WHEN CONSOLIDATION FAILS: THE CHALLENGES OF PARALLEL ARBITRATION PROCEEDINGS
Author: Arushi Sharma, NLU, Shimla
Abstract
Consolidation in simple terms is a process in which two or more claims are put in one single dispute and this procedure helps in avoiding conflicting awards in order to save time and money and to ensure operation of this procedure the consent of the parties and connection of the disputes is a must. As per article 10 of the International Chamber of Commerce (‘ICC’) either the demand for consolidation should be made under the same arbitration agreement or the agreements must be driven by the same parties, disputes, legal relationships. The consent for consolidate should be given expressly without leaving any doubt just like the consent to arbitrate. In the absence of an express consent parallel proceedings arise which are quite common in the energy industry because of the involvement of multi-parties and multi-contract transactions. Parallel proceedings have their own challenges and one of them is inconsistent findings of fact or law which eventually leads to inconsistent decisions on damages and sentences.
Parallel proceedings can arise when in a project various contractors have signed different contracts and all or at least some of them have agreed to different dispute resolution clauses. The difficulty arises when the dispute resolution procedures are not in sync with the fact or law responsible for the dispute in the first place. Parallel proceedings can also arise when several foreign organizations are investing in the same foreign project or when different investors have separate foreign investments in the same sector.[1] Due to the international nature of arbitration there is no scope for the arbitrators to follow precedents or even to appeal to a superior authority in case of discontentment with the decision.
No publication of awards of decisions and awards of previous decisions of the same case adds on to the chaos and lastly, the international nature of the dispute broadens the horizon of legal problems among arbitrators than among judges in a single national court system which make arbitral decision-making less predictable.[2]
In an investment arbitration, for instance, one party may choose to opt for litigation in a national court instead of an ongoing arbitration, this would be a classic example of a parallel proceeding in international arbitration. A domestic court is not the only platform where a second proceeding may be declined on the ground of the wording of a clause of arbitration between the parties instead, proceedings of a tribunal could easily overlap jurisdiction with another arbitral tribunal or in fact international courts. Two proceedings are not deemed parallel only because of the involvement of two identical parties or because that they originate from the same transaction but because they are themselves identical but still filed in two separate courts.
Parallel proceedings may cause delays, increase the budget, if there is any, can be a potential abuse of process, can be a gateway to forum shopping and can lead to conflicting results. Parallel proceedings result in loss of confidentiality as court proceedings are usually open and public which one of the reasons arbitrationis opted by the parties in the first place. Existence of a conflicting result can raise questions about its enforceability as the two forums may apply different substantive laws and in addition to it, these rulings are capable of threatening the legitimacy and stability of the system of the tribunal itself.
Forum shopping is a tool used by the parties to get their desired outcome from a tribunal or court of their choice sometimes under the pretext of geographical convenience. In investment arbitration it is often stated by the respondent that parallel proceedings are nothing but an abuse of process when the same interest is to be defended against the same investors in more than one proceeding. It was finally put to rest after it was clarified by a tribunal that it would not be deemed abusive as long as the claimant had a valid reason to pursue the claim on the basis of its right of recourse to treaty protection or arbitration clauses. [3]When it comes to an issue of jurisdiction between two courts, the New Convention provides a solution in the form of doctrine of competence-competence. As per this doctrine, arbitrators have the power to decide their own jurisdiction and it also allows arbitral tribunals to go ahead even if parallel proceedings are pending. As a last resort, the courts can also resort to anti-suit injunctions, they are issued by arbitral tribunals against or in support of court litigation.[4]
References:
[1]Vasilis FL Pappas, Romeo Rojas and Gita Keshava, ‘When Consolidation Fails: The Challenges of Parallel Arbitral Proceedings ‘, gdr, 10 November 2020.
[2] D. Brian King, Towards a Uniform International Arbitration Law? (West Group, St. Paul, MN, 1992).
[3]Investment Arbitration and Parallel Proceedings, available at: https://www.lexology.com/library/detail.aspx?g=d50cded5-ba00-478a-becc-a9e1fd7eedd0 (last visited: 8 December ,2020).
[4] Gabrielle Kaufmann-Kohler,” How to Handle Parallel Proceedings: A Practical Approach to Issues such as Competence-Competence and Anti-Suit Injunctions”, 2 HHPP 111 (2008).
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