Consolidation of Arbitration Proceedings: Analysing the Degree of Connection and the Parties’ Consent Notion

Consolidation is defined in arbitration as “a procedural device which denotes the process whereby two or more claims are united into one single procedure concerning all parties and all disputes”[1] which allows to avoid conflicting awards, to save time and money.[2] To this end, consolidation of arbitration proceedings is seen as a key to resolve the prevention of loss of right in international arbitration; conversely it could be challenged owing to consensual nature of arbitration.[3]

With regards to consolidation, multiple institutional rules bring forward the requirements for actualizing this mechanism. In greater part of those, consent of the parties and connection of the disputes are core elements to ensure consolidation.[4] Either arising from a single contract or separate series of contracts, a definite relation is needed between parties additional to the parties’ consent to consolidate.

Herein this article, it will be examined the imperative degree of connection between arbitration proceedings either originating from single or several contracts and the approval of the contractual parties in order to realize consolidation of the arbitration.

The Degree of Connection

Putting consolidation into practice depends on existence of a link between arbitrations. The adequate relation in order to effectuate consolidation appears in several provisions under noted institutions. From the aspect of The International Chamber of Commerce (“ICC”) as stated in article 10, either the demands on consolidation should be made under the same arbitration agreement or; in case of holding more than one arbitration agreement, these agreements must be driven by the same parties, disputes, legal relationships.[5]

In a similar vein, according to Article 13 of the Belgian Centre for Arbitration and Mediation(“CEPANI”) Arbitration Rules, the consolidation may be executed “where the claims have been made pursuant to more than one arbitration agreement whether they are compatible and whether the proceedings involve the same parties and concern disputes arising from the same legal relationship”.[6] Clearly, The CEPANI Rules does not make any emphasis on the identity of the parties as a condition for consolidation of disputes apart from pinpointing arbitration agreement itself. While inconsistent provisions in international arbitration rules are in progress apropos of parties’ connection with relevant arbitration proceedings, the primary benchmark at this juncture could be provided throughout the economic essence of the connection between parties.[7]

However, a critical issue may originate from the disputes which different parties involved in and each of them pursuing their own interests.[8] In a typical engineering contractual or construction project, not only the employer and the main contractor but also a host of specialised suppliers and sub-constructors are involved in overall process. Therefore, separate contracts may seem to create indirect contractual links amongst disputants in those disputes. Any failure in fulfilment of the duties could appear in one work but within separate agreements. In this circumstance, in arbitration process, even if the main contractor has a benefıt in consolidation of different disputes, one may necessitate an agreement to arbitrate between all parties in consequence of consensual nature of arbitration.

The Parties’ Consent

Mutual understanding of the institutions principally unites at one spot where consolidation could be not proceeded without parties’ consent. In case of absence of the parties’ consent, one cannot make reference to consolidation of disputes.

Parties are expected to state expressly an arbitration clause or agreement to resolve any future disputes throughout a written agreement in advance, however, parties can still conclude an agreement to arbitrate after a dispute has arisen.[9] Preferably, the consent to consolidate or join additional parties ought to be given expressly beyond any reasonable doubt as so the approval to arbitrate. Arbitral tribunals by and large tend to avoid consolidation of proceedings when there is no explicit will of parties as to enable participation of any additional parties.[10]

In this respect, judicial mechanisms are reluctant to order consolidation in absence of mutual and express consent of parties. [11] The United States Supreme Court states in Stolt-Nielsen SA v Animal Feeds Intern Corporation case that solely the parties ‘silent’ consent in arbitration agreement could not contribute to class arbitration and thus, silent consent stipulates a burden of determination in presence of tribunal.[12] In the same dispute, the Counsel of Animal Feeds further deduces that “all parties agree that when a contract is silent on an issue there’s been no agreement that has been reached on that issue”.

Bearing in mind that; consent to multiparty arbitration could be esteemed, while agreeing on the arbitration clause. The disputants must or should have been aware of that in the case of a dispute arisen, it may entail multiparty arbitration. So as to avoid any confusion about this debate, it would be ideal to expressly indicate the intent of parties in their arbitration clause regarding the future possibilities of consolidation.

Author: Ezgi Aysima Kır