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Mme Shirin Gurdova

Praticien de l'arbitrage international - 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

2.

Traditionally, requests for bifurcation concern the separation of jurisdictional issues from the merits of the dispute.2 The division of the merits phase into liability and quantum phases is also possible in investment arbitration.3 If the issues are divided into three phases (for example, jurisdiction, merits and quantum), the proceedings are trifurcated.4 Issues can be also debifurcated.5

II. Procedure to request bifurcation

3.

In the vast majority of cases, the request for bifurcation of jurisdictional issues is filed by respondents,6 and to lesser extent by claimants7 or by both parties per their agreement.8 Jurisdictional and admissibility issues may be also bifurcated by the tribunal proprio motu.9 In this case, the tribunal may add an appropriate provision in the procedural timetable for the scenarios that provide for bifurcation or not.10

4.

The tribunal’s decision on the request for bifurcation (or trifurcation) may take the form of a procedural order11 or a fully reasoned decision.12 

III. General practice

5.

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

6.

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 issues15 with discretionary power to decide on the issue.16

7.

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”.17 The 2010 edition thus eliminated the presumption in favour of bifurcation in the jurisdictional context.18 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”.19

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 grant tribunals discretion to decide on bifurcation when faced with a jurisdictional or admissibility objection.20 The tribunal may also decide any issue of jurisdiction on its own initiative at any stage of the proceeding.21 The tribunals have also considered bifurcation of other discrete issues, including quantum and merits, under the umbrella of Article 44 of the ICSID Convention.22

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.23 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.24

7.

Rules 42-45 of the ICSID Arbitration Rules proposed for amendment by ICSID in February 2020 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.25 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.26

8.

Rule 44 as amended in the 2020 proposal provides for preliminary objection with a request for bifurcation, whereas Rule 45 provides for preliminary objections without a request for bifurcation.27 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. Considerations by arbitral tribunals to decide on bifurcation

9.

In deciding whether to bifurcate, tribunals mentioned principle of fairness and procedural economy,25 taking into consideration the following factors,26 which are not exhaustive:27

  1. the merit of the objection (whether it is substantial or frivolous, clearly unfounded or without merits),28
  2. whether bifurcation would materially reduce time and costs;29 and
  3. whether jurisdiction and merits are so intertwined as to make bifurcation impractical.30 In this vein, only subtantial overlap would be considered as an obstacle to bifurcation.31 Bifurcation requests have been partially or fully rejected where the issues were so intertwined that it was impossible to dispose of them in separate phases.32 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” where 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”.33 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”.34  See further Consent to Arbitration; Cooling Off Period.
10.

Other factors are also taken into account by tribunals to decide on a bifurcation request, such as:

  1. whether bifurcation would significantly reduce the complexity of the case;35
  2. whether bifurcation would preserve parties’ procedural rights;36
  3. whether the bifurcation request was premature.37 (See further Prima facie Test)

Some investment treaties also specify the criteria for bifurcation.38

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.

Proposals for Amendment of the ICSID Rules – Working Paper No. 4, Volume 1, ICSID Secretariat, February 2020, p. 312-317.

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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