Multi-party and multi-contract disputes are, today, etched into the fabric of international dispute resolution. This is an inevitable consequence of the increasingly specialized and complex nature of international commerce. Yet, such disputes raise unique concerns that can affect the quality of the arbitral process by leading to a proliferation of parallel proceedings and inconsistent decisions, which can in turn lead to unfair and unsatisfactory outcomes for parties. Resolving these complexities is essential to the success of international arbitration, as with any dispute resolution procedure. This article highlights two key procedural mechanisms that provide avenues to manage complex disputes under many leading institutional arbitration rules: joinder and consolidation.
In broad terms, joinder provisions permit the addition of a new party to an arbitral proceeding. The additional party must, under many institutional rules, be bound by the arbitration agreement giving rise to the dispute, whether as a signatory or non-signatory. In some cases, a party may be joined even if it is bound by a different arbitration agreement, if that agreement is compatible with the arbitration agreement giving rise to the dispute and the dispute arising out of the two arbitration agreements relates to the same transaction or legal relationship. Depending on the applicable joinder provision, the additional party may either elect to intervene in a dispute itself or may be compelled to join by an existing party to a dispute.
Consolidation, on the other hand, provides a mechanism for separate arbitral proceedings to be joined together in a single arbitration because, among other things, those proceedings all arise out of the same arbitration agreement or different, but compatible, arbitration agreements. As with joinder, in the latter scenario, there is usually also a requirement that the disputes in the different proceedings relate to the same transaction or legal relationship and, in some instances, there might be a further requirement for an identity of parties. Where consolidation occurs, the proceedings are all combined into one, with a single procedural timetable and hearing.
While joinder and consolidation have a well-established history in many judicial systems, their place in international arbitration has been conceptually more complex. This is for a number of reasons.
First, unlike national courts, which derive their jurisdiction from statute, tribunals derive their authority from the consent of the parties. Without the parties' consent it would not be possible to compel those parties to resolve their disputes in proceedings with other parties or with disputes arising from other contracts.
Second, multiparty proceedings also raise confidentiality concerns. Confidentiality is widely considered a touchstone of the arbitral process and parties, in many cases, have an expectation that their arbitral proceedings will not be privy to strangers. Some argue that the introduction of non-parties to a proceeding would lead to a loss, albeit limited, of that confidentiality. This concern is overstated – when additional parties join an arbitral process, it is typically within the power of the arbitral tribunal to impose appropriate confidentiality measures. The proceedings will remain outside the public domain.
Third, multiparty arbitrations may also raise practical concerns in relation to the composition of the tribunal. Tribunal appointment procedures generally presume that parties on opposite sides of a claim align in their interests and can thus fall neatly into categories of "claimants" and "respondents," with each "side" appointing or nominating a single co-arbitrator or sole arbitrator. Yet, the presumption betrays reality where parties that are ostensibly on the same side have disparate interests.
Fourth, multiparty proceedings, whether in an arbitral or judicial forum, may make proceedings more complex, and thus longer and more expensive, for certain parties. With additional disputants and issues to contend with, parties may need to draft more complex submissions, over longer procedural timetables and prepare for more complex hearings, inevitably incurring greater legal costs.
Notwithstanding the challenges outlined above, joinder and consolidation mechanisms have become increasingly prevalent in leading institutional arbitration rules because of the benefits that they offer in the resolution of multiparty disputes. For instance, multi-contract and multi-party disputes are likely to raise common factual and legal issues. Resolving these claims in a single proceeding will lead to substantial savings in time and costs by avoiding duplicative submissions, evidence and hearings. It also eliminates the risk of different decision makers in different proceedings reaching different results or granting different, inconsistent relief. When related factual and legal issues are heard together, the decisionmaker is also able to acquire a more complete and contextual understanding of the parties' transaction and obligations. This in turn provides a basis for better-reasoned decisions and enhances the quality of decision-making.
The practical and theoretical concerns, including party autonomy, tribunal constitution and confidentiality, have been addressed through appropriately framed multiparty provisions. These provisions respect the necessity for the parties' consent to arbitrate, while catering to the desire for efficient dispute resolution. Critically, however, consent remains the touchstone for consolidation and joinder in any dispute.
As with other aspects of arbitration, party consent is construed through applicable national laws, arbitral rules or the language of the arbitration agreement. In the context of consolidation and joinder, national laws and arbitration agreements rarely provide detailed guidance. The use of consolidation and joinder in arbitration has thus primarily been driven by arbitral institutions through their respective arbitral rules. In particular, arbitral institutions have included increasingly effective provisions on consolidation, joinder and intervention in successive versions of their rules. Incorporating provisions on multiparty arbitration through arbitral rules is also consistent with requirements of consent as parties are deemed to have accepted these provisions in their selection of the rules.
Today, all leading arbitral rules, including the London Court of International Arbitration, International Chamber of Commerce and Singapore International Arbitration Centre ("SIAC"), have provisions on consolidation and joinder to manage multi-party and multi-contract disputes. By choosing these rules, parties are deemed to have consented to the any joinder and consolidation provisions contained in them.
It is also worth noting that the developments in managing complex disputes are by no means limited to commercial arbitration and arbitral institutions. In the investment arbitration sphere, the International Center for the Settlement of Investment Disputes ("ICSID") is also considering the inclusion of provisions that permit consolidation of proceedings in its on-going rules revision process. In contrast to the arbitral rules mentioned above, however, the ICSID provisions contemplate the parties expressly electing (or "opting in") to consolidate proceedings after the disputes have arisen: "[p]arties to two or more pending arbitrations administered by the Centre may agree to consolidate or coordinate these arbitrations." The rules explain the distinction between consolidation (where all aspects of the arbitrations are joined, resulting in a single award) and coordination (where specific aspects of cases – identical tribunals, combined hearings – could be aligned, but the proceedings and any awards remain distinct). The concept of "coordination" is not formalized in most other leading arbitral rules, although it would be within the power of a tribunal(s) to synthesize certain steps in parallel proceedings with party consent.
In short, existing procedural mechanisms have come a considerable way in mitigating the shortfalls inherent in arbitrating complex disputes. They are, however, not without limitation. One notable lacuna arises in the context of consolidation.
As explained above, in order to consolidate parallel proceedings, the disputes either have to arise out of the same arbitration agreement or different, but compatible, arbitration agreements. Compatibility broadly looks to whether the arbitration agreements align on fundamental elements of the arbitral process, like the seat, the number of arbitrators or the arbitral rules. The compatibility requirement – which occurs in all leading arbitral rules - is an essential precondition to consolidating arbitrations that arise out of different arbitration agreements. It ensures that foundational aspects of the parties' arbitration agreement remain unchanged once the proceedings are combined. Thus, notwithstanding that the disputes arise out the same factual matrix or may otherwise be integrally connected, consolidation under existing arbitral rules will not be possible if the arbitration agreements diverge on core elements.
While differences on these elements in complex transaction may be deliberate, this is not always the case. This is particularly so where the difference relates to a choice of arbitral rules. Often, the difference is merely a reflection of the fact that the separate contracts were negotiated separately. Disputes arising under these related contracts are thus inadvertently forced into different fora, which leads to the inefficiencies and risks outlined above.
It is, of course, open to the parties at this stage to agree to consolidate their proceedings by agreeing to vary the applicable arbitral rules. Parties may also de facto consolidate their arbitrations by appointing the same arbitral tribunal to hear all the disputes. Hearings may also be conducted concurrently or sequentially to mitigate the risk of inconsistent decisions. These solutions are subject to the express consent of the parties provided after the dispute has arisen. However, for obvious reasons, such ex post consent is not always forthcoming. Parties may, for instance, wish to leverage the fragmentation of disputes, including the increase in time and costs, to try to secure a non-legal resolution of their claims. Parties are thus left exposed to an unsatisfactory dispute resolution framework that may lead to unfair outcomes, including through the risk of inconsistent decisions.
To mitigate the strictures of the compatibility requirement, in 2017, SIAC proposed a protocol that would permit the consolidation of arbitrations subject to different arbitral rules. The proposal sets out a two-pronged mechanism on (i) how arbitral institutions can determine whether proceedings under different arbitral rules should be consolidated; and (ii) how the proceedings should be administered, once consolidated. In simple terms, the protocol, entered into by arbitral institutions, would remove one element of incompatibility between arbitration agreements that would otherwise preclude the consolidation of proceedings. Arbitration agreements would still need to align on other fundamental elements, including (and importantly) on the choice of a seat.
Although novel, the proposal for cross-institutional consolidation is by no means radical. It builds on existing principles in international arbitration, such as deemed consent, to develop the existing framework for complex multiparty dispute resolution. By choosing to incorporate the rules of an arbitral institution that is party to the consolidation protocol, parties would be deemed to have also consented to the application of the consolidation protocol itself. If implemented, the protocol could expand the benefits of procedures to manage complex disputes to a broader class of claims.