Author

Ms Shirin Gurdova

International arbitration practitioner - Independent

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Bifurcation

I. Definition

1.

In investment treaty arbitration, bifurcation refers to the consideration of distinct issues for preliminary or independent determination in a separate phase of proceedings.1 In the vast majority of cases, the request for bifurcation of jurisdictional issues is filed by respondents,2 and to lesser extent by claimants3 or by both parties per their agreement.4 Jurisdictional and admissibility issues may be also bifurcated by the tribunal proprio motu.5

2.

Traditionally, requests for bifurcation concern the separation of jurisdictional issues from the merits of the dispute.6 The division of the merits phase into liability and quantum phases is also possible in investment arbitration.7 If the issues are divided into three phases (for example, jurisdiction, merits and quantum), the proceedings are trifurcated.8 The tribunal’s decision on the request for bifurcation (or trifurcation) may take the form of a procedural order9 or a fully reasoned decision.10 For instance, the tribunal in Murphy v. Ecuador II held that the respondent’s jurisdictional objections to the claimant’s shareholder claims, taxation issues and umbrella clauses were so intertwined with substantive issues that they should be considered in the merits phase.11 In Gavrilovic v. Croatia, the tribunal refused the respondent’s request for bifurcation of the proceedings into a jurisdictional phase and a merits phase reasoning that “[T]here is no procedural or other advantage with bifurcating the proceeding” which would require the tribunal “to consider the same, or similar, evidence on two occasions, but as to require witnesses to appear on two occasions, submissions to be prepared which canvass the same, or similar matters, and the consequential cost and expense.12

II. General practice

3.

There were 115 arbitral decisions issued on bifurcation between 2000 and 2017, as far as ICSID proceedings are concerned.13 There is no full record of arbitral decisions issued on request for bifurcation in UNCITRAL proceedings due to the lack of a single registry – except for some cases whose decisions were made public.14

III. Bifurcation under major arbitration rules

A. The UNCITRAL Arbitration Rules

4.

Article 21(4) of the 1976 edition of the UNCITRAL Arbitration Rules states that “[i]n general, the arbitral tribunal should rule on a plea concerning its jurisdiction as a preliminary question,” thus creating a presumption in favour of bifurcation of jurisdictional issues.15 Under the 2010 edition, arbitral tribunal has a full discretion under Article 23(3) to rule on a plea concerning its jurisdiction “either as a preliminary question or in an award on the merits”.16 The 2010 edition thus eliminated the presumption in favour of bifurcation in the jurisdictional context.17 The tribunal must exercise its authority to conduct proceedings in a manner “it considers appropriate, provided that the parties are treated with equality” and “each party is given a reasonable opportunity of presenting its case”.18

B. ICSID Convention and Arbitration Rules

5.

Article 41(2) of the ICSID Convention and Rule 41(3) of the ICSID Arbitration Rules of 2006 provide for the possibility of bifurcation when a tribunal is faced with a jurisdictional or admissibility objection. The tribunal may also decide any issue of jurisdiction on its own initiative at any stage of the proceeding.19 The tribunals have also considered bifurcation of other discrete issues, including quantum and merits, under the umbrella of Article 44 of the ICSID Convention.20

6.

Rule 41(3) of the ICSID Arbitration Rules of 2006 allows the tribunal to treat the objections to jurisdiction and admissibility as a preliminary matter and to suspend the proceedings on the merits or to join the objections to the merits of the dispute.21 Neither the ICSID Convention, nor the Arbitration Rules in their iteration up until 2020 provided further guidance to the tribunals or the parties on the criteria for bifurcation.

7.

Rules 42-45 of the ICSID Arbitration Rules proposed for amendment by ICSID in 2018 include stand-alone provisions on bifurcation and provide detailed guidance on the timing, procedure and factors to be considered when dealing with the questions of bifurcation.22 According to Rule 42, a party may request bifurcation and shall file such request “as soon as possible” including the “questions to be bifurcated”. The tribunal shall “fix time limits for written and oral submissions on the request for bifurcation, as required”. The Rule requires that the tribunal “issues its decision […] within 30 days after the later of the last written or oral submission on the request” leaving it to the discretion of the tribunal to “fix any time limit necessary for the further conduct of the proceeding”. The Rule provides for the tribunal to consider whether bifurcation would reduce time and cost.23

8.

Rule 44 provides for preliminary objection with a request for bifurcation, whereas Rule 45 provides for preliminary objections without a request for bifurcation.24 This way the rules provide for a clearcut guidance for each type of preliminary objections. The proposed amendments modernize current ICSID Arbitration Rules and provide for a cost and time effective framework for the investor-state arbitration proceeding. At the time of writing this Note the new edition of the ICSID Arbitration Rules is under consideration.

IV. Procedure and considerations

9.

Bifurcation of certain issues may be agreed by the parties and reflected in a procedural order25 or decided by the tribunal, if parties fail to reach an agreement. In the latter case, the tribunal may add an appropriate provision in the procedural timetable for the scenarios that provide for bifurcation or not.26

10.

Such principles as fairness and procedural economy have been cited as the bases for the decisions to bifurcate.27 In deciding whether to bifurcate, the tribunals tend to consider such factors as (i) the merit of the objection (whether it is substantial or frivolous), (ii) whether bifurcation would materially reduce time and costs and (iii) whether jurisdiction and merits are so intertwined as to make bifurcation impractical.28 Bifurcation requests have been rejected where the issues were so intertwined that it was impossible to dispose of them in separate phases.29 For instance, in Westwaters Resources v. Turkey, the tribunal unanimously rejected the respondent’s bifurcation request based on the respondent’s objection to jurisdiction ratione materiae and split over the issue of the claimant’s compliance with the required negotiation period. The majority has decided that “procedural efficiency would not be served” were the latter issue be bifurcated because “the evidentiary basis for the Respondent’s objection [was] so intertwined with factual issues that c[ould] more effectively be explored in the substantive hearing”.30 The dissenting arbitrator disagreed, noting that the negotiation period was “an inherent part of the State’s Consent to Arbitration” and were the argument be “accepted, it would put an end to the case”.31  See further Consent to Arbitration; Cooling Off Period.

Bibliography

Vasani, B.S., and Vasani, S.Z., Bifurcation of Investment Disputes, in Yannaca-Small, Y., Arbitration Under International Investment Agreements: A Guide to the Key Issues, 2nd ed., 2018, pp. 302-311. 

ICSID, Bifurcation - ICSID Convention Arbitration.

Commission, J., and Moloo, R., The Splitting of Issues for Separate Determination (Bifurcation/Trifurcation), Procedural Issues in International Investment Arbitration, 2018, pp. 70-83.  

Greenwood, L., Does Bifurcation Really Promote Efficiency?, Journal of International Arbitration, 2011, p. 105-111.

Greenwood, L., Revisiting Bifurcation and Efficiency in International Arbitration Proceedings, Journal of International Arbitration, pp. 421 - 430.

Proposals for Amendment of the ICSID Rules – Working Paper, Volume 3, ICSID Secretariat, 2 August 2018, pp. 187-190.

Kinsella, S.N., and Rubins, N.D., Arbitration Procedure, in International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide, 2005, p. 346.

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