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Mme Kiran Gore

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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.

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

3.

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

II. Conditions for consolidation

4.

Where consolidation is requested, the arbitral tribunal must verify that conditions are met and then balance its advantages and disadvantages to the case.4

A. Consent as prerequisite

5.

Consolidation is only possible where there is evidence of the parties’ consent to and consensus on such treatment5 even if implicit.6 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.”7 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.8

B. Other conditions and considerations

6.

Some of the other considerations taken into account by tribunals are:

  1. Connectivity between the cases proposed to be consolidated, such as common facts, economic activity, challenged measures, or relief sought,9
  2. Identity or relationship between the underlying legal instruments, i.e., contracts, laws, or investment agreements,10
  3. Efficiency and fairness of the consolidated arbitration proceedings.11 This includes factors such as: time, costs, non-participation in the appointment of the arbitral tribunal, potential infringements of a party’s substantive rights and avoidance of conflicting or contradictory awards,12 and
  4. The presence of applicable confidentiality provisions, which, under certain circumstances, influence arbitral tribunals’ conclusions on the efficiency of a proposed consolidation.13

III. Consolidation under different arbitration rules and investment treaties

A. Consolidation in the ICSID system

7.

Consolidation is not expressly provided for under the ICSID rules or the ICSID additional facility rules.  

8.

Commentators argue that arbitral tribunals are empowered to order consolidation of multiple arbitral proceedings under article 44 of the ICSID Convention 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.14

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.”15

10.

In practice, some ICSID proceedings have been consolidated with the parties’ consent.16

11.

As part of the ICSID rule amendment process, a specific rule providing the factors to be considered by an arbitral tribunal that is deciding whether consolidation is appropriate is currently under consideration.17

B. Consolidation under UNCITRAL rules

12.

The 1976 UNCITRAL Rules do not provide for consolidation. The 2007 Working Group convened to draft the 2010 UNCITRAL Rules considered including such a provision on consolidation.18 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.19

C. Consolidation based on specific investment treaties

13.

Some investment treaties include express provisions for consolidation of related claims and proceedings.20 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.

 

14.

Similarly, NAFTA (USMCA’s predecessor) provides at Article 1126 a consolidation procedure that could be initiated by either the investor or the State. Article 1126 sets forth a detailed procedure and standard which guide whether the requested consolidation would be granted. In particular, it provides three requirements for consolidation of claims: (i) that the claim “have a question of law or fact in common;” (ii) that consolidation would be “in the interest of a fair and efficient resolution of the claim;” and (iii) the parties have an opportunity to be heard on the consolidation request.21

D. Consolidation of cases under different treaty instruments and/or different arbitral rules

15.

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.

16.

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 host State party. 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.

17.

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).22 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.

18.

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”.23 

IV. Consequences of the consolidation

19.

Consolidation raises issues regarding the constitution of the arbitral tribunal who will decide on the request24 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’ request25 or by the arbitral tribunal of one of the cases.

20.

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.26

21.

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, 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.26

V. Pragmatic tools in lieu of consolidation

22.

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.27 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.28

23.

For example, arbitration institutions29 or parties30 may wish to appoint the same arbitrators to hear similar or related cases in parallel proceedings, even if commenced under separate investment treaties.31 However, the issue of consent remains an important consideration for the arbitral tribunal’s approach, inclusive of any coordination with parallel arbitrations concerning similar disputes.32

24.

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.33

VI. Bibliography

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

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.

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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