Parallel Proceedings

There is no universal definition of the term “parallel proceedings”, with the definition varying depending on the applicable legal regime.¹ However, the International Law Association (ILA) helpfully describes it as:

“[P]roceedings pending before a national court or another arbitral tribunal in which the parties and one or more of the issues are the same or substantially the same as the ones before the arbitral tribunal in the Current Arbitration”.²

In the context of investment disputes, a similar working definition has been used by the UNCITRAL Secretariat for the term “concurrent proceedings” – albeit acknowledging that different legal bases exist for assessing what amounts to the same.³  Certain tribunals have also used an approach consistent with this definition to identify whether parallel proceedings exist: by examining “whether the same or related parties and the same or related issues are in dispute” (in the putative parallel proceedings).⁴

ICSID Tribunals have also used a comparable approach for the purposes of Article 26 of the ICSID Convention (on ICSID arbitration being an exclusive remedy), considering that “proceedings are parallel… when such proceedings deal with the same subject matter as the ICSID dispute”.⁵

While parallel proceedings can occur in the context international commercial arbitration (e.g. if the existence or validity of an arbitration agreement is disputed, there may be concurrent court and arbitration proceedings), certain types of parallel proceedings have arisen and/or are prone to arise in investor-State arbitration due to features unique to it.

In the investor-State arbitration context, there are several types of parallel proceedings which have arisen and/or are prone to arise. Three bear mention – each corresponding to a unique feature of investor-State arbitration. Some commentators have also identified other features which contribute to parallel proceedings in investor-State arbitration.⁶ 

In the first type, a situation may arise where different unrelated investors bring multiple proceedings against a State due to its identical or similar measures that affected each of them. This is due to the potentially extensive impact of actions by States (e.g. a change in policy with respect to certain economic sectors), which increases the likelihood of multiple unrelated claimants.⁷ This occurred when Argentina privatized several of its government-run industries in the early 1990s (giving rise to multiple cases concerning the scope and applicability of the “necessity clause” in its investment treaties),⁸ and when the Czech Republic cancelled the legal, tax and regulatory incentive regime that had previously been established in its photovoltaic sector from around 2010.⁹

The second type occurs where claims are brought against a State by different but related entities (e.g. a company as well as its shareholders) in respect of the same harm. Such types of parallel proceedings occur because investments are often structured through multiple legal entities, more than one of which may be entitled to bring claims against a State.¹⁰ A well-known example of this that of the parallel proceedings in CME Czech Republic B.V. v The Czech Republic and Ronald S. Lauder v. Czech Republic, which respectively concerned claims by a company and its controlling shareholder due to the acts of the Czech Republic’s Media Council in 1990s which affected the profitability of a broadcasting investment.¹¹

The third type occurs where the same investor brings claims in respect of the same set of facts against the same State in multiple fora. This is caused by the multiple sources of law that may be applicable where a single investor is affected by a State’s conduct, and to which different dispute resolution procedures may be applicable. For example, a single measure from a State can give rise to both a contract claim in court proceedings, and a treaty claim in arbitration.¹² Further, parallel proceedings of this type may be necessary as a well-known decision of the ICSID Ad hoc Committee (ICSID Case No. ARB/97/3) previously upheld a distinction between causes of action arising from treaties and contracts, confirming the need for a claimant to pursue parallel proceedings in certain situations in order not to forego any of its rights.¹³

There are several issues with parallel proceedings:¹⁴

1. There is inefficiency and wasted costs, since the same or substantially the same issues need to be tried in multiple fora.¹⁵
2. Multiple recovery is also a real risk when remedies for essentially the same damage are sought by multiple claimants within the same corporate structure but with distinct legal identities (i.e. what is known as reflective loss in certain jurisdictions) – or by the same claimant in multiple fora.
3. Further, there are the potentially inconsistent decisions from the various fora, as was the case in the conflicting awards on the State’s liability in CME Czech Republic B.V. v The Czech Republic¹⁶ and Ronald S. Lauder v The Czech Republic.¹⁷ This arises especially since there is no rule of stare decisis in international adjudication (see Precedent), which also results in concerns about the legitimacy and credibility of such decisions.¹⁸

Concerns with such issues have been part of the impetus for UNCITRAL’s ongoing work on potential solutions to address the dissatisfaction with the present investment dispute regime.¹⁹ However, despite such issues, it bears mention that various tribunals have noted that parallel proceedings are not prohibited per se – whether generally or under the specific dispute resolution regime applicable in the relevant case(s).²⁰ Instead, tribunals have considered the circumstances of each case in deciding whether and how to address the specific parallel proceedings before it.²¹

Measures to address parallel proceedings can broadly be divided into those implemented: (1) before the claims in the parallel proceedings have arisen; and (2) after the same.

The availability of these measures will turn on the precise circumstances of the parallel proceedings in question. This includes the applicable legal regime (e.g. treaty provisions, arbitration rules) or fora in which the parallel proceedings are brought.

Preventive measures are meant to exclude or narrow the situations in which parallel proceedings can arise. This includes the use of waiver, fork in the road,²² or exclusive remedy provisions, which are meant to force a claimant to select to pursue the claim(s) in a single fora if there are multiple available. An example is article 26 of the ICSID Convention, which stipulates that “[c]onsent of the parties to arbitration under [the ICSID Convention] shall, unless otherwise stated, be deemed consent to such arbitration to the exclusion of any other remedy” (i.e. an exclusive remedy provision).²³ Another example is article 1121 of the NAFTA, which states that the “right to initiate or continue before any administrative tribunal or court under the law of any Party, or other dispute settlement procedures, any proceedings with respect to the measure of the disputing Party that is alleged to be a breach referred to in Article 1116” have been waived (i.e. a type of waiver provision).²⁴ 

Other examples of preventive measures would be lex specialis dispute resolution mechanisms,²⁵ narrow definitions of investor or qualifying investments, or denial-of-benefits clauses (which can address the situation where multiple claimants are making a claim in respect of substantially the same loss).²⁶ These preventive measures can then be relied upon when challenging the jurisdiction / admissibility of claims before one or more of the fora hearing the parallel proceedings, or for applications for provisional measures (e.g. to enforce the exclusivity of ICSID proceedings provided for in article 26 of the ICSID Convention).

These measures are meant to address the potential or actual parallel proceedings after the relevant claims have arisen. To “reduce” the number of parallel proceedings, it may be open for courts and/or tribunals to dismiss claims/proceedings (or issue injunctions) by employing the doctrines of lis pendens²⁷ or forum non conveniens,²⁸ res judicata (if a decision has been rendered – see also Estoppel),²⁹ and abuse of process (or abuse of rights).³⁰

Alternatively, multiple proceedings may effectively be merged through:

1. Formal consolidation, subject to the applicable legal regime (including the arbitration rules) and/or the parties’ consent;³¹ and
2. In exceptional circumstances and even without formal consolidation, parties and arbitral tribunals may also consider consenting to parallel arbitration proceedings being heard together by the same tribunal (e.g. the multiple arbitrations arising out of the Czech Republic’s cancellation, from around 2010, of the legal, tax and regulatory incentive regime that had previously been established in its photovoltaic sector,³² or the well-known Yukos arbitration proceedings³³).

Finally, even if the multiple proceedings might not be eliminated, it may be open for the courts and/or tribunals to coordinate proceedings by implementing a stay of proceedings³⁴ and/or by taking into account the proceedings and decisions of other fora³⁵ (e.g. to ensure there is no double recovery, or in the allocation of costs³⁶).