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Author

Ms Kiran Gore

Professorial Lecturer in Law - The George Washington University Law School

Editor

Dr Daniel Müller

Member of the Paris Bar

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Consolidation

I. Definition

1.

Consolidation refers to the ability to combine multiple arbitral proceedings, initially commenced separately often against the same respondent State, into a single proceeding.1 Consolidation is appropriate where proceedings concern the same or similar questions of fact and law and can be undertaken at the request of either the claimants or the respondent State.

2.

Consolidation addresses two goals: first, alleviating the time, costs, and other inefficiencies of multiple and/or parallel proceedings as well as avoiding procedural harassment, and second, avoiding inconsistent decisions.2 While this procedural tool is commonly used in international commercial arbitration, it is less frequently applied in the investment arbitration context.3

II. Distinction between consolidation and other ISDS procedural tools

3.

Consolidation is different from joinder, which allows a third-party to join an existing arbitration proceeding,4 and “multi-party claims” or “mass claims,”5 which allow two or more claimants initiate a single proceeding against the same respondent by jointly filing a single request for arbitration.

4.

Where consolidation is requested, the arbitral tribunal must verify that conditions are met and then balance its advantages and disadvantages to the case.6

III. Consent as prerequisite

5.

Consolidation is only possible where there is evidence of the parties’ consent to and consensus on such treatment7 even if implicit.8 Hanno Wehland explains, “it is generally acknowledged that consolidation or quasi-consolidation mechanisms can only be applied with the consensus of all the parties concerned.”9

6.

Consent or consensus can be manifested in different ways, for instance, through an ad hoc agreement once multiple parallel proceedings have been commenced or through agreement to and application of a treaty and/or arbitral rules, which expressly and specifically provide for consolidation.10

IV. Additional factors considered under specific arbitration rules

A. Consolidation in the ICSID system

1. No express provision currently exists provided for in the ICSID rules or the ICSID Convention

7.

Consolidation is not expressly provided for under the ICSID Arbitration Rrules 2006 or the ICSID Additional Facility Rules 2006.  

8.

Commentators argue that arbitral tribunals are empowered to order consolidation of multiple arbitral proceedings under Article 44 of the ICSID Convention11 and Rule 19 of the ICSID Arbitration Rules through their procedural discretion concerning matters not otherwise covered by relevant arbitral rules agreed by the parties.12

9.

Some commentators argue that Article 26 of the ICSID Convention provides for mandatory consolidation where multiple proceedings concern common elements because “the fact that consent to arbitration under the Convention is ‘to the exclusion of any other remedy means that only one procedure may be pending in relation to a given dispute. As a result, once the parties have given their consent to ICSID arbitration, they could no longer seek relief from another national or international forum.”13

10.

As part of the ICSID rule amendment process, a specific rule is currently under consideration that will provide the factors to be considered by an arbitral tribunal tasked with determining whether consolidation is appropriate.14

2. Factors often taken into consideration by ICSID tribunals

11.

In practice, some ICSID proceedings have been consolidated with the parties’ consent.15

12.

Other factors taken into consideration by ICSID arbitral tribunals have included:

  1. Connectivity of the cases, which can include common facts, economic activity, challenged measures, or relief sought,16 a single dispute;17
  2. Identity or relationship between the underlying legal instruments, i.e., contracts, laws, or investment agreements;18 and/or
  3. Efficiency and fairness of the consolidated arbitration proceedings to preserve judicial economy.19 This includes factors such as: time and costs,20 non-participation in the appointment of the arbitral tribunal, potential infringements of a party’s substantive rights and avoidance of conflicting or contradictory awards.21

B. Consolidation under UNCITRAL rules

13.

The 1976 UNCITRAL Arbitration Rules do not provide for consolidation. The 2007 Working Group convened to draft the 2010 UNCITRAL Arbitration Rules considered including such a provision on consolidation.22 However, it ultimately did not do so, owing to their conclusion that a consolidation mechanism may be too difficult to implement in non-administered/ad hoc arbitrations.23

V. Additional factors considered under specific investment treaties

A. USMCA

14.

Some investment treaties include express provisions for consolidation of related claims and proceedings.24 For example, Article 14.D.12 of the United States-Mexico-Canada Agreement (USMCA) allows for consolidation of claims that “have a question of law or fact in common and arise out of the same events or circumstances.” Article 14.D.12(1) specifically states that such consolidation may be requested by “any disputing party … with the agreement of all the disputing parties.

B. NAFTA

1. The standard for consolidation under NAFTA

15.

Similarly, NAFTA (USMCA’s predecessor) provides at Article 1126 a consolidation procedure that could be initiated by either the investor or the State. 

16.

Article 1126 sets forth a detailed procedure and standard which guide whether the requested consolidation would be granted. The standard for consolidation is not high.25

17.

Consolidation requests should be disposed of within the “shortest possible time”.26

18.

If the proceedings subject to the consolidation application are not stayed by the original tribunals, the consolidation tribunal may order that they be stayed according to Article 1126(9).27

2. Additional factors considered under NAFTA article 1126

19.

Article 1126 of NAFTA provides for three requirements for consolidation of claims:

a. A question of law or fact in common

20.

Claims on which the consolidation request should “have a question of law or fact in common,”28 – not necessarily raised in both original proceedings if the party can show that the question will be raised with a “degree of certainty” in the other proceeding that is the subject of the request for consolidation.29

21.

This issue is qualitative and not quantitative30 and it is based on a commonality test.31

b. Procedural efficiency

22.

Consolidation should be ordered “in the interest of a fair and efficient resolution of the claim.”32 It is an “objective and fact-driven” standard33 and a balance should be preserved between the parties.34

23.

Many factors can be relevant in this respect, such as:

  1. Time, which includes an assessment of the time and potential delay that can result from assessing the claims of the original proceeding;35
  2. Costs, which requires an “assessment of the costs to all parties involved”;36 and/or
  3. The risk of conflicting decisions.37
24.

The presence of applicable confidentiality provisions,38 or the need for confidentiality measures because of the competitive relationship of the parties on the market39 can, under certain circumstances, influence arbitral tribunals’ conclusions on the efficiency of a proposed consolidation. 

c. Right to be heard

25.

The parties should have an opportunity to be heard on the consolidation request.40

3. Factors not considered by NAFTA tribunals

26.

Arguments based on the doctrine of laches and estoppel were rejected and considered as having no impact on a consolidation request.41 

VI. Consolidation of cases under two (or more) different treaty instruments and/or different arbitral rules

27.

A unique challenge to consolidation is accounting for the nuances where the proceedings proposed to be consolidated arise under different treaty instruments and/or different arbitral rules.

A. Consolidation of cases under different investment treaties and different arbitration rules

28.

A helpful case study is provided by the variety of arbitral proceedings brought against Argentina relating to its 2001 financial crisis. For example, Suez, Sociedad General de Aguas de Barcelona S.A. and Interagua Servicios Integrales de Agua S.A. v. Argentine Republic (ICSID Case No. ARB/03/17), Aguas Cordobesas S.A., Suez, and Sociedad General de Aguas de Barcelona S.A. v. Argentine Republic (ICSID Case No. ARB/03/18), Suez, Sociedad General de Aguas de Barcelona S.A. and Vivendi Universal S.A. v. Argentine Republic (ICSID Case No. ARB/03/19), and AWG Group Ltd v. The Argentine Republic (UNCITRAL Rules Arbitration) were a series of cases arising under different BITs with Argentina as the respondent State. Three of these BITs provided for ICSID arbitration, while the final one provided for UNCITRAL arbitration. Here, formal consolidation was not granted, but Argentina consented to have the UNCITRAL case administered by the ICSID Secretariat and to be decided by the same tribunal, which rendered a single award for Suez (ICSID Case No. ARB/03/19) and AWG (UNCITRAL) and a separate award for Suez (ICSID Case No. ARB/03/17). The fourth case was ultimately discontinued by the parties’ agreement and no final award was issued.

B. Consolidation of cases under different investment treaties and the same arbitration rules

29.

A similar situation can be observed with Lao Holdings N.V. Lao People’s Democratic Republic (II) (ICSID Case No. ARB(AF)/16/2) and Sanum Investments Limited v. Lao People’s Democratic Republic (II) (ICSID Case No. ADHOC/17/1).42 Sanum (II) was originally an ad hoc arbitration filed under the China-Laos BIT until the parties agreed to have it consolidated with Lao Holdings (II) and it was administered by the ICSID Secretariat.

30.

Such consolidation was attempted by claimants in further cases.43

31.

There are also examples of other arbitral proceedings, arising under different BITs, which were partially consolidated “in so far as it was practicable to do so”.44

C. Consolidation of cases under an investment treaty and an investment contract

32.

This was the case with the Noble Energy case in which consolidation was determined to be practical for claims based on an investment treaty and an investment contract as they were considered as closely linked.45 

D. Partial consolidation

33.

Consolidation can be ordered in many forms. For instance, a consolidation tribunal can decide to fully consolidate cases, or only specific issues presented.46 

34.

There are examples of other arbitral proceedings, arising under different BITs but same arbitration rules, which were partially consolidated “in so far as it was practicable to do so.”47 

VII. Consequences of the consolidation

A. Decisionmaker on the consolidation request

35.

Consolidation raises issues regarding the constitution of the arbitral tribunal who will decide on the request48 as well as the new tribunal of the newly consolidated cases. The request can be decided by the arbitration institution upon one of the parties’ request49 or by the arbitral tribunal of one of the cases.

B. Effects of full or partial consolidation

36.

Consequences of consolidation can vary depending on whether it was fully or partially upheld. Partial consolidation raises the question whether, and if so, to what extent, the individual claim tribunals should adjourn the proceedings before them, pending resolution by the consolidation tribunal. The consolidation tribunal in the softwood lumber case has raised but not examined the question.50

37.

Conversely, in cases of full consolidation, the consolidation tribunal takes over the newly consolidated case and the original tribunals cease to function.51 Upon consolidation, the consolidation tribunal has the discretionary power to determine the conduct and sequence of the consolidated proceedings and decide on the matter.52

38.

Nonetheless, the original tribunals’ jurisdiction can still be contested if the parties are not time-barred to object their jurisdiction.53 

39.

Some national laws on arbitration, if chosen as the applicable law, would specify the procedural impact of the outcome of a consolidation request. For instance, the Netherlands code of civil procedure states that if consolidation in full is ordered, the tribunals constituted to hear the original claims cease to function. If partial consolidation is ordered, then these tribunals no longer have jurisdiction over the part over which the consolidation tribunal has assumed jurisdiction.54 A similar solution is provided under NAFTA.55 

C. Party’s withdrawal after consolidation

40.

A party’s withdrawal from the proceedings after a consolidation decision has cost consequences on the relevant party.56 

VIII. Pragmatic tools in lieu of consolidation

41.

Where the applicable arbitral rules and investment treaties do not provide any mechanism for consolidation, efficiency, or avoidance of inconsistency, or where the nuances of different governing instruments renders consolidation impractical, parties and arbitral tribunals may pursue pragmatic approaches to achieve similar goals.57 This is known as quasi-consolidation, de facto consolidation, or coordination, whereby “formally separate arbitrations are heard by the same panel of arbitrators and awards are coordinated both in terms of substance and timing” to achieve similar goals.58

42.

For example, arbitration institutions59 or parties60 may wish to appoint the same arbitrators to hear similar or related cases in parallel proceedings, even if commenced under separate investment treaties.61 However, the issue of consent remains an important consideration for the arbitral tribunal’s approach, inclusive of any coordination with parallel proceedings concerning similar disputes.62

43.

On the other hand, a party wishing to avoid consolidation or quasi-consolidation may simply influence the timing of the proceedings so that they are not compatible, rendering consolidation as practically and logically infeasible, as use of these mechanisms presumes that the proceedings to be consolidated are at similar and comparable stages.63

VI. Bibliography

Commission, J. and Moloo, R., Procedural Issues in International Investment Arbitration, Oxford University Press, 2018.

Fried, J. T., Two Paradigms for the Rule of International Trade Law, Canada-United States Law Journal, 1994, Volume 20.

Kinnear, M. and Mavromati, C., Chapter 15: Consolidation of Cases at ICSID, in Neil Kaplan and Michael J. Moser (eds), Jurisdiction, Admissibility and Choice of Law in International Arbitration: Liber Amicorum Michael Pryles, Kluwer Law International, 2018.

Platte, M., ‘When should an Arbitrator Join Cases?’, in Arbitration International Journal, Volume 18, March 2002.

Sabahi, B. and Rubins, N., Chapter VII - Special Procedures: Applications and Motions, in Sabahi, B., Rubins, N., and Wallace, D., Investor-State Arbitration, 2nd ed., Oxford University Press, 2019.

Schreuer, C.H., The ICSID Convention - A Commentary, Cambridge University Press, 2001.

Vanhonnaeker, L., The Consolidation of Proceedings and Mass Claims in International Investment Law and Arbitration in Shareholders' Claims for Reflective Loss in International Investment Law, Cambridge University Press, 2020.

Wehland, H., The Coordination of Multiple Proceedings in Investment Treaty Arbitration, Oxford University Press, 2013.

Yannaca-Small, K., Consolidation of Claims: A Promising Avenue for Investment Arbitration?, in International Investment Perspectives, OECD, September 2006

Yannaca-Small, K., Part III Procedural Issues, Chapter 25 - Parallel Proceedings, Muchlinski, P., Ortino, F., Schreuer, C.H. (eds.), The Oxford Handbook of International Investment Law, Oxford University Press, 2008.

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