May 3, 2016

Institutional approaches to multi-party and multi-contract disputes in arbitration

On 26 April 2016, the Stockholm Chamber of Commerce (“SCC”) released its draft Arbitration Rules 2017 which propose the introduction or development of provisions relating to multi-party and multi-contract disputes.

Disputes governed by arbitration clauses can involve more than two parties, more than one contract, or both. In these cases, parties often prefer to have one set of proceedings. There are obvious advantages in terms of costs savings and it can also avoid inconsistent determinations where common factual or legal issues are in question.

In the absence of express provisions in this regard, parties may have in the past sought to persuade tribunals that they had the power to join parties or consolidate arbitrations. Rules often contained little to no reference as to the power of institutions or tribunals to do so.

Arbitral institutions have recognised this and are developing their rules to better accommodate the increasing complexity and sophistication of disputes. For example, in January this year SIAC issued revised draft Arbitration Rules which propose to introduce specific provisions on multiple-contract disputes and consolidation, as well as to develop those regarding joinder of additional parties.

With institutions around the world aiming to establish themselves as the institution of choice for complex multi-party and multi-contract disputes, it is possible we will see the major institutions continue to develop their rules in this respect.

Below is an overview of the different institutions’ approaches to the issues of:

  • joinder of a third party to an existing arbitration; and
  • consolidation of separate but related arbitrations (potentially involving different arbitration agreements and/or parties).

Key points

Joinder

  • Under the proposed SCC Rules, a provision for joinder will be added, allowing the SCC Board of Directors (“Board”), at the request of a party, to join an additional party to an arbitration, even where claims are made under separate arbitration agreements.
  • Not all institutions provide this flexibility in terms of joinder under separate arbitration agreements. For example, the ICC and SIAC rules only allow joinder where the additional party is party to the same arbitration agreement.

Consolidation

  • Under the proposed SCC Rules, the Board is still able to consolidate two or more sets of related arbitrations; however, further guidance is provided in regard to relevant factors which the Board is to consider in its decision-making procedure.
  • The proposed SCC Rules retain the current requirement for the Board to consult with the parties and the tribunal before consolidating proceedings. This position is substantially the same as the conditions for consolidation under the HKIAC rules, but differs from the position under the ICC and LCIA rules (under which such consultation is not required). The ICDR rules are unique in that a request for consolidation is decided by a consolidation arbitrator appointed by the Administrator.

Multi-contract claims

  • The proposed SCC Rules explicitly permit the Board to allow multi-contract claims to be raised in the same arbitration in certain circumstances.

  • This is broadly in line with the positions of the ICC, ICDR and HKIAC rules, which also allow multi-contract claims to be heard in a single arbitration (subject to certain conditions), while the LCIA rules implicitly allow such claims. Until the proposed revised SIAC rules come into effect, there will be no express provision allowing for multi-contract claims in a SIAC arbitration.

Institutional Rules Joinder of a third party to an existing arbitration Consolidation of separate but related arbitrations

SCC

The current rules contain no joinder provisions.

The draft Arbitration Rules 2017 propose introducing two new provisions:

Article 13 will allow the Board, at the request of a party, to join one or more additional parties to an arbitration.

Unless the Board decides otherwise, a request for joinder after the submission of the Answer will not be considered.

The Board may release any arbitrator already appointed and appoint new arbitrators, unless all parties, including the additional party, agree otherwise.

In addition to this joinder provision, Article 14 will allow parties to make multi-contract claims in a single arbitration. Where a party raises an objection to holding multi-contract dispute, the claim will proceed if the Board is preliminarily satisfied that the arbitration agreements are compatible, and it can be inferred that there is an agreement between all parties to the arbitrations that the claims may be determined in a single arbitration.

Article 11 of the current rules allows the Board to consolidate new claims with existing proceedings at the request of a party and subject to consulting the parties and the arbitral tribunal.

The draft Arbitration Rules 2017 seek to develop and expand this existing rule. Article 15 will allow the Board to consolidate a newly commenced arbitration with a pending arbitration if:

  • the parties agree to consolidate; or
  • all the claims are made under the same arbitration agreement; or
  • where the claims involve the same parties and are made under more than one arbitration agreement, the Board considers the arbitration agreements to be compatible, and it may be inferred, having regard to all relevant circumstances, that there is an agreement that the claims may be determined in a single arbitration.

The Board may only do so once it has consulted with the parties and the tribunal. Where the Board opts to consolidate proceedings, it may release any arbitrator already appointed in the newly commenced arbitration.

LCIA

Article 22(viii) grants the tribunal the power (upon the application of a party, and only after giving the parties a reasonable opportunity to state their views) to allow one or more additional parties to be joined in the arbitration provided the applicant and the additional party or parties consented to such joinder in writing.

There is no express requirement that the third party be party to the same arbitration agreement so this could allow joinder in multi-contract situations.

Article 22(ix) allows the tribunal, with the approval of the LCIA Court, to consolidate two or more arbitrations where all the parties to the arbitrations agree in writing.

ICC

Article 7 allows parties to join a third party in a situation where the same arbitration agreement binds all the parties. It expressly provides that joinder will not be permitted after the appointment of an arbitrator unless all the parties including the third party agree to it.

Article 8 allows the joined party to make claims against any other party in the arbitration.

Article 9 permits the parties to make multi-contract claims in a single arbitration, irrespective of whether such claims are made under one or more than one arbitration agreement.

Article 10 allows the Court, at the request of the party, to consolidate two or more arbitrations where any of the following criteria are satisfied:

  • the parties have agreed to the consolidation; or
  • all of the claims in the arbitrations are made under the same arbitration agreement; or
  • where the claims in the arbitrations are made under more than one arbitration agreement, the arbitrations are between the same parties, the disputes in the arbitrations arise in connection with the same relationship and the court finds the arbitration agreements to be compatible.

ICDR

Article 7 allows a party to submit a Notice of Arbitration to the Administrator in order to join an additional party before the constitution of the tribunal. A party may only be joined after the appointment of the arbitrators with the consent of all parties (including the additional party). The tribunal and the Administrator therefore play less of a decision-making role than the other institutions’ equivalent position in this regard.

Article 4(7) envisions multi-party disputes, allowing the parties to cross-claim and set off amounts otherwise owing against one another.

Article 8 allows the Administrator, at the request of a party, to appoint a consolidation arbitrator who may order the consolidation of two or more ICDR (or American Arbitration Association) arbitrations, in circumstances where:

  • the parties have agreed; or
  • the claims and counter claims are made under the same arbitration agreement; or
  • the claims, counterclaims or set offs are made under more than one arbitration agreement, involve the same parties, the disputes arise in connection with the same legal relationship, and the consolidation arbitrator finds the arbitration agreements to be compatible.

SIAC

Article 24(b) allows the tribunal to join one or more third parties to the arbitration upon the application of a party provided the third party is a party to the arbitration agreement and provides written consent to the joinder.

The SIAC rules do not expressly allow consolidation.

HKIAC

Article 27 allows the tribunal, at the request of a party (including the additional party), to join an additional party if, prima facie, the additional party is bound by an arbitration agreement giving rise to the arbitration.  

Article 29 allows multi-contract claims to be made in a single arbitration provided that:

  • all parties to the arbitration are bound by each arbitration agreement under which the disputes arise;
  • a common question of law or fact arises under each arbitration agreement giving rise to the arbitration;
  • the rights to relief claimed are in respect of, or arise out of, the same transaction or series of transactions; and
  • the arbitration agreements under which those claims are made are compatible.

Article 28 allows HKIAC, at the request of a party and after consultation with the parties and any confirmed arbitrators, to consolidate two or more arbitrations pending under the HKIAC rules, provided:

  • the parties agree to consolidate; or
  • all of the claims in the arbitrations are made under the same arbitration agreement; or
  • the claims are made under more than one arbitration agreement, a common question of law or fact arises in both or all of the arbitrations, the rights to relief claimed are in respect of, or arise out of, the same transaction or series of transactions and HKIAC finds the arbitration agreements to be compatible.