Consolidation in International Commercial
Arbitration –
the ICC and Swiss Rules
DISSERTATION
of the University of St. Gallen,
School of Management,
Economics, Law, Social Sciences
and International Affairs
to obtain the title of
Doctor of Philosophy of Law
submitted by
Lara Michaela Pair
from
Germany
Approved on the application of
Prof. Dr. Ivo Schwander
and
Prof. Dr. Markus Müller-Chen
Dissertation no. 3923
Eleven Publishing / 2011, Den Haag
The University of St. Gallen, School of Management,
Economics, Law, Social Sciences and International Affairs
hereby consents to the printing of the present dissertation,
without hereby expressing any opinion on the views herein
expressed.
St. Gallen, May 17, 2011
The President:
Prof. Dr. Thomas Bieger
III
Zusammenfassung
Diese Dissertation befasst sich mit der Zusammenlegung von
Schiedsverfahren nach
den
Regeln
der Internationalen
Handelskammer (ICC Rules) oder der Schiedsordnung der
Schweizer Handelskammern (Swiss Rules) . Zu Beginn erfährt
der Leser die praktischen und rechtlichen Gründe,
welche solche Konsolidierungsnormen als wünschenswert
erscheinen lassen. Ausgehend von einem Schiedsgericht mit
Sitz in der Schweiz und einer fiktiven Vollstreckung
in Deutschland oder den USA werden anschliessend die
Implikationen einer Verfahrenszusammenlegung unter den
genannten Schiedsordnungen ausgeleuchtet und analysiert.
Angesprochen wird zuerst, ob und unter welchen
Voraussetzungen mit dem Verweis auf eine der beiden
Schiedsordnungen auch die Zustimmung zu einer
Konsolidierung angenommen werden kann. Anschliessend
widmet sich die Dissertation dem Spannungsfeld zwischen
Gleichbehandlung
respektive
Autonomie
der Partein und zwingendem lokalen Recht. Schlussendlich
wendet sich die Analyse den konsoliderungsbedingten
Verfahrensanpassungen zu und schliesst mit einer kritischen
Gegenüberstellung
der
eingangs
dargestellten
Rechtfertigungsgründe und der im Laufe der Dissertation
erarbeiteten Konklusionen.
Die These kommt zum Schluss, dass der durch sie beabsichtigte
Effekt nur durch eine massvolle Anwendung der bestehenden
Konsolidierungsnormen
erreicht
werden
kann.
Voraussetzung hierzu
bildet
die Aufstellung
klarer
Voraussetzungen für die Verfahrenszusammenlegung. Nur
dann halten die behandelten Normen einer richtlichen
Überprüfung stand.
IV
Summary
This dissertation treats consolidation of arbitral disputes
pending before either the International chamber of Commerce
or the Swiss Chambers of Commerce. It is mainly concerned
with determining both the logical and the legal justifications for
these rules. Using Switzerland as the seat country and Germany
and the United States as sample enforcement countries, this
analysis will go into detail.
First, the validity of choosing consolidation by reference to
these institutional rules will be addressed. Second, the choice of
arbitrators will be discussed in light of party equality and party
autonomy versus mandatory local laws. Third, procedural
adjustments, made necessary by the use of a consolidation
procedure, will be analyzed. Fourth, the logical justifications
for consolidation will be tested.
This dissertation concludes that only a policy of restraint and a
spelling out of criteria for consolidation will serve the purposes
of consolidation and withstand judicial scrutiny.
V
Preface of the Author
Dedicated to my parents and my partner for their love and
everything else. I do not know how to express my devotion
better.
To Prof. Ivo Schwander, Prof. Markus Müller-Chen, Prof.
emertitus Robert N. Coleman, Prof. David J. Bederman, and
Chief Judge Benjamin Studdard III, I extend my deepest respect
for their guidance throughout my professional life.
Ulrike Demelius, Céline Hofer, Dr. iur. Christoph Bauer and
Pascal Rey have supported me wherever they could - to them
my heartfelt gratitude.
I would also like to thank the Swiss Chambers of Commerce,
specifically the Chamber of Commerce and Industry of Geneva
and Zürich, and the International Chamber of Commerce for
access to information and exceeding curtesy.
This analysis includes material up to June 28, 2011.
June, 2011
Lara Michaela Pair
VI
Table of Contents
1
Introduction ................................................................................ 1
1.1 Methodology ........................................................................ 1
1.2 Preface .................................................................................. 2
1.3 Limitations ........................................................................... 6
1.3.1 Institutional Rules .......................................................... 7
1.3.2 Jurisdictions.................................................................... 8
1.3.3 Independent Cases .......................................................... 9
1.3.4 Forcible Consolidation ................................................. 10
1.3.5 Accomplished Consolidation ....................................... 10
1.3.6 No Intertemporal Issues ............................................... 11
1.4 Outlook............................................................................... 11
2
Purpose of Consolidation......................................................... 13
2.1 Layman’s View .................................................................. 13
2.2 Definition ........................................................................... 14
2.3 Avoidance of Contradictory Judgments ......................... 15
2.4 Efficiency ........................................................................... 16
2.5 Fairness, Truth and Justice .............................................. 16
2.6 Outlook............................................................................... 17
3
Consolidation Procedures in Institutional Arbitration ........ 21
3.1 Introduction ....................................................................... 21
3.2 UNCITRAL ....................................................................... 22
3.3 American Arbitration Association .................................. 25
3.4 London Court of International Arbitration ................... 26
3.5 International Chamber of Commerce ............................. 28
3.6 Swiss Chambers of Commerce ........................................ 30
3.7 The Austrian Federal Economic Chamber..................... 34
3.8 Arbitration Institute of the Stockholm International
Chamber of Commerce.............................................................. 35
3.9 Other Institutional Rules .................................................. 37
3.10 Summary.......................................................................... 38
4
ICC and Swiss Rules Consolidation in Detail ........................ 39
4.1 The Provisions – ICC Rules 4(6) or 10 and Swiss Rule
4(1) 39
4.2
4.3
4.4
Applicable Institutional Rules ......................................... 42
Arbitrators ......................................................................... 43
Initiation Procedure .......................................................... 45
VII
4.5 Timing ................................................................................ 46
4.5.1 ICC Rules ..................................................................... 47
4.5.2 Swiss Rules .................................................................. 49
4.6 Seat ..................................................................................... 50
4.7 Language ............................................................................ 52
4.8 Secrecy ............................................................................... 54
4.9 Costs ................................................................................... 55
4.10 Connection Between Cases ............................................. 56
4.10.1 ICC Rules ................................................................... 56
4.10.1.1 Parties ................................................................... 57
4.10.1.2 Legal Relationship ............................................... 59
4.10.2 Swiss Rules ................................................................ 60
4.11 Procedural Adjustments in the Consolidated Case ..... 61
4.12 Summary.......................................................................... 63
5
Consent to Consolidation......................................................... 65
5.1 Applicable Law.................................................................. 67
5.2 Incompatible Clauses ........................................................ 71
5.3 Swiss Law Regarding Validity of Consent to
Consolidation .............................................................................. 76
5.3.1 Principles of Interpretation ........................................... 76
5.3.2 Consolidation Not Prohibited ....................................... 81
5.3.3 Violation of the Principle of Undue Surprise ............... 81
5.3.4 Violation of Article 27 Swiss Civil Code..................... 82
5.3.4.1 One Contract - Same Parties .................................. 86
5.3.4.2 One Contract – Differing Parties ........................... 87
5.3.4.3 Multiple Contracts – Same Parties ......................... 89
5.3.4.4 Multiple Contracts – Differing Parties ................... 91
5.3.4.5 Interim Conclusion ................................................. 92
5.4 Institutional Approach ..................................................... 93
5.5 Alternative Approach ....................................................... 96
5.5.1 Admissible Claims and Parties..................................... 98
5.5.1.1 Claims .................................................................... 99
5.5.1.2 Parties ................................................................... 101
5.5.2 Interim Conclusion ..................................................... 105
5.6 Advance Consent and Waiver........................................ 106
5.6.1 Dutco .......................................................................... 106
5.6.2 Swiss Law .................................................................. 108
5.7
6
Conclusion ....................................................................... 109
Background on Consolidation Decisions.............................. 111
VIII
6.1 Secrecy as Obstacle to Consolidation ............................ 111
6.2 Administrative Effect of Consolidation ........................ 116
6.3 Reasoning for (Initially) Placing Decision with
Institutions ................................................................................ 117
6.4 Institutional Decision Makers ........................................ 118
6.4.1 ICC Decision Makers ................................................. 118
6.4.2 Swiss Rules Decision Makers .................................... 119
6.5 Judicial Treatment of Consolidation in Arbitral Cases
120
6.5.1 Consolidation of Arbitrations in Switzerland............. 122
6.5.2 Consolidation of Arbitrations in Germany ................. 123
6.5.3 Consolidation of Arbitrations in United States .......... 124
7
Challenge of the Decision on Consolidation......................... 129
7.1 Challenge Before Arbitrators ........................................ 130
7.1.1 Opinion Affirmative of a Challenge Before Arbitrators
131
7.1.2 Opinion Against a Challenge Before Arbitrators ....... 133
7.1.3 Author’s Opinion........................................................ 133
7.1.3.1 Jurisdictional Character........................................ 133
7.1.3.2 Institutions Retain Sufficient Control .................. 134
7.1.3.3 Limits to Party Autonomy.................................... 135
7.1.3.4 Procedural Authority Rests With Arbitrators....... 139
7.1.3.5 Practical Considerations ....................................... 140
7.1.4 Summary .................................................................... 140
7.2 Challenge in the Seat Country ....................................... 141
7.2.1 Institutional Decision Cannot Be Challenged Directly
141
7.2.2 Grounds for Challenge ............................................... 144
7.3 Challenge in the Enforcement Countries ...................... 148
7.3.1 Waiver of Challenge................................................... 149
7.3.2 Lack of Jurisdiction – Articles V(1)(a) and (c) NYC. 151
7.3.3 Violation of Party Agreement – Article V(1)(d) NYC
153
7.4 Conclusion ....................................................................... 155
8
Arbitrators’ Choices .............................................................. 157
8.1 Involuntary Loss of Mandate ......................................... 157
8.2 Arbitrators With Enlarged Case ................................... 158
9
Arbitrator Selection ............................................................... 165
IX
9.1 Common Selection Methods........................................... 166
9.2 Composition of the Consolidated Panel ........................ 169
9.3 Right to Party Arbitrators ............................................. 171
9.4 Impact of Qualifications of Arbitrators ........................ 174
9.5 Implications of Arbitrator Selection for Annulment ... 175
9.5.1 Improper Constitution - Article 190(2)(a) SPILA...... 176
9.5.2 Lack of Equal Treatment - Article 190(2)(d) SPILA . 179
9.5.2.1 Definition of Violations of Equal Treatment ....... 179
9.5.2.2 Waiver of the Right to Equal Treatment .............. 180
9.5.3 Violation of Public Policy - Article 190(2)(e) SPILA 185
9.5.4 Interim Conclusion ..................................................... 186
9.6 Implications for Refusal of Recognition and Enforcement
187
9.6.1 Improper Constitution - Article V(1)(d) NYC ........... 188
9.6.2 Public Policy - Article V(2)(b) NYC ......................... 191
9.6.2.1 Applicable Standard ............................................. 191
9.6.2.2 Content of the Provision ...................................... 193
9.6.3 Summary .................................................................... 197
9.7 Solutions ........................................................................... 197
10
Aside: Duty to Create an Enforceable Award .................. 201
11
Procedural Adjustments Required by the Lex Fori.......... 205
11.1 Impartiality – Article 190(2)(a) SPILA ....................... 206
11.2 Jurisdiction – Article 190(2)(b) SPILA ....................... 208
11.3 Incongruence – Article 190(2)(c) SPILA .................... 210
11.4 Equality and the Right to be Heard - Article 190(2)(d)
SPILA ........................................................................................ 210
11.4.1 File Transfer and Confidentiality ............................. 213
11.4.2 Procedural Orders..................................................... 214
11.4.3 Oral Testimony and Hearings .................................. 215
11.5 Public Policy – Article 190(2)(e) SPILA ..................... 217
11.6 Summary........................................................................ 218
12 Procedural Adjustments Required by the New York
Convention .................................................................................... 219
12.1 Introduction................................................................... 219
12.2 Agreed Procedure - Article V(1)(d) NYC .................. 222
12.3 Due Process and Public Policy - Articles V(1)(b) and
V(2)(b) NYC .............................................................................. 223
12.3.1 Overview .................................................................. 223
12.3.2 Content of Due Process and Public Policy ............... 225
X
12.3.3 Causal Nexus ............................................................ 228
12.3.4 Implications for Procedure ....................................... 229
12.3.4.1 Challenge of Arbitrators ..................................... 229
12.3.4.2 File Transfer and Confidentiality ....................... 230
12.3.4.3 Procedural Orders............................................... 230
12.3.4.4 Oral Proceedings ................................................ 231
12.4 Summary........................................................................ 232
13
Usefulness of Consolidation ................................................ 233
13.1 Avoidance of Contradictory Judgments ..................... 233
13.2 Efficiency ....................................................................... 237
13.2.1 Time ......................................................................... 237
13.2.2 Costs ......................................................................... 240
13.2.2.1 Allocation of Costs ............................................. 242
13.2.2.2 Total Cost ........................................................... 243
13.2.3 Conclusion on Efficiency ......................................... 245
13.3 Fairness, Truth and Justice.......................................... 246
13.4 Alternatives to Consolidation ...................................... 247
13.5 Summary........................................................................ 249
14
Proposed Solutions............................................................... 251
14.1 Consolidation Requirements........................................ 251
14.2 Arbitrator Selection ...................................................... 253
14.3 Procedural Adjustments............................................... 253
14.4 Conclusion ..................................................................... 254
XI
Consolidation is the act or process of uniting several
independent proceedings which are pending or initiated into
one single case.1
1
Philippe Gilliéron and Luc Pittet, “Article 4 - Consolidation of Arbitral
Proceedings (Joinder), Participation of Third Parties,” in Swiss Rules of
International Arbitration: Commentary, ed. Tobias Zuberbuhler, Klaus
Müller, and Philipp Habegger (Zurich, Basel, Geneva: Kluwer Law
International, 2005), note 3.
XII
Table of Abbreviations
AAA
International
Rules
ABA
ADR
AG
art.
ASA
International Dispute Resolution
Procedures of the American
Arbitration Association
American Bar Association
Alternative Dispute Resolution
Aktiengesellschaft
Article
Association suisse de l’arbitrage
Ausenwirtschaftsdienst des
AWD
Betriebsberaters
BayObLG
Bayrisches Oberlandesgericht
Bundesgerichtshof (German Federal
BGH
Court)
Swiss Civil Code of 10 December
CC
1907 (as amended; SR 210)
International Arbitration Rules of the
Centre Belge d'Arbitrage et de
CEPANI Rules
Médiation
Chambers of Commerce and
Chambers
Industry of Basel, Berne, Geneva,
Ticino, Vaud and Zurich
CHF
Swiss Franc
Cir.
Circuit
Swiss Federal Law of 30 March
1911 concerning the amendment of
CO
the Swiss Civil Code (Part 5: Law of
Obligations)(as amended; SR 220)
Co.
Company
Code of Ethics for Arbitrators in
Code of Ethics for Commercial Disputes (2004)
Arbitrators
(adopted by the AAA and ABA in
2004)
Concordat or
Swiss Intercantonal Concordat on
Interncantonal
Arbitration of 27 March 1969 (SR
Concordat
279)
Corp.
Corporation
D.
District
D.C.
District of Columbia
Del.
Delaware
DIS
German Arbitration Institution
E.D.
Eastern District
XIII
e.g.
ECHR
ECtHR
ed(s).
et al.
et seq(q).
etc.
EU
F.2d
F.3d
F.Supp
FAA
Fed. R. Civ. Pro.
Ga.
GCCP
GFCD
GmbH
i.e.
IBA
ibid.
ICC Court
ICC Internal
Rules
ICC or CCI
ICC Rules
ICC Statutes
ICCA
ICSID
ILA
exemplum gratia
European Convention on Human
Rights of 4 November 1950
European Court of Human Rights
Edition, editor(s)
Et alibi
Et sequence (one q denotes one page,
two q several pages)
Et cetera
European Union
Federal Reporter 2nd
Federal Reporter 3rd
Federal Supplement
Federal Arbitration Act (United
Stated)
Federal Rules of Civil Procedure
(United States)
Georgia, USA
German Code of Civil Procedure
German Federal Court Decision
(decisions of the highest civil court
of Germany, not to be confused with
the Supreme Court decisions, civil
cases often cited in ist official
reporter BGHZ)
Gesellschaft mit beschränkter
Haftung
Id est
International Bar Association
Ibidem
ICC International Court of
Arbitration
International Rules of the ICC Court
(Appendix II to the Rules)
International Chamber of Commerce
ICC Rules of Arbitration effective as
from 1 January 1998
Statutes of the ICC Court (Appendix
1 to the Rules)
International Council for
Commercial Arbitration
International Centre for Settlement
of Investment Disputes
International Law Association
XIV
Ill.
Inc.
Institutional
arbitration
IPRG
L.M.A.A.
LCIA
LCIA Rules
LDIP
lit.
LLC
Ltd.
Md.
N.D.
N.Y. or NY
no.
NYC or New
York Convention
OLG
Panel
para.
Provider
organizations
Publ.
s.
S.A.
S.D.
SCC Institute
SCC Rules
SCCP
Illinois
Incorporated
Institutional international
commercial arbitration
See SPILA
London Maritime Arbitrators
Association
London Court of International
Arbitration
LCIA Arbitration Rules in force as
of 1 January 1998
See SPILA
Litera
Limited Liability Company
Limited
Maryland
Northern District
New York
Number
United Nations Convention on the
Recognition and Enforcement of
Foreign Arbitral Awards of 10 June
1958
Oberlandesgericht
Arbitral Panel, whether consisting of
one or more members, deciding a
single case
Paragraph
Institutions providing institutional
arbitration
Publishers
Sentence
Société Anonyme
Southern District
Arbitration Institute of the
Stockholm Chamber of Commerce
International Commercial Arbitration
Rules of the Arbitration Institute of
the Stockholm Chamber of
Commerce
Swiss Code of Civil Procedure of 19
December 2008, in force since 1
January 2011 (SR
XV
sec.
SFCD
Special
Committee
SPILA
Swiss Chambers
Swiss Internal
Rules
Swiss Rules
U.S. or United
States
UNCITRAL
Model Law
UNICITRAL
UNICITRAL
Rules
USC
v.
VIAC
WL
ZH
ZR
Zurich Rules
Section
Swiss Federal Court Decision
(decisions of the Highest Court in
Switzerland); in German abbreviated
BGE
Subcommittee under the Swiss Rules
Swiss Private International Law Act
of 18 December 1987 (SR 291)
Swiss Chambers' Court of
Arbitration and Mediation
Administration of the Rules by the
Swiss Chamber of Commerce and
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November 2006
Rules of the Swiss Chambers' Court
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of the Austrian Federal Economic
Chamber
Westlaw
Zurich, Switzerland
Internal Designation for the German
Federal Court case Numbers
Zurich Chamber of Commerce
International Arbitration Rules
effective as of 1 January 1989
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LII
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LVII
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1
1
Introduction
Consolidation is intended to make arbitration easier in many
ways. This analysis will show that this intention can be turned
into reality without sacrificing the integrity of the arbitral
process, although not in every case.
1.1
Methodology
Multi-party arbitration is becoming more and more common
and there are many opinions on the subject. Consolidation has
received less attention, maybe because it occurs not only
between multiple parties, maybe because it is not so common.
There is no comprehensive academic work dealing with
consolidation in a detailed and fundamental fashion. This may
be due partly to the vastness of topics touched by this subject
and by the many different implications in various jurisdictions.
It is probably impossible to create a work that is all-inclusive.
However, this author will attempt to fill a part of the gap with
reference to the ICC and Swiss Rules.
In order to be able to do so, this author employs several
methods. First, as most legal theses do, this author uses
comparative, deductive and inductive reasoning. To this end,
this author will strongly rely on scholarly writing and case law.
Second, this author has chosen and was afforded the possibility
to conduct several interviews with practitioners and
administrators of the ICC and Swiss Rules with relation to
consolidation as practiced under these rules. Third,
consolidation is very complex, so that this author makes use of
examples with multiple variants. The variants include the
parties, the contracts, the number of claims and cases.
2
•
Parties are called Elma Inc., Fido Co., Guido Ltd.
and Halo S.A.2
•
Contracts are called contract X and Y.
•
Case names are case A, B and C.
•
Claims are numbered 1 through 10.
The citation style used herein conforms to the Chicago Manual
of Style with full bibliography.3 Emphasis will be made by use
of underlines. Italics indicate words in a foreign language.
Italics in quotation marks are direct quotes. Block quotes are
indented.
American English is used throughout, unless direct quotes are in
the English style. This work will be referred to as this analysis.
The first level of the outline is referred to as chapter. The
second level is called a subchapter. The third level is named
section and the fourth level subsection. This author hopes the
esteemed reader will find this analysis instructive.
1.2
Preface
We live in a complicated world. Everything is interconnected.
Little is left of the simple way of doing business. Life becomes
more complicated and so do the disputes arising out of life.
2
3
Any similarities with existing companies are purely coincidental.
University of Chicago Press, The Chicago Manual of Style by University
(Www.Bnpublishing.Com, 2007). The Chicago Manual of Style (abbreviated
in writing as CMS or CMOS, or verbally as Chicago) is a style guide for
American English published since 1906 by the University of Chicago Press.
Its 16 editions have prescribed writing and citation styles widely used in
publishing. It is considered the de facto guide for American English style,
grammar, and punctuation. The CMS deals with aspects of editorial practice,
from American English grammar and usage to document preparation.
3
Once the overwhelming majority of disputes were conducted
between two parties;4 today the percentage of multi-party
arbitrations is growing.5 Similarly, cases touching on
consolidation issues have increased in recent years.6
Consequently, arbitration has evolved.
Moving with the times, dispute resolution procedures must
accommodate more complicated set-ups. Dispute resolution
methods are mostly tailored to two-party disputes.7 Modern
4
5
6
7
Daniel Girsberger and Nathalie Voser, International Arbitration in
Switzerland (Zurich: Schulthess, 2008), note 362; Jens-Peter Lachmann,
Handbuch für die Schiedsgerichtspraxis, 3rd ed. (Cologne: O. Schmidt,
2008), note 2801; Nathalie Voser, “Multi-party Disputes and Joinder of Third
Parties,” in 50 Years of the New York Convention, ed. Albert Jan Van Den
Berg, International Council for Commercial Arbitration Congress Series 14
(Deventer: Kluwer, 2009), 351.
Gary Born, International Commercial Arbitration Volume II, 3rd ed. (Kluwer
Law International, 2009), 2069 suggesting that one third of ICC arbitrations
alone are multi-party; Lachmann, Handbuch für die Schiedsgerichtspraxis,
note 2802 estimating an average of 20 percent of multi-party arbitrations in
the ICC alone; Voser, “Multi-party Disputes and Joinder of Third Parties,”
343 suggesting 40 percent of international commercial arbitration cases
involve more than two parties; Anne Marie Whitesell, “Multiparty
Arbitration: The ICC International Court of Arbitration Perspective,” in
Multiple Party Actions in International Arbitration, ed. Permanent Court of
Arbitration (New York: Oxford University Press, 2009), note 6.02 suggesting
In 2007, 31.1 percent of ICC cases were multi-party; Frank-Bernd Weigand
and Antje Baumann, “Introduction,” in Practitioner’s Handbook on
International Commercial Arbitration, ed. Frank-Bernd Weigand, 2nd ed.
(Oxford: Oxford University Press, 2009), note 1.284 referring to each year
multi-party arbitration represents about 20 percent of ICC cases.
Franz Kellerhals, “Highlights from the Arbitration Committee,” in The Swiss
Rules of International Arbitration - Five Years of Experience, ed. Rainer Füeg
(Basel: Swiss Chambers’ Court of Arbitration and Mediation, 2009), 30;
Simon Greenberg, José Ricardo Feris, and Christian Albanesi, “Consolidation,
Joinder, Cross-Claims, Multiparty and Multicontract Arbitrations: Recent ICC
Experience,” in Dossier VII - Multiparty Arbitration (Paris: ICC Publishing
S.A., 2010), 164, stating that in the ICC there were 24 cases involving
consolidation alone between 1 January 2007 and 31 December 2009.
Yves Derains, “The Limits of the Arbitration Agreement in Contracts
Involving More Than Two Parties,” in Complex Arbitrations - Special
Supplement of the ICC Bulletin (Paris: International Chamber of Commerce,
2003), 31; Joachim G. Frick, Arbitration in Complex International Contracts
(Kluwer Law International, 2001), 229; Daniel Girsberger, “Pitfalls in Swiss
Arbitration Agreements,” in New Developments in International Commercial
Arbitration 2008, ed. Christoph Müller and Antonio Rigozzi (Zurich:
Schulthess, 2008), 101; Ricardo Ugarte and Thomas Bevilacqua, “Ensuring
Party Equality in the Process of Designating Arbitrators in Multiparty
Arbitration: An Update on the Governing Provisions,” Journal of
International Arbitration 27, no. 1 (2010): 9; Richard Bamforth and Katerina
Maidment, “‘All join in’ or Not? How Well Does International Arbitration
Cater for Disputes Involving Multiple Parties or Related Claims?,” ASA
4
disputes often involve more than just two parties (one claimant
and one respondent) and many more than one or two issues.8
Multi-party
situations
were
and
still
are
difficult
to
accommodate in arbitration.9 Consolidation or joinder10 in
international arbitration are far less common and much more
difficult to achieve than in national court litigation.11 In order to
achieve accommodation, arbitration needed to be adapted. In the
search for appropriate tools, arbitration looked to its big brother
litigation. Consolidation was effective as a concept in litigation
to cope with the altered life in the courtroom, so its application
was also suggested in the context of arbitration. Consolidation
in arbitration is comparable to consolidation in civil litigation to
an extent,12 but consolidation and arbitration are not necessarily
compatible.13
The difference between arbitration
concept of consolidation hard to
arbitration is always based on party
founded on the universal claim of
8
9
10
11
12
13
14
and litigation makes the
transplant. At its core,
agreement.14 Litigation is
the state to all (judicial)
Bulletin 27, no. 1 (2009): 8; Burkhard Hess, “Cross-border Collective
Litigation and the Regulation Brussels I,” Praxis des Internationalen Privatund Verfahrensrechts 2010, no. 2 (2010): 116.
Carrie J. Menkel-Meadow, Lela Porter Love, and Andrea Kupfer Schneider,
Dispute Resolution: Beyond the Adversary Model (Aspen Publishers, 2004),
679; Patricia Izquierdo Piña, “Consolidation of Arbitral Proceedings”,
undated, 1, www.camex.com.mx/nl35-cont.pdf.
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 2801.
Consolidation is sometimes referred to as joinder as well. In this context
joinder refers to joining parties or claims to an existing case, whereas
consolidation refers to joining two existing cases.
Izquierdo Piña, “Consolidation of Arbitral Proceedings”; Voser, “Multi-party
Disputes and Joinder of Third Parties,” 350 et seq. Unlike in state court
litigation, it is not possible to impose proceedings on the parties and third
parties unilaterally.
Philip Leboulanger, “Multi-Contract Arbitration,” Journal of International
Arbitration 13, no. 4 (1996): 77.
Antonio Offenhausen, Mehrparteienschiedsgerichtsverfahren bei der
Beteiligung einer Gesellschaft Bürgerlichen Rechts (Frankfurt am Main:
Lang, 2007), 78.
Joseph Lookofsky and Ketilbjørn Hertz, Transnational Litigation and
Commercial Arbitration an Analysis of American, European and International
Law, 2nd ed., 2nd printing ed. (Copenhagen: DJØF, 2004), 770.
5
authority in its territory.15 Party agreement gives legitimacy to
arbitration and limits it at the same time. Where party
agreement ends, governmental authority takes over seamlessly.
While consolidation can be highly useful and efficient, inherent
differences between litigation and arbitration pose certain
challenges, specifically concerning jurisdiction and the choice
of arbitrators.16 These differences must be taken into account
when applying the concept of consolidation in arbitration.
How these challenges ought to be addressed, or whether
consolidation should be part of arbitral proceedings at all, is not
clear.17 A majority of institutions have not included
consolidation in their rules.18 Even though arbitration may show
a tendency toward harmonization,19 institutions seem reluctant
to include consolidation.20 Among these rules, details
concerning procedure and application of consolidation vary.21
This variation may be due to the need of arbitral institutions to
distinguish themselves in order to attract customers.22 This
author believes that different approaches are chosen in order to
15
16
17
18
19
20
21
22
Michael Schweitzer, Staatsrecht III: Staatsrecht, Völkerrecht, Europarecht,
10th ed. (Heidelberg: C.F. Müller, 2010), note 574.
Born, International Commercial Arbitration Volume II, 2069.
This will be address infra, in chapter 13.
See infra chapter 3.
Bernhard Berger and Franz Kellerhals, Internationale und interne
Schiedsgerichtsbarkeit in der Schweiz (Bern: Stämpfli, 2006), note 14 This
trend may be attributed to the influence of the UNCITRAL Model Law on
Arbitration and the UNCITRAL Model Arbitration Rules, the issue of
consolidation in arbitration.
Andrea Meier, Einbezug Dritter vor internationalen Schiedsgerichten
(Schulthess Juristische Medien, 2007), 225; Leboulanger, “Multi-Contract
Arbitration,” 64.
Maybe because the problems associated with the transfer of a concept from
litigation have not yet been resolved satisfactorily by any option offered so far
and experimentation will continue for some time, maybe because institutions
must be able to distinguish themselves in comparison to competitors.
James H. Carter, “AAA & International ADR: Balancing Traditional Methods
and Innovation,” in Handbook on International Arbitration and ADR, ed.
Thomas E. Carbonneau (Huntington, N.Y: JurisNet, 2006), 33 Arbitration
associations need to distinguish themselves to attract business; Russell
Thirgood, “International Arbitration: The Justice Business,” Journal of
International Arbitration 21, no. 4 (2004): 341 - 354.
6
accommodate different views of the balance between efficiency
and procedural justice. Efficiency cannot outweigh a lack of
procedural justice in enforcement proceedings.23
1.3
Limitations
The scope of this analysis is limited to in-depth examination of
two consolidation provisions in institutional rules and three
jurisdictions in which the enforceability of the rules will be
tested. The choice of institutional rules, notably the ICC and
Swiss Rules, and jurisdictions, notably Switzerland, Germany
and the USA, is based on criteria of diversity and practical use
for the arbitration community.
During
the
publication
process,
the
institutional
rules
specifically treaded in this analysis have undergone revision.
The ICC adopted a revision, which enters into force after the
publication of this work. The launch of the new rules is in
September 2011. The new version is the result of two years of
active work within the ICC Commission on Arbitration, with
620 dispute resolution specialists from 90 countries.
Commission members and representatives of the Secretariat of
the ICC Court have drawn on their own experience and
feedback from a task force to draft the new Rules. The task
force was composed of over 175 members from 41 different
countries. To accommodate for the changes, this analysis will
present the new rule on consolidation along with the one in
effect to date.
23
Jens Kleinschmidt, “Die Widerklage gegen einen Dritten im
Schiedsverfahren,” Neue Zeitschrift für Schiedsverfahren 4, no. 3 (2006): 146;
Julian D. M. Lew, Loukas A. Mistelis, and Stefan Kröll, Comparative
International Commercial Arbitration (The Hague: Kluwer Law International,
2003), notes 16-96.
7
The Swiss Chambers are currently debating a revision. No final
version is approved to date. Nevertheless, with the friendly
assistance of the task force, this author will introduce the
proposed changes alongside the current version.
Further limitations are defined infra.
1.3.1 Institutional Rules
This analysis treats institutional24 arbitration. Consolidation of
ad hoc arbitration does not have the same implications as
institutional consolidation, so that the UNCITRAL Model Rules
are discussed only briefly. Of the surveyed rules on
international commercial arbitration, few institutions contain
consolidation provisions. Of these, one institution, the VIAC,
repeats the principle that consensual consolidation is
permissible.25 The SCC Rules, which are also not discussed in
detail, provide for a broader time spectrum, but the same
approach to multiple parties as the ICC. It falls in its scope
between the ICC and the Swiss Rules.26 The CEPANI Rules,27
which are not discussed in more detail, contain a consolidation
clause that falls in its scope of application and guidance
provided for consolidation between the remaining two and were
therefore similarly disregarded for a detailed analysis. The
remaining two, the ICC and Swiss Rules, are chosen for an indepth analysis. Treating all institutions does not add value to
this analysis and surpasses its scope.28
24
25
26
27
28
Institutional arbitration implies the existence of a permanent organization that
administers and not only promotes arbitration. W. Laurence Craig, William
W. Park, and Jan Paulsson, International Chamber of Commerce Arbitration,
3rd ed. (Dobbs Ferry, NY: Oceana Publications, 2000), 40.
See infra subchapter 3.6.
See infra subchapter 3.7.
See infra subchapter 3.8.
This author encourages readers to study these rules and analyze them, as this
would close another gap.
8
The ICC Rules remain on the conservative end of the spectrum
and are commonly used, with more than a decade of case law
since the consolidation rule’s inception to draw upon. The Swiss
Rules entered into force on 1 January 2004. They contain one of
the more recent attempts to include a provision on
consolidation. While not the most recent attempt providing for
consolidation in the context of international arbitral institutions,
they are still the broadest in existence and may thus serve as
providing an outer edge for this analysis.29
1.3.2 Jurisdictions
The chosen jurisdictions, notably Switzerland, Germany and the
USA, represent three different approaches to international
commercial arbitration.
Switzerland was chosen as a frequent seat country. It did not
fashion the international arbitration law after the UNCITRAL
Model Law.30 Switzerland will serve as fictitious seat country
and its lex fori as applicable procedural law.31
Germany was chosen as an enforcement country for the
fictitious consolidated Swiss award.32 It represents countries
29
30
31
32
Richard Bamforth and Katerina Maidment, “‘All join in’ or Not? How Well
Does International Arbitration Cater for Disputes Involving Multiple Parties
or Related Claims?,” ASA Bulletin 27, no. 1 (2009): 8; Wolfgang Peter,
“Some Observations on the Swiss Rules of International Arbitration,” in The
Swiss Rules of International Arbitration, ed. Gabrielle Kaufmann-Kohler and
Blaise Stucki, vol. 22, ASA Special Series (presented at the ASA Swiss
Arbitration Association conference of January 23, 2004 in Zürich, Basel:
Swiss Chambers’ Court of Arbitration and Mediation, 2004), 1.
Peter, “Some Observations on the Swiss Rules of International Arbitration,” 1.
This author is aware that the fact of being the seat country does not
necessarily indicate, that the lex fori is also the applicable law to the
procedure of the arbitration. However, it is often implied that the seat will
provide the applicable procedural law. In the absence of a concrete contract,
this choice is reasonable. For more detail see infra subchapter 5.1.
The seat of the arbitration defines its nationality. Patricia Nacimiento,
“Konfliktlösung nach allgemeinen Schiedsordnungen, insbesondere ICC,
AAA, und DIS,” Zeitschrift für Urheber- und Medienrecht 11 (2004): 788.
9
that have enacted a law on international commercial arbitration
based on the UNCITRAL Model law.33 As UNCITRAL Model
law jurisdiction, the comments concerning Germany may thus
be useful in many jurisdictions that also enacted the
UNCITRAL Model law.
The U.S. will serve as second enforcement country, to provide a
broader analysis. It was chosen as representative for the
Common Law approach to international commercial arbitration.
In addition, U.S. parties are frequent, so that enforcement will
frequently be attempted in the USA. Further, it has long
tradition of international commercial arbitration.
All countries are parties to the NYC, so that it applies between
them.
1.3.3 Independent Cases
This analysis treats only consolidation. This means this analysis
treats the unification of two independent cases into one single
case. The assumption of the reader must always be that (at least)
two procedurally independent cases have been filed. The
concept analyzed here is much narrower than what is usually
treated under the heading of complex arbitration. Complex
arbitration encompasses consolidation, but it also includes
addition of claims and parties where only one case exists,34
multi-party one case arbitration and others.35
33
34
35
Jean-François Poudret and Sébastien Besson, Comparative Law of
International Arbitration, 2nd ed. (London: Thomson/Sweet & Maxwell,
2007), note 42 et seq.
The distinction being that the latter does not require a second case to be filed.
For more information on alternative procedural tools see infra subchapter
14.4.
10
1.3.4 Forcible Consolidation
Consolidation as discussed herein only refers to those
proceedings to which at least one participant objects at the time
of consolidation. This means a consolidation which is not
achieved by the consent of all parties to the unification of two or
more specific cases at the time of the disputes. There is no
doubt that in arbitration the parties may consolidate their cases
if they agree to do so after the dispute has arisen.36
This analysis further does not treat cases of consolidation, in
which parties unquestionably did not agree at any time to
consolidate. Consolidated arbitration without express or implied
consent of parties is impermissible.37
Whether agreement can be made at a time prior to the dispute
arising is discussed infra in this analysis in chapter 5. This
analysis only treats forcible consolidation.
1.3.5 Accomplished Consolidation
This analysis mainly treats cases in which consolidation is
granted. While mention is made of certain issues relating to
36
37
Brian King, “Consistency of Awards in Cases of Parallel Proceedings
Concerning Related Subject Matters,” in Towards a Uniform International
Arbitration Law? YAP Seminars, Paris - March 28, 2003, Geneva - March 26,
2004, ed. Emmanuel Gaillard et al. (Huntington, NY: Juris Publishing, 2005),
293 and 316; Wolfgang Hahnkamper, “Der Ablauf von ad-hoc
Schiedsverfahren - Teil I: Die ersten Schritte im Verfahren,” in
Praxishandbuch Schiedsgerichtsbarkeit, ed. Hellwig Torggler (Baden-Baden:
Nomos, 2007), note 75; Andreas Reiner and Werner Jahnel, “ICCSchiedsgerichtsordnung,”
in
Institutionelle
Schiedsgerichtsbarkeit
Kommentar, ed. Rolf A. Schütze, 2nd ed. (Cologne: Carl Heymanns Verlag,
2011), note 20; Michael Pryles and Jeffrey Waincymer, “Multiple Claims in
Arbitration Between the Same Parties,” in 50 Years of the New York
Convention, ICCA International Arbitration Conference (Alphen aan den
Rijn: Kluwer Law International, 2009), 438.
Craig, Park, and Paulsson, International Chamber of Commerce Arbitration,
181.
11
consolidation being denied,38 the vast majority of issues lie with
consolidated cases.
1.3.6 No Intertemporal Issues
This analysis does not treat potential intertemporal issues, such
as those created by dynamic references concerning provisions
not previously contained in the rules. This could be an issue in
the Swiss Rules, as previously only the Zurich Rules39
contained provisions on consolidation.
1.4
Outlook
Initially, this analysis will focus on the general purposes of
consolidation, only outlining their content. In this fashion the
esteemed reader can retain the background for consolidation
while being immersed in this analysis. Following this brief
outline, this author will give an overview of existing
institutional rules with regard to consolidation in chapter 3,
before focusing on the ICC and Swiss Rules in detail in chapter
4.
The detailed examination will highlight the implications of
consolidation and how, if at all, these implications are addressed
by these institutions. This examination will show that many
areas are not addressed by the rules. This author will therefore
move on to examine the institutional rules in light of the effect
these rules will have in an enforcement proceeding40 in the three
countries selected.
38
39
40
See infra section 8.2.2, referring to SFCD of 11 May 1992 ASA Bulletin 390
(Swiss Federal Court 1992).
Available
at
http://www.jurisint.org/doc/html/reg/en/2000/2000jiregen32.html.
Enforcement is referred to as both domestic enforcement or its counterpart
annulment and international enforcement in recognition and enforcement
proceedings.
12
Validity of the consent will form the starting point of the
examination concerning enforceability followed by a detailed
look into the appointment procedure and the adjustment of the
arbitral procedure of the consolidated case. Specifically, this
analysis will treat whether and, if yes, how domestic laws
require adjustment of the procedure to retain enforceability.
Closing the bracket, this author will address whether the
purposes of consolidation are in fact fulfilled by the current
rules in light of the finding of this analysis. In conclusion, this
author will give a summary and suggest solutions for the
problems identified.
In examining the different rules on consolidation in the context
of international commercial arbitration, this analysis intends to
give both guidelines to practitioners on how to approach the
topic and influence the future revisions of institutional rules
with a view toward maintaining high levels of international
acceptance of arbitral awards.
13
2
Purpose of Consolidation
The purposes of consolidation will be addressed only briefly to
give the reader a background. An in-depth analysis will follow
infra in chapter 13.
2.1
Layman’s View
Expressed at the most basic level, dispute resolution employs a
variety of procedural tools to decide claims collectively, rather
than in parallel or successive two-party disputes.41 Claims
arising out of the same transaction or occurrence appear from a
layman’s perspective as a natural whole artificially torn asunder
by two-party dispute resolution. To maintain the connection
between the claims and parties, procedural tools are used to
alleviate the seemingly fragmented approach, allowing separate
(two-party one-claim) cases to be treated as one.42
This holistic approach of combining all connected (two-party
one-claim) cases into one case is based on the assumption that
each aspect of an event affects another. Therefore, the
procedurally separate (two-party one-claim) cases affect each
other because they all are connected. Treating one (two-party
one-claim) case at a time does not take into account the
remaining (two-party one-claim) cases. Influences exerted by
the other (two-party one-claim) cases will not be perceptible,
potentially resulting in the adjudicators missing crucial details
or the bigger picture. While lacking the big picture may cause
unjust results, the alternative of reconsidering all aspects of the
41
42
The reasons for this will be address in this chapter infra.
One of the tools employed to hear all parties and issues at the same time in
front of a single adjudicator is consolidation. Other tools include joinder,
amendment of claims, counterclaim, set off, interpleader, impleader and more.
While some use the terms interchangeably, each of these tools is employed in
slightly different circumstances. For more information regarding the
applicability of the individual tools, see infra subchapter 14.
14
whole for each (two-party one- claim) case individually - i.e.,
disputing the same facts multiple times - is wasteful. Hearing all
(two-party one-claim) cases at the same time appears to be an
adequate solution.
2.2
Definition
There exist various interpretations of the meaning of the
procedural mechanism consolidation, as it is known in
international commercial arbitration.43 This analysis will follow
GILIÉRON/PITTET who define consolidation as the act or process
of uniting into one single case several independent proceedings
which are pending or initiated.44 It is the only definition which
encompasses all situations possible under the ICC and Swiss
Rules.
Having defined consolidation, this analysis will now move to
giving a brief overview of its purposes. Consolidation is not an
end in itself. It serves avoidance of contradictory judgments,
efficiency, and fairness.45 These will be addressed in turn.
43
44
45
Michael F. Hoellering, “Consolidated Arbitration: Will it Result in Increased
Efficiency or an Affront to Party Autonomy?,” Dispute Resolution Journal 52
(1997): 41 - 59; Thomas J. Stipanowich, “Arbitration: The ‘New Litigation’,”
University of Illinois Law Review 2010 (2010): 505 et seq.; S.I. Strong, “The
Sound of Silence: Are U.S. Arbitrators Creating Internationally Enforceable
Awards When Ordering Class Arbitration in Cases of Contractual Silence or
Ambiguity?,” Michigan Journal of International Law 30 (2009): 1039;
Greenberg, Feris, and Albanesi, “Consolidation, Joinder, Cross-Claims,
Multiparty and Multicontract Arbitrations: Recent ICC Experience,” 163;
Bernard Hanotiau, Complex Arbitrations Multiparty, Multicontract, MultiIssue and Class Actions (The Hague: Kluwer Law International, 2005), 179;
Izquierdo Piña, “Consolidation of Arbitral Proceedings,” 4; Stavros L
Brekoulakis, Third Parties in International Commercial Arbitration (Oxford
University Press, USA, 2010), note 3.53.
Gilliéron and Pittet, “Article 4 - Consolidation of Arbitral Proceedings
(Joinder), Participation of Third Parties,” 3.
Ibid., 2; John W Cooley, Arbitration Advocacy, 2nd ed., NITA Practical
Guide Series (Notre Dame, IN: National Institute for Trial Advocacy, 2003),
49; Wolfgang Hahnkamper, “Der Ablauf von ad-hoc Schiedsverfahren - Teil
I: Die ersten Schritte im Verfahren,” 74; Bone, Robert G, Civil Procedure:
The Economics of Civil Procedure (New York, NY: Foundation Press, 2003),
146“A rule that reaps large benefits in error cost reduction might still be
15
2.3
Avoidance of Contradictory Judgments
Like other procedural tools designed to allow adjudication of
multi-party, multi-claim cases, consolidation aims at avoiding
contradictory judgments.46 Consistent judgments increase faith
in an adjudicative system. In western societies the rule of law
reigns supreme. Results appear more just if no contradictions
occur. Adjudication appears less arbitrary and more predictable.
KING rightly points out that arbitration outcomes are far less
predictable than national judicial outcomes as there are no
superior courts to correct aberrational results.47 Arbitration
decisions have no true precedential effect.48 Any concept
allowing for the appearance of predictability, i.e., consistency,
therefore serves the goal of increased faith in the adjudicative
system. KING, speaking on parallel arbitral proceedings
concerning related subject matters, excellently demonstrates this
general feeling that contradictory results offend the sensibilities
and reduce faith in the system. He points out that it is
consequently beneficial to avoid them.
46
47
48
undesirable, if its implementation adds substantially to process costs.”;
Bernard Hanotiau, “Complex Multicontract-Multiparty Arbitration,”
Arbitration International 14 (1998): 403; Robert H Klonoff, Class Actions
and Other Multi-Party Litigation in a Nutshell, 3rd ed. (St. Paul, MN:
Thomson/West, 2007), 408; Born, International Commercial Arbitration
Volume II, 2069 et seq.; Peter Hartmann, Zivilprozessordnung, 68th ed. (Beck
Juristischer Verlag, 2009), notes 147-2; Hans-Joachim Musielak, ed.,
Kommentar zur Zivilprozessordnung mit Gerichtsverfassungsgesetz, 7th ed.
(Munich: Vahlen, 2009), notes 147-1; GFCD 68, 81 (German Federal Court
1977).
Frick, International Arbitration Law Library, 230; Leboulanger, “MultiContract Arbitration,” 54, 62 et seq.; Julie C. Chiu, “Consolidation of Arbitral
Proceedings and International Commercial Arbitration,” Journal of
International Arbitration 7 (1990): 55 et seq.; Hanotiau, Complex Arbitrations
Multiparty, Multicontract, Multi-Issue and Class Actions, 403; Cooley,
Arbitration Advocacy, 49; Voser, “Multi-party Disputes and Joinder of Third
Parties,” 350; Bamforth and Maidment, “‘All join in’ or Not? How Well Does
International Arbitration Cater for Disputes Involving Multiple Parties or
Related Claims?,” 4.
King, “Towards a Uniform International Arbitration Law?,” 294.
Rolf A. Schütze, “The Precedential Effect of Arbitration Decisions,” Journal
of International Arbitration 11, no. 3 (1994): 69 This author is aware of the
fierce discussion on precedential effects of arbitral decisions. This author
therefore refers only to the true original effect given to precedent in Common
Law jurisdictions.
16
2.4
Efficiency
Consolidation also aims at efficiency.49 Efficiency has two
prongs, namely money and time.
In both litigation and arbitration cost digression exists. Several
cases combined into one will result in less total cost (paid to the
court or institution).50 Disputing the same or similar facts
repeatedly will consume resources (i.e., time and money)
repeatedly. Avoidance of waste and cultivation of arbitral time
economy appears similarly but not equally in the context of
judicial economy in national courts.
National judicial systems are based on the finite resources of a
court and are financed largely by the community as a whole.
Nevertheless, in arbitration, parties simply waste their own
money, which is permissible from a societal point of view.
When at least one party wishes to economize, it is prudent for
an arbitral institution to provide a vehicle.
2.5
Fairness, Truth and Justice
Arbitration proceedings are consolidated because the interest of
justice so requires.51
49
50
51
Chiu, “Consolidation of Arbitral Proceedings and International Commercial
Arbitration,” 55; critical Strong, “The Sound of Silence: Are U.S. Arbitrators
Creating Internationally Enforceable Awards When Ordering Class
Arbitration in Cases of Contractual Silence or Ambiguity?,” 1039; Born,
International Commercial Arbitration Volume II, 2069 et seq.; Voser, “Multiparty Disputes and Joinder of Third Parties,” 350; Leboulanger, “MultiContract Arbitration,” 54.
This will be discussed in more detail infra in section 14.2.2 on costs.
Dominique T. Hascher, “Consolidation of Arbitration by American Courts:
Fostering or Hampering International Commercial Arbitration?,” Journal of
International Arbitration 1, no. 2 (1984): 133; Leboulanger, “Multi-Contract
Arbitration,” 63.
17
“In arbitration, fairness requires some measure of
efficiency, since justice too long delayed becomes justice
denied.”52
Consolidation is also intended to keep things fair on a
procedural and substantive level.53 It limits one party’s ability to
continue a dispute in several different cases, wearing the less
affluent party down with additional costs. It limits the potential
to blame a third party not present in the proceeding. This may
create odd results, which would be technically not
contradictory, but nonetheless unfair.54 In addition, having all
facts available will promote the finding of the truth of the
underlying facts.
2.6
Outlook
Arbitration is based on a two-party approach.55 In disputes with
more than two parties or more than one claim, the ordinary
procedural approach may seem inexpedient. Consequently, the
52
53
54
55
Henri Alvarez, “Autonomy of International Arbitration Process,” in Pervasive
Problems in International Arbitration, ed. Loukas A. Mistelis and Julian D.
M. Lew (Alphen aan den Rijn: Kluwer Law International, 2006), 144 Note 710.
Leboulanger, “Multi-Contract Arbitration,” 54.
For example: An employee of Elma Inc. has bought caviar from both Fido Co.
and Guido Ltd. He mixes the caviar in a bowl and eats it. Then employee of
Elma Inc. has food poisoning as a result of eating the caviar. In a case against
Fido Co. the panel finds Fido Co. is not liable because employee of Elma Inc.
cannot prove it was Fido Co.’s caviar. In a case against Guido Ltd. the panel
finds Guido Ltd. not liable for the same reason. Doubtless someone’s caviar
was bad. The results may not be possible when seen together, but they are not
contradictory. An example for a contradictory result would be the following:
Same scenario as before. Employee of Elma Inc. eats the caviar and is sick for
two days. He also ruins his silk shirt while throwing up. In the first case,
employee of Elma Inc. sues Fido Co. for the shirt and Fido Co. is found liable
because the caviar was spoilt. In a second case, employee of Elma Inc. sues
Fido Co. for lost wages and Fido Co. is found not liable because the caviar
was not spoilt. At what point of congruence judgments become contradictory
is a matter of some discussion in each jurisdiction and will not be discussed in
detail here.
Poudret and Besson, Comparative Law of International Arbitration, note 237.
18
concept of arbitration has evolved into a complex system,
including both non-signatories and groups of claimants or
respondents, who wish to resolve their disputes in one single
arbitration.56
There are a number of situations in which cases are begun
separately despite the availability of other procedural tools57
allowing for claims and parties to be added to the traditional
two-party one-claim case.58 Consolidation is distinguishable
from these other procedural tools because the unification takes
place after two separate cases have been filed.59
Usually consolidation is not a necessity.60 Without
consolidation both cases would simply be continued as
independent and, more importantly, self-contained matters.
Lack of consolidation does not prevent the dispute from coming
to a conclusion. Each individual case is complete and capable of
independent adjudication. The various concepts of necessary
parties, without whom a case cannot be decided due to
substantive or procedural law and must therefore be dismissed,
56
57
58
59
60
Michael P. Daly, “Come One, Come All: the New and Developing World of
Non-signatory Arbitration and Class Arbitration,” University of Miami Law
Review 62 (2007): 115.
Such as a accumulation of claims, addition of counterclaims and others.
Roger S. Haydock, “Mediation and Arbitration for Now and the Future,” in
The Arbitration Process, ed. Susan Meek (The Hague: Kluwer Law
International, 2002), 8.
This author does not use the term pending, as she is aware of at least one case
under the Swiss Rules, in which the second case had not yet been formally
pending and the provision on consolidation was applied. This case will be
discussed further infra section 14.2.1.
For example: Rolf A. Schütze, Schiedsgericht und Schiedsverfahren, 4th ed.
(Beck Juristischer Verlag, 2007), note 342; Thomas Rüede and Reimer
Hadenfeldt, Schweizerisches Schiedsgerichtsrecht nach Konkordat und IPRG,
2nd ed. (Zurich: Schulthess, 1993), 255. When rights or obligations are
indivisible and the other holder of the right or obligation is not part of the
proceeding and furthermore cannot be added by consolidation or other means,
the case will have to be dismissed. Under such circumstances, consolidation
(or any other tool) would be necessary for the case to continue. This situation
will be addressed infra in chapter 5.5.
19
address the question of joinder, not consolidation.61 Claims
contained in a previously filed case cannot be added to another
case by the use of joinder or other procedural tools, due to the
prohibition of lis pendens.62
Consolidation has not been accepted universally by either
national courts adjudicating arbitration related matters or major
arbitral institutions.63 It remains to be seen whether
consolidation provisions truly add value to the arbitral system
and the skepticism of courts and institutions is unfounded.
Skepticism is unfounded if consolidation serves it purposes and
balances them with the core values of international commercial
arbitration: party autonomy, secrecy, and fairness.64
This chapter briefly outlined the underlying purposes of
consolidation: avoidance of contradictory results, increased
efficiency and fairness. Whether these purposes are achieved by
the ICC or the Swiss Rules will be discussed infra in chapter 13.
Keeping both the purposes of consolidation and the sketch of its
alternatives in mind, the esteemed reader will now move on to a
survey of institutional rules on consolidation.
61
62
63
64
Even though it may be possible to use consolidation to affect joinder, this is
not the true nature of consolidation. Ordinarily a joinder would have to be
performed and the second case dismissed for lis pendens reasons.
See generally Norah Gallagher, “Parallel Proceedings, Res Judicata and Lis
Pendens: Problems and Possible Solutions,” in Pervasive Problems in
International Arbitration, ed. Loukas A. Mistelis and Julian D. M. Lew
(Alphen aan den Rijn: Kluwer Law International, 2006), 329 - 356; Campbell
McLachlan, Lis Pendens in International Litigation (Leiden Boston: Martinus
Nijhoff Publishers / Brill Academic, 2009).
S.I. Strong, “Intervention and Joinder as of Right in International Arbitration:
An Infringement of Individual Contract Rights or a Proper Equitable
Measure?,” Vanderbilt Journal of Transnational Law 31 (1998): 938.
Edward J. Brunet et al., Arbitration Law in America: A Critical Assessment
(New York: Cambridge University Press, 2006), 663 et seqq.; Girsberger and
Voser, International Arbitration in Switzerland, note 662; Julian D. M. Lew,
“Achieving the Dream: Autonomous Arbitration?,” in Arbitration Insights
Twenty Years of the Annual Lecture of the School of Interational Arbitration,
Sponsored by Freshfields Bruckhaus Deringer, ed. Julian D. M. Lew and
Loukas A. Mistelis (Alphen aan den Rijn: Kluwer Law International, 2007),
457 Note 20-10.
20
21
3
Consolidation
Procedures
in
Institutional Arbitration
This chapter is intended to give an overview of institutional
arbitration rules with regard to consolidation. It is not intended
to be all-inclusive, but shall provide the esteemed reader with a
sense of the prevailing views among arbitration institutions.
3.1
Introduction
Having discussed the purposes of consolidation, this analysis
will begin with a survey of institutional rules in search for those
containing consolidation clauses. There are numerous
institutions for international arbitration.65 Only a few offer
solutions for consolidation.66
This author would go beyond the scope of this thesis and not
add much value to include all institutions currently in existence.
More space and detail is dedicated to the AAA International
Rules; the LCIA Rules; the ICC Rules; the Swiss Rules; the
VIAC Rules and the SCC Rules.67 Other institutional rules will
be mentioned in passing where appropriate.68
65
66
67
Marc Blessing, “Comparison of the Swiss Rules with the UNCITRAL Rules
and Others,” in The Swiss Rules of International Arbitration, ed. Gabrielle
Kaufmann-Kohler and Blaise Stucki, vol. 22, ASA Special Series (presented
at the ASA Swiss Rules of International Arbitration Conference of January
23, 2004 in Zürich, Basel, 2004), 1.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 360; Nayla
Comair-Obeid, “Consolidation and Joinder in Arbitration - The Arab Middle
Eastern Approach,” in 50 Years of the New York Convention, ed. Albert Jan
van den Berg, ICCA International Arbitration Conference (Alphen aan den
Rijn: Kluwer Law International, 2009), 503; Pryles and Waincymer,
“Multiple Claims in Arbitration Between the Same Parties,” 466.
Girsberger and Voser, International Arbitration in Switzerland, note 85; Jan
Paulsson, Nigel Rawding, and Lucy F. Reed, The Freshfields Guide to
Arbitration and ADR: Clauses in National Contracts, 2nd ed. (The Hague:
Kluwer Law International, 1999), 52 et seqq.; Gary Born, International
Arbitration and Forum Selection Agreements: Drafting Forcing, 2nd ed.
(Netherlands: Kluwer Law International, 2006), 45 et seq.; Klaus Lionnet and
22
This survey will, however, not begin with an institutional set of
rules, but with the UNCITRAL Rules.69
3.2
UNCITRAL
The UNCITRAL Rules70 are not institutional rules.71 Inclusion
of these ad hoc rules in this analysis of institutional rules is
based on practical considerations. They form an important basis
for the understanding of current arbitral culture. It can safely be
said that once a rule has found its way into the UNCITRAL
Rules, chances are high that the application of such a rule forms
an internationally accepted standard generally unlikely to result
in annulment or refusal of recognition and enforcement.72 The
UNCITRAL Rules of 1976 represent the first attempt to put
down a set of international commercial arbitral rules
accommodating and consolidating the different cultural
approaches to arbitration all around the world. They were, from
68
69
70
71
72
Annette Lionnet, Handbuch der internationalen und nationalen
Schiedsgerichtsbarkeit:
Systematische
Darstellung
der
privaten
Handelsschiedsgerichtsbarkeit für die Praxis, 3rd ed. (Stuttgart: Boorberg,
2005), note 486 et seqq. The foregoing are only a few among many.
No specific significance is attached to the sequence of institutions discussed.
Even though these are institutional rules for international commercial
arbitration. The reasoning will be explained further in 3.2.
See for current UNCITRAL Arbitration Rules Version 2010 see See
http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration.html.
See www.uncitral.org. These rules should not be confused with the
UNCITRAL Model Law on International Commercial Arbitration, which
serve as a model for governmental law givers to fashion arbitration laws for
national jurisdictions.
Stefan M. Kröll, “Introduction to §§ 1060, 1061,” in Arbitration in Germany:
The Model Law in Practice, ed. Karl-Heinz Böckstiegel, Stefan M. Kröll, and
Patricia Nacimiento (Kluwer Law International, 2008), note 4“In most legal
systems, the enforcement rights is a two-step process, involving two separate
and different sets if proceedings. The first stage is concerned with making a
binding determination of whether an alleged right exists. The second stage,
the enforcement proceedings in the proper sense, serve to execute the findings
of the first stage against a party or its property, where the judgmnet debtor has
not voluntarily complied. Proceedings if the recognition and enforcement of
awards pursuant to the NYC 1958 or to §§ 1060, 1061 ZPO, belong to the first
stage.”
23
the outset, designed for ad hoc arbitrations.73 Consequently,
institutional powers are not provided for in the UNCITRAL
Rules.74
The presence of a consolidation provision would therefore
indicate some international acceptance of consolidation in
arbitration. The UNCITRAL Rules do not contain a provision
on consolidation. Addition of a consolidation provision in the
revised 2010 version was discussed and rejected.75 At its 46th
session held in New York on 5-9 February 2007 the
UNCITRAL working group on arbitration and conciliation
expressed conflicting views on the desirability of consolidation.
The report states:
“Consolidation of cases before arbitral tribunals
116. The Working Group noted that, in some cases,
under the Rules, consolidation of cases was only
possible where the parties specifically so agreed and
proceeded to consider whether a provision on that
matter should be added to the Rules, as proposed under
document A/CN.9/WG.II/WP.145/Add.1.
117. Some support was expressed for inclusion of such
a provision. It was said that such a provision could be
useful in situations where several distinct disputes
arose between the same parties under separate
contracts (e.g., related contracts or a chain of
contracts) containing separate arbitration clauses or to
73
74
75
Lionnet and Lionnet, Handbuch der internationalen und nationalen
Schiedsgerichtsbarkeit:
Systematische
Darstellung
der
privaten
Handelsschiedsgerichtsbarkeit für die Praxis, 534.
The UNCITRAL Rules were adopted by the UN General Assembly on
December 15, 1976. Poudret and Besson, Comparative Law of International
Arbitration, note 98; Peter, “Some Observations on the Swiss Rules of
International Arbitration,” 2.
Daniel Wehrli, B. Gino Koenig, and Claudius Triebold, “Management of the
Proceedings and Quality Control under the Swiss Rules,” in The Swiss Rules
of International Arbitration, ed. Gabrielle Kaufmann-Kohler and Blaise
Stucki, vol. 22, ASA Special Series (presented at the ASA Swiss Arbitration
Association Conference, Basel, 2004), 87.
24
avoid a situation where a party initiated a separate
arbitration in respect of a distinct claim under the same
contract in order to gain a tactical advantage.
Consolidation in such situations might provide an
efficient resolution of the disputes between the parties,
and also might reduce the possibility of inconsistent
awards in parallel arbitrations.
118. (. . .)
119. However, doubts were expressed as to the
workability of such a provision particularly when the
Rules applied in non-administered cases. As well, it was
said that either the provision was intended to deal with
new claims under the same contract, and that situation
would be better dealt with under provisions on
amendment of the statement of claim, or that provision
was intended to cover several distinct disputes arising
between the same parties under separate contracts
containing separate arbitration clauses. In that latter
situation, the application of the provision might subject
parties to arbitration proceedings under terms, which
differed from those, agreed in their arbitration
agreement. It was said that that situation raised
complex issues, and might result in unfair solutions.
A/CN.9/619
120. After discussion, the Working Group agreed that it
might not be necessary to provide for consolidation (. .
.).“76
Lack of inclusion of a consolidation provision in these rules
does not by itself mean that consolidation for international
commercial arbitration is unacceptable. WEHRLI suggests that
its lack of insertion into the rules may be due to their ad hoc
76
See:
http://www.uncitral.org/uncitral/en/commission/working_groups/2Arbitration.
html and follow link of 46th session.
25
nature.77 According to BINDER, consolidation was abandoned
because it raised too many complex issues, the working group
preferring to deal with possibilities to streamline connected
cases by reference to set-off.78 WIRTH states that the
UNCITRAL working group did not include a consolidation
provision from fear of risk of unfairness and other
complications.79
This author believes that the discussions in the working group
show a certain reluctance to accept consolidation as a viable
concept for international commercial arbitration. This
reluctance echoed the reluctance of many institutional
arbitration organizations.80 It may in part be based on the
difficulty of balancing the purposes of consolidation with the
realities and values of arbitration, as will be outlined in this
analysis in chapter 13.
3.3
American Arbitration Association
The American Arbitration Association offers both domestic and
international arbitration. It is the arbitral institution with the
least invasive international arbitration rules. It is also the
world’s largest arbitration institution.81 The task of the
77
78
79
80
81
Daniel Wehrli, “The Swiss Rules and the Revision of the UNCITRAL
Arbitration Rules,” in The Swiss Rules of International Arbitration - Five
Years of Experience, ed. Rainer Füeg, 2009, 88.
Peter Binder, International Commercial Arbitration and Conciliation in
UNCITRAL Model Law Jurisdictions, 3rd ed. (London: Sweet &
Maxwell/Thomson Reuters, 2010), notes 11-009.
Markus Wirth, “The Current Revision of the UNCITRAL Rules,” in New
Developments in International Commercial Arbitration 2007, ed. Christoph
Müller (Zurich: Schulthess, 2007), 10.
Strong, “Intervention and Joinder as of Right in International Arbitration: An
Infringement of Individual Contract Rights or a Proper Equitable Measure?,”
938.
Lionnet and Lionnet, Handbuch der internationalen und nationalen
Schiedsgerichtsbarkeit:
Systematische
Darstellung
der
privaten
Handelsschiedsgerichtsbarkeit für die Praxis, 516.
26
institution resembles that of a clerk at court.82 The American
Arbitration Association strictly respects the arbitrators’ sole
discretion and attempts to preserve this discretion,83 which is in
harmony with the U.S. court decisions.84
The latest amendment of the AAA International Rules entered
into force on 1 June 2009.85 Although dating from 2009, and
thus created after other institutions had already included
consolidation in their rules, the AAA International Rules do not
contain a provision on consolidation.86 This may be explained
by the attitude of the courts of the U.S.87
3.4
London
Court
of
International
Arbitration
The LCIA Rules also are issued from a very important
institution in international commercial arbitration.88 Not only is
82
83
84
85
86
87
88
Michael F. Hoellering, “The Influence of Courts and Arbitral Institutions,” in
Handbook on International Arbitration and ADR, ed. Thomas E. Carbonneau
(Huntington, N.Y: JurisNet, 2006), 55; Jenny Power and Hans-Patrick
Schroeder,
“AAA
International
Rules,”
in
Praxishandbuch
Schiedsgerichtsbarkeit, ed. Hellwig Torggler (Baden-Baden: Nomos, 2007),
note 38.
Power and Schroeder, “AAA International Rules,” 41.
Okuma Kazutake, “Party Autonomy in International Commercial Arbitration:
Consolidation of Multiparty and Classwide Arbitration,” Annual Survey of
International and Comparative Law 9 (2003): 194 The FAA wants to secure
enforcement of party wishes, it is not in the business of making the parties
choices more efficient for them.
See http://www.adr.org/sp.asp?id=33994.
Pascale Gola, Karin Graf, and Claudia Götz Staehelin, eds., “Comparison of
Various Arbitration Institutions,” in Institutional Arbitration Tasks and
Powers of Different Arbitration Institutions (Zurich: Schulthess, 2009), 11.
For further information see infra subsection 6.2.1.4.
For statistics concerning the LCIA see Julian D. M. Lew, Loukas A. Mistelis,
and Josephine C.P. Davies, “LCIA Rules,” in Practitioner’s Handbook on
International Commercial Arbitration, ed. Frank-Bernd Weigand, 2nd ed.
(Oxford: Oxford University Press, 2009), note 18.26 et seqq.; Lionnet and
Lionnet,
Handbuch
der
internationalen
und
nationalen
Schiedsgerichtsbarkeit:
Systematische
Darstellung
der
privaten
Handelsschiedsgerichtsbarkeit für die Praxis, 511.
27
the London Court of International Arbitration one of the oldest
institutions89 but it also has a large number of cases.90
The LCIA Rules were last revised in 1998 and are often
considered less institutionalized, meaning that LCIA Rules
concentrate more on administering than on controlling or
overseeing arbitration proceedings.91 Similar to the American
Arbitration Association, this Common Law institution considers
its task to be “primarily administrative and therefore fairly
narrow”.92 In many instances, party autonomy is given more
room than in other institutional rules.93 Parties may even impose
their wishes concerning procedure on an empanelled panel, so
long as agreement persists among them.94
Forcible consolidation was rejected by the LCIA. While the
LCIA Rules do contain a provision of joinder of third parties in
article 22(1)(h),95 this section cannot be used to join whole
cases. For this purpose, it was only invoked a few times,96 and
89
90
91
92
93
94
95
96
“THE LONDON COURT OF INTERNATIONAL ARBITRATION (LCIA),”
http://www.lcia-arbitration.com/.
See the report under the subheading NEWS “LCIA Director General's
Report,” See http://www.lcia-arbitration.com.
Peter Turner and Reza Mohtashami, A Guide to the LCIA Arbitration Rules
(Oxford: Oxford University Press, 2009), note 5.05; Poudret and Besson,
Comparative Law of International Arbitration, note 103; Sabine Konrad and
Robert
Hunter,
“LCIA-Schiedsregeln,”
in
Institutionelle
Schiedsgerichtsbarkeit Kommentar, ed. Rolf A. Schütze, 2nd ed. (Cologne:
Carl Heymanns Verlag, 2011), note 64.
Pascale Gola and Ned Beale, eds., “London Court of International
Arbitration,” in Institutional Arbitration Tasks and Powers of Different
Arbitration Institutions (Zurich: Schulthess, 2009), 149; Turner and
Mohtashami, A Guide to the LCIA Arbitration Rules, 2.21.
Turner and Mohtashami, A Guide to the LCIA Arbitration Rules, note 5.05;
Simon Nesbitt, “London Court of International Arbitration Arbitration Rules,
1998,” in Concise International Arbitration, ed. Loukas Mistelis (Alphen aan
den Rijn: Kluwer Law International, Wolters Kluwer Law & Business, 2010),
401.
Turner and Mohtashami, A Guide to the LCIA Arbitration Rules, note 5.16.
It has been propounded that consolidation may be introduced using as a back
door the joinder provision as described above, this was rejected. A lack of
consolidation provision does not preclude consolidation based on ad hoc party
consent. Ibid., note 6.55.
Konrad and Hunter, “LCIA-Schiedsregeln,” 18 stating that since 1985,
application was made only 6 times.
28
was sensibly rejected.97 However, while no provision on
consolidation exists, with the consent of all
consolidation may take place, and has taken place.98
3.5
parties
International Chamber of Commerce
The ICC is the leading institution of its kind and one of the
oldest.99 The case statistics are staggering. In 2007, the ICC
administered 599 cases; in 2008, 663 cases; and in 2009, 817.100
The ICC Rules, despite flexible directives, follow a continental
approach to procedure.101 The current ICC Rules entered into
force on 1 January 1998.102
The ICC Rules are widely used. They are also the most
institutionalized,103 i.e., restrictive, rules to party autonomy in
widespread use. The ICC Rules contain a provision on
consolidation. ICC article 4(6) is limited in scope,104 which is
one of the reasons it was chosen for this analysis. Article 4(6) of
the ICC Rules provides:
97
98
99
100
101
102
103
104
Turner and Mohtashami, A Guide to the LCIA Arbitration Rules, note 6.59;
differing: Ulf Franke, “Institutional Arbitration: Trends and Developments,”
in Festschrift für Ottoarndt Glossner zum 70. Geburtstag, ed. Karl-Heinz
Böckstiegel, Jens Bredow, and Alain Plantey (Heidelberg: Verlag Recht und
Wirtschaft, 1994), 127.
Consolidation by consent after the dispute has arisen is always possible as an
expression of party autonomy, not only under LCIA Rules. Turner and
Mohtashami, A Guide to the LCIA Arbitration Rules, note 6.57 stating that
consolidation had been sought 48 times and granted 16 times.
Girsberger and Voser, International Arbitration in Switzerland, note 192.
For verification and additional information see “ICC Statistics,”
http://www.iccwbo.org/court/arbitration/id5531/index.html.
Steven C. Bennett, Arbitration Essential Concepts (New York: ALM Publ.,
2002), 145.
Lionnet and Lionnet, Handbuch der internationalen und nationalen
Schiedsgerichtsbarkeit:
Systematische
Darstellung
der
privaten
Handelsschiedsgerichtsbarkeit für die Praxis, 491.
Daniel Girsberger, Nathalie Voser, and Simone Fuchs, International
Arbitration in Switzerland (Zurich: Schulthess, 2008), 45 Note 193; Michael
W. Bühler and Thomas H. Webster, Handbook of ICC Arbitration
Commentary, Precedents, Materials, 2nd ed. (London: Sweet & Maxwell,
2008), notes 0-10.
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, notes 4-69.
29
“When a party submits a Request in connection with a
legal relationship in respect of which arbitration
proceedings between the same parties are already
pending under these Rules, the Court may, at the
request of a party, decide to include the claims
contained in the Request in the pending proceedings
provided that the Terms of Reference have not been
signed or approved by the Court. Once the Terms of
Reference have been signed or approved by the Court,
claims may only be included in the pending proceedings
subject to the provisions of Article 19.”
The ICC forcibly consolidates cases sparingly.105 In most
related cases before the ICC, the parties agree on
consolidation,106 or parties raise claims together from the
outset.107
Since October 2008, a task force of over 175 members from 41
countries was revising the rules.108 A new version will be
launched in September 2011. The new provision on
consolidation is not only in a different place, giving it its own
article, but also changes the ICC rules drastically. The new
article 10 reads:
105
106
107
108
Ibid., notes 4-77; Greenberg, Feris, and Albanesi, “Consolidation, Joinder,
Cross-Claims, Multiparty and Multicontract Arbitrations: Recent ICC
Experience,” 164, stating that In the three years between 1 January 2007 and
31 December 2009, the Court dealt with 24 contested requests for
consolidation, eight of which were accepted and the remainder rejected.
Anne Marie Whitesell and Eduardo Silva-Romero, “Multiparty and
Multicontract Arbitration: Recent ICC Experience,” in Complex Arbitrations,
ICC Special Supplement 2003 (Paris, 2003), 16.
Craig, Park, and Paulsson, International Chamber of Commerce Arbitration,
183.
See http://www.iccwbo.org/policy/arbitration/index.html?id=28796.
30
"The Court may, at the request of a party, consolidate
two or more arbitrations pending under the Rules into a
single arbitration, provided that either:
a) the parties have agreed to consolidation; or
b) all of the claims in the arbitrations are made
under the same arbitration agreement; or
c) 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
legal relationship, and the Court finds the arbitration
agreements to be compatible.
In deciding whether to consolidate, the Court may take
into account any circumstances it considers to be
relevant including whether one or more arbitrators
have been confirmed or appointed in more than one of
the arbitrations and, if so, whether the same or different
persons have been confirmed or appointed.
When arbitrations are consolidated, they shall be
consolidated into the arbitration that commenced first,
unless otherwise agreed by all parties."
Details of this provision will be further discussed in chapter 4.
3.6
Swiss Chambers of Commerce
The Swiss Chambers of Commerce are comprised of the six
original chambers of commerce109 plus the recently added
Chamber of Commerce of Neuchâtel. These seven Swiss
Chambers jointly form another important arbitration institution
in Europe, the Swiss Chambers. The organization is delocalized,
with each of the seven chambers administering arbitrations. The
109
Geneva, Bern, Zürich, Ticcino, Basel, Vaud.
31
Swiss Chambers jointly administered 68 cases in 2008, 104 new
cases in 2009, and 89 cases in 2010.110
Their Swiss Rules entered into force in 2004. The Swiss Rules
as a whole have been qualified as having a light form of
administration.111 Indeed, it has been stated that the Swiss Rules
intended to avoid
“(. . .) any overly-bureaucratic or unduly restrictive
regulation, while nevertheless achieving the necessary
level of monitoring and administration of
procedures.”112
This is true when compared to the ICC Rules.113 Administration
of cases is intended to be mainly in the hands of the panel.114
However, Swiss Chambers are offered discretionary powers in
many instances, including the question of consolidation.
110
111
112
113
114
See https://www.sccam.org/sa/en/organisation.php and follow link statistics.
No information is available on 2010 at this time.
Peter, “Some Observations on the Swiss Rules of International Arbitration,”
139; Bertrand Moreau, “Arbitrage liés,” in De lege ferenda réflexions sur le
droit désirable, ed. Laurent Hirsch and Anne Héritier Lachat (Geneva:
Slatkine, 2004), 79 - 85; Christian Oetiker and Sabine Burkhalter, “Swiss
Chambers’ Court of Arbitration and Mediation,” in Institutional Arbitration
Tasks and Powers of Different Arbitration Institutions, ed. Pascale Gola,
Karin Graf, and Claudia Götz Staehelin (Zurich: Schulthess, 2009), 241;
Girsberger and Voser, International Arbitration in Switzerland, 46 Note 197.
Wolfgang Peter, “Quelques observations sur le nouveau règlement suisse
d’arbitrage international,” in De lege ferenda réflexions sur le droit désirable,
ed. Laurent Hirsch and Anne Héritier Lachat (Geneva: Slatkine, 2004), 139.
ICC provides for mandatory terms of reference, review of the award and
information of the ICC Court concerning all communications. Further
explanation of this statement and the exact differences will be give infra.
Bernhard
Meyer-Hauser
and
Dominik
Vock,
“Schweizerische
Schiedsordnung,” in Praxishandbuch Schiedsgerichtsbarkeit, ed. Hellwig
Torggler (Baden-Baden: Nomos, 2007), note 7.
32
The Swiss Rules contain the broadest clause on consolidation
currently in use. Swiss Rules are broader than the ICC Rules on
consolidation.115 Article 4(1) Swiss Rules reads as follows:
“Where a Notice of Arbitration is submitted between
parties already involved in other arbitral proceedings
pending under these Rules, the Chambers may decide,
after consulting with the parties to all proceedings and
the Special Committee, that the new case shall be
referred to the arbitral tribunal already constituted for
the existing proceedings. The Chambers may proceed
likewise where a Notice of Arbitration is submitted
between parties that are not identical to the parties in
the existing arbitral proceedings. When rendering their
decision, the Chambers shall take into account all
circumstances, including the links between the two
cases and the progress already made in the existing
proceedings. Where the Chambers decide to refer the
new case to the existing arbitral tribunal, the parties to
the new case shall be deemed to have waived their right
to designate an arbitrator”
According to some writers, article 4 was an important
innovation in the Swiss Rules in comparison to the rules
previously applied by the different Swiss Chambers.116 The
Swiss Rule on consolidation has also been criticized.117 Its
115
116
117
Bamforth and Maidment, “‘All join in’ or Not? How Well Does International
Arbitration Cater for Disputes Involving Multiple Parties or Related Claims?,”
15.
Peter, “Some Observations on the Swiss Rules of International Arbitration,”
5; Sébastien Besson, “Introduction,” in Swiss Rules of International
Arbitration Commentary, ed. Tobias Zuberbühler, Christoph Müller, and
Philipp Habegger (The Hague: Kluwer Law International, 2005), note 20;
Gilliéron and Pittet, “Article 4 - Consolidation of Arbitral Proceedings
(Joinder), Participation of Third Parties,” 1; Daniela Jobin-Chiabudini,
“Administered Arbitration under Swiss Rules of International Arbitration of
the Swiss Chambers of Commerce”, October 2004, 4.
ULMER calls the provision on consolidation a dangerous additions. Nicolas
Ulmer, “The Cost Conundrum,” Arbitration International 26, no. 2 (2010):
227 et seq.; Lachmann, Handbuch für die Schiedsgerichtspraxis, note 4070.
33
breadth remains unparalleled by the other important institutional
rules, even though other important institutions have revised
their rules since the inception of the Swiss Rules. In addition to
the comparatively broad scope of the rule, Swiss Chambers and
the Special Committee
consolidation.118
have
an
attitude
favoring
The proposed new rule reads:
“Consolidation and Joinder
Article 4
1. Where a Notice of Arbitration is submitted between
parties already involved in other arbitral proceedings
pending under these Rules, the Chambers may decide,
after consulting with the parties and any confirmed
arbitrator to all proceedings and the Special
Committee, that the new case shall be referred to the
arbitral tribunal already constituted for the existing
proceedings. The Chambers may proceed likewise
where a Notice of Arbitration is submitted between
parties that are not identical to the parties in the
existing arbitral proceedings. When rendering their
decision, the Chambers shall take into account all
relevant circumstances, including the links between the
two cases and the progress already made in the pending
arbitral proceedings. Where the Chambers decide to
consolidate the new case into the pending arbitral
proceeding, the parties to all proceedings shall be
deemed to have waived their right to designate an
arbitrator and the Swiss Chambers´Court may revoke
the appointment and confirmation of arbitrators and
118
Kellerhals, “Highlights from the Arbitration Committee,” 30.
34
apply the provisions of Articles 7(1), 9(3-5) and
10.2.”119
Details of this provision will be further expanded upon in
chapter 4.
3.7
The
Austrian
Federal
Economic
Chamber
“The Austrian Federal Economic Chamber, which is
the umbrella organization of the nine Regional
Economic Chambers, established the VIAC in 1975
particularly for the settlement of East-West commercial
disputes ( . . .). By the end of 2006, fifty-one
international arbitration cases were pending before the
VIAC with a total amount in dispute of approximately
one billion Euros.”120
On average 40 cases are filed each year. In 2009, 60 new cases
were filed.121 The VIAC Rules provide for consolidation of
cases in article 15(8), which reads:
“In cases other than those mentioned in paragraph 1 of
the present Article, the consolidation of two or more
disputes shall be admissible only if the same arbitrators
have been appointed in all the disputes that are to be
consolidated and if all parties and the sole arbitrator
(arbitral tribunal) agree.”
119
120
121
Underlined sections are new.
Werner Melis, “Arbitration in Austria”, January 25, 2011, 3,
http://portal.wko.at/wk/format_detail.wk?angid=1&stid=328065&dstid=8459
&opennavid=0.
Christopher
Liebscher,
“Wiener
Regeln,”
in
Institutionelle
Schiedsgerichtsbarkeit Kommentar, ed. Rolf A. Schütze, 2nd ed. (Cologne:
Carl Heymanns Verlag, 2011), note 5.
35
All parties to the cases must have chosen the VIAC Rules, but
not necessarily in the same agreement.122 This rule does not
suggest substantive consolidation standards.123
This consolidation provision restates the accepted concept that,
in international commercial arbitration, parties may agree on
procedure and, therefore, on consolidation. Consolidation under
VIAC Rules is not admissible if the parties have appointed
different arbitrators.
Furthermore, forced consolidation is not possible under the
VIAC Rules is but rather based on the principle of party (and
arbitrator) consent. In fact, consolidation rarely occurs under
these rules.124 It will therefore not be discussed in more detail.
3.8
Arbitration Institute of the Stockholm
International Chamber of Commerce
Since the 1990’s the number of cases filed with the Arbitration
Institute of the Stockholm International Chamber of Commerce
increased considerably.125 The Stockholm International
Chamber of Commerce emerged as one of the most important
and frequently used arbitration institutions worldwide.126 This is
especially true concerning cases of East-West trade.127 It
122
123
124
125
126
127
Franz T. Schwarz and Christian W. Konrad, The Vienna Rules: A
Commentary on International Arbitration in Austria (Alphen an den Rijn:
Kluwer Law International, Wolters Kluwer Law & Business, 2009), notes 15008.
Ibid., notes 15-067.
Ibid., notes 15-068.
Marie
Öhrström,
“Stockholmer
Regeln,”
in
Institutionelle
Schiedsgerichtsbarkeit Kommentar, ed. Rolf A. Schütze, 2nd ed. (Cologne:
Carl Heymanns Verlag, 2011), note 2.
See http://www.sccinstitute.com/hem-3/statistik-2.aspx.
Lionnet and Lionnet, Handbuch der internationalen und nationalen
Schiedsgerichtsbarkeit:
Systematische
Darstellung
der
privaten
Handelsschiedsgerichtsbarkeit für die Praxis, 526; Günther J. Horvath and
Moritz Keller, “Die Regeln des Schiedsgerichtsinstituts der Stockholmer
36
administered 170 cases in 2007, and 176 cases in 2008.128 The
institution’s role in the conduct of arbitrations is similar to that
of the ICC.129
The SCC Rules are among the most recent institutional
international commercial arbitration. The SCC Rules entered
into force on 1 January 2010.130 Consolidation is permitted
under the 2010 rules, as modified from the previous version of
2007.
Article 11 Stockholm Rules of 2007 reads:
“Upon the submission of a Request for Arbitration
concerning a legal relationship in respect of which an
arbitration between the same parties is already pending
under these Rules, the Board may, at the request of a
party, decide to include the claims contained in the
Request for Arbitration in the pending proceedings.
Such decision will only be made after consulting the
parties and the Arbitral Tribunal.”
Article 11 of 2010 reads:
“If arbitration is commenced concerning a legal
relationship in respect of which an arbitration between
the same parties is already pending under these Rules,
the Board may, at the request of a party, decide to
include the new claims in the pending proceedings.
128
129
130
Handelskammer,” in Praxishandbuch Schiedsgerichtsbarkeit, ed. Hellwig
Torggler (Baden-Baden: Nomos, 2007), 447 and 450 Note 50.
Stockholm Chamber of Commerce, “Arbitration - Statistics 2008”, n.d.,
http://www.sccinstitute.com/statistics-2008.aspx.
Horvath and Keller, “Die Regeln des Schiedsgerichtsinstituts der Stockholmer
Handelskammer,” 46 et seqq.
See http://www.sccinstitute.com/skiljeforfarande-2/regler-4.aspx.
37
Such decision may only be made after consulting the
parties and the Arbitral Tribunal.”
The substance of the provision, defining which cases can be
consolidated, remained the same. The SCC Institute may join
claims, so long as the same parties are involved and the same
legal relationship is concerned. This is stricter than the standard
of the ICC, and a restrictive practice is expected.131 It does,
however, provide for a broader possibility to consolidate
concerning the timeframe of consolidation. Due to the similarity
of the ICC and SCC Rules provisions, only the ICC Rules
provision will be discussed further.
3.9
Other Institutional Rules
Other international commercial arbitration institutions’ rules do
not contain consolidation clauses, despite most post-dating 1998
in their current versions. To name but a few: the China
International Economic and Trade Arbitration Commission does
not contain a consolidation provision;132 neither does the
German Institution for Arbitration, in effect since July 1998;133
nor do the Australian Center for International Commercial
Arbitration Rules;134 nor do the Singapore International
Arbitration Center Rules of 2010;135 nor the Hong Kong
International Arbitration Center Rules of 2008.136 Even though
some institutions have added the possibility of allowing third
parties into an existing case, as seen under the LICA Rules, this
is not equal to a provision on consolidation through the back
door.137 The Centre Belge d’Arbitrage et de Médiation Rules
131
132
133
134
135
136
137
Öhrström, “Stockholmer Regeln,” 32.
See http://cn.cietac.org/english/rules/rules.htm.
See http://www.dis-arb.de/download/disscho98_05_eng_eur.pdf.
See http://www.acica.org.au/arbitration_rules.html#_Toc132016249.
See http://www.siac.org.sg/Pdf/Rules2010.pdf. Pryles and Waincymer
however consider the power to consolidate to be encompassed in art. 24 of the
rules. Pryles and Waincymer, “Multiple Claims in Arbitration Between the
Same Parties,” 440 et seq.
See
http://www.hkiac.org/documents/Arbitration/Arbitrationpercent20Rules/HKI
AC%20Procedures%20for%20International%20Arbitration.pdf.
See supra subchapter 3.4.
38
article 12 also contains a consolidation provision, which is
labeled joinder.138
3.10 Summary
Forcible consolidation is by no means widely accepted in
international commercial arbitration. Comparatively few
organizations contain consolidation clauses, which vary in the
scope of their application.
The VIAC Rules only restate the accepted concept that
consolidation by party agreement is permissible. The Stockholm
Rules are very similar to the ICC Rules consolidation provision
with the exception that no reference to the ‘terms of reference’
exists as cut-off. The Swiss Rules are by far the most expansive
rules currently in existence.
As the VIAC only restates an existing rule permitting
consolidation by party agreement, and the SCC and ICC Rules
are very similar, this analysis will limit itself to presenting the
ICC Rules and the Swiss Rules, which offer the greatest
variants. These provisions will be discussed in further detail in
the following chapter.
138
See
CEPANI
Rules
art.
11
http://www.jurisint.org/doc/html/reg/en/2003/2003jiregen38.html.
at
39
4
ICC and Swiss Rules Consolidation
in Detail
In this chapter the author will give an overview over the
consolidation provisions of both the ICC Rules and the Swiss
Rules. When practical guidance is given in the rules itself, it
will be discussed. When this is not the case, the problem is
highlighted, but left for analysis infra in chapter 5 trhough 13.
Unless otherwise mentioned, the new and proposed rules have
the same treatment and the analysis does not change.
4.1 The Provisions – ICC Rules 4(6) or 10
and Swiss Rule 4(1)
As previously described, the ICC as well as the Swiss Rule
provision on consolidation will be examined in further detail in
this chapter. This chapter is not intended to give an in-depth
analysis concerning legal problems (which will be addressed in
the subsequent chapters), but only the practical questions and
how they are addressed by the rules.
As outlined in chapter 3, the ICC Rules article 4(6) reads:
“When a party submits a Request in connection with a
legal relationship in respect of which arbitration
proceedings between the same parties are already
pending under these Rules, the Court may, at the
request of a party, decide to include the claims
contained in the Request in the pending proceedings
provided that the Terms of Reference have not been
signed or approved by the Court. Once the Terms of
Reference have been signed or approved by the Court,
40
claims may only be included in the pending proceedings
subject to the provisions of Article 19.” 139
The new rule 10 reads:
"The Court may, at the request of a party, consolidate
two or more arbitrations pending under the Rules into a
single arbitration, provided that either:
a) the parties have agreed to consolidation; or
b) all of the claims in the arbitrations are made
under the same arbitration agreement; or
c) 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
legal relationship, and the Court finds the arbitration
agreements to be compatible.
In deciding whether to consolidate, the Court may take
into account any circumstances it considers to be
relevant including whether one or more arbitrators
have been confirmed or appointed in more than one of
the arbitrations and, if so, whether the same or different
persons have been confirmed or appointed.
When arbitrations are consolidated, they shall be
consolidated into the arbitration that commenced first,
unless otherwise agreed by all parties."
As is immetiately apparent, the rule on consolidation has gained
in prominence, detail and scope.
The Swiss Rules take up consolidation in article 4(1), which
states:
139
Michael Schöll, ed., Sourcebook of International Arbitration (Switzerland)
(Zürich: Schulthess, 2008), 81.
41
“Where a Notice of Arbitration is submitted between
parties already involved in other arbitral proceedings
pending under these Rules, the Chambers may decide,
after consulting with the parties to all proceedings and
the Special Committee, that the new case shall be
referred to the arbitral tribunal already constituted for
the existing proceedings. The Chambers may proceed
likewise where a Notice of Arbitration is submitted
between parties that are not identical to the parties in
the existing arbitral proceedings. When rendering their
decision, the Chambers shall take into account all
circumstances, including the links between the two
cases and the progress already made in the existing
proceedings. Where the Chambers decide to refer the
new case to the existing arbitral tribunal, the parties to
the new case shall be deemed to have waived their right
to designate an arbitrator.”140
The proposed new Swiss Rule 4(1) has not changed in scope,
but (important) details.
“1. Where a Notice of Arbitration is submitted between
parties already involved in other arbitral proceedings
pending under these Rules, the Chambers may decide,
after consulting with the parties and any confirmed
arbitrator to all proceedings and the Special
Committee, that the new case shall be referred to the
arbitral tribunal already constituted for the existing
proceedings. The Chambers may proceed likewise
where a Notice of Arbitration is submitted between
parties that are not identical to the parties in the
existing arbitral proceedings. When rendering their
decision, the Chambers shall take into account all
140
Michael Schöll, ed., Sourcebook of International Arbitration (Switzerland)
(Zurich: Schulthess, 2008), 47.
42
relevant circumstances, including the links between the
two cases and the progress already made in the pending
arbitral proceedings. Where the Chambers decide to
consolidate the new case into the pending arbitral
proceeding, the parties to all proceedings shall be
deemed to have waived their right to designate an
arbitrator and the Swiss Chambers´Court may revoke
the appointment and confirmation of arbitrators and
apply the provisions of Articles 7(1), 9(3-5) and
10.2.”141
Consolidation of cases by the ICC as well as the Swiss
Chambers is discretionary.142 This means that the parties do not
have a right to demand consolidation.
4.2
Applicable Institutional Rules
Parties have many choices, both of institutional and of ad hoc
models.143
Unlike in litigation, in which all procedural rules are
interconnected and a cohesive whole exists, arbitration relies on
limited jurisdiction.144 Each case is separate and distinct and
each panel limited to its case, even when the same institutional
rules are chosen. Both the ICC Rules and Swiss Rules require
that all cases to be consolidated be subject to the same rules.
Some institutional rules offer a variety of procedures, e.g., “fast
track”, summary or expedited arbitration, which will not match
the institution's standard procedural rules. In some cases, like
141
142
143
144
Underlined sections are new.
For the Swiss Rules see Gilliéron and Pittet, “Article 4 - Consolidation of
Arbitral Proceedings (Joinder), Participation of Third Parties,” 7.
See supra chapter 3.
Girsberger and Voser, International Arbitration in Switzerland, note 1 et seqq.
43
the Swiss Rules, the “expedited procedure” is contained in the
same document,145 while other rules provide for separate
documents, like the Rules for Expedited Arbitration of the
Arbitration Institute of the Finnish Central Chamber of
Commerce.146 No mention is made concerning consolidation,
whether arbitration with ordinary procedures and one with
expedited procedures could be consolidated. However, nothing
indicates a prohibition thereof.
A problem arises under the Swiss Rules in connection to the
“expedited procedure”. It can apply when specifically chosen
by the parties, however, the “expedited procedure” under the
Swiss Rules may also apply, when the parties did not
specifically choose them but when the threshold amount in
controversy of 1 million CHF has not been met.147 Thus, while
formally fulfilling the criteria to apply the same set of rules, this
may still mean that two different procedures would be mixed.
The wording suggests that the choice or default of the second
case A would be irrelevant and simply added to whatever type
of proceeding happened to apply in case A. This might create
odd results if, e.g., case A was a default “expedited procedure”,
while case B was a much larger case. The neither the existing
nor the proposed Swiss Rules offer a solution. This topic will be
addressed infra in subchapter 5.2.
4.3
Arbitrators
One of the issues most discussed when it comes to consolidation
is the choice of arbitrators.148 However, there are more issues
related to arbitrators.
145
146
147
148
For example see Swiss Rules article 42.
Patrik Lindfors, “New Rules for Fast Track Arbitration in Finland,” Nordic
Journal of Commercial Law 2004, no. 2 (2004): 1 - 3.
Article 42(2) Swiss Rules.
The selection of arbitrators will be discussed infra in chapter 9 in more detail.
44
Three different issues can be determined. First, the arbitrators of
the initial case A will be assigned additional claims or parties or
both, without the possibility of the parties of case B, be they
identical or not, selecting arbitrators.149
Second, neither the ICC Rules nor the Swiss Rules directly
address the question of the number of arbitrators. Rather, each
rule grants the power to add case B to case A, which will only
result in the same number and identity of arbitrators for case B
as there were in case A, regardless of the provisions of case B.
If considering solely the wording of the rule, it is irrelevant if
the arbitration agreement of case B requires a different number
of arbitrators.150
Third, neither set of rules makes specific mention of the impact
of qualifications imposed on the arbitrators by the parties.
Parties are permitted to specify qualifications for arbitrators.151
A literal reading of the rules concludes the same way as before,
that the qualifications required for arbitrators in case B are
irrelevant and the claims are referred to the case A panel.
The proposed new Swiss Rule does however clarify, that even
the arbitrators in case A may be removed, so that an all new
panel could be appointed for the case A into which the second
case B is consolidated. This is of importance and will be
discussed further infra in chapters 8 and 9.
149
150
151
See infra chapter 9.
The question of arbitrators will be discussed infra in chapters 5 and 9.
Pryles and Waincymer, “Multiple Claims in Arbitration Between the Same
Parties,” 328; Girsberger and Voser, International Arbitration in Switzerland,
note
472;
Klaus
Peter
Berger,
Internationale
Wirtschaftsschiedsgerichtsbarkeit: Verfahrens- und materiellrechtliche
Grundprobleme im Spiegel moderner Schiedsgesetze und Schiedspraxis
(Berlin: de Gruyter, 1992), 142; Rüede and Hadenfeldt, Schweizerisches
Schiedsgerichtsrecht nach Konkordat und IPRG, 139.
45
4.4
Initiation Procedure
Initiation procedures address the appropriate participant as well
as the appropriate procedure for initiating consolidation.
Litigation allows parties to move for consolidation.152
Consolidation sua sponte by the judge is also a possibility.153
Options in institutional arbitration encompass three choices for
the appropriate participant: institutions, arbitrators and courts.154
Under the ICC Rules, consolidation is initiated by the request of
a party. No sua sponte consolidation is permitted.155 The
addressee for the initial request is the ICC, which makes a
152
153
154
155
Article 185 Swiss Private International Law Act.152 It reads:
“If further assistance of the judicial or administrative authorities is required,
the judge at the seat of the arbitral panel shall have jurisdiction.”
German Law requires either express consent of the parties or express
permission in the law for courts to act. This strict interpretation is based on §
1026 GCCP, which provides that no court shall intervene except where so
provided in the 10th book of the GCCP, which refers to arbitration and
codifies the UNCITRAL Model Law. There is no suggestion that arbitrators
would have discretion to order consolidation without prior consent.
The Swiss Code of Civil Procedure provides for consolidation in a list of
potential actions by a court to streamline and simplify litigation in article 125.
“Zur Vereinfachung des Prozesses kann das Gericht insbesondere
Das Verfahren auf einzelne Fragen oder auch einzelne Rechtsbegehren
beschränken;
Gemeinsam eingereichte Klagen trennen;
Selbstständig eingereichte Klagen vereinigen;
Eine Widerklage vom Hauptverfahren trennen.“
The German Code of Civil Procedure provides for consolidation in § 147:
“Das Gericht kann die Verbindung mehrerer bei ihm anhängiger Prozesse
derselben oder verschiedener Parteien zum Zwecke der gleichzeitigen
Verhandlung und Entscheidung anordnen, wenn die Ansprüche, die den
Gegenstand dieser Prozesse bilden, im rechtlichen Zusammenhang stehen
oder in einer Klage hätten geltend gemacht werden können.“
Consolidation is found in Rule 42 of the United States Code of Federal Civil
Procedure. It states:
“(a) Consolidation.
If actions before the court involve a common question of law or fact, the court
may:
(1) join for hearing or trial any or all matters at issue in the actions;
(2) consolidate the actions; or
(3) issue any other orders to avoid unnecessary cost or delay.”
Craig, Park, and Paulsson, International Chamber of Commerce Arbitration,
83.
Lionnet and Lionnet, Handbuch der internationalen und nationalen
Schiedsgerichtsbarkeit:
Systematische
Darstellung
der
privaten
Handelsschiedsgerichtsbarkeit für die Praxis, 414; Lachmann, Handbuch für
die Schiedsgerichtspraxis, note 2835.
46
decision without giving reasons (“unreasoned”). The arbitral
panel has no jurisdiction to consolidate cases.156
The Swiss Chambers initiate consolidation sua sponte and issue
an unreasoned decision. While, according to the Secretariat of
the Zurich Chamber of Commerce, initiation could be made
upon motion,157 the rules are silent on this matter. If the literal
wording is applied, parties would be impotent should Swiss
Chambers remain inactive.
4.5
Timing
In both arbitration and litigation, there are time frames in which
certain procedural acts must be performed.158 In German
litigation, e.g., cases that have already progressed to the point
where judgment can be rendered, may not be consolidated.159
A large number of scenarios exist for the procedural stages that
two or more cases could be in at the time of consolidation.160 In
156
157
158
159
160
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, notes 4-65. An example for a legal framework with court driven
consolidation are the Netherlands. Article 1046 of the Dutch Civil Code of
Procedure gives the judge the authority to consolidate arbitration procedures
seated in the Netherlands on request of one party if the subject matters of the
different procedures are connected. Moreover, the judge has extensive
competence to bindingly define the procedure should the involved parties not
reach an agreement in a set time period. However, the parties can expressly
exclude court ordered consolidation in their arbitration agreement.
Interview with Zurich Chamber of Commerce on 8 April 2010.
Such as appeals within a certain timeframe, responses, pleadings, etc.
Reinhard Greger, “§§ 128 - 167,” in Zöller Zivilprozessordnung, ed. Richard
Zöller, 27th ed. (Cologne: Schmidt (Otto), 2009), notes 147-5; Hartmann,
Zivilprozessordnung, no. 147-13; Hans-Joachim Musielak, ed., Kommentar
zur Zivilprozessordnung mit Gerichtsverfassungsgesetz, 7th ed. (Munich:
Vahlen, 2009), notes 147-1.
For example: One case has far progressed and the other is just at the
beginning; both cases have far progressed but only at a late stage it becomes
apparent that there will be a possibility of at least partially contradicting
judgments; both cases have been begun at the same time and contradicting
judgment are likely, but the parties choose to lead separate proceedings for
reasons of their own; both cases are filed at the same time and seem to belong
47
arbitration, what precise procedural stages of both arbitral
proceedings consolidaton may still be permissible depends on
the policy of the institution and must be addressed in any
consolidation provision. It is a question of balancing the
purposes of consolidation against the principles of arbitration.161
In this regard, the ICC Rules and Swiss Rules have made
different choices.
4.5.1 ICC Rules
Under the ICC Rules, the ICC may order consolidation as long
as the terms of reference in either case have been neither signed
nor approved.162 As the terms of reference form an early stage
of arbitration, the window for consolidation is narrow under the
ICC Rules.163
Terms of reference are intended to provide an agreed
framework and to give the parties the possibility to shape the
proceedings as to their own gusto.164 After the terms of
reference are signed or approved, claims may only be added by
the use of article 19 ICC Rules.
Article 19 ICC Rules provides:
“After the Terms of Reference have been signed or
approved by the Court, no party shall make new claims
161
162
163
164
together at first glance, but have no issues in common; or anything in
between.
This will be addressed in more detail infra in chapter 13.
Brunet et al., Arbitration Law in America, 29 Brunet argues, that party
autonomy and privacy, as a rule, trump efficiency.
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, notes 4-75; Craig, Park, and Paulsson, International Chamber of
Commerce Arbitration, 183.
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, notes 18-5; Reiner and Jahnel, “ICC-Schiedsgerichtsordnung,” 183 et seqq.
48
or counter-claims which fall outside the limits of the
Terms of Reference unless it has been authorized to do
so by the Arbitral Tribunal, which shall consider the
nature of such new claims or counter-claims, the stage
of the arbitration and other relevant circumstances.”
This means that once the terms of reference are signed or
approved, the arbitrators are both the addressee for and the
authority to decide the addition of new claims. From this
moment on, the ICC Court of Arbitration loses jurisdiction over
the procedure.165
The reference to article 19 ICC Rules was added for
clarification that the addition of claims is possible under certain
circumstances even when consolidation is no longer possible.
However, article 19 ICC Rules is not a case of consolidation: no
new case is filed, so that the permission to add a claim or
counter-claim would not end case B (which was never in
existence).166
The new article 10 disposes of both the timing restriction and
the reference to article 19, permitting for a far broader
timeframe in which consolidation can take place. This change
brings the ICC closer to the Swiss Rule 4(1).
165
166
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, 19-12.
Generally speaking article 19 ICC Rules gives the arbitrators wide discretion
to allow claims not within the terms of reference. This discretion is also found
under the Swiss Rules, however, afforded not to the arbitration panel but to
Swiss Chambers. As this work focuses on forcible consolidation only and
does not treat all forms of additions of parties or claims, article 19 ICC Rules
will only be discussed again in chapter 13.
49
4.5.2 Swiss Rules
As Swiss Chambers initiate consolidation sua sponte, there
seems to be no particular timing for consolidation. The wording
of the article is silent regarding timing. The English version
states, “(w)here notice of arbitration is submitted”, which does
not denote timing, but simply the fact that at some point notice
of case B was submitted. The German version is similarly
unenlightening: “(W)ird eine Einleitungsanzeige (. . .)
eingereicht (. . .)” This version does not indicate that the
submission is the triggering event. The French version reads:
“Lorsqu’une notification d’arbitrage est soumise (. . .)” This
also indicates no particular timing after the initiation.
None of the languages specifies timing. Instead, the wording
indicates that Swiss Chambers retain the possibility to
consolidate even after the second case B has passed from their
care and the file is transmitted to the arbitrators.
This is also the view of BAMFORTH/MAIDMENT who state that
consolidation can be performed at any stage under the Swiss
Rules.167 In contrast to this GILLIÉRON/PITTET suggest that
consolidation is to take place only directly upon initiation of
case B.168 GEISINGER supports the later authors and explains
that consolidating cases at a later date, i.e., after both panels
have been chosen, is not provided for in the Swiss Rules.169
However, the wording of the rules does not exclude the option.
The Zurich Chamber of Commerce informed this author upon
request that consolidations are usually not proceeded with if a
167
168
169
Bamforth and Maidment, “‘All join in’ or Not? How Well Does International
Arbitration Cater for Disputes Involving Multiple Parties or Related Claims?,”
15.
Gilliéron and Pittet, “Article 4 - Consolidation of Arbitral Proceedings
(Joinder), Participation of Third Parties,” 7.
Bamforth and Maidment, “‘All join in’ or Not? How Well Does International
Arbitration Cater for Disputes Involving Multiple Parties or Related Claims?,”
15.
50
period of six months has elapsed.170 This provision is very
inclusive.
4.6
Seat
International commercial arbitration agreements ordinarily
contain a choice of the seat of arbitration.171 This raises the
question of how to deal with different seats of the cases to be
consolidated. Neither the ICC Rules nor the Swiss Rules
directly addressed this issue.
It is therefore necessary to fall back to the seat provisions
regarding the standard proceedings, which could be applied to a
consolidation scenario as well. Article 14 ICC Rules provides:
“(1) The place of the arbitration shall be fixed by the
Court unless agreed upon by the parties.
(2) The Arbitral Tribunal may, after consultation with
the parties, conduct hearings and meetings at any
location it considers appropriate unless otherwise
agreed by the parties.
(3) The Arbitral Tribunal may deliberate at any
location it considers appropriate.”
The ICC has so far declined to consolidate proceedings with
different explicit seat choices. Under the ICC Rules, the timing
requires that case A not have passed the stage of the signature
and approval of the terms of reference. This means that the
arbitrators can still take into account the seat choice (if any) and
circumstances of case B when making the determination. The
ICC Rules give no indication of opposing choices in seats.
170
171
Interview with Zurich Chamber of Commerce on 8 April 2010.
Haydock, “Mediation and Arbitration for Now and the Future,” 22 et seq.
51
The new rule 10 does indicate, that clauses must be compatible,
which this author uspects to be an alteration reflecting previous
ICC practice, which is discussed further infra. In this case,
different seats would prevent consolidation.
Article 16 Swiss Rules also treat seat selection without
specifically addressing issues of consolidation.
“1. If the parties have not determined the seat of the
arbitration, or if such designation is unclear or
incomplete, the Special Committee shall determine the
seat of the arbitration taking into account all relevant
circumstances, or shall request the arbitral tribunal to
determine the seat.
2. Without prejudice to the determination of the seat of
the arbitration, the arbitral tribunal may decide where
the proceedings shall be conducted. In particular, it
may hear witnesses and hold meetings for consultation
among its members at any place it deems appropriate,
having regard to the circumstances of the arbitration.”
Under the Swiss Rules, which do not provide for this timing
restriction, the chosen seat of case A would either have to be
altered (for which the Swiss Rules make no provision) based on
the circumstances of case B, or more likely case B would have
to accept the language of case A based on the wording of the
article 4(1), which adds case B to case A, as is.
GILLIÉRON/PITTET suggest that consolidation of arbitrations
with different Swiss seats should be possible.172 The rules do
not prevent consolidation in this fashion. However, in the single
172
Gilliéron and Pittet, “Article 4 - Consolidation of Arbitral Proceedings
(Joinder), Participation of Third Parties,” 8.
52
case under the Swiss Rules the involved two different seats,
namely Geneva and Zurich, Chambers rejected consolidation.
The case arose under two different arbitration clauses with two
different seats. Claimant requested arbitration of cases under
both contracts combined in both Geneva and Zurich. Each
Chamber rejected one case and permitted the other,
simultaneously declining to consolidate the cases.173 This one
case is not indicative of a practice and is not required by the
wording of the rules.
The ICC and Swiss Rules leave much unanswered in the
wording of their provisions. Therefore, the question of
incongruent seats will be addressed infra in subchapter 5.2.
4.7
Language
Parties are free to choose the language of their arbitration and
most parties do so in their arbitration clauses. International
commercial arbitration agreements ordinarily contain a choice
of the language clause.174
In relation to consolidation neither the ICC Rules nor the Swiss
Rules directly addressed the language question. An indication
concerning the treatment of languages may be found in article
16 ICC Rules, which provides:
“In the absence of an agreement by the parties, the
Arbitral Tribunal shall determine the language or
languages of the arbitration, due regard being given to
173
174
Kellerhals, “Highlights from the Arbitration Committee,” 30 et seq. Case No.
8 (numbered in timely sequence) concerning consolidation. Details were
provided during an Interview with the Zurich Chamber of Commerce on 8
April 2010.
Haydock, “Mediation and Arbitration for Now and the Future,” 22 et seq.
53
all relevant circumstances, including the language of
the contract.”
Article 17(1) Swiss Rules allows the arbitration panel to make a
determination of the language.
“Subject to an agreement by the parties, the arbitral
tribunal shall, promptly after its appointment,
determine the language or languages to be used in the
proceedings. This determination shall apply to the
Statement of Claim, the Statement of Defense, and any
further written statements and, if oral hearings take
place, to the language or languages to be used in such
hearings.”
If there is no uniformity between the languages chosen in cases
A and B, the arbitrators are given full discretion to decide on the
language, absent ad hoc party agreement. For consolidated
cases this has certain consequences.
Under the ICC Rules, the timing requires that case A not have
passed the stage of the signature and approval of the terms of
reference. This means that the arbitrators can still take into
account the language choice (if any) and circumstances of case
B when making the determination. Under the new rules, without
the timing restriction, the analysis equals the one given for the
Swiss Rule.
Under the Swiss Rules, which do not provide for this timing
restriction, the chosen language of case A would either have to
be altered (for which the Swiss Rules make no provision) based
on the circumstances of case B, or more likely, case B would
have to accept the language of case A based on the wording of
the article 4(1) Swiss Rules, which adds case B to case A, as is.
54
Differing express choices by the parties will be addressed infra
in subchapter 5.2.
4.8
Secrecy
Secrecy is used here to refer jointly to terms privacy and
confidentiality. Privacy refers only to a lack of the public in
arbitrations.175 Confidentiality refers to the enforceable duty not
to disclose any information gleaned during the arbitration, or the
fact of the arbitration itself.176
No specific provisions exist to provide for general secrecy.
Under the ICC Rules, when only the same parties are involved
in cases for consolidation, the concern for information leakage
is minimal concerning parties to the new case. In ICC
arbitrations, secrecy is up to the parties’ agreement. Article
20(7) only states: “The Arbitral Tribunal may take measures for
protecting trade secrets and confidential information.”
A protective order under the ICC Rules is not intended to give
confidentiality inside the proceedings, but only from outsiders.
This is known as relative confidentiality.177
Under the Swiss Rules additional parties can be added, creating
a potential migration of information. The Swiss Rules are more
concerned with secrecy than are other rules. Article 43(1) Swiss
Rules provides for secrecy as default.
175
176
177
Kyriaki Noussia, Confidentiality in International Commercial Arbitration: A
Comparative Analysis of the Position under English, US, German and French
Law (Springer, Berlin, 2010), 39 et seq.
Turner and Mohtashami, A Guide to the LCIA Arbitration Rules, 9.06;
Noussia, Confidentiality in International Commercial Arbitration, 40 et seq.
Yves Derains, “Evidence and Confidentiality,” in Confidentiality in
Arbitration, ICC 2009 Special Supplement (Paris, 2009), 67.
55
“Unless the parties expressly agree in writing to the
contrary, the parties undertake as a general principle to
keep confidential all awards and orders as well as all
materials submitted by another party in the framework
of the arbitral proceedings not otherwise in the public
domain, save and to the extent that a disclosure may be
required of a party by a legal duty, to protect or pursue
a legal right or to enforce or challenge an award in
legal proceedings before a judicial authority. This
undertaking also applies to the arbitrators, the tribunalappointed experts, the secretary of the arbitral tribunal
and the Chambers.”
No specific rule on secrecy in consolidated proceedings exists.
This seems odd, as the Swiss Rules are more secrecy conscious
and at the same time are more vulnerable to leakage of
information. Under the Swiss Rules article 4(1)(s.2) new parties
may be added by consolidation. This opens up the possibility of
more persons having access to the information than previously
contemplated, specifically if more than one contract is
concerned. This analysis will address secrecy in more detail
infra in subchapter 6.1.
4.9
Costs
Neither the ICC Rules nor the Swiss Rules make special
provisions for the allocation of costs in consolidated cases. The
ordinary rules apply.
ICC Rule article 31(2) provides:
“The Court may fix the fees of the arbitrators at a
figure higher or lower than that which would result
56
from the application of the relevant scale should this be
deemed necessary due to the exceptional circumstances
of the case. Decisions on costs other than those fixed by
the Court may be taken by the Arbitral Tribunal at any
time during the proceedings.” (Emphasis added)
Swiss Rule article 40(1) provides:
“Except as provided in paragraph 2, the costs of
arbitration shall in principle be borne by the
unsuccessful party. However, the arbitral tribunal may
apportion each of such costs between the parties if it
determines that apportionment is reasonable, taking
into account the circumstances of the case.” (Emphasis
added)
The issue of costs will be further addressed infra in section
13.2.2.
4.10 Connection Between Cases
Consolidation is usually attempted when cases share a
connection. The extent of this required connection is not
uniformly defined, as described supra in chapter 3. This
required connection will also play an important role for the
remainder of this analysis.
4.10.1
ICC Rules
The connection required for consolidation under article 4(6)
ICC Rules is rather strict: The same parties must be involved in
57
both cases,178 and the same legal relationship must be
concerned.179
The new rule 10 is more inclusive, but also requires strict
connectivity. No additional connection is required when all
claims are made under the same agreement, which would tend
to supply a strong connection. When different agreements are
the subject of claims to be consolidated, 10(c) ICC Rules
imposes three requirements: the same parties, the same legal
relationship, and compatible agreements.
The first two are also found in the old ICC rule, while the third
reflects ICC practice as it referred to language and seat.
Compatibility of clauses will be discussed infra.
In addition, the ICC takes into account the subsequent will of
the parties as indicated by the choice of arbitrators for all
proceedings.
4.10.1.1 Parties
By far the most common reason for the ICC Court to reject an
application for consolidation is non-satisfaction of identical
parties.180 That requirement can sometimes appear restrictive in
178
179
180
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, notes 4-67; Reiner / Jahnel; ICC Schiedsordnung Pierre A. Karrer,
“Internationale Schiedsordnung der Schweizerischen Handelskammer,” in
Institutionelle Schiedsgerichtsbarkeit Kommentar, ed. Rolf A. Schütze, 2nd
ed. (Cologne: Carl Heymanns Verlag, 2011), note 19; Reiner and Jahnel,
“ICC-Schiedsgerichtsordnung,” 19 Here it is interesting to note the overlap
between e.g. the group of companies doctrine.
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, notes 4-67; Reiner / Jahnel; ICC Schiedsordnung Karrer,
“Internationale Schiedsordnung der Schweizerischen Handelskammer,” 19;
Reiner and Jahnel, “ICC-Schiedsgerichtsordnung,” 19.
It has been suggested, that this is even narrower, requiring the same
“economic transaction”. Whitesell, “Multiparty Arbitration: The ICC
International Court of Arbitration Perspective,” 6.29 and 6.31.
58
situations where two parties are intricately related. Doctrines
such as the group of companies doctrine are not accepted.181
Case law confirms this restrictive view. The ICC refused to
consolidate three arbitrations in which all of the parties to the
first two arbitrations were involved in the third arbitration
because the parties in the first two cases were not identical.182
In two arbitrations filed in 2008, the parties were closely related
but not identical. While the respondents were identical in both
cases, the claimants were slightly different members of the same
group of companies with the same corporate address but had
different names and different company identification
numbers.183
The ICC refused to consolidate when the respondents to both
cases were not the same, even though the group of companies
doctrine was argued.184
This means that the ICC will not join the proceedings when
additional parties join compared to another case.185 For
example, if case A is between parties Elma Co., Fido Inc., and
Guido Ltd., while case B is between parties Elma Co., Fido Inc.,
Guido Ltd., and Halo S.A., the cases cannot be consolidated.
181
182
183
184
185
Greenberg, Feris, and Albanesi, “Consolidation, Joinder, Cross-Claims,
Multiparty and Multicontract Arbitrations: Recent ICC Experience,” 164;
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, notes 4-72.
Greenberg, Feris, and Albanesi, “Consolidation, Joinder, Cross-Claims,
Multiparty and Multicontract Arbitrations: Recent ICC Experience,” 164.
Ibid., 165.
Whitesell, “Multiparty Arbitration: The ICC International Court of Arbitration
Perspective,” 6.36.
Ibid.; Reiner and Jahnel, “ICC-Schiedsgerichtsordnung,” 4-19.
59
The ICC Court does consider the same parties to be involved
even when groups of claimants and respondents are not
identical, i.e., the roles are interchangeable,186 as long as no
additional parties are involved. It thus makes no difference if
case A was between Elma Co. and Fido Inc., versus Guido Ltd.,
while case B was between Elma Co., versus Fido Inc. and
Guido Ltd.
This is now different, when the same contact forms the basis of
all arbitrations, as indicated in article 10(b) ICC Rules. The
requirement stays intact, when different underlying agreements
are concerned as stated in article 10(c) ICC Rules.
4.10.1.2 Legal Relationship
The requirement of “connection with a legal relationship” is a
more undefined term. It may include a legal or factual
connection. It has been suggested that this means the same
economic transaction in the ICC context.187 Unfortunately, this
is a vague term as well and must be regarded in light of
previous cases.
The same legal transaction was found to exist when two
separate agreements between the same parties, signed the same
day and relating to products with the same definition, were
subject to a dispute. In both cases the matter turned on whether
the claimant had terminated the contracts. Relief sought was
identical and most of the evidence involved both contracts. 188
186
187
188
Michael W. Bühler and Sigvard Jarvin, “The Arbitration Rules of the
International Chamber of Commerce (ICC),” in Practitioner’s Handbook on
International Commercial Arbitration, ed. Frank-Bernd Weigand, 2nd ed.
(Oxford: Oxford University Press, 2009), note 15.270.
Yves Derains and Eric A. Schwartz, A Guide to the ICC Rules of Arbitration,
2nd ed. (The Hague: Kluwer Law International, 2005), 74.
Whitesell, “Multiparty Arbitration: The ICC International Court of Arbitration
Perspective,” 6.34; Reiner and Jahnel, “ICC-Schiedsgerichtsordnung,” 4-19.
60
In a different instance, the ICC consolidated two cases based on
the same project, when one claim was based on the original
contract and the second on the amended contract.189
Under the new rule 10, this requirement only remains for cases
of different underlying contracts, as a connection is presumed
for the same contract.
Both requirements will be addressed further in this analysis.
4.10.2
Swiss Rules
Requirements for consolidation under the Swiss Rules are very
few. Chambers must take into account all circumstances,
including the links between the two cases and the state of
advancement of the existing proceedings when consolidating
cases.190 PETER suggests that criteria for consolidation will be
up to Chambers to define.191
Since the inception of the Swiss Rules, the Swiss Chambers
experienced fewer than 20 cases in which consolidation was
even an issue.192 Sufficient detail for analysis of a practice was
not available.
189
190
191
192
Whitesell, “Multiparty Arbitration: The ICC International Court of Arbitration
Perspective,” 6.35.
Wolfgang Peter, “Die neue Schweizerische Schiedsordnung - Anmerkungen
für die Praxis,” Neue Zeitschrift für Schiedsverfahren 2004 (2004): 60;
Meyer-Hauser and Vock, “Schweizerische Schiedsordnung,” 56; Peter,
“Some Observations on the Swiss Rules of International Arbitration,” 5.
Peter, “Some Observations on the Swiss Rules of International Arbitration,” 5.
Interview on 8 April 2010, not all of these cases were forced consolidations.
Only 4 cases were in fact consolidated. According to a telephone conference
with Ms. Veronique Schlaepfer, Chairwomen of the National Arbitration
Committee of the Swiss Chambers’ Court of Arbitration and Mediation, on 12
April 2010, between 2-5 cases had occurred in Geneva as of 2010.
61
Some have argued that arbitration is also based on flexibility
and the expertise of arbitrators, so that any rules too detailed
contravene the nature of arbitration.193 This author propounds,
however, that there must be balance between flexibility and
predictability, so as to avoid arbitrariness.194
Unfortunaltely the proposed new rule 4(1) Swiss Rules does not
require a legal connection either. The required connection will
be discussed in detail infra in subsections 5.4. and 5.5. of this
analysis.
4.11 Procedural
Adjustments
in
the
Consolidated Case
Consolidation does not only involve the decision on
consolidation itself. The unification of two previously separate
proceedings requires certain adjustments.195 The arbitrators who
have not heard the previous stages must be informed.
Furthermore, not all parties have had the opportunity to be
heard on every issue, so that certain allowances must be made.
Many procedural difficulties can be avoided when consolidation
occurs in the early stages of both proceedings.
The Rules of both the ICC and the Swiss Chambers are silent
regarding explicit provisions relating to procedural adjustments
193
194
195
Xavier Favre-Bulle, “Are Arbitration Proceedings Still Exclusively Reserved
for Parties?,” in Towards a Uniform International Arbitration Law?, ed. Anne
Véronique Schlaepfer, Philippe Pinsolle, and Louis Degos (Huntington, NY:
Juris Publishing, 2005), 241 et seq.
No pun intended.
Speaking of multi-party arbitration: Girsberger, “Pitfalls in Swiss Arbitration
Agreements,” 101. The same reasoning applies, even when only the same two
parties are involved.
62
following consolidation. General guidelines for arbitrators are
of little assistance.196
Under the ICC Rules, the panel has discretion to decide the
procedure within the bounds of article 15(2) ICC Rules:
“In all cases, the Arbitral Tribunal shall act fairly and
impartially and ensure that each party has a reasonable
opportunity to present its case.”
In short, fairness, impartiality and the right to be heard are the
guideposts for arbitrators.
Concerning consolidation, the Swiss Rules are equally silent on
the subject of the conduct of the proceedings after
consolidation. Commentators of article 4 have attempted to give
guidance, which does not prove overly helpful. KARRER states
that the panel decides the details of how to proceed after the
consolidation.197
Article 15 Swiss Rules gives arbitrators discretion for the
conduct of the proceeding.
“1. Subject to these Rules, the arbitral tribunal may
conduct the arbitration in such manner as it considers
appropriate, provided that it ensures equal treatment of
the parties and their right to be heard.
(. . .)
196
197
In all fairness, institutional rules rarely treat the conduct of the proceedings as
such.
Karrer,
“Internationale
Schiedsordnung
der
Schweizerischen
Handelskammer,” 4.
63
6. All participants in the arbitral proceedings shall act
in accordance with the requirements of good faith.”
(Emphasis added)
Swiss Rules attempt to avoid repetition. Speaking about
replacement of arbitrators, KARRER believes that a review of
appropriate protocols can be sufficient.198
As neither of the sets of rules provide much guidance to the
stressed arbitrator, this analysis will move on to interpreting the
requirements provided by the lex arbitri and the laws of the
enforcement countries.199 Parties must be given due process of
law, which includes the right to be heard and the right to equal
treatment.200 This will be discussed infra in chapters 11 and 12.
4.12 Summary
Many important issues concerning consolidation remain
unaddressed in both sets of Rules. Nevertheless, concerning the
ICC Rules it has been suggested that they “(. . .) work tolerably
well in practice.”201
From a practical standpoint the institution seems best placed to
know of potential cases suitable for consolidation as it receives
and administers them.202 Each institution provides that the
198
199
200
201
202
Ibid., 14-2.
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, notes 12-31.
Article 18 UNCITRAL Model Law, article 15(1) UNCITRAL Arbitration
Rules, 15(2) ICC Rules, article 182(3) SPILA, § 1042(1) GCCP.
John Marrin, “Multiparty Arbitration in the Construction Industry,” in
Multiple Party Actions in International Arbitration, ed. Permanent Court of
Arbitration (New York: Oxford University Press, 2009), note 17.29.
Of course this is not true to the same extent in all institutions. While the ICC
is included in all communications, the Swiss Chambers have, true to the Swiss
tradition of decentralization, different administrative locations, which might
not communicate. In addition the Swiss Chambers are not copied on all
communications. This federalism is somewhat eased by the mandatory
involvement of the Special Committee.
64
choice of arbitrators for case B is nonexistent and that the first
panel will assume the second case. Neither institution provides
specifically adjusted rules for costs, procedural adjustments,
secrecy, seat or language. The rules as to initiation procedures,
requirements, and timing of consolidation differ substantially
between the ICC Rules and the Swiss Rules. The Swiss Rules
are far more inclusive than the ICC Rules and can accommodate
many more situations.
From the next chapter on, this analysis will face the task of
putting these rules in the context of the chosen jurisdictions and
thus into practice. Chapter 5 will address one of the central
topics in, and the basis of, arbitration: consent.
65
5
Consent to Consolidation
A fundamental aspect of arbitration is that it is consent-based.203
This means that parties are free to agree on their method and
procedure204 of dispute resolution.205 This principle is called
party autonomy and is still the principle basis of arbitration.206
Party autonomy gives arbitration both its legitimacy and its
boundaries.207 Only those disputes can be arbitrated that the
parties have agreed to arbitrate. Consent to arbitration is a
waiver of the right of access to the courts.208 Beyond the scope
of the party agreement lies the realm of governmental judicial
authority.
Party autonomy has limits.209 Party preferences have always
been weighed against other concerns, such as due process or
203
204
205
206
207
208
209
Richard Garnett et al., A Practical Guide to International Commercial
Arbitration (Dobbs Ferry, N.Y: Oceana Publications, 2000), 3.
Exemplum gratia article 182(1) SPILA, § 1042(4) GCCP, article 15(1) ICC
Rules, article 15(1) UNCITRAL Rules and others.
Markus A. Petsche, The Growing Autonomy of International Commercial
Arbitration, Beiträge zum Internationalen Wirtschaftsrecht (Munich: Sellier
European Law Publishers, 2005), 16.
Lew, “Achieving the Dream: Autonomous Arbitration?,” 457 Note 20-10;
Girsberger and Voser, International Arbitration in Switzerland, note 23;
Lionnet and Lionnet, Handbuch der internationalen und nationalen
Schiedsgerichtsbarkeit:
Systematische
Darstellung
der
privaten
Handelsschiedsgerichtsbarkeit für die Praxis, 54; Pryles and Waincymer,
“Multiple Claims in Arbitration Between the Same Parties,” 327; Weigand
and Baumann, “Introduction,” 1.172; Gerald Ghikas, “KompetenzKompetenz: A Principle of Law or an Agreement,” VJ 14 (2010): 129; KarlHeinz Böckstiegel, “Party Autonomy,” in Handbook on International
Arbitration and ADR, ed. Thomas E. Carbonneau (Huntington, N.Y: JurisNet,
2006), 115 - 126.
Jaime Dodge Byrnes and Elizabeth Pollman, “Arbitration, Consent and
Contractual Theory: The Implications of EEOC v. Waffle House,” Harvard
Negotiation Law Review 8 (2003): 289; In Germany party autonomy is
derived from article 92 GBL. Hanns Prütting, “Schiedsgerichtsbarkeit und
Verfassungsrecht,” in Grenzüberschreitungen - Beiträge zum Internationalen
Verfahrensrecht und zur Schiedsgerichtsbarkeit. Festschrift für Peter
Schlosser zum 70. Geburtstag., ed. Birgit Bachmann et al. (Tübingen: Mohr
Siebeck, 2005), 708.
Georgios Petrochilos, Procedural Law in International Arbitration (Oxford
Univ Press, 2004), note 4.11.
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, notes 0-17 et seq.; Turner and Mohtashami, A Guide to the LCIA
Arbitration Rules, 5.04 speaking of the LCIA Rules; Berger and Kellerhals,
Internationale und interne Schiedsgerichtsbarkeit in der Schweiz, note 11.
66
public policy.210 Party autonomy is subject to mandatory laws of
the lex arbitri,211 be they procedural or substantive.212 Which
laws are mandatory depends on each jurisdiction.213 Generally
speaking, fundamental rights are violated when the weaker
party is forced into a disadvantage which is no longer tolerable
by the legal system.214
Speaking about forcible consolidation seems to be an inherent
contradiction. As willing as courts and commentators are to
enter into a debate about consolidating arbitrations, many
authorities have traditionally been hesitant to require
consolidation without the explicit consent of the parties.215 Even
so, forcible consolidation and consent as concepts can be
reconciled under certain conditions. In principle, the same
210
211
212
213
214
215
Marc Blessing, “Mandatory Rule of Law versus Party Autonomy in
International Arbitration,” Journal of International Arbitration 14 (1997): 23;
Donald Francis Donovan and Alexander K. A. Greenawalt, “Mitsubishi After
Twenty Years: Mandatory Rules Before Courts and International Arbitrators,”
in Pervasive Problems in International Arbitration, ed. Loukas A. Mistelis
and Julian D. M. Lew (Alphen aan den Rijn: Kluwer Law International,
2006), 11.
María Elena Alvarez de Pfeifle, Der Ordre Public-Vorbehalt als
Versagungsgrund
der
Anerkennung
und
Vollstreckbarerklärung
internationaler Schiedssprüche unter Berücksichtigung des Deutschen,
Schweizerischen, Französischen Und Englischen Rechts sowie des
UNCITRAL-Modellgesetzes (Frankfurt am Main: Peter Lang, 2009), 205;
Michael Kronenburg, Vollstreckung ausländischer Schiedssprüche in den
USA: Die Rechtsprechung US-Amerikanischer Gerichte (Frankfurt am Main:
Peter Lang, 2001), 325; Blessing, “Mandatory Rule of Law versus Party
Autonomy in International Arbitration,” 23; Donovan and Greenawalt,
“Mitsubishi After Twenty Years: Mandatory Rules Before Courts and
International Arbitrators,” 11; Girsberger and Voser, International Arbitration
in Switzerland, note 667.
Poudret and Besson, Comparative Law of International Arbitration, note 545
et seqq.; Weigand and Baumann, “Introduction,” 1.228.
Weigand and Baumann, “Introduction,” 1.229. Mandatory laws are the
opposite of default rules. While both are outside the contract, mandatory laws
must be observed in every case and are usually designed to protect the public
interest rather than the interest of the individual, while default rules only need
be observed in cases when the contract does not provide.
See generally Florian Nikolaus Rehm, Die Schiedsgerichtsbarkeit im
Rechtssystem (Baden-Baden: Nomos, 2009), 28 et seqq.
Fritz Nicklisch, “Multi-Party Arbitration and Dispute Resolution in Major
Industrial Projects,” Journal of International Arbitration 11, no. 4 (1994): 59;
Strong, “The Sound of Silence: Are U.S. Arbitrators Creating Internationally
Enforceable Awards When Ordering Class Arbitration in Cases of Contractual
Silence or Ambiguity?,” 1039. That hesitancy may be changing.
67
reasoning applies as with forcing a party to honor an arbitration
agreement previously made.
5.1
Applicable Law
The following analysis wishes to be of practical use. The seat of
a fictitious consolidated arbitration is somewhere in
Switzerland, the award is then to be enforced in Germany and
the United States. These choices have practical implications.
The law applied to arbitral procedure is the lex arbitri.216 What
content the lex arbitri has is determined, unless chosen by the
parties,217 by the law applicable to the substance of the
contract,218 or the law of the seat.219 The seat retains great
importance for the arbitration in any case,220 as it defines the
nationality of the award221 and determines which courts have
216
217
218
219
220
221
Poudret and Besson, Comparative Law of International Arbitration, 112;
Nigel Blackaby et al., Redfern and Hunter on International Arbitration, 5th
ed. (Oxford: Oxford University Press, 2009), note 3.07. Lex arbitri
encompasses all rules and regulations applicable to the arbitration.
This choice is to be determined by interpretation. This analysis presumes there
is no choice explicit or implicit, so that default rules are applied.
Blackaby et al., Redfern and Hunter on International Arbitration, note 3.10.
For a detailed analysis see e.g. Julian D. M. Lew, The Law Applicable to the
Form and Substance of the Arbitration Clause, ICCA Congress Series No. 9:
Improving The Efficiency of Arbitration Agreements and Award: 40 Years of
Application and the New York Convention (Paris: International Council for
Commercial Arbitration - ICCA, May 3, 1998), para. 136.
Claude R. Thomson and Annie M. K. Finn, “Managing an International
Arbitration - A Practical Perspective,” Dispute Resolution Journal 60, no. 2
(2005): 4; August Reinisch, “Die internationale Handelsgerichtsbarkeit und
andere Formen der Streitbeilegung im internationalen Wirtschaftsrecht,” in
Internationales Wirtschaftsrecht (Berlin: de Gruyter Recht, 2009), note 38;
Strong, “The Sound of Silence: Are U.S. Arbitrators Creating Internationally
Enforceable Awards When Ordering Class Arbitration in Cases of Contractual
Silence or Ambiguity?,” 1064; Klaus Sachs and Torsten Lörcher, “§ 1043 Place of Arbitration,” in Arbitration in Germany: The Model Law in Practice,
ed. Karl-Heinz Böckstiegel, Stefan M. Kröll, and Patricia Nacimiento (Kluwer
Law International, 2008), note 1; Girsberger, “Pitfalls in Swiss Arbitration
Agreements,” 98; Justus Wilke, Interessenkonflikte in der internationalen
Schiedsgerichtsbarkeit:
Unparteilichkeit,
Unabhängigkeit
und
Offenlegungspflichten / vorgelegt von Justus Wilke (Berlin: dissertation.de,
2006), 162; Derains and Schwartz, A Guide to the ICC Rules of Arbitration,
200.
Nacimiento, “Konfliktlösung nach allgemeinen Schiedsordnungen,
insbesondere ICC, AAA, und DIS,” 788.
68
jurisdiction during the arbitration.222 Absent contractual choice,
the conflicts of laws of the seat also determines which
procedural law applies to the arbitration.223 Article 176(1)
SPILA states that it applies to international arbitrations with a
seat in Switzerland.
In Switzerland, two different laws pertain to arbitration; the
SCCP applies to domestic arbitration,224 while chapter 12
SPILA applies to international arbitration.225 Even though
adopted roughly three years after the UNCITRAL Model Law
was accepted by the United Nations, SPILA does not implement
the UNCITRAL Model Law.226 Article 182(2) SPILA permits a
choice by the panel. This author applies the law of the seat, i.e.,
Swiss procedural law, as stated supra in section 1.3.2.
The hierarchy of applicable rules to the arbitral procedure
consists of the mandatory laws of the lex fori,227 agreement of
the parties,228 the applicable institutional rules,229 procedural
222
223
224
225
226
227
228
229
Instead of many see: Blackaby et al., Redfern and Hunter on International
Arbitration, note 3.67 et seqq.
Rüede and Hadenfeldt, Schweizerisches Schiedsgerichtsrecht nach Konkordat
und IPRG, 199; Filip De Ly, “Conflicts of law in international arbitration - an
overview,” in Conflict of Laws in International Arbitration, ed. Franco Ferrari
and Stefan Kröll (Sellier European Law Publ., 2010), 7.
On 1.1.2011 the Swiss Civil Procedure Code replaced the former
Intercantonal Concordat.
See generally Peter Probst, Das Verhältnis zwischen dem Konkordat über die
Schiedsgerichtsbarkeit und dem 12. Kapitel IPRG (Zurich: Schulthess, 1999).
Ibid., 11; Poudret and Besson, Comparative Law of International Arbitration,
note 61; Bernhard Meyer-Hauser, “The Swiss Rules of International
Arbitration - Five Years of Experience,” in The Swiss Rules of International
Arbitration - Five Years of Experience, ed. Rainer Füeg (Basel: Swiss
Chambers’ Court of Arbitration and Mediation, 2009), 10; Peter, “Some
Observations on the Swiss Rules of International Arbitration,” 1.
Turner and Mohtashami, A Guide to the LCIA Arbitration Rules, 5.25.
Strong, “The Sound of Silence: Are U.S. Arbitrators Creating Internationally
Enforceable Awards When Ordering Class Arbitration in Cases of Contractual
Silence or Ambiguity?,” 1072.
If institutional rules are incorporated into the agreement, they take precedence
over the statutory default rules. Gerhard Wagner, Ҥ 1027 - Loss of Right to
Object,” in Arbitration in Germany: The Model Law in Practice, ed. KarlHeinz Böckstiegel, Stefan M. Kröll, and Patricia Nacimiento (Kluwer Law
International, 2008), note 6; Blackaby et al., Redfern and Hunter on
International Arbitration, note 3.42.
69
orders by the panel, and the non-mandatory lex fori.230 These
together form the lex arbitri.231 The lex arbitri encompasses all
provisions governing the arbitration, from the validity of the
agreement to the assistance of the courts.232 Party agreement
only prevails over non-mandatory laws.233
Arbitrators need to know whether a particular principle of law is
considered mandatory or is simply a default rule, since no
derogations from the former are permitted.234
Mandatory laws, as well as the public policy of the countries
treated in this analysis, encompass certain human rights, in
specific the right to due process and access to the courts.
Governments are the primary addressees of the conventions on
230
231
232
233
234
Here Anglo-American and European theories differ slightly. While European
countries are more likely to accept institutional rules as governing, US courts
prefer to apply national procedural law of the seat (lex arbitri). Matti S.
Kurkela and Hannes Snellman, Due Process in International Commercial
Arbitration (Dobbs Ferry, New York: Oceana Publications, 2005), 25; Wilke,
Interessenkonflikte in der internationalen Schiedsgerichtsbarkeit, 96 et seq.;
George A. Bermann, “Building the Civilization of Arbitration: Ascertaining
the Parties’ Intentions in Arbitral Design,” Penn State Law Review 113
(2009): 113; Garnett et al., A Practical Guide to International Commercial
Arbitration, 21; Szuts v. Dean Witter Reynolds, Inc., 931 F.2d 830, 831 et seq.
(11th Cir., USA 1991).
This author does not wish to make a contribution to the ongoing debate over
what constitutes lex arbitri or lex fori, but simply wishes to establish the
parameters of the terminology used herein. For a comprehensive overview see
Blackaby et al., Redfern and Hunter on International Arbitration, note 3.39 et
seqq.; Poudret and Besson, Comparative Law of International Arbitration,
note 112 et seqq.
Bernhard Berger and Franz Kellerhals, International and Domestic
Arbitration in Switzerland, 2nd ed. (London: Sweet & Maxwell/Thomson
Reuters, 2010), note 376; Turner and Mohtashami, A Guide to the LCIA
Arbitration Rules, note 5.24.
Poudret and Besson, Comparative Law of International Arbitration, note 249;
Karsten Thorn and Walter Grenz, “The effect of overriding mandatory rules
on the arbitration agreement,” in Conflict of Laws in International Arbitration,
ed. Franco Ferrari and Stefan Kröll (Sellier European Law Publ., 2010), 193.
Donovan and Greenawalt, “Mitsubishi After Twenty Years: Mandatory Rules
Before Courts and International Arbitrators,” 1 et seqq.; Strong, “The Sound
of Silence: Are U.S. Arbitrators Creating Internationally Enforceable Awards
When Ordering Class Arbitration in Cases of Contractual Silence or
Ambiguity?,” 1064.
70
human rights.235 For example, article 35(3) of the Federal
Constitution of the Swiss Confederation states:
“The authorities shall ensure that fundamental rights,
where appropriate, apply to relationships among
private persons.”
Regardless of which opinion one follows as to whether an
arbitral panel must give effect to human rights conventions,236
an arbitral panel wishing to render an enforceable award should
be aware of the public policy implications of the human rights
conventions on the enforceability of the award.237 The influence
of human rights is limited mainly to the procedural guarantees
in article 6(1) ECHR238 or the article 8 American Convention on
Human Rights.239
The validity of the agreement and the procedures performed
there under are determined solely by the lex arbitri. A
proceeding which has observed the lex arbitri cannot be refused
recognition or enforcement under the NYC unless following the
lex arbitri would result in an award the enforcement of which
235
236
237
238
239
Petrochilos, Procedural Law in International Arbitration, note 4.07.
Pro applicability Ben Steinbrück, Die Unterstützung ausländischer
Schiedsverfahren durch staatliche Gerichte: Eine rechtsvergleichende
Untersuchung des Deutschen, Österreichischen, Englischen, Schweizerischen,
Französischen und US-Amerikanischen Schiedsrechts (Tübingen: Mohr
Siebeck, 2009), 57; Lionnet and Lionnet, Handbuch der internationalen und
nationalen Schiedsgerichtsbarkeit: Systematische Darstellung der privaten
Handelsschiedsgerichtsbarkeit für die Praxis, 95; Christoph Müller,
International Arbitration: A Guide to the Complete Swiss Case Law
(Unreported and Reported) (Cologne: O. Schmidt, 2004), 6; Petrochilos,
Procedural Law in International Arbitration, note 4.96; Poudret and Besson,
Comparative Law of International Arbitration, note 86; contra: Lew, Mistelis,
and Kröll, Comparative International Commercial Arbitration, notes 5-74;
SFCD 117 Ia 166 (Swiss Federal Court 1991).
Thorn and Grenz, “The effect of overriding mandatory rules on the arbitration
agreement,” 199 et seqq. Concerning the arbitrator’s duty to issue an
enforceable award see infra chapter 10.
Poudret and Besson, Comparative Law of International Arbitration.
American Convention on Human Rights, O.A.S.Treaty Series No. 36, 1144
U.N.T.S. 123, entered into force July 18, 1978, reprinted in Basic Documents
Pertaining to Human Rights in the Inter-American System,
OEA/Ser.L.V/II.82 doc.6 rev.1 at 25 (1992).
71
violated the public policy of the enforcement country.240
Mandatory laws of the enforcement country are only relevant
insofar as they reach the level of public policy.241 This will be
addressed further infra in subchapter 9.6 and chapter 12. This
analysis shall now turn to whether an agreement to consolidate
by choosing the ICC or Swiss Rules is valid.
5.2
Incompatible Clauses
In cases of a single arbitration agreement, incompatible clauses
cannot occur. In multi-contract situations, there are two
arbitration clauses to consider. When two arbitration clauses
contain incompatibilities, these would supersede the
institutional rules permitting consolidation by indicating
opposition thereto by the parties.242 If parties indicated different
wishes for different arbitration clauses, consolidation would not
only be unforeseeable but also amount to a violation of party
agreement.
The current practice of the ICC requires that the dispute
resolution provisions of the contracts involved must be
compatible.243 The new ICC rule 10(c) requires as much.
Conceptually speaking, there are fewer problems consolidating
proceedings if the different arbitration agreements contain
identical language.244 Indeed,
240
241
242
243
244
Patricia Nacimiento, “Article V(1)(a) NYC,” in Recognition and Enforcement
of Foreign Arbitral Awards: A Global Commentary on the New York
Convention, ed. Herbert Kronke et al. (Kluwer Law International, 2010), 224.
For further explanation see infra chapters 13.
See infra chapters 9 and 12
Leboulanger, “Multi-Contract Arbitration,” 81; Poudret and Besson,
Comparative Law of International Arbitration, note 240; Born, International
Commercial Arbitration Volume II, 2075.
Whitesell, “Multiparty Arbitration: The ICC International Court of Arbitration
Perspective,” 6.29.
Hanotiau, “Complex Multicontract-Multiparty Arbitration,” 376; Whitesell
and Silva-Romero, “Multiparty and Multicontract Arbitration: Recent ICC
Experience,” 15.
72
"it is generally legitimate to presume that by including
identical arbitration clauses in the various related
contracts, the parties intended to submit the entire
operation to a single arbitral tribunal."245
When cases are consolidated in the United States, the clauses
were compatible.246 What exactly constitutes incompatibility is
not uniformly agreed upon. BÜHLER/WEBSTER do not require
that the arbitration agreements be worded the same.247 However,
the clauses may not be significantly different.248 For LEW ET AL.
all contracts contain identical clauses249 BERGER/KELLERHALS
define incompatibility as either concurring or identical.250
Concurring means that there is no difference between the
clauses with respect to certain core features, such as applicable
rules, place of arbitration, number of arbitrators, language of
arbitration.251
Certainly, for consolidation, all parties must have agreed to the
same arbitral institution.252 By ICC practice it is not permissible
245
246
247
248
249
250
251
252
Strong, “The Sound of Silence: Are U.S. Arbitrators Creating Internationally
Enforceable Awards When Ordering Class Arbitration in Cases of Contractual
Silence or Ambiguity?,” 1041; Fouchard, Emmanuel Gaillard, and John
Savage, Fouchard Gaillard Goldman on International Commercial
Arbitration (Aspen Publ., 1999), 521.
Kazutake, “Party Autonomy in International Commercial Arbitration:
Consolidation of Multiparty and Classwide Arbitration,” 197.
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, notes 4-69.
Ibid.
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-57.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 478.
Ibid.
Justus
Wilke,
Interessenkonflikte
in
der
Internationalen
Schiedsgerichtsbarkeit:
Unparteilichkeit,
Unabhängigkeit
und
Offenlegungspflichten (Berlin: dissertation.de, 2006), 71; Lachmann,
Handbuch für die Schiedsgerichtspraxis, note 1369; Lionnet and Lionnet,
Handbuch der internationalen und nationalen Schiedsgerichtsbarkeit:
Systematische Darstellung der privaten Handelsschiedsgerichtsbarkeit für die
Praxis, 295 et seqq.; Blackaby et al., Redfern and Hunter on International
Arbitration, notes 3-72 et seqq.
73
to consolidate arbitrations with differing seats.253 A similar
practice is followed by the Swiss Chambers. Two different
contracts providing for two different procedures with two
different seats (though both in Switzerland) were not
consolidated by the Zurich and Geneva Chambers.254
The Swiss Federal Court decided a case in which two
companies had concluded a number of related contracts, two of
which were exclusive delivery agreements and the others
delivery agreements. All agreements contained incompatible
arbitration clauses, choosing different institutions, seats and
applicable laws.255 The panel had rejected hearing the cases
together and the Swiss Federal Court agreed that the
inconsistencies of the two contracts between the same parties
indicated that no consolidation was intended.256
This view is supported by a number of scholars, such as
BORN257 and LACHMANN.258 Other scholars expand
incompatibility even further. Incompatibility is given when the
seat, constitution of the arbitral panel or the applicable
procedure differ.259 Different seats are given even when they are
located in same country.260
253
254
255
256
257
258
259
260
Poudret and Besson, Comparative Law of International Arbitration, note 248;
Torsten Lörcher, “The Swiss Rules of International Arbitration Seen from
Abroad,” in The Swiss Rules of International Arbitration - Five Years of
Experience, ed. Rainer Füeg (Basel: Swiss Chambers’ Court of Arbitration
and Mediation, 2009), 69.
Kellerhals, “Highlights from the Arbitration Committee,” 30 et seq. Case No.
8 (numbered in timely sequence) concerning consolidation. Details were
provided during an Interview with the Zurich Chamber of Commerce on 8
April 2010.
SFCD of 29 February 2008 - 4A.452/2007 (Swiss Federal Court 2008).
Ibid., para. C. 2.5.3.
Born, International Commercial Arbitration Volume II, 2090.
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 4074.
Poudret and Besson, Comparative Law of International Arbitration, note 240;
Paul D. Friedland, Arbitration Clauses for International Contracts, 2nd ed.
(Huntington, NY: Juris Publishing, 2007), 135; Lew, Mistelis, and Kröll,
Comparative International Commercial Arbitration, notes 16-59.
See supra chapter 4.
74
The language of the proceeding may have considerable impact
on the proceedings.261 However, determining the wrong
language may only lead to setting aside of the award on
exceptional cases.262 To illustrate, this author gives a few
examples. Lack of knowledge of the language is not sufficient
to refuse recognition and enforcement,263 as language
capabilities of the parties can be adjusted through the use of an
interpreter.264 Using English as the common language of
international arbitration cannot be regarded as a ground for
refusal of recognition and enforcement.265
Different constitutions of panels are given when different
numbers of arbitrators are selected, when different
qualifications for the arbitrators are selected, or even when
different methods of choosing the arbitrators are selected.
Different applicable procedures are given when one is ad hoc
and one institutional, when one is ordinary and one is
261
262
263
264
265
Klaus Sachs and Torsten Lörcher, “§ 1045 - Language of Proceedings,” in
Arbitration in Germany: The Model Law in Practice, ed. Karl-Heinz
Böckstiegel, Stefan M. Kröll, and Patricia Nacimiento (Kluwer Law
International, 2008), note 4.
Ibid., 5; Stefan M. Kröll, “§ 1061 - Foreign Awards,” in Arbitration in
Germany: The Model Law in Practice, ed. Karl-Heinz Böckstiegel, Stefan M.
Kröll, and Patricia Nacimiento (Alphen aan den Rijn, The Netherlands:
Wolters Kluwer Law & Business, Kluwer Law International, 2007), note 76;
OLG Köln of 16 December 1992, 1993 Recht der Internationalen Wirtschaft
499, 501 (Regional Court Cologne, Germany 1992).
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 2588; Klaus Sachs
and Torsten Lörcher, “§ 1042 - General Rules of Procedure,” in Arbitration in
Germany: The Model Law in Practice, ed. Karl-Heinz Böckstiegel, Stefan M.
Kröll, and Patricia Nacimiento (Alphen aan den Rijn, The Netherlands:
Wolters Kluwer Law & Business, Kluwer Law International, 2007), note 17;
GFCD of 20 January 2003 - III ZB 6/02 Int. A.L.R. N-59; Clout Case No. 559
(2003); Patricia Nacimiento, “Article V(1)(d) NYC,” in Recognition and
Enforcement of Foreign Arbitral Awards: A Global Commentary on the New
York Convention, ed. Herbert Kronke et al. (Alphen aan den Rijn, The
Netherlands: Kluwer Law International, 2010), 294; differing: OLG Celle of
31 May 2007 - 8 Sch 06/06, XXXIII Yearbook of Commercial Arbitration 524
(Regional Court Celle, Germany 2008).
GFCD of 20 January 2003 - III ZB 6/02; OLG Celle of 2001, XXXII
Yearbook of Commercial Arbitration 303, 307 (Regional Cout Celle,
Germany 2007).
Andrés Jana, Angie Armer, and Johanna Klein Kranenberg, “Article V(1)(b)
NYC,” in Recognition and Enforcement of Foreign Arbitral Awards: A
Global Commentary on the New York Convention, ed. Herbert Kronke et al.
(Alphen aan den Rijn: Kluwer Law International, Wolters Kluwer Law &
Business, 2010), 251.
75
expedited,266 or when different institutions administer the
proceedings.
Different selection of arbitrators after the cases have
commenced is not an indicator. Subsequent absence of the wish
to consolidate does not denote lack of forseeability of
consolidation at the conclusion of the contract. 267
This author therefore concludes that in multiple contract
scenarios consolidation by reference to institutional rules is
superseded by party agreement in the following circumstances:
1) incompatible seats; 2) incompatible languages; 3)
incompatible choice of institutions; 4) incompatible choice of
procedures within the institutions; 5) incompatible applicable
law either on the merits or procedurally; and 6) different
number, qualification or selection procedures for arbitrators.268
This, however, does not mean that all compatible clauses result
in consolidation. This analysis will therefore move to a
determination on validity of the reference to consolidation. For
the remainder of this analysis, the esteemed reader should
assume that this author only speaks of scenarios with
compatible clauses unless specified otherwise.
266
267
268
This only applies when different procedures are chosen, rather than when
different procedures are applicable by operation of the rules, article 42(2)
Swiss Rules.
Differing opinion to author: Lew, Mistelis, and Kröll, Comparative
International Commercial Arbitration, notes 16-93. It will be a rare
occurrence in any case, that in the narrow time window permissible for
consolidation under the ICC Rules both sole arbitrators will have been chosen.
In the face the appointment of two different arbitrators the will of the parties
not to consolidate is so clear that the ICC is unlikely to force the issue.
Blackaby et al., Redfern and Hunter on International Arbitration, notes 3-82;
Daly, “Come One, Come All: the New and Developing World of Nonsignatory Arbitration and Class Arbitration,” 112.
76
5.3
Swiss
Law
Regarding
Validity
of
Consent to Consolidation
The SPILA provides in article 178(2):
“As to substance, the arbitration agreement shall be
valid if it complies with the requirements of the law
chosen by the parties or the law governing the object of
the dispute and, in particular, the law applicable to the
principal contract, or with Swiss law.”
Choosing this wording SPILA intends to give the greatest
possibility of validity to an agreement.269 In addition, the
principle of in favorem validitatis applies,270 once it has been
established that the parties generally wish to arbitrate.271 Article
178(2) SPILA is mandatory in itself.272 The options chosen by
article 178(2) SPILA are permissible under article V(1)(a)
NYC, which allows the determination of validity to stand if it
conforms with the standards of the law of the seat country,
failing any other agreement.273
5.3.1 Principles of Interpretation
The principles of interpretation of an arbitration agreement have
changed over the last century from restrictive to very broad.274
269
270
271
272
273
274
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 368; Werner Wenger, “Article 178 SPILA,” in International Arbitration
in Switzerland an Introduction to and a Commentary on Articles 176-194 of
the Swiss Private International Law Statute, ed. Stephen V. Berti et al. (Basel:
Helbing & Lichtenhahn, 2000), note 24.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 369. This will be explained further infra in this subchapter.
SFCD 128 III 50 (Swiss Federal Court 2001); Girsberger, “Pitfalls in Swiss
Arbitration Agreements,” 91.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 370 undecided; Girsberger and Voser, International Arbitration in
Switzerland, note 284.
Nacimiento, “Article V(1)(a) NYC,” 224.
Kurkela and Snellman, Due Process in International Commercial Arbitration,
69.
77
Nevertheless, ordinary principles of contract interpretation
apply when determining whether the parties did intend to
arbitrate.275 In construing the contract, the common intention or
will of the parties276 in light of the particular circumstances of
the case277 is sought.278
In Switzerland, the general rules of formation and interpretation
of a contract apply,279 as the Swiss Federal Court states:
“(. . .) in an international arbitration governed by
PILA, and considering the clear intent of the parties to
apply Swiss law, the arbitration clause must be
interpreted according to the Swiss rules relating to the
interpretation of contracts.
The contents of a contract are determined primarily
through subjective interpretation, namely by seeking the
true and reciprocal intent of the parties, instead of
275
276
277
278
279
SFCD of 14 June 1990, 12 ASA Bulletin 226 - 229 (Swiss Federal Court
1990); Girsberger and Voser, International Arbitration in Switzerland, note
222; Kurkela and Snellman, Due Process in International Commercial
Arbitration, 71 t is there argued that the arbitration agreement is a contract sui
generis and thus must be interpreted accordingly. Wenger, “Article 178
SPILA,” 30; SFCD 130 III 66 71 (Swiss Federal Court 2003); SFCD of 3 May
2010 - 4A_456/2009 C. 3.3 (n.d.).
Werner Wenger, “Article 186 SPILA,” in International Arbitration in
Switzerland: An Introduction to and a Commentary on Articles 176-194 of the
Swiss Private International Law Statute, ed. Stephen V. Berti et al. (Basel:
Helbing u. Lichtenhahn, 2000), note 28 whether this hypothetical will can be
expressed (solely) by choosing institutional rules shall be discussed
elsewhere.
Rolf Trittmann and Inka Hanefeld, “§ 1029 - Definition,” in Arbitration in
Germany: The Model Law in Practice, ed. Karl-Heinz Böckstiegel, Stefan M.
Kröll, and Patricia Nacimiento (Kluwer Law International, 2008), note 31;
OLG Karlsruhe of 5 June 2007 (Regional Court Karlsruhe, Germany 2007).
SFCD of 3 May 2010 - 4A_456/2009, note C. 3.3.1; SFCD 133 III 61 67
(Swiss Federal Court 2006).
SFCD of 29 February 2008 - 4A.452/2007, sec. c. 2.3 “Die Auslegung einer
Schiedsvereinbarung folgt den für die Auslegung privater Willenserklärungen
allgemein geltenden Grundsätzen. Massgebend ist in erster Linie das
übereinstimmende tatsächliche Verständnis der Parteien. Kann ein solcher
tatsächlicher Parteiwille nicht festgestellt werden, ist die Schiedsvereinbarung
objektiviert auszulegen, d.h. die Willenserklärungen sind nach dem
Vertrauensprinzip so auszulegen, wie sie vom Empfänger nach Treu und
Glauben verstanden werden durften und mussten.” ; SFCD 130 III 66, sec. E.
3.2; Berger and Kellerhals, International and Domestic Arbitration in
Switzerland, note 421.
78
relying on the inaccurate denominations or words they
may use, mistakenly or in order to disguise the true
nature of the contract (Art. 18 (1) CO).
Whenever (. . .), there are no factual certainties as to
the real and reciprocal intent of the parties or when the
court finds that one party did not understand the other’s
intent, their (presumed) intent must be determined
interpreting their statements according to the principle
of trust (so called objective interpretation), namely with
the meaning that each contractive party could and
should reasonably attribute to the statements of intent
of the other under the specific circumstances. Not only
the text and the context of the statements must be
considered for that purpose, but also the circumstances
which preceded or accompanied the stipulation of the
contract, but not the behaviourbehavior subsequently
adopted by the parties.
Finally, it must be recalled that the principle of trust
allows the attribution to a party of the objective
meaning of its statement or its behaviour, even though
this may not correspond to its intimate will.”280
The first canon of interpretation of contracts in Swiss law is the
“common actual intention” as per article 18(1) CO. This is a
subjective test. Only when this cannot be found can an objective
test be employed, seeking a presumed intention.281 This
intention is ascertained by the way the recipient was reasonably
entitled to understand it.282
280
281
282
SFCD of 5 December 2008 - 4A_376/2008 E. 7.3.1 (Swiss Federal Court
2008), translation provided by praetor.ch.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 415.
SFCD 125 III 305 308 (Swiss Federal Court 1999); Ingeborg Schwenzer,
Schweizerisches Obligationenrecht Allgemeiner Teil, 3rd ed. (Berne:
Stämpfli, 2003), note 27.41; SFCD of 3 May 2010 - 4A_456/2009, para. C.
3.3.1.
79
This analysis assumes that each contract contains a standard
arbitration clause.283 These clauses are valid as to the parties of
the respective agreement. Consolidation is referred to only via
the inclusion of the institutional rules. This analysis will
therefore move to determine whether the consolidation
reference invalidates the otherwise valid clause or is in itself
invalid. The scope of the arbitration agreement is to be
interpreted broadly.284 This presupposes that the general
agreement to arbitrate disputes arising from a certain
relationship with certain parties has been made. Therefore, the
principle of in favorem validitatis applies.285
Under Swiss law, an agreement may be invalid due to its
content, if it violates mandatory rules of law or public policy
according to article 19(2) and article 20(1) CO.286 However,
pursuant to article 20(2) CO, invalidity only affects those parts
which are offensive.287 Invalidity of the reference to
consolidation would therefore not invalidate the arbitration
agreement itself, so long as it can be determined that the parties
would have agreed to arbitration without the offending
clause.288 As a rule, the entire affected part is invalid.289
However, concerning arbitration agreements, a different
283
284
285
286
287
288
289
This analysis further presupposes the formal validity of the agreements.
Gerhard Walter, “Die Internationale Schiedsgerichtsbarkeit in der Schweiz,”
in Internationale Schiedsgerichtsbarkeit, ed. Peter Gottwald (Bielefeld:
Gieseking, 1997), 823.
Wenger, “Article 178 SPILA,” 24 et seqq.
Andreas Furrer and Markus Müller-Chen, Obligationenrecht - Allgemeiner
Teil (Zurich: Schulthess, 2008), notes 5-60 et seq.
SFCD 130 II 66 74 (Swiss Federal Cout 2003), the Federal Court applies
article 20(2) CO in analogy to uphold an arbitration agreement where the will
of the parties to submit their case to arbitration was unambiguous but the
provision relating to the appointment of the arbitrators had an impossible
content. In such a case, the invalid provision has to be interpreted teleological
in order to be valid, to be deleted without replacement or to be substituted by
a replacing state law provision; Furrer and Müller-Chen, Obligationenrecht Allgemeiner Teil, notes 5-120.
Furrer and Müller-Chen, Obligationenrecht - Allgemeiner Teil, notes 5-121.
Theo Guhl et al., Das Schweizerische Obligationenrecht: Mit Einschluss des
Handels- und Wertpapierrechts, 9th ed. (Zurich: Schulthess Juristische
Medien, 2000), notes 7-39 et seq.
80
solution is permissible.290 It may employ an interpretation to the
reference which preserves the maximum permissible content.291
The Swiss Federal Court applies article 20(2) CO in analogy to
uphold an arbitration agreement when the will of the parties to
submit their case to arbitration was unambiguous but the
provision relating to the appointment of the arbitrators had an
impossible content.292 In such a case, the invalid provision has
to be interpreted as teleological in order to be valid, to be
deleted without replacement or to be substituted by a replacing
state law provision.293
The agreement should be interpreted in a way in which the
scope of the agreement would retain validity, unless it is found
that the parties would not have concluded the agreement
without the offending provision.294 In multi-party arbitration, it
is particularly important to show that the parties have actually
specifically consented to this type of arbitration.295
Under a standard arbitration clause, it can be assumed that the
parties had generally agreed to arbitration. However, even
though the parties have agreed to arbitration under specific
rules, which is permissible, the agreement to consolidation can
still be invalid, unless it can be interpreted in a way that retains
validity.
290
291
292
293
294
295
SFCD 130 III 66, 74; Gary Born, International Commercial Arbitration
Volume I, 3rd ed. (Austin, TX: Wolters Kluwer Law & Business, 2009), 657;
Blackaby et al., Redfern and Hunter on International Arbitration, note 2.179.
Guhl et al., Das Schweizerische Obligationenrecht, notes 7-40 et seqq.; Peter
Gauch et al., Schweizerisches Obligationenrecht allgemeiner Teil ohne
ausservertragliches Haftpflichtrecht, 8th ed. (Zurich: Schulthess, 2003), notes
6-89 et seqq.
SFCD 130 III 66, 74.
Ibid.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 552.
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-3.
81
5.3.2 Consolidation Not Prohibited
In Switzerland there is no mandatory law forbidding
consolidation in international arbitration. In the contrary, some
authors support the view that under article 185 SPILA, which
deals with the cooperation of state courts, the juge d’appui
would be permitted to consolidate cases.296 However, even such
interpretation of article 185 SPILA does not amount to a
mandatory monopoly of the state judge when it comes to
consolidation.
5.3.3 Violation of the Principle of Undue Surprise
Reference to institutional rules are a reference to terms and
conditions.297 As such, these terms and conditions are subject to
review. Should certain terms and conditions be surprising to the
exent that a reasonable person should not have expected them,
the reference may be invalid.298 This requires however, that the
disadvantaged party is in some way inferior to the advantaged
party.299 In this context the principle is diffcult to apply, as no
person is yet identified as either disadvantaged or inferior.
It is also questionable whether this defense would be successful.
Consolidation is not unknown in arbitration and established in
litigation. The Swiss Rules are well known and so is its special
oddity, the particulary broad rule on consolidation. The Rules
are freely available online and elsewhere. They have been in
force for a period of 6 years at the time of writing. In this
296
297
298
299
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 534; Stephen V. Berti, “Article 185 SPILA,” in International Arbitration
in Switzerland: An Introduction to and a Commentary on Articles 176-194 of
the Swiss Private International Law Statute, ed. Stephen V. Berti et al. (Basel:
Helbing & Lichtenhahn, 2000), note 12; Girsberger and Voser, International
Arbitration in Switzerland, note 880 et seqq.
Menno Aden, Internationale Handelsschiedsgerichtsbarkeit, 2nd ed. (Beck
Juristischer Verlag, 2002), notes 8-15.
Schwenzer, Schweizerisches Obligationenrecht Allgemeiner Teil, note 28.67.
Furrer and Müller-Chen, Obligationenrecht - Allgemeiner Teil, notes 5-129 et
seqq.
82
author’s opinion it would be difficult to convince a judge or an
arbitrator deciding on jurisdiction, that the disadvantaged person
(a disadvantage would also have to be found and proven) was
reasonble in being uninformed. Most users of international
commercial arbitration
international contracts.
are
consulted
when
preparing
5.3.4 Violation of Article 27 Swiss Civil Code
Indirectly, consolidation may still violate mandatory provisions
of Swiss law. While the arbitration agreement might be valid as
such, defining one contractual relationship as a basis for
arbitration, an agreement to consolidate may enlarge this
consent in an impermissible way.
Such impermissible enlargement may be covered by the
provision on the protection of personal rights, one of the
mandatory rules in Swiss law.300 For example, article 27 CC
states that
“(n)o person may surrender his or her freedom or
restrict the use of it to a degree which violates the law
or public morals.”
Violation of this article occurs, e.g., when intensity, duration or
domination are excessive.301 In the context of the arbitration
agreement, the safeguard of the parties’ personal rights provides
that a certain amount of specificity concerning the scope of the
disputes subjected to arbitration must exist for the agreement to
300
301
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 548; Werner Wenger, “Article 354 SCCP,” in Kommentar zur
Schweizerischen Zivilprozessordnung (ZPO), ed. Thomas Sutter-Somm, Franz
Hasenböhler, and Christoph Leuenberger (Zurich: Schulthess, 2010), note 6.
Furrer and Müller-Chen, Obligationenrecht - Allgemeiner Teil, notes 5-103.
83
be valid.302 Minimum consent for the arbitration agreement
specifies the object of the dispute or the legal relationship of the
arbitration.303 An arbitration agreement that does not relate to a
defined or objectively definable legal relationship is deemed
invalid, because it creates an excessive commitment.304
A global reference to “this and future contracts” is invalid as
being too vague.305 The Swiss Federal Court stated, in this
respect, that an arbitration agreement has to relate to “existing
or determined future disputes”.306 Agreement to one contract
cannot be interpreted without further evidence as extending to
other contracts,307 even if they are related. It would be
sufficiently specific consent to non-traditional two-party oneclaim arbitration proceedings, if parties who wish to submit
several legal relationships to arbitration at the same time specify
all relationships in the clause.308 As an agreement to arbitrate is
a waiver of the right of access to the courts, parties are only
302
303
304
305
306
307
308
Alvarez de Pfeifle, Der Ordre Public-Vorbehalt als Versagungsgrund der
Anerkennung und Vollstreckbarerklärung internationaler Schiedssprüche
unter Berücksichtigung des Deutschen, Schweizerischen, Französischen Und
Englischen Rechts sowie des UNCITRAL-Modellgesetzes, 214; Berger and
Kellerhals, International and Domestic Arbitration in Switzerland, note 548;
Myriam Gehri, “Die Anfechtung internationaler Schiedssprüche nach IPRG eine Analyse der bundesgerichtlichen Rechtsprechung,” in Internationales
Zivilprozess- und Verfahrensrecht IV, ed. Karl Spühler (Zurich: Schulthess,
2005), 77 et seq.; Markus Müller-Chen and Rahel Egger, “Article 357 SCCP,”
in Kommentar zur Schweizerischen Zivilprozessordnung (ZPO), ed. Thomas
Sutter-Somm, Franz Hasenböhler, and Christoph Leuenberger (Zurich:
Schulthess, 2010), note 35.
Girsberger, “Pitfalls in Swiss Arbitration Agreements,” 90; Alvarez de Pfeifle,
Der Ordre Public-Vorbehalt als Versagungsgrund der Anerkennung und
Vollstreckbarerklärung
internationaler
Schiedssprüche
unter
Berücksichtigung des Deutschen, Schweizerischen, Französischen Und
Englischen Rechts sowie des UNCITRAL-Modellgesetzes, 214.
Alvarez de Pfeifle, Der Ordre Public-Vorbehalt als Versagungsgrund der
Anerkennung und Vollstreckbarerklärung internationaler Schiedssprüche
unter Berücksichtigung des Deutschen, Schweizerischen, Französischen Und
Englischen Rechts sowie des UNCITRAL-Modellgesetzes, 214; Berger and
Kellerhals, International and Domestic Arbitration in Switzerland, note 548;
Gehri, “Die Anfechtung internationaler Schiedssprüche nach IPRG - eine
Analyse der bundesgerichtlichen Rechtsprechung,” 77 et seq.
Wenger, “Article 178 SPILA,” 34.
SFCD 130 II 66, 69; SFCD 129 III 675 679 et seq. (Swiss Federal Court
2003); SFCD of 29 October 2008 E. 3.1 (Swiss Federal Court 2008).
Wenger, “Article 178 SPILA,” 34; Rüede and Hadenfeldt, Schweizerisches
Schiedsgerichtsrecht nach Konkordat und IPRG, 67 et seqq.
Girsberger and Voser, International Arbitration in Switzerland, note 315.
84
permitted to derogate from the governmental litigation insofar
as they can anticipate the nature of the dispute and its
importance.309
References to institutional rules are usually sufficient to apply
all procedural rules contained therein.310 According to the Swiss
Federal Court, a reference to the institutional rules is a sufficient
agreement to support application of the entire system.311 For
example, a reference to the ICC Rules is sufficient agreement
and includes the rules of appointment of arbitrators.312 The
reference to the arbitration rules of an institution is acceptable,
when interpreted in accordance with the institutions’ organs, so
long as such interpretation is not untenable or unforeseeable.313
A limitation applies. A reference is acceptable, and provides the
required specificity, so long as the application of the rules are
foreseeable for the parties. Excessive domination to the will of
another or excessive extension is avoided in these cases.
The sentiment that a general reference to institutional rules
suffices as a valid consent to consolidation in all cases possible
is held by GILLIÉRON/PITTET, POUDRET/BESSON, and
PRYLES/WAINCYMER.314 The latter propound the view that
when parties have chosen a lex arbitri or arbitral rules
containing consolidation, party agreement would not be
infringed by consolidations.
309
310
311
312
313
314
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 286.
SFCD 110 Ia 493 63 et seq. (Swiss Federal Court 1976).
Ibid.
Ibid.
SFCD 110 Ia 59 65 et seq. (Swiss Federal Court 1984).
Pryles and Waincymer, “Multiple Claims in Arbitration Between the Same
Parties,” 469; Poudret and Besson, Comparative Law of International
Arbitration, note 239; Gilliéron and Pittet, “Article 4 - Consolidation of
Arbitral Proceedings (Joinder), Participation of Third Parties,” 4.
85
BERGER/KELLERHALS also state that selection of the Swiss
Rules overcomes a lack of specific agreement.315
KARRER/STRAUB state that for one-contract multi-party
arbitrations, consent from the outset is possible and assumed,
even when not specifically mentioned.316
VOSER argues that in light of party autonomy, parties’ interests
in predictability are defeated when regulations are in place that
put parties in unknowable situations.317 She elaborates at a
different point by warning that any parties having chosen the
institutional rules could be forced to arbitrate together. At the
current figures that would mean more than 100 potential
parties.318 Along the same line BORN argues that it is one thing
for parties to agree to arbitrate under a certain set of rules with
certain parties, and quite another to agree to arbitrate with just
anybody.319 To LEW ET AL. it is similarly doubtful whether a
mere reference to a set of rules is sufficient as consent to a
certain kind of arbitration.320 MOREAU advocates that, in
addition to a reference to institutional rules, a clause linking the
different contracts is required.321
Unfortunately, none of the above authors give an in-depth
analysis referring to the lack of specificity. In order to make an
informed statement about the validity of consolidation clauses
in the ICC and Swiss Rules with respect to the forseeability of
disputes involved, this analysis needs to be more concrete.
315
316
317
318
319
320
321
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 478.
Pierre A. Karrer and Peter A. Straub, “Switzerland,” in Practitioner’s
Handbook on International Commercial Arbitration, ed. Frank-Bernd
Weigand, 2nd ed. (Oxford: Oxford University Press, 2009), note 12.25.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 413.
Ibid., 395.
Born, International Commercial Arbitration Volume II, 2072.
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-65 specifically preferring to multiparty arbitration.
Moreau, “Arbitrage liés,” 80.
86
The ICC Rules permit only the same parties in consolidated
arbitrations.322 The same is true for cases under article 4(1)(s.1)
Swiss Rules. The new ICC rule 10(c) permits different parties,
when the same contract is involved. This limits the types of
disputes a consolidated arbitration could involve considerably.
Each party knows the connections it has with the other
party(ies) and the potential conflicts which may arise with them,
when the contract is signed.
5.3.4.1
One Contract - Same Parties
In one instance of ICC arbitration, the claimant of two claims
against the same party from the same contract requested
consolidation, which was granted.323 The Zurich Chamber of
Commerce also reports cases number 3 and 10.324
In principle and simply put, Elma Inc. arbitrates in case A
against Fido Co. because of delivery of a car pursuant to
contract X; Fido Co. then initiates an arbitration in case B
against Elma Inc. for payment of the purchase price pursuant to
contract X.
The above scenario was in principle the same as under case
number 10 of the Zurich Chamber of Commerce.325
Considerable support for the proposition of the permissibility of
this type of consolidation can be had when only one contract is
involved. BERGER/KELLERHALS,326 VOSER,327 and the otherwise
322
323
324
325
326
327
See supra subchapter 4.10.
Whitesell and Silva-Romero, “Multiparty and Multicontract Arbitration:
Recent ICC Experience,” 16.
Interview with the Zurich Chamber of Commerce of 8 April 2010.
Interview with the Zurich Chamber of Commerce of 8 April 2010.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 475.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 360.
87
critical LACHMANN328 are but three supporters of this view. This
category is not contentious, as the cases could also be brought
together and the parties have already agreed to arbitrate issues
under the one contract together.329
Any claims by the claimants could have been bought together as
any counter-claims by the respondents are equally permissible
under lex arbitri. Even the permissibility of cross-claims
between respondents or claimants can no longer be doubted.330
Until recently, it was the view that the claimant determined who
was to be party to proceedings, as no provision explicitly stated
the respondents’ rights to do so.331
5.3.4.2
One Contract – Differing Parties
In pinciple, and again simply put, Elma Inc. and Fido Co.
agreed to deliver one car and one bike to Guido Ldt. and Halo
S.A. in contract X. Guido Ltd. now initiates arbitration against
Elma Inc. for delivery of the car in case A. Halo S.A. initiates
arbitration in case B against Fido Co. concerning the car as
well. Both arbitrations turn on who was to receive delivery of
the car according to the contract.
328
329
330
331
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 4073.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 475; Craig, Park, and Paulsson, International Chamber of Commerce
Arbitration, 180.
Greenberg, Feris, and Albanesi, “Consolidation, Joinder, Cross-Claims,
Multiparty and Multicontract Arbitrations: Recent ICC Experience,” 179.
While the ICC Rules are silent, ICC practice permits these claims; citing a
case of the ICC from 1995 without case No. Lew, Mistelis, and Kröll,
Comparative International Commercial Arbitration, notes 16-9 the ICC in
1995, under a similar rule, held that consent of one contract only includes
claims from one set of claimants to one set of respondents, but not any cross
claims; Wenger, “Article 186 SPILA,” 29; Hanotiau, “Complex
Multicontract-Multiparty Arbitration,” 387 et seqq.
Christopher Koch, “Judicial Activism and the Limits of Institutional
Arbitration in Multiparty Disputes,” ASA Bulletin 28, no. 2 (2010): 383 et seq.
This approach may be changing.
88
Consolidation under this category can only occur under the
Swiss Rules article 4(1)(s.2) and under the new rule 10(c) of the
ICC Rules. An occurrence of this category was case number 7
in the Zurich Chamber of Commerce. Fourteen parties in 4
cases were disputing a resolution taken in accordance with the
statutes of a business entity, which contained an arbitration
clause.332 Under the old ICC Rules, the parties to the cases to be
consolidated must be the same.333 Scholars supporting the
position that consent to consolidation should be permitted point
to the forseeability of all parties being forced to litigate together
at the conclusion of the agreement.
KLEINSCHMIDT334 and POUDRET/BESSON335 plead foreseeable
anticipation of joint proceedings. HAMANN/LENNARZ also favor
consolidation under such circumstances.336 LEW ET AL.337 along
with KARRER/STRAUB,338 MEIER,339 VOSER,340 CAPRASSE,341
SCHWARTZ,342 and HANEFELD343 assume that in scenarios where
multiple parties sign a single contract, awareness and thus
consent, of a multi-party arbitration should be assumed.
332
333
334
335
336
337
338
339
340
341
342
343
Interview with the Zurich Chamber of Commerce of 8 April 2010.
This does not mean it is impossible to arbitrate these cases together. However,
consolidation cannot occur in this situation under the ICC Rules.
Kleinschmidt, “Die Widerklage gegen einen Dritten im Schiedsverfahren,”
146.
Poudret and Besson, Comparative Law of International Arbitration, note 240.
Hartmut Hamann and Thomas Lennarz, “Parallele Verfahren mit identischem
Schiedsgericht als Lösung für Mehrparteinenkonflikte?,” Neue Zeitschrift für
Schiedsverfahren 2006, no. 6 (2006): 294 addition of parties is permissible so
long as there is an arbitration agreement between the parties.
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-8.
Karrer and Straub, “Switzerland,” 12.25.
Meier, Einbezug Dritter vor internationalen Schiedsgerichten, 222.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 355.
Oliver Caprasse, “The Setting up of the Arbitral Tribunal in Multi-Party
Arbitration,” La Revue de Droit des Affaires Internationales / International
Business Law Journal 2006, no. 2 (2006): 199.
Eric A. Schwartz, “Multi-Party Arbitration and the ICC in the Wake of
Dutco,” Journal of International Arbitration 10 (1993): 7.
Inka Hanefeld, “Germany,” in Practitioner’s Handbook on International
Commercial Arbitration, ed. Frank-Bernd Weigand, 2nd ed. (Oxford: Oxford
University Press, 2009), note 7.23.
89
RAU344 AND LIONNET/LIONNET345 state that the fact that parties
are bound by the same contract does not mean that they agree to
arbitrate jointly in a non-traditional proceeding.
The ICC Court has typically assumed, on a prima facie basis,
that it is the intention of all parties to a single contract to
arbitrate in one single proceeding.346
5.3.4.3
Multiple Contracts – Same Parties
Consolidation in this category could occur under both the ICC
(old and new) and the Swiss Rules. An occurrence of this
category under the auspices of the ICC was reported by
WHITESELL.347
Simply put, Elma Inc. agrees to sell Fido Co. a car in contract
X. Fido Co. agrees to sell a computer to Elma Inc. in contract Y.
In case A, Elma Inc. sues Fido Co. for payment under contract
Y. In case B, Fido Co. sues Elma Inc. for payment under
contract X.
Supporters of the view that this category should be consolidated
include HAMANN/LENNARZ,348 and LEW ET AL.349 Critical voices
occur more frequently in this category, requiring additional
344
345
346
347
348
349
Alan Scott Rau, “‘Consent’ to Arbitral Jurisdiction: Disputes With NonSignatories,” in Multiple Party Actions in International Arbitration, ed.
Permanent Court of Arbitration (New York: Oxford University Press, 2009),
note 3.05.
Lionnet and Lionnet, Handbuch der internationalen und nationalen
Schiedsgerichtsbarkeit:
Systematische
Darstellung
der
privaten
Handelsschiedsgerichtsbarkeit für die Praxis, 416.
Schwartz, “Multi-Party Arbitration and the ICC in the Wake of Dutco,” 7 et
seq.
Whitesell and Silva-Romero, “Multiparty and Multicontract Arbitration:
Recent ICC Experience,” 16.
Hamann and Lennarz, “Parallele Verfahren mit identischem Schiedsgericht
als Lösung für Mehrparteinenkonflikte?,” 293.
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-88.
90
criteria. The ICC Rules themselves require a connection that
will make the contracts appear to belong to the same economic
transaction.350
When the cases that are to be consolidated involve more than
one contract, the ICC Court will, in addition to the conditions
set out in Article 4(6) ICC Rules, apply the conditions derived
from its practice with respect to multi-contract arbitrations.351
BERGER/KELLERHALS also focus on the connection of the
contracts rather than on the fact that the same parties are
concerned, arguing that ordinarily an agreement to arbitrate
covers subsequent, related disputes.352
CAPRASSE believes that in cases of multi-contract arbitrations, it
must be considered if the parties intended for joint arbitration.353
HANEFELD states that in Germany, multi-contract situations will
only rarely be interpreted as interrelated and subject to the same
arbitration.354 TENCATE suggests that it may be more difficult to
find intent to arbitrate jointly when a horizontal or chain
relationship is concerned.355 GIRSBERGER/VOSER and the Swiss
Federal Court state that general arbitration clause wordings such
as “all disputes arising from or in connection with the contract”
are insufficient to give a panel jurisdiction over another contract
containing an arbitration clause or a forum selection clause.356
The argument rightly focuses on the principle ius posterior
350
351
352
353
354
355
356
See supra.
Greenberg, Feris, and Albanesi, “Consolidation, Joinder, Cross-Claims,
Multiparty and Multicontract Arbitrations: Recent ICC Experience,” 163.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 475.
Caprasse, “The Setting up of the Arbitral Tribunal in Multi-Party Arbitration,”
201.
Hanefeld, “Germany,” 7.17.
Irene M. TenCate, “Multi-Party and Multi-Contract Arbitrations: Procedural
Mechanisms and Interpretation of Arbitration Agreements under U.S. Law,”
The American Review of International Arbitration 15 (2004): 156.
Girsberger and Voser, International Arbitration in Switzerland, note 317
citing SFCD of 20 Feb. 2008 (4a 452/2007) cons. 5.1.
91
derogat priori.357 POUDRET/BESSON require parties to have
concluded the same arbitration agreement358 and reject multicontract situations. Explanations concerning forseeability are
mostly and sadly lacking again.
5.3.4.4
Multiple Contracts – Differing Parties
GREENBERG ET AL. report two cases under this category, in
which consolidation was refused by the ICC.359 Even under the
new rules, this scenario will not be possible. Under this category
the Zurich Chamber of Commerce does not report any
successful cases which did not result from party consent at the
time.360
Simply put, Elma Inc. agrees to sell a car to Fido Co. in contract
X. Guido Ltd. agrees to sell a truck to Halo S.A. Elma Inc.
arbitrates against Fido Co. in case A and Guido Ltd. arbitrates
against Halo S.A. in case B. Both contracts are identical with
identical clauses. All companies have the same address.
Consolidation under this category could occur only under the
Swiss Rules article 4(1)(s.2). To make the breadth of the Swiss
Rule article 4(1)(s.2) clear, this author would like to argue,
along with VOSER, that under the Swiss Rules article 4(1)(s.2),
however, new parties and cases can be added that are not bound
to each other by contractual relations but with any person
having a contract specifying arbitration under the Swiss Rules
as method of dispute resolution. In practice, using the numbers
provided in the Swiss Chambers statistics on the website, a
party with a Swiss Rules clause could be faced with about 200
357
358
359
360
SFCD 121 III 495 E. 5a (Swiss Federal Court 1995).
Poudret and Besson, Comparative Law of International Arbitration, note 239.
Greenberg, Feris, and Albanesi, “Consolidation, Joinder, Cross-Claims,
Multiparty and Multicontract Arbitrations: Recent ICC Experience,” 164.
Interview with the Zurich Chamber of Commerce of 8 April 2010.
92
additional parties361 per year. In the worst-case scenario, the
parties do not know the other parties at all and have never heard
from them.
Support for these kinds of consolidations lessens in comparison
to the previous category. LACHMANN criticizes the assumption
of forseeabilty as unwarranted.362 LEW/MISTELIS/KRÖLL state
that whether a multi-party arbitration can be compelled depends
on the provisions of the various contracts.363 Without this
specification it may be impossible to make an advance
determination of how many and which parties and contracts will
be involved in any given consolidated case.364
5.3.4.5
Interim Conclusion
This author considers the reference to institutional rules to be
valid with regard to the prohibition against article 27 CC. The
agreement is defined and limited as to the possibility of
consolidation itself. The parties have chosen their contractual
partners and the disputes which they are willing to arbitrate
together. Without consolidation, cases under these two
categories could be raised in one case from the outset. No right
worthy of protection will be catered to by refusing permit the
validity of the reference.
This conclusion does not mean that this author considers
consolidation under these categories to be advisable at all times.
This will be discussed infra in chapter 13. Whether the
procedures applied are permissible is not a question of validity
361
362
363
364
100 new cases on average, each at least 2 parties, not allowing for
duplications. However, these are only the cases, not the number of contracts,
containing Swiss Rules clauses, which are even higher.
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 4074.
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-38.
Girsberger and Voser, International Arbitration in Switzerland, note 362.
93
of consolidation itself. The procedures will be addressed infra in
chapters 11 and 12.
This author concludes further, that consolidation permitted
under article 4(1)(s.2) Swiss Rules creates an excessive
commitment and would be invalid. The number of possible
parties as well as the potential claims are excessive and not
foreseeable for the parties. In addition, the decision on
consolidation is made in complete discretion by Chambers,
creating excessive influence of a third party over the extent of
the commitment. It may, however, be possible to retain a
limited validity of the reference to article 4(1)(s.2) Swiss Rules,
which will be discussed infra in this chapter.
This author would like to reserve judgment with reference to
multiple contracts scenarios when the same parties are involved.
In this author’s opinion that the categorization is not sufficient
to draw a conclusion on whether commitment to consolidation
is excessive pursuant to article 27 CC.
5.4
Institutional Approach
The attempt to ensure validity chosen under the ICC Rules is to
add a requirement of connexity. In addition to its requirement of
the same parties in all proceedings to be consolidated, this
provides a fairly narrow range of cases which could be
consolidated. Parties are foreseeable and connected claims are
also limited to the same economic transaction. Absent a second
arbitration clause, these contracts would presumably fall under
the usually broad standard arbitration clauses.
Under the ICC practice, two contracts were found to have a
sufficient connection when, without the materials delivered
94
under one contract, the main contract could not be fulfilled.365
For rule 4(6) or 10(c) new rules ICC Rules to apply, the same
legal relationship means the same economic transaction.366 This
view was repeated in an interview with the current ICC Deputy
Secretary General on 25 May 2010 with the caveat that this is a
very imprecise definition. However, as some authors suggest. it
would not depend on the number of facts or issues that the cases
have in common. In case 6829 of 1992, a single legal
relationship was not found, as language of the contracts and
intention of the parties pointed to a different conclusion.367
Some provisions define the required connection as implying
“questions of law and fact in common,” adding that these
common questions “arise out of the same events or
circumstances.”368 Other texts require that there be a risk of
conflicting decisions if the matters are handled separately.369
Still others simply refer to cases concerning the same subject
matter on account of the connection between them, without
specifying the nature of this connection, and allow
consolidation whenever there are reasons that make it
desirable.370
According to LEBOULANGER, there are two situations in which
multiple contracts should be interpreted as one legal
relationship: a) when the reciprocal obligations have a common
origin, identical sources and an operational unit,371 or b) when
365
366
367
368
369
370
371
ICC Case No. 122/85 - Poland, 1989 Yearbook of Commercial Arbitration
187, 189 (ICC 1987).
Whitesell and Silva-Romero, “Multiparty and Multicontract Arbitration:
Recent ICC Experience,” 16.
ICC Case No. 6829 of 1992, XIX Yearbook of Commcercial Arbitration 167
(ICC 1994).
Izquierdo Piña, “Consolidation of Arbitral Proceedings,” 23.
Ibid.
Ibid.
Leboulanger, “Multi-Contract Arbitration,” 52 et seq.
95
the agreements are concluded on the same date, for the same
duration or for the same purpose.372
According to LEBOULANGER, a framework agreement with its
contracts, a main agreement with its ancillary agreements, and
successive or simultaneous agreements should be treated as one
transaction.373
The Swiss Rules only impose on Chambers a requirement to
take into account the connection and timing of the cases.
Neither a firm requirement nor guidance as to the required
connection exists, even though LÖRCHER suggests that the
Chamber’s taking a connection into account establishes
sufficient firmness of the requirement.374
This author is well aware that cases without connection, or with
immaterial connections as in the example given supra in
subsection 5.3.3.4 will not likely raise the question of
consolidation. However, this example is meant to show the
overly broad commitment under the Swiss Rules article
4(1)(s.2).
Alternatively, it may occur in a string sale that the sole issue is
the quality of a good, but a number of different sales contracts
and parties are involved.375 For example, a producer sells bricks
to a builder for the renovation of house. In such cases, it may
well be foreseeable that, in a dispute concerning the bricks, the
owner and the producer will both be present.
372
373
374
375
Ibid., 53 et seq.
Ibid., 78.
Lörcher, “The Swiss Rules of International Arbitration Seen from Abroad,”
68.
This occurs in the commodities trade, in which a unique fashion of dispute
resolution is permitted whereby only the original seller and the final buyer
participate in the arbitration and the other seller-buyers are bound by the
outcome of this dispute.
96
Even with more connections, it may still be unforeseeable for
the parties. It is also difficult to draw the line without guidance
from the Swiss Rules. As a connection requirement is not
available for the Swiss Rules, this author suggests an alternative
approach to retain validity and avoid violation of article 27 CC.
5.5
Alternative Approach
Whether a multi-contract multi-party (could be both, same and
differing) proceeding is possible depends on the language found
in the arbitration agreements.376 PRYLES/WAINCYMER begin the
question of permissibility of consolidation by examining the
scope of each arbitration agreement as such, not just the choice
of rules.377 This means that each agreement would be analyzed
to determine if it encompassed the disputes of the other case as
well.
Figure 1: own creation
The circles represent the scope of the jurisdiction of each
arbitral contract in each case. Only where they overlap will
consolidation be possible. The consolidation clause in the Swiss
Rules would only serve to give the procedural tool. As disputes
that could be consolidated would already be in the scope of the
376
377
Frick, International Arbitration Law Library, 230; Leboulanger, “MultiContract Arbitration,” 62 et seq.; Chiu, “Consolidation of Arbitral
Proceedings and International Commercial Arbitration,” 55 et seq.
Pryles and Waincymer, “Multiple Claims in Arbitration Between the Same
Parties,” 440 et seq.
97
permissible arbitration clause of each contract, no element of
lack of specificity would arise.
The same reasoning was already propounded by VOSER
concerning article 4(1) (s.2) Swiss Rules. VOSER advocates the
interpretation of the Swiss Rules in a way that is declaratory,
i.e., restating the arbitral panel’s power to include parties that
would be included in the original agreement.378
The provision on consolidation permits only the procedural
mechanism, but does not expand the original arbitration clause.
The claims and parties that cannot be added by interpretation of
the clause itself, or by other doctrines, such as the group of
companies doctrine, would not be able to be consolidated.
In this case the question of validity would no longer depend on
the interpretation of the rules, but solely on the clause. This
question would then become jurisdictional. If clauses were
compatible and if the both cases have congruent jurisdiction,
then the reference to consolidation is valid.
This author would like to expand this point. Some courts
consider arbitration agreements “inoperative” in multi-party
situations as a misinterpretation of article II(3) NYC.379 Some
say that contract interpretation reaches its limits when disputes
relate to several contracts.380 BORN considers the inference of
party intent with regard to arbitration as artificial, as procedural
details are rarely an issue.381 In this author’s opinion, even when
a reference to institutional rules is given, ordinary contract
378
379
380
381
Voser, “Multi-party Disputes and Joinder of Third Parties,” 396 et seq.
However, referring only to joinder. The same reasoning can apply.
For an overview see: Lew, Mistelis, and Kröll, Comparative International
Commercial Arbitration, notes 16-85.
Trittmann and Hanefeld, “Arbitration in Germany,” 32.
Born, International Commercial Arbitration Volume II, 2072.
98
construction still applies.382 This means that any contract,
including its reference to institutional rules and the breadth
intended hereunder, needs to be interpreted individually.383
While the reference to institutional rules can be indicative, it is
not determinative.
Specificity requires that a legal relationship be defined or
definable. Even an economic transaction of a number of parts
can be regarded as one legal relationship, as the same goal and
purpose is served. However, whether the transactions to be
arbitrated together do identify a legal relationship or several
different ones, cannot be determined by category alone.
Institutional rules are not reviewed in the abstract. The principle
of in favorem validitatis allows for an interpretation which
retains the validity of the clause with the jurisdictional
approach.
5.5.1 Admissible Claims and Parties
Although arbitration is a contractual matter based on party
consent,384 there are exceptions. As a rule,
"arbitrators may extend their jurisdiction to connected
agreements only if the intention of the parties and the
382
383
384
Girsberger, Voser, and Fuchs, International Arbitration in Switzerland, note
222.
This interpretation has to be performed by the arbitrators as a part of their
duty to determine jurisdiction and can be reviewed by the courts.
United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574,
582 (United States Supreme Court, USA 1960) “Arbitration is a matter of
contract and a party cannot be required to submit to arbitration any dispute
which he has not agreed so to submit.” ; Thomson-CSF, S.A. v. Am.
Arbitration Association, 64 F.3d 773, 776 (2nd Cir., USA 1995) “Arbitration
is contractual by nature (. . .).”
99
language of the relevant instruments permit such an
extension."385
The Common Law doctrine of privity of contract, which in its
pure form means that no contract can bind a third party and that
no third party can interfere with the contract,386 prohibits
extending arbitration agreements beyond the contract, except for
exceptional circumstances.387 BERGER/KELLERHALS argue that
consent under the arbitration agreements must be respected in
order to maintain party autonomy and privity of contract.388
This means that the connection is only close enough if the case
is covered by the same contract. Lack of privity of contract is a
major obstacle to consolidation.389 Extending arbitration
agreements to include non-signatories may weaken or even
destroy this important foundation of the arbitral process.390
To determine whether both cases are covered by both arbitration
clauses, the ordinary methods of interpretation and extension of
clauses over parties and claims are permitted.391
5.5.1.1
Claims
Claims that could have been brought at the same time by the
claimant are sufficiently specific.
385
386
387
388
389
390
391
Leboulanger, “Multi-Contract Arbitration,” 51; Hanotiau, “Complex
Multicontract-Multiparty Arbitration,” 378.
Olagoke O. Olatawura, “The ‘Privity to Arbitration’ Doctrine: The Withering
of the Common - Law Privity of Contract Doctrine in Arbitration Law,”
American Review of International Arbitration 16 (2005): 432.
Trittmann and Hanefeld, “Arbitration in Germany,” 36 et seqq.; Kurkela and
Snellman, Due Process in International Commercial Arbitration, 71.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 534.
S.I. Strong, “Enforcing Class Arbitration in the International Sphere: Due
Process and Public Policy Concerns,” University of Pennsylvania Journal of
International Law 2008, no. 30 (2008): 938.
Daly, “Come One, Come All: the New and Developing World of Nonsignatory Arbitration and Class Arbitration,” 122.
This topic is not covered by this analysis in detail. Information can generally
be found in works on third parties, multi-party arbitration and non-signatories
writings. It is included here only as an aside, is not limited to situations of
consolidation and merits its own analysis.
100
Counter-claims are permissible in arbitration.392 Counter-claims
are not mentioned in the SPILA but are sufficiently common in
arbitration that the parties should at least have foreseen their
potential appearance,393 unless they have provided for a
different arbitration or forum selection clause for the particular
claim.394 A case related closely enough to be a counter-claim
would not be invalid for lack of specificity.
Set-offs are permitted under the Swiss Rules article 21(5) and
generally permitted under Swiss law,395 even though SPILA is
silent on the issue. While the previous law for domestic
arbitration could not be applied in absence of regulations in the
SPILA,396 the SCCP may possible supply some guidance397 as
set-offs are permissible under article 377 SCCP, which
corresponds to article 21(5) Swiss Rules.398 The final word on
permissibility of set-offs has not yet been spoken.399
392
393
394
395
396
397
398
399
Dolf Weber, “Wider den Verlust des Betellungsrechts bei Nichteinigung der
Mehrparteiengegenseite auf einen Schiedsrichter,” in Grenzüberschreitungen
Beiträge
zum
Internationalen
Verfahrensrecht
und
zur
Schiedsgerichtsbarkeit. Festschrift für Peter Schlosser zum 70. Geburtstag,
ed. Birgit Bachmann et al. (Tübingen: Mohr Siebeck, 2005), 1076.
Binder, International Commercial Arbitration and Conciliation in UNCITRAL
Model Law Jurisdictions, notes 1-058.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 490.
Domenic Gross, Das rechtliche Schicksal von Verrechnungsansprüchen im
Schiedsverfahren (Zurich: Schulthess, 1999), 29; Wenger, “Article 186
SPILA,” 41.
Instead of many: Pierre Lalive, Jean-François Poudret, and Claude Reymond,
Le droit de l’arbitrage interne et international en suisse édition annotée et
commentée du concordat sur l’arbitrage du 27 Mars 1969 (Lausanne: Payot,
1989), 276 et seq.; Rüede and Hadenfeldt, Schweizerisches
Schiedsgerichtsrecht nach Konkordat und IPRG, 10 et seqq.
Contra: Joachim G. Frick, “Article 354 SCCP,” in Schweizerische
Zivilprozessordnung (ZPO), ed. & McKenzie (Zürich) Baker (Berne:
Stämpfli, 2010), note 19.
Stephan Netzle, “Article 377 SCCP,” in Kommentar Zur Schweizerischen
Zivilprozessordnung (ZPO), ed. Thomas Sutter-Somm, Franz Hasenböhler,
and Christoph Leuenberger (Zurich: Schulthess, 2010), note 4.
For an overview see: Berger and Kellerhals, International and Domestic
Arbitration in Switzerland, note 490.
101
Generally speaking, “in relation to this agreement” must not be
understood as meaning that other claims arising from other
contracts with arbitration clauses differently worded should be
included. Rather, arbitration clauses formulated in this way also
include disputes as to the entry into force or the validity of the
contract as well as claims resulting from the termination of the
contract or claims based on illicit acts.400
5.5.1.2
Parties
Arbitration agreements will apply only to such non-signatories
"in rare circumstances."401 Non-signatory involvement in
international arbitration has been described as a "delicate" and
critical aspect of international arbitration.402
“According to the principles of relativity of the
obligations arising from a contract and of the legal
independence of corporations, Swiss law sets some
strict requirements as to the extension of an arbitration
agreement to a third party not mentioned there.”403
Internationally, non-signatories may become involved in
international arbitration through the private law of assignment,
agency, and succession.404 Application of group of companies
doctrine,405 or by piercing the corporate veil also allow for
400
401
402
403
404
405
Wenger, “Article 178 SPILA,” 35.
Bridas Sociedad Anonima Petrolera, Industrial y Comercial v. Government of
Turkm., 345 F.3d 347, 358 (5th Cir., USA 2003); Daly, “Come One, Come
All: the New and Developing World of Non-signatory Arbitration and Class
Arbitration,” 95.
Daly, “Come One, Come All: the New and Developing World of Nonsignatory Arbitration and Class Arbitration,” 102; Jan Paulsson, “Arbitration
Without Privity,” ICSID Review - Foreign Investment Law Journal 10 (1995):
257.
SFCD of 19 August 2008 - 4A_128/2008 C. 4.1.2 (Swiss Federal Court 2008).
Translation provided by praetor.ch.
Blackaby et al., Redfern and Hunter on International Arbitration, notes 3-34.
Pietro Ferrario, “The Group of Companies Doctrine in International
Commercial Arbitration: Is There any Reason for this Doctrine to Exist?,”
102
extention of an agreement to arbitrate.406 United States courts
have applied the doctrine of agency to bind agents to arbitrate
claims in international disputes.407 An agent may be bound to an
agreement which works to his or her benefit.408 Similarly, courts
have applied the doctrine of equitable estopple to international
disputes by compelling arbitration between companies who had
not signed an arbitration agreement, if the claims were
"inherently inseparable."409
Under the group of companies doctrine, the benefits and duties
arising from an arbitration agreement may be extended to other
members of the same group of companies or to the
shareholders, officers, or directors of a signatory company.410
For example, in Dow Chemical France v. ISOVER Saint
Gobain,411 the ICC arbitral panel determined that non-signatory
parent companies and affiliates to an arbitration agreement can
be treated by the parties to the agreement as "one and the same
economic reality" with the signatories.412
406
407
408
409
410
411
412
Journal of International Arbitration 26 (2009): 647 - 673; Schütze,
Schiedsgericht und Schiedsverfahren, note 86.
SFCD 128 III 50; SFCD 120 II 155, 415 ASA Bulletin (Swiss Federal Court
1994); Georg Naegeli and Chris Schmitz, “Switzerland: Strict Test for
Extension of Arbitration Agreements to Non-Signatories: Note on an
Important Decision Rendered by the Swiss Federal Tribunal,” Neue Zeitschrift
für Schiedsverfahren 2009 (2009): 188; Schütze, Schiedsgericht und
Schiedsverfahren, note 110 et seqq.
Alamria v. Telcor International, Inc., 920 F. Supp 658, 669 et seqq. (District
Md. 1996) holding non-signatory Saudi Arabian agent of U.S. manufacturer
bound by an ICC arbitration clause under principles of apparent authority.
American Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349, 353
(2nd Cir., USA 1999) holding that Italian agent who signed arbitration
agreement with boat classification society on behalf of French principal could
be bound to arbitrate claim against society because agent derived benefit from
the contract.
JLM Indus., Inc. v. Stolt-Nielsen S.A., 387 F.3d 163, 177 et seq. (2nd Cir.,
USA 2004) permitting non-signatory subsidiaries of companies from the
Netherlands, Norway, and Luxembourg to compel signatory customers to
arbitrate claims that were “undeniably intertwined”; Daly, “Come One, Come
All: the New and Developing World of Non-signatory Arbitration and Class
Arbitration,” 104.
Blackaby et al., Redfern and Hunter on International Arbitration, notes 3-31.
Dow Chemical France v. ISOVER Saint Gobain, 1984 Revue Arbitrale 98
(Regional Court of Appeal, Paris, France 1983).
Daly, “Come One, Come All: the New and Developing World of Nonsignatory Arbitration and Class Arbitration,” 103 et seq.
103
Under Swiss law, third parties (i.e., not parties to the underlying
contract) can be permitted to participate in an arbitration by an
express agreement in the arbitration clause or other clear and
unambiguous indications of the parties wishes.413 Cases of
assignment permit extention to a non-original third party.414
Assumption of an obligation (simple or joint) or the transfer of a
contractual relationship, can result in third parties being
bound.415 Succession permits extension to third parties.416 The
extension to the piercing of the corporate veil has not been well
received.
In Switzerland, strict requirements for the extension to third
parties must be met.417 A prime example for this reluctance is
the Westland case.418 In that case Egypt was found not to have
been a party to an arbitration, even though it was part of a
consortium that had signed the agreement to arbitrate. The
group of companies doctrine fare little better on the whole. 419 Parties
may
be
added
under
the
concept
of
“Streitgenossenschaft”. HABSCHEID and MARKFORT advocate
the necessity of common questions of law or fact similar to the
Streitgenossenschaft,420 LEW ET AL. that all contracts be
413
414
415
416
417
418
419
420
Bernhard Berger and Franz Kellerhals, Internationale und interne
Schiedsgerichtsbarkeit in der Schweiz (Bern: Stämpfli, 2006), note 514.
SFCD 128 III 50, 55 et seq.; see more generally: Juan Carlos Landrove,
Assignment and Arbitration a Comparative Study (Zurich: Schulthess, 2009).
SFCD 129 III 727, 22 ASA Bulletin 364, 735 (Swiss Federal Court 2004).
Wenger, “Article 186 SPILA,” 25.
Naegeli and Schmitz, “Switzerland: Strict Test for Extension of Arbitration
Agreements to Non-Signatories: Note on an Important Decision Rendered by
the Swiss Federal Tribunal,” 187; For further information on binding nonsignatories under Swiss law see Philipp Fischer, “When Can an Arbitration
Clause be Binding on Non-Signatories Under Swiss Law?,” Jusletter (January
4, 2010).
SFCD 120 II 155, 415:172.
Wenger, “Article 186 SPILA,” 29.
Walther
J.
Habscheid,
“Zum
Problem
der
Mehrparteienschiedsgerichtsbarkeit,”
in
Schweizer
Beiträge
zur
Internationalen Schiedsgerichtsbarkeit, ed. ASA (Zurich: Schulthess, 1994),
104
concluded in connection to the same economic venture.421
BERGER/KELLERHALS require identical or factually related
claims between the same parties.422 They add that the required
connection is always present when the parties are jointly and
severally liable.423
However, the Swiss Federal Court found, e.g., that the phrase
‘all disputes arising from or in connection with the contract’
was insufficient to permit an extension of arbitral jurisdictions
to other contracts,424 not to mention other parties, regardless of
the asserted connection between the cases. In this case, two
companies had concluded a number of related contracts, two of
which were exclusive delivery agreements and the others
delivery agreements. The agreements contained incompatible
arbitration clauses, involving different institutions, seats and
applicable laws.425
The topic of addition of parties is vast and has been addressed
very well elsewhere.426 This analysis only needs to point out
that jurisdiction over both cases must exist, and that extensions
of agreements to non-signatories or unrelated claims are fraught
with difficulties.
421
422
423
424
425
426
181; Rainer Markfort, Mehrparteien-Schiedsgerichtsbarkeit im Deutschen und
ausländischen Recht (Cologne, Berlin, Bonn: Heymanns, 1994), 114.
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-57.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 478.
Ibid., note 515.
SFCD of 29 February 2008 - 4A.452/2007, sec. c. 2.5.1.
Ibid. „Die Formulierung “im Zusammenhang mit diesem Vertrag” muss nicht
so verstanden werden, dass damit auch Ansprüche aus anderen Verträgen mit
anderslautenden Schiedsvereinbarungen gemeint sind.“.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 370 et seqq.;
Boris Niklas, Die subjektive Reichweite von Schiedsvereinbarungen: Eine
systematische Darstellung unter besonderer Berücksichtigung der
Mehrparteienschiedsgerichtsbarkeit (Tübingen: Mohr Siebeck, 2008).
105
5.5.2 Interim Conclusion
If cases have no connection, it would certainly be unforeseeable
for the parties to be forced to arbitrate them together. If a
commitment is unforeseeable, it is excessive and therefore
invalid. If there were no connection, an affirmative decision on
consolidation would amount to giving the institution the ability
to bestow jurisdiction to the panel.427
In order to make a prima facie determination on jurisdiction, as
is customary for institutions, a full scale jurisdictional inquiry is
neither possible nor practicable. To determine a close
connection is therefore difficult for chambers. Neverthelss, it is
workable and corresponds to the duty to deterime prima facie
jurisdiction in any case.
Extensions of jurisdiction is only permissible within the bounds
of the doctrines described above, which usually depend on a
connection between the arbitration and the non-party.428 Beyond
these extensions, a panel has no jurisdiction. It is reasonable to
combine the inquiry as to lack of specificity with jurisdiction, as
a valid agreement to consolidate must also pass the test of
whether a panel has personal and subject matter jurisdiction
over the additional case. When the determination of jurisdiction
reveals the scope of the clause, it reveals also if the clause had
been specific enough.
Jurisdiction is more likely when a close connection is given, and
vice versa. Both approaches, the jurisdictional approach and the
427
428
This is not the case, as will be discussed infra in chapter 7.
See generally Brekoulakis, Third Parties in International Commercial
Arbitration; Niklas, Die subjektive Reichweite von Schiedsvereinbarungen;
Chittharanjan Felix Amerasinghe, Jurisdiction of Specific International
Tribunals (Leiden: Brill, 2009); Mohamed S. Abdel Wahab, “Extension of
arbitration agreements to third parties: A never ending legal,” in Conflict of
Laws in International Arbitration, ed. Franco Ferrari and Stefan Kröll (Sellier
European Law Publ., 2010), 137 - 185.
106
ICC approach concerning the requirement of connexity would
therefore guartee validity with respect the an overextention of
the commitment of the parties.
No forcible consolidation case has yet come before the Swiss
Federal Court.429 It is therefore difficult to conjecture how the
Swiss Federal Court would interpret two compatible arbitration
agreements.
5.6
Advance Consent and Waiver
The question has been raised whether consent to consolidation
can be given in advance, or whether the dispute must have
already arisen. The question was first raised in the famous
Dutco430 case.
5.6.1 Dutco
While Dutco addresses joinder of parties rather than
consolidation, its holding and reasoning are important for any
multi-party case. The case concerned a single agreement and
three parties and originated with the ICC. The French court held
that agreement to consolidation is not possible before the actual
dispute had arisen.431
In Dutco, BKMI, Siemens and Dutco had entered into a
consortium agreement for the execution of a construction
contract to build a cement plant for which BKMI was the main
contractor. Dutco alleged that it incurred additional cost due to
429
430
431
Only a case in which consolidation had been rejected by the arbitrators. This
will be described infra.
Siemens AG and BKMI Industrieanlagen GmbH v. Dutco Construction
Company, 1992 No. 3 Arb. Rev. 470 (Cour de Cassation, France 1992).
Ibid.
107
BKMI’s delay in providing the drawings for the design of the
project and to the changes made by Siemens in the design of
electrical equipment. Dutco had very distinct claims against
BKMI and Siemens due to the non-performance of their
respective obligations under the agreement. Dutco filed one
single case with the ICC to avoid conflicting awards. Siemens
and BKMI did not want to arbitrate as one, as they also had
diverse interests, and initially refused to nominate a joint
arbitrator. After not obtaining bifurcation from the ICC, they
reserved their rights and proceeded with the arbitration. The
interim award on proper constitution was then challenged. The
challenge went through the instances and was finally decided by
the Cour de Cassation on 7 January 1992.
The court held that the agreement(s) must, in addition to
covering the applicability of arbitration, cover the parties, the
substantive claim, and an agreement to arbitrate cases
together.432 While the French Cour de Cassation did not object
to the joint proceeding, or that the parties had agreed thereto by
signing a single contract, it did object to the parties being
permitted to consent to institutional rules which, in these
circumstances, would result in inequality in the selection of
arbitrators.433 In Dutco, it held that such agreement was
impermissible when made in advance.434
This does not mean that the parties could not have chosen the
rules and joint proceedings, only that when unequal selection
resulted, such was against public policy and could not be agreed
to. An advance waiver of equal treatment is not permissible.435
432
433
434
435
Ibid.
Schwartz, “Multi-Party Arbitration and the ICC in the Wake of Dutco,” 13.
Siemens AG and BKMI Industrieanlagen GmbH v. Dutco Construction
Company, 1992 No. 3:.
Schwartz, “Multi-Party Arbitration and the ICC in the Wake of Dutco,” 13.
108
While Dutco is not binding on Swiss Courts, it had a dramatic
impact and its holding was adopted by many jurisdictions.436
Nevertheless, Some scholars have expressed doubts as to
whether Dutco is good law generally.437 BORN questions the
interpretation of the Dutco decision in a way that prohibits all
advance waivers, especially as the parties in international
commercial transactions can be said to be savvy enough.438
VOSER explicitly condemns the Dutco decision as too broad.439
The selection of arbitrators will be discussed infra in chapter 9.
However, whether the right to consent to consolidation only
exists after the dispute has arisen or leads to invalidity of that
part of the clause shall be discussed here. The case raises the
question of whether it would be permissible for parties to
contract out of the requirement of specificity. If this were the
case, consent to the Swiss Rules article 4(1)(s.2) would never
result in invalidity for lack of specificity.
5.6.2 Swiss Law
Consent denotes an agreement to act or omit to act; waiver
denotes the concept of allowing a violation of one’s rights either
expressly or implicitly.440 While consent can also be a waiver of
a right, such as the right to a governmental judge guaranteed by
article 6 ECHR,441 article 8 American Convention on Human
Rights, and various national constitutions,442 a difference exists.
436
437
438
439
440
441
442
See: GFCD of 29 March 1996, 1996 Neue Juristische Woche 1753, 1755
(German Federal Court ).
See for example Petrochilos, Procedural Law in International Arbitration,
note 4.83.
Born, International Commercial Arbitration Volume II, 2101 et seq.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 363 et seq.
Pryles and Waincymer, “Multiple Claims in Arbitration Between the Same
Parties,” 482.
Petrochilos, Procedural Law in International Arbitration, note 4.04 et seqq.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 443.
109
In principle, consent and waiver can occur before and after a
specific situation has arisen. At this point, only the
permissibility of consent to consolidation, not the waiver of a
potential right to a party arbitrator, is discussed. While the
extent of the consent to arbitrate is construed broadly,443 the
concept of waiver is construed narrowly.
Under Swiss law, mandatory provisions of law cannot be
waived in advance.444 As discussed supra, specificity of the
agreement is a mandatory law. This means that parties cannot
contract out of the requirement of specificity in advance but
may waive the right when the violation thereof occurs.
Concerning consolidation, WENGER445 and POUDRET/BESSON446
have spoken out for the possibility of advance waiver.
The interpretation of the clauses remains the only feasible
method of determining the validity of multi-contract scenarios.
5.7
Conclusion
This author considers the reference to institutional rules to be
valid with regard to cases in which the same parties are
involved in arbitration under the same contract. When different
443
444
445
446
Girsberger, “Pitfalls in Swiss Arbitration Agreements,” 91; Karrer and Straub,
“Switzerland,” 12.21; Girsberger and Voser, International Arbitration in
Switzerland, note 223; Kurkela and Snellman, Due Process in International
Commercial Arbitration, 71; Hanefeld, “Germany,” 7.16; Peter Bowman
Rutledge, Rachel Kent, and Christian Henel, “United States,” in Practitioner’s
Handbook on International Commercial Arbitration, ed. Frank-Bernd
Weigand, 2nd ed. (Oxford: Oxford University Press, 2009), 13.31;
Nacimiento, “Article V(1)(a) NYC,” 228; SFCD of 19 May 2003 4C.40/2003 (Swiss Federal Court 2003); SFCD 129 III 675, c. 2.3; SFCD 116
Ia 56 c. 3.b (Swiss Federal Court 1990).
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 547; Wenger, “Article 354 SCCP,” 6.
Wenger, “Article 186 SPILA,” 15; notably speaking of the former Zurich
Rules consolidation. In light of the concept of specificity, Wenger is more
restraint. See Wenger, “Article 354 SCCP,” 6.
Poudret and Besson, Comparative Law of International Arbitration, note 248
et seq.
110
parties arbitrate under the same contract, this author similarly
considers the reference valid.
When different arbitration agreements are concerned and they
are compatible, determination on validity depends on a number
of circumstances. Under the ICC Rules, a legal relationship is
required that prevents the extension of the arbitration agreement
to an unbearable extent. Under the Swiss Rule article 4(1)(s.2),
however, such requirement does not exist. As a consequence,
the reference would be invalid if it could not be interpreted in a
restricted fashion.
The author has suggested the jurisdictional method, which
permits consolidation insofar as the original agreement to
arbitrate stretches and is also covered by the second agreement.
It is not possible to waive the lack of specificity, so that consent
to the institutional rules does not free the parties from the
obligation to be sufficiently specific.
111
6
Background
on
Consolidation
Decisions
In order to put the remainder of this analysis into perspective, it
is necessary for the esteemed reader to have some background
information on the decision on consolidation. This chapter will
address concerns that consolidation could result in a violation of
arbitral secrecy. Thereafter, the chapter will describe the
administrative effect of consolidating cases, then explore the
reasoning for placing the decision with an institution, next
describe the institutional decision makers, and finally discuss
how national jurisdictions treat consolidation of arbitral cases.
6.1
Secrecy as Obstacle to Consolidation
One of the core values of arbitration is secrecy.447
"Many parties choose to arbitrate their disputes rather
than litigate them precisely because they do not want
certain information, such as trade secrets, revenue, and
other sensitive data, to become public."448
The private character of arbitration is often viewed as a good
reason not to consolidate, as it may violate the secrecy of the
process.449 Some authors have gone so far as to claim secrecy to
be an obstacle to consolidation.450 This author does not agree.
447
448
449
Brunet et al., Arbitration Law in America, 663 et seqq.; Girsberger and Voser,
International Arbitration in Switzerland, note 662; Lew, “Achieving the
Dream: Autonomous Arbitration?,” 457 Note 20-10.
Strong, “Intervention and Joinder as of Right in International Arbitration: An
Infringement of Individual Contract Rights or a Proper Equitable Measure?,”
933; see also: Daly, “Come One, Come All: the New and Developing World
of Non-signatory Arbitration and Class Arbitration,” 124.
Leboulanger, “Multi-Contract Arbitration,” 65; Nicklisch, “Multi-Party
Arbitration and Dispute Resolution in Major Industrial Projects,” 427;
Michael Collins Q.C., “Symposium on International Commercial Arbitration:
112
As stated supra in chapter 3, secrecy is subdivided into privacy
and confidentiality.451 This term is by no means universally
recognized or even uniform.452 For example, COLLINS refers to
the right to privacy rather than confidentiality.453 Neither
concept is violated by consolidation.
In the United States, a duty to confidentiality in international
arbitration per se is not recognized.454 Generally, protection for
arbitral confidentiality is actually quite minimal.455 In most
countries non-publicity is not found in the law, but treated as a
principle.456 Instead, privacy and confidentiality are only
protected under the New York Convention to the extent such
requirements are reflected in the parties' arbitration
agreement.457
450
451
452
453
454
455
456
457
Privacy and Confidentiality in Arbitration Proceedings,” Texas International
Law Journal 30 (1995): 121 - 134; Öhrström, “Stockholmer Regeln,” 32;
Bamforth and Maidment, “‘All join in’ or Not? How Well Does International
Arbitration Cater for Disputes Involving Multiple Parties or Related Claims?,”
5 et seq.
Cristián Conejero Roos, “Multi-party Arbitration and Rule-making: Same
Issues, Contrasting Approaches,” in 50 Years of the New York Convention, ed.
Albert Jan Van Den Berg, ICCA Congress Series 14 (Deventer: Kluwer,
2009), 432; Bamforth and Maidment, “‘All join in’ or Not? How Well Does
International Arbitration Cater for Disputes Involving Multiple Parties or
Related Claims?,” 6. The private nature of international commercial
arbitration is at odds with the concept of permitting addition of parties after
commencement of the proceedings.
Noussia, Confidentiality in International Commercial Arbitration, 24 et seqq.
Michael Hwang and Katie Chung, “Protecting Confidentiality and its
Expectations - The Way Forward?,” ICC Bulletin 2009, no. Special
Supplement (20009): 39; Daly, “Come One, Come All: the New and
Developing World of Non-signatory Arbitration and Class Arbitration,” 125;
Noussia, Confidentiality in International Commercial Arbitration, 37 et seqq.
Collins Q.C., “Symposium on International Commercial Arbitration: Privacy
and Confidentiality in Arbitration Proceedings,” 122.
Steven Kouris, “Confidentiality: Is International Arbitration Losing One of Its
Major Benefits?,” Journal of International Arbitration 22, no. 2 (2005): 134.
Strong, “The Sound of Silence: Are U.S. Arbitrators Creating Internationally
Enforceable Awards When Ordering Class Arbitration in Cases of Contractual
Silence or Ambiguity?,” 1088.
Philipp Ritz, Die Geheimhaltung im Schiedsverfahren nach Schweizerischem
Recht (Tübingen: Mohr Siebeck, 2007), 57.
Strong, “The Sound of Silence: Are U.S. Arbitrators Creating Internationally
Enforceable Awards When Ordering Class Arbitration in Cases of Contractual
Silence or Ambiguity?,” 1088.
113
What arbitration does is exclude the public.458 Excluding the
public is said to be one of the reasons for arbitration.459 Parties
to arbitration often wish to keep the fact of the dispute and its
details between themselves and the panel.460 A non-public
proceeding is less hard on business relationships than a public
proceeding.461
Arbitrations have generally been more secretive than litigation
because arbitral decisions have traditionally been unpublished,
and commercial arbitral proceedings usually occur in the private
confines of rented hotel rooms rather than in public
courtrooms.462
However, publicly held corporations that become involved in
arbitral proceedings may have to disclose information about any
such disputes to their shareholders and to the general public,
e.g., under securities regulations.463
Privacy is not violated when the same parties participate in the
consolidated proceeding, as parties are by definition not the
public. Similarly, additional parties are hardly the public as they
become parties. There should not be a concern about privacy on
account of the numbers involved. It is hard to imagine that a
consolidated case would reach the proportions of, e.g., a class
458
459
460
461
462
463
Bamforth and Maidment, “‘All join in’ or Not? How Well Does International
Arbitration Cater for Disputes Involving Multiple Parties or Related Claims?,”
6. Stating that only the notion that international commercial arbitration is
essentially private rather than public is universally accepted.
Ritz, Die Geheimhaltung im Schiedsverfahren nach Schweizerischem Recht,
56.
Bamforth and Maidment, “‘All join in’ or Not? How Well Does International
Arbitration Cater for Disputes Involving Multiple Parties or Related Claims?,”
5.
Ritz, Die Geheimhaltung im Schiedsverfahren nach Schweizerischem Recht,
57.
Daly, “Come One, Come All: the New and Developing World of Nonsignatory Arbitration and Class Arbitration,” 124.
Ibid., 125.
114
arbitration, so that additional parties do not threaten the private
nature of the proceedings.
Confidentiality is not violated when the same parties participate
in the old and in the consolidated arbitrations.464 When new
parties from differing contracts are added, these parties will
receive access to information that was previously unknown to
them. However, this is not a violation of confidentiality.
Confidentiality applies between the parties, including new
parties. These parties are bound by the same confidentiality as
the previous parties.465 The wish to protect certain information
from another party is not protected in arbitration.
Even though an English case, Oxford Shipping Co. v. Nippon
Yusen Kaisha,466 forbade non-consensual consolidation due, at
least in part, to concerns about confidentiality and the
assumption that additional parties would be strangers to the
proceedings, this cannot apply in general.
The ICC Rules, as stated supra in chapter 3, do not contain
generalized secrecy arrangements, but only contain protection
of specific business secrets. The Swiss Rules are strict in
comparison to other institutional rules.467
“1. Unless the parties expressly agree in writing to the
contrary, the parties undertake as a general principle to
464
465
466
467
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-87.
Alexander Jolles and Maria Canals de Cediel, “Chapter 6 - Confidentiality,”
in International Arbitration in Switzerland a Handbook for Practitioners, ed.
Gabrielle Kaufmann-Kohler and Blaise Stucki (The Hague: Kluwer Law
International, 2004), 100 et seqq.
Oxford Shipping Co. v. Nippon Yusen Kaisha, 3 All England Reporter 835
(Queen’s Bench, England 1984).
Meyer-Hauser and Vock, “Schweizerische Schiedsordnung,” Note 52.et. seq.
115
keep confidential all awards and orders as well as all
materials submitted by another party in the framework
of the arbitral proceedings not otherwise in the public
domain, save and to the extent that a disclosure may be
required of a party by a legal duty, to protect or pursue
a legal right or to enforce or challenge an award in
legal proceedings before a judicial authority. This
undertaking also applies to the arbitrators, the tribunalappointed experts, the secretary of the arbitral tribunal
and the Chambers.
2. The deliberations of the arbitral tribunal are
confidential.” 468
Nevertheless, confidentiality is limited to the deliberation of the
panel, awards, orders and materials.469 Even so, as mentioned
supra, many legal duties will make certain information public.
Also, the addition of other parties or claims that would have
been foreseeable, as outlined supra in chapter 5, cannot violate
confidentiality. The possibility of arbitrating with all the parties
to the contract existed from the outset. These parties and claims
could already have been parties and, as parties, are bound by the
same obligation to secrecy.
In addition, given the shift toward increased transparency in
bilateral arbitration, particularly in cases involving matters of
public interest, it would be difficult to oppose joint arbitration
simply on the claim that the procedure violates principles of
privacy or confidentiality.470
468
469
470
See articles 43(1) and 43(2) Swiss Rules.
Fabrizio La Spada, “Article 43 - Confidentiality and the Exclusion of
Liability,” in Swiss Rules of International Arbitration Commentary, ed.
Tobias Zuberbühler, Christoph Müller, and Philipp Habegger (The Hague:
Kluwer Law International, 2005), note 7.
Strong, “The Sound of Silence: Are U.S. Arbitrators Creating Internationally
Enforceable Awards When Ordering Class Arbitration in Cases of Contractual
Silence or Ambiguity?,” 1089; Disagreeing: Kurkela and Snellman, Due
Process in International Commercial Arbitration, 71; Hamann and Lennarz,
116
In this author’s opinion, consolidation is not hampered by
considerations of secrecy when interpreted in the fashion
outlined in this analysis. In case of doubt, TENCATE suggests
separate confidentiality agreements.471 These could render
otherwise compatible arbitration clauses incompatible and thus
unfit for consolidation.472
6.2
Administrative Effect of Consolidation
Consolidation under the ICC and the Swiss Rules merges the
previously independent cases into one single case. In this single
case, only one identifying name or number exists. When cases
are heard at the same time, i.e., when only the oral hearing takes
place at the same time and location, the cases themselves
remain independent, with the need to submit pleadings and
evidence for both cases.473 Consolidation goes beyond hearing
the cases together.
Consolidation does not, however, create a new single case, but
rather merges one case into the other. The ICC Rules specify
that the claims of the new case be added to the previous one.
The new ICC Rule even specifies, that the second case is
merged into the first. The Swiss Rules state that the new case be
added to the existing case. In both instances, one case continues
on as an enlarged version, while the other case ceases to exist.474
This means case A retains its indentifying number or name.
471
472
473
474
“Parallele Verfahren mit identischem Schiedsgericht als Lösung für
Mehrparteinenkonflikte?,” 291.
TenCate, “Multi-Party and Multi-Contract Arbitrations: Procedural
Mechanisms and Interpretation of Arbitration Agreements under U.S. Law,”
138.
See supra chapter 5.
Joint hearings form an alternative to consolidation, which will be discussed in
chapter 13.
Bühler and Jarvin, “The Arbitration Rules of the International Chamber of
Commerce (ICC),” 15.271.
117
Case A
– Claims
1, 2, 3
Figure 2: own creation
6.3 Reasoning for (Initially) Placing Decision
with Institutions
Three main reasons for charging institutions with the decision
on consolidation exist. First, an institution is aware of all cases
commenced under its auspices, so that it can identify potential
cases for consolidation whereas others without such a bird’s eye
view could not.475 Different arbitrations are generally not aware
of one another.
Second, only institutions can render a single decision for all
cases concerned.476 Depending on the stages all cases are in,
there could already be all panels in place. Unlike in most
national jurisdictions, one panel cannot bind another panel to a
decision on consolidation.477 It would be difficult to coordinate
475
476
477
More so for the centralized ICC, less so for the Swiss Chambers.
With the exception of those jurisdictions, which permit judges to consolidate
arbitral cases.
There may be ways for an arbitral panel to bind another informally in the form
of persuasive precedent, but no formal power to bind another panel in
arbitration exists. For a discussion on binding precedent see Klaus Peter
Berger, “The International Arbitrators’ Application of Precedents,” Journal of
Int’l Arbitration (n.d.): 5-22; Schütze, “The Precedential Effect of Arbitration
Decisions”; Legum Barton, “The Definition of ‘Precedent’ in International
Arbitration,” in Precedent in International Arbitration, ed. Yas Banifatemi
(Huntington, N.Y.: Juris Publ., 2008), 5 - 14; Yas Banifatemi, ed., Precedent
in International Arbitration (Huntington, N.Y: Juris Pub, 2008); Alexis
Mourre, “Precedent and Confidentiality in International Commercial
Arbitration: The Case for the Publication of Arbitral Awards,” in Precedent in
International Arbitration, ed. Emmanuel Gaillard and Yas Banifatemi
(Huntington, N.Y: Juris Publ, 2008), 39 - 65; Francois Perret, “Is There a
Need for Consistency in International Commercial Arbitration?,” in The
118
the decisions. Potential for conflicting orders results. If none or
just one panel is installed, no authority to order consolidation
exists for the other parties or claims.478
Third, institutional arbitration institutions are charged with
administration of cases, much in the same way a governmental
clerk of court and court would in ad hoc proceedings.479 Making
administrative decisions and aiding the initiation of the
arbitration is a raison d’être of arbitral institutions.480 The
extent of the institutional task, roughly speaking, encompasses
all things arbitrators cannot, in all practicality, be expected do
so.
6.4
Institutional Decision Makers
Arbitrators derive their power directly from party agreement
when the parties participate in their selection.481 To understand
the nature of the institution and the interplay of independence
and authority, this analysis will not proceed to outline who the
institutional decision makes are and where their authority is
derived from.
6.4.1 ICC Decision Makers
Under the ICC Rules, the decision maker is the ICC Court.482
According to the ICC Statutes article 2, the “Court consists of a
Chairman, Vice-Chairmen, members and alternate members.”
478
479
480
481
482
Precedent in International Arbitration, ed. Yas Banifatemi and Emmanuel
Gaillard (25 - 37: JurisNet, LLC, 2008).
See e.g. SFCD 120 II 155, vol. 415, note c. 3.
Petsche, The Growing Autonomy of International Commercial Arbitration, 90.
Girsberger and Voser, International Arbitration in Switzerland, note 82 et seq.
Ibid., note 1.
ICC Rules article 4(6).
119
The world council483 elects members of the ICC Court from
among the national committees for a three-year term.484
Including the surrogate, the ICC Court currently consists of 125
members.485
6.4.2 Swiss Rules Decision Makers
Under the Swiss Rules the decision maker is Chambers, which
denotes the seven chambers of commerce and industry of Bern,
Basel, Geneva, Neuchâtel, Ticino, Vaud and Zurich.486 When
referred to in the Swiss Rules concerning any administrative
tasks, the Arbitration Committee in fact exercises the powers of
Chambers.487
“The Arbitration Committee
experienced
practitioners
488
arbitration.”
is
of
comprised of
international
The members of the Chambers of Commerce489 appoint the
Arbitration Committee. To date this Arbitration Committee
consists of 36 members.490
483
484
485
486
487
488
489
490
This also means businesses which are members of the International Chamber
of Commerce.
ICC Internal Rules article 3(1) and (2). Robert Briner and Rudolf Hömberg,
“Der Internationale Schiedsgerichtshof der Internationalen Handelskammer,”
in Praxishandbuch Schiedsgerichtsbarkeit, ed. Hellwig Torggler (BadenBaden: Nomos, 2007), 363 Note 2.
See http://iccwbo.org/iccdafdg/index.html.
Rainer Füeg, “The Swiss Chambers’ Court of Arbitration and Mediation,” in
The Swiss Rules of International Arbitration - Five Years of Experience, ed.
Rainer Füeg (Basel, 2009), 4 The Chamber of Neuchâtel joined the original
six Chambers of Commerce in 2008. Besson, “Introduction,” 1.
Introduction to the Swiss Rules on International Arbitration lit. d. “ (. . .)
Chambers have appointed an Arbitration Committee (. . .) which shall
exercise the powers vested in the Chambers under these Rules (. . .)”.
Introduction to the Swiss Rules of International Arbitration lit. e, s.1.
This means businesses that hold membership.
“Swiss
Arbitration
Organization,”
October
1,
2010,
https://www.sccam.org/sa/en/organisation.php. Filip De Ly, Mark Friedman,
and Luca G. Radicati di Brozolo, “International Law Association International
Commercial Arbitration Committee’s Report and Recommendations on
120
The Arbitration Committee is advised by the Special
Committee,491 which consists of one member and one alternate
from each local Chamber.492 Among the group of experts
represented in the Arbitration Committee, the members of the
Special Committee are those who have “very important
international arbitration experience”.493
The Arbitration Committee and the Special Committee are
governed by the Unified Internal Rules issued by the member
Chambers.494
6.5
Judicial Treatment of Consolidation in
Arbitral Cases
In principle, governmental courts do not interfere with the
arbitral procedure.495 This restraint does not mean that courts do
not have the power to do so. Competences of courts in
connection to arbitration can be subdivided into two groups:
491
492
493
494
495
‘Ascertaining the Contents of the Applicable Law in International
Commercial Arbitration’,” Arbitration International 26, no. 2 (2010): 72;
Besson, “Introduction,” 12; Peter, “Some Observations on the Swiss Rules of
International Arbitration,” 1.
Swiss Rules Introduction lit. e; Paolo Michele Patocchi, “The Practice of the
Special Committee of the Swiss Chambers of Commerce in the
Administration of Arbitrations Conducted Under the Swiss Rules of
International Arbitration (2004 - 2007),” in New Developments in
International Commercial Arbitration 2007, ed. Christoph Müller (Zurich:
Schulthess, 2007), 109; Peter, “Some Observations on the Swiss Rules of
International Arbitration,” 3.
Patocchi, “The Practice of the Special Committee of the Swiss Chambers of
Commerce in the Administration of Arbitrations Conducted Under the Swiss
Rules of International Arbitration (2004 - 2007),” 96; Besson, “Introduction,”
13.
Peter, “Some Observations on the Swiss Rules of International Arbitration,” 3.
See https://www.sccam.org/sa/en/organisation.php.
Aden, Internationale Handelsschiedsgerichtsbarkeit, notes 7-26; Steinbrück,
Die Unterstützung ausländischer Schiedsverfahren durch staatliche Gerichte:
Eine rechtsvergleichende Untersuchung des Deutschen, Österreichischen,
Englischen, Schweizerischen, Französischen und US-Amerikanischen
Schiedsrechts, 1; Lachmann, Handbuch für die Schiedsgerichtspraxis, note
1620, stressing the requirement of the panel or parties to approach the court.
121
measures in support of the arbitral proceeding and measures to
supervise and control the arbitral proceedings.496
When consolidation of arbitral cases is addressed in national
legal systems,497 these national legal systems vary in their
treatment of consolidation of arbitral proceedings.498 Some
jurisdictions allow either the courts499 or the arbitral panel500 to
order consolidation, others allow consolidation only upon
unanimous ad hoc agreement of all parties.501 Some countries
providing for consolidation in arbitral cases by court order set
many preconditions, so that the practice, in the opinion of
MOREAU, creates more problems than it solves.502 Certainly,
forced consolidation is rare in national arbitration laws.503
496
497
498
499
500
501
502
503
Ragnar Harbst, Die Rolle der Staatlichen Gerichte im Schiedsverfahren: Ein
Rechtsvergleich zwischen dem Englischen Arbitration Act 1996 und
Deutschem Schiedsverfahrensrecht (Heidelberg: Verlag Recht und Wirtschaft,
2002), 19; Piero Bernardini, “Arbitral Justice, Courts and Legislation,” in
Arbitration in the Next Decade, ed. Fabien Gélinas, ICC Special Supplement
1999 (ICC Publishing S.A., 1999), 19 et seqq.; Steinbrück, Die Unterstützung
ausländischer Schiedsverfahren durch staatliche Gerichte: Eine
rechtsvergleichende Untersuchung des Deutschen, Österreichischen,
Englischen, Schweizerischen, Französischen und US-Amerikanischen
Schiedsrechts, 7 et seqq.; Lachmann, Handbuch für die Schiedsgerichtspraxis,
note 1621 et seqq.; Margaret L. Moses, The Principles and Practice of
International Commercial Arbitration (Cambridge: Cambridge University
Press, 2008), 84 et seqq.
Born, International Commercial Arbitration Volume II, 2076 even though
there may not be an express provision, some countries judiciaries have
addressed the issue.
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, notes 4-74.
Bermuda Arbitration Act, § 9; British Columbia Commercial Arbitration Act,
§ 21; Ontario International Commercial Arbitration Act of 1990, Article 7.
For further examples see. Australian International Arbitration Act, § 24; Irish
Arbitration Act 1998, § 9; Singapore Arbitration Act, § 26. For further
examples are French Arbitration law, that does not allow for the court to assist
in arbitration, see Jean-Louis Delvolvé, French Arbitration Law and Practice
a Dynamic Civil Law Approach to International Arbitration, 2nd ed. (Alphen
aan den Rijn: Kluwer Law International, Wolters Kluwer Law & Business,
2009).
Born, International Commercial Arbitration Volume II, 2076 According to
Born, absent agreement the NYC does not allow for forced consolidation.
Moreau, “Arbitrage liés,” 81.
Born, International Commercial Arbitration Volume II, 2078. For examples of
such see: Netherlands Code of Civil Procedure, Article 1046; New Zealand
Arbitration Act, Second Schedule, Article 2; Hong Kong Arbitration
Ordinance, Article 6B.
122
The lex arbitri determines how consolidation should be treated
in arbitration.504 However, BORN rightly states that the more
specific intent of the parties should prevail in any case over,
e.g., the lex fori or arbitration institution, which could contain a
provision on consolidation.505 Incompatible clauses supercede
institutional rules, because they are the more specific option.506
To provide a firm background, this author describes Swiss,
German and U.S. American law on consolidation of
arbitrations.
6.5.1 Consolidation of Arbitrations in Switzerland
Switzerland does not allot the authority to consolidate cases to
either courts or arbitrators. Swiss authorities, according to
GIRSBERGER/VOSER, disagree on whether courts would be
entitled to consolidate arbitral proceedings.507 Supporters508 of
the argument base the approval on the wording of article 185
SPILA.509 It reads:
“If further assistance of the judicial or administrative
authorities is required, the judge at the seat of the
arbitral tribunal shall have jurisdiction.”
This can be interpreted to mean that courts may assist the
arbitral proceedings when it comes to requests concerning
504
505
506
507
508
509
Ibid., 2076; Craig, Park, and Paulsson, International Chamber of Commerce
Arbitration, 473.
Born, International Commercial Arbitration Volume II, 2075. See also chapter
5.
See supra subchapter 5.1.
Girsberger and Voser, International Arbitration in Switzerland, note 880.
Berti, “Article 185 SPILA,” 12; Lalive, Poudret, and Reymond, Le droit de
l’arbitrage interne et international en suisse édition annotée et commentée du
concordat sur l’arbitrage du 27 Mars 1969, 378.
Berti, “Article 185 SPILA,” 12; Lalive, Poudret, and Reymond, Le droit de
l’arbitrage interne et international en suisse édition annotée et commentée du
concordat sur l’arbitrage du 27 Mars 1969, no. 378 N. 12.
123
acceleration of procedures; extension of term of office of the
panel; decisions regarding the repetition of proceedings after the
replacement of an arbitrator.510
Opponents of this view permit consolidation only upon
agreement of all parties and base this opinion on party
autonomy, pointing to the lack of explicit permission and
customary actions by the courts.511
No Swiss author suggests that arbitrators could force
consolidation absent consent.
6.5.2 Consolidation of Arbitrations in Germany
The UNCITRAL Model Law makes no provision for
consolidation. Germany did not add such a provision upon the
UNCITRAL Model Law’s adoption.
Courts may support the arbitration in the taking of evidence and
in service of process by ordering interim measures providing
assistance in establishing the arbitral panel or by enforcing
arbitration agreements.512
There is no suggestion in jurisprudence or scholarly writing that
the general assistance clause, contained in § 1050 GCCP, which
is similar to article 185 SPILA, would permit courts to
510
511
512
Girsberger and Voser, International Arbitration in Switzerland, note 879.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 1115; Marcel Schneider, Funktionen des staatlichen Richters am Sitz des
Internationalen Schiedsgerichts gemäss 12. Kapitel des IPRG (Zurich: Dike,
2009), 166 et seqq.; Wenger, “Article 186 SPILA”, "consolidation (...)
requires the consent of all concerned.
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 1621; Karl-Heinz
Böckstiegel et al., eds., “§ 1026 - Extent of Court Intervention,” in Arbitration
in Germany: The Model Law in Practice (Austin, TX: Wolters Kluwer Law &
Business, Kluwer Law International, 2007), note 2.
124
consolidate cases. Similarly, there is no suggestion that
arbitrators would have discretion to order consolidation without
prior consent.513 In Germany, no forcible consolidation for
arbitral proceedings exists.514
6.5.3 Consolidation of Arbitrations in United States
In the United States, “(t)he problem is that too much law covers
the subject.”515 There are International conventions, the FAA,
State arbitration acts, party agreements.516 It is clear, however,
that in principle federal law supersedes state law.517 The only
uniformly applied law is the FAA. The FAA provides a
nationwide supplement to the NYC.518 This analysis is therefore
limited to federal cases.
The FAA does not address the issue of consolidation directly.519
Over time courts have not decided uniformly on whether they
have the power to force consolidation in arbitration. In early
cases, the United States federal courts held that courts could
order consolidation. After several United States Supreme Court
513
514
515
516
517
518
519
Lionnet and Lionnet, Handbuch der internationalen und nationalen
Schiedsgerichtsbarkeit:
Systematische
Darstellung
der
privaten
Handelsschiedsgerichtsbarkeit für die Praxis, 414; Lachmann, Handbuch für
die Schiedsgerichtspraxis, note 2835 If this can be done soley by reference to
institutional rules as part of party agreement will be discussed elsewhere.
Sachs and Lörcher, “§ 1042 - General Rules of Procedure,” 43.
Karl Heinz Schwab and Gerhard Walter, Schiedsgerichtsbarkeit
systematischer Kommentar zu den Vorschriften der Zivilprozessordnung, des
Arbeitsgerichtsgesetzes, der Staatsverträge und der Kostengesetze über das
privatrechtliche Schiedsgerichtsverfahren, 7th ed. (Munich: Beck, 2005),
notes 16-20.
Daniel M. Kolkey, “Reflections on the U.S. Statutory Framework for
International Commercial Arbitrations: Its Scope, Its Shortcomings, and the
Advantages of U.S. Adoption of the UNCITRAL Model Law,” American
Review of International Arbitration 1 (1990): 504.
Ibid., 496.
Kronenburg, Vollstreckung ausländischer Schiedssprüche in den USA: Die
Rechtsprechung US-Amerikanischer Gerichte, 43; Linda R. Hirshman, “The
Second Arbitration Trilogy: The Federalization of Arbitration Law,” Virginia
Law Review 71 (1985): 1353.
Lookofsky and Hertz, Transnational Litigation and Commercial Arbitration
an Analysis of American, European and International Law, 783.
Born, International Commercial Arbitration Volume II, 2079.
125
in not directly consolidation related decisions, this approach
was modified to allow the court to order consolidation only
when there was evidence that parties agreed thereto.520 There is
no United States Supreme Court decision on whether this
agreement by the parties seems to have to be explicit. The
United States Supreme Court has already denied certiorari for
at least four consolidation cases.521
On this issue of consent, the federal circuits are split.522 In
Compania Espanola de Petroleos v. Nereus Shipping, the
Second Circuit forced consolidation.523 By contrast, in 1984 the
Ninth circuit refused to follow the Second Circuit, even though
in this case both arbitration clauses were identical.524 A later
case by the United States district court for the Southern District
of New York found that strict adherence to the arbitration
clauses was necessary and would thus not consolidate without
consent.525 In Karaha, the Fifth Circuit enforced a decision on
consolidation based solely on the agreement with the
UNCITRAL Rules, which do not even contain explicit
consolidation provisions.526 Furthermore, the leading case
prohibiting the non-consensual consolidation of arbitrations -
520
521
522
523
524
525
526
Peter Ashford, Handbook on International Commercial Arbitration
(Huntington, N.Y: JurisNet, LLC, 2009), 31; Connecticut General Life
Insurance Co. v. Sun Life Assurance Company of Canada, 210 F.3d 771 (7th
Cir., USA 2000).
Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (United States Supreme Court 1985); Volt Info. Sciences, Inc. v. Bd. of Trustees, 489 U.S. 468 (United States Supreme Court 1989); Moses H. Cone Mem’l Hops. v. Mercury Constr., 460 U.S. 1 (United States Supreme Court 1983); Weyerhaeuser Co. v. Western Seas Shipping Co., 743 F.2d 635 (9th Cir., USA 1984).
David J. Branson and Richard E. Wallace, “Court-ordered Consolidated
Arbitrations in the United States: Recent Authority Assures Parties the
Choice,” Journal of International Arbitration 4 (1987): 89 - 94; Ashford,
Handbook on International Commercial Arbitration, 31.
Compania Espanola de Petroleos v. Nereus Shipping, 527 F.2d 966, 975 (2nd
Cir., USA 1975); William M. Barron, “Court-ordered Consolidation of
Arbitration Proceedings in the United States,” Journal of International
Arbitration 4, no. 1 (1987): 82.
Weyerhaeuser Co. v. Western Seas Shipping Co., 743:637.
Ore & Chem. Corp. v. Stinnes Interoil, Inc., 606 F.Supp 1510, 1513
(S.D.N.Y., USA 1985).
Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas
Bumi Negara, 364 F.3d 274, 295 et seq. (5th Cir., USA 2004).
126
the Seventh Circuit's holding in Champ v. Siegel Trading Co.527
- has since been discredited, with the Second Circuit recently
noting that Champ does "not represent a governing rule of
contract interpretation" in all cases, nor is it "adhered to in
every jurisdiction."528
The current consensus seems to be that courts are disinclined to
force consolidation absent party agreement.529 Nevertheless,
POUDRET/BESSON conclude that in the United States it is
possible to file in court for the consolidation of arbitral cases.530
COOLEY concludes that consolidation will be granted, even
though jurisprudence is not uniform, when the issues are
substantially the same and no party will be prejudiced by
consolidation.531 MOREAU states more cautiously that United
States courts seem to consolidate under certain circumstances,
but do so only reluctantly.532 None of the cases related to
institutional provisions permitting consolidation.
In Green Tree, a decision made in 2003, the United States
Supreme Court addressed the issue in an indirect fashion.533
Justice Stephen Breyer, writing for a plurality of the United
States Supreme Court, reasoned that because the question
relates to "what kind of arbitration proceeding the parties
agreed to" - i.e., the procedure to be followed - rather than "the
validity of the arbitration clause (. . .) or its applicability," the
issue can and should be addressed by the arbitrator, unless the
527
528
529
530
531
532
533
Champ v. Siegel Trading Co, 55 F.3d 269 (7th Cir., USA 1995).
Strong, “The Sound of Silence: Are U.S. Arbitrators Creating Internationally
Enforceable Awards When Ordering Class Arbitration in Cases of Contractual
Silence or Ambiguity?,” 1027.
Government of U.K. of Gr. Brit. v. Boeing, 998 F.2d 68 (2nd Cir., USA 1993);
Ashford, Handbook on International Commercial Arbitration, 31.
Poudret and Besson, Comparative Law of International Arbitration, note 245.
Cooley, Arbitration Advocacy, 50.
Moreau, “Arbitrage liés,” 81.
Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 453 (U.S. Supreme
Court 2003) noting that the question “concerns contract interpretation and
arbitration procedures” and that “arbitrators are well situated” to address those
issues.
127
arbitration agreement clearly requires these jurisdictional
questions to be decided by a judge, an approach that has
subsequently been adopted by various federal circuit courts.534
The consequences of this decision on consolidation in the
United States remain unclear.535 Some have named this “the
most important legal development in recent years”.536 In the
wake of Green Tree, the First, Third, Fourth, Seventh and Ninth
Circuits held that arbitrators must decide the issue of
consolidation,537 and refused to take their own decision.
534
535
536
537
Ibid. noting that the question “concerns contract interpretation and arbitration
procedures” and that “arbitrators are well situated” to address those issues.
Hanotiau, Complex Arbitrations Multiparty, Multicontract, Multi-Issue and
Class Actions, note 415.
Strong, “The Sound of Silence: Are U.S. Arbitrators Creating Internationally
Enforceable Awards When Ordering Class Arbitration in Cases of Contractual
Silence or Ambiguity?,” 1026; Green Tree Financial Corp. v. Bazzle,539:.
Certain Underwriters at Lloyd’s London v. Westchester Fire Inurance Co.,
489 F.3d 580 (3rd Cir., USA 2007); Employers Insurance Co. of Wausau v.
Century Indem. Co., 443 F.3d 573 (7th Cir., USA 2006); Dockser v.
Schwartzberg, 433 F.3d 421 (4th Cir., USA 2006); Shaw’s Supermarkets, Inc.
v. United Food and Comm. Workers Union, 321 F.3d 251 (1st Cir., USA
2003); Molly L. Pease and David J. Grais, “Consolidation of Arbitrations:
Courts Have Punted to Arbitrators; Now What?,” Mealey’s Litigation Report
18, no. 5 (2007): 1.
128
129
7
Challenge
of
the
Decision
on
Consolidation
BLESSING remarks that consolidation and joinder
“(. . .) require a very careful, thoughtful and cautious
handling by the administering body (. . .)”.538
Having described the parameters for the validity of consent to
consolidation, the procedures and prerequisites, the analysis
turns to the matter of who, if anyone, can review the decision of
the institution to consolidate cases. Neither in litigation nor in
arbitration can every decision be challenged.
It is necessary to distinguish between a challenge of the decision
on consolidation and a challenge to any effects that occur as a
result of a consolidation having occurred.539 This chapter only
analyzes the decision of consolidation by the institution itself.
Neither the procedure which leads to the decision,540 nor
whether any other effects for which the decision will play a role,
are discussed here. The latter will be discussed infra in chapters
11 and 12.
A decision is any conclusion or resolution reached after
consideration.541 Several possibilities for a challenge of a
decision exist. No reconsideration within the arbitration
538
539
540
541
Blessing, “Comparison of the Swiss Rules with the UNCITRAL Rules and
Others,” 31.
This will be addressed in chapters 11 and 12. Any violations resulting from
the procedure following consolidation must be challenged when they occur.
The selection of arbitrators will be addressed in chapter 9.
Both the ICC Court and the Swiss Chambers issue unreasoned decisions after
inviting the views of the parties. Neither does a contradictory proceeding take
place, nor a hearing nor an appeal to the institution.
Girsberger and Voser, International Arbitration in Switzerland, note 954.
130
institution will take place.542 Challenge of the institutional
decision could take place in front of the arbitrators (once they
are in place).543 Parties could resist in front of the court at the
seat either with or without recourse first having been sought
from the arbitral panel. Finally, challenge could be made after
the final award in the courts of an enforcement country. The
following analysis will determine which options are viable.
7.1
Challenge Before Arbitrators
Institutional powers are not absolute principles.544 Decisions
that are not reviewed are rare indeed.545 Initially, one may think
of negative prima facie decisions concerning the existence of an
arbitral agreement.546 However, parties are not prevented from
raising the question of jurisdiction in front of a court of law.547
Similarly, an affirmative prima facie rulings on jurisdiction do
not bind the arbitrators.548 A de novo review occurs.549 One may
also consider the appointment decisions concerning
542
543
544
545
546
547
548
549
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, para. 7-43 et seq.
Blackaby et al., Redfern and Hunter on International Arbitration, notes 10-11.
Fabien Gélinas and Horacio A. Grigera Naón, “The Powers of the ICC
International Court of Arbitration vis-à-vis Parties and Arbitrators,” in
Arbitration in the Next Decade, ICC Special Series 1999 (Paris: ICC
Publishing S.A., 1999), 57.
Bühler and Jarvin, “The Arbitration Rules of the International Chamber of
Commerce (ICC),” 15.111.
Rau, “‘Consent’ to Arbitral Jurisdiction: Disputes With Non-Signatories,”
3.39.
Craig, Park, and Paulsson, International Chamber of Commerce Arbitration,
173.
Pierre Heitzmann, “The International Chamber of Commerce,” in Institutional
Arbitration Tasks and Powers of Different Arbitration Institutions, ed. Pascale
Gola, Karin Graf, and Claudia Götz Staehelin (Zurich: Schulthess, 2009), 130;
Briner and Hömberg, “Der Internationale Schiedsgerichtshof der
Internationalen Handelskammer,” 370, Note 22; Gabrielle Kaufmann-Kohler
and Antonio Rigozzi, Arbitrage international droit et pratique à la lumière de
la LDIP (Bern: Editions Weblaw, 2010), note 423 et seq.; Poudret and
Besson, Comparative Law of International Arbitration, note 468.
Rau, “‘Consent’ to Arbitral Jurisdiction: Disputes With Non-Signatories,”
3.39.
131
arbitrators.550 However, the appointment of an arbitrator may
also be reviewed by courts, even if indirectly.551
A challenge before the arbitrators of an institutional decision
requires that the arbitrators not be bound by the institutional
decision. Whether the decision on consolidation can be
reviewed remains unclear, as the latest revisions of the rules do
not clarify the issue.
7.1.1 Opinion Affirmative of a Challenge Before
Arbitrators
A majority opinion speaks in favor of a de novo decision
concerning jurisdiction by the panel.552
Without further elaboration KARRER states, regarding the Swiss
Rules, that Chambers may initially order consolidation.553 This
appears to suggest that there will be a review. What form the
review should take is not revealed.
LEW AT AL. assert that in an ICC arbitration, the initial decision
is made by the ICC Court, which does not prevent the panel
thereafter from deciding the request.554 BÜHLER/JARVIN note
550
551
552
553
554
SFCD 110 Ia 59, 61.
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, notes 0-24; SFCD 118 II 359 E. 3b (Swiss Federal Court 1992);
Gerhard Walter, Internationales Zivilprozessrecht der Schweiz: Ein Lehrbuch,
4th ed. (Stuttgart: UTB, 2007), 548.
Stephanie Reed Traband, “American Arbitration Association,” in Institutional
Arbitration Tasks and Powers of Different Arbitration Institutions, ed. Pascale
Gola, Claudia Götz Staehelin, and Karin Graf (Zurich: Schulthess, 2009), 33.
Karrer,
“Internationale
Schiedsordnung
der
Schweizerischen
Handelskammer,” 4, emphasis added.
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-90.
132
more generally that the ICC decisions are not necessarily
binding on the arbitrators.555
VOSER believes that an institution would not bind arbitrators,
but rather that the arbitrators have the final decision of
admissibility of consolidation under the contract(s).556 BORN
argues for leaving the decision on consolidation to the panel
because of its stewardship of the proceedings and procedural
efficiency and fairness.557 BREKOULAKIS is of the same opinion,
when speaking about addition of third party claims.558
Swiss Courts have generally denied that arbitrators are bound
by institutional decisions.559 The Swiss Federal Court went so
far as to state that institutional decisions do not have res
judicata effect, and therefore the decision leaves any questions
to the arbitrators and then subsequently to the courts.560
Similarly, the institutional practice permits that arbitrators
reconsider the decision on consolidation. As example, in one
case before the Zurich Chamber of Commerce, the panel
decided to bifurcate a case previously consolidated by
Chambers.561
555
556
557
558
559
560
561
Bühler and Jarvin, “The Arbitration Rules of the International Chamber of
Commerce (ICC),” 15.111.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 360;
Kleinschmidt, “Die Widerklage gegen einen Dritten im Schiedsverfahren,”
147.
Born, International Commercial Arbitration Volume II, 2092.
Brekoulakis, Third Parties in International Commercial Arbitration, note
3.59.
SFCD of 29 October 2008 c. 3.3.1.6 (Swiss Federal Court 2008); SFCD of 11
January 2010 - 4A_258/2009 3.2.1 (Swiss Federal Court 2010); SFCD 128 III
330 332 (Swiss Federal Court 2002). Save the decision on dismissal or
appointment of arbitrators, as arbitrators cannot be judges in their own cause.
SFCD 110 Ia 59, 61.
Interview with Zurich Chamber of Commerce on 8 April 2010.
133
In his final report for the ICC on multi-party arbitration
DELVOLÉ states that in the event of a challenge it is the panel
which decides whether it has jurisdiction as regards all of the
parties to the proceeding in question.562
7.1.2 Opinion
Against
a
Challenge
Before
Arbitrators
A different opinion states that when consolidation arises from
chosen arbitration rules, the institution and not the panel
decides.563 The parties must be deemed to have assented to the
minimum of control by the institution.564 GILLIÉRON/PITTET do
not mention the possibility of a review by the arbitrators.565
LÖRCHER stresses the discretionary nature of the rule and only
mentions review at the enforcment stage.566
7.1.3 Author’s Opinion
This author agrees with the majority and will show infra the
reason therefor.
7.1.3.1
Jurisdictional Character
Consolidation is more than a procedural detail which does not
require review, e.g., how many pleadings should be exchanged.
Rather, consolidation is closely bound up with consent to
562
563
564
565
566
Jean-Louis Delvolvé, “Final Report on Multi-Party Arbitrations,” ICC
Bulletin 6, no. 1 (June 14, 1995): 37.
Perret, “Is There a Need for Consistency in International Commercial
Arbitration?,” 33.
Kurkela and Snellman, Due Process in International Commercial Arbitration,
167.
Gilliéron and Pittet, “Article 4 - Consolidation of Arbitral Proceedings
(Joinder), Participation of Third Parties.”
Lörcher, “The Swiss Rules of International Arbitration Seen from Abroad,”
68.
134
arbitrate and significantly changes the ordinary proceeding.567
Consent to consolidated arbitration in effect means agreeing to
arbitration with the party/ies of the other/second case. PETSCHE
states that there are things too substantial to be addressed by an
institution without recourse.568 In multi-party arbitration, which
will often be the case in instances of consolidation, it is
particularly important to show that the parties have actually
consented to this type of arbitration.569
It has an aspect of jurisdiction and procedure.570 Consolidation
is considered a procedural issue in the United States,571 but it is
also within the realm of contract interpretation and thus
jurisdiction.572 The similarities to jurisdiction are striking, as in
both cases the institutions must determine whether a valid
agreement exists, either a valid agreement to arbitrate or a valid
agreement to consolidate.573
7.1.3.2
Institutions Retain Sufficient Control
The criticism that a modicum of control is given by agreement
to an institution does not prevent review by arbitrators. An
institution does render a prima facie decision. With this
decision, it sets the initial parameters for the proceedings. In
addition, the decision will not be directly challengeable in front
of the courts, as it neither ends a case nor disposes of any
567
568
569
570
571
572
573
Frick, International Arbitration Law Library, 237.
Petsche, The Growing Autonomy of International Commercial Arbitration, 91.
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-3.
Born, International Commercial Arbitration Volume II, 2076. This can be
observed in the approach taken concerning a challenge. Some challenge
consolidation as jurisdictional question, some as procedural one. For further
information see chapter 7.
Pease and Grais, “Consolidation of Arbitrations: Courts Have Punted to
Arbitrators; Now What?,” 1. This will be addressed infra in subchapter 7.3.
Green Tree Financial Corp. v. Bazzle,539:.
The jurisdictional character is also addressed in chapters 5.
135
material aspect of the case.574 In case of refusal of
consolidation, the proceedings will continue separately, as the
arbitrators of different cases cannot bind one another to
consolidate the cases.575 A certain control is exercised by an
institution regardless.
7.1.3.3
Limits to Party Autonomy
Party autonomy cannot transfer decision-making power to just
any entity.576 A transfer of final decision-making power to the
institution requires certain safeguards. Refusing arbitrators the
right to review an institutional decision on consolidation
overlooks the required standards for decision makers.
In order for arbitration to be a valid alternative to litigation,
certain standards of independence and legitimacy of deciding
authorities must be met.577 Although the competence, i.e.,
legitimacy of arbitral institutions with regard to managing and
supervising arbitrations is recognized in principle, it does not
remain uncriticized or even clearly defined.578 According to
PETSCHE, judicial attitudes towards institutional decisionmaking are
“an – unsatisfactory – compromise between the
autonomy of institutional decision making and the
concern with independence and impartiality of
arbitrators.”579
574
575
576
577
578
579
This will be further addressed in subchapter 7.2 concerning the nature of
decisions which can be attacked in front of court.
SFCD of 11 January 2010 - 4A_258/2009. In this case, the ICC arbitrators had
rejected consolidation. The Swiss Federal Court upheld the decision.
This refers to both independence, impartiality, and legitimacy.
This is already implied by the European Convention on Human Rights.
Poudret and Besson, Comparative Law of International Arbitration, note 94.
Petsche, The Growing Autonomy of International Commercial Arbitration, 91
here referring to the decision on challgenes of arbitrators.
136
The institutions’ powers and functions must be distinguished
from the arbitrators’ powers.580 Institutions are purely
administrative in nature581 and do not settle disputes.582 Final
decisions on matters relating to substance or procedure are
usually left to the arbitrators in order to prevent disgruntled
parties from asserting due process violations against the
institution.583 Arbitrators derive their powers from private
agreement and not by the authority of the state.584 In essence,
party agreement forms its legitimacy in a much more confined
way.585 Even more confined is the legitimacy of an institution,
which does not provide for safeguards of independence and
impartiality.
In most countries the independence and impartiality of the
arbitrators is a matter of public policy.586 It has been argued that
the institution has a duty to ensure that a fundamentally fair and
impartial proceeding under its auspices exists and is carried out
by careful scrutiny of conflicts of interest.587 In consequence,
institutions uniformly guard against biased arbitrators as a
means to ensure enforceability of the awards.588 There are
numerous ethical standards for arbitrators in place.589 Not all of
them are congruent or even compatible.590 In other words, the
580
581
582
583
584
585
586
587
588
589
590
Speaking about the ICC: Bühler and Jarvin, “The Arbitration Rules of the
International Chamber of Commerce (ICC),” 15.109.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 416.
Greenberg, Feris, and Albanesi, “Consolidation, Joinder, Cross-Claims,
Multiparty and Multicontract Arbitrations: Recent ICC Experience,” 162.
Craig, Park, and Paulsson, International Chamber of Commerce Arbitration,
381.
Girsberger and Voser, International Arbitration in Switzerland, note 1.
Bennett, Arbitration Essential Concepts, 59; Petsche, The Growing Autonomy
of International Commercial Arbitration, 111.
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, notes 11-7.
Gunnar Sachs, Verhaltensstandards für Schiedsrichter (Cologne: Heymanns,
2008), 159.
Petsche, The Growing Autonomy of International Commercial Arbitration, 33.
To name but a few, the AAA/ABA Code of Ethics for Arbitrators in
Commercial Disputes, the IBA Rules of Ethics for International Arbitration
and Guidelines on Conflict of Interest in International Arbitration, the Charted
Institute of Arbitrators Code of Professional Conduct and more. For an
overview, please see Sachs, Verhaltensstandards für Schiedsrichter.
Ibid., 148 et seqq.
137
impartiality of arbitrators is secured in various ways and subject
to strict review, while the impartiality of institutions is not.
The existing standards for institutions do not suffice to satisfy
the necessary standard. Admittedly, many of the members of the
ICC Court or the Swiss Chambers Arbitration Committee591 are
lawyers and are bound personally (even if not when acting as
attonreies) by ethical standards. Additionally, some concessions
to impartiality in the decision-making are made. The members
of the ICC Secretariat and the chairman may not participate in
any ICC arbitrations.592 Vice-chairmen are not to be appointed
as arbitrators. Chairmen, vice-chairmen or members of the ICC
Court in an ongoing arbitration will be prohibited from
participating in or being present at ICC Court decisions relating
to this matter.593 They will also be prohibited from receiving
any material in this case.594 Nevertheless, these standards do not
approach the standards required for judges or arbitrators. Even
in literature concerned solely with bias in international
commercial arbitration, bias of international organizations does
not enter the analysis.595 It is only recently that the field has
begun to look at the ethical requirements that should apply to
provider organizations as distinct from the ethical requirements
of the neutrals themselves.596
On an international level there has been an attempt to introduce
standards for institutions. In 2002, the CPR-Georgetown
Commission on Ethics and Standards of Practice in ADR issued
591
592
593
594
595
596
See supra subchapter 6.4 for a description of the decision makers.
Internal Rules of the ICC article 2(1).
ICC Internal Rules articles 2(3) and (4).
ICC Internal Rules article 2(5).
See, e.g., Sam Luttrell, Bias Challenges in International Commercial
Arbitration the Need for a “Real Danger” Test (Alphen aan den Rijn: Kluwer
Law International, 2009).
Sharon Press, “Ethics for Provider Organizations,” in Dispute Resolution
Ethics: A Comprehensive Guide, ed. Phyllis Bernard and Bryant G Garth
(Washington, DC: American Bar Association, Section of Dispute Resolution,
2002), 155.
138
the Principles for Provider Organizations.597 Among these
principles is the principle of assuring neutrality of the
organization.
“The ADR Provider Organization’s policies relating to
confidentiality, organizational and individual conflicts
of interests, and ethical standards for neutrals and the
Organization;”
It requires disclosure of organizational bias.598 It is also requires
that complaint and grievance mechanisms be offered.599 To
date, neither the ICC Court nor the Swiss Chambers have
adopted these principles.
Without similar standards for institutions, judges and
arbitrators, any final decision making authority allocated to
institutions must remain exceptional and be based on other
important reasons. In the case of consolidation, it cannot. It is
therefore difficult to justify a lack of review by the arbitrators.
597
598
599
“Ethics
for
Provider
Organizations”
See
http://www.cpradr.org/Portals/0/finalProvider.pdf.
“V. Disclosure of Organizational Conflicts of Interest
a. The ADR Provider Organization should disclose the existence of any
interests or relationships which are reasonably likely to affect the impartiality
or independence of the Organization or which might reasonably create the
appearance that the Organization is biased against a party or favorable to
another, including (i) any financial or other interest by the Organization in the
outcome; (ii) any significant financial, business, organizational, professional
or other relationship that the Organization has with any of the parties or their
counsel, including a contractual stream of referrals, a de facto stream of
referrals, or a funding relationship between a party and the organization; or
(iii) any other significant source of bias or prejudice concerning the
Organization which is reasonably likely to affect impartiality or might
reasonably create an appearance of partiality or bias.”
“VI ADR Provider Organizations should provide mechanisms for addressing
grievances about the Organization, and its administration or the neutral
services offered, and should disclose the nature and availability of the
mechanisms to the parties in a clear, accurate and understandable manner.
Complaint and grievance mechanisms should also provide a fair and impartial
process for the affected neutral or other individual against whom a grievance
has been made.”
139
7.1.3.4
Procedural
Authority
Rests
With
Arbitrators
Arbitrators enjoy great freedom in managing the procedure.600
BORN suggests that the decision on consolidation should be in
the hands of the arbitrators due to their stewardship of the
proceedings.601 Absent party agreement concerning the
procedure, arbitrators have discretion to conduct
proceedings within the confines of mandatory laws.602
the
All institutional rules recognize the arbitrators’ power, in the
silence or disagreement of the parties, to direct the proceeding
subject to his own discretion and the respect of procedural due
process.603 Even in the very highly institutionalized system of
the ICC, the arbitrator is to determine procedure, while the
institution only provides a framework and administrative
assistance, also with the goal of ensuring enforceability.604
Further guidelines for arbitrators’ discretion are provided by
non-binding “best practices” or ethical rules.605 Procedural
questions which grow out of the dispute and bear on its final
disposition are for the arbitrators to decide.606
A final decision on consolidation does not only influence the
procedure that follows, but determines it in many ways as will
be shown infra. Consolidation is not a purely administrative
action, inspite of its administrative consequences outlined in
600
601
602
603
604
605
606
Kurkela and Snellman, Due Process in International Commercial Arbitration,
66.
Born, International Commercial Arbitration Volume II, 2092.
Poudret and Besson, Comparative Law of International Arbitration, note 525.
Kurkela and Snellman, Due Process in International Commercial Arbitration,
152.
See infra chapter 10.
Christian Borris, “The Reconciliation of Conflicts Between Common Law and
Civil Law Principles in the Arbitration Process,” in Conflicting Legal Cultures
in Commercial Arbitration, Old Issues, ed. Stefan Frommel, vol. 4, Studies in
Comparative Corporate and Financial Law (Kluwer Law International, 1996),
4.
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (United States
Supreme Court 2002).
140
subchapter 6.2. Procedural implications far outweigh the
administrative ones, so that the arbitrators as masters of the
procedure would be entitled to make the final determination on
consolidation.
7.1.3.5
Practical Considerations
Finally, there are practical limitations that make a final
determination by institutions unlikely. When the institution
orders consolidation, the cases are usually in very early stages.
Institutions will not make a detailed inquiry into the facts and
will decide on consolidation based on whatever information is
available at the time. The Swiss Chambers sent to the Special
Committee a summary of the cases, which is also based on
redacted information available to Chambers at the time.607 In
this case a detailed analysis is not possible. If an arbitral panel
made a determination on jurisdiction based on such cursory
inquiry, the decision would not stand scrutiny but be
remanded.608 As stated supra in chapter 4, the ICC Rule
explicitly requires a connection, and the Swiss Rule requires a
connection to avoid invalidity of the consent to consolidation.609
Finality makes little sense when limited information is
available.
7.1.4 Summary
As a mixture of administrative action, procedural order and
jurisdicational decision, the decision on consolidation falls into
the sphere of arbitrator authority and responsibility. Arbitrators
can make administrative decisions, should make procedural
decisions and must make jurisdictional decisions. In summary,
607
608
609
Interview with the Zurich Chamber of Commerce on 8 April 2010.
SFCD 128 III 50.
This applied to the previous and applies to the new (or proposed new)
versions of the ICC and Swiss Rules.
141
it is this author's position, that the arbitral panel will have to
make an independent decision on whether consolidation met the
criteria of the institutional rules and is covered by agreement of
the parties. Refusal to review the institutional decision
(implicitly or explicitly) would amount to a denial of justice and
as such be reviewable by the courts.610
7.2
Challenge in the Seat Country
Swiss judges have jurisdiction over questions in relation to the
arbitral proceedings with a seat in Switzerland. Applicable law
is the SPILA. In the recognition and enforcement phase the
New York Convention is applicable. Under both SPILA and
NYC only awards may be challenged.611 This excludes
administrative and procedural decisions, which can be
challenged, if at all, only indirectly.612
This analysis will first have to answer the question whether the
the decision on consolidation (either by the institution or by the
arbitrators) is an award and can thus be challenged directly.
7.2.1 Institutional Decision Cannot Be Challenged
Directly
The definition of which decisions are also awards is left to
national courts, as no international convention contains a final
definition.613 Generally speaking, an award is a decision by
610
611
612
613
The remainder of this analysis will proceed on the assumption that parties
make the appropriate objections to the panel.
Girsberger and Voser, International Arbitration in Switzerland, note 1045.
With the exception of jurisdictional decisions, which must be challenged or
are waived.
Thierry Augsburger and Lara M. Pair, “Note to SFCD 136 III 200 of 13 April
2010,” Aktuelle Juristische Praxis 12/2010 (2010): 1618.
142
which formal requests of the parties are disposed of.614
Procedural decisions, which either have an effect on the
existence of a proceeding615 or jurisdiction,616 are also classified
as awards.617 Included in the term award are preliminary,
interim618 or partial awards,619 which are distinguished by their
binding effect on the arbitrators.620 A final award terminates the
arbitral proceeding by granting, dismissing or deciding not to
hear a claim.621 A preliminary award does not terminate any
aspect of the merits, but decides a preliminary issue concerning
either a procedural or substantive matter, so long as it does not
end any part of the proceeding.622 Orders are decisions which
are not awards.623
Even though a positive decision on consolidation effectively
terminates one case,624 its substance of all claims remains
unaltered and must still be decided.625 Similarly, no prayer for
relief is answered by consolidation. It is this author’s
conclusion, that the decision by the institution does not, in
effect, have an impact on the existence of the claims.
This view is supported by courts and scholars. It has been the
long-standing practice of courts in Switzerland and elsewhere to
disallow direct challenges of decisions of arbitration
614
615
616
617
618
619
620
621
622
623
624
625
Girsberger and Voser, International Arbitration in Switzerland, note 954;
SFCD 116 II 80 82 et seq. (Swiss Federal Court 1990).
SFCD 116 II 80, 82 et seq.
Girsberger and Voser, International Arbitration in Switzerland, note 961.
Rolf A. Schütze, “Die gerichtliche Überprüfung von Entscheidungen des
Schiedsgerichts,” Neue Zeitschrift für Schiedsverfahren 2009 (2009): 246 et
seq.
Intermin awards no longer considered awards according to Augsburger and
Pair, “Note to SFCD 136 III 200 of 13 April 2010.”
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 1522.
Girsberger and Voser, International Arbitration in Switzerland, note 955.
SFCD 130 III 76 78 et seq. (Swiss Federal Court 2003).
Ibid., 79.
Günter Henn, Schiedsverfahrensrecht: Handbuch für die Praxis, 3rd ed. (C.F.
Müller, 2000), note 336.
See subchapter 6.2 on administrative effect of consolidation.
See subchapter 6.2.
143
institutions.626 Only an indirect challenge of the institutional
decision is permitted.627
Challenges of procedural orders or other decisions dealing with
primarily procedural matters are equally inadmissible.628 Even
the indirect examination of the award takes no heed of the
offensive institutional decision, as this decision is rendered in a
non-contradictory fashion,629 but only of the panel decisions or
the procedures that are a result thereof.
The institutional decision by itself cannot form the basis for a
challenge, only the decision of the panel that treats the
insitituional act. The inquiry thus turns to which form the panel
decision has, which can be challenged. Is it a procedural or a
jurisdictional challenge?
626
627
628
629
SFCD 118 II 359, 102 ASA Bulletin 359, 361 (Swiss Federal Court 1994);
Société Cubic Defense Systems Inc. v. Chambre de commerce internationale,
2001 Rev.arb. No. 3 511 (Cour de Cassation, Civ. 1e ); SFCD 115 II 294 296
(Swiss Federal Court 1989); SFCD 120 II 155,415:; SFCD 118 II 359, 361;
SFCD of 17 February 2000 ASA Bulletin 783 (Swiss Federal Court 2000);
SFCD 128 III 330, 332; SFCD of 11 January 2010 - 4A_258/2009, para. C.
3.1.2; Stephen V. Berti and Anton K. Schnyder, “Article 190 SPILA,” in
International Arbitration in Switzerland: An Introduction to and a
Commentary on Articles 176-194 of the Swiss Private International Law
Statute, ed. Stephen V. Berti et al. (Basel: Helbing u. Lichtenhahn, 2000), 22;
Pierre A. Karrer and Natasa Muric Maier, “Swiss Rules of International
Arbitration,” Croation Arbitration Yearbook 12 (2005): 230; Poudret and
Besson, Comparative Law of International Arbitration, note 536; KaufmannKohler and Rigozzi, Arbitrage international droit et pratique à la lumière de
la LDIP, note 723; Kurkela and Snellman, Due Process in International
Commercial Arbitration, 80 etseq.
SFCD 120 II 155, 415:415; SFCD 118 II 359, 361; SFCD of 17 February
2000; SFCD 118 II 359 (30 June 1994), 102:102; showing disapproval: Berti
and Schnyder, “Article 190 SPILA,” 29; showing approval Pierre A. Karrer,
“Buchstabensuche, Buchstabenseuche – Leichte Polemik zu Art. 190 IPRG,”
ASA Bulletin 1994 (1994): 333.
Pro: Stefan M. Kröll and Peter Kraft, “§ 1059 - Setting Aside of Awards,” in
Arbitration in Germany: The Model Law in Practice, ed. Karl-Heinz
Böckstiegel, Stefan M. Kröll, and Patricia Nacimiento (Kluwer Law
International, 2008), note 12; Girsberger and Voser, International Arbitration
in Switzerland, note 700; Karrer, “Buchstabensuche, Buchstabenseuche –
Leichte Polemik zu Art. 190 IPRG,” 333; contra: Berti and Schnyder, “Article
190 SPILA,” 29.
SFCD of 11 May 1992.
144
7.2.2 Grounds for Challenge
When the arbitral panel reviews the institutional decision, it
must do so in the context of determining its jurisdiction.
Overwhelming scholarly and judicial opinion places the
decision on consolidation by the panel in the realm of contract
interpretation as to the scope of jurisdiction.630 This means that
the panel will examine each of the accepted theories for
extension or interpretation of an arbitration agreement. An
argument could be made, that agreement to arbitral rules grants
the power to extend jurisdiction beyond the actual contractual or
consensual approach of the original contract on the basis and
scope of the arbitral rules. (Brekoulakis) This argument is to be
rejected insofar as the institution would make the choice for
want of procedural safeguards. A consolidation order itself does
not amount to a final determination on jurisdiction.631
The principle of competence-competence states that arbitrators
have the power to decide on their own jurisdiction.632 In light of
competence-competence, the panel can decide whether a certain
form of combined arbitration is covered by the agreement.633
630
631
632
633
Strong, “The Sound of Silence: Are U.S. Arbitrators Creating Internationally
Enforceable Awards When Ordering Class Arbitration in Cases of Contractual
Silence or Ambiguity?,” 1026; Wenger, “Article 186 SPILA,” 15; Voser,
“Multi-party Disputes and Joinder of Third Parties,” 361; Lew, Mistelis, and
Kröll, Comparative International Commercial Arbitration, notes 16-61;
William W. Park, “Determining an Arbitrator’s Jurisdiction: Timing and
Finality in American Law,” Nevada Law Journal 8 (2007): 151; contra: Rau,
“‘Consent’ to Arbitral Jurisdiction: Disputes With Non-Signatories”, who
considers it a question of arbitrability.
Jan Willem Bitter, “Consolidation of Arbitral Proceedings in the
Netherlands,” in Multiple Party Actions in International Arbitration, ed.
Permanent Court of Arbitration (New York: Oxford University Press, 2009),
note 8.30.
Bowman Rutledge, Kent, and Henel, “United States,” 13.56; Schwab and
Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, notes 6-9.
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-10.
145
The extent of competence-competence is dependant on the lex
arbitri.634
In Switzerland the principle of competence-competence is
recognized without reservation according to article 186(1)
SPILA. Commentators are unanimous that this norm is
mandatory.635 Parties cannot deprive the arbitral panel of this
power and confer it to someone else, be it an institution or a
court.636
The Swiss Federal Court explicitly decided that the preliminary
decisions on jurisdiction by the institution do not establish
jurisdiction of the panel.637 In this decision Swiss Federal Court
decided that the decision on joinder had to be determined by the
arbitrator, even if the institution were to make a determination
itself. 638 The decision on consolidation must thus be made by
the arbitrators as well.
634
635
636
637
638
Turner and Mohtashami, A Guide to the LCIA Arbitration Rules, 6.86.
Instead of many more: Wenger, “Article 186 SPILA,” 3; Poudret and Besson,
Comparative Law of International Arbitration, note 462; Andreas Bucher, Le
nouvel arbitrage international en suisse (Basel: Helbing & Lichtenhahn,
1988), 52; Lalive, Poudret, and Reymond, Le droit de l’arbitrage interne et
international en suisse édition annotée et commentée du concordat sur
l’arbitrage du 27 Mars 1969, 380.
Poudret and Besson, Comparative Law of International Arbitration, note 462;
SFCD 128 III 50; Bucher, Le nouvel arbitrage international en suisse, note
341; Gabriele Nater-Bass, “‘Prima Facie’ Zuständigkeitsentscheide in
internationalen Schiedsgerichtsverfahren aus der Sicht der Parteien”, 2002;
SFCD 118 IA 28 (Swiss Federal Court 1992).
SFCD of 5 December 2008 - 4A_376/2008, sec. c. 8.
Ibid.
The facts of the case can be summarized as follows: An English company sold
all the shares of a UAE company to a buyer, pursuant to a sales contract
entered into by the parties and by the director and creditor of the UAE
company. On the same day, the buyer was appointed managing director of the
company by virtue of an employment contract entered into by the buyer and
the company represented by its unique partner (also creditor of the UAE
company), who was himself represented by the seller. Both contracts
contained identical clauses. The buyer requested that the arbitration be
extended to the seller, because of the interplay between the two contracts.
Both the ICC Court (after a prima facie examination pursuant to Article 6(2)
of the ICC Rules) and the arbitral panel admitted their jurisdiction, but refused
the extension holding that, in the absence of a specific provision in the ICC
Rules allowing third party intervention, such intervention cannot occur
146
In addition, in decisions on consolidation, the arbitrator must
decide not only the traditional question, whether both cases are
included within the scope of the respective agreements, but also
the less traditional ones, whether the second case also falls
within the material and personal scope of the other agreement
and whether the parties validly consented to hearing cases
together.639 In making these jurisdictional determinations
particular attention must be paid to the relationship between the
contracts or claims.640 The required connection was already
discussed supra in chapter 5. The same procedure was followed
in the Dutco641 and the Westland cases.642 Whether the choice of
specific rules extends the jurisdiction of the panel indepently of
the scope of the arbitration clause itself was discussed in chapter
5.
Once the arbitral panel has rendered a decision on its
jurisdiction, Swiss courts can review this decision. A challenge
would fall under article 190(2)(b) SPILA, unless an interim
award had been issued, in which case article 190(3) SPILA in
connection with article 190(2)(b) SPILA would apply.
Absent objection, the jurisdictional challenge is lost.643 To raise
an objection means more than simply registering it with the
639
640
641
642
643
without the consent of the interested parties. The arbitrator denied his
jurisdiction based on the ICC Court decision.
Meredith R. Miller, “Contracting Out of Process, Contracting Out of
Corporate Accountability: An Argument Against Enforcement of Pre-Dispute
Limits of Process,” Tennessee Law Review 75 (2008): 374 et seq.; Berger and
Kellerhals, International and Domestic Arbitration in Switzerland, note 474;
Siemens AG and BKMI Industrieanlagen GmbH v. Dutco Construction
Company, 1992 No. 3:.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 474.
Siemens AG and BKMI Industrieanlagen GmbH v. Dutco Construction
Company, 1992 No. 3:.
SFCD 120 II 155,415:.
Ibid.
147
panel.644 It means to take all appropriate steps to remedy the
alleged violation as soon as possible.645 The challenge must be
made within 30 days of notification.646 Failure to protest within
the time limit constitutes an irrevocable waiver of the challenge
to jurisdiction.647 If a lack of jurisdiction is not pleaded in the
arbitration itself, it may not be raised in annulment
proceedings.648 If a party proceeds to the merits without
reservation it is considered to have assented to jurisdiction by
then, even if jurisdiction had not existed previously.649 An
exception is only possible in the context of 190(2) SPILA, a
challenge is only possible if the grounds were unknown and
unknowable at the time, or raised and rejected by the panel.650
Each of the grounds listed in article 190 SPILA is interpreted
narrowly.651
Article 190(2)(b) states that the award “can be challenged only:
(. . .) b. If the arbitral panel erroneously held that it had or did
not have jurisdiction”. Article 190(2)(b) SPILA does not only
apply to the whole dispute, but to aspects of contention of
jurisdiction.652 Article 190(2)(b) SPILA permits a challenge
both of the subjective and the objective scope of jurisdiction.653
Similarly, if the panel accepted jurisdiction on a summary or
preliminary examination, the award may be challenged.654
644
645
646
647
648
649
650
651
652
653
654
AAOT Foreign Economic Association Technostroyexport v. International
Development and Trade Services, Inc., 139 F.3d 980 (2nd Cir., USA 1998).
Petrochilos, Procedural Law in International Arbitration, note 4.23.
Karrer and Straub, “Switzerland,” 12.36 et seqq.; Berger and Kellerhals,
International and Domestic Arbitration in Switzerland, note 682.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 682.
SFCD 130 III 125 129 (Swiss Federal Court 2003).
SFCD 128 III 50, 57 et seq.
SFCD 119 II 271 ASA Bulletin 407 - 408 (Swiss Federal Court 1993); SFCD
118 II 359 (30 June 1994), 102:360 et seq.
Elliott Geisinger and Viviane Frossard, “Challenge and Revision of the
Award,” in International Arbitration in Switzerland: A Handbook for
Practitioners - Five Years of Experience, ed. Gabrielle Kaufmann-Kohler and
Blaise Stucki (The Hague: Kluwer Law International, 2004), 135.
SFCD 118 II 359 (30 June 1994),102:.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 1551; Berti and Schnyder, “Article 190 SPILA,” 47.
SFCD 128 III 50.
148
Whether this challenge would be successful depends on the
circumstances. The categories and indicators propounded supra
in chapter 5 on validity will also be employed to determine
whether the contracts can be interpreted to encompass both
cases and an agreement to consolidate.
7.3
Challenge in the Enforcement Countries
As previously stated, institutional decisions are generally
reviewed indirectly.655 Challenges may take place on two levels,
in the country of the seat via an annulment action, and in the
countries of enforcement via opposition to enforcement.656 The
applicable law concerning a Swiss award in Germany and the
United States is the New York Convention,657 which binds 145
countries.658
In Germany the NYC was transformed by § 1061(1) GCCP
without alteration. The United States did likewise in USC, title
9, chapter 2, § 201,659 also known as the FAA. The
jurisprudence developed under the FAA has construed the
grounds enumerated in the NYC for refusal and enforcement to
655
656
657
658
659
Petsche, The Growing Autonomy of International Commercial Arbitration, 91.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 680.
Schwab and Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, notes 59-1.
Fabien Gélinas, “Peeking Through the Form of Uniform Law: International
Arbitration Practice and Legal Harmonization,” Journal of International
Arbitration 27, no. 3 (2010): 322. For the exact number see
http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_s
tatus.html
“The Convention on the Recognition and Enforcement of Foreign Arbitral
Awards of June 10, 1958, shall be enforced in United States courts in
accordance with this chapter.“
149
be both exclusive and narrowly construed.660 Federal courts
have jurisdiction to hear these cases.661
7.3.1 Waiver of Challenge
Raising a defense under the NYC depends to a certain extent on
the previous actions of the parties. Failure to raise a
jurisdictional defense at the earliest possible moment will result
in a loss of the defense. In this context, this means that failure to
object in front of the arbitral panel will result in the loss of the
defense, as it would in the seat country. 662
Many national jurisdictions contain provisions that prohibit the
assertion of the violation of rights after a substantial amount of
time has passed or in cases of venire contra factum proprium,663
expecting the wronged party to object the seat country within a
time limit when the objectionable facts become known.664
Nevertheless, it is highly controversial whether the party also
660
661
662
663
664
Marc J. Goldstein and Julian Wilson, “Enforcement of Foreign Arbitral
Awards Under United States and English Law,” in Transatlantic Commercial
Litigation and Arbitration, ed. John Fellas (Dobbs Ferry, N.Y: Oceana
Publications, 2004), 631.
Elisabeth M. Senger-Weiss, “Enforcing Foreign Awards,” in Handbook on
International Arbitration and ADR, ed. Thomas E. Carbonneau (Huntington,
N.Y: JurisNet, 2006), 168; Brunet et al., Arbitration Law in America, 63 et
seq.
Born, International Commercial Arbitration Volume II, 2795; Hanefeld,
“Germany,” 7.38; Nacimiento, “Article V(1)(d) NYC,” 299; LaminoirsTrefilieries-Cableries de Lens v. Southwire Co. 484 F.Supp 1063, 1066 (N.D.
Ga., USA 1980); Sachs and Lörcher, “§ 1042 - General Rules of Procedure,”
19; AAOT Foreign Economic Association Technostroyexport v. International
Development and Trade Services, Inc.,139:.
Petsche, The Growing Autonomy of International Commercial Arbitration,
123.
Born, International Commercial Arbitration Volume II, 2593; Kurkela and
Snellman, Due Process in International Commercial Arbitration, 191-193;
Andrew Tweeddale and Keren Tweeddale, Arbitration of Commercial
Disputes International and English Law and Practice (Oxford: Oxford
University Press, 2005), note 12.67.
150
needs to have exhausted its remedies under the laws of the seat
country.665 The New York Convention is silent on the subject.
Whether resiting enforcement also requires raising the defense
at the seat in an annulment proceeding is questionable. In
Germany, the public policy defense need not be raised at the
seat of the arbitration.666 The appellant has a choice between the
two options. This view is supported by scholars,667 even though
there used to be some disagreement.
KRÖLL advocates that the defense should be precluded when
equal protection as in German Courts would be available.668 In
Switzerland, as previously seen it would not be. In Germany,
the public policy defense need not be raised at the seat of the
arbitration.669 German courts held specifically, that the appellant
has a choice between the two options.
For both Germany and the United States, a challenge of
jurisdiction or validity, which has not been raised in the seat
country with available relief, is lost for the enforcement
proceeding.670 In short, articles V(1)(a), (c), and (d) NYC will
be lost if not raised in the seat country.671
665
666
667
668
669
670
Kröll, “§ 1061 - Foreign Awards,” 50.
Andrés Jana, Angie Armer, and Johanna Klein Kranenberg, “Article V(2)(b)
NYC,” in Recognition and Enforcement of Foreign Arbitral Awards: A
Global Commentary on the New York Convention, ed. Herbert Kronke et al.
(Alphen aan den Rijn: Kluwer Law International, Wolters Kluwer Law &
Business, 2010), 408.
Dirk Otto and Omania Elwan, “Article V(2) NYC,” in Recognition and
Enforcement of Foreign Arbitral Awards: A Global Commentary on the New
York Convention, ed. Herbert Kronke et al. (Alphen aan den Rijn: Kluwer
Law International, Wolters Kluwer Law & Business, 2010), 409.
Kröll, “§ 1061 - Foreign Awards,” 50.
Jana, Armer, and Klein Kranenberg, “Article V(2)(b) NYC,” 408.
Tweeddale and Tweeddale, Arbitration of Commercial Disputes International
and English Law and Practice, note 13.77; Born, International Commercial
151
If it has been raised and rejected, res judicata may prevent the
renewed assertion in relation to defenses that relate to the same
applicable law,672 namely most defenses under article V(1)
NYC,673 not, however, defenses under article V(2) NYC.
In Germany, a challenge to the consolidation decision would be
regarded as a challenge to jurisdiction, not one under article
V(1)(d) NYC. In the United States, it is considered a question of
violation of party agreement pursuant to article V(1)(d) NYC.674
The standard of interpretation is that of the lex arbitri.
7.3.2 Lack of Jurisdiction – Articles V(1)(a) and (c)
NYC
A lack of jurisdiction V(1)(c) NYC and invalidity V(1)(a) NYC
are closely connected. Both articles V(1)(a) and V(1)(c) NYC
are implicated in consolidation decisions. Article V(1)(a) NYC
will apply to the parties, article V(1)(c) to the scope of the
claims.675
As an illustrative example, Elma Inc. arbitrates against Fido Co.
in case A. Their claims are W and X. Guido Ltd. arbitrates
against Halo S.A. in case B. Their claims are Y and Z. In this
case, Elma Inc. and Fido Co. could assert lack of a valid
arbitration agreement V(1)(a) NYC with either Guido Ltd. or
671
672
673
674
675
Arbitration Volume II, 2862; Soviet Danube Steam Navigation Co. v. Travel
Agency, 35 Recht der Internationalen Wirtschaft 911, 35 (Regional Court
Frankfurt, Germany 1989); International Standard Electric Corporation v.
Bridas Sociedad Anonima Petrolera, Industrial y Comercial, 745 F.Supp. 172
(S.D.N.Y., USA 1990).
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 2542 et seqq.; Born,
International Commercial Arbitration Volume II, 2862; Kröll, “§ 1061 Foreign Awards,” 88.
Kröll, “§ 1061 - Foreign Awards,” 51.
This does not refer to article V(1)(a) NYC.
Karaha Bodas Co. L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas
Bumi Negara, 364 F.3d 274, 40 et seqq. (5th Cir., USA 2004).
Kronenburg, Vollstreckung ausländischer Schiedssprüche in den USA: Die
Rechtsprechung US-Amerikanischer Gerichte, 187.
152
Halo S.A., and vice versa. Elma Inc. and Fido Co. could further
raise article V(1)(c) NYC against the claims 1 and 2, while
Guido Ltd. and Halo S.A. could raise the same for claims 3 and
4.
Assuming the defenses can still be raised, in both Germany and
the United States, there is a presumption that the arbitrators
acted within their authority.676
“(. . .) the Convention recognizes that an award may
not be enforced where predicated on a subject matter
outside the arbitrator’s jurisdiction, it does not sanction
second-guessing of arbitrator’s construction of the
parties’ agreement.”677
This jurisdictional analysis has traditionally allowed for a wide
interpretation.678 As long as there is a plausible legal reasoning
for the authority exercised by the arbitrators, the court will not
find that there was exceeding of authority.679
German courts assume that split jurisdiction is to be avoided
and therefore construe arbitration agreements broadly.680
German authorities have been reluctant to refuse enforcement
for invalidity due to a lack of specificity,681 which was
676
677
678
679
680
681
Nicholas Christine Port, Scott Ethan Bowers, and Bethany Davis Noll,
“Article V(1)(c) NYC,” in Recognition and Enforcement of Foreign Arbitral
Awards: A Global Commentary on the New York Convention, ed. Herbert
Kronke et al. (Alphen aan den Rijn: Kluwer Law International, Wolters
Kluwer Law & Business, 2010), 260 et seqq.; Parsons & Whittemore
Overseas Co. v. Societé Generale de L’Industrie du Papier, 508 F.2d 969, 976
(2nd Cir., USA 1974).
Parsons & Whittemore Overseas Co. v. Societé Generale de L’Industrie du
Papier,508:.
Kurkela and Snellman, Due Process in International Commercial Arbitration,
27.
Fertilizer Corp. of India v. IDI Management, 517 F.Supp 948, 958 (S.D.
Ohio, USA 1981).
Kröll, “§ 1061 - Foreign Awards,” 83.
Ibid., 66.
153
discussed in connection with validity in chapter 5. The
enforcement courts should thus not reach a different conclusion
from that outlined previously.682
7.3.3 Violation of Party Agreement – Article V(1)(d)
NYC
Precedent exists in the United States that even wrongfully
consolidated cases are not to be refused recognition and
enforcement.683 Karaha Bodas was, at its outset, a Swiss arbitral
case which concluded that sufficient interconnectedness
between the cases existed. It must, however, be stated that the
Fifth Circuit considered consolidation not as a jurisdictional
violation, but as a violation of party agreement pursuant to
article V(1)(d).684
Karaha (“KBC”) signed two contracts to produce electricity
from geothermal sources in Indonesia. Under the Joint
Operation Contract ("JOC"), KBC had the right to develop
geothermal energy sources in the Karaha area of Indonesia;
Pertamina was to manage the project and receive the electricity
generated. Under the Energy Sales Contract ("ESC"), PLN
agreed to purchase from Pertamina the energy generated by
KBC's facilities. Both contracts contained almost identical
broad arbitration clauses requiring the parties to arbitrate any
disputes in Geneva, Switzerland under the Arbitration Rules of
the United Nations Commission on International Trade Law
("UNCITRAL"). Swiss procedural law applied to the
arbitration. An award was rendered and in February 2001,
Pertamina appealed the Award to the Supreme Court of
682
683
684
In practice it will be difficult to say whether the German Court would indeed
reach the same result.
Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas
Bumi Negara,364:.
Karaha Bodas Co. L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas
Bumi Negara, vol. 364, para. 40 et seqq.
154
Switzerland. In April 2001, the Swiss Supreme Court dismissed
Pertamina's claim because of untimely payment of costs.
Pertamina moved for reconsideration; the Swiss court denied
that motion in August 2001.
The 5th Circuit found that, based on the UNCITRAL Rules, the
panel could do everything appropriate and that the panel’s
finding that consolidation was appropriate had not been shaken.
The panel had considered “connexity”, costs and risk of
differing judgments.685
“(T)he Preliminary Award, the Tribunal set out the
basis for concluding that the two contracts were
integrated such that "the parties did not contemplate
the performance of two independent contracts but the
performance of a single project consisting of two
closely related parties." The Tribunal continued: In
such circumstances, the conclusion of this Arbitral
Tribunal is that KBC's single action should be admitted,
provided it is appropriate. The Arbitral Tribunal has
not the slightest doubt in this respect. Due to the
integration of the two contracts and the fact that the
Presidential Decrees, the consequences of which are at
the origin of the dispute, affected both of them, the
initiation of two separate arbitrations would be
artificial and would generate the risk of contradictory
decisions. Moreover, it would increase the costs of all
the parties involved, an element of special weight in the
light of difficulties faced by the Indonesian economy, to
which counsel for (Pertamina) legitimately drew the
Arbitral Tribunal's attention.” 686
685
686
Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas
Bumi Negara, vol. 364, para. 43 et seq.
Ibid.
155
The Court further found that even if a procedural violation had
taken place, there had been no prejudice to the parties, so that
no refusal of enforcement could be granted.687 This decision
further indicates that the U.S. is not following the Dutco688
approach with respect to the impermissibility to consent to
consolidation in advance.
7.4
Conclusion
The previous analysis has shown that the institutional decision
can and must be challenged in front of the arbitrators. It is a
quasi-jurisdictional decision for the institution on a prima facie
basis, and a jurisdictional decision for the panel. The decision
then taken by arbitrators could be attacked both in front of the
seat country immediately or once the final award is rendered. In
Switzerland and Germany ground for the challenge would be
made concerning the proper jurisdiction of the panel, while the
challenge in the United States would likely be treated as one
violation of agreed procedure. Based on precedent, it is safe to
say that the United States is disposed to accept awards based on
forcible consolidation, while German courts will likely not
deviate from the findings of Swiss courts.
687
688
Karaha Bodas Co. L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas
Bumi Negara, vol. 364, note 47.
Siemens AG and BKMI Industrieanlagen GmbH v. Dutco Construction
Company, 1992 No. 3:.
156
157
8
Arbitrators’ Choices
This chapter focuses on the point of view of the arbitrator, i.e.,
on whether an arbitrator has the right to resign from her
appointment in either case, based on the alteration of
circumstances.689 Arbitrators are affected by consolidation in
one of two ways. Either they are faced with an enlarged dispute
or they lose a mandate. A parallel to judges, who may not
resign, cannot be drawn.690 Judges must serve. In international
arbitration, when arbitrators agree to serve,691 different criteria
apply. Initially, this analysis addresses the involuntary loss of a
mandate, followed by voluntary resignation.
8.1
Involuntary Loss of Mandate
Arbitrators who lose their mandate for whatever reason have no
possibility of retaining their case. 692 While removed
arbitrators693 are reimbursed for services already performed,694 no entitlement to continued appointment exists.695 The proposed
Swiss Rules even clarify, that no arbitrator in a situation
involving consolidation has an absolute right to remain.
Additionally, this lack of entitlement to continue a mandate is
illustrated in all jurisdictions by the fact that arbitrators can be
689
690
691
692
693
694
695
This aspect of resignation is unique to arbitration, as governmental judges are
not permitted to resign from adjudication of a case absent partiality or health
reasons.
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 2813.
Emilia Onyema, International Commercial Arbitration and the Arbitrator’s
Contract (London: Routledge, 2010), chap. 4.
Franz Hoffet, Rechtliche Beziehungen zwischen Schiedsrichtern und Parteien
(Zurich: Schulthess, 1991), 320 et seqq.
Arbitrators who are removed are excluded from performing services by an
authority such as a court or an institution. Arbitrators who resign actively
discontinue their functions.
Onyema, International Commercial Arbitration and the Arbitrator’s
Contract, 177; Rüede and Hadenfeldt, Schweizerisches Schiedsgerichtsrecht
nach Konkordat und IPRG, 164.
Girsberger and Voser, International Arbitration in Switzerland, note 587.
158
removed for a variety of reasons,696 many of which are bias
related, or to a lack of ability to fulfill their functions.697
Removal without reason is permissible as well. 698
Consolidation does not warrant different treatment. As a
consequence, agreement of the arbitrators of the first case is not
required for consolidation.699
8.2
Arbitrators With Enlarged Case
Arbitrators who find themselves in a position in which they
must decide a case larger than originally anticipated when
accepting appointment are in a different situation.700 The
question is not one of retaining a mandate, but whether an
arbitrator may resign.701
Laying down the mandate at any given time is not permitted.702
The relationship between arbitrator and party, however it may
technically be qualified or construed, has both a contractual and
a procedural aspect influencing the possibilities arbitrators have
696
697
698
699
700
701
702
Ibid., note 566.
Article 12(1) Swiss Rules; article 12(2) ICC Rules.
Hoffet, Rechtliche Beziehungen zwischen Schiedsrichtern und Parteien, 319
et seqq.; Girsberger and Voser, International Arbitration in Switzerland, note
567; speaking against a right to dismiss the arbitrator freely: Dorothée
Schramm, Andreas Furrer, and Daniel Girsberger, “Articles 176 - 194
SPILA,” in Handkommentar zum Schweizer Privatrecht: Art. 1 - 200 IPRG,
ed. Andreas Furrer, Daniel Girsberger, and Markus Müller-Chen, re-issued 1st
ed. of 2007 ed. (Zurich: Schulthess, 2010), notes 179-3.
Reiner and Jahnel, “ICC-Schiedsgerichtsordnung,” 4-17.
This analysis does not address potential damage claims against the resigning
arbitrator.
The question of increased remuneration need not be addressed here. If the
value of the case increases, so do the fees.
Girsberger and Voser, International Arbitration in Switzerland, note 573;
Reiner and Jahnel, “ICC-Schiedsgerichtsordnung,” 24 article 7; Born,
International Commercial Arbitration Volume I, 1613; Kleinschmidt, “Die
Widerklage gegen einen Dritten im Schiedsverfahren,” 149; Schramm, Furrer,
and Girsberger, “Articles 176 - 194 SPILA,” 179-5.
159
in these situations.703 In all jurisdictions arbitrators have the
option to resign their mandate704 under certain circumstances.705
Even institutional rules expressly mention arbitrators’
resignation.706 When an arbitrator takes a case, he is bound by a
contractual relationship with the parties and governed by
procedural law, while private law applies by analogy.707 Due to
the dual nature of an arbitrator’s contract as a substantive law
contract with procedural elements, the procedural aspect of the
contract also disallows an arbitrator to terminate his or her
contract with the parties or institution at an inopportune time.708
Circumstances permitting resignation involve “good”,
“important” or “serious” reasons.709 Good reasons could be,
703
704
705
706
707
708
709
Much ink has been spilled over the nature of the relationship in the triangle of
institution-arbitrator-party. It is not this author’s intention to repeat everything
that has previously been said, as its influence on this analysis is marginal. See
generally Onyema, International Commercial Arbitration and the Arbitrator’s
Contract, 68 et seq.
Girsberger and Voser, International Arbitration in Switzerland, note 566;
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 4369; Poudret and
Besson, Comparative Law of International Arbitration, note 450; Born,
International Commercial Arbitration Volume I, 1612; SFCD 117 Ia 166.
Girsberger and Voser, International Arbitration in Switzerland, note 573;
SFCD 117 Ia 166; Born, International Commercial Arbitration Volume I,
1612; Rüede and Hadenfeldt, Schweizerisches Schiedsgerichtsrecht nach
Konkordat und IPRG, 168.
For example article 13 Swiss Rules; UNCITRAL article 11(3); ICC Rules
12(1); LCIA Rules 10(1) and (4); CEPANI Rules article 18(4).
SFCD 111 Ia 72 76 (Swiss Federal Court 1985); Hoffet, Rechtliche
Beziehungen zwischen Schiedsrichtern und Parteien, 10 et seqq.; Girsberger
and Voser, International Arbitration in Switzerland, note 604 et seqq.; Rüede
and Hadenfeldt, Schweizerisches Schiedsgerichtsrecht nach Konkordat und
IPRG, 151.
Patricia Nacimiento and Amelie Abt, Ҥ 1034 - Composition of Arbitral
Tribunal,” in Arbitration in Germany: The Model Law in Practice, ed. KarlHeinz Böckstiegel, Patricia Nacimiento, and Stefan M. Kröll (Alphen aan den
Rijn, The Netherlands: Wolters Kluwer Law & Business, Kluwer Law
International, 2007), note 32 et seq.; Lachmann, Handbuch für die
Schiedsgerichtspraxis, note 4369; Born, International Commercial
Arbitration Volume I, 1605 et seqq.; Poudret and Besson, Comparative Law of
International Arbitration, note 437 et seqq.; Nathalie Voser and Pascale Gola,
“The Arbitral Tribunal,” in International Arbitration in Switzerland: A
Handbook for Practitioners - Five Years of Experience, ed. Gabrielle
Kaufmann-Kohler and Blaise Stucki (The Hague: Kluwer Law International,
2004), 35.
Schwab and Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, notes 8-11 and 13-10; Lachmann, Handbuch für die
160
e.g., health reasons or issues of bias.710 The ICC Rules require
that the arbitrator’s resignation be approved by the ICC Court
according to article 12(1) ICC Rules, which serves the same
function as court approval in Switzerland and the prohibition to
resign at an inopportune time in Germany.
A sufficient reason may exist when the terms of service change
drastically. Regardless of the underpinnings of the contract
which binds arbitrators,711 regardless of the law governing the
relationship,712 arbitrators (at one point) must have agreed to
serve. This agreement is often encompassed in written contracts,
the terms of reference,713 oath of office,714 operation of law,715
or otherwise,716 and relates only to the controversy brought
before the arbitrator at the time of agreement.717
The concept of significant change of circumstances and
consequent resignation of an arbitrator due thereto is accepted
in Switzerland,718 where absent agreement by the parties a
710
711
712
713
714
715
716
717
718
Schiedsgerichtspraxis, note 4370; Born, International Commercial
Arbitration Volume I, 1634 quoting the AAA/ABA Code of Ethics; SFCD 117
Ia 166, 169.
IBA Rules on Ethics. For additional adequate reasons, not related to the topic
of consolidation see Born, International Commercial Arbitration Volume I,
1636.
Onyema, International Commercial Arbitration and the Arbitrator’s
Contract, 102 et seqq.; Pierre A. Karrer, “Konstituierung des
Schiedsgerichts,” in Praxishandbuch Schiedsgerichtsbarkeit, ed. Hellwig
Torggler (Baden-Baden: Nomos, 2007), note 61 et seq.
Instructive for the different possibilities which law is the govern the
relationships between parties and arbitrators as well as arbitrators and
institutions: Onyema, International Commercial Arbitration and the
Arbitrator’s Contract.
For ICC arbitrations.
Karrer, “Konstituierung des Schiedsgerichts,” 83, referring to an oath of office
practiced in Nepal.
Office of Public Sector Information and United Kingdom Parliament,
“Arbitration
Act
1996,”
Text,
Sec.
33,
http://www.opsi.gov.uk/acts/acts1996/ukpga_19960023_en_1.
Article 7(5) ICC Rules “By accepting to serve, every arbitrator undertakes to
carry out his responsibilities in accordance with these Rules.”
Michael J. Mustill Sir and Stewart C. Boyd, Law and Practice of Commercial
Arbitration in England, 2nd ed. (Lexis Law Publ., 1989), 129.
Girsberger and Voser, International Arbitration in Switzerland, note 594 et
seq.
161
national court must ultimately decide whether resignation is
based on a sufficient reason. In Germany, the discussion
concerning sufficient reason is on a more theoretical level and
the answer depends on the categorization of the arbitrator’s
contract. SCHWAB/WALTER and the German Federal Court
consider arbitrators’ contracts to be substantive law contracts
with certain modifications,719 i.e., of dual (i.e., substantive and
procedural) nature.720 Substantively, the obligations of an
arbitrator are based on a service contract.721 The service
rendered is the participation in the proceeding.722
Whether arbitrators can terminate a contract is determined by
assessing service contract law. Whether an important reason for
resignation exists depends on a balancing of all
circumstances.723 According to LACHMANN, the mere increase
of workload is not a sufficient reason,724 while BORN
disagrees.725 POUDRET/BESSON require the arbitrators’ consent
for the addition of new claims.726 According to MEIER, the
agreement of the arbitrators is not necessary for the addition of
parties, unless the workload is greatly exaggerated.727
719
720
721
722
723
724
725
726
727
Schwab and Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, notes 11-8.
Ibid., notes 12-9.
Nacimiento and Abt, “§ 1034 - Composition of Arbitral Tribunal,” 32 et seq.
“Dienstvertrag” § 611 German Civil Code. But also a contract sui generis.
Schwab and Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, notes 12-1.
Tweeddale and Tweeddale, Arbitration of Commercial Disputes International
and English Law and Practice, note 22.35; Lachmann, Handbuch für die
Schiedsgerichtspraxis, note 4377.
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 2814.
Born, International Commercial Arbitration Volume I, 1636.
Poudret and Besson, Comparative Law of International Arbitration, note 241;
Born, International Commercial Arbitration Volume I, 1636; Kleinschmidt,
“Die Widerklage gegen einen Dritten im Schiedsverfahren,” 148; disagreeing:
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 1370.
Meier, Einbezug Dritter vor internationalen Schiedsgerichten, 222; ageeing:
Hamann and Lennarz, “Parallele Verfahren mit identischem Schiedsgericht
als Lösung für Mehrparteinenkonflikte?,” 291.
162
Whether the change or addition of a party is sufficiently grave
must then be considered in the light of the clause upon which
the arbitrator agreed to serve. It is true that in non-consolidation
cases the arbitrators cannot reject additional claims, set-offs or
similar enlargements of their mandate. Unlike the addition of
claims, amendment of claims, or addition of individual parties
to an existing case, arbitrators of existing cases initially have no
input into the matter of consolidation. There is a crucial
difference between this and other cases of enlargement, where
the clause is interpreted to see if there is jurisdiction, i.e.,
whether their obligation to perform their function exists. In this
author’s opinion, such circumstances may lead to justified
resignation.728
Agreement of the panel of the first case is not required for
consolidation under the ICC Rules.729 Under the ICC Rules,
consolidation is only possible until the terms of reference have
been either signed or approved by the ICC. According to article
7(2) ICC Rules, arbitrators must submit a statement of
independence with their acceptance of the case. The statement
of impendence is based on general information provided by the
ICC or the appointing parties, such as names of parties, names
of counsel, amount in dispute, characteristics of the dispute,
place of arbitration, applicable law and any specific issues of
the arbitration.730 The agreement to serve is thus based on the
barest information concerning the case. It is unlikely that any
additional claim between the same parties which could meet the
criteria of consolidation would not be encompassed by such a
broad consent.
728
729
730
Elliott Geisinger, “How to Work with the Swiss Rules - the Arbitrator’s
View,” in The Swiss Rules of International Arbitration - Five Years of
Experience, ed. Rainer Füeg, 2009, 43.
Reiner and Jahnel, “ICC-Schiedsgerichtsordnung,” 4-17.
Bühler and Webster, Handbook of ICC Arbitration Commentary, Precedents,
Materials, notes 9-2.
163
In addition, the arbitrators are aware of the institutional rules
which form part of the framework of their mandate,731 including
the rules on consolidation as experts in their field. As such, any
claim of surprise of substantial alteration of circumstances
would be hard to prove. Specifically, under the ICC Rules, the
exact nature of the dispute and the issues are to be clarified in
the Terms of Reference, which the arbitrators will only draft
once empanelled and after the completion of which no
consolidation will take place.
As a result, for the ICC Rules no potential for a justified
resignation exists. Under the Swiss Rules, the danger is more
pronounced. While the consent of the arbitrators concerning
new claims can be inferred even at a later stage in the
proceeding, as the basis for the consent is equally broad and the
rules even broader, the same cannot be stated for the addition of
parties.
The analysis changes for the new rule 10, which does not
contain time limits. It is equal to the analysis concerning the
Swiss Rules.
Whether a resignation is indeed permissible is irrelevant for the
continuation of the arbitral dispute. Instruments that force an
arbitrator to continue his duties, such as specific performance,
are not contemplated.732 However, damages will be incurred if a
resignation is not justified.733
731
732
733
Onyema, International Commercial Arbitration and the Arbitrator’s
Contract, 121 et seq.
Hoffet, Rechtliche Beziehungen zwischen Schiedsrichtern und Parteien, 288
et seqq.
Ibid., 301 et seqq.; Onyema, International Commercial Arbitration and the
Arbitrator’s Contract, 121 et seq.
164
165
9
Arbitrator Selection
Having discussed the issues in relation to the decision on
consolidation itself, the analysis now moes on to the effects of
consolidation on the conduct of the proceedings. In most works
addressing consolidation, the selection of arbitrators forms the
main focus.734 Some authors consider the choice of arbitrator
the most important choice in any proceeding.735
Ordinarily, all parties have certain rights in the selection of the
panel.736 When unifying two or more cases the usual selection
process is disrupted, becoming either impractical or downright
impossible to maintain while at the same time affording each
party the rights it would enjoy in the usual selection process.737
This discrepancy may lead to annulment of the award according
to articles 190(2)(a); (2)(b) or (2)(e) SPILA, or refusal of
recognition and enforcement according to articles V(1)(d) or
(2)(b) NYC.
This chapter will outline commonly accepted methods of
arbitrator selection, in subchapter 10.1, to give the esteemed
reader the background necessary to follow the analysis in this
chapter. Subchapter 10.2 will outline the selection of arbitrators
in consolidated cases. Subchapter 10.3 will discuss whether an
absolute right to a party appointed arbitrator exists. Subchapter
10.4 will address implications of specified qualifications or
734
735
736
737
Frick, International Arbitration Law Library, 233; Strong, “The Sound of
Silence: Are U.S. Arbitrators Creating Internationally Enforceable Awards
When Ordering Class Arbitration in Cases of Contractual Silence or
Ambiguity?,” 1089; Lachmann, Handbuch für die Schiedsgerichtspraxis, note
4078 et seqq.
José Maria Abascal, “Barcelona Afterthoughts,” Journal of International
Arbitration 20 (2003): 116; Gerald Asken, “The Tribunal’s Appointment,” in
The Leading Arbitrator’s Guide to International Arbitration, ed. Lawrence W.
Newman and Richard D. Hill, 2nd ed. (Huntington, NY: Juris Publishing,
2008), 31.
Concerning the usual methods of selection see infra subchapter 10.1.
See infra subchapter 10.3.
166
selection criteria of the arbitrators. Subchapters 10.5 and 10.6
will in turn focus on the consequences of the practical effects
for annulment and recognition.
9.1
Common Selection Methods
The selection of arbitrators can occur in a range of ways and
varies with the number of arbitrators selected.738 The most
common number of arbitrators is three.739 Some procedural
rules provide for a default of one arbitrator for smaller or
expedited cases.740 In some instances, the administering
institutions confirm arbitrators. In some cases arbitrators are
chosen from a list provided by the institution.741
When multiple arbitrators conduct the arbitration, it is common
for each party to select an arbitrator, also known as party
arbitrators, who in turn agree on the chairman.742 When a single
arbitrator conducts the arbitration, this arbitrator is agreed upon
by the parties or chosen by an appointing authority.743 The
738
739
740
741
742
743
Moses, The Principles and Practice of International Commercial Arbitration,
120.
Christopher R. Drahozal and Richard W. Naimark, eds., “Commentary (on
Arbitrator Selection),” in Towards a Science of International Arbitration:
Collected Empirical Research (The Hague: Kluwer Law International, 2005),
fig. 2 page 149, giving exact figures for ICC arbitrations. Kurkela and
Snellman, Due Process in International Commercial Arbitration, 108
claiming that the sole arbitrator is most frequent, while a three member panel
is merely common. Walter, “Die Internationale Schiedsgerichtsbarkeit in der
Schweiz,” 827; Lachmann, Handbuch für die Schiedsgerichtspraxis, note 777.
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 781. Swiss Rules
article 42.
Onyema, International Commercial Arbitration and the Arbitrator’s
Contract, 97 et seq.
Ibid., 99; Moses, The Principles and Practice of International Commercial
Arbitration, 121; Lachmann, Handbuch für die Schiedsgerichtspraxis, note
798 et seqq.
Moses, The Principles and Practice of International Commercial Arbitration,
127; Lachmann, Handbuch für die Schiedsgerichtspraxis, note 795 et seqq.
167
appointing authority can be an institution, a court or any
neutral.744
The ICC Rules, as well as the Swiss Rules, provide articles on
the topic of appointment, opting for a default number of one
arbitrator.745 Neither ICC nor Swiss Rules contain curtailment
of choice in form of a list, but require confirmation of
arbitrators.746
Often in cases of multi-party arbitration, parties are aligned
according to joint interests and then must jointly agree on their
(single party) arbitrator.747 If aligned parties cannot agree, an
institution or a neutral third party appoints either this one
arbitrator or the entire panel.
The old ICC Rule 10 provides
“1) Where there are multiple parties, whether as
Claimant or as Respondent, and where the dispute is to
be referred to three arbitrators, the multiple Claimants,
jointly, and the multiple Respondents, jointly, shall
nominate an arbitrator for confirmation pursuant to
Article 9.
2) In the absence of such a joint nomination and where
all parties are unable to agree to a method for the
constitution of the Arbitral Tribunal, the Court may
appoint each member of the Arbitral Tribunal and shall
designate one of them to act as chairman. In such case,
the Court shall be at liberty to choose any person it
744
745
746
747
Girsberger and Voser, International Arbitration in Switzerland, note 493 et
seqq.; Onyema, International Commercial Arbitration and the Arbitrator’s
Contract, chap. 4.
Swiss Rules section II, in particular article 6(2). The ICC provides for a
preference of a sole arbitrator in article 8(2).
Article 5 (1) Swiss Rules, article 9 ICC Rules.
Girsberger and Voser, International Arbitration in Switzerland, note 498.
168
regards as suitable to act as arbitrator, applying Article
9 when it considers this appropriate.”
The Swiss Rule 8 provides
“1. Where a dispute between two adverse parties is
referred to a three-member arbitral tribunal, each party
shall designate one arbitrator, unless the parties have
agreed otherwise.
2. If a party fails to designate an arbitrator within the
time-limit set by the Chambers or resulting from the
arbitration agreement, the Chambers shall appoint the
arbitrator. Unless the parties’ agreement provides
otherwise, the two arbitrators so appointed shall
designate, within thirty days from the confirmation of
the second arbitrator, a third arbitrator who shall act
as the presiding arbitrator of the arbitral tribunal.
Failing such designation, the Chambers shall appoint
the presiding arbitrator.
3. In multi-party proceedings, the arbitral tribunal shall
be constituted in accordance with the parties'
agreement.
4. If the parties have not agreed upon a procedure for
the constitution of the arbitral tribunal in multi-party
proceedings, the Chambers shall set an initial thirtyday time limit for the Claimant or group of Claimants to
designate an arbitrator and set a subsequent thirty-day
time limit for the Respondent or group of Respondents
to designate an arbitrator. If the group or groups of
parties have each designated an arbitrator, Article 8,
paragraph 2 shall apply by analogy to the designation
of the presiding arbitrator.
5.Where a party or group of parties fail(s) to designate
an arbitrator in multiparty proceedings, the Chambers
169
may appoint all three arbitrators and shall specify the
presiding arbitrator.”
The methods supra are generally accepted. This analysis shall
now turn to the concrete compotition of the panel in
consolidated cases.
9.2
Composition of the Consolidated Panel
The composition of the consolidated case panel under the ICC
or Swiss Rules after consolidation does not correspond entirely
to the methods described above.
Under the ICC Rules, the Court may
“(. . .) include the claims contained in the [new]
Request in the pending proceedings (. . .).”748
The new rule 10 permits simply an addition of the entire case B
to case A. In both cases, this means that the second case B will
be added to the earlier case with the latter’s arbitrators.749 The
selection of arbitrators in the earlier case will proceed according
to the ordinary selection procedures.750
748
749
750
ICC Rules Article 4(6)(s.1).
This presupposes that arbitrators for the earlier case have been chosen. There
is a potential, that the composition of the initial panel is not complete or that
the selection of arbitrators for the later case has already begun. It can be
assumed, even though this author is not aware of any cases with this fact
pattern, that the second panel does not receive confirmation and the selection
of the initial case will proceed.
If there are multiple parties in the cases, not just a two-party scenario, the
selection of the first case will have been affected in accordance with Rule 10
ICC Rules, according to which aligned parties must choose their arbitrator
jointly. The propriety of this selection shall not be discussed here and has
created much dispute among scholars. This analysis is focused on
consolidation specific, which this is not. Problem when claims are added later
i.e. also with consolidation is shifting alignment. The problem of shifting
alignments is not addressed here as it is a fide issue. In case of consolidation
170
Under the Swiss Rules, the second case B is also referred to the
arbitrators of the first case A. In a two-party situation in which a
new case is submitted between the same parties, the institution
may refer the new case to the existing panel.751 When the parties
are not identical, the institution may do likewise.752 The parties
to the second case are
“(. . .) deemed to have waived their right to designate
an arbitrator.”753
Both sentence 2 and 3 form a significant difference from the
ICC Rules under both the current and the proposed Swiss Rules.
In relation to both sets of rules, the parties to the second cases B
experience a different selection procedure than expected if each
case were conducted separately. Under all circumstances of
consolidation, the second case B loses either its arbitrators or
the right to participate in the selection of arbitrators.
Qualifications agreed upon by the parties of the second case B
remain unconsidered.754 Consequently, parties to the second
case may claim improper constitution. In extreme cases, when
filing occurs very close in time, which party is disadvantaged by
losing its rights, as in the ordinary appointment process, as laid
out supra in subchapter 9.1, is entirely random.
751
752
753
754
in a multi-party situation, again the same arbitrators as in the initial case will
administer the enlarged case. The complications connected to a mixing of
alignments due to the addition of claims are not addressed. The same issue
may arise where alignments i.e. interests are unclear or when they shift for
reasons of counterclaims or set offs. These issues however cannot be
discussed here in detail. They are addressed by writings concerning multiparty arbitration as such.
Article 4(1)(s.1) Swiss Rules.
Article 4(1)(s.2) Swiss Rules.
Article 4(1)(s.3) Swiss Rules.
The possibility to include the parties’ qualification requirements into the
choice of the arbitrators under certain circumstances will be discussed infra in
subchapter 10.4.
171
These changes in appointment procedure have an impact for
annulment and refusal of recognition and enforcement of an
award in various respects: violation of party agreement and lack
of equal treatment. In order to put in further perspective the
violation of party agreement and equal treatment, this analysis
will first discuss the commonly propounded notion of the right
to a party arbitrator.
The proposed Swiss Rule 4(1) permits Chambers an out by
providing that case A may also loose its arbitrators. Which
concrete method of appointment is used in such cases is not
fully clear.
9.3
Right to Party Arbitrators
The right to your own party arbitrator does not exist.755 The
right to appoint an arbitrator is an important right in
arbitration.756 However, parties are not entirely free to choose
arbitrators all the time.757 Party autonomy is, quite simply, not
the only policy at issue. Instead, courts and arbitrators must take
755
756
757
Lachmann, Handbuch für die Schiedsgerichtspraxis, 461; Offenhausen,
Mehrparteienschiedsgerichtsverfahren bei der Beteiligung einer Gesellschaft
Bürgerlichen Rechts, 96.
Karl
Heinz
Schwab,
“Mehrparteienschiedsgerichtsbarkeit
und
Streitgenossenschaft,” in Festschrift für Walther J. Habscheid zum 65.
Geburtstag, 6. April 1989 (Bielefeld: Gieseking, 1989), 290.
Fouchard, Gaillard, Goldman on International Commercial Arbitration (The
Hague: Kluwer Law International, 1999), 783 et seqq.; stating that parties are
free to choose any person, Lachmann, Handbuch für die
Schiedsgerichtspraxis, note 815; Poudret and Besson, Comparative Law of
International
Arbitration,
note
401;
Schwab
and
Walter,
Schiedsgerichtsbarkeit systematischer Kommentar zu den Vorschriften der
Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der Staatsverträge und der
Kostengesetze über das privatrechtliche Schiedsgerichtsverfahren, notes 9-9
et seq.; Offenhausen, Mehrparteienschiedsgerichtsverfahren bei der
Beteiligung einer Gesellschaft Bürgerlichen Rechts, 99; Born, International
Commercial Arbitration Volume I, 1439 et seq.
172
other competing interests and principles into account.758 Within
the limits of mandatory laws, parties are permitted to consent to
any kind of arbitration procedure.759 Known mandatory rules are
the right to equal treatment and the right to be heard.760
WILKE strongly advocates a party’s right to nominate its own
arbitrator with the argument that taking away this right would
sever the roots of international arbitration and put into question
the whole idea of thinking the parties capable of settling their
disputes by ADR rather than in a court.761 WEBER describes the
right to a party appointed arbitrator as a fundamental right.762
SCHWAB and LIONNET/LIONNET maintain that this right may
only be curtailed in circumstances in which material law forces
the parties to make a unified choice,763 such as with the
recalcitrant or defaulting party.764 POUDRET/BESSON reject an
758
759
760
761
762
763
764
Strong, “The Sound of Silence: Are U.S. Arbitrators Creating Internationally
Enforceable Awards When Ordering Class Arbitration in Cases of Contractual
Silence or Ambiguity?,” 1045.
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 1376. According to
§ 1042 III GZPO, parties are free to decide the procedure or choose arbitration
rules with the exception of violation of mandatory provisions. The choice of
institutional rules does not free the parties from mandatory provisions of the
law.
Donovan and Greenawalt, “Mitsubishi After Twenty Years: Mandatory Rules
Before Courts and International Arbitrators,” 13 Note 1-4; TenCate, “MultiParty and Multi-Contract Arbitrations: Procedural Mechanisms and
Interpretation of Arbitration Agreements under U.S. Law,” 926; George A.
Bermann and Loukas A. Mistelis, Mandatory Rules in International
Arbitration, 2010.
Justus
Wilke,
Interessenkonflikte
in
der
internationalen
Schiedsgerichtsbarkeit
Unparteilichkeit,
Unabhängigkeit
und
Offenlegungspflichten (Berlin: dissertation.de, 2006), 153.
Weber, “Wider den Verlust des Betellungsrechts bei Nichteinigung der
Mehrparteiengegenseite auf einen Schiedsrichter,” 1065.
Lionnet and Lionnet, Handbuch der internationalen und nationalen
Schiedsgerichtsbarkeit:
Systematische
Darstellung
der
privaten
Handelsschiedsgerichtsbarkeit
für
die
Praxis,
411;
Schwab,
“Mehrparteienschiedsgerichtsbarkeit und Streitgenossenschaft,” 293.
Lionnet and Lionnet, Handbuch der internationalen und nationalen
Schiedsgerichtsbarkeit:
Systematische
Darstellung
der
privaten
Handelsschiedsgerichtsbarkeit für die Praxis, 417. (outlines 3 different
opinions)
173
absolute right to appoint one’s own arbitrator,765 and so do
REINER/JAHNEL766 and others.767
This author propounds that no right to a party arbitrator exists.
In a single arbitrator situation, not every party gets to choose
one arbitrator, although all parties must agree. In many
instances, the single arbitrator is chosen by a neutral third
party,768 such as the institution.769 Having to choose arbitrators
from a list is permissible, so long as no party had undue
influence on the composition of this list.770 In cases of a
defaulting or dilatory party, this party may not choose its own
arbitrator.771 In short, there are many instances in which it is
already accepted that no right to a party appointed arbitrator
exists.
This does not mean that the parties do not have the right to be
treated equally, as will be addressed in more detail infra in
subchapters 9.5 and 9.6.
765
766
767
768
769
770
771
Poudret and Besson, Comparative Law of International Arbitration, note 242.
Liebscher, “Wiener Regeln,” 3; Reiner and Jahnel, “ICCSchiedsgerichtsordnung,” 10-1 et seqq.
Offenhausen, Mehrparteienschiedsgerichtsverfahren bei der Beteiligung einer
Gesellschaft Bürgerlichen Rechts, 94 other opnions find the right to nominate
ones arbitrator fundamental.
Schwab and Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, notes 10-3; Girsberger and Voser, International
Arbitration in Switzerland, note 492.
SFCD 84 I 39 6 (Swiss Federal Court 1958).
Poudret and Besson, Comparative Law of International Arbitration, note 404;
SFCD 107 Ia 155 161 (Swiss Federal Court 1981); SFCD 129 III 271 276 et
seq. (Swiss Federal Court 2002); Nacimiento and Abt, Ҥ 1034 - Composition
of Arbitral Tribunal,” 14.
SFCD 84 I 39, 51.
174
9.4
Impact of Qualifications of Arbitrators
Parties are free to set qualifications for arbitrators,772 which,
when not fulfilled, violate party agreement and may lead to
annulment or refusal of recognition and enforcement.773 For
example, in construction cases, solid knowledge of the business
is required for an arbitrator to be effective.774 As a consequence
parties may mandate such expertise in their arbitrators.
When consolidation is ordered at an early stage, an option to
allow the choosing of arbitrators by the parties of cases A and B
jointly is a possibility. Similarly, the criteria set for
qualifications of the arbitrators could be applied at the same
time. Under the old ICC Rules, consolidation must take place
rather early in both proceedings so that the option seems
reasonable. Under new ICC and the Swiss Rules, there is no
time limitation for consolidation, so that it is as likely as not that
the first panel has already been chosen without cooperation.
However, these thoughts are too practical.
It is impermissible to limit the parties’ choices of case A,775 not
based on a list of arbitrators (which is permissible) but based on
the subjective criteria set by the parties to case B and vice versa.
Even if the parties to both cases were the same, the subject
matters may require different types of agreed upon expertise.
The ICC and Swiss Rules themselves do not specify such
cooperation.
772
773
774
775
Wilke, Interessenkonflikte in der Internationalen Schiedsgerichtsbarkeit, 59;
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 908; Born,
International Commercial Arbitration Volume I, 1453 et seqq.; Girsberger and
Voser, International Arbitration in Switzerland, note 473 et seqq.; Moses, The
Principles and Practice of International Commercial Arbitration, 120.
Girsberger and Voser, International Arbitration in Switzerland, note 480;
Born, International Commercial Arbitration Volume I, 1458 et seq.
Paul Hobeck, Volker Mahnken, and Max Koebke, “Schiedsgerichtsbarkeit im
internationalen Anlagenbau - Ein Auslaufmodell?,” Neue Zeitschrift für
Schiedsverfahren 2007, no. 5 (2007): 232.
This would amount to a contract to the detriment of third parties.
175
Some argue that an award will not be set aside when the
agreement of the parties or the rules of the institution on
composition are violated in a minor fashion.776
WALTER/BOSCH/BRÖNIMANN argue that any lack of compliance
with the party agreement must be sanctioned.777 In addition,
even when contractual qualifications of an arbitrator are not
met, courts are unlikely to set aside the award.778 The same is
true for Switzerland.779
Having discussed the underlying principles, this analysis will
now turn to the consequences of the composition of the panel of
the consolidated case. This analysis will address, in turn, the
potential grounds for annulment and refusal due to the effects
on the arbitral panel composition after consolidation.
9.5
Implications of Arbitrator Selection for
Annulment
A ground for anulment in relation to the selection of arbitrators
is 190(2)(a) SPILA. According to article 190(2)(a) SPILA, an
award may be annulled if the arbitrator or the panel was not
properly constituted. The award may also be annulled if the
principle of equal treatment was violated (article 190(2)(d)
SPILA) or if the award is incompatible with public policy
(article 190(2)(e) SPILA). These grounds will be addressed in
turn.
776
777
778
779
Girsberger and Voser, International Arbitration in Switzerland, note 1069.
Gerhard Walter, Wolfgang Bosch, and Jürgen Brönnimann, Internationale
Schiedsgerichtsbarkeit in der Schweiz: Kommentar zu Kapitel 12 des IPRGesetzes (Berne: Stämpfli Verlag, 1991), 216.
OLG Dresden of 20 October 1998 (Regional Court Dresden, Germany 1998).
SFCD of 30 June 1994 - 4P.168/1999 (Swiss Federal Court 1994).
176
9.5.1 Improper Constitution - Article 190(2)(a)
SPILA
According to art. 190(2)(a) SPILA, annulment of an award can
be sought on the grounds of wrongful composition of the
arbitral panel. The protection of article 190(2)(a) SPILA
originates both in article 6(1) ECHR and the Swiss Constitution
article 29.780 Typically this is the case when an arbitrator was
appointed in violation of the lex arbitri,781 i.e., in violation of
the rules applicable in the hierarchy indicated supra in chapter
5. This means that mandatory Swiss laws must be observed, and
individual agreement supersedes institutional rules. Even if the
panel is appointed in accordance with institutional rules, if the
appointment was contrary to either party agreement or
mandatory law, annulment might follow.
Swiss courts have set aside an award due to improper
composition only rarely.782 Parties are free to agree to an
appointment procedure.783 This can be accomplished by way of
reference to institutional rules.784 A reference to, e.g., ICC Rules
is sufficient for the application on the rules of the choice of
arbitrator.785
It is assumed when reference to institutional rules is made that
the rules are to be applied in their entirety, unless the parties
specifically agree otherwise. Complete integration of the
institutional rules into the contract means that the choice of the
780
781
782
783
784
785
Voser and Gola, “The Arbitral Tribunal,” 42; SFCD 129 III 445 3.3.3 (Swiss
Federal Court 2003).
Franz Satmer, Verweigerung der Anerkennung Ausländischer Schiedssprüche
wegen Verfahrensmängeln (Zurich: Schulthess, 1994), 59; Martin Wiebecke,
“Das Anfechtungsverfahren,” in Praxishandbuch Schiedsgerichtsbarkeit, ed.
Hellwig Torggler (Baden-Baden: Nomos, 2007), note 37.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 1549.
Berti and Schnyder, “Article 190 SPILA,” 25.
Girsberger and Voser, International Arbitration in Switzerland, note 517;
SFCD 129 III 675; SFCD 130 III 66.
Reiner and Jahnel, “ICC-Schiedsgerichtsordnung,” 4; SFCD 110 Ia 493, 498
et seqq.
177
parties of institutional rules would suffice to permit the choice
of arbitrators, as set out in section 9.2. This would include not
only the common appointment procedure but also exceptional
circumstances, as outlined in articles 10 old ICC Rules, 8 or
4(1)(s.3) Swiss Rules. This assumption is not overturned lightly.
This author has already propounded her view that this
agreement only validly refers to such cases in which
consolidation is foreseeable, in chapter 5. This author has also
already concluded that no absolute right to a party appointed
arbitrator exists. So assuming the mandates as outlined in this
analysis are maintained, this analysis will turn to a violation of
mandatory law.
Equal treatment of the parties during the entirety of the arbitral
process is firmly established in mandatory law.786 Switzerland
also forbids derogation from equal treatment.787
Under the ICC Rules article 4(6) and new 10, as well as the
Swiss Rules article 4(1)(s.1), and with compatible clauses, the
same parties are involved in both cases. Both parties have
participated in the creation of the panel under the rules (usually)
without application of exceptional, unforeseeable alterations in
the procedure. The parties have a panel they have chosen for a
dispute with their opponent.
786
787
Offenhausen, Mehrparteienschiedsgerichtsverfahren bei der Beteiligung einer
Gesellschaft Bürgerlichen Rechts, 94 other opnions find the right to nominate
ones arbitrator fundamental.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 366; Martin
Platte, “Multi-Party Arbitration: Issues Arising out of Joinder and
Consolidation,” in Enforcement of Arbitration Agreements and International
Arbitral Awards: The New York Convention in Practice, ed. Emmanuel
Gaillard and Domenico Di Pietro (Cameron May, 2008), 76; SFCD 118 II 359
(30 June 1994),102:; SFCD 120 II 155,415:; SFCD 107 Ia 155, 161 et seq.
178
All parties had the same rights in the first case A, and both
parties had the same rights in case B concerning selection of the
arbitrators. It does not seem to give rise to concern to refuse the
parties the option to choose a second panel in the same way.
This remains true even if different qualifications for arbitrators
in both cases had been decided upon.788
In this author’s opinion, the parties do not need to be afforded
the right to appoint a panel for each case.789 These cases do not
violate equal treatment, and so party agreement rules the
composition. The procedure chosen by the rules is foreseeable
to the parties and thus validly chosen. Article 190(2)(a) SPILA
is not violated by ICC Rules old article 4(6) or new article 10 or
Swiss Rules article 4(1)(s.1).
When different parties are involved in cases A and B, as
permitted under article 4(1)(s.2) Swiss Rules, difficulties arise.
The parties to the second case B lose their right to participation
as per the ordinary appointment procedure. Parties to the initial
case A retain their influence on the composition. As a
consequence, inequality in the appointment process ensues. This
inequality is not justified by any action of the parties. Random
inequalities are not entitled to deference under Swiss law.
Whether this inequality will result in an actionable lack of equal
treatment should be determined in accordance with article
190(2)(d) SPILA, even though challenging it in a preliminary
award would have to be through article 190(2)(a).790
788
789
790
See supra chapters 5 and 7.
Correctly also: Bühler and Webster, Handbook of ICC Arbitration
Commentary, Precedents, Materials, para. 4-70.
Girsberger and Voser, International Arbitration in Switzerland, note 1091;
Georg von Segesser and Dorothée Schramm, “Swiss Private International
Law Act (Chapter 12),” in Concise International Arbitration, ed. Loukas A.
Mistelis (Aspen Publ, 2010), 960; Berti and Schnyder, “Article 190 SPILA,”
77. See article 190(3) SPILA.
179
9.5.2 Lack of Equal Treatment - Article 190(2)(d)
SPILA
When 190 (2)(d) SPILA is violated, the award may be set aside
regardless of the reason for the violation or the impact the
violation had on the award.791 Article 190(2)(d) SPILA requires
parties to be treated equally only in comparable situations.792 It
protects the general notion of equal treatment,793 without
requiring exact equality. It outlaws unjustified congruent
discrimination against parties.794 Article 190(2)(d) SPILA
relates to a formal denial of justice.795
9.5.2.1 Definition
Treatment
of
Violations
of
Equal
In the context of the selection of arbitrators, unequal treatment
occurs, e.g., when a party has a disproportionate influence over
the composition of the panel.796 A disproportionate or
predominant influence over the appointment of the arbitral
panel is sufficient.797 A party has disproportionate influence if it
is allowed to appoint a majority of the arbitrators, or more
791
792
793
794
795
796
797
Karrer and Straub, “Switzerland,” 12.207; von Segesser and Schramm, “Swiss
Private International Law Act (Chapter 12),” 958; Gehri, “Die Anfechtung
internationaler Schiedssprüche nach IPRG - eine Analyse der
bundesgerichtlichen Rechtsprechung,” 85; disagreeing: Berger and Kellerhals,
International and Domestic Arbitration in Switzerland, note 1592.
Girsberger and Voser, International Arbitration in Switzerland, note 1087;
SFCD of 17 February 2002 ASA Bulletin 589 (Swiss Federal Court 2002);
SFCD of 10 December 2002 ASA 591 (Swiss Federal Court 2002); SFCD of
26 November 2002 ASA Bulletin 413 (Swiss Federal Court 2002); SFCD 129
III 445; SFCD of 11 November 2002 ASA Bulletin 378 (Swiss Federal Court
2002).
Geisinger and Frossard, “Challenge and Revision of the Award,” 147;
Moreau, “Arbitrage liés,” 80; Bernard Dutoit, Droit international privé suisse
commentaire de la loi fédérale du 18 décembre 1987, 3rd ed. (Basel: Helbing
& Lichtenhahn, 2001), notes 182-6.
Berti and Schnyder, “Article 190 SPILA,” 61; Walter, Bosch, and
Brönnimann, Internationale Schiedsgerichtsbarkeit in der Schweiz, 223.
Geisinger and Frossard, “Challenge and Revision of the Award,” 148.
Girsberger and Voser, International Arbitration in Switzerland, note 520.
SFCD 107 Ia 155, 158.
180
arbitrators than another party.798 This is also true if the sole
arbitrator is appointed by a single party.
A lack of equal treatment does not arise in cases in which the
institutions selected all arbitrators for all cases, so that no party
had any influence.799 The existence of unequal treatment in
cases of differing parties is unquestioned.800 It is equally
unquestioned that unequal treatment may be justified, e.g., in
the case of default of a party or agreement of the parties.801
When unequal influence is due to alignment of interest on the
basis of substantive law, such unequal influence is permissible.
No material reasons, such as default of a party or alignment of
interest, necessarily exist in the circumstances of consolidation.
However, the parties could have waived their rights to challenge
the composition of the panel.
9.5.2.2
Waiver of the Right to Equal Treatment
A waiver of rights is only permissible within certain
limitations.802 Waiver can ocurr by conduct or omission.803 It
can be ex ante or ex post,804 with ex post waivers being more
798
799
800
801
802
803
804
Girsberger and Voser, International Arbitration in Switzerland, note 519;
SFCD 26 II 758 (Swiss Federal Court 1990); SFCD 31 II 688 693 (Swiss
Federal Court 1905).
Poudret and Besson, Comparative Law of International Arbitration, note 242;
Born, International Commercial Arbitration Volume II, 2070.
Swiss Rules of International Arbitration Commentary (The Hague: Kluwer
Law International, 2005), 39 also art. 4 sec 1 last sentence. Unequal treatment
may also result from the fact that one set of parties had more time to get to
know, present to and influence the panel. This is however not an issue of
selection of arbitrators but a question of procedure and timing. Procedure is
discussed infra in chapters 11 and 12.
As explained in subchapter 10 concerning the right to a party appointed
arbitrator.
Born, International Commercial Arbitration Volume II, 2735.
Kurkela and Snellman, Due Process in International Commercial Arbitration,
30.
Valentine Gétaz Kunz, Rechtsmittelverzicht in der internationalen
Schiedsgerichtsbarkeit der Schweiz mit Rechtsvergleichung (Bern: Stämpfli,
1993), 26.
181
prominent.805
Some
authors806
interpret
the
choice
of
institutional rules containing consolidation to be a waiver of the
right to challenge the appointment of the arbitrators according
to the procedure outlined for consolidated procedures. This
view confuses consent with waiver. The reference to a set of
institutional rules does not permit the interpretation as challenge
waiver.807
Both the ICC Rules and the Swiss Rules contain general
waivers.
Article 33 of the ICC Rules states:
“A party which proceeds with the arbitration without
raising its objection to a failure to comply with any
provision of these Rules, or of any other rules
applicable to the proceedings, any direction given by
the Arbitral Tribunal, or any requirement under the
arbitration agreement relating to the constitution of the
Arbitral Tribunal, or to the conduct of the proceedings,
shall be deemed to have waived its right to object.”
Similarly, article 30 of the Swiss Rules reads:
“A party who knows that any provision of, or
requirement under, these Rules has not been complied
with and yet proceeds with the arbitration without
promptly stating its objection to such non-compliance,
shall be deemed to have waived its right to object.”
805
806
807
Kurkela and Snellman, Due Process in International Commercial Arbitration,
30 et seq.
Poudret and Besson, Comparative Law of International Arbitration, note 248.
SFCD of 6 June 2007 - 4A_18/2007 c. 3 (Swiss Federal Court 2007);
Girsberger and Voser, International Arbitration in Switzerland, note 1045.
182
Both waiver provisions speak of concrete violations which have
been ignored and can no longer be challenged after a certain
time. An objection must be made when the violation occurs.808
This does not mean at the conclusion of the contract, but when
the violation materializes.809 The challenge to proper
constitution is waived when the appointment of the arbitrators is
not objected to
appointment.810
expediently
upon
completion
of
the
Advance waivers must therefore be qualified (specific) and
cannot be limited to reference to institutional rules.811 Abstract
waivers require awareness812 or, at a minimum, forseeability of
the rights which are surrendered by the waiver. Boilerplate
language or broad references are insufficient.813 The drafters of
the Swiss Rules have attempted to circumvent this problem of
unequal treatment by inserting a specific waiver into article
4(1)(s.3) Swiss Rules.814 For this reason the Swiss Rules have
been criticized,815 and scholars have expressed doubt concerning
the enforceability of awards based on consolidation under this
rule.816 LEW said that "it is doubtful whether an award arising
out of consolidated arbitration proceedings would be
enforceable under the New York Convention," even in cases
808
809
810
811
812
813
814
815
816
Berti and Schnyder, “Article 190 SPILA,” 62.
Satmer, Verweigerung der Anerkennung Ausländischer Schiedssprüche wegen
Verfahrensmängeln, 155.
Girsberger and Voser, International Arbitration in Switzerland, note 1071;
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 1588; Karrer and Straub, “Switzerland,” 12.210.
Satmer, Verweigerung der Anerkennung Ausländischer Schiedssprüche wegen
Verfahrensmängeln, 160.
Wagner, “Arbitration in Germany,” 3; Binder, International Commercial
Arbitration and Conciliation in UNCITRAL Model Law Jurisdictions, notes 1093.
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-19.
This provision is also in the proposed new rules.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 366, 388; Berger
and Kellerhals, International and Domestic Arbitration in Switzerland, note
547; Lachmann, Handbuch für die Schiedsgerichtspraxis, note 4078; Lew,
Mistelis, and Kröll, Comparative International Commercial Arbitration, notes
16-97 et seq.
Conejero Roos, “Multi-party Arbitration and Rule-making: Same Issues,
Contrasting Approaches,” 426 et seq.
183
where the relevant law or arbitral rules give the necessary
authority to a court, arbitrator, or appointing authority.817
Swiss Rules contain a specific waiver in article 4(1)(s.3). This
specific waiver is directed at the composition of the panel and
provides:
“Where the Chambers decide to refer the new case to
the existing arbitral tribunal, the parties to the new case
shall be deemed to have waived their right to designate
an arbitrator.”
Whether the specific waiver inserted in the Swiss Rules
withstands scrutiny is debatable.818 While the Swiss Federal
Court permits waivers in the abstract relatively freely,819 certain
limitations apply. Mandatory laws are not at the disposal of the
parties and cannot be waived.
Equal treatment is a matter of public policy and can neither be
waived820 nor derogated from.821 Nevertheless, according to
POUDRET/BESSON, the presumption of waiver to the right to
appoint an arbitrator is valid under Swiss law and difficult to
reconcile with Dutco.822 Dutco is the French case introduced
supra in section 5.6.1. The court found that it was
impermissible to agree to institutional rules which resulted in
817
818
819
820
821
822
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-97 et seq.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 366, 388; Berger
and Kellerhals, International and Domestic Arbitration in Switzerland, note
547; Lachmann, Handbuch für die Schiedsgerichtspraxis, note 4078; Lew,
Mistelis, and Kröll, Comparative International Commercial Arbitration, notes
16-97 et seq.
Actual awareness of the violation not required. François Carrard, SFCD of 4
August 2006, 25 ASA Bulletin 105, 105 (Swiss Federal Court 2006).
SFCD 107 Ia 155, 161.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 366.
Poudret and Besson, Comparative Law of International Arbitration, note 248.
184
inequality during the selection process.823 However, France is
not Switzerland.
The difference may be especially marked, as in Switzerland the
parties are permitted to waive review of the final award in
advance under limited circumstances.824 Should none of the
parties have their domicile, habitual residence or business in
Switzerland, article 192(1) SPILA even permits a waiver of any
judicial review within Switzerland.825 This includes no review
of public policy.826 Such waiver will only apply to Switzerland
and does not deprive parties of review at the enforcement
stage.827
The requirements for a formally valid waiver are strict.828 The
waiver under article 192 SPILA is very specific to situations in
which Switzerland has no interest in the case as neither party is
connected to the country and its public policy or legal regime,
so no issues of propriety exist. One could conclude that the
823
824
825
826
827
828
Siemens AG and BKMI Industrieanlagen GmbH v. Dutco Construction
Company, 1992 No. 3:.
Petrochilos, Procedural Law in International Arbitration, note 4.36.
Switzerland, Belgium, Sweden, Turkey, and Tunesia allow waivers to judicial
review.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 683.
SFCD of 31 October 2005 - 4P.198/2005, 2006/2 ASA Bulletin 339, 246
(Swiss Federal Court 2005); Alvarez de Pfeifle, Der Ordre Public-Vorbehalt
als Versagungsgrund der Anerkennung und Vollstreckbarerklärung
internationaler Schiedssprüche unter Berücksichtigung des Deutschen,
Schweizerischen, Französischen Und Englischen Rechts sowie des
UNCITRAL-Modellgesetzes, 296.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 683; Marc Blessing, “Das neue internationale Schiedsgerichtsrecht der
Schweiz,” in Die Internationale Schiedsgerichtsbarkeit in der Schweiz (II).
Das neue Recht ab 1. Januar 1989., ed. Karl-Heinz Böckstiegel, vol. 2,
Schriftenreihe des Deutschen Instituts für Schiedsgerichtswesen (Cologne,
Berlin, Bonn, Munich: Carl Heymanns Verlag, 1988), 85; Gétaz Kunz,
Rechtsmittelverzicht in der internationalen Schiedsgerichtsbarkeit der
Schweiz mit Rechtsvergleichung, 117.
SFCD 134 III 260 (Swiss Federal Court 2008); , for a differentiated view on
the Swiss Federal Court´s jurisprudence on waivers see Nora Krausz, “Waiver
of Appeal to the Swiss Federal Tribunal: Recent Evolution of the Case Law
and Compatibility with ECHR, Article 6,” Journal of International
Arbitration 28, no. 2 (2011): 137 - 162.
185
waiver contained in article 4(1)(s.3) Swiss Rules is thus valid
under the same circumstances as a general waiver of review, but
this seems farfetched. Absent the waiver of final review, the
right of equal treatment in the constitution of the panel cannot
be waived before the dispute has arisen.829
This point had already been decided by Swiss Federal Court.
Complaints against inequality in the choice of arbitrators cannot
be waived in advance if not raised at the time of the violation or
discovery thereof.830 Hence, specific waiver in article 4(1)(s.3)
Swiss Rules is not permissible and has no effect. Article
4(1)(s.2) Swiss Rules violates the right to equal treatment in the
appointment of arbitrators.
9.5.3 Violation of Public Policy - Article 190(2)(e)
SPILA
Article 190(2)(e) SPILA is interpreted narrowly.831 Special
grounds for setting aside article 190(2)(a-d) SPILA prevail over
190(2)(e) SPILA.832 Procedural public policy protects against
violations not included in the other grounds.833 An award is only
reversed when it is not only in its reasoning, but also in its
result, contrary to public policy.834
Annulment on this ground occurs if the award violates
fundamental legal principles and is therefore incompatible with
829
830
831
832
833
834
SFCD 118 II 359 (30 June 1994),102:; Martin Platte, “When Should an
Arbitrator Join Cases?,” Arbitration International 18 (2002): 76.
SFCD 120 II 155,415:.
SFCD 126 III 249 253 (Swiss Federal Court 2000).
SFCD of 4 August 2006 - 4P.105/2006 c. 5.3 (Swiss Federal Court 2006).
SFCD 117 II 346 346, 347 (Swiss Federal Court 1991); SFCD of 7 January
2004 ASA Bulletin (Swiss Federal Court 2004).
SFCD 132 III 389 2.2 et seq. (Swiss Federal Court 2006); SFCD 120 II 155,
415:E. 6.a; SFCD 116 II 634 E. 4 (Swiss Federal Court 1990).
186
Swiss law and values.835 While public policy is based on Swiss
values, the effects may be limited concerning international
circumstances.836 This includes both substantive and procedural
public policy.837 Not every violation will lead to an annulment,
only such which violate essential assurances of fairness.838 In
this, ‘une approche pragmatique de la question’ is used by the
Swiss Federal Court.839 The Swiss Federal Court developed a
case-by-case analysis and has so far amassed a catalogue of
principles of public policy encompassing, amongst other things,
the right to equal treatment and the prohibition against abuse of
rights.840
This ground for annulment is very rare. In fact on 13 April
2010, the first award was annulled for a violation of public
policy by the Swiss Federal Court.841 As a violation of equal
treatment does occur, article 190(2)(e) SPILA will be violated
as well.
9.5.4 Interim Conclusion
The ICC Rules have safeguarded against the possibility of
inequalities in appointment by limiting the scope of
835
836
837
838
839
840
841
Berti and Schnyder, “Article 190 SPILA,” 71; Alvarez de Pfeifle, Der Ordre
Public-Vorbehalt
als
Versagungsgrund
der
Anerkennung
und
Vollstreckbarerklärung
internationaler
Schiedssprüche
unter
Berücksichtigung des Deutschen, Schweizerischen, Französischen Und
Englischen Rechts sowie des UNCITRAL-Modellgesetzes, 144; SFCD 116 II
634, note 4.
Alvarez de Pfeifle, Der Ordre Public-Vorbehalt als Versagungsgrund der
Anerkennung und Vollstreckbarerklärung internationaler Schiedssprüche
unter Berücksichtigung des Deutschen, Schweizerischen, Französischen Und
Englischen Rechts sowie des UNCITRAL-Modellgesetzes, 143; SFCD 120 II
155, vol. 415, note 6a.
Girsberger and Voser, International Arbitration in Switzerland, note 1089.
SFCD 129 III 445, 464.
SFCD 120 II 155,415:.
Alvarez de Pfeifle, Der Ordre Public-Vorbehalt als Versagungsgrund der
Anerkennung und Vollstreckbarerklärung internationaler Schiedssprüche
unter Berücksichtigung des Deutschen, Schweizerischen, Französischen Und
Englischen Rechts sowie des UNCITRAL-Modellgesetzes, 144.
SFCD of 13 April 2010 - 4A_490/2009 (Swiss Federal Court 2010).
187
consolidation dramatically, while the Swiss Rules sought a
more inclusive approach. Far from missing the issue of equality,
the drafters of the Swiss Rules inserted an unorthodox waiver
provision concerning the right to participate in the selection of
arbitrators.
Nevertheless, article 4(1)(s.2) Swiss Rules violates equal
treatment and Swiss public policy. Appointment provisions
concerning the same parties as can be found in article 4(6) old
and article 10 new ICC Rules and article 4(1)(s.1) Swiss Rules
are permissible. The proposed new Swiss Rule speficying that
arbitrators could all be replaced might bring a solution to the
issue of equality, if it is used to replace the panel for all parties.
Whether this will be done remains to be seen, should the
proposed solution be adopted.
As a consequence, arbitration based on consolidated cases with
previously different parties would be annulled, with the
exception of the case that all arbitrators are appointed by the
institution from the outset.
9.6 Implications for Refusal of Recognition
and Enforcement
According to article V(1)(d) NYC, which applies if enforcement
is sought in Germany842 or the United States,843 refusal of
enforcement of an award in relation to the composition of a
panel can be based on the improper constitution of the panel.
842
843
Entry into force 28 September 1961, Schöll, Sourcebook of International
Arbitration (Switzerland), 22.
Entry into force on 29 December 1970, Ibid., 25.
188
Similarly, a violation of public policy article V(2)(b) NYC
can844 lead to refusal of enforcement.
In cases in which no lack of equal treatment can be found, no
refusal would be appropriate. When all arbitrators have been
appointed by a neutral third, such as an institution, no unequal
treatment arises.845 Similarly, when the same parties are
concerned, all parties have the same rights.846 The sole question
here is thus whether article 4(1)(s.3) Swiss Rules could be
enforced in Germany or the United States.
In Germany the NYC was transformed by § 1061(1) GCCP
without change. The United States did likewise in USC, title 9,
chapter 2, § 201.847 Recognition of awards occurs automatically
provided no grounds exist to resist enforcement.848
9.6.1 Improper Constitution - Article V(1)(d) NYC
Article V(1)(d) NYC provides that enforcement of an award
may be refused when the agreement of the parties or the law
applicable to the procedure was violated.849 It is permissible
844
845
846
847
848
849
Whether the courts have discretion is debated. For a good and brief analysis
see: Nacimiento, “Article V(1)(a) NYC,” 208 et seq. For the purposes of this
analysis, this is immaterial, as the practice of the courts will be considered in
general terms and no specific factual situation can be analyzed.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 363.
There may be situations, when the first case A was already a multi-party case,
in which aligned parties agreed to one arbitrator. If the alignment changes due
to the addition of the second case B or because not all parties of A are also
parties of B, some inequalities may arise. Under such circumstances a detailed
analysis of equality would be necessary. It is neither feasible nor sensible to
attempt generalized statements on this issue in this analysis.
“The Convention on the Recognition and Enforcement of Foreign Arbitral
Awards of June 10, 1958, shall be enforced in United States courts in
accordance with this chapter.“
Kröll, “§ 1061 - Foreign Awards,” 2.
Stefan M. Kröll, “Die Vollstechbarerklärung von Schiedssprüchen nach
Deutschem Recht - Rechtsgrundlagen und prozessuale Fragen des
Exequaturverfahrens,” in Die Vollstreckung von Schiedssprüchen, ed. Gerhard
Wagner and Peter Schlosser (Heymanns, 2007), 75; Kröll, “§ 1061 - Foreign
189
under the NYC for the parties to select the procedure of the
appointment of arbitrators by reference to institutional rules.850
"(I)f consolidation is based on the parties' implied consent, then
article V(1)(d) NYC would presumably not be offended."851
Article V(1)(d) may be precluded if not raised according to the
law of the seat.852
Article V(1)(d) NYC states that enforcement could be refused
if:
“The composition of the arbitral authority or the
arbitral procedure was not in accordance with the
agreement of the parties, or, failing such agreement,
was not in accordance with the law of the country
where the arbitration took place;”
Whether refusal of recognition and enforcement is proper is
determined using the law applicable to the procedure.853 Party
autonomy concerning the arbitrator selection is only limited by
certain articles of the NYC, notably articles V(2)(a) and (b)
NYC, not, however, article V(1)(d) NYC.854
This would indicate that the same conclusions as in the previous
subchapter apply. However, the situation is more complex. Both
the agreement of the parties or the law of the seat would be
850
851
852
853
854
Awards,” 94; BayObLG of 24 February 1999, 2000 Neue Juristische Woche Rechtsprechungsreport, 361 (Regional Court Bavaria, Germany 1999).
Nacimiento, “Article V(1)(d) NYC,” 283.
Gary Born, International Commercial Arbitration in the United States
Commentary & Materials (Deventer: Kluwer Law and Taxation Publishers,
1994), 695.
Thomas
Henkel,
Konstituierungsbezogene
Rechtsbehelfe
im
schiedsrichterlichen Verfahren nach der ZPO, Dissertation. (Berlin: e-doc,
2007),
note
413,
http://www.openthesis.org/documents/KonstituierungsbezogeneRechtsbehelfe-im-schiedsrichterlichen-Verfahren-524105.html.
Ibid.; Lachmann, Handbuch für die Schiedsgerichtspraxis, note 1323.
Nacimiento, “Article V(1)(d) NYC,” 284; Joseph Müller AG v. Bergesen 108
Ib 85, 4. a et seq. (Swiss Federal Court 1982).
190
permissible options, giving, however, the agreement of the
parties preference in case of deviating results.855
While preponderant influence of one or more parties over the
composition of the panel would serve as improper constitution
in principle on the basis of lack of equality,856 this is not so
when the agreed upon procedure is followed.857 Mandatory law
of the enforcement country is irrelevant for article V(1)(d)
NYC. This does not mean that a violation of article V(2)(b)
NYC cannot have occurred.858 Seeming lack of protection
against certain procedural agreements is balanced by article
V(2) NYC.859 An award which violates due process or public
policy cannot be enforced.860 When the panel is chosen in
accordance with the institutional rules, and subject to the
limitations outlined supra, article V(2)(d) NYC is not violated.
855
856
857
858
859
860
Kröll, “§ 1061 - Foreign Awards,” 89, stating that the mandatory law of the
seat is only protected through article V(1)(e) NYC; Peter Schlosser, “Anhang
zu § 1061,” in Kommentar zur Zivilprozessordnung, ed. Friedrich Stein and
Martin Jonas, vol. 9, 22nd ed. (Tübingen: Mohr Siebeck, 2002), note 122;
Poudret and Besson, Comparative Law of International Arbitration, note 915;
Fouchard, Gaillard, and Savage, Fouchard Gaillard Goldman on
International Commercial Arbitration, para. 1702.
Kröll, “§ 1061 - Foreign Awards,” 92.
If the arbitration was conducted in Germany, the composition of the tribunal
according to the agreement of the parties under article 4 (1)(s.3) Swiss Rules
violates §1034 GZPO. If relief was sought, a German judge would override
party agreement to preserve the application of German law, otherwise the
award could be annulled. In turn, this violation of party autonomy would then
most likely result in an application of article V(1)(d) NYC, refusing
enforcement to the award rendered under these conditions. The principle is
explained in Nacimiento, “Article V(1)(d) NYC,” 285; Tweeddale and
Tweeddale, Arbitration of Commercial Disputes International and English
Law and Practice, note 13.25 et seq.
Nacimiento, “Article V(1)(d) NYC,” 291.
Giorgio Gaja, “Introduction,” in International Commercial Arbitration: New
York Convention, Part I, ed. Giorgio Gaja (Dobbs Ferry, NY: Oceana
Publications, 1987), note I.C.3.
Nacimiento, “Article V(1)(d) NYC,” 286 et seq.; Ulrich Haas, “Convention
on the Recognition and Enforcement of Foreign Arbitral Awards, New York,
June 10, 1958,” in Practitioner’s Handbook on International Commercial
Arbitration, ed. Frank-Bernd Weigand (Oxford: Oxford University Press,
2002), note V - 66; Kröll, “§ 1061 - Foreign Awards,” 89; GFCD 110, 104
106 et seq. (German Federal Court 1990).
191
In conclusion, all variations of consolidation under the ICC and
Swiss Rules, foreseeable for the parties, would be proper under
article V(1)(d) NYC.
9.6.2 Public Policy - Article V(2)(b) NYC
As article V(1)(d) NYC does not prevent enforcement, as shown
above, article V(2)(b) NYC will be examined. Article V(2)(b)
NYC is lex generalis to the provisions of article V(1) NYC,
even though some courts consider public policy grounds
simultaneously with other grounds.861 Article V(2)(b) NYC has
to be considered ex officio.862 Even though often raised863 the
fact is that article V(2)(b) NYC fails more often than other
grounds for refusal of recognition and enforcement.864
9.6.2.1
Applicable Standard
Only when the enforcement of the award would violate public
policy (not the award itself) will enforcement be denied.865
Procedural mistakes also must have had the potential of an
impact on the result, i.e., the award, to be objectionable.866
861
862
863
864
865
866
Otto and Elwan, “Article V(2) NYC,” 366.
Kröll, “§ 1061 - Foreign Awards,” 111.
Wolfgang Kühn, “Aktuelle Fragen zur Anwendung der New Yorker
Konvention von 1958 im Hinblick auf die Anerkennung und Vollstreckung
ausländischer Schiedssprüche,” Neue Zeitschrift für Schiedsverfahren 2009,
no. 1 (2009): 57.
Otto and Elwan, “Article V(2) NYC,” 365; Bowman Rutledge, Kent, and
Henel, “United States,” 13.301; Tweeddale and Tweeddale, Arbitration of
Commercial Disputes International and English Law and Practice, note
13.43; Loukas A. Mistelis and Domenico Di Pietro, “Convention on the
Recognition and Enforcement of Foreign Arbitral Awards (New York
Convention), 1958,” in Concise International Arbitration, ed. Loukas Mistelis
(Alphen aan den Rijn: Kluwer Law International, Wolters Kluwer Law &
Business, 2010), note 19.
Otto and Elwan, “Article V(2) NYC,” 366.
Alvarez de Pfeifle, Der Ordre Public-Vorbehalt als Versagungsgrund der
Anerkennung und Vollstreckbarerklärung internationaler Schiedssprüche
unter Berücksichtigung des Deutschen, Schweizerischen, Französischen Und
Englischen Rechts sowie des UNCITRAL-Modellgesetzes, 161; Lachmann,
Handbuch für die Schiedsgerichtspraxis, note 2612; Kröll, “§ 1061 - Foreign
192
Much literature exists concerning the question of whether a
domestic or internationalized standard for public policy needs to
be applied.867 According to MISTRELIS/DI PIETRO and MOSES,
the only relevant public policy is that of the enforcing state.868
This view is correct as article V(2)(b) NYC states: “The
recognition or enforcement of the award would be contrary to
the public policy of that country.“
Both Germany and the United States follow an international
public policy standard.869 Each country applies its own version
of this standard, but variations are a question of degree rather
than of substance due to the narrow notion applied.870 The
867
868
869
870
Awards,” 112; Otto and Elwan, “Article V(2) NYC,” 389; OLG Stuttgart
of 14 October 2003 (Regional Court Stuttgart, Germany 2003); BayObLG of
23 September 2004 DIS Online Datenbank (Regional Court Bavaria, Germany
2004).
For an overview see Otto and Elwan, “Article V(2) NYC,” 366.
Mistelis and Di Pietro, “Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (New York Convention), 1958,” 17; Moses, The
Principles and Practice of International Commercial Arbitration, 218;
Tweeddale and Tweeddale, Arbitration of Commercial Disputes International
and English Law and Practice, note 13.58.
Hanefeld, “Germany,” 7.273; Alvarez de Pfeifle, Der Ordre Public-Vorbehalt
als Versagungsgrund der Anerkennung und Vollstreckbarerklärung
internationaler Schiedssprüche unter Berücksichtigung des Deutschen,
Schweizerischen, Französischen Und Englischen Rechts sowie des
UNCITRAL-Modellgesetzes, 165 et seqq.; Poudret and Besson, Comparative
Law of International Arbitration, note 933; GFCD of 18 January 1990, 1990
Neue Juristische Woche 2199, 2199 et seqq. (German Federal Court );
Parsons & Whittemore Overseas Co. v. Societé Generale de L’Industrie du
Papier,508:; Jon Newman, “The Bench: Judicial Application of the
Convention (US part),” in Enforcing Arbitration Awards under the New York
Convention - Experience and Prospects (New York (NY): United Nations
Publications, 1999), 31; Kühn, “Aktuelle Fragen zur Anwendung der New
Yorker Konvention von 1958 im Hinblick auf die Anerkennung und
Vollstreckung ausländischer Schiedssprüche,” 57.
Kröll, “§ 1061 - Foreign Awards,” 111; Reinhard Bork, “Internationale
Schiedsgerichtsbarkeit
in
Deutschland,”
in
Internationale
Schiedsgerichtsbarkeit, ed. Peter Gottwald (Bielefeld: Gieseking, 1997), 310;
Kühn, “Aktuelle Fragen zur Anwendung der New Yorker Konvention von
1958 im Hinblick auf die Anerkennung und Vollstreckung ausländischer
Schiedssprüche,” 57; Karaha Bodas Co. L.L.C. v. Perusahaan Pertambangan
Minyak Dan Gas Bumi Negara,364:; Ukrvneshprom State Foreign Economic
Enterprise v. Tradeway Inc., XXII Yearbook of Commercial Arbitration 958
(S.D.N.Y., USA 1996). The basis for the international standard remains the
law of the country where enforcement is sought.
193
enforcement countries are bound by the determinations of
neither the panel nor a court in the seat country.871
9.6.2.2
Content of the Provision
DERAINS describes public policy as the safety valve of domestic
courts.872 Article V(2)(b) NYC is narrow and applies only when
the most basic notions of morality and justice are violated.873
Procedural public policy is directed at the proper constitution of
the panel, the independence of the arbitrators, the limits and
extent of the arbitral mandate, principles of equal treatment and
the right to be heard.874 Equal influence of the composition of
the arbitral panel forms part of public policy.875
Violation of domestic or foreign procedural law is insufficient
in this regard.876 A certain severity is required.877 Only the
principles behind the laws are applied.878
In Germany,
871
872
873
874
875
876
877
878
Otto and Elwan, “Article V(2) NYC,” 368.
Yves Derains, “State Court and Arbitrators,” in Arbitration in the Next
Decade, ed. Fabien Gelinas, ICC Special Series 1999 (Paris: ICC Publishing
S.A., 1999), 31.
Mistelis and Di Pietro, “Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (New York Convention), 1958,” 21; Otto and Elwan,
“Article V(2) NYC,” 389.
Alvarez de Pfeifle, Der Ordre Public-Vorbehalt als Versagungsgrund der
Anerkennung und Vollstreckbarerklärung internationaler Schiedssprüche
unter Berücksichtigung des Deutschen, Schweizerischen, Französischen Und
Englischen Rechts sowie des UNCITRAL-Modellgesetzes, 160; Lachmann,
Handbuch für die Schiedsgerichtspraxis, note 1290; Homayoon Arfazadeh,
Ordre public et arbitrage international à l’épreuve de la mondialisation une
théorie critique des sources du droit des relations transnationales (Brussels:
Bruylant, 2006), 52.
GFCD 98, 70, 1986 Neue Juristische Woche 3027, 76 (German Federal Court
); GFCD 132, 278 (German Federal Court 1996); Kröll, “§ 1061 - Foreign
Awards,” 124; Kurkela and Snellman, Due Process in International
Commercial Arbitration, 109.
Kröll, “§ 1061 - Foreign Awards,” 120.
Otto and Elwan, “Article V(2) NYC,” 389.
Alvarez de Pfeifle, Der Ordre Public-Vorbehalt als Versagungsgrund der
Anerkennung und Vollstreckbarerklärung internationaler Schiedssprüche
unter Berücksichtigung des Deutschen, Schweizerischen, Französischen Und
Englischen Rechts sowie des UNCITRAL-Modellgesetzes, 160; GFCD 48, 327
333 (German Federal Court 1968).
194
“(p)rocedural public policy is violated if the award has
been rendered in proceedings which deviate from the
basic principles of German procedural law in a way
that the procedure can no longer be considered to be in
accordance with the basic principles of a ‘fair
trial’.”879
In principle, the parties’ freedom to agree on an appointment
procedure exists, however, public policy limits this right.880
Equal treatment at its core requires equal chances.881 It is not
unequal when a party defaulted and as a result thereof the party
arbitrator decides; it is, however, unequal when default is not
the cause.882 Any actual inequality is sufficient. It is irrelevant
whether the inequality was actually known or foreseeable.883
That the parties are not treated equally has already been
demonstrated. Whether the waiver provision of article 4(1)(s.3)
Swiss Rules is more effective in Germany and the United States
than in Switzerland is questionable.
The German BGH adopted the French decision made in
Dutco.884 This means that advance waivers are impermissible.885
879
880
881
882
883
884
885
Kröll, “§ 1061 - Foreign Awards,” 120.
Trittmann and Hanefeld, “Arbitration in Germany,” 5 et seq.; Henkel,
Konstituierungsbezogene Rechtsbehelfe im schiedsrichterlichen Verfahren
nach der ZPO, 413; Lachmann, Handbuch für die Schiedsgerichtspraxis, note
1324 et seqq.
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 1292.
Kröll, “§ 1061 - Foreign Awards,” 124; Lachmann, Handbuch für die
Schiedsgerichtspraxis, note 932.
Lachmann, Handbuch für die Schiedsgerichtspraxis, 938; differing: OLG
Frankfurt a.M. of 24 November 2005 - 26 Sch 13/05 (2005).
GFCD of 29 March 1996, 1996:1755.
Born, International Commercial Arbitration Volume II, 2735; Lachmann,
Handbuch für die Schiedsgerichtspraxis, notes 2346, 2818; Schwab and
Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, notes 15-1; Musielak, Kommentar zur
Zivilprozessordnung mit Gerichtsverfassungsgesetz, notes 1059-39;
195
In particular, the choice of institutional rules does not free the
parties from non-waivable provisions of the law.886 PETSCHE
argues that parties cannot waive such rights that may be raised
by courts ex officio.887 Under German law, the agreement would
not be invalid, but would result in the right of the party to
request neutral appointment of the entire panel.888
It is unclear how U.S. courts would treat advance waivers;
however, where article V(2)(b) NYC is concerned, waivers will
likely fail.889
In some jurisdictions this would not raise an issue. In 1999 an
Indian court found that the predominant influence of one party
over the appointment of the panel was acceptable.890
A violation of equal treatment may be harmless if a cure has
been affected or a waiver ex post occurred.891 A party that has
886
887
888
889
890
891
Nacimiento and Abt, “§ 1034 - Composition of Arbitral Tribunal,” 8 et seq.;
GFCD of 29 March 1996 - II ZR 124/95 834 (German Federal Court 1996);
Tweeddale and Tweeddale, Arbitration of Commercial Disputes International
and English Law and Practice, note 13.81.
Schwab and Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, notes 15-32.
Petsche, The Growing Autonomy of International Commercial Arbitration,
125; Suovaniemi and Others v. Finland, Admissibility Decision of 23
February 1999, No. 31737/96 (n.d.).
Any
imbalance
sufficient.
Lachmann,
Handbuch
für
die
Schiedsgerichtspraxis, note 932.
Born, International Commercial Arbitration Volume II, 2736; Marino v.
Writers Guild of Am., 484 F.Supp. 1480, 1484 (9th Cir., USA 1993).
Open Seas Maritimes Inc. v. R. Pyarelal International Pvt. Ltd., 101(2)
Bombay Law Review 12 (Bombay High Court, India 1999).
Petrochilos, Procedural Law in International Arbitration, note 4.82; Siemens
AG and BKMI Industrieanlagen GmbH v. Dutco Construction Company, 1992
No. 3:; Lachmann, Handbuch für die Schiedsgerichtspraxis, notes 1205, 2613;
Kröll, “§ 1061 - Foreign Awards,” 49, 124; Nacimiento and Abt, “§ 1034 Composition of Arbitral Tribunal,” 24; Hartmann, Zivilprozessordnung, notes
1059-2; Girsberger and Voser, International Arbitration in Switzerland, note
1192; La Société Nationale pour la Recherche, la Production, le Transport et
la Commercialisation des Hydrocarbures v. Shaheen Natural Resources Co.,
585 F.Supp 57 (S.D.N.Y., USA 1983); Laminoirs-Trefilieries-Cableries de
Lens v. Southwire Co.; OLG Stuttgart of 14 October 2003.
196
cooperated with the appointment of an imbalanced panel has
forfeited its right to object.892 Similarly, even signing a contract
with an arbitrator can be seen as tacit consent to the arbitrator
and defeat the argument against his plea for equal treatment.893
When a party has knowledge of facts that entitle it to an
objection, that party cannot remain silent and only attempt
challenge at the enforcement stage.894 The right to claim a
public policy defense may also be lost if available remedies in
the seat country remain unused.895 If the violation can or has
been cured during the proceedings or in the appellate
proceedings, the violation will no longer be of importance.896
In a German case, arbitration in front of the L.M.A.A. was
conducted. The sole arbitrator had been appointed by one of the
parties, and, pursuant to the L.M.A.A., this arbitrator decided
the case because the other party refused to appoint an arbitrator.
The German Federal Court granted recognition and
enforcement.897 While the court applied the ground of partiality,
the same reasoning is applicable to any public policy defense.
892
893
894
895
896
897
Nacimiento and Abt, “§ 1034 - Composition of Arbitral Tribunal,” 27.
Nacimiento, “Article V(1)(d) NYC,” 290; Nacimiento and Abt, “§ 1034 Composition of Arbitral Tribunal,” 25.
AAOT Foreign Economic Association Technostroyexport v. International
Development and Trade Services, Inc., 139:982.
GFCD of February 1 2001 - III ZR 332/99 (German Federal Court 2001);
Kühn, “Aktuelle Fragen zur Anwendung der New Yorker Konvention von
1958 im Hinblick auf die Anerkennung und Vollstreckung ausländischer
Schiedssprüche,” 59; , arguing that article V(2) defesnes can never be waived:
Petsche, The Growing Autonomy of International Commercial Arbitration,
125; Poudret and Besson, Comparative Law of International Arbitration, note
943.
Alvarez de Pfeifle, Der Ordre Public-Vorbehalt als Versagungsgrund der
Anerkennung und Vollstreckbarerklärung internationaler Schiedssprüche
unter Berücksichtigung des Deutschen, Schweizerischen, Französischen Und
Englischen Rechts sowie des UNCITRAL-Modellgesetzes, 161.
GFCD of February 1 2001 - III ZR 332/99.
197
The public policy defense may only be raised if it could still be
raised in the seat country,898 or the raising of the defense would
be or was fruitless.899 This has been addressed supra in
subchapter 7.3. As the defense would indeed prove effective, it
would have had to be asserted.
9.6.3 Summary
Both the German and the United States courts would refuse the
recognition and enforcement of consolidated arbitrations that
are based on article 4(1)(s.2) Swiss Rules, provided it had been
raised in Switzerland.
9.7
Solutions
Numerous solutions for lack of equal treatment in the
appointment process have been proposed over the years.900
Adding arbitrators does not solve the problem but rather creates
more.901
Many authors suggest, for consolidation in particular, the
solution is that the arbitral institution select the entire panel.902
898
899
900
901
902
GFCD 52, 184 189 (German Federal Court 1969).
GFCD of February 1 2001 - III ZR 332/99, note 25; Kühn, “Aktuelle Fragen
zur Anwendung der New Yorker Konvention von 1958 im Hinblick auf die
Anerkennung und Vollstreckung ausländischer Schiedssprüche,” 59; GFCD
of 27 March 2006 - 9 Sch 2/05 (German Federal Court 2006).
Compania Espanola de Petroleos v. Nereus Shipping,527:; Government of
U.K. of Gr. Brit. v. Boeing,998:; Frick, International Arbitration Law Library,
234.
Patricia Nacimiento and Amelie Abt, “§ 1035 - Appointment of Arbitrators,”
in Arbitration in Germany: The Model Law in Practice, ed. Karl-Heinz
Böckstiegel, Stefan M. Kröll, and Patricia Nacimiento (Kluwer Law
International, 2008), note 38.
Meier, Einbezug Dritter vor internationalen Schiedsgerichten, 223; Chiu,
“Consolidation of Arbitral Proceedings and International Commercial
Arbitration,” 60 et seq.; Schwab and Walter, Schiedsgerichtsbarkeit
systematischer Kommentar zu den Vorschriften der Zivilprozessordnung, des
Arbeitsgerichtsgesetzes, der Staatsverträge und der Kostengesetze über das
privatrechtliche Schiedsgerichtsverfahren, notes 10-15; Martin Bartels,
198
The same solution is offered in Germany and the Netherlands.
The German domestic solution of § 1034(2) GCCP as well as its
model,903 the Netherlands Code of Civil Procedure § 1028,
suggest:
“Privileged
position
of
a
party
in
appointing
arbitrators
If the arbitration agreement gives one of the parties a
privileged position with regard to the appointment of
the arbitrator or arbitrators, the other party may,
despite the method of appointment laid down in that
agreement, request the Provisional Relief Judge of the
District Court within one month after the
commencement of the arbitration to appoint the
arbitrator or arbitrators. The other party shall be given
an opportunity to be heard. The provisions of Article
1027(4) shall apply accordingly.“904
In ordinary multi-party situations, the ICC and the Swiss Rules
attempt to achieve equal treatment by appointing the whole
panel when parties cannot agree.905 As most commentators
suggest the same solution for consolidation, it appears
reasonable that the institution simply use a reference to its own
rules on multiple parties. When one or all panels have already
been appointed, VOSER suggests that the entire panel be
replaced. LACHMANN suggests that consolidation should only be
permitted when no panel has been constituted.906 These last
suggestions will be more closely considered in chapter 13.
903
904
905
906
“Multiparty Arbitration Clauses,” Journal of International Arbitration 2, no. 2
(1985): 63; Lionnet and Lionnet, Handbuch der internationalen und
nationalen Schiedsgerichtsbarkeit: Systematische Darstellung der privaten
Handelsschiedsgerichtsbarkeit für die Praxis, 411; Ottoarndt Glossner, Jens
Bredow, and Michael Bühler, Das Schiedsgericht in der Praxis, 4th ed.
(Heidelberg: Recht und Wirtschaft GmbH, 2002), note 159.
Nacimiento and Abt, “§ 1034 - Composition of Arbitral Tribunal,” 7.
http://www.dutchcivillaw.com/legislation/civilprocedure044.htm.
See article 10 ICC Rules, article 8 Swiss Rules.
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 2838.
199
Unfortunately, the proposed revision of the Swiss Rules do not
offer clear solutions.
Even where equality is maintained in the selection of arbitrators,
other procedural problems may arise in the context of the
conduct of the proceedings.907
907
Moreau, “Arbitrage liés,” 83.
200
201
10
Aside:
Duty
to
Create
an
Enforceable Award
Having discussed the formative stage of the arbitral proceeding,
this analysis will move on to the procedural adjustments of
consolidated case. As outlined in chapter 4, the ICC and Swiss
Rules do not offer adequate guidance to arbitrators wishing to
ensure enforceability of resulting award. Arbitrators should pay
attention to both the lex fori and the laws of potential
enforcement countries not because they are forced to, but
because it is good practice.908
Enforceability of arbitral awards is one of the goals arbitration
institutions attempt to achieve through their case management
and quality control.909 In principle the arbitrators should provide
an award capable of execution.910 From the point of view of the
parties, an unenforceable award does not finally resolve the
dispute.911 Even though statistics reveal that arbitral awards are
often complied with and do not require formal recognition and
enforcement,912 it is possible that the easy enforcement of
arbitral awards creates this tendency and is an important
908
Garnett et al., A Practical Guide to International Commercial Arbitration, 29 et
seq.
909
Wehrli, Koenig, and Triebold, “Management of the Proceedings and Quality
Control under the Swiss Rules,” 87; Bühler and Webster, Handbook of ICC
Arbitration Commentary, Precedents, Materials, notes 0-33 et seq.; Daly,
“Come One, Come All: the New and Developing World of Non-signatory
Arbitration and Class Arbitration,” 113.
910
Kröll, “Die Vollstechbarerklärung von Schiedssprüchen nach Deutschem
Recht - Rechtsgrundlagen und prozessuale Fragen des Exequaturverfahrens,”
86 et seqq.; Thorn and Grenz, “The effect of overriding mandatory rules on
the arbitration agreement,” 199 et seq.
911
Jens Gal, Die Haftung des Schiedsrichters in der internationalen
Handelsschiedsgerichtsbarkeit (Tübingen: Mohr Siebeck, 2009), 132; Schwab
and Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, chap. 12 note 3.
912
Laure Leservoisier, “Enforcing Arbitration Awards and Important
Convention,” in The Arbitration Process, ed. Susan Meek (The Hague:
Kluwer Law International, 2002), 255.
202
consideration in favor of choosing arbitration.913 In any case, a
panel cannot rely on such compliance.
Many institutional rules also oblige arbitrators to make every
reasonable effort to render a legally enforceable award914 in
order to preserve their reputation.
“ (. . .) an enforcing court can be assured that an award
rendered under the aegis of an established arbitral
institution has ensued from a proceeding under welltested rules applied by accomplished arbitrators (. .
.)”915
Even so, according to KARRER, arbitrators are not required to
create an award that is enforceable.916 This statement may be
misleading and requires explanation. LEW ET AL. state the duties
of the arbitrator as follows: to settle the dispute, to complete the
mandate, to stay impartial, to conduct the arbitration fairly and
without delay, and to maintain confidentiality.917 The arbitrator
shall actively advance the proceedings and refrain from all acts
which would jeopardize the orderly conduct of the proceedings.
This obligation presents an accessory contractual duty of the
arbitrator.918
913
914
915
916
917
918
Bernhard Meyer-Hauser, “Stärkung des Schiedsplatzes Schweiz: Neue
internationale Schiedsordnung in Kraft,” in The Swiss Rules of International
Arbitration, ed. Gabrielle Kaufmann-Kohler and Blaise Stucki, vol. 22, ASA
Special Series (presented at the ASA Swiss Arbitration Association
Conference of January 23, 2004 in Zürich, Basel, 2004), 291.
See for example article 32(2) LCIA Rules.
Friedland, Arbitration Clauses for International Contracts, 40.
Karrer, “Konstituierung des Schiedsgerichts,” Note 90.
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 12-04 et seqq.; see also: Voser and Gola, “The Arbitral Tribunal,” 34.
SFCD 111 Ia 259, 262; 111 Ia 72, 75.
203
Arbitrators do not have a duty to render an enforceable award,
which could lead to liability of the arbitrator.919 The arbitrator
must participate in the proceeding to the best of her ability.920
This duty of participation includes doing everything just and
reasonable to produce an enforceable award.921 If an award
proves to be unenforceable, liability for the arbitrators is not
automatic. It only leads to liability when intentional behavior
leads to an unenforceable award.922 Therefore, many authors
cannot agree with KARRER’S statement.923 Understanding that
the statement refers more to the technical meaning of an
enforceable duty, KARRER is correct.
For the procedural adjustments which will be described in the
following chapters, this means that arbitrators should indeed
alter the ordinary two-party procedure when indicated to ensure
enforceability.
919
920
921
922
923
Nacimiento and Abt, “§ 1034 - Composition of Arbitral Tribunal,” 15 et seqq.
where the duties of the arbitrator are enumerated. Gal, Die Haftung des
Schiedsrichters in der internationalen Handelsschiedsgerichtsbarkeit, 130;
Onyema, International Commercial Arbitration and the Arbitrator’s
Contract, 119.
Schwab and Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, notes 12-1; Gal, Die Haftung des Schiedsrichters in
der internationalen Handelsschiedsgerichtsbarkeit, 127 et seqq.; Lachmann,
Handbuch für die Schiedsgerichtspraxis, note 1155.
Gal, Die Haftung des Schiedsrichters in der internationalen
Handelsschiedsgerichtsbarkeit, 128; GFCD of 5 May 1986 - III ZR 223/84
3077, 3078 (German Federal Court 1986).
Schwab and Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, notes 12-9; GFCD 15, 12, 1954 Neue Juristische
Woche 1763 (German Federal Court ); Bork, “Internationale
Schiedsgerichtsbarkeit in Deutschland,” 297; Walter, “Die Internationale
Schiedsgerichtsbarkeit in der Schweiz,” 829.
Of the same opinion: Günther J. Horvath, “Duty of the Arbitral Tribunal to
Render an Enforceable Award,” in The Arbitration Process, ed. Susan Meek
(The Hague: Kluwer Law International, 2002), 229 et seqq. In great detail....
Institutional rules must ensure that proceedings do not hinder later recognition
and enforcement. Gabriele Nater-Bass, “How to Work with the Swiss Rules:
The Counsel's Perspective,” in The Swiss Rules of International Arbitration Five Years of Experience, ed. Rainer Füeg, 53.
204
205
11
Procedural Adjustments Required
by the Lex Fori
Absent party agreement the panel is permitted to proceed
according to its own discretion,924 limited by the lex fori.925 The
arbitrators' procedural powers constitute a particularly fertile
ground for conflict.926 As the procedural rules of the institutions
do not provide sufficient guidance to the arbitrator concerning
to the necessity of adjustments in various procedural stages, as
discussed supra in subchapter 4.10, this chapter is intended to
provide such guidelines.
Generally speaking, awards are rarely vacated in their seat
countries.927 Judicial review leaves much license to arbitrators.
Absent concrete circumstances this analysis must remain vague
and can only give orientation as to the required adjustments. It
is certainly clear that specific procedural difficulties concerning
multi-contract arbitration exist.928 LEW ET AL. argue that it is
impossible to deal with the procedural issues of multi-party
arbitration on a generalized basis, beyond the principle of equal
treatment.929
According to VOSER and KLEINSCHMIDT, important procedural
steps must be repeated.930 This analysis will address the
procedural adjustments in more detail, initially focusing on the
Swiss lex fori before moving to the laws of the enforcement
924
925
926
927
928
929
930
Girsberger and Voser, International Arbitration in Switzerland, note 669.
Ibid., note 671 et seqq.
Park, “Determining an Arbitrator’s Jurisdiction: Timing and Finality in
American Law,” 151.
Lookofsky and Hertz, Transnational Litigation and Commercial Arbitration
an Analysis of American, European and International Law, 854.
Leboulanger, “Multi-Contract Arbitration,” 43.
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-32.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 388;
Kleinschmidt, “Die Widerklage gegen einen Dritten im Schiedsverfahren,”
146.
206
countries in chapter 13. This analysis will structure its review
by following article 190(2) SPILA.
11.1 Impartiality – Article 190(2)(a) SPILA
The challenge of arbitrators has been addressed, to an extent,
supra in chapter 9. This subchapter will concentrate on the
hitherto unaddressed aspects.
“(The award) can be challenged only: a) If a sole
arbitrator was designated irregularly or the arbitral
tribunal was constituted irregularly;”931
Article 190(2)(a) SPILA also protects the right to an impartial
and independent tribunal.932
“More precisely, it shall protect the parties’ right of
access to independent and impartial arbitrators, (. .
.)”933
Article 180(1) SPILA gives concrete instances for possible
challenges:
“An arbitrator must be challenged:
a) If he does not possess the qualification agreed upon
by the parties; b) If there exist grounds for challenge in
the rules of arbitration adopted by the parties; or c) If
931
932
933
Article 190(2)(a) SPILA.
Girsberger and Voser, International Arbitration in Switzerland, note 1069;
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 1546; SFCD 129 III 445, para. 3.1.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 1546.
207
the circumstances permit legitimate doubt about his
independence.”934
Much has been said about independence and impartiality of
arbitrators.935 LUTTRELL defines bias in international
commercial arbitration in two categories: preference for a party
and preference for an outcome.936
The arbitrators have an ongoing duty to disclose facts giving
rise to concerns regarding bias requires revelation and
challenges. 937 Thus, a challenge may be made when new
information becomes available.938 For consolidation concerning
the same parties, only new grounds should be raised, as
decisions have already been rendered.
Parties which are added under Swiss Rule article 4(1)(s.2) have
the right to challenge the (new to them) arbitrators on any
ground pertinent to them.939 This includes grounds for which the
arbitrator has been challenged previously. Any challenge is
specific to the party.
For the previous parties of case A this means that, through
consolidation, new grounds for challenge may arise. Previously
decided challenges are not reopened by virtue of a new party
raising the same facts as they pertain to them. As an example,
934
935
936
937
938
939
It is unnecessary to go into the details of the existence of a concrete
circumstance. This analysis is only concerned with the procedural effect of
this article on the consolidated procedure.
See
e.g.
Wilke,
Interessenkonflikte
in
der
internationalen
Schiedsgerichtsbarkeit
Unparteilichkeit,
Unabhängigkeit
und
Offenlegungspflichten.
Luttrell, Bias Challenges in International Commercial Arbitration the Need
for a “Real Danger” Test, 14 et seqq.
Wilke, Interessenkonflikte in der Internationalen Schiedsgerichtsbarkeit, 69;
Schramm, Furrer, and Girsberger, “Articles 176 - 194 SPILA,” 180-15.
Moses, The Principles and Practice of International Commercial Arbitration,
140.
Article 180(2) SPILA.
208
Elma Inc. challenged an arbitrator because of his holding stock
in Fido Co. If the newly added party Guido Ltd. raises the same
challenge again, permission must be granted, as Guido Ltd.
cannot be bound by a decision it did not have the opportunity to
comment on. This would not only violate the right to an
impartial arbitrator, but also the right to equal treatment and the
right to be heard.940 However, Elma Inc. should not be allowed
to re-comment as the opportunity to do so had already been
granted.941
The right to challenge is not lost by the specific waiver in article
4(1)(s.3) Swiss Rules. The waiver only refers to the selection
process, not subsequent challenges.942
11.2 Jurisdiction – Article 190(2)(b) SPILA
A challenge of jurisdiction is covered by article 190(2)(b)
SPILA. In any given case, arbitrators943 initially must decide on
their jurisdiction, should there be a challenge944 as to whether
jurisdiction is granted to them to hear a case. This means the
arbitrators must decide if a valid arbitration agreement945 exists
and whether the dispute at hand falls hereunder.946 This analysis
has already treated validity supra in chapter 5.
940
941
942
943
944
945
946
See infra subchapter 11.4.
The righ to comment and submit evidence is not limitless. Girsberger and
Voser, International Arbitration in Switzerland, note 674.
Even in cases where the arbitrators are chosen by the institution alone, see
LCIA and in Swiss Rules and ICC Rules, the right to challenge based on bias
is never waived. It is an expression of most basic due process
The concept of competence-competence is followed in most jurisdictions.
Girsberger and Voser, International Arbitration in Switzerland, note 409.
It will be assumed from hereon out, that there is a challenge, as it has been
explained before that consolidation by consent of all parties is possible.
SFCD 128 III 50, 54.
Moses, The Principles and Practice of International Commercial Arbitration,
88 et seqq.
209
Article 190(b) SPILA covers both jurisdiction over the whole
dispute and other contentious issues relating thereto.947 The
contentious issues encompass which persons and claims are
included in the arbitration agreement. 948
This analysis assumes that each contract involved in the
consolidated arbitration individually covers the dispute of its
arbitration. However, this does not mean that no inquiry into
jurisdiction must be made following consolidation.
It has previously been stated with reference to the Dutco949 case,
and supra in chapter 5, that the arbitral panel, which is to
adjudicate the case, must not only have jurisdiction over each
case individually, but also over the type of procedure, i.e.,
consolidated procedure. In addition, each of the contracts X and
Y must also cover the claims raised under the respective other
contract. This is so because each party only agreed to arbitrate
the issues under its contract with its parties. Extension of this
agreement is only permissible within accepted narrow
boundaries explained supra in chapter 5. The basic question is
always who and what fits under a clause.950 This means that the
arbitrators
need
to
(re-)evaluate the extent of the arbitration clause(s) to determine
whether that dispute is also covered under the respective other
agreement.
947
948
949
950
SFCD 134 III 260, 265; SFCD 118 II 193 195 (Swiss Federal Court 1992).
SFCD 134 III 565 567 (Swiss Federal Court 2008); Berti and Schnyder,
“Article 190 SPILA,” 32; Bernard Dutoit, Droit international privé suisse
commentaire de la loi fédérale du 18 décembre 1987 - Supplement pour la
4ième édition (Basel: Helbing Lichtenhahn, 2011), notes 190-7.
Siemens AG and BKMI Industrieanlagen GmbH v. Dutco Construction
Company, 1992 No. 3:.
Bernard Hanotiau, “Problems Raised by Complex Arbitrations Involving
Multiple Contracts - Parties - Issues,” Journal of International Arbitration 18,
no. 3 (2001): 255.
210
Whether or not a decision on jurisdiction on the existence and
coverage of the individual cases has been made, when new
parties are added these parties must be permitted to comment on
the jurisdictional decision of the other case. The parties of the
first case A must be permitted to comment on the jurisdictional
question concerning the second case B.951
In addition, the panel must determine whether a consolidated
procedure was indeed agreed upon, as outlined supra in section
7.1.3 Consolidating two cases, the institutional determination
only decides whether the procedural prerequisites, such as
whether the same rules are applicable, whether the same parties
arbitrate in both cases (ICC Rules), whether the timing
requirements (ICC Rules) and others are met.952 The scope of an
arbitration clause is to be determined in the finding on
jurisdiction by the arbitrators, and is subject to a challenge in
front of court.
11.3 Incongruence – Article 190(2)(c) SPILA
Article 190(2)(c) SPILA applies when a discrepancy between
award and pleas occurs,953 and is of no consequence in this
context.
11.4 Equality and the Right to be Heard Article 190(2)(d) SPILA
Article 190(2)(d) SPILA requires equal treatment and the right
to be heard. In Switzerland, the right to be heard is embedded in
951
952
953
This is again a question of the right to be heard and equal treatment discussed
in subchapter 11.4.
It has been discussed that the institutional decision itself does not confer
jurisdiction in chapters 5 and 9.
Schramm, Furrer, and Girsberger, “Articles 176 - 194 SPILA,” 190-10;
Girsberger and Voser, International Arbitration in Switzerland, note 1076.
211
article 29(2) of the Swiss Federal Constitution.954 It applies to
arbitral proceedings. 955 If the parties are not all heard
concerning a question in an adversarial proceeding, these rights
will be violated.956 The right to equal treatment and the right to
be heard are closely related.957
Each party must have an equal opportunity to present its case,
within reasonable non-discriminatory bounds.958 Justified
inequalities are permitted.959 The right to equal treatment only
means that the parties have to be treated equally in comparable
situations.960
The right to be heard is violated if one party cannot bring forth
its point of view in the proceedings, making its right of
participation meaningless.961 The right to adversarial
proceedings guarantees the right to take a position with regard
to the allegation of the opposing party.962 The parties must have
the opportunity to participate in the proceedings, especially the
evidentiary stage, as expression of their right to be heard.963
954
955
956
957
958
959
960
961
962
963
SFCD of 9 June 2009 - Urteil 4A_108/2009 C 2.1 (Swiss Federal Court 2009).
SFCD of 7 January 2004; SFCD 127 III 576 2 c (Swiss Federal Court 2001);
SFCD 119 II 386 386, 1b (Swiss Federal Court 1993); SFCD of 19 February
2009 - 4A_539/2008 c. 5.1 (Swiss Federal Court 2009).
Ritz, Die Geheimhaltung im Schiedsverfahren nach Schweizerischem Recht,
63; SFCD 130 III 35 35, 38 (Swiss Federal Court 2003); SFCD 117 II 346,
347.
SFCD 116 II 639 643 (Swiss Federal Court 1990); Lalive, Poudret, and
Reymond, Le droit de l’arbitrage interne et international en suisse édition
annotée et commentée du concordat sur l’arbitrage du 27 Mars 1969, 182-6
et seqq.
SFCD 129 III 445; Karrer, “Internationale Schiedsordnung der
Schweizerischen Handelskammer,” 15-1; SFCD of 11 November 2002.
Berti and Schnyder, “Article 190 SPILA,” 61.
SFCD of 17 February 2002; SFCD of 10 December 2002; SFCD of 26
November 2002.
SFCD 127 III 576, 579 et seq.; SFCD of 23 September 2008 - 4A_178/2008
(Swiss Federal Court 2008).
SFCD 130 III 35, 38; SFCD 119 II 386, 388 et seq.; SFCD 117 II 346, 347 et
seq.
SFCD 98 Ia 337 (Swiss Federal Court 1972).
212
Equal treatment of the parties, guaranteed by articles 182(3) and
190(2)(d) SPILA, implies that the proceedings must be
organized and conducted in such a way that each party has the
same possibilities to present its case. Under that principle,
which also applies to the time limits within which the briefs
must be filed, the arbitral panel must treat the parties in the
same way at all stages of the proceedings.964
In cases in which the same parties are involved, the procedural
adjustments will certainly be fewer, as the parties to case A are
the same as to case B and have had the opportunity to comment
on each issue. Concerning procedural tactics, parties may have
held arguments (and other things) back, or would have adjusted
their position depending on the inclusion or exclusion of other
cases.965 However, this must remain un-regarded, first, because
of the standard that only a “reasonable” opportunity must be
granted, not one that covers all eventualities, and second
because parties have a duty to cooperate in good faith.966
In cases of addition of parties, concerns for procedural
adjustments grow. At this point it is important to remember that
only cases with compatible arbitration clauses can be
consolidated as outlined supra in subchapter 5.2. Therefore,
choice of seat and language of the arbitration does not cause
concern.
964
965
966
SFCD of 29 February 2008 - 4A.452/2007, para. C. 4.1; Kaufmann-Kohler
and Rigozzi, Arbitrage international droit et pratique à la lumière de la
LDIP, note 486. (Emphasis added).
Michael Hwang and Katie Chung, “Defining the Indefinable: Practical
Problems of Confidentiality in Arbitration,” Journal of International
Arbitration 2009, no. 26(5) (2009): 613.
Frick, International Arbitration Law Library, 234; Leboulanger, “MultiContract Arbitration,” 91.
213
11.4.1
File Transfer and Confidentiality
File transfer and confidentiality in arbitral proceedings can be
difficult to reconcile. As outlined supra in subchapter 6.1,
confidentiality of the proceedings depends on specific party
agreement. However, once a party to an arbitration, that party is
entitled to equal treatment and the right to be heard. This means
that it has access to the documents which have already been
exchanged.967 Business secrets and other special documentation
are protected in any case by agreement or law outside the lex
arbitri.
BAMFORTH argues that disclosure of documents may result in
difficulties after consolidation, due to the party autonomy.968
However, absent business secrets, the parties have a right to
access and comment on the content of the file. The right to be
heard includes the right to introduce evidence and comment on
the evidence of another party.969 Reasonable time must be
afforded to review and comment.970 These rights would be
curtailed if the parties were not granted access to information
available to other parties as a matter of course. A consolidation
cannot be a legitimate justification for this lack of equal
treatment.
967
968
969
970
von Segesser and Schramm, “Swiss Private International Law Act (Chapter
12),” 933.
Bamforth and Maidment, “‘All join in’ or Not? How Well Does International
Arbitration Cater for Disputes Involving Multiple Parties or Related Claims?,”
16 et seq. citing a report of the English Departmental Advisory Committee on
Arbitration Law.
Berti and Schnyder, “Article 190 SPILA,” 69; SFCD 130 III 35, 38; SFCD
119 II 386, 388 et seq.; SFCD 117 II 346, 347 et seq.
SFCD of 23 June 2009 - 4A_62/2009 (Swiss Federal Court 2009); SFCD 127
III 576, 579 et seq.; SFCD of 23 September 2008 - 4A_178/2008.
214
11.4.2
Procedural Orders
Since they are not awards, procedural orders are not normally
subject to direct judicial review.971 An exception is made for the
denial of right to be heard or a breach of public policy.972
Procedural orders must be adjusted. When such procedural
orders were issued, no res judicata effect ensues, so that the
panel can alter its orders.973 However, not every detail must be
discussed with the new parties. If the procedural order is based
on party consent, the new parties must be permitted to have the
same input.
How the lack of such input would endanger the existence of an
award, however, is difficult to imagine. A certain impact on the
award must have resulted.974 Potential for such impact exists
when procedural orders relate to evidence. When arbitration
proceedings are organized in such a way as to prevent a party
from commenting on new evidence, such is a violation of the
right to be heard.975
Parties that come later do not fail to organize themselves
properly, but they genuinely have less time and thus have a
valid ground for annulment.976 The right to be heard is not
971
972
973
974
975
976
Poudret and Besson, Comparative Law of International Arbitration, note 536;
Kaufmann-Kohler and Rigozzi, Arbitrage international droit et pratique à la
lumière de la LDIP, note 723; Kurkela and Snellman, Due Process in
International Commercial Arbitration, 80 et seq.; SFCD of 11 January 2010 4A_258/2009, para. C. 3.1.2; SFCD 128 III 330, 332; SFCD 118 II 359, 360 et
seq.
Poudret and Besson, Comparative Law of International Arbitration.
von Segesser and Schramm, “Swiss Private International Law Act (Chapter
12),” 932.
Kurkela and Snellman, Due Process in International Commercial Arbitration,
80 et seq.
Otto and Elwan, “Article V(2) NYC,” 388.
SFCD of 14 December 2004 - 4P.208/2004 (Swiss Federal Court 2004).
215
infringed when the parties fail to follow
established
977
procedure.
The right to adversarial proceedings guarantees the right to take
a position with regard to the allegation of the opposing party.978
The parties must have the opportunity to participate in the
proceedings.979 The parties must have the right to comment on
opponent’s submissions and offer submissions in rebuttal.980
This is especially relevant, as the proper time for preparation
must be granted to all parties.
It is therefore vital that the parties could in fact follow these
procedures and had time to organize themselves. In many cases,
this will require re-organization of the proceedings and redrafting of the procedural orders.
11.4.3
Oral Testimony and Hearings
When the same parties are involved, the issues that would
threaten annulment are not as pressing. Parties have already
participated in hearings and had the opportunity to examine.
This does not mean that there might not be instances in which
additional claims might necessitate re-calling a witness or reopening a hearing to add submissions pertaining to the new
claims. The parties must have the opportunity to participate in
the proceedings, especially the evidentiary stage, as expression
of their right to be heard.981
977
978
979
980
981
SFCD of 19 February 2009 - 4A_539/2008, para. c. 5.2.
SFCD 130 III 35, 38; SFCD 119 II 386, 388 et seq.; SFCD 117 II 346, 347 et
seq.
SFCD 98 Ia 337.
von Segesser and Schramm, “Swiss Private International Law Act (Chapter
12),” 934.
SFCD 98 Ia 337.
216
Concerning the addition of parties, the right to be heard equally
within an adversarial proceeding may be threatened. Oral
testimony should be repeated to afford each new party the
opportunity to question the witnesses. The parties must have the
opportunity to participate in the proceedings, especially the
evidentiary stage, as expression of their right to be heard.982
Limiting the new parties to transcripts is insufficient. There is
no substitute for actual situational perception. The parties would
also be treated unequally, as some parties had the opportunity to
question directly, while others did not.
The right to present witnesses and their testimony was subject to
a recent Swiss Federal Court case. The Swiss Federal Court
denied a violation of article 190(2)(d) SPILA,983 but the
reasoning of the Swiss Federal Court is instructive for the extent
of deference granted to the panel.
In this case, appellant sent various documents, including some
written witness statements from two witnesses to the ICC. They
were not signed. Respondent asked to cross-examine the
witnesses. Shortly before a scheduled hearing it became
apparent that the witnesses declined to appear. Appellant sought
his assistance of the arbitrator on the basis of the applicable
rules. The witnesses continued to be recalcitrant. Respondent
witnesses duly appeared and were heard. Subsequently, the
arbitrator decided not to accept the unsigned statement as
evidence.
“On December 6, 2007 the Arbitrator issued
Procedural Order n°2 in which he rejected the
Appellant’s request of November 26, 2007. According
982
983
Ibid.
SFCD of 19 February 2009 - 4A_539/2008, para. c. 5.2.
217
to the Arbitrator it was inappropriate for the Appellant
to file on October 2, 2007 two documents entitled
witness statements and to wait until November 15,
2007, i.e. four days before the hearing to point out that
they refused to sign the statements. By doing so, the
Appellant had given the erroneous impression that
V.________ and
cooperate.”984
W.________
were
ready
to
While not a case on consolidation, the Swiss Federal Court
shows that the parties’ right to present evidence can be
restricted quite easily. For the purposes of this analysis, this
author must therefore come to the conclusion that a repletion of
the oral hearings may be substituted by receiving the file and
commenting on the issues therein, thereby waiving the right to a
repeat hearing.
Even if the hearing is not fully repeated, the new parties as well
should be afforded a hearing on the same issues, as an
expression of equal treatment. Any results from the previous
hearing should be null and void, so as to create a new
replacement hearing.
11.5 Public Policy – Article 190(2)(e) SPILA
The provision was explained supra in section 9.5.3 As
previously stated, a violation of procedural public policy occurs
if none of the grounds of article 190(2)(a-d) apply.985 The
application of public policy requires a severe standard986 No
more specific duties than previously stated can be described
than would be particular to consolidated cases.
984
985
986
Ibid. Translation provided by Praetor.ch.
Berti and Schnyder, “Article 190 SPILA,” 77.
Satmer, Verweigerung der Anerkennung Ausländischer Schiedssprüche wegen
Verfahrensmängeln, 73.
218
11.6 Summary
In a collective procedure, the courts should protect the
procedural rights of the participants by adjusting the ordinary
two-party procedure.987
“By leaving procedural matters to the arbitrators’
discretion, institutions side-step the hard choices about
what exactly it means to conduct a fair and efficient
proceeding.”988
Due to the lenient standard applied by the panel with respect to
arbitrator decisions, only severe misapplications will lead to
annulment. A lack of jurisdictional analysis, or severe cases of
inequality in the right to present their case can cause such a
result. This author hopes to have effectively provided guidelines
drawn from Swiss law.
987
988
Lucy Gordon-Vrba, Vielparteienprozesse: Kollektive Durchsetzung
gleichartiger, individueller Kompensationsansprüche unter dem Aspekt der
prozessualen Effizienz und Fairness (Zurich: Schulthess, 2007), 132.
William W. Park, “Arbitration’s Protean Nature: The Value of Rules and the
Risk of Discretion,” in Arbitration Insights Twenty Years of the Annual
Lecture of the School of International Arbitration, Sponsored by Freshfields
Bruckhaus Deringer, ed. Julian D. M. Lew and Loukas A. Mistelis (Alphen
aan den Rijn: Kluwer Law International, 2007), 339 Note 17-21.
219
12
Procedural Adjustments Required
by the New York Convention
Not only the laws of the seat country may lead to an
unenforceable award. If the award is to be enforced in the
countries chosen for this analysis, Germany or the United
States, the NYC in their domestic incarnations989 have some
influence on the conduct of the procedure if an enforceable
award is to be rendered.990
12.1 Introduction
As a procedural backdrop it is interesting to consider that upon
replacement of arbitrators by a court,991 both Germany and the
United States require that the proceedings must begin anew.992
Any results of previous steps may only be used at the consent of
the parties.993 Insofar as this may be necessary in the context of
consolidation, the subject will be discussed in this chapter.
This chapter will treat neither articles V(1)(a) nor (1)(c) NYC,
as validity and jurisdiction have been discussed in chapter 5.
This analysis will treat neither articles V(1)(e) nor (2)(a) NYC,
as they are not implicated.
989
990
991
992
993
In Germany the NYC was transformed by § 1061(1) GCCP without change.
The United States did likewise in U.S. Code, Title 9, Chapter 2, § 201.
Kronenburg, Vollstreckung ausländischer Schiedssprüche in den USA: Die
Rechtsprechung US-Amerikanischer Gerichte, 203; Alvarez, “Autonomy of
International Arbitration Process,” 6-3.
This is similar in situation for the parties of the second case B. For these
parties it is as if all arbitrators have been replaced.
Schwab and Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, notes 16-33; Pemex-Refinancion v. Tblisi 2004 US
Dist. LEXIS 17478 (S.D.N.Y., USA 2004).
Nacimiento and Abt, “§ 1034 - Composition of Arbitral Tribunal,” 32.
220
According to the New York Convention Article V,
“1. (. . .)(b) The party against whom the award is
invoked (. . .) was otherwise unable to present his case;
(. . .) or (d) (. . .) the arbitral procedure was not in
accordance with the agreement of the parties, or,
failing such agreement, was not in accordance with the
law of the country where the arbitration took place; ( . .
.)
2. Recognition and enforcement of an arbitral award
may also be refused if the competent authority in the
country where recognition and enforcement is sought
finds that: (. . .)(b) The recognition or enforcement of
the award would be contrary to the public policy of that
country.”
The New York Convention makes international arbitral awards
more readily enforceable than foreign judgments.994 United
States courts have embraced arbitration wholeheartedly995 and
are extremely reluctant to refuse enforcement of international
arbitral awards.996 German courts also tend to uphold arbitral
awards.997 To ensure the goal of easy enforceability, the
exceptions to article V NYC must be interpreted narrowly.998 In
994
995
996
997
998
Friedland, Arbitration Clauses for International Contracts, 11 et seq.;
Bamforth and Maidment, “‘All join in’ or Not? How Well Does International
Arbitration Cater for Disputes Involving Multiple Parties or Related Claims?,”
6.
Thomas E. Carbonneau, Alternative Dispute Resolution Melting the Lances
and Dismounting the Steeds (Urbana, Ill.: University of Illinois Press, 1989),
105.
Thomas E. Carbonneau, “International Arbitration - The United States,” in
Internationale Schiedsgerichtsbarkeit, ed. Peter Gottwald, 1997, 889;
Lookofsky and Hertz, Transnational Litigation and Commercial Arbitration
an Analysis of American, European and International Law, note 871;
Kronenburg, Vollstreckung ausländischer Schiedssprüche in den USA: Die
Rechtsprechung US-Amerikanischer Gerichte, 150.
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 2148.
Rona G. Shamoon and Irene M. TenCate, “Absence of Consent Trumps
Arbitral Economy: Consolidation of Arbitrations under U.S. Law,” American
Review of International Arbitration 12 (2001): 55; Barbara Steindl,
“Durchsetzung ausländischer Schiedssprüche,” in Praxishandbuch
Schiedsgerichtsbarkeit, ed. Hellwig Torggler (Baden-Baden: Nomos, 2007),
221
fact only about ten percent of all attempts at hindering
enforcement are successful.999
Article V NYC enumerates specific grounds on which a court
with secondary jurisdiction may refuse enforcement. In contrast
to the limited authority of secondary-jurisdiction courts to
review an arbitral award, courts of primary jurisdiction, i.e., the
seat country courts, usually the courts of the country of the
arbitral situs, have much broader discretion to set aside an
award.1000 Under the New York Convention, the rulings of the
panel interpreting the parties' contract are entitled to
deference.1001
Authors nonetheless warn of consolidation as a source for lack
of enforcement.1002 According to VOSER, a concern in multiparty arbitration is also enforceability, which, however, should
not be over-emphasized.1003 POUDRET/BESSON believe that
consolidation provisions do not endanger enforcement under the
NYC.1004
The individual grounds will now be addressed in turn. Articles
V(1)(b) and (2)(b) NYC are very similar and neither is based on
999
1000
1001
1002
1003
1004
note 27; Troy L. Harris, “The ‘Public Policy’ Exception to Enforcement of
International Arbitration Awards Under the New York Convention,” Journal
of International Arbitration 24, no. 1 (2007): 11; Mistelis and Di Pietro,
“Convention on the Recognition and Enforcement of Foreign Arbitral Awards
(New York Convention), 1958,” 15; Strong, “Enforcing Class Arbitration in
the International Sphere: Due Process and Public Policy Concerns,” 55.
Albert Jan Van Den Berg, “Refusals of Enforcement under the New York
Convention of 1958: the Unfortunate Few,” in Arbitration in the Next Decade,
ed. Fabien Gélinas, ICC Special Bulletin 1999 (Paris: ICC Publishing S.A.,
1999), 75.
Karaha Bodas Co. L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas
Bumi Negara, vol. 364, para. 27.
Ibid., vol. 364, para. 31. The court provides further references in footnote 27.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 413; Leboulanger,
“Multi-Contract Arbitration,” 70; Öhrström, “Stockholmer Regeln,” 32; Frick,
International Arbitration Law Library, 237.
Voser, “Multi-party Disputes and Joinder of Third Parties,” 352.
Poudret and Besson, Comparative Law of International Arbitration, note 249.
222
the law of the seat. They will, therefore, be treated together,
after article V(1)(d) NYC.
12.2 Agreed Procedure
- Article V(1)(d)
NYC
Failure to abide by the rules determined by the parties may lead
to refusal of recognition and enforcement.1005 This challenge is
rarely successful.1006 Further, article V(1)(d) NYC overlaps with
article V(1)(b) NYC and (2)(b) NYC.1007
The procedural requirements to be observed are those of the seat
country,1008 as outlined supra in chapter 11. Combined with the
considerable freedom of the arbitrator to conduct the
proceedings described in section 7.1.3, this defense will be hard
to prove.1009
As described supra in chapter 5, only in those cases in which
consolidation was validly agreed to were the subsequent
adjustments in procedure agreed to as well, insofar as they are
described in the institutional rules. Consequently, article
V(1)(d) NYC does not provide further guidance.
1005
1006
1007
1008
1009
Schwab and Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, notes 15-33.
Moses, The Principles and Practice of International Commercial Arbitration,
212; Nacimiento, “Article V(1)(d) NYC,” 282.
Nacimiento, “Article V(1)(d) NYC,” 282; Kröll, “§ 1061 - Foreign Awards,”
95.
Alvarez de Pfeifle, Der Ordre Public-Vorbehalt als Versagungsgrund der
Anerkennung und Vollstreckbarerklärung internationaler Schiedssprüche
unter Berücksichtigung des Deutschen, Schweizerischen, Französischen Und
Englischen Rechts sowie des UNCITRAL-Modellgesetzes, 242 et seq.; Lionnet
and
Lionnet,
Handbuch
der
internationalen
und
nationalen
Schiedsgerichtsbarkeit:
Systematische
Darstellung
der
privaten
Handelsschiedsgerichtsbarkeit für die Praxis, 122; Böckstiegel, “Party
Autonomy.”
Kröll, “§ 1061 - Foreign Awards,” 95.
223
12.3 Due Process and Public Policy - Articles
V(1)(b) and V(2)(b) NYC
The abstract evaluation of when due process instead of public
policy is violated does not advance the goal of this analysis, as
both violations are very similar and will lead to the same basic
procedural adjustments. This analysis will nevertheless give a
very brief discussion of the distinction between the two
provisions for the sake of accuracy. After this overview a
description of the content of the provisions shall be given,
followed by the impact thereof on arbitral procedure. In order to
maintain a separation of the two concepts, this analysis shall
refer to due process violations when article V(1)(b) NYC is
meant, and violation of public policy when article V(2) NYC is
referred to.
12.3.1
Overview
Much overlap exists between the defenses of article V(1)(b) and
V(2)(b) NYC.1010 Article V(1)(b) NYC is more specific1011 and
should precede article V(2)(b) NYC in any analysis.
Furthermore, article V(1)(b) NYC must be raised by the parties,
1010
1011
Sachs and Lörcher, “§ 1042 - General Rules of Procedure,” 18; Lachmann,
Handbuch für die Schiedsgerichtspraxis, notes 2106, 2582; Schwab and
Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, notes 15-1; Kröll and Kraft, “§ 1059 - Setting
Aside of Awards,” 42; Strong, “Enforcing Class Arbitration in the
International Sphere: Due Process and Public Policy Concerns,” 55; Shamoon
and TenCate, “Absence of Consent Trumps Arbitral Economy: Consolidation
of Arbitrations under U.S. Law,” 67; Steindl, “Durchsetzung ausländischer
Schiedssprüche,” 23, citing OLG Köln 23.04.2004, YCA XXX (2005) 560.
Kronenburg, Vollstreckung ausländischer Schiedssprüche in den USA: Die
Rechtsprechung US-Amerikanischer Gerichte, 175.
224
while public policy concerns can be raised either by the parties
or by the court ex officio.1012
The difference in content between the articles V(1)(b) and
V(2)(b) NYC is twofold: First, article V(1)(b) NYC concerns
violations of due process only, while article V(2)(b) NYC
protects all rules and regulations of a country that form "(. . .)
the fundamental economic, legal, moral, political, religious, and
social standards (. . .)"1013 of the enforcement countries.1014
Second, not all V(1)(b) NYC violations are grave enough to be
violations of V(2)(b) NYC, so that there is a certain
discrepancy.1015
This means, as to the first point, that article V(2) NYC is
broader because it protects more kinds of violations;1016 and as
to the second, that it is narrower in its protection of due process
violations than the due process provision. Due process is part of
public policy,1017 but not all due process violations are also
violations of public policy.1018
1012
1013
1014
1015
1016
1017
1018
TenCate, “Multi-Party and Multi-Contract Arbitrations: Procedural
Mechanisms and Interpretation of Arbitration Agreements under U.S. Law,”
55; Harris, “The ‘Public Policy’ Exception to Enforcement of International
Arbitration Awards Under the New York Convention,” 10; Goldstein and
Wilson, “Enforcement of Foreign Arbitral Awards Under United States and
English Law,” 633.
Kurkela and Snellman, Due Process in International Commercial Arbitration,
264; Strong, “Enforcing Class Arbitration in the International Sphere: Due
Process and Public Policy Concerns,” 66.
Mistelis and Di Pietro, “Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (New York Convention), 1958,” 21; Otto and Elwan,
“Article V(2) NYC,” 389; GFCD of 5 May 1986 - III ZR 223/84; GFCD 123,
268, 1993 Neue Juristische Woche 1993, 640, 270 (German Federal Court ).
Kröll, “§ 1061 - Foreign Awards,” 68.
Ibid., 121; Petrochilos, Procedural Law in International Arbitration, note
4.05.
Schwab and Walter, Schiedsgerichtsbarkeit systematischer Kommentar zu den
Vorschriften der Zivilprozessordnung, des Arbeitsgerichtsgesetzes, der
Staatsverträge und der Kostengesetze über das privatrechtliche
Schiedsgerichtsverfahren, notes 15-1.
Kröll, “§ 1061 - Foreign Awards,” 111.
225
Yet another difference is the applicable standard of review.
Article V(1)(b) NYC applies the law of the enforcement
country. Conformity with the lex fori is irrelevant1019 unless it is
substantially similar to the enforcement country’s. Article
V(2)(b) applies an internationalized version of the enforcement
countries’ public policy.1020
12.3.2
Policy
Content of Due Process and Public
Arbitral due process involves that the parties know in advance
what to expect.1021 Article V(1)(b) NYC allows for the refusal
of recognition if a party “(. . .) was otherwise unable to present
his case (. . .)”. Being unable to present one’s case has been
divided into two categories: a violation of the right to be heard
and unequal treatment.1022
A violation of the right to be heard has been defined by the
United States Court of Appeals for the Seventh Circuit1023 as a
fundamentally fair hearing with minimum standards, a hearing
on the evidence, and an impartial decision of the arbitrators. The
concept of a fair hearing is stressed under German law also.
1019
1020
1021
1022
1023
Kronenburg, Vollstreckung ausländischer Schiedssprüche in den USA: Die
Rechtsprechung US-Amerikanischer Gerichte, 174; Jana, Armer, and Klein
Kranenberg, “Article V(1)(b) NYC,” 238; , speaking of lex arbitri as law of
the forum: Kröll, “§ 1061 - Foreign Awards,” 69; Parsons & Whittemore
Overseas Co. v. Societé Generale de L’Industrie du Papier,508:; , differing:
Hans-Jochem Lüer, “German Court Decisions Interpreting and Implementing
the New York Convention,” Journal of International Arbitration 7 (1990):
130; Pryles and Waincymer, “Multiple Claims in Arbitration Between the
Same Parties,” 651; Iran Aircraft Industries v. AVCO Corp. 980 F.2d 141
(2nd Cir., USA 1992).
Arfazadeh, Ordre public et arbitrage international à l’épreuve de la
mondialisation une théorie critique des sources du droit des relations
transnationales, 130 et seq. Differing opinions in ...
Park, “Arbitration’s Protean Nature: The Value of Rules and the Risk of
Discretion,” 364 Note 17-97.
Strong, “Enforcing Class Arbitration in the International Sphere: Due Process
and Public Policy Concerns,” 56.
Generica Ltd. v. Pharmaceutical Basics, Inc., 123 F.3d 1123 (7th Cir., USA
1997).
226
Some national laws, among them Germany’s, interpret this as a
full opportunity to present one’s case,1024 whereas others only
require a reasonable opportunity to do so.1025
It must be guaranteed that the party can actively participate in
the proceedings by commenting and submitting its own views
and receiving consideration thereon.1026 Some aspects include
the right to be duly informed, the opportunity to comment of the
relevant facts and points of law, and the right to have one’s
arguments considered.1027
No party may be given advantage over the other.1028 This means
that the parties of the consolidated case each must have an equal
opportunity to present their case,1029 “at a meaningful time and
in a meaningful manner”.1030
The right to be heard is not limitless, does not extend to the
same breadth as national litigation,1031 and does not entitle a
party to obstruct proceedings by dilatory tactics.1032
1024
1025
1026
1027
1028
1029
1030
1031
1032
Mistelis and Di Pietro, “Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (New York Convention), 1958,” 18.
Shamoon and TenCate, “Absence of Consent Trumps Arbitral Economy:
Consolidation of Arbitrations under U.S. Law,” 63.
Kröll, “§ 1061 - Foreign Awards,” 70 et seqq.; GFCD 96, 40 48 (German
Federal Court 1985); GFCD 110, 104; Poudret and Besson, Comparative Law
of International Arbitration, note 550; Sachs and Lörcher, “§ 1042 - General
Rules of Procedure,” 8, 11; GFCD 85, 288 Neue Juristische Woche 1983,
867, 291 (German Federal Court 1982).
Sachs and Lörcher, “§ 1042 - General Rules of Procedure,” 9, 12; Lachmann,
Handbuch für die Schiedsgerichtspraxis, note 1299.
Sachs and Lörcher, “§ 1042 - General Rules of Procedure,” 4.
Reinhold Geimer, “§§ 1025 - 1066,” in Zöller Zivilprozessordnung, ed.
Richard Zöller, 27th ed. (Cologne: Schmidt (Otto), 2009), note 2.
Iran Aircraft Industries v. AVCO Corp., 146; Generica Ltd. v. Pharmaceutical
Basics, Inc.,123:.
Generica Ltd. v. Pharmaceutical Basics, Inc., 123:1130; the United States
courts consider the flexibility of arbitration in exchange for certain procedural
rights afforded in litigation to be voluntary and acceptable: Goldstein and
Wilson, “Enforcement of Foreign Arbitral Awards Under United States and
English Law,” 641 et seq.; Kronenburg, Vollstreckung ausländischer
Schiedssprüche in den USA: Die Rechtsprechung US-Amerikanischer
Gerichte, 185.
Sachs and Lörcher, “§ 1042 - General Rules of Procedure,” 14.
227
Public policy is not defined in the New York Convention.1033 In
2002, the International Law Association adopted a resolution
concerning public policy in the enforcement context.1034 It
reads:
“. . . the body of principles and rules recognized by a
State, which, by their nature, may bar the recognition
or enforcement of an arbitral award rendered in the
context of international commercial arbitration when
recognition or enforcement of said award would entail
their violation on account of either the procedure
pursuant to which it was rendered or of its
contents.”1035
Article V(2) NYC serves as a catchall to protect the
enforcement countries’ interests.1036
“Public policy is a broad concept, covering manifold
subjects, constantly changing and likely to draw the
1033
1034
1035
1036
Strong, “Enforcing Class Arbitration in the International Sphere: Due Process
and Public Policy Concerns,” 53; Harris, “The ‘Public Policy’ Exception to
Enforcement of International Arbitration Awards Under the New York
Convention,” 16; Francesco Trezzini, “The Challenge of Arbitral Awards for
Breach of Public Policy according to Art. 190 para. 2 lit. e of the Swiss
Private International Law,” in Three Essays on International Commercial
Arbitration (Lugano: ADV Publishing, 2003), note 59; Kurkela and Snellman,
Due Process in International Commercial Arbitration, 11.
Strong, “Enforcing Class Arbitration in the International Sphere: Due Process
and Public Policy Concerns,” 66; Final Report on Public Policy as a Bar to
Enforcement of International Arbitral Awards (“ILA Final Report”), 2002,
available at http://www.ila-hq.org/en/committees/index.cfm/cid/19 (follow
link for “Conference Report New Delhi 2002”); Report on Public Policy as a
Bar to Enforcement of International Awards (“ILA Interim Report”), 2000,
available at http://www.ila-hq.org/en/committees/index.cfm/cid/19 (follow
link for “Conference Report London 2000”).
Kurkela and Snellman, Due Process in International Commercial Arbitration,
12 citing the ILA resolution adopted at the 70th conference held in New
Dehli, India, April 2-6, 2002.
Strong, “Enforcing Class Arbitration in the International Sphere: Due Process
and Public Policy Concerns,” 55; William W. Park and Alexander A. Yanos,
“Treaty Obligation and National Law: Emerging Conflicts in International
Arbitration,” Hastings Law Journal 58 (2006): 259.
228
attention of judicial activists. Public policy is subject to
shifting interpretations
trends.”1037
depending
upon
political
The public policy defense, however, is narrow.1038 Public policy
may encompass procedural and substantive issues.1039 The exact
content and application of these principles vary greatly.1040 They
will be addressed infra, when applicable.
12.3.3
Causal Nexus
In order to result in refusal of recognition, there must be some
effect of the violation on the award. Scholars argue about
whether there need be a substantial defect or, with respect to
causality, the necessary extent of the effect on the award.1041
For both due process and public policy violations a causal nexus
is required.1042 There must be the potential of causality of the
violation to the award.1043 In general, it is sufficient that it
1037
1038
1039
1040
1041
1042
1043
Robert Coulson, “So Far, So Good: Enforcement of Foreign Awards in US
Courts,” in Contemporary Problems in International Arbitration, ed. Julian D.
M. Lew (Dordrecht: Nijhoff, 1987), 357.
Goldstein and Wilson, “Enforcement of Foreign Arbitral Awards Under
United States and English Law,” 631.
Strong, “Enforcing Class Arbitration in the International Sphere: Due Process
and Public Policy Concerns,” 67; Kurkela and Snellman, Due Process in
International Commercial Arbitration, 11.
Arfazadeh, Ordre public et arbitrage international à l’épreuve de la
mondialisation une théorie critique des sources du droit des relations
transnationales, 53.
For an overview see: Nacimiento, “Article V(1)(d) NYC,” 298.
Kröll, “§ 1061 - Foreign Awards,” 112; Kronenburg, Vollstreckung
ausländischer Schiedssprüche in den USA: Die Rechtsprechung USAmerikanischer
Gerichte,
203;
Aden,
Internationale
Handelsschiedsgerichtsbarkeit, notes 7-23; Kühn, “Aktuelle Fragen zur
Anwendung der New Yorker Konvention von 1958 im Hinblick auf die
Anerkennung und Vollstreckung ausländischer Schiedssprüche,” 57; Steindl,
“Durchsetzung ausländischer Schiedssprüche,” 27; Nacimiento, “Article
V(1)(d) NYC,” 298; OLG Hamburg 3 April 1975 AWD 1975, 432 =
Yearbook II (1977), 241, 241 (Regional Court Hamburg, Germany 1975);
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 1358.
Harbst, Die Rolle der Staatlichen Gerichte im Schiedsverfahren: Ein
Rechtsvergleich zwischen dem Englischen Arbitration Act 1996 und
229
cannot be excluded that the award would have been different
without the violation.1044
American courts favor a substantial prejudice standard,1045
which expresses that the violation must have substantially
diminished the chances of success. Substantial prejudice or
nexus depends on the gravity of the violation and may be
presumed, if it cannot be excluded, that prejudice resulted.1046 In
any case, there has to be a potential difference in the
outcome.1047
12.3.4
Implications for Procedure
Having discussed the basic tenets of refusal of recognition and
enforcement under German and United States law, this analysis
will now proceed to the potential impact of the NYC on the
consolidated arbitration.
12.3.4.1 Challenge of Arbitrators
Decisions by biased arbitrators violate public policy.1048 The
procedure must ensure that all parties had the opportunity to
1044
1045
1046
1047
1048
Deutschem Schiedsverfahrensrecht, 133; Jana, Armer, and Klein Kranenberg,
“Article V(1)(b) NYC,” 252; Lachmann, Handbuch für die
Schiedsgerichtspraxis, note 2612; OLG Stuttgart of 14 October 2003;
BayObLG of 23 September 2004; Nacimiento, “Article V(1)(d) NYC,” 298.
OLG Hamburg 3 April 1975; Lachmann, Handbuch für die
Schiedsgerichtspraxis, note 2586; Kronenburg, Vollstreckung ausländischer
Schiedssprüche in den USA: Die Rechtsprechung US-Amerikanischer
Gerichte, 177.
Campagnie des Bauxites de Guinee v. Hammermills, Inc. U.S. Dist. LEXIS
8046, 16 (D.C. 1992); P.T. Reasuransi Umum Indonesia v. Evanston Ins. Co.
1992 WL 400733, 1 et seq. (S.D.N.Y., USA 1992); Kronenburg,
Vollstreckung ausländischer Schiedssprüche in den USA: Die Rechtsprechung
US-Amerikanischer Gerichte, 207; Goldstein and Wilson, “Enforcement of
Foreign Arbitral Awards Under United States and English Law,” 643 et seq.
Jana, Armer, and Klein Kranenberg, “Article V(1)(b) NYC,” 253.
GFCD 31, 43 48 (German Federal Court 1960).
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 5-68.
230
challenge, even when added after a challenge had already been
decided. Bias is determined between arbitrator and party and not
universally.1049 It is therefore necessary to allow all new parties
to challenge arbitrators, regardless of the choice to select the
arbitrators being taken from the parties.
12.3.4.2 File Transfer and Confidentiality
As stated supra in subchapter 11.4, files need to be transferred
to prevent refusal. In a German case, an arbitral panel
considered documents not made available to another party; the
court refused recognition.1050 A party must be informed about
the factual and legal arguments of the other side.1051
As previously discussed supra in subchapter 6.1, a right to
secrecy does not impose limitations on the right of access to the
file. As a consequence, all materials available to the other
parties need to be forwarded to the new parties. As this is
already the case under Swiss law, no further adjustments are
required.
12.3.4.3 Procedural Orders
As outlined supra in chapter 11.4, procedural orders must be
altered when they could have an effect on the outcome and have
been drafted with unequal influence.
1049
1050
1051
Otto and Elwan, “Article V(2) NYC,” 369 et seqq.
OLG Hamburg 3 April 1975; Sachs and Lörcher, “§ 1042 - General Rules of
Procedure,” 9; Poudret and Besson, Comparative Law of International
Arbitration, note 549.
Otto and Elwan, “Article V(2) NYC,” 388; OLG Hamburg 3 April 1975.
231
12.3.4.4 Oral Proceedings
In literature concerning oral proceedings, opinion is divided.
SCHLOSSER consider due process to be adequately protected
without repetition, while LACHMANN and RASCHKE-KESSLER
believe it necessary to do re-hearings to an extent. 1052 The
parties have the right to participate in the oral proceeding.1053
This is particularly the case when credibility of witnesses is
examined.1054 Neither scholar gives a detailed analysis for these
opinions. Violation of the right to be heard is particularly
important in the American context, where witness statements
have high value.
To the knowledge of this author, no case law exists on
consolidated proceedings concerning this topic. This author
believes, however, that the right to be heard is not adequately
protected if oral hearings are not repeated, or if the parties did
not have the opportunity to participate in the hearing at the
outset.
The right to participate includes the right to take part in the
taking of evidence and commenting on it, whether in
documentary form or by witnesses.1055 While presenting one’s
case is not impaired when subject matter is limited during
questioning of a witness or party,1056 this does not condone
absolute lack of questioning, which would be the case in
consolidation.
1052
1053
1054
1055
1056
Patricia Nacimiento and Amelie Abt, Ҥ 1039 - Appointment of Substitute
Arbitrator,” in Arbitration in Germany: The Model Law in Practice, ed. KarlHeinz Böckstiegel, Stefan M. Kröll, and Patricia Nacimiento (Kluwer Law
International, 2008), note 19 get original sources; Lachmann, Handbuch für
die Schiedsgerichtspraxis, note 643; Hilmar Raeschke-Kessler and Klaus
Peter Berger, Recht und Praxis des Schiedsverfahrens, 3rd ed. (RWS Verlag,
2002), note 558.
Lachmann, Handbuch für die Schiedsgerichtspraxis, notes 1328, 1418.
Ibid., note 1420; Raeschke-Kessler and Berger, Recht und Praxis des
Schiedsverfahrens, note 558.
GFCD of 26 October 1972 - VII ZR 181/71 (German Federal Court 1972);
Kröll, “§ 1061 - Foreign Awards,” 72.
Generica Ltd. v. Pharmaceutical Basics, Inc.,123:.
232
It is true that only abuse of discretion of the panel will be
sanctioned, as arbitrators must decide what is relevant;1057 lack
of repetition would constitute such abuse.
12.4 Summary
The main influence of the NYC on consolidated proceedings
which can be felt stems from articles V(1)(b) and V(2)(b) NYC.
Swiss law also requires many of the changes required by the
NYC. The enforcement-friendly attitude and the required nexus
between the violation and the award make concrete guidance
difficult. When case law already exists, this author has provided
it.
1057
Laminoirs-Trefilieries-Cableries de Lens v. Southwire Co., 1067 This case is
cited in connection with the NYC even though it was not decided thereunder.
233
13
Usefulness of Consolidation
Consolidation is useful so long as it serves its functions, which
have been outlined supra in chapter 2. This chapter focuses on
whether these purposes are met by the consolidation provisions
of the ICC and Swiss Rules.
This chapter will first discuss to what extent the purpose of
avoidance of contradictory judgments is served. Second, this
chapter will move on to determine the time and cost efficiency
of consolidation under the provisions, and third, whether truth
and justice are served by these consolidating provisions. At the
end of this chapter the author will discuss alternatives to
consolidation.
13.1 Avoidance of Contradictory Judgments
Avoiding contradictory judgments preserves the faith in an
adjudicatory system and is, as such, a good idea. Contradictory
judgments do threaten enforceability of awards. It is contrary to
public policy if in one jurisdiction two contradictory decisions
on the same claim between the same parties exist, if both are
equally and simultaneously in execution.1058 If public policy
were thus violated, enforcement consequences would follow.
Consolidation of cases certainly preempts the existence of
contradictions. This author, however, wonders if consolidation
is truly the tool of choice in all cases.1059
1058
1059
Geisinger and Frossard, “Challenge and Revision of the Award,” 152 et seq.;
SFCD 127 III 279 283 (Swiss Federal Court 2001); Poudret and Besson,
Comparative Law of International Arbitration, note 42 et seq.
Devoting an article to contradictory judgements and how to avoid them: Frank
Spoorenberg and Jorge E. Viñuales, “Conflicting Decisions in International
Arbitration,” The Law and Practice of International Courts and Tribunals 8
(2009): 91 - 113.
234
Cases in which consolidation may have been useful was the
series of arbitrations between CMS and LG&E.1060 A major
reason why the awards have generated considerable
commentary from practitioners and academics alike is that the
two panels reached conflicting conclusions on the issue of
necessity, despite similar factual backgrounds. Indeed, both
cases concerned a number of restrictive measures taken by the
Argentine government to cope with the economic crisis that
unfolded in Argentina starting in late 1999.
Only an unusual fact pattern like this one will lead to outright
conflict of jurisdiction between two panels.1061 Results that
appear contradictory to the naked eye may occur even in
judicial proceedings. When regarded more closely, the
contradiction disappears.
Concepts of which issues or facts have been determined by a
judicial decision vary from country to country.1062 While the
United States knows a system of issue preclusion, which
disallows the same issue decisive for the case to be decided
differently in other circumstances,1063 Germany does not have
such a concept.1064 The number of cases which, in either
litigation or arbitration, would in fact produce contradictory
results as interpreted by more than one country at a time, is
slight. It is difficult to achieve perfect consistency even in court
adjudications.1065
1060
1061
1062
1063
1064
1065
CMS Gas Transmission Co. v. Argentina, ICSID (W. Bank), Case No. ARB/
01/8 (12 May 2005); CMS Gas Transmission Co. v. Argentina, Decision of
Annulment, ICSID (W. Bank), Case No. ARB/01/8 (25 Sept. 2007); LG&E
Energy Corp. v. Argentina, Decision on Liability, ICSID (W. Bank), Case No.
ARB/02/1 (3 Oct. 2006).
McLachlan, Lis Pendens in International Litigation, 214.
McLachlan, Lis Pendens in International Litigation.
Steven S Gensler, Federal Rules of Civil Procedure - Rules and Commentary,
3rd ed. (Eagan, MN: Thomson/West, 2007).
Klaus Reichold and Rainer Hüsstege, “Einleitung II,” in Zivilprozeßordnung,
31st ed. (Munich: C.H. Beck, 2010), note 1 et seqq.
King, “Towards a Uniform International Arbitration Law?,” 293.
235
In arbitration, contradictory judgments are not prohibited.
“The world of arbitral decisions is, however, full of
inconsistencies (and so are the interests of multiple
parties involved).”1066
In fact, this risk is inherent in the arbitral system and must be
accepted.1067 Arbitration is not a homogenous system.1068
However, individual categories can be identified, for which
consolidation more likely than not avoid contradictions.
In cases of indivisible rights or necessary parties, consolidation
could be the only option to avoid a case having to be dismissed
entirely. In such cases, avoidance of contradictory results would
not be the issue.
In cases of one contract and same parties, the cases could have
been brought together. Allowing consolidation could indeed
prevent two judgments with the same parties and issues that are
directly opposed, even when the same issues are decided
differently.
1066
1067
1068
Gerold Herrmann, “Does the World Need Additional Uniform Legislation on
Arbitration,” in Arbitration Insights Twenty Years of the Annual Lecture of the
School of Interational Arbitration, Sponsored by Freshfields Bruckhaus
Deringer, ed. Julian D. M. Lew and Loukas A. Mistelis (Alphen aan den Rijn:
Kluwer Law International, 2007), 263 Note 13-41.
Sometimes parties are aware of the effect and choose to litigate separately
nonetheless. This author does not comment at this point on whether these
contradictory judgments could both be enforceable at the same time.
Rolf A. Schütze, Ausgewählte Probleme des Deutschen und internationalen
Schiedsverfahrensrecht (Cologne: Heymann, 2006), 103; Barton, “The
Definition of ‘Precedent’ in International Arbitration,” 13; Ashford,
Handbook on International Commercial Arbitration, 191; Mourre, “Precedent
and Confidentiality in International Commercial Arbitration: The Case for the
Publication of Arbitral Awards,” 41; Perret, “Is There a Need for Consistency
in International Commercial Arbitration?,” 34; SFCD 127 III 279, 283.
236
In cases of one contract and different parties, the risk of the
same issues being decided differently is still present but may not
lead to directly contradictory judgments.
In cases of several contracts between the same parties, the risk
of contradictory judgments becomes more remote.
In cases of unrelated contracts, there is no risk of contradictory
judgments. The more closely the contracts are intertwined, the
greater the risk of contradictory judgments.
In cases of several contracts and different parties, the risk of
contradictory judgments is remote. Only when the contracts are
very closely related, as is sometimes the case in joint ventures,
and the issues concern contract interpretation rather than
determination of the law and the facts, does there exist a danger
of contradictory judgments.
Nevertheless, arbitrators attempt to give the business
community a reliable and acceptable standard of international
adjudication1069 by taking other judgments into account, even
when not forced to do so.1070
The benefit of avoidance of contradictory judgments thus
depends on the connections of cases. As pointed out supra in
chapter 5, certain presumptions based on the number of parties
and the number of contracts can give an indication of a
sufficient connection. The ICC Rule provides for a mandatory
close connection that reaches the level of one economic
transaction. The Swiss Rule, however it may in fact be
1069
1070
Mourre, “Precedent and Confidentiality in International Commercial
Arbitration: The Case for the Publication of Arbitral Awards,” 42.
See chapter 13 for further discussion of possibilites to take the other
proceeding into account.
237
administered, does not provide for a mandatory connection.
This lack of specific criteria is dramatic with reference to article
4(1)(s.2) Swiss Rules, which does not require the involvement
of the same parties or the same contract.
13.2 Efficiency
Efficiency is a major motivating factor in consolidating
proceedings in court, although it may not be determinative in
arbitration because of arbitration's simultaneous need to
consider matters of consent.1071 FRICK doubts whether multiparty arbitration is in fact faster or more efficient.1072
The definition of efficiency in multi-party arbitration is also
notoriously vague, referring to everything from the avoidance of
duplicative dispute resolution procedures in different fora to the
prevention of inconsistent results and minimization of costs.1073
In this context efficiency can be subdivided into time and cost
efficiency.
13.2.1
Time
Efficiency is only guaranteed if both cases would be heared one
after the other and with the party actually having to dispute in
both.1074 This analysis shall assume that efficiency of time
means that the consolidated proceeding is not significantly
prolonged for any party, in comparison to the original
1071
1072
1073
1074
Strong, “The Sound of Silence: Are U.S. Arbitrators Creating Internationally
Enforceable Awards When Ordering Class Arbitration in Cases of Contractual
Silence or Ambiguity?,” 1039.
Frick, International Arbitration Law Library, 231.
Ibid., 230; Leboulanger, “Multi-Contract Arbitration,” 62 et seq.;
Stipanowich, “Arbitration: The ‘New Litigation’,” 343; Strong, “The Sound
of Silence: Are U.S. Arbitrators Creating Internationally Enforceable Awards
When Ordering Class Arbitration in Cases of Contractual Silence or
Ambiguity?,” 1046.
Frick, International Arbitration Law Library, 235.
238
proceeding this party was involved in. This definition has been
chosen over the definition that any consolidated proceeding that
is shorter than its parts put one after the other. This preference
was fueled by the consideration that arbitrations could run
parallel. While the total hours spent are closer to running the
proceedings one after the other, this presumes that all parties are
active in all aspects of all cases. The present definition takes a
more party centered than holistic approach.
Time efficiency depends on the stages that the arbitrations have
already undergone and the stages which have to be repeated.
According to GORDON-VRBA, the usefulness of consolidation of
cases in terms of procedural economy is limited by the necessity
to grant the right to be heard fully.1075 For this reason a number
of scholars suggest limiting consolidation to cases in their
earliest stages. HANOTIAU suggests that cases should only be
consolidated until they have entered the pleading stage.1076 LET
ET AL. and CONEJERO ROOS suggest that consolidation should
not be ordered if two arbitration panels have been
constituted.1077 LACHMANN propounds that consolidation should
only be permitted when no panel has been constituted, or when
both are constituted with the same arbitrators and no progress
has been made in either case.1078
As indicated by this analysis, preliminary matters, such as
challenge of arbitrators, choice of language and seat, transfer of
files and even procedural orders must be adjusted in order to
satisfy mandatory lex fori and public policy of the enforcement
countries. These changes can be made with limited time and
1075
1076
1077
1078
Gordon-Vrba, Vielparteienprozesse: Kollektive Durchsetzung gleichartiger,
individueller Kompensationsansprüche unter dem Aspekt der prozessualen
Effizienz und Fairness, 171. See also supra chapters 12 and 13.
Hanotiau, Complex Arbitrations Multiparty, Multicontract, Multi-Issue and
Class Actions, 379.
Conejero Roos, “Multi-party Arbitration and Rule-making: Same Issues,
Contrasting Approaches,” 427; Lew, Mistelis, and Kröll, Comparative
International Commercial Arbitration, notes 16-93.
Lachmann, Handbuch für die Schiedsgerichtspraxis, note 2838.
239
work-hours lost. If case A (or B) is uncomplicated or had few
issues, it may not be worth the time to repeat, when comparing
the hours already past (and progress made) to the hours still
required.
Apart from repetition, there is also a concern of incongruence. If
one case is very complicated and has many issues, consolidation
may result in overburdening the consolidated case. If one case
has many issues that are unimportant for the other case (and
vice versa), each individual case is prolonged.
As an illustration of the problem, consider case A and B,
independent of the parties or contracts involved. The panel in
case A has to decide claims 1, 2 and 3. The panel in case B has
to decide issues 2, 3, and 4. Consolidation would appear to be
reasonable. What happens if case A contains claims 1 – 5 and
case B claims 5 – 10? How about case A contains claims 1 – 9
and case B claims 9 and 10?
Many different circumstances are addressed by consolidation
and whether they are efficient does not depend so much on
hearing all claims together, but on minimizing repetition. The
categories presented in chapter 5 are a slight indicator of
likelihood of combined claims or issues. Nothing more.
Whether time efficiency would in fact ensue for each party
depends on the individual cases. As stated supra in chapter 4,
the lack of mandatory connection in the Swiss Rules makes
fulfilling of this purpose difficult to predict. A benefit under the
ICC Rules is not only the required connection, but also the
restriction on the time in which consolidation can be
accomplished. Choosing an early procedural stage, rather than a
time limit, allows for the flexible approach required. The Swiss
Rules do not contain such limitation. It is true that the Swiss
240
Rules do not have terms of reference, but the first procedural
order could serve the same purpose.
13.2.2
Costs
For many parties costs are an important factor in many
decisions,1079 even though only 41 percent of practitioners found
arbitration generally less expensive than litigation.1080 In terms
of annulment or enforcement, an award to costs does not violate
public policy even if not in accordance with prevailing of the
parties.1081 Any allocation so unfair as to provoke the
application of public policy defenses would be rare. The effect
on costs that consolidation can have will therefore be addressed
in this section. First the allocation of cost and second the total
cost will be treated.
Consolidation is said to save cost and time, although that view
is disputed in the arbitral realm.1082 However, the benefits of
efficiency in arbitration are not aimed at third parties, the courts,
or the public at large. Indeed, that is why arguments based on
efficiency rationales have not been uniformly successful when
raised in the context of consolidated arbitrations.
1079
1080
1081
1082
John Uff, “Predictability in International Arbitration,” in International
Commercial Arbitration Practical Perspectives, ed. Andrew Berkeley and
Jacqueline Mimms (London: Centre of Construction Law & Management,
2001), 152 et seq. Speaking of amendment of claims under the LCIA
Proceeding.
Christian Bühring-Uhle, Arbitration and Mediation in International Business,
2nd ed. (Alphen aan den Rijn: Kluwer Law International, 2006), 145.
SFCD 116 II 373 (Swiss Federal Court 1990); SFCD of 9 June 1998 ASA
Bulletin 660 (Swiss Federal Court 1998).
Chiu, “Consolidation of Arbitral Proceedings and International Commercial
Arbitration,” 55; critical Strong, “The Sound of Silence: Are U.S. Arbitrators
Creating Internationally Enforceable Awards When Ordering Class
Arbitration in Cases of Contractual Silence or Ambiguity?,” 1039; Born,
International Commercial Arbitration Volume II, 2069 et seq.; Voser, “Multiparty Disputes and Joinder of Third Parties,” 350; Leboulanger, “MultiContract Arbitration,” 54.
241
Principles of mere efficiency are also often overcome when the
consolidated proceeding would involve a third party stranger
(either as a party or an arbitrator) to the arbitration, since
permitting non-parties to participate in an arbitration would
violate the type of proceeding to which the original signatories
to the contract agreed.1083
Interestingly, concerns about third party strangers have also
arisen in situations in which the strangers involved were the
same parties or arbitrators that were involved in the initial
arbitration. In these cases, the fact that the parties had agreed to
arbitration under different contracts or relating to different types
of disputes was sufficient to block consolidation, since it was
decided that each of the proceedings was meant to be
individual, not combined.1084
Consolidation may be used, like many other tools, as strategic
device.1085 Parties may not want to consolidate precisely
because of the potential additional cost involved, not only of the
repetition of stages but also because it increases attorney’s fees
when parties are confronted with issues that are not necessarily
of concern for their part of the case.1086 The principle of
efficiency must contend with other principles, such as
procedural fairness. In order to make any determinations on
efficiency, this analysis will first go into more detail.
1083
1084
1085
1086
Hanotiau, “Complex Multicontract-Multiparty Arbitration,” 389 et seq.;
Platte, “When Should an Arbitrator Join Cases?,” 5-8; Frick, International
Arbitration Law Library, 237.
Strong, “The Sound of Silence: Are U.S. Arbitrators Creating Internationally
Enforceable Awards When Ordering Class Arbitration in Cases of Contractual
Silence or Ambiguity?,” 1046.
Haydock, “Mediation and Arbitration for Now and the Future,” 8.
Bone, Robert G, Civil Procedure, 146; Cooley, Arbitration Advocacy, 50.
242
13.2.2.1 Allocation of Costs
Neither ICC nor Swiss Rules make provisions for the potential
effect of consolidation but rely on general rules. This means that
the arbitrators are relatively free to determine the allocation of
cost and must fall back on generalized rules.
The panel must take all aspects into consideration to ensure due
process and the right to be heard when considering the
distribution of costs.1087
The ICC Rules article 31(3) provides:
“The final Award shall fix the costs of the arbitration
and decide which of the parties shall bear them or in
what proportion they shall be borne by the parties.”
The Swiss Rules article 40(1) provides:
“Except as provided in paragraph 2, the costs of
arbitration shall in principle be borne by the
unsuccessful party. However, the arbitral tribunal may
apportion each of such costs between the parties if it
determines that apportionment is reasonable, taking
into account the circumstances of the case.”
Costs are not awarded on the basis of individual procedural
steps but based on the outcome of the case. Nevertheless, the
arbitrators can take into account which parties should be
burdened with additional costs caused by the consolidation or
incurred before the consolidation took place. The Swiss Rules
are worded more flexibly than the ICC Rules in this regard.
1087
Turner and Mohtashami, A Guide to the LCIA Arbitration Rules, 6.18.
243
It is difficult, however, to make these considerations fair,
particularly when new parties are added or procedural steps
need to be repeated.
13.2.2.2 Total Cost
Total cost of the arbitration is divided into two blocks, the first
being the administrative costs of the institution and the panel
and the second the costs of the parties.1088 Even rough estimates
of which percentage of the total costs is found with the
administration versus the party costs are difficult and have a
great range.1089
Most authors and institutions praise consolidation as method of
monetary efficiency.1090 While this may certainly be true for
some cases, a global statement of such nature cannot be
supported and depends on the precise circumstances of the
cases. An exact statement would require statistical analysis of
data, which is neither currently available nor easily procured.1091
Logical deduction alone supports only the statement that the
more the claims involved share facts and legal arguments and
the earlier consolidation takes place, the more monetarily
efficient a proceeding is.
1088
1089
1090
1091
Bühring-Uhle, Arbitration and Mediation in International Business, 151; Paul
Baumgartner, Die Kosten des Schiedsgerichtsprozesses (Zurich: Schulthess,
1981), 75.
Christian Bühring-Uhle, Arbitration and Mediation in International Business,
2nd ed. (Alphen aan den Rijn: Kluwer Law International, 2006), 151 et seq.
Disagreeing: Born, International Commercial Arbitration Volume II, 2070 et
seq.
Detailed information on averages of necessary hours, hourly rates, likelyhood
of repetitions, percentage of reusable work and so on would be needed for
parallel and consolidated cases. Even the studdy used herein is to be taken
with a grain of salt, as its author confesses Bühring-Uhle, Arbitration and
Mediation in International Business, 155.
244
Arbitral institutions offer a service for a fee, thus they are in
essence a commercial organization,1092 often attached to
chambers of commerce or associations of legal practitioners.
“Courts and arbitrators are in the same business,
namely the administration of justice. The only
difference is that the courts are in the public and the
arbitrators in the private sector of the industry.”1093
Financial interests of the institutions will speak against
consolidation.1094 The total cost for the institution and the
arbitrators will indeed be cheaper in comparison to having two
full cases next to one another for reasons of cost digression.
This saving will be reduced with additional work done (by the
arbitrators,1095 as the institutional fee is a flat rate). The more
issues are added, the larger the workload of the arbitrator. Any
issue present in only one of the cases will thus decrease the
margin of savings for combining the cases.
Concerning the cost of the parties, there is no digression, as
attorneys are paid at an hourly rate.1096 MOHAN/TECK suggest
that in consolidated cases cost may even be higher for (some of)
the parties.1097 Attorneys usually make some use of previously
drafted memoranda with the same issues for both cases. Only
hearing times would create the double cost. The same is true
when considering that procedural steps may have to be repeated
in order to satisfy due process, which reduces the savings as
1092
1093
1094
1095
1096
1097
Berger and Kellerhals, Internationale und interne Schiedsgerichtsbarkeit in
der Schweiz, note 14.
Bremer Vulkan Schiffbau und Maschinenfabrik v. South India Shipping Corp.
Ltd., 3 W.L.R. 471, 479 (1979).
Aden, Internationale Handelsschiedsgerichtsbarkeit, 137.
Onyema, International Commercial Arbitration and the Arbitrator’s
Contract, 136 et seqq.
Bühring-Uhle, Arbitration and Mediation in International Business, 152.
R. Chandra Mohan and Lim Wee Teck, “Some Contractual Approaches to the
Problem of Inconsistent Awards in Multi-party, Multi-contract Arbitration
Proceedings,” Asian International Arbitration Journal 1, no. 2 (2005): 164.
245
well. According to BÜHRING-UHLE, lawyers’ time is roughly
evenly spread throughout the proceedings, with 19,8 percent of
time spent before the constitution of the panel, 16,3 percent of
time spent between constitution and first hearing, 26,3 percent
of time between the initial hearing and the main evidence
hearing, 24,8 percent for hearings, and finally 12,8 percent of
time form post hearing to award.1098 This leads to the conclusion
that the later consolidation is effected, the less cost efficient it
is.
When disputes involve similar subject matter, common
questions of law and fact, and related issues and defenses, the
advantages of consolidation are apparent.1099 There are no
conflicting decisions, no waste through duplication.1100
However, parties that only participate because of a small or
limited issue are disadvantaged due to the cost and time
involved for them, which they would otherwise not have
encurred.1101
13.2.3
Conclusion on Efficiency
Efficiency is a due process principle, but of lesser significance
than impartiality or the right to be heard.1102 Whether
consolidation is more efficient depends on the individual case in
light of the requirement of the lex fori and the enforcement
countries’ law. Under the ICC Rules the mandatory criteria
provide a modicum of certainty that efficiency is truly served.
However, the Swiss Rules, in particular article 4(1)(s.2.), cause
1098
1099
1100
1101
1102
Bühring-Uhle, Arbitration and Mediation in International Business, 152 et
seq.
TenCate, “Multi-Party and Multi-Contract Arbitrations: Procedural
Mechanisms and Interpretation of Arbitration Agreements under U.S. Law,”
137.
Ibid., 137 et seq.
Ibid., 138; Chiu, “Consolidation of Arbitral Proceedings and International
Commercial Arbitration,” 55.
Kurkela and Snellman, Due Process in International Commercial Arbitration,
185.
246
concern. The savings decrease, the fewer similarities appear
between the cases or the more advanced the proceedings are.
Too often the inclusion of more parties or cases to already
complex proceedings will prolong the proceedings
significantly.1103
13.3 Fairness, Truth and Justice
This author takes a (maybe excessively) cynical view
concerning the strength of the principles justice and fairness in
arbitration when compared to the other goals pursued. Multiparty proceedings create tension between procedural economy
and fairness.1104 It is not fair, and sometimes even
impermissible, to consider the total cost or total time spent,
rather than the time and cost to the individual. It is true that all
facts will be revealed in a consolidated arbitration and tactics
become more limited with the gain of access to all information.
However, litigation and arbitration are not the same. Arbitration
strives to settle a dispute between parties privately, while
litigation must also preserve the peace, create predictable rules,
preserve its resources and aim at the objective truth.
What is economical for one party or the system may not be for
all, so that due consideration should be given to the parties’
wishes.
1103
1104
Detlev Kühne, “ICC Arbitration in Germany,” in Arbitration in Germany: The
Model Law in Practice, ed. Karl-Heinz Böckstiegel, Stefan M. Kröll, and
Patricia Nacimiento (Austin, TX: Wolters Kluwer Law & Business, Kluwer
Law International, 2007), note 49.
Gordon-Vrba, Vielparteienprozesse: Kollektive Durchsetzung gleichartiger,
individueller Kompensationsansprüche unter dem Aspekt der prozessualen
Effizienz und Fairness, 117.
247
13.4 Alternatives to Consolidation
To determine usefulness, one further piece is missing from this
analysis: a comparison to alternatives. Consolidation is not the
only tool available to streamline arbitration and avoid
contradictory results.
One of the ways often employed in litigation is the prohibition
of hearing a case already pending elsewhere, known as lis
pendens, or the prohibition to adjudicate the same claim anew,
known as res judicata.1105 The application of such principles as
res judicata and lis pendens are accepted as general principles
of international law.1106
One method is to wait for the outcome in a related case by a
stay of the proceedings.1107 Critics consider a stay to cause too
much delay and breach the privacy of the process.1108 While this
is true for arbitrations that are not between the same parties, it
would be effective. Awards rendered in disregard of legally
binding previous judgments or awards may constitute a
violation of public policy, if the conflict is obvious.1109 Whether
cases are consolidated, parallel or subsequently treated, the
panels cannot ignore the existence of the other proceedings.1110
A solution often propounded and used for cases which do not
meet one or the other criterion for consolidation is parallel
1105
1106
1107
1108
1109
1110
Gallagher, “Parallel Proceedings, Res Judicata and Lis Pendens: Problems and
Possible Solutions,” 335 Note 17-11.
Ibid., 334 Note 17-10.
Michael McIlwrath and John Savage, International Arbitration and Mediation
a Practical Guide (Austin, TX: Wolters Kluwer Law & Business, Kluwer
Law International, 2010), notes 1-171 et seqq.
Lew, Mistelis, and Kröll, Comparative International Commercial Arbitration,
notes 16-83.
Kröll, “§ 1061 - Foreign Awards,” 128.
Pryles and Waincymer, “Multiple Claims in Arbitration Between the Same
Parties,” 438 et seq.
248
arbitration.1111 Parallel cases with the same arbitrators also
allow for the arbitrators’ taking other cases into account.1112 The
parallel arbitrators would also be unlikely to decide the cases
differently.
As pointed out supra in chapter 5, the traditional methods of
counter-claims, cross-claims,1113 set-offs and simply bringing all
related cases together (accumulation)1114 or adding them by,
e.g., the use of article 19 ICC Rules, are also an option to
streamline related cases.1115
Another solution for strings of contracts can be found in
maritime or commodity arbitrations.1116 The practice is to hold a
single arbitration between the first seller and the last buyer,
which is then binding on all, including the middle ones.1117
The above-mentioned methods all serve the same purposes as
consolidation and are true alternatives, well suited to their
particular applications.
1111
1112
1113
1114
1115
1116
1117
Greenberg, Feris, and Albanesi, “Consolidation, Joinder, Cross-Claims,
Multiparty and Multicontract Arbitrations: Recent ICC Experience,” 165;
McIlwrath and Savage, International Arbitration and Mediation a Practical
Guide, notes 1-171 et seq.; speaking only for LCIA practice: Turner and
Mohtashami, A Guide to the LCIA Arbitration Rules, 165.
Craig, Park, and Paulsson, International Chamber of Commerce Arbitration,
180 et seq.
Wenger, “Article 186 SPILA,” 29.
Berger and Kellerhals, International and Domestic Arbitration in Switzerland,
note 533.
Ibid., note 486.
Iris Goldner, “Multi-Party Arbitration,” Croatian Arbitration Yearbook. 8
(2001): 117; Lew, Mistelis, and Kröll, Comparative International Commercial
Arbitration, notes 16-85.
Goldner, “Multi-Party Arbitration,” 117.
249
13.5 Summary
Tensions between efficiency, party autonomy and the fair
administration of justice exist when parties (or cases) are
joined.1118 Utilizing the method proposed supra in chapter 5
would ensure the jurisdictional connection between the cases. A
jurisdictional connection would in turn insure that a sufficiently
close connection between the cases exists to avoid consolidated
arbitrations in which one or the other party is involved in issues
not pertaining to its case. Ensuring a minimum of tension.
“The worthy desire to secure the rapidity of arbitral
proceedings and the finality of awards must be
balanced against the equally important need to protect
the basic procedural rights.”1119
In the end, only a careful balancing of interests will permit a
rule on consolidation to fulfill all its purposes satisfactorily.
When the purposes of consolidation cannot be achieved with
certainty, more disadvantages than advantages ensue and
consolidation should not be sought.1120 The benefits of
consolidation do not necessarily outweigh the necessary
adjustments to the agreed procedure,1121 which are drastic.1122 It
is this author’s conclusion, therefore, that consolidation should
not be expanded, but carefully limited. Other tools are able to
fill gaps that consolidation leaves, so that an over inclusive rule,
such as article 4(1)(s.2) Swiss Rules, should not stand as is. On
1118
1119
1120
1121
1122
Conejero Roos, “Multi-party Arbitration and Rule-making: Same Issues,
Contrasting Approaches,” 432.
Amazu A. Asouzu, “A Threat to Arbitral Integrity,” Journal of International
Arbitration 12, no. 4 (1995): 160.
Lionnet and Lionnet, Handbuch der internationalen und nationalen
Schiedsgerichtsbarkeit:
Systematische
Darstellung
der
privaten
Handelsschiedsgerichtsbarkeit für die Praxis.
Chiu, “Consolidation of Arbitral Proceedings and International Commercial
Arbitration,” 57.
Frick, International Arbitration Law Library, 237.
250
the other hand the ICC Rule prohibits consolidations of cases in
a wasteful fashion, if the cases are very closely connected.
251
14
Proposed Solutions
Many of the issues raised in this analysis could be addressed
from the drafter’s side. This means to include not only the
contractual drafters but also the drafters of institutional rules.
Arbitration clauses are often midnight clauses.1123 However,
even for a midnight clause, suitable examples for consolidation
provisions in contracts exist. SCHÜTZE recommends that the
parties specify additional procedural rules, even when choosing
institutional rules, because there still remains the possibility that
parties do not anticipate all procedural rules, thereby
influencing their position in the proceeding immensely.1124
Similarly, FRIEDLAND, SHAMOON and TENCATE suggest certain
drafting options.1125
14.1 Consolidation Requirements
Practitioners, in the service of their clients, employ more and
more tricks they have learned from litigation or other savvy
international practitioners. The absence of precise procedural
rules in arbitration is considered one of arbitration’s assets.1126
However, PARK suggests that the benefits of arbitrator
discretion are overrated.1127 “Unrealistic expectations are
resentments waiting to happen.”1128 As the complexity of
arbitration grows, its flexibility is lost. In order to maintain the
1123
1124
1125
1126
1127
1128
Blackaby et al., Redfern and Hunter on International Arbitration, note 2.04;
Weigand and Baumann, “Introduction,” 5.
Schütze, Einleitung, in Liebscher, “Wiener Regeln,” 32 p. 13.
Friedland, Arbitration Clauses for International Contracts Chapter 9. This
will be adressed in more detail supra. Shamoon and TenCate, “Absence of
Consent Trumps Arbitral Economy: Consolidation of Arbitrations under U.S.
Law,” 360.
Park, “Arbitration’s Protean Nature: The Value of Rules and the Risk of
Discretion,” 334 Note 17-12.
Ibid., 336 Note 17-16; Uff, “Predictability in International Arbitration,” 151.
Park, “Arbitration’s Protean Nature: The Value of Rules and the Risk of
Discretion,” 337 Note 17-17.
252
expectations of practitioners and clients alike, more guidance,
more rigidity if you will, is required. RAU states that “prearbitral expectations” must be satisfied.1129 The sentiment is
echoed by MCILWRATH/SAVAGE and PRYLES/WAINCYMER,
who lament the lack of exact circumstances in which the
institution will accept or reject consolidation.1130
FAVRE-BULLE advocates, for the sake of predictability, that
parties should know what to expect when they choose a system
of dispute resolution which allows for consolidation.1131 This is
only possible if the discretion afforded to the decision maker is
based on prescribed criteria. These criteria should be
“reasonably precise” to avoid any surprise and maintain
efficiency, while avoiding delay or obstacles to the arbitration
process.1132
In this author’s opinion, more guidance should be given by the
institutions concerning incompatible clauses and the required
connection between the cases. In addition, the Swiss Rules
should add timing constraints connected to an early procedural
stage as well as connection requirement. In this fashion, many
of the procedural problems following consolidation could be
minimized.
This author applauds the efforts of the ICC to carefully broaden
the scenarios in which consolidation can be used. However, the
abandonment of a time restriction was a mistake, as following
procedural problems may become more prevalent than up to this
point.
1129
1130
1131
1132
Rau, “‘Consent’ to Arbitral Jurisdiction: Disputes With Non-Signatories,”
3.40.
McIlwrath and Savage, International Arbitration and Mediation a Practical
Guide, notes 1-169; Pryles and Waincymer, “Multiple Claims in Arbitration
Between the Same Parties,” 482.
Favre-Bulle, “Are Arbitration Proceedings Still Exclusively Reserved for
Parties?,” 240 et seq.
Ibid., 241 et seq.
253
14.2 Arbitrator Selection
Arbitrator selection can be addressed either by the drafters of
arbitration clauses, or by reference of the arbitral rules to their
provisions on multi-party selection. Traditionally, arbitration
was a contractually agreed upon procedure in which the parties
selected an arbitrator to reach a binding resolution of their
dispute.1133 However, as the arbitral procedure unfolds, the
initial contractual agreement is transformed into a phenomenon
with jurisdictional dimensions.1134
Consolidation of cases is just one of the phenomena that
arbitration has been faced with. In litigation, consolidation is
reasonable and beneficial, because the resources protected
belong to the public. In consolidated arbitration only the
resources of individuals can be protected, often at the expense
of another individual. The justification applicable to litigation
does not apply. In order to minimize the occurrences of
individual loss due to procedural mechanism, a close link
between the issues to be arbitrated in both cases should exist.
The provision on the dismissal of arbitrators added in the
proposed Swiss Rule may prove a good tool to deal with
inequality in the appointment process, if used in a fashion that
ensures equality.
14.3 Procedural Adjustments
Most procedural adjustments can be avoided, when
consolidation takes place at an early stage, as suggested supra
1133
1134
Ariana R. Levinson, “Lawyering Skills, Principles and Methods Offer Insight
as to Best Practices for Arbitration,” Baylor Law Review 60 (2008): 6.
Stavros L Brekoulakis, “The Effect of an Arbitral Award and Third Parties in
International Arbitration: Res Judicata Revisited,” American Review of
International Arbitration 16 (2005): 179.
254
in chapter 13, the efficiency of the consolidated procedure
would be increased without the necessity of repetitions.
14.4 Conclusion
Consolidation was intended to make arbitration easier in many
ways. In order to achieve this goal, consolidation needs to be
applied with care. This analysis has shown that positive effects
can be achieved without sacrificing the integrity of the arbitral
process, although not in every case.
This analysis began with a reference to litigation and will now
go full circle and end with a comparison to litigation and the
two-party process.
Consolidation encompasses a number of different scenarios. As
varied as the possibilities are, as varied must an answer to the
question be whether the concept can be and has been
transplanted from litigation to arbitration. In order to achieve
more efficiency, more predictability and more fairness, the
arbitration process needs to be adapted.
Arbitration is often praised for its flexibility, but flexibility is
more and more limited the more complicated a situation
becomes. To retain reliability, a certain predictability is needed.
Unfortunately, with reliability and predictability, flexibility is
lost. The ICC and Swiss Rules on consolidation are good
examples.
Under the ICC Rules, the transition has yielded results that are
predictable, workable and enforceable, but also very limited in
scope. This limited scope in the end denies one of the benefits
of consolidation, namely to join cases that are so related that
255
their issues appear to be an economic transaction, even though
additional parties are involved. The rare number of cases which
have been consolidated under the ICC Rules show that the
intended benefit is limited. More complex contractual structures
cannot be accommodated.
Under the Swiss Rules, the transition has yielded a broad rule,
not even paralleled by consolidation provisions in litigation. It
allows for maximum flexibility, as all circumstances and all
timings are coupled with almost limiting no requirements. The
Swiss Rule - current and proposed new - is therefore riddled
with difficulties and uncertainties in its application. The
permission to consolidate itself requires restricting
interpretation to retain validity. The rule on the selection of
arbitrators in multi-party situations contains a violation of equal
treatment with an invalid waiver. In the proceedings themselves,
due to the unlimited timing, the arbitrators are left without
guidance and may have to repeat many steps, destroying the
intended efficiency and fairness.
Both institutional rules would benefit from slight adjustments to
the text of the rules. This author suggests that an adjustment of
expectations in what a rule on consolidation should do would
yield equally beneficial results. Consolidation in arbitration is
yet young. This author is looking forward so seeing how it will
develop.
256
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"Einführung ins Recht“
· Praxishandbuch zum Geschäftsverkehr mit
den USA für deutschsprachige Anwälte, De
Gruyter Verlag (in Bearbeitung).
· Authority Allocation – Decision Making
Authority of Arbitration Institutions, in:
Festschrift für Prof. Dr. Ivo Schwander (in
Bearbeitung, erscheint 2011).
· Consolidation in International Commercial
Arbitration (Dissertation, Eleven
Publishing, erscheint 2011).
· Kommentierung von Art. 1, 2 und 42 Swiss
Rules sowie Art. 17, 22, 30 und 31 ICC
Rules, in: Manuel Arroyo (Ed.), Arbitration
in Switzerland – The Practitioner’s Guide,
erscheint 2012 (Co-Autor Markus MüllerChen).
· Avoidance for Non-conformity of Goods
under Art. 49 (1) (a) CISG, in: Stefan
Kroll, Loukas Mistelis, Pilar Perales
Viscasillas and Vikki Rogers. eds.
International Arbitration and International
Commercial Law: Synergy, Convergence
and Evolution (Kluwer Law International,
2011) (Co-Autor Markus Müller-Chen).
261
· Urteilsbesprechung BGE 136 III 360, in:
AJP 12/2010 (Co-Autor Thierry
Augsburger).
· Cross Cultural Arbitration: Do the
Differences Between Cultures Still
Influence International Commercial
Arbitration Despite Harmonization?, 9
ILSA J. Int’l& Comp. L. (2002).
· Judicial Activism in the ICJ (UN) Charter
Interpretation, 8 ILSA J. Int’l & Comp. L.,
181 (Fall 2001).
· Cyber Confusion over being haled into
Court, The Internet Law Journal, March
Issue 2001.