Concurrent Hearings

• Definition: The same tribunal hearing two or more separate arbitrations currently in one arbitration, in a single hearing.

• Use Case: This method may occur when consolidation is not possible (e.g., if the arbitration agreements are incompatible).

• Requirement: Requires checking for CONSENT (in the agreement, applicable rules, or post-dispute agreement).

• Outcome: The tribunal will render separate awards unless the parties agree otherwise.

• Case Examples: Privatebank v Russian Federation (PCA case no. 2015-21) and Aeroport Belbak v. Russian federation (PCA case no. 2015-07).

Multi-Contract Arbitration

• Content and Consent: Consent is given when the contract is formed. The content includes checking what form of consent was given (in writing?).

• Substance: Requires checking the scope (implied versus express consent).

• Rules Examples: ICC Art. 9 and NAI Art. 11.

Expedited Procedures: Emergency Arbitration 

• Purpose: Provides a short-term solution. The decision is rendered as an award or order.

• Timing: Decisions are rendered prior to the construction of a “full” arbitral tribunal.

• Development: Developed as an alternative to going to national courts to obtain interim measures before a tribunal could be constituted.

• Consent: CONSENT must first be checked. Most rules have emergency arbitration now, so parties "should" explicitly opt out if they do not want it.

• Process: Involves the appointment of an emergency arbitrator (usually by an arbitral institution) with an extremely short procedural timeline.

• Decisions (Orders vs. Awards): Decisions may be rendered as orders or awards. The key distinction is the finalityof the decision; if it is internal, it is not final and cannot be enforced.

• Enforceability: Enforceability depends largely on the state where enforcement is sought, considering whether emergency decisions constitute awards under the New York convention.

• Follow-Up: The parties will temporally go through a full arbitration process afterward. If a party has not complied with the decision of the emergency arbitrator, this non-compliance can be used against that party in the MAIN proceedings.

Expedited Arbitration

• Characteristics: This is a “full” arbitration but with a condensed proceedings and an expedited timeline. It uses abridged procedures.

• Consent: Once again, CONSENT is required.

• Thresholds: Usually, mandatory thresholds apply.

  • Parties can generally opt-out when a dispute falls within the threshold, or opt-in when it falls outside the threshold.

• Financial Threshold Examples:

  • NAI: 1 EUR million (Art. 41).

  • ICC: USD 2 mm (pre-2021) or USD 3 mm (post 1/1/2021) (Art. 1(2) of appendix VI).

Multiple Tiers

•  Also known as "escalation clauses," mandate that certain pre-arbitration steps—such as negotiations, mediation, or dispute adjudication—must be completed prior to initiating arbitration proceedings.

• These clauses aim to resolve disputes at a lower cost and may help narrow and frame the dispute through objective assessment, although they risk increasing the overall time and cost of the proceedings.

  
  

Enforceability of the pre-arbitration requirement

• pre-arbitration provision must prescribe:

• (a) a sufficiently certain and unequivocal commitment to commence a process;

• (b) clear steps for each party to take; and

• (c) a definition enabling a court to objectively determine the minimum required participation and when the process is exhausted or terminable without breach.

• high court of England and Wales 

 Interpretation of the pre-arbitration requirement

• Even mandatory requirements can be difficult to interpret regarding what steps constitute compliance. A Swiss Federal Tribunal decision demonstrated this difficulty when it set aside an award because the claimant withdrew its conciliation request prior to the first meeting, concluding that the claimant had not complied with the specific ADR Rules requirement to participate until the first meeting had taken place.

Jurisdiction or Admissibility Issue (Multi-tiered arb clauses)

• Jurisdiction:

  • Some courts view pre-arbitration requirements as conditions to arbitrate; if unfulfilled, consent to arbitrate does not exist, and the tribunal lacks jurisdiction (e.g., the referenced Swiss decision).

• Admissibility:

  • Other courts, notably in the United States, characterize them as matters of admissibility (equivalent to procedural arbitrability), concerning whether a claim is ripe for judicial determination. The US Supreme Court, in BG v Argentina, found that a requirement to litigate in local courts before arbitration was a matter of procedural arbitrability, meaning arbitrators, not State courts, were primarily responsible for assessing compliance.

Impact of Non-compliance (mulit-tiered)

• The appropriate remedy depends on the circumstances and the applicable law.

• Doctrinal approaches developed for such situations suggest the pre-arbitration agreement may become futile, be deemed fulfilled, or the opposing party may be estopped from asserting non-compliance.

• For example, the tribunal in BG v Argentina found that Argentina’s actions hindering BG’s access to the judiciary made compliance with the pre-arbitration requirement impossible.

Multiple Contracts 

• Initiating a single arbitration proceeding covering claims under multiple contracts (Multi-Contract Arbitration); or

• The consolidation of multiple already-pending arbitration proceedings.

Multi-Contract Arb

• Party Consent:

  • All parties must have consented to have the claims decided in one single arbitration. Consent is necessary because parties may have specific interests in separating proceedings, such as appointing arbitrators with differing expertise or managing varying procedural complexities. Consent can be express or implied, based on factors such as whether the contracts relate to the same economic transaction, involve the same parties, or share the same date.

• Compatibility of Arbitration Clauses:

  • The arbitration clauses in the separate contracts must be compatible. Incompatibility occurs if compliance with one clause forces non-compliance with the other (e.g., conflicting arbitral seats).

• Court-Ordered Consolidation:

  • While some US State laws permit this, under the Federal Arbitration Act (FAA), courts typically rule that, absent a clear agreement otherwise, the question of consolidation is a procedural matter for the arbitrators or the arbitral institution.

• ICC Art 10; by consenting to the ICC, also consent to article 10 

Assignment

• A consent-based theory where the assignment of a claim subject to arbitration is generally understood to transfer the arbitration clause along with the claim, treating the clause as an accessory right.

Agency

• A consent-based theory resting on contract law principles, where an agent may consent to arbitrate on behalf of a principal, binding the principal without their signature.

Incorporation by Reference 

• A consent-based theory where parties to a contract that does not contain an arbitration clause may be bound by referencing an arbitration clause in a different contract (e.g., a bill of lading incorporating the terms of a charter party).

Group of Companies Doctrine

• A controversial theory, often associated with the Dow Chemical Case.

• It suggests that a non-signatory party that played a dominant role in concluding, performing, or terminating a contract may be bound by the arbitration agreement if this corresponds to the common will of the parties.

• The underlying idea is that the group constitutes "one and the same economic reality". This doctrine is applied in some jurisdictions but rejected or applied hesitantly in others (e.g., English and Swiss courts).

Implied Consent

• Rests on the principle that declarations of intent can be made impliedly. A party’s conduct in negotiations or participation in arbitration proceedings may constitute implied consent to arbitrate.

Equitable Estoppel

• theory based on equity and fairness 

• This common law doctrine prohibits contradictory behavior. A party is estopped from asserting that their lack of signature invalidates the arbitration clause if they consistently rely on and enforce other provisions of the same contract for their benefit. The US Supreme Court found that domestic equitable estoppel doctrines are compatible with the New York Convention, as the convention is silent on enforcement by non-signatories.

Piercing the Corporate Veil

• theory based on equity and fairness 

• Allows the arbitral tribunal to exceptionally disregard a company’s separate legal personality to bind non-signatories. Under New York law, this requires establishing:

  • (1) complete domination of the company regarding a particular transaction,

  • and (2) that the domination was used to commit a fraud or wrong resulting in injury.

Binding Non-Signatories Analogy

•  is like holding the furniture brand (the parent company, the non-signatory) responsible for defects even if you only bought the product from a reseller (the signatory subsidiary). You might use agency(the reseller acted for the brand), implied consent (the brand participated in the design), or piercing the corporate veil (the brand illegally dominated the reseller) to pull the main company into the dispute.

Dow Chemical v ISOVER Saint Gobain 

•  Tribunal held that non-signatory companies from a corporate group could be bound by the arbitration clause in a contract signed by a subsidiary.

• The tribunal ruled that due to the close relationship and active participation of the parent company in the contract's performance, the "group of companies" constituted a single economic entity and all parties were subject to the arbitration agreement