Ahan Gadkari
Introduction
Article 10 of the 2021 International Chamber of Commerce (“ICC”) Rules grants the ICC Court the discretionary power to consolidate two or more arbitrations. This creates a compelling dilemma: when parties deliberately select the ICC Rules within their arbitration agreement and further stipulate a clause that empowers the arbitration tribunal to consolidate proceedings, can they effectively modify the ICC Rules through their contract? This question is at the heart of a contentious debate, especially when considering the foundational principle of party autonomy in arbitration, which traditionally allows parties to dictate their preferred procedural mechanisms, including consolidation methods. Party autonomy is regarded as the cornerstone of arbitration, with its foundations traceable to Hugo Grotius’ seminal work, De Jure Belli ac Pacis, which laid the groundwork for international law. In such situations, the autonomy embedded within the contract can conflict with the institutional rules. This division of opinion has led to inconsistencies among ICC tribunals, with some interpreting that the authority to consolidate strictly resides with the ICC Court, while others argue that this power can be extended to the tribunals themselves under certain conditions. The article aims to explore the debate over the authority to consolidate arbitrations under the ICC Rules, highlighting the tension between the ICC Court’s discretion and the principle of party autonomy, and argues for clearer consolidation rules to enhance the ICC’s effectiveness and ensure the predictability and enforceability of arbitration outcomes.
Background
In the realm of international arbitration, the complexity of disputes involving multiple parties and contracts has become a common scenario. Recognizing the need to efficiently manage such sophisticated cases, premier global arbitration institutions have recently updated their rules or introduced significant amendments. A pivotal element in these reforms is the inclusion of consolidation procedures, aimed at enhancing efficiency by minimizing time and expenses, preventing simultaneous processes, and avoiding conflicting outcomes.
Historically, the 1998 ICC Rules lacked a specific provision for consolidation, vaguely addressing it under Article 4(6) – the same provision that covered joinder of additional claims. It was not until the 2012 ICC Rules that a dedicated consolidation clause was established. Article 10 in the 2012 ICC Rules laid out clear criteria for merging arbitration claims, marking a significant step forward in procedural clarity and flexibility.
The criteria for consolidation under the 1998 ICC Rules, as per Article 4(6), were quite stringent (since the provision did not directly reference consolidation), requiring identical parties and legal relationships in both cases. In contrast, Article 10(c) of the 2012 ICC Rules broadened the scope for consolidation codifying the criteria for consolidation, though it still maintained rigorous requirements for connecting claims. Specifically, it stipulated that for different agreements to be consolidated, the parties involved must be the same, the legal relationships must be identical, and the arbitration agreements must be the same. The 2017 ICC Rules maintained Article 10 in the same form as the 2012 ICC Rules. The 2021 ICC Rules evolved this provision, allowing for the consolidation of claims even if they are not under the same arbitration agreement, thereby offering even greater flexibility and adaptability in managing complex international disputes. Yet, the Rules leave an open question: whether consolidation decisions rest solely with the court, or if the tribunal itself also has the authority to consolidate cases.
Cases Where the Tribunal Consolidated
Before exploring the reasons why the tribunal may lack the authority to consolidate, it is crucial to first examine the circumstances under which the tribunal has done so. The language of Article 10 ICC Rules reads that the “Court may … consolidate two or more arbitrations.” The phrasing “may” indicates that the court does not hold a monopoly on the process of consolidation. This interpretation implies that Article 10 presents court approval as merely one of several avenues through which parties can achieve consolidation, including options like proceeding through the tribunal. Moreover, if the parties’ arbitration clause explicitly assigns the consolidation authority to the tribunal, the Rules do not expressly prohibit such an arrangement.
There have been two cases wherein an ICC tribunal took over the power of consolidation. First, in the case of PDV v. ConocoPhillips Company and Sweeny Coker, Partial Award of 2014, an ICC tribunal encountered a request from one party for the consolidation of two claims. The tribunal elected to consolidate the two arbitrations, a decision subsequently affirmed by the ICC Secretariat (¶59-60). It is important to highlight that this arbitration, initiated in 2010, fell under the purview of the 1998 ICC Arbitration Rules (¶29). The consolidation provision (Article 10) and the phrasing “the Court may … consolidate two or more arbitrations” were introductions in the 2012 ICC Arbitration Rules, hence not applicable to this scenario. Nonetheless, Article 4(6) of the 1998 ICC Arbitration Rules, which guided consolidation in this case, contains similar wording: “the Court may … decide to include the claims.” This award, which predates the formal consolidation provision in the ICC Rules, was recognized and enforced by the United States District Court for the Southern District of New York (¶24).
However, there has been a case wherein the tribunal consolidated claims after the 2012 ICC Arbitration Rules came into force. Second, in the case of AEC v. TDIC, Hyflux and MCB, adjudicated under the 2017 ICC Arbitration Rules, the tribunal faced an arbitration agreement designating the ICC as the arbitration institution and granting consolidation powers to the arbitrators (¶51). Here, the tribunal asserted its consolidation authority, consolidating the two arbitrations. When challenged, albeit regarding the addition of non-signatories and not on consolidation grounds, the award was recognized and enforced by the Paris Court of Appeals (¶57).
These instances demonstrate that tribunal-led consolidation is feasible. However, this is not the dominant approach, nor one endorsed by the ICC as will be described in the section below.
ICC Approach: Tribunal Cannot Consolidate
The ICC appears to maintain that the authority to consolidate cases should reside with the Court, a perspective derived from the administrative prerogatives assigned to the ICC Court by Article 1(2) of the ICC Rules. According to Article 1(2), the ICC Court is the sole entity responsible for performing administrative tasks. This viewpoint is supported by the Handbook of ICC Arbitration, accessible on the ICC’s website, which acts as an official commentary to its arbitration rules (¶1-18). Furthermore, the Handbook specifies that consolidation is an administrative action, exclusively within the purview of the ICC Court, explicitly stating that arbitrators are not empowered to consolidate proceedings under the ICC Rules (¶10-2). This brings up an important discussion on how this stance interacts with the concept of party autonomy.
Article 1(1) of the ICC Rules constrains the parties’ ability to deviate unilaterally from the arbitration framework established in the Rules. The principle of estoppel necessitates such a restriction on party autonomy; selecting an institution to administer arbitration implies adherence to its Rules (p. 2). The Handbook of ICC Arbitration, citing Article 1(1), notes that the ICC Court has the discretion to refuse to administer a case if the parties attempt to alter the Rules (¶1-28). This interpretation finds support in Fouchard’s 1996 Final Report on the status of arbitrators, which played a crucial role in the development of the 1998 ICC Rules. The Report articulates that the issuance of the Rules represents an offer from the ICC to the parties, proposing the use of its arbitration services as defined by its Rules. Consequently, arbitrators are obliged to observe the institution’s Rules (p. 38).
Generally, parties directly approach the ICC Court for consolidation, avoiding potential authority issues. This was the case in several arbitrations, such as Petroci v. MRS Holdings; Logistics International v. Mozambique and EMATUM (V); Privinvest v. Mozambique and EMATUM (II); andCominière and Jin Cheng v. AVZI and GLH, where the parties directly sought consolidation from the ICC Court. Additionally, arbitration tribunals have generally declined to assume consolidation powers. For instance, in the GUPC v. ACP (II) (Concrete Arbitration), despite the Claimant’s push for consolidation and a plea for the tribunal to adopt these powers, the tribunal emphasized that Article 10 of the ICC Rules assigns the authority for consolidation to the ICC Court, not to the tribunal itself (¶69).
Analysis
The ICC stands as one of the most preferred arbitration institutions globally, attracting parties who seek clarity and assurance about the outcome of their consolidation proceedings. While case law indicates a limited number of instances where the ICC tribunal has exercised the power of consolidation, this approach is not aligned with the guidelines set forth in the ICC Handbook and the rulings of other ICC tribunals. This discrepancy in viewpoints regarding the authority for consolidation can lead to complications in enforcement, particularly when parties believe they are adhering to precedents set by previous tribunals. Enforcement challenges may also emerge out of the arbitration clause being deemed pathological or the tribunal exceeding their authority.
First, a critical issue emerges regarding whether parties creating contracts that deviate from an arbitration institute’s rules might render their arbitration clause invalid or “pathological.” Enforcement challenges arise under Article V 1(a) of the New York Convention (“NYC”) and Article 34(2)(a)(i) of the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”), which allow awards to be annulled if the arbitration agreement is invalid under the governing law. Moreover, the arbitration clause itself can become contentious, leading to an injunction on arbitration proceedings. This issue often stems from a contradiction within the arbitration clause—nominating the ICC Rules for dispute resolution while simultaneously attempting to bestow consolidation powers upon the tribunal. Such inconsistencies create a pathological clause, challenging its validity.
For instance, the Queen’s Bench Division (Commercial Court) in the case of Paul Smith Ltd v. H&S International Holdings Inc., encountered a situation where an arbitration agreement, while assigning jurisdiction to English courts, also instructed the use of ICC Rules. The court determined the arbitration agreement to be invalid and unenforceable. Furthermore, post-award, courts have set aside awards due to internal contradictions within the arbitration agreement, exemplified by the Paris Court of Appeals in Malaysia v. Nurhima Kiram Fornan et al. Therefore, an arbitration clause that simultaneously confers consolidation powers to the tribunal and identifies the ICC Rules as the governing framework for the dispute may be declared invalid, and any resulting award could be vulnerable to being set aside due to the inherent inconsistency of the clause.
Second, a concern in arbitration enforcement arises when an arbitral tribunal exceeds its granted authority, a situation that can lead to the setting aside of the award. Enforcement challenges can stem from Article V 1(c) of the NYC and Article 34(2)(a)(iii) of the Model Law, which permits awards to be set aside if they address matters not submitted to arbitration. This principle was highlighted in Tion Huat Rubber Factory v. Wah-Chang, where the Hong Kong Court of Appeal refused to enforce an award for a dispute outside the specified arbitration clause. The court found that the arbitration clause, which specified arbitration in Malaysia for disputes about the “quality or condition of rubber or other disputes arising under these contract regulations,” did not encompass letter of credit disputes. The authority of the tribunal is derived from the arbitration clause; should this clause reference the ICC Institute; the tribunal is consequently bound to adhere to its Rules. However, these Rules explicitly delegate certain powers, such as consolidation, to the Court. Therefore, any attempt by the tribunal to assume these powers could be construed as exceeding their authority, jeopardizing the enforceability of their decisions.
Conclusion
To enhance its efficacy as an arbitral institution, the ICC must clarify its consolidation provisions. By doing so, it would achieve the dual objectives of reducing uncertainty and increasing the likelihood of award enforcement. There is a pressing need for certainty; thus, the ICC’s clarification of the rules is imperative. Clearer provisions would significantly bolster the ICC’s role in international arbitration, ensuring that it continues to be a preferred choice for parties seeking efficient and reliable dispute resolution.
The author is an LL.M Candidate for Georgetown University Law Centre.
NUALS Law Journal 