Could related arbitrations administered by different institutions be consolidated?

SIAC has published a proposal on cooperation between arbitral institutions to allow the consolidation of related arbitrations being conducted under the rules of different institutions.

Consolidation of arbitrations – the benefits

Consolidation is a process whereby two or more arbitrations are combined into a single arbitration. Consolidation may be desirable where there are closely related arbitrations which may turn on substantially the same facts and evidence. In these cases, determining both disputes in one set of proceedings, rather than in two or more parallel arbitrations, can potentially lead to a number of benefits. First, consolidation can avoid duplication in the arbitral process (e.g. duplication of document production, witness evidence and hearings) and so can potentially be more time-efficient and cost-effective than conducting two separate proceedings. Second, it also avoids the risk of different tribunals reaching inconsistent or incompatible decisions in closely related proceedings, which may have implications for enforcement of the award.

Recognising these potential benefits, all major arbitral institutions’ rules provide for consolidation, albeit their processes differ. Generally, consolidation takes one of three forms:

  • Consolidation of arbitrations which are subject to the same arbitration agreement
  • Consolidation of arbitrations pursuant to more than one arbitration agreement, but where the arbitrations are between the same parties
  • Consolidation of arbitrations between different parties and/or under different arbitration agreements where all parties agree

What are the limitations of consolidation?

Whilst nearly all major arbitral institutions provide for consolidation in their rules, those rules also constrain consolidation in one important respect. Most institutional rules (ICC, LCIA, CIETAC, AAA, HKIAC, SIAC) provide that the institution may consolidate two or more arbitrations pending under those rules.

The result of this is that it is not possible to consolidate related proceedings where those proceedings are being conducted under the rules of two or more institutions who have adopted such a rule. As SIAC’s proposal notes, “[t]hus, a SIAC arbitration can be consolidated with another SIAC arbitration, but not with an ICC arbitration; likewise an ICC arbitration can be consolidated with another ICC arbitration, but an ICC arbitration cannot be consolidated with a SIAC arbitration”.

As a result, at present, parties are not able to consolidate arbitrations proceedings under the rules of two or more different institutions. Parties might therefore be well-advised to ensure that dispute resolution provisions in related contracts are compatible – in particular, by choosing the same seat and arbitral rules – in order to benefit from consolidation provisions in the rules.

However, SIAC’s proposal seeks to find an alternative solution to this problem.

SIAC’s proposal

SIAC proposes a cross-institution consolidation protocol which would enable institutions to offer consolidation of arbitrations under two or more institutions’ rules. It proposes that arbitral institutions adopt and incorporate the protocol into their own rules. By agreeing to arbitrate under the rules of a given institution, parties would then automatically be agreeing to the cross-institution protocol to allow for the potential future consolidation of disputes, giving the consent that is the keystone of international arbitration.

SIAC has broken the protocol into two stages.

The first stage is to decide how applications for cross-institutional consolidation should be decided. SIAC proposes that institutions could either adopt:

  • a new standalone mechanism to address when and how consolidation applications should be decided with each application presided over by a joint committee of representatives from the relevant major institutions; or
  • alternatively the institutions could agree on a number of objective criteria according to which one institution would be authorized under the protocol to make the decision on consolidation.

In this regard, SIAC favours incorporating a standalone mechanism.

Once a decision is made on consolidation, the second question to arise is what procedural rules should apply to the consolidated arbitration. Again, SIAC envisages that the institutions could either agree to new procedural rules which would apply to all proceedings consolidated across different institutions, or the consolidated arbitration could proceed under the rules of one institution – again to be determined according to objective criteria, such as:

  • the number of consolidated arbitrations which ‘belonged’ to each institution;
  • the aggregate value of disputes;
  • when the respective proceedings were commenced;
  • division of cases based on type of dispute. SIAC proposes institutions could divide consolidated proceedings in a way which reflects their own caseload – “ICC could, for instance, focus on [consolidated proceedings in] construction, engineering and energy disputes, while SIAC could specialize in commercial, corporate and shipping disputes”; and
  • nationality of parties – the ICC could focus on disputes relating to European and American parties, while SIAC focuses on cases involving Asian and African parties. Could this undo one of the key benefits of arbitration – neutrality?

SIAC’s proposal is an interesting move. Such a protocol would have great potential to benefit users of international arbitration, particularly in complex projects and transactions which may involve a series of related contracts, but where the parties have failed to agree on a common institution for the resolution of all related disputes. Opening this dialogue also signals SIAC’s desire to be viewed as a forward-looking and innovative forum for international arbitration.

However, these first steps are some way from producing a workable protocol, and other institutions will need to engage on the detail of any protocol before users can reap these potential benefits, a process which may take some time.

SIAC has invited comments on the proposal, which can be sent to its dedicated email account by 31 January 2018.