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Auteur

Docteur Maximilian Pika

Associate - Morgan, Lewis & Bockius LLP

Éditeur

Mme Camilla Gambarini

Senior Associate - Withers LLP

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Abuse of Process

I. Definition

1.

Under international law, the doctrine of abuse of process precludes a claim – either as inadmissible or for lack of jurisdiction (with many tribunals not deciding between jurisdiction/admissibility).1 The doctrine is an implementation of the general doctrine of abuse of rights and the principle of good faith.2 Abuse of process “denotes conduct that is not prima facie illegal” but that “can nonetheless cause significant prejudice to the party against whom it is aimed and can undermine the fair and orderly resolution of disputes by international arbitration.”3

2.

The assessment is discretionary and fact-based.4 The burden of proof relies on the party advancing this objection. That is, in investment arbitration, the burden of proof lies with the respondent State and, once a prima facie case is established, with the investor. The standard of proof is the same as on the merits. The threshold to find a violation is high.5

3.

Whilst the ICJ often held the requirements not to be met to find an abuse of process,6 investment treaty tribunals have applied the doctrine in the contexts of dispute-aimed ‘treaty shopping’ (infra, at III.) and multiple proceedings (infra, at IV.).7

II. Treaty practice

4.

Abuse of process is a jurisprudential matter as it is included in virtually no treaty, the most prominent exception being Article 294(1) UNCLOS.8

III. Application regarding investor nationality

5.

Several arbitral tribunals regarded claims inadmissible and declined jurisdiction when investors had conducted dispute-aimed “treaty shopping”, i.e. adopted a certain nationality by means of re-location or corporate re-structuring for the purpose of bringing the dispute under a particular treaty9 or when the only time the investor made use of its registered office was to benefit from a specific treaty’s protection.10 The objection failed before other tribunals.11

6.

The primary criterion is whether the dispute was foreseeable when the nationality was adopted.12 The time frame considered for an abuse of process objection is distinct from the one used for a jurisdiction ratione temporis objection; if a nationality is acquired after the disputed measure, there will be no jurisdiction ratione temporis.13 

7.

As a further criterion, it has been assessed whether the nationality was adopted for purposes of the dispute or would also have been adopted but-for the dispute.14 (See Nationality Planning)

IV. Application for purposes of forum coordination

8.

More recently, the doctrine of abuse of process received another function in that it precluded claims due to prior/parallel proceedings.

9.

Some tribunals applied the doctrine, such as in Orascom and Ampal, because the claimants’ subsidiaries pursued overlapping claims in other fora,9 a situation where other tribunals applied the “privy” doctrine of res judicata. CME/Lauder rejected an abuse of process plea on the grounds that the Czech Republic had refused consolidation.10 

10.

Others rejected abuse of process plea.11 For instance, in CME/Lauder, the tribunal rejected the plea on the grounds that the arbitral tribunal was the only fora with jurisdiction to hear claims under the applicable treaty and that the Czech Republic had refused consolidation.12 

11.

A matter not yet decided under international law is whether the doctrine cannot only be applied to overcome the “same parties” requirement of res judicata/lis pendens, but also to overcome the “same subject-matter” requirement. At common law, for instance, claims that were not but should have been brought by a claimant in prior proceedings are precluded13 – a concept also favoured within the International Law Association’s principles in international commercial arbitration.14 Moreover, French law compensates a very strict “same legal grounds” requirement (whose scope for res judicata is not fully settled yet in international law) by a “concentration” duty pursuant to which all legal grounds must be brought at first opportunity.15

12.

By contrast, abuse of process cannot undermine res judicata’s “same legal order” requirement. Prior litigation does not bar arbitration of treaty rights.16

V. Other forms of abuse of process

13.

Respondents have also argued that there is abuse of process when the claimants are not the true parties in interest of the claims brought under an investment treaty.17 

14.

Moreover, tribunals have rejected abuse of process objections, for non-paid securities for costs18 or simultaneous applications for both a revision and annulment of the same award.19

VI. Consequence on costs

15.

Tribunals may grant the party full compensation of arbitration costs if abuse of process is proven.

Bibliography

Brown, C., The Relevance of the Doctrine of Abuse of Process in International Arbitration, Transnational Dispute Management, 2011, Vol. 2.

Ceretelli, C., Abuse of Process: An Impossible Dialogue between ICJ and ICSID Tribunals?, Journal of International Dispute Settlement, 2020, Vol. 11, pp. 47-68.

Gaillard, E., Abuse of Process in International Arbitration, ICSID Review, 2017, pp. 1-21.

Wehland, H., The Coordination of Multiple Proceedings in Investment Treaty Arbitration Oxford University Press, 2013, paras. 7.29-7.53.

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