ICC Articles

INTRODUCTION

The consolidation of parallel proceedings is currently one of the most discussed topics in international arbitration. There are several reasons for this:

Consolidation is often a desired result, yet it is very hard to achieve.

Consolidation raises the expectation of an ideal outcome, which however remains an unachievable 'dream' when confronted with the obstacles that need to be surmounted.

The provisions of the law, the parties' agreements as well as judicial or arbitral decisions are far from contributing to make the 'dream' a reality.

Consolidation postulates a super partes consensus capable of overcoming the intrinsic privity of arbitration, all forms of which remain founded on the principle of party autonomy.

When consolidation fails, the result is a proliferation of parallel proceedings, and this diffuses an image of 'ungovernable anarchy' of the process.

All will surely agree that the credibility of arbitration as an efficient mechanism for the settlement of international disputes is undermined when such 'anarchy' prevails. However, no one - private practitioner or institution - has found the magic wand that, in a single stroke, is capable of consolidating proceedings which were born distinct.

This contribution focuses on consolidation between arbitration and court proceedings in investment (or 'investor-to-State') disputes, which are usually referred to arbitration pursuant to the forum selection clauses of the relevant Bilateral Investment Treaties (BITs). [Page79:]

However, before addressing consolidation in investment disputes, one should first consider the experience gained in the same matter in international commercial arbitration. After this preliminary analysis, comparative observations will follow.

CONSOLIDATION IN INTERNATIONAL COMMERCIAL ARBITRATION

This first section shall present a general overview of the main consolidation issues in international commercial arbitration, more specifically the relevance of the consolidation of related arbitral proceedings (1) as opposed to the consolidation of arbitral and court proceedings (2). A brief examination of the different methods used to achieve consolidation shall then follow (3). Finally, a few observations will be made on the interaction between consolidation and the principles of lis pendens, 'competence-competence' and the New York Convention (4), as well as with the principle of res judicata (5).

1. The consolidation of related arbitral proceedings

In the context of international commercial disputes, experience shows us that the real issue is not the consolidation of arbitrations and related court proceedings, but rather the consolidation of related arbitrations. ¹ This is most likely due to the fact that, notwithstanding the uncertainty created by a multiplicity of related arbitral proceedings, the existence of arbitration agreements in each of the interrelated contracts suffices per se for State courts to decline jurisdiction over such cases (except of course in the cases where the courts are called to control a posteriori whether the arbitrators have validly or invalidly exercised their jurisdiction).

In such situations, consolidation is not needed between arbitral and court proceedings. Indeed, the courts' 'withdrawal' in favour of arbitration is in itself a form of 'preventive consolidation'. The

courts are therefore out of the picture (at least for the time being). Only parallel arbitrations therefore need to be consolidated, if possible. ²

2. The consolidation of arbitral and court proceedings: in which situations is it relevant?

The consolidation of parallel arbitration and court proceedings may become relevant in the following situations: [Page80:]

Situation No. 1

The same two parties have concluded more than one contract relating to a same business or project, and one (or a few) contract contains an arbitration clause while the other contract (or contracts) contains a forum selection clause which refers disputes to State courts. ³

Situation No. 2

One claimant - based on the same or connected events - has claims against two or more respondents, and one claim must be submitted to arbitration pursuant to an agreed arbitration clause while the other claim (or other claims) is subject to the jurisdiction of the national courts.

A good example of the second situation is a dispute based on the good or bad performance of contractual obligations where the performance is guaranteed by a third party, and in which the main contract contains an arbitration agreement while the guarantee contract obliges the concerned party to bring its claims against the guarantor before the national courts. ⁴

Situation No. 3

A respondent is taken to arbitration, but the same respondent also has claims against related third parties who cannot be forced to participate in the same arbitration because their contract with the respondent is subject to the jurisdiction of the State courts. Similar 'cross-claims' may arise when one claimant takes two or more co-respondents to arbitration, but the respondents have claims against each other which must be submitted to the State courts.

Contracts for international construction or industrial projects are good examples of the third situation. In such agreements, a main contract is concluded between an employer and a contractor, but both parties are often compelled to execute ancillary contracts with third parties in order to be able to implement their respective roles in the project. These implementing agreements are, for instance, the subcontracts between the main contractor and its subcontractors, the service contracts between the employer and its designers or supervisory consultants, the loan agreements between the employer and its financiers, the insurance policies made by the employer and the contractor either individually or jointly. Usually the main contract contains an arbitration agreement, whereas each of the implementing or related contracts may contain either different arbitration clauses or forum selection clauses subjecting the disputes to the jurisdiction of the national[Page81:] courts. ⁵ As a consequence, disputes which arise from the same facts and which are based on the same or related legal arguments will inevitably be brought either before separate arbitral tribunals or before an arbitral tribunal and a State court. ⁶

3. The different methods used to achieve consolidation

In the situations described in Para.2, it is very rare that the question of whether or not to consolidate court proceedings with parallel arbitration proceedings will actually be raised. The parties' tendency is to fight to defend the prevailing or exclusive jurisdiction of one of the two competitive forums 'without even contemplating consolidation' as a possible solution.⁷ However, when consolidation is possible, it remains to be seen by whom and by what methods it can be done.

One may indeed wonder whether State courts have the power to order consolidation between court and arbitral proceedings without the parties' consent. According to E. Gaillard, ⁸ only the 1989 Colombian decree on arbitration goes so far as to allow such consolidation. The decree renders invalid an arbitration agreement where a dispute may have effects on a third party that refuses to be joined in the arbitration. Thus, it effectively consolidates the dispute, since the only remedy left to the claimant is to refer the dispute to the courts. This decree has thus the effect of abusively frustrating any arbitration agreement, the validity of which is made dependent upon a third party - which is not a party to the arbitration agreement and which may, presumably, be interested in using dilatory tactics whenever it stands as a defendant. ⁹

No other national law contains provisions contemplating any form of court-ordered consolidation between arbitral and judicial proceedings without the consent of all the parties concerned. ¹⁰

The consolidation between arbitral and judicial proceedings - as well as consolidation between parallel arbitrations - can therefore only be achieved with the consent of all the parties involved. The parties may agree to consolidate the proceedings either into a single arbitration or into a single court action. The parties' agreement is the precondition in both cases. [Page82:]

The agreement to consolidate into a single arbitration is sometimes promoted by a State court. It may be also reached as a result of the parties' conduct, provided it clearly results from such conduct (e.g., the signing of the terms of reference for an arbitral tribunal while abandoning a parallel court case). ¹¹

The agreement to consolidate into a single court action is usually reached by the express waiver of the arbitration agreement and the submission of all related disputes to the same court. However, the waiver may also be implied, for instance, when a claimant brings a court action on the merits or a defendant files a defense on the merits to the court, and no party challenges the court's jurisdiction on the ground that an arbitration agreement exists. In cases of implied adhesion to the court's jurisdiction, the court must give effect to the parties' intention as if they had agreed to that jurisdiction in their contract, ¹²and cannot decline jurisdiction ex officio.

4. Lis pendens, 'competence-competence' and the New York Convention

Apart from the rare case of consolidation, the coordination between arbitration and court proceedings is governed by the principle of lis pendens to the extent that it is compatible with the New York Convention.

The lis pendens principle requires that jurisdiction is kept by the forum - arbitral tribunal or court-which is first seized of the case between the same parties, provided the two venues are both competent. ¹³ If the case is brought before an arbitral tribunal based on an existing arbitration agreement and is then resubmitted to a State court, the latter should decline jurisdiction since the dispute is already pending before a competent venue.

In international arbitration, however, this is not an absolute rule due to the coexistence of two diverging principles:

Pursuant to the principle of 'competence-competence', the authority to decide on the competence of the arbitral tribunal belongs to the tribunal itself through its control over the validity, operation and scope of the arbitration agreement.

Pursuant to the New York Convention (Art.II (3)), the State courts have also the authority to exercise a control over the validity of the arbitration agreement when they are required to enforce it. [Page83:]

The two rules would be less diverging or even almost converging if it would be plainly established that the arbitrators' control over the validity of the arbitration agreement enjoys priority, whereas the court's control is preliminary and exclusively limited to a prima facie test.

Those who stress the 'effet négatif' deriving from the competence-competence principle are of the opinion that arbitrators must be empowered to decide on their own competence before any State court, which is seized of the same case, decides on its own jurisdiction, and that the State court should accord a precedence to the arbitral tribunal. ¹⁴

If this opinion - which is the solution adopted by some States in their legislation - is followed, then there is a derogation to the principle of lispendens. Indeed, irrespective of who is first seized of the case - whether the court or the arbitral tribunal - the above hierarchy should have the effect of returning the jurisdiction to the arbitral tribunal even when the dispute is first introduced in court.

The conflict between lis pendens and 'effet négatif' must be resolved pursuant to the national law governing the proceedings, bearing in mind Art.II (3) of the New York Convention, which reads as follows:

"The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed."

The same principle can also be found, using almost the same language, in Art.8(1) of UNCITRALModel Law on International Commercial Arbitration. ¹⁵

Therefore, under the New York Convention the State court is obliged to ('shall') refer the parties to arbitration, but reserves the power to verify ('finds') whether the invoked arbitration agreement is invalid or ineffective, at least when Art.II(3) applies. ¹⁶ In other words, the New York Convention does not attribute to arbitral tribunals any priority in determining the validity and effectiveness of the arbitration clause, nor does it limit the State court's control to a prima facie test. A number of arbitration specialists share this interpretation. ¹⁷[Page84:]

However, the aim of the Convention is to improve the functioning of arbitration in international trade through recognition and enforcement of arbitration agreements and awards by all contracting States. This being its purpose, the Convention does not prohibit the contracting States to allow for more liberal provisions in their internal laws, whereby the court's review of arbitration agreements is limited to a prima facie control of the 'manifest' existence and validity of the arbitration agreement.

This is why national laws - as applied by the courts - lack uniformity as to the scope of the judge's control over arbitration agreements. Certain laws which fully or partially adopt the 'effet négatif' approach (or similar theories) provide that arbitral tribunals have a right of priority in respect of the State courts in deciding on the validity and scope of the arbitration agreement and therefore on their competence. This is the case in France, Italy and, to some extent, Switzerland.

Other laws provide that the State court has full authority to examine the validity of the arbitration agreement without being bound to concede any precedence to the arbitrators, so that - if the court deems that it is competent

- it proceeds to examine the merits of the case. This is the case in Germany, Belgium, the Netherlands and Sweden.

In English law, an intermediate position is adopted which consists in the suspension of the court proceedings until the arbitrators have decided on their competence. Indeed, English Courts have the power to verify the validity of the arbitration agreement in the meaning of Art.II (3) of the New York Convention. However, on application by the defendant who invokes an arbitration agreement, the Court 'shall grant a stay' of its proceedings 'unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed' (Section 9(4) of the 1996 Arbitration Act). The English Court therefore does not directly 'refer the parties to arbitration', as required in Art.II (3) of the New York Convention, but rather suspends the court proceedings, thus compelling the claimant to refer the dispute to arbitration if he wants his claims be heard. The solution is equally respectful of the arbitration agreement and does not seem to be incompatible with the New York Convention. ¹⁸

In conclusion, the role of the lis pendens objection is not absolute in international commercial arbitration because the New York Convention allows[Page85:] for a control by the national courts over arbitration agreements irrespective of whether the court is approached before or after the commencement of the arbitration.

5. Res Judicata in International Commercial Arbitration

Pursuant to the res judicata doctrine, an earlier and final decision by a court or arbitral tribunal is conclusive in any subsequent proceedings involving:

(i) the same subject matter,

(ii) the same legal grounds, and

(iii) the same parties. The doctrine has a 'positive' effect as it binds the parties to implement the judgement or award as final, and a 'negative' effect as the subject matter¹⁹ cannot be re-litigated a second time ne bis in idem.

Res judicata defenses may be raised in international commercial arbitration in a myriad of situations. For instance, they can be raised between partial and final awards, between a State court and an arbitral tribunal, between two arbitral tribunals, or between a supra-national tribunal and a commercial arbitral tribunal. ²⁰ Situations in which res judicata defenses are raised arise most frequently between courts and arbitral tribunals, irrespective of the national law governing the proceedings.

In common law, the doctrine of res judicata is well established under the theories of 'cause of action estoppel' (all claims arising from a single event and relying on the same evidence are treated as the same cause of action), 'issue estoppel', 'former recovery' or 'abuse of process'. ²¹ When an English court finds that an arbitral award has been rendered, that this award is not challenged and that it decides on a certain matter between the same parties, the court must enforce the award and refuse to recognize any subsequent court judgement that adjudicates on the same matter differently. ²² The same is true for United States courts, which generally accept pleas of 'claim preclusion' or 'issue preclusion' to defend the conclusive nature of prior arbitral awards. ²³

The res judicata doctrine also exists in European civil law countries. Its application to domestic legal proceedings is codified and the triple identity test is used (i) the same parties, (ii) the same causa petendi (grounds for relief) and (iii) the same petitum (relief sought). In these countries an arbitral award - even if it is rendered locally but in an international arbitration, or rendered abroad but locally recognized under the New York Convention -

²⁴[Page86:]

also has the authority of res judicata.

The positive res judicata effect of an award is reinforced by many institutional rules which provide that an award is final and binding. ²⁵ These rules also prescribe that an award must 'state the reasons' upon which it is based. ²⁶ Thus, it has been argued that the reasons (i.e., the ratio decidendi of the award) are also final and binding as well as the award which contains them. ²⁷

Res judicata receives international recognition and enforcement in Art.III of the New York Convention, which requires each contracting State to 'recognize arbitral awards as binding and enforce them in accordance with [...]' their own laws. Pursuant to Art.35(1) of the UNCITRAL Model Law, an award rendered in international commercial arbitration shall be recognized as binding irrespective of the country in which it is made.

Finally, based on arbitration case law it can be said that commercial arbitral tribunals normally abide by the res judicata doctrine and respect prior awards between the same parties just as a State court would do. ²⁸

CONSOLIDATION IN INVESTMENT DISPUTES: THE ICSID CONVENTION

The consolidation provisions contained in the ICSID Convention, i.e., Articles 25(1) and 26 of the Convention (1), as well as the application of Article 26 by ICSID Tribunals (2), shall be reviewed in this section. This will lead to an examination of the principle of the primacy of treaty-based tribunals (3).

1. Articles 25(1) / 26 of the ICSID Convention and the ICSID Arbitration Rules

As regards consolidation under the Washington Convention, only the final sentence of Art.25(1) and Art.26 are relevant. The first reads as follows:

"When the parties have given their consent, no party may withdraw

its consent unilaterally."

This provision refers to the parties' written consent to submit a given dispute to ICSID. ²⁹ It provides that such consent, once given, is binding, and that it becomes irrevocable once it is accepted by the other party.

In an investor-to-State dispute based on a State's public offer of consent to ICSID arbitration, the State is obviously the first party who gives its consent. This consent is given either in a BIT, in a multilateral treaty or in an internal[Page87:] law regarding the protection and promotion of foreign investments. The investor gives his consent after a dispute has arisen, when he elects to file a request for arbitration to ICSID. In such a case, at least a temporary consolidation is achieved when both parties have expressed their consent to this form of dispute resolution. The dispute is consolidated in the ICSID arbitration and no other forum is competent.

Obviously, the respondent State may raise objections to ICSID jurisdiction on several grounds - including the objection that the dispute must be referred to its domestic courts under the forum clause agreed in the investment contract from which the dispute arises. Such an objection is not admissible if it amounts to a withdrawal of the State's consent to ICSID arbitration. It is only admissible if the State argues that the scope of its consent does not include the specific dispute referred to ICSID and that the offer of ICSID arbitration made in the public instruments does not purport to override the contractual forum clause specifically agreed to in the investment contract

which is at the source of the dispute. In such a case, it belongs to the ICSID tribunal to determine whether the objection constitutes an attempt by the State to withdraw its consent or rather purports to establish the proper limits of the State's consent.

The tribunal's role in distinguishing admissible and non admissible objections is further defined in another important provision of the Convention, Art.26, which reads as follows:

"Consent of the parties to arbitration under this Convention shall, unless otherwise stated, be deemed consent to such arbitration to the exclusion of any other remedy. A Contracting State may require the exhaustion of local administrative or judicial remedies as a condition of its consent to arbitration under this Convention."

It is commonly held that 'the Convention does not contain any rules regarding possible parallel proceedings'. ³⁰ However, Art.26 seems to achieve consolidation at least temporarily as it provides that only one procedure may be pending in relation to a certain dispute.

If the State's consent is made subject to the prior exhaustion of local remedies, the recourse to [Page88:] ICSID arbitration will only be possible after these local remedies are exhausted. Until that time, only the domestic proceedings will be pending. However, if the prior exhaustion of local remedies is not required, the State's consent makes ICSID arbitration 'exclusive of any other remedy', which excludes the parallel referral of the dispute to domestic courts.

If consolidation is a means of avoiding competing proceedings, then Art.26 achieves that objective (at least until ICSID jurisdiction is decided).

As opposed to some other institutional rules, the ICSID Arbitration Rules do not contain

provisions allowing for the consolidation of parallel or related proceedings. ³¹ However, this does not prevent the ICSID Secretariat from making efforts to harmonize parallel proceedings when this is possible.

For instance, at the commencement of the Salini v. Morocco arbitration, the ICSID Secretariat was aware of the fact that another parallel arbitration had been initiated by other Italian investors against the Kingdom of Morocco, based on the same BIT in force between Italy and Morocco and on factual and legal backgrounds similar to those of the Salini case.³²When the tribunal was to be constituted, theICSIDSecretariat took the initiative of recommending to the two Italian claimants and to the Kingdom of Morocco to each appoint the same arbitrator in both cases, with the understanding that the co-arbitrators would appoint a same presiding arbitrator in the two proceedings. The two cases were never formally merged. Pleadings and hearings were conducted separately and two separate decisions on jurisdiction were rendered. However, the fact that an identical tribunal had been appointed in the two cases had the effect of avoiding inconsistent decisions. Indeed, the arbitrators' decisions as to the scope and limits of their jurisdiction were the same in both cases.

This de facto consolidation suggested by the ICSID Secretariat proved to be a very reasonable solution.

2. Article 26 as applied by ICSID Tribunals

According to its plain meaning, Art.26 has the effect of overriding the 'exclusive' nature of a forum selection clause contained in an investment contract, especially in consideration of the fact that both parties' consent to ICSID arbitration postdates - sometimes by several years - the earlier relevant contract. [Page89:]

Indeed, when ICSID proceedings are commenced and consent to ICSID jurisdiction is thereby given by both parties 'to the exclusion of any other remedy', the different jurisdiction possibly agreed to in the prior investment contract should also be excluded as regards this specific dispute. In such a situation where two agreements - the contractual forum clause and the agreement to ICSID arbitration - co-exist, the later agreement overrides the earlier one, unless the State's consent to ICSID arbitration makes a clear reservation maintaining in force the original forum clause.

It is true that Art.26 contains the phrase 'unless otherwise stated'. However, the context of the phrase deals exclusively with the parties' most recent consent to ICSID arbitration, mutually perfected when the offeree accepts the State's offer. It is thus reasonable to infer that it is in such later consent to ICSID arbitration that the parties should 'otherwise state' that they do not consider it an exclusive forum. The 'otherwise stated' intention cannot be understood as referring to an earlier - sometimes many years old - forum selection clause inserted in the investment contract. If such an interpretation was given, very few BIT cases could be brought before ICSID as the vast majority of investment contracts contain a dispute resolution clause which refers the dispute to forums other than ICSID (domestic courts, domestic arbitrations, ICC, UNCITRAL or ad hoc arbitrations).

The exchange of consent perfects an arbitration agreement which is not only later, but is also more specific than the contract forum selection clause. While this clause refers to a generality of future disputes, the agreement to bring a specific dispute before ICSID arbitration applies only to that dispute and does not entirely subvert the contractual forum selection clause. This has two consequences. First, the maxim lex specialis derogat generali finds application in favour of the consent to ICSID in respect of the specific dispute which is the object of the mutual consent in the meaning of Art.26. Second, if another dispute arises subsequently, the contract forum clause is still effective and the investor has again a choice between the domestic courts and ICSID arbitration. It is only when ICSID arbitration has been accepted by both parties in relation to a specific dispute that it becomes the exclusive remedy for that dispute.

Based on a different interpretation of Art.26, an ICSID tribunal has concluded that Art.26 does not have the (limited) overriding effect discussed above for three reasons: [Page90:]

according to the 'travaux préparatoires', Art.26 was intended as a rule of interpretation, not as a mandatory rule;

the scope of the phrase 'unless otherwise stated' includes a contrary jurisdictional clause agreed to by the parties before their mutual consent to ICSID arbitration is perfected; and

where, pursuant to the applicable BIT, the investor has the choice between ICSID and other arbitrations, the overriding effect of Art.26 would only materialise if the claimant opts for ICSID arbitration, but not if he opts for an UNCITRAL or an ICC arbitration (as the BIT may provide), so that the legal rights of the parties would be materially affected solely by the investor's choice, this being an outcome that could not be intended when Art.26 was drafted. ³³

The third reason appears to have some persuasive value. However, when Art.26 was drafted, BITs and especially States' inclination to offer to investors alternative forum options were still far from being common practice. The drafters of the Convention surely could not have had that concern in mind.

Moreover, the idea of mutually exclusive competences should in my view be abandoned. The jurisdictions of international tribunals and of domestic courts do not necessarily 'override' or 'replace' one another. Rather, they coexist and the claimant has the right to select among these alternative forums in relation to a specific dispute, after it has arisen. This approach guided my dissenting opinion in the decision on jurisdiction in SGS v. Philippines. I am now glad to see that the ICSID tribunal in Siemens v. Argentina also adopted this approach:

"[...] Art.26 [...] presumes exclusivity of the remedies under the Convention unless the parties had agreed otherwise. Art.26 does not provide that what may be agreed otherwise excludes the remedies under the Convention. In that case, the remedies under the Convention are not exclusive but neither are those otherwise agreed." ³⁴

In previous ICSID cases, a number of tribunals applied Art.26 as a provision giving 'primacy' to ICSID arbitration vis-à-vis domestic forums. In M.I.N.E.

v. Guinea, certain proceedings related to the dispute submitted to ICSID had been commenced in Switzerland and in Belgium. The ICSID tribunal held that these proceedings constituted an 'other remedy' in the meaning of[Page91:] Art.26, i.e., a remedy excluded by the 'mandatory supremacy' of ICSID arbitration over domestic proceedings. Therefore, the tribunal ruled that the domestic proceedings were to be discontinued during the ICSID arbitration proceedings. ³⁵ In Lanco v. Argentina, Argentina's objection that the contractually agreed forum clause had conferred exclusive jurisdiction to the administrative tribunals of Buenos Aires was rejected on several grounds, among which the exclusivity provided by Art.26, which required that 'once valid consent to ICSID arbitration is established, any other forum called on to decide the issue should decline jurisdiction'. ³⁶

In my view, Art.26 remains an important reference point as a 'policy of consolidation' that serves to avoid the duplication of proceedings. Whether the application of Art.26 will lead to definitive consolidation depends on the outcome of the ICSID tribunal's decision on jurisdiction in each case. Where an ICSID tribunal rules that it has jurisdiction, consolidation becomes final for the claims over which it has accepted jurisdiction. Otherwise, jurisdiction is returned to a different forum (e.g., the domestic courts, if this was the available alternative). However, in all cases only one proceeding at a time shall be pending and each proceeding shall be dealt with and concluded in a consecutive manner. This avoids the situation where several proceedings are pending simultaneously, which may lead to conflicting decisions.

Several important authorities confirm the view that the effect of Art.26 is to confer upon ICSID arbitration a primacy over domestic proceedings.

According to Professor Schreuer, the function of Art.26 is to create a 'rule of priority vis-à-vis other systems of adjudication in order to avoid contradictory decisions and to preserve the principle of ne bis in idem'. ³⁷

Professor Schreuer also underlines that 'if competing consent clauses exist nevertheless, it makes more sense to have the entire dispute heard by one tribunal, preferably the one with the most comprehensive jurisdiction'. ³⁸

George Delaume asserted in 1984 that, when a domestic litigation and an ICSID arbitration are pending contemporaneously, 'if the possibility exists that the claim may fall within the jurisdiction of ICSID, the court must stay the proceedings pending proper determination of the issue by ICSID'. ³⁹

Based on Art.26, Professor Toope concluded that once ICSID arbitration is commenced 'resort to alternative, even subsequently agreed upon, arbitral adjudication is excluded as in any attempt to involve municipal jurisdiction'. ⁴⁰[Page92:]

3. The primacy of treaty-based tribunals

Irrespective of Art.26, ICSID tribunals are supranational forums established by international treaties (the ICSID Convention and BITs or similar instruments). As such, they enjoy primacy over internal proceedings pursuant to a rule of international law to this effect. The same rule has been constantly applied by other treaty-based tribunals well before the creation of ICSID.

The Primacy of ICSID tribunals

In the very first case brought to ICSID arbitration, Holiday Inns v. Morocco, the tribunal made reference to this rule of international law as a fundamental reason for affirming its jurisdiction over the entire claim. The tribunal did so notwithstanding the fact that it had been constituted on the basis of an ICSID arbitration clause contained in one of the contracts entered into by the

parties (the 'Basic Agreement', which concerned the establishment and operation of hotels), whereas other contracts (loan agreements) also relevant to the resolution of the dispute contained forum selection clauses in favour of the courts of Morocco. The tribunal extended its jurisdiction to the issues concerning the loan agreements based upon the following considerations:

'the general unity of an investment operation' - the basic agreement constitutes the 'charter' of the investment while the loan contracts were 'a measure of execution' of the main agreement, with the consequence that the two sets of contracts had important elements in common;

the application of the international law rule according to which "international proceedings in principle have primacy over purely internal proceedings".⁴¹

The tribunal addressed the possibility that the local courts might have to deal with questions that the ICSID tribunal would be also called upon to decide. In this respect, the Tribunal found that:

"[I]n such a hypothetical situation the Moroccan tribunals should refrain from making decisions until the Arbitral Tribunal has decided these questions or, if the Tribunal has already decided them, the Moroccan tribunals should follow its opinion. Any other solution would, or might, put in issue the responsibility of the Moroccan State and would endanger the rule that international proceedings prevail over internal proceedings". ⁴²[Page93:]

The tribunal thus emphasized the principles of primacy of international over domestic proceedings and the general unity of the investment operation, which led to the result that both categories of claims were heard by the same ICSID tribunal. This solution did not result from an application of Art.26. Rather, it results from the application of the principle that a supranational tribunal is called upon to rule on issues of State responsibility in international law and that its jurisdiction is therefore all-embracing. In Holiday Inns v. Morocco this led to the inclusion of issues arising from contracts which were formally separate but related to the same investment operation. It is worth noting that the issues relating to the loan contracts were the investor's complaints that the State agency with which the investment and the loans were contracted had failed to repay certain loans. This demonstrates to what point an ICSID tribunal may extend its exclusive jurisdiction when the 'unity' of the operation is the guiding criterion. According to Professor Lalive, 'any other solution would have jeopardized the credibility of international arbitration and the future of the whole ICSID system in particular.' ⁴³

In Amco v. Indonesia, the ICSID arbitration was commenced after an Indonesian State agency had sued the investor before the Indonesian courts on matters relating to the same investment. In ICSID proceedings, Indonesia objected to ICSID jurisdiction, arguing that the investor had appeared before the domestic courts without raising jurisdictional objections and thus had waived its rights to ICSID arbitration. The ICSID tribunal rejected the objection on grounds similar to those in Holiday Inns v. Morocco, i.e., the rule in international law pursuant to which 'an international tribunal is not bound to follow the result of a national court'. The tribunal further held that 'if a national judgement was binding on an international tribunal such a procedure would be rendered meaningless'. The tribunal concluded that the international tribunal's jurisdiction is more comprehensive and prevailing. ⁴⁴

In CSOB v. Slovakia, the ICSID tribunal recommended, based on Art.47 of the Convention which deals with interim measures, that certain parallel proceedings be suspended because they could have the effect of leading to the determination of matters which were related to those already under consideration in the pending ICSID proceedings. Notwithstanding the fact that the parties and the object of the ICSID and the parallel proceedings were not exactly the same, the tribunal was concerned that domestic judicial decisions might pre-judge the matters brought before it. Thus, priority was given to ICSID arbitration. ⁴⁵[Page94:]

In SGS v. Pakistan, Pakistan had commenced an Islamabad-based arbitration against SGS a year before SGS commenced ICSID arbitration. The domestic arbitration had been agreed to in the investment contract as the forum for contractual disputes. A stay of the domestic arbitration was requested by SGS. Considering that Pakistan's contractual claims before the domestic arbitration had or could have a connection with SGS' claims before the ICSID tribunal, the latter tribunal accepted the request. It recommended a stay of the contractually agreed arbitration until the ICSID tribunal had decided its own jurisdiction, holding that '[i]t would be wasteful of resources for two proceedings relating to the same or substantially the same matter to unfold separately while the jurisdiction of one tribunal awaits determination'.( ⁴⁶) Evidently, the tribunal assumed that - in the eventuality that it decided that it had jurisdiction over the matters referred to the domestic arbitration - its jurisdiction would inevitably prevail over that of the domestic arbitrator.

In the same Procedural Order the tribunal went on to state that it was 'by no way bound' by a judgement of the Supreme Court of Pakistan that had purported to suspend the ICSID proceedings and impose upon SGS the obligation to arbitrate exclusively before the Islamabad-based arbitrator. The tribunal vigorously defended its own exclusive jurisdiction to decide whether SGS had 'access to international adjudication under the ICSID Convention' regarding both breach of contract and breach of the BIT. It was 'essential for the proper operation of the BIT and the ICSID Convention that the right of access to international adjudication be maintained' at least until the tribunal's decision on jurisdiction. Such a right 'cannot be constrained by an order of a national court. Nor can a State plead its internal law in defence of an act that is inconsistent with its international obligations. Otherwise, a Contracting State could impede access to ICSID arbitration by operation of its own law.' ⁴⁷

Undoubtedly, the Procedural Order was inspired by the same international rule pursuant to which the jurisdiction of international tribunals has primacy over the jurisdiction of domestic courts in the same or in related matters.

The superior status of other treaty-based tribunals in litispendence defenses

The above ICSID cases follow a tendency which had already begun in preceding years by means of decisions consistently issued by other (non[Page95:] -ICSID) international tribunals. In these other cases, the principle that the international tribunals' jurisdiction takes precedence over the domestic courts' jurisdiction was constantly applied. ⁴⁸

In Socaciu v. Austria, a case decided in 1927 by a Romanian-Austrian Mixed Tribunal, the claimant had initiated proceedings in the same matter before the Romanian courts prior to the constitution of the mixed tribunal. Austria raised a lis pendens objection to stay the international proceedings. The mixed tribunal rejected the objection on the following ground:

"L'exception de litispendance soulevée, en plaidant, par M. l'Agent du gouvernement autrichien, n'est pas davantage fondée, car dès le moment où le T.A.M. [Tribunal Arbitral Mixte] admet sa compétence, le procès devant la Cour d'Appel de Bucarest n'a plus d'objet, le présent jugement revêtant l'autorité de la chose jugée." ⁴⁹

The principle that international forums set up by treaties have prevailing jurisdiction over municipal forums is also expressed in clear terms by the Franco-Italian Conciliation Commission in the S.A.M.I. Claim case:

"The Conciliation Commission, an international tribunal set up by a treaty, has supremacy over municipal courts. If a municipal court is seized of this case, it is necessary, in order that the international tribunal may hear and decide the claim, that the claimants [...] should discontinue the proceedings in the municipal court." ⁵⁰

The Iran-US Claims Tribunal had the opportunity to affirm this same principle in E-System Inc v. Iran and Bank Melli. The Iranian Ministry of Defence had filed a claim against E-System before the Teheran Public Court, pursuant to a forum selection clause contained in the contract between the two parties, claiming the restitution of certain aircrafts from a Texas plant and damages for late performance. When the case was brought by E-System before the Iran-US Claims Tribunal, the Ministry's claim was submitted to this Tribunal by way of counterclaim without discontinuing the Teheran proceedings, and the Tribunal ruled as follows:

"Not only should it be said that the award to be rendered in this case by the Tribunal, which was established by inter-governmental agreement, will prevail over any decision inconsistent with it rendered by Iranian or United States courts, but, in order to ensure the full effectiveness[Page96:] of the Tribunal's decisions, the Government of Iran should request

that actions in the Iranian Court be stayed until proceedings in this

Tribunal have been completed." ⁵¹

The same principle was also applied in regard to domestic arbitration proceedings, and not only court proceedings. In the Jean-Baptiste Caire case, a claim had first been brought before the National Mexican Claims Commission prior to being brought before the International Mixed Claim Commission. Mexico's position was that the Mixed Commission was precluded from hearing the case until the claim in the Mexican arbitration had been withdrawn. The Mixed Commission rejected the objection relying on the principle of the supremacy of international tribunals. ⁵²

The prerogative of supranational tribunals and their supremacy in cases of litispendence were strengthened by the British-Venezuela Claims Commission in the Selwyn case, ⁵³ by the Permanent Court of International Justice in the Case Concerning Certain German Interests in Polish Upper Silesia resulting from the expropriation of a factory at Charzow⁵⁴ and by the Mixed Tribunal⁵⁵

constituted in Boskowitz c. S.A. Haditermény et Etat Hongrois.

CONSOLIDATION IN INVESTMENT DISPUTES: INVESTMENT TREATIES

The typical provisions contained in investment treaties aimed at avoiding the duplication of proceedings must now reviewed (1). This will be followed by an examination of the consolidation solutions adopted in the North American Free Trade Agreement (NAFTA) (2) and in recent bilateral investment treaties (BITs) (or free trade agreements) (3).

1. The provisions aimed at avoiding the duplication of proceedings

The techniques used in investment treaties to avoid the duplication of proceedings either require the claimant to irrevocably choose between pursuing its claim in domestic courts or in international arbitration; waive its rights to submit its claim to any other forum as a precondition to international arbitration; or have prior recourse to State courts for a fixed period of time. First, each of these three techniques shall be examined and comments on their actual consolidating effects will follow. [Page97:]

Three techniques aimed at avoiding the duplication of proceedings

The 'fork-in-the-road' clause

The first technique is known as the 'fork-in-the-road' clause and it is found in some BITs.

Art.8(2) of the France-Argentina BIT is a good example of such a clause. After providing that 'any dispute relating to investments' between the host State and the investor shall be, as far as possible, resolved amicably, the provision goes on to state that if the dispute is not resolved within six months:

"it shall be submitted, at the request of the investor, either to the national jurisdiction of the Contracting Party involved in the dispute; or to international arbitration [...]. Once an investor has submitted the dispute either to the jurisdiction of the Contracting Party involved or to international arbitration, the choice of one or the other of these procedures shall be final."

Similar 'fork-in-the-road' clauses are found in other BITs, such as, for instance, in the US-Argentina BIT (Art.VII (2)).

The fork-in-the-road clause obliges the investor to make a forum selection which cannot be modified thereafter. However, an examination of the practice reveals that it is questionable whether the fork-in-the-road clause actually achieves consolidation.

The fork-in-the-road clause is based on the assumption that there is only one same 'dispute' in classic legal terms. In order for such a clause to achieve the effects for which it was intended, it is necessary that the dispute be the same both in the domestic proceedings and in the international arbitration (i.e., that the parties and the cause of action are the same). The practice shows, however, that an investor may have, on the one hand, claims based on breaches of contract against a State or a State entity, and, on the other, claims against the State based on violations of the applicable BIT (either in addition to or depending on the violations of the contract by the State or State entity). Thus, the parties and the causes of action in the internal proceedings may easily differ from those in the international proceedings.

In such a situation, is the investor obliged to make a single and irrevocable choice regardless of the legal sources of the rights which form the basis of his claims? To the extent that the fork-in-the-road clause requires that the dispute be the same, the answer is quite uncertain. Following the approach[Page98:] of the ICSID Tribunal in Holiday Inns v. Morocco, ⁵⁶ the unity of the investment should in principle exclude parallel proceedings. However, in several recent cases⁵⁷ the theory of the unity of the operation was not followed by ICSID tribunals, which rather decided to divide the dispute between 'treaty claims' and 'contract claims' and assume jurisdiction over only the former. Alternatively, the investor could bring the entire dispute (treaty and contract claims) before the State courts, but it is rather doubtful that these courts would rule against their own State in matters of international responsibility. In sum, it is practically impossible for an investor to opt once and for all for a 'global' jurisdiction, unless the unity of the investment approach is generally accepted by both arbitral tribunals and the courts.

It is difficult to infer from this that an investor is prohibited from pursuing in separate forums treaty and contract claims arising from a same investment. Literally, the fork-in-the-road clause requires the investor to make a choice between international arbitration and domestic proceedings before the courts in relation to 'any dispute relating to investments', which appears to include both treaty claims and contract claims. However, as ICSID case law has moved away from the principle of the 'unity of the dispute' of Holiday Inns towards the recent division between disputes relating to treaty claims and those relating to contract claims, such a development does not encourage an investor to submit joint claims. Moreover, the traditional legal meaning of the word 'dispute' would in any case allow for a duplication of proceedings due to the existence of distinct causes of action and different parties.

The waiver of alternative forums

A second technique used to avoid the duplication of proceedings is the clause requiring the waiver of recourse to any other forum as a condition for referring the dispute to arbitration ('waiver clause'). A good example of such a provision is given by Art.1121 of NAFTA, which sets forth the 'conditions precedent to submission of a claim to arbitration'. Art.1121(1) reads as follows:

"A disputing investor may submit a claim under Art.1116 to arbitration only if: [...] (b) the investor [...] waive[s its] right to initiate or continue before any administrative tribunal or court under the law of any Party, or other dispute settlement procedures, any proceedings with respect to the measure [...] that is alleged to be a breach [...] except for proceedings for injunctive, declaratory or other extraordinary relief [...]."[Page99:]

Such a clause is based on a completely different criterion from the one of the fork-in-the-road clause. Indeed, the waiver clause, instead of focusing on the traditional criterion of the 'identity of the dispute', rather focuses on the concept that the State 'measure' from which the dispute arises must be the same both in the arbitration and in the alternative proceedings (which must be renounced by the investor). As there can only be one such measure, there can only be one arbitration after the waiver has been made.

This approach was followed by the ICSID tribunal in the first Waste Management case. ⁵⁸ In this case, the investor had argued that the waiver required by NAFTA did not apply to the domestic proceedings which were going on in Mexico. According to the investor, the domestic proceedings involved violations by Mexico of duties 'imposed by other sources of law, including the municipal law of Mexico'. Thus, the dispute referred thereto was different from that referred to arbitration under NAFTA even though both disputes arose in relation to a same measure taken by Mexico. The ICSID tribunal did not accept this argument and held that:

"when both legal actions have a legal basis derived from the same measures, they can no longer continue simultaneously in light of the imminent risk that the Claimant may obtain the double benefit in its claim for damage. This is precisely what NAFTA Art.1121 seeks to avoid."

The tribunal added that potential 'overlapping' of factual and legal findings was to be avoided.

In my view this decision is correct. Unlike the fork-in-the-road clause, the wording of Art.1121 of NAFTA is not at all ambiguous. It clearly identifies the dispute as the one which arises from a same State 'measure'. Thus, all claims arising from that measure can be brought to international arbitration provided that parallel court proceedings are waived.

The prior recourse to State Courts for a fixed period of time

A third technique used to avoid the duplication of proceedings, which is found in some BITs, requires the investor to first have recourse to the domestic courts for a certain period of time as a precondition to the right to refer the matter to international arbitration under the BIT after the expiration of the time limit (the 'prior recourse' clause). [Page100:]

Art.X of the Spain-Argentina BIT contains such a clause. It provides that if the investment dispute is not settled amicably within six months 'it shall be submitted to the competent tribunal of the Contracting Party in whose territory the investment was made'. The dispute may subsequently be submitted to international arbitration if 'no decision has been rendered [by the domestic courts] on the merits of the claim after the expiration of a period of eighteen months' or if 'such decision has been rendered, but the dispute between the parties continues.'

The meaning of this clause was considered by the ICSID tribunal in the Maffezini case. ⁵⁹ At first glance, this is somehow surprising due to the fact that the investor had failed to first have recourse to the Spanish courts. However, it turns out that the Spain-Argentina BIT contained a most-favoured-nation clause which allowed the tribunal to apply other BITs entered into by Spain which did not require the prior recourse to the domestic courts before

referring the dispute to arbitration. This is why the ICSID tribunal found that the claim was admissible despite the fact that the requirement of prior recourse to the domestic courts had not been complied with. Even if it was not required to do so in that case, the tribunal nevertheless added an obiter dictum giving its own interpretation of the 'prior recourse' clause.

According to the Maffezini tribunal, Spain and Argentina, by agreeing to Art.X of the BIT, 'wanted to give their respective courts the opportunity, within the specified period of eighteen months, to resolve the dispute, before it could be taken to international arbitration'. The tribunal noted that the parties remained free to refer the dispute to international arbitration after the expiration of the eighteen-month period. However, the tribunal added that the parties would most likely do so only if they were dissatisfied with the decision of the domestic court and if they were convinced that the international tribunal would reach a different decision. According to the tribunal, the BIT gives 'the Courts of the Contracting Parties [...] an opportunity to vindicate the international obligations guaranteed in the BIT. Given the language of the treaty, this is a role which the Contracting Parties can be presumed to have wished to retain for their courts, albeit within a prescribed time limit.'

The obiter dictum was founded on the tribunal's opinion that such BIT clauses reflect a balance between two objectives, i.e., the protection of: the State's 'preference' to resolve investment disputes before its own courts[Page101:] (which historically derives from the Calvo doctrine), and the investor's right to arbitrate before an international forum. ⁶⁰ However, it is doubtful whether such a clause could ever serve the purpose of avoiding arbitration. The period of time reserved to the domestic courts seems too short to allow for the effective resolution of the dispute in that forum. The clause also does not require the exhaustion of domestic remedies. The investor is therefore absolutely free to invoke international protection after the expiration of the deadline, whether or not the domestic court has begun to examine the case or even if it has rendered a decision. The clause seems to merely create a longer 'reflection period' before the case can be brought to international arbitration rather than to truly offer the State courts an 'opportunity to vindicate the international obligations' of the State.

The interpretation given by the Maffezini tribunal has an undeniable interest in that it gives the State courts the authority to deal with treaty claims-and not only contract claims. Indeed, the investor is obliged to seek prior recourse to the domestic courts for both treaty claims and contract claims jointly. The clause thus achieves consolidation-at least temporarily-by avoiding the split of the claims based on their legal nature (treaty v. contract claims) as well as their parallel referral to different forums.

To be consistent, ICSID tribunals, when seized of a case based on a prior recourse clause after the expiration of the time limit, should accept jurisdiction for both treaty and contract claims. Otherwise, the whole system developed by this clause does not make any sense. Indeed, a prior recourse clause makes sense only if both treaty and contract claims can be pursued sequentially before two distinct forums. If this was not so, the relevant BITs would require that only treaty claims be referred to international arbitration and only contract claims be referred to the domestic courts.

Attention must of course be paid to the language of each individual BIT. A prudent investor should be aware of the consequences deriving from a potential duplication of proceedings. Indeed, he must be careful not to jeopardize his treaty claims in a forum other than ICSID, except when this is the inevitable result of his irrevocable choice (e.g., a fork-in-the-road clause applied to treaty claims) or when this is a temporary precondition which ultimately does not affect his right to bring his treaty claims to international arbitration (as is the case with a prior recourse clause). [Page102:]

The consolidating effects of 'non-duplication' clauses

To conclude on the matter of whether clauses aimed at avoiding the duplication of proceedings may have the effect of consolidating court proceedings into arbitral proceedings, the following observations may be made.

As seen above, Art.1121 of NAFTA is an example of a clause which effectively achieves consolidation between arbitration and court proceedings, as only one of the two proceedings can unfold at a given time in relation to a dispute regarding a specific State measure.

The same cannot be stated with as much certainty in respect of fork-in-the-road clauses, which usually identify the dispute through traditional legal criteria (same parties, object and relief sought) instead of defining it by reference to the State 'measure' from which the dispute arises. This latter criterion is more adapted to prevent duplications.

Finally, the prior recourse clause does not truly consolidate court and arbitral proceedings. It simply sets a sequential order to the unfolding of the proceedings before the two different forums. However, it does have the positive effect of creating a mechanism whereby treaty and contract claims are dealt with as an ensemble.

2. NAFTA and consolidation

In international investment arbitration, a provision that truly consolidates parallel arbitral claims is Art.1126 of NAFTA. The rationale underlying this provision is to be found in the NAFTA system - which is a more sophisticated system than that of usual BIT regimes.

In NAFTA, an investor may bring a claim not only on his own behalf (Art.1116), but also on behalf of an 'enterprise', i.e., a juridical person that the investor owns or controls directly or indirectly (Art.1117). There is no requirement that there be a contract and an arbitration agreement between the investor (or enterprise) and the responding State. There can also be several investors claiming that a same State measure has affected their investment. Moreover, the definition of arbitrable investments is broad. As a consequence, a large number of arbitral claims may arise from a single State measure. This possibility of parallel claims has been dealt with in Art.1126, which has rightly been described as an 'unusual and innovative' provision. ⁶¹[Page103:]

Pursuant to Art.1121 of NAFTA, as seen above, an investor must waive all parallel (non-arbitral) proceedings (which arise from a State measure which is the same as the one in respect of which arbitration is sought) as a precondition for bringing the dispute to arbitration under NAFTA. However, while this provision succeeds in preventing the duplication of judicial and arbitral proceedings, it does not address the situation of parallel arbitrations within the NAFTA system (in the event that more than one claimant has claims arising from a same State measure). This lacuna was dealt with by introducing a consolidation mechanism in Art.1126.

Pursuant to Art.1126(3), any 'disputing party', whether a State or an investor, may request to the ICSID Secretary-General the establishment of a special tribunal to hear a request to consolidate claims. If this tribunal is satisfied that more than one arbitral claim has been submitted to arbitration under Art.1120, that these claims have 'a question of law or fact in common' and that 'the interests of fair and efficient resolution of claims' justify their consolidation, the tribunal may assume jurisdiction over, hear and determine together, all or part of the claims, or assume jurisdiction over, hear and determine, one or more of the claims in order 'to assist the resolution' of the others. The relevant decision takes the form of an 'order' (Art.1126(2)).

Upon application of a disputing party, the tribunal may also order that the proceedings of a previously established Chapter 11 tribunal be stayed pending the decision under Art.1126(2) (Art.1126(9)). Consequently, if the consolidation tribunal assumes jurisdiction over certain parallel claims, the previously constituted tribunal loses jurisdiction to the extent of that assumed by the consolidation tribunal. The consolidated arbitration is conducted under UNCITRAL Arbitration Rules, except as modified by the relevant NAFTA section. The consolidated tribunal is appointed by the ICSID Secretary General (Art.1126(5)).

Access to consolidated proceedings is also open to investors or State parties which are not named in the consolidation request but which are parties to arbitral claims already submitted under Art.1116 (investor) or Art.1117 (enterprise) (as soon as they receive notice of the request for consolidation). This is why the request for consolidation must be notified to all parties concerned either directly or through the NAFTA Secretariat (Art.1126(6) and (10-13), Art.1127 and 1129). [Page104:]

The NAFTA consolidation provision is very innovative and unique for the following reasons:

A more precise criterion

Art.1126 addresses the possibility of multiple arbitral claims arising from a 'same State measure', whereas all the other provisions commented above address the possibility of parallel referral of a 'same dispute' to arbitration and to court proceedings. This is a positive development in respect of traditional arbitration law as the concept of State 'measure' is a much more precise notion to determine and identify claims than the concept of 'dispute' used in traditional legal terms. Indeed, there might be, within a same 'dispute', several claims involving different parties, possibly also based on different legal grounds. Moreover, the rule applies to two or more arbitrations, not to arbitration and court proceedings (in respect of which the waiver provision in Art.1121 is sufficient).

A State does not have to defend itself in multiple arbitrations

Art.1126 relieves a State from the burden of having to defend against multiple claims (arising from a same measure) in scattered arbitrations, as a State party may also request the consolidation of related claims.

The risk of inconsistent decisions is avoided

At the same time, Art.1126 avoids the risk of inconsistent decisions in arbitrations arising from a same measure (including, for example, the risk that the State be condemned in one arbitration and absolved in another).

A hierarchy of arbitral tribunals is created

Interestingly, consolidation is decided by a tribunal newly constituted for this purpose, not by the tribunal previously constituted in a specific arbitration. Quite the contrary, the latter tribunal is subject to the authority of the consolidation tribunal, which has the exclusive jurisdiction to determine whether the initial tribunal maintains jurisdiction, and to what extent. This was the first example of a hierarchy between two arbitral tribunals, both created by treaty provisions.

The finality of consolidation

The consolidation decision is final. No challenge or appeal is possible. [Page105:]

Consolidation must be requested by one of the parties

Although the consolidation tribunal renders a binding final decision, consolidation can never be decided ex officio by neither the consolidation tribunal, the arbitration tribunal firstly constituted in a specific case, the NAFTA Secretariat nor the ICSID Secretary-General, even though they might be aware of the existence of parallel arbitration claims. Consolidation can only be decided upon the request of one the parties involved in one of the arbitrations.

Consolidation is ultimately based on consent

Finally, an investor, by submitting a claim to arbitration under Chapter 11B of NAFTA, inevitably agrees to the NAFTA rules, which include the consolidation rule. The same applies to a State's consent to arbitration under the same rules. Therefore, even NAFTA consolidation ultimately takes its source from the parties' consent. This system is reminiscent of the old arbitration privity since consolidation cannot be ordered without one of the parties explicitly requesting it. In the absence of such a request, the two or more arbitration cases proceed separately and in parallel.

3. BITs and consolidation

Recent BITs and similar treaties follow the NAFTA example regarding consolidation. In this section, the new model BITs and recent free trade agreements shall be reviewed. A few general remarks on these new BITs will then follow.

The new model BITs

The consolidation provisions of new model BITs here examined are those of the new United States model BIT as well as those of the new Canada model BIT.

The New United States Model BIT

The US Model BIT, released by the Department of State on 5 February 2004, contains: a waiver clause, which requires the investor to waive any alternative forum as a condition for submitting the dispute to arbitration under the BIT (Art.26(2)), and a consolidation clause, which regulates the consolidation of arbitration proceedings arising from 'the same events and circumstances' and having 'a question of fact or law in common' (Art.33). [Page106:]

The US Model BIT addresses the possibility that arbitration under the BIT may be requested by either an investor on his own behalf (Art.24.1(a)) or by him on behalf of an enterprise owned or controlled by the investor directly or indirectly (Art.24.1(b)). Moreover, each of the parties may submit to arbitration claims based on allegations of breaches by the respondent State of three categories of legal rules: the substantive provisions of the BIT (Art.3 through Art.10), the investment authorization or the investment agreement.

Therefore, were it not for the provisions on consolidation, a duplication of arbitration proceedings could easily occur in such cases where there is more than one claimant or different legal sources form the basis of the claims.

Interestingly, an ICSID tribunal established under the Model BIT does not have the power to refuse jurisdiction over claims that are only contractual in nature. This is due to the fact that Art.24.1 of the Model BIT includes the breach of the investment agreement as one of the grounds upon which an arbitral submission may be made, and requires the claimant to specify in the arbitration notice the legal sources of the provisions allegedly breached by the respondent, which include the provisions of the investment agreement.

This is consistent with the fact that, because of the mandatory waiver of any other forum, the claims arising from an allegation of a mere contractual breach cannot but be submitted to arbitration under the treaty.

The New Canada Model BIT

Canada has also drafted a recent Model BIT. The main provisions concerning consolidation are the following:

claims may be referred to arbitration either by an investor on its own behalf (Art.22) or by the investor on behalf of an enterprise owned or controlled by the investor directly or indirectly (Art.23(1));

an investor may submit to arbitration under the Model BIT a claim that the host State has breached the substantive provisions of the treaty;

when a claim is submitted by the investor on behalf of an enterprise or when 'a non controlling investor in the enterprise' submits an arbitral claim arising out of 'the same events', then 'the claims should be heard together by a Tribunal established under Art.32 (consolidation), unless the Tribunal finds that the interests of a disputing party would be prejudiced thereby' (Art.23(3)); [Page107:]

the investor and the owned or controlled enterprise must waive their right to refer claims arising from the same State measure to any alternative forum, as a condition for referring the claims to arbitration under the treaty (Art.26.1(e) and Art.26.2(e));

when more than one arbitration claim is submitted to arbitration, they can be consolidated by order of a consolidation tribunal (Art.32, which resembles Art.1126 of NAFTA).

Canada's new model BIT has many similarities with the US Model BIT; however, two differences are worth noting:

a 'non controlling investor in the enterprise' has also access to arbitration under the treaty;

claims which are founded on the investment contract do not figure in the category of claims which can be referred to arbitration under the treaty.

Recent free trade agreements

Recent applications of the model BITs seen above are: the Chile-US Free Trade Agreement; the Morocco-US Free Trade Agreement; the Singapore-US Free Trade Agreement and the Canada-Chile Free Trade Agreement.

The Chile-US Free Trade Agreement

In the Chile-US Free Trade Agreement of 6 June 2003, entered into force on 1 January 2004, the Contracting States agreed on substantive provisions for the promotion and the protection of foreign investors similar to those found in traditional BITs (Section A of Chapter 10) and on the right to resolve investment disputes by means of international arbitration (Section B of Chapter 10).

Like in NAFTA, a claimant may be either the investor on its own behalf, or the investor on behalf of an 'enterprise' (i.e., a juridical person that the investor owns or controls directly or indirectly). The claim may be based on allegations of breach of either the treaty, the investment authorization or the investment contract (Art.10.15).

Pursuant to Art.10.17, no claim may be submitted to arbitration (either ICSID, UNCITRAL or any other agreed institutional arbitration (Art.10.15(5)) unless the notice of arbitration is accompanied by the investor's or the enterprise's written waiver: [Page108:]

"of any right to initiate or continue before any administrative tribunal or court under the law of either Party, or other dispute settlement procedures, any proceeding with respect to the events alleged to give rise to the claimed breach".

This provision strongly resembles Art.1121 of NAFTA, with only a slight difference in terminology: NAFTA's 'measure of the [State] that is alleged to be a breach' is replaced by 'the events alleged to give rise to the claimed breach'. The substance is the same: all parallel proceedings must originate from the same events, which obviously includes the measure taken by the State hosting the investment.

The waiver provision prevents the duplication of arbitration and court proceedings, but it does not avoid the duplication of parallel arbitrations, as there can be more than one claimant and more than one claim. As in Art.1126 of NAFTA, this second objective is achieved in the Chile-US Free Trade Agreement by a specific consolidation provision (Art.10.24).

The drafting of Art.10.24 is better than the somehow complex text of Art.1126 of NAFTA. Its Para.1 deserves to be quoted in its entirety:

"Where two or more claims have been submitted separately to arbitration under Article 10.15(1) and the claims have a question of law or fact in common and arise out of the same events or circumstances, any disputing party may seek a consolidation order in accordance with the agreement of all the disputing parties sought to be covered by the order or the terms of paragraphs 2 through 10."

Its Para.6, which deals with the powers of the consolidation tribunal, is also worth quoting:

"Where a Tribunal established under this Article is satisfied that two or more claims that have been submitted to arbitration under Article 10.15(1) have a question of law or fact in common, and arise out of the same events or circumstances, the tribunal may, in the interest of fair and efficient resolution of the claims, and after hearing the disputing parties, by order:

(a) assume jurisdiction over, and hear and determine together, all or part of the claims; or[Page109:]

(b) assume jurisdiction over, and hear and determine one or more of the claims, the determination of which it believes would assist in the resolution of the others; or

(c) instruct a tribunal previously established under Article10.18 to assume jurisdiction over, and hear and determine together, all or part of the claims, provided that:

(i) the tribunal, at the request of any claimant not previously a disputing party before that tribunal, shall be reconstituted with its original members, except that the arbitrator for the claimants shall be appointed pursuant to paragraphs 4(a) and 5;

(ii) that tribunal shall decide whether any prior hearing shall be repeated."

The Morocco - US Free Trade Agreement

The exact same scheme as the one in the Chile-US Free Trade Agreement is adopted in the Free Trade Agreement concluded between the US and Morocco on 15 June 2004. It contains: a waiver provision, whereby the investor and the enterprise renounce to their right of recourse to any other forum as a condition for the request for arbitration to be submitted (Art.10.17(2)), and a consolidation provision (Art.10.24) identical to Art.10.24 of the Chile-US Free Trade Agreement.

The Singapore - US Free Trade Agreement

The same provisions are also found in the Free Trade Agreement concluded between the US and Singapore on 6 May 2003, which entered into force on 1 January 2004, i.e.: a waiver provision (waiver of all other forums) (Art.15.17), and a consolidation provision (consolidating different arbitrations which arise from the same events or circumstances) (Art.15.24).

The Canada-Chile Free Trade Agreement

Canada's recent practice follows the same trend. The 'Accord de Libre Echange' between Canada and Chile of 2 December 1996, which entered into force on 5 July 1997, contains the same type of waiver and consolidation provisions:

??a waiver provision (Art.G22(2)) requiring renunciation of all administrative and judicial 'procédures se rapportant à la mesure de la Partie contestante présumée constituer un manquement visé à l'article G18' as a condition for submitting an arbitration notice under the treaty; and[Page110:]

a consolidation ('jonction') provision (Art.G27) similar to Art.1126 of NAFTA, by which a consolidation tribunal is constituted with the powers of ordering the consolidation of related arbitrations if it is 'convaincu que les plaintes soumises à l'arbitrage en vertu de l'article G21 portent sur un même point de droit ou de fait'.

General remarks on the new BITs

Regarding the waiver and consolidation provisions of the new BITs, the following general comments can be made.

Consolidation is not made <i>ex officio</i>

As already noted in respect of Art.1126 of NAFTA, the new BIT practice provides for consolidation only upon application by a disputing party, on the basis of a treaty regime that is consented to by all the parties involved. Thus, even though consolidation results from an order provoked by one of the parties which is finally binding upon all other parties and on previously established tribunals, consolidation ultimately remains a consensual mechanism.

Consolidation is made in respect of a 'same measure' or 'same events'

Like Art.1126 of NAFTA, the new BIT provisions consolidate multiple claims which arise from a same fact, usually a State measure which is alleged to be in breach of the State's obligations. This concept constitutes a much more precise criterion for consolidation than the same dispute concept under the traditional lis pendens/res judicata theories (same parties, same causes of action, same relief sought).

The owned or controlled enterprise

All the provisions of the new BITs seen above - with the exception of the Canada Model BIT, which includes 'non controlling investors' among the possible claimants - require that the claiming investor own or control the enterprise as a condition for consolidating into one arbitration the claims raised on behalf of the enterprise. Such provisions do not cover claims raised by a minority or non-controlling shareholder, which therefore cannot be consolidated. As such claims cannot be consolidated, they will be referred to other (including judicial) forums, in which case there is no requirement that the recourse to these other forums be waived. [Page111:]

Does consolidation merge 'treaty claims' with 'contract claims'?

Under the US Model BIT and the Free Trade Agreements, a consolidation tribunal assumes jurisdiction over, hears and determines either treaty claims, contract claims, or both. Under the Canada Model BIT (Art.22, Art.23 and Art.24) only treaty claims may be referred to arbitration and possibly consolidated under the BIT provisions. As seen above, the US list of claims which can be brought to treaty arbitration includes breaches of the substantive provisions of the BIT, breaches of the investment authorization or breaches of the investment contract. This list is significantly broader than the Canada Model BIT's list, which only includes breaches of the substantive provisions of the BIT.

The Scope of consolidation

Consolidation may either be total ('all claims') or partial ('one or more of the claims'). In the case of a partial consolidation, the tribunal chooses at its discretion the claims over which it assumes jurisdiction. The determination of these claims by the consolidating tribunal 'assists the determination' (this being the common language used in consolidation clauses) of the outstanding claims submitted to a single (non-consolidated) tribunal. Such language suggests that consolidation will be made in respect of those claims which deal with issues of a general nature or which have repercussions on the claims left to the determination of a specific tribunal. It also suggests that the consolidating tribunal deals with issues of principle. For instance, a consolidating tribunal might choose to determine whether a State measure is a breach of its obligations and leave to the non-consolidated tribunal the determination of quantum matters in accordance with compensation principles established in the consolidated proceedings.

The re-constitution of a single arbitration tribunal

A consolidation tribunal may also order that other claimants be added as parties to one of the initial arbitrations, instructing that tribunal to assume jurisdiction over the claims. In such a case, the initial tribunal shall be re-constituted by reappointment of the arbitrator for the claimants, and the same tribunal shall decide whether to conduct again any prior hearing.

Is consolidation always advantageous, and for whom?

Consolidation is certainly an advantage for a State called to respond for a measure it has taken in respect of a certain investment. Without consolidation[Page112:], the State would be a respondent in multiple parallel cases. Consolidation thus relieves the State from the burden of preparing multiple defenses before different tribunals, possibly with conflicting results.

However, it is not as certain that consolidation is equally advantageous to an investor. The investor may have small or indirect claims, the determination of which is likely to take longer and be more expensive in a consolidated arbitration than it would in a purely bilateral resolution of the dispute. Moreover, the protection of confidentiality may be lost in a consolidated (and inevitably multilateral) arbitration. The investor may also be required to re-think and re-shape his legal strategies when obliged to plead in the presence of, and concurrently with, third investors who only have in common with him the fact of being or alleging to be the victims of a same State measure. Indeed, in such a scenario, the investor may be unwilling or reluctant, in the presence of third investors (who may also be competitors), to plead on the same grounds as he would if he were the only claimant; or he may be unwilling to make disclosures of the same confidential information he would otherwise freely rely on if he were the sole claimant.

CONSOLIDATION IN COMMERCIAL AND INVESTMENT ARBITRATION: DIFFERENT APPROACHES

In this final section, concluding remarks will be made on the difference in approach between consolidation in investment arbitration and consolidation in international commercial arbitration. More specific comments will be made on the lessons to be drawn from the CME / Lauder cases (1) as well as on the principle of the unity of the State measure and the resulting inapplicability of the traditional lis pendens/res judicata principles in investment arbitration (2). Consequently, the principle of the unity of the State measure requires a unity of the process (3). Such unity of the process favours arbitration (4). Finally, observations will be made on the justifications underlying this difference in approach between investment arbitration and commercial arbitration (5).

1. The lessons from the CME / Lauder cases

In the CME and Lauder cases, two conflicting arbitral awards were rendered in two UNCITRAL arbitrations. ⁶² This situation would likely have been avoided had the relevant BITs contained consolidation provisions such as those found in the recent US or Canada BITs. [Page113:]

In August 1999, Mr. Lauder, a US national, initiated an UNCITRAL arbitration in London against the Czech Republic pursuant to the BIT in force between the Czech Republic and the United States (the Czech-US BIT). Mr. Lauder claimed that, as a shareholder with a controlling interest in CME (Central European Media Enterprises), a Dutch company which had made an investment in the Czech Republic in the telecommunications sector, he was entitled to compensation as the Czech Republic had allegedly violated the Czech-US BIT by interfering with the property rights of the claimant and thus causing damages to his investment. The London tribunal issued its final award on 3 September 2001. It found that the Czech Republic, through certain arbitrary and discriminatory measures, committed breaches of the Czech-US BIT. Nonetheless, the tribunal rejected the claim for damages on the ground that the claimant did not bring forth sufficient evidence to prove that the arbitrary or discriminatory measures caused damaging interference affecting Lauder's own property rights.

In February 2000, the Dutch company CME initiated an UNCITRAL arbitration against the Czech Republic pursuant to the BIT in force between the Czech Republic and the Netherlands (the Czech-Dutch BIT), claiming that the Czech Republic had violated its obligations under the BIT in relation to a telecommunications investment made by CME in that country. CME claimed that the Czech Media Council had illegitimately interfered and deprived CME of its property rights in the investment (a licence to broadcast). The venue of the arbitration was Stockholm. On 13 September 2001, the Stockholm tribunal[Page114:] ruled on the an debeatur issues, deciding that the Czech Republic was liable for breaches of the BIT and for the resulting damages (the quantum of which was to be determined in second decision). On 14 March 2003, the tribunal ruled that the Czech Republic had to pay to CME almost USD 300 million in compensation for the damages caused by the same breaches of the BIT.

After the Stockholm tribunal rendered its award of September 2001, the Czech Republic made a request before the Court of Appeal of Stockholm to have the award set aside. This request was based on several grounds, one of these being a res judicata challenge by which the Czech Republic claimed that CME was the same party as Lauder and that both claimants had submitted the same claim in the two arbitrations. Since Lauder's claim had already been dismissed by the London tribunal when the Stockholm tribunal rendered its decision, the Stockholm tribunal was bound by res judicata and its decision had to be annulled as it was in conflict with a previous final decision on the same matter. The Stockholm Court of Appeal rejected the motion to set aside the award. Concerning the res judicata issue, the Court ruled that Lauder and CME, albeit inter se related, were not the same parties and that res judicata did not apply.

It is unfortunate that the claims in the CME-Lauder cases were brought before two ad hoc UNCITRAL tribunals and not before two ICSID tribunals. Had the two cases been brought before ICSID, the ICSID Secretariat would have most likely found a way to persuade the parties to constitute a single tribunal for both cases (as the ICSID Secretariat did, for instance, in Salini v. Morocco (see p.89)).

The CME-Lauder cases were intensively discussed in the legal literature as an example of conflicting awards rendered on similar factual backgrounds which 'might destroy confidence in international arbitration.' ⁶³

However, a careful analysis of the reasoning behind the two decisions reveals that they are not truly in conflict, at least not on issues of principle. Both tribunals recognized that the Czech Republic had taken arbitrary and discriminatory measures which interfered with the property rights of the investor, measures which amounted to breaches of the BITs respectively applicable in each case. However, whereas the Lauder tribunal concluded that the claimant had not proven the damages, the tribunal in the Stockholm arbitration concluded that CME had proven and substantiated the losses incurred as an effect of the interference. The Stockholm Court of Appeal did not address this point and thus missed the opportunity to justify the rejection of the res judicata challenge on the reasoning that the Czech Republic had been found liable in principle in both arbitrations.

Rather, the Court of Appeal addressed the res judicata issue in light of traditional commercial arbitration law (same parties, same causes of action, same relief sought) and reached the conclusion that, in CME, the res judicata doctrine did not play a role since the claimants were different. The Court was certainly influenced by the fact that the Czech Republic had deliberately renounced to raise any lis pendens or res judicata defence during the CME arbitration proceedings. The Czech Republic was even given an opportunity to consolidate the two cases, but it declined the offer. Therefore, the Czech[Page115:] Republic could not blame the CME tribunal for failing to apply lis pendens or res judicata principles ex officio, given that it had itself renounced to rely on these principles at the proper time. The CME tribunal had well understood that any possible jurisdictional defence based on lis pendens or res judicata had been waived by the Czech Republic. It therefore assumed jurisdiction over the claim (even though the Lauder arbitration was concurrently ongoing) and felt obliged to render an award even at the risk that it might conflict with the London tribunal's award.

However, the State measure from which the two arbitral claims had arisen was exactly the same. Applying the consolidation principles discussed above (p.97), the consolidation of the two cases was a perfectly conceivable solution. In the given circumstances, it would have been a shock to no one if the CME tribunal had applied sua sponte the principles of lis pendens and res judicata. However, considering the fact that the Czech Republic had waived its jurisdictional defenses based on these principles, the UNCITRAL tribunal was not strictly obliged to do so.

The application of the principle of the 'unity of the investment' (according to which an investment is to be considered as a single economic operation) and the fact that a same single State measure is at the source of the dispute ('unity of the State measure') rather suggest another solution. Indeed, in application of these principles, the Stockholm tribunal should have considered the shareholder (Lauder) and the company (CME) as the same investor, thus abandoning the fictive separation between the two. This would have allowed the second tribunal to decline jurisdiction on the grounds of lis pendens and res judicata.

Thus, in my view, the basic rationale underlying consolidation in investment disputes is that, in the presence of a dispute which regards a same investment (which is to be considered as a single economic operation) and which arises from a same single State measure, only one arbitration should be conducted to settle all related elements of the dispute.

2. The unity of the State measure and the inapplicability of lis pendens / res judicata in investment arbitration

If investment arbitrations were to be consolidated only in the presence of a 'same dispute' (as it is understood in classic legal terms) consolidation would very rarely occur. As commercial arbitration practice shows, a 'same dispute'[Page116:] is when: the parties are the same, the causes of action are the same, and the relief sought is the same. When these requirements are met, consolidation is not achieved. Rather, the traditional lis pendens / res judicata principles will lead to the application of procedural rules for the mere coordination between different forums. On the contrary, consolidation can be achieved much more effectively when the requirement of a 'same dispute' is replaced with the more precise requirement of 'a same State measure from which the dispute arises'.

This alternative requirement is unfortunately of little assistance in commercial arbitration, where there are few investor-to-State disputes governed by the international law regime pertaining to investments. The criterion of a 'same State measure' is, however, fully applicable in investment disputes. Indeed, such disputes usually arise from specific actions (or measures) of the State that the investor alleges to be contrary to that State's obligations relating to the investment in question. The 'same State measure' criterion is therefore the fundamental element to be taken into consideration in order to determine whether or not parallel arbitrations should be consolidated.

It is not by chance that the recent treaty provisions reviewed above are all absolutely uniform on this matter. They all contain two provisions, with the double effect of consolidating arbitrations with judicial proceedings, on the one hand, and different arbitrations inter se, on the other:

the first provision requires the waiver of the right to submit the dispute (originating from a same State measure) before any other forum as a condition for acceding to international arbitration, thus effectively putting an end to the possible duplication of arbitration and domestic court proceedings;

the second provision sets the parameters for a tribunal-ordered consolidation when multiple arbitral claims are raised in relation to a same State measure, thus allowing for the effective consolidation of two or more parallel arbitral claims (an outcome that, in commercial arbitration, would practically be impossible to achieve unless it was consented to by all the parties concerned).

As the very first ICSID case (Holiday Inns v. Morocco) demonstrated long ago, the only way to achieve consolidation in investment disputes is to accept the 'unity of the operation' as the guiding criterion. [Page117:]

3. Unity of the State measure requires unity of the process

As seen above, the existing rules on consolidation in investment arbitration are uniformly constructed on the notion that the fundamental consolidation criterion is the State measure at the origin of the claims to be consolidated. Upon careful examination of these rules, one may wonder whether the application of the general principles of international law would lead to the same result and whether the drafters of these provisions were, consciously or not, guided by these principles.

In international public law, the determination regarding State responsibility is made according to objective standards. A State measure is either legitimate or illegitimate. It cannot be legitimate for one tribunal and illegitimate for another, where both tribunals are faced with exactly the same factual events and the same legal issues. The legitimacy of a State measure depends only on the applicable international law standards, not on the identity of the claimant or that of the arbitrators.

It is reasonable to expect that other new BITs, if they are to contain consolidation provisions for investment arbitrations, will most likely adopt the same approach as the one adopted in the BITs discussed above, i.e., an approach based on the principle that a State cannot be exposed to two opposite decisions in regard to a same measure (one decision absolving the State from any responsibility, the other condemning it for having violated its international obligations).

The inevitable question is whether an investment arbitration tribunal (ICSID or UNCITRAL) should adopt this same approach even in the absence of a compulsory consolidation provision in the applicable investment treaty. Although a firm and categorical answer might be premature in light of present international law, I am nonetheless inclined to give an affirmative answer to this question.

When a tribunal is asked to rule on the legitimacy of a State measure in international law, while another tribunal has already ruled on the same question in a parallel case based on substantially identical legal provisions, the second tribunal is bound to refrain from rendering a second decision ex novo and must therefore decline jurisdiction according to the res judicata doctrine. Indeed, international law requires that the matter not be judged again and rather requires that the process be unified. [Page118:]

4. Unity of the process favours arbitration

In return for the benefits gained from a unity of process, States should accept the fact that consolidation will inevitably lead to an increase in the number of disputes that will pass from domestic courts to international tribunals. Thus, for the sake of coherence, States should limit - as much as it is reasonable to expect - their usual and constant jurisdictional objections aimed at keeping disputes within the realm of the local forum.

The main purpose of investor-to-State arbitration is to avoid resorting to the local courts. As stated in the third preamble of the ICSID Convention, the Contracting States have solemnly 'recognized' that:

"while such [investment] disputes would usually be subject to national

legal processes, international methods of settlement may be appropriate

in certain cases."

Just as it is reasonable for States to wish the consolidation of parallel cases as much as possible (so as to avoid the reoccurrence of CME/Lauder-like situations), it is equally understandable that investors wish to submit the entirety of their claim to one single forum. This single forum is arbitration.

5. The difference in approach has its justification

It follows from the above considerations that the consolidation of related commercial arbitrations remains fully dependent on the consent of all the parties involved, ⁶⁴ whereas the consolidation of related investment arbitrations may be achieved by a tribunal's binding order. As seen above, the guiding consolidation principles in international investment law are the unity of the economic transaction affected by a same State measure. The same principles do not find application in international commercial arbitration.

The differences between the two regimes should not be surprising. They find their justification in the different legal status of the parties. In commercial disputes, the parties are equal, i.e., no party has a right or a legitimate interest which is superior or deserves a higher legal protection than the right or the legitimate interest of the other party. On the contrary, in investment disputes, one of the parties is inevitably a State, and a State can legitimately rely on its superior interest not to be judged twice for a same action or omission. [Page119:]

Moreover, in commercial arbitration, the conduct of various related tribunals and the coordination between different arbitral awards (or between awards and court decisions) remain subject to the courts' control in the annulment or enforcement phase. On the contrary, the annulment of ICSID awards by domestic courts is excluded by the Convention and their enforcement is immediate and does not allow for any judicial control over the award as such (Art.52-54 ICSID Convention).

The situation of conflicting awards rendered in commercial arbitration may therefore receive judicial redress, while two ICSID conflicting awards escape any further remedy. The possibility of treating the conflict between ICSID awards as a ground for annulment under Art.52 seems to be purely theoretical, and this is due in part to the fact that it would be very difficult to establish which of the two awards should to be annulled.

Such situations can occur in multi-claimant disputes in which several claimants have an interest in common. For example, when one claimant is the principal trader or investor and the other claimants are his shareholders, ⁶⁵ or when all the claimants are co-contractors in a same economic transaction, but the co-claimants do not act jointly in a same proceeding. ⁶⁶ If such a situation occurs in international commercial arbitration, the parallel disputes will follow their course and the competent national courts will bring the appropriate remedies to the extent possible. However, if the same situation occurs in an ICSID dispute and no consolidation is made, the State is exposed to the risk of two conflicting awards, both valid and enforceable, without any possible judicial revision. Consolidation seems therefore inevitable in this last case. Also, in a consolidation, prevalence should be given to the dispute involving the party which has the strongest legal relationship with the State (e.g., the dispute involving a direct investor rather than the dispute which involves a shareholder).

A private international trader runs several risks if he structures his contracts in a manner that opens the door to multiple disputes. This, at least in part, depends on him. A State, however, is not in the same position. When a situation arises where it is alleged that its actions or omissions have affected more than one investor simultaneously, a State has the right to have international rules applied to it in a consistent way. [Page120:]

While a degree of 'abuse of process', however unwelcome, can be seen as inevitable in international commercial arbitration, where the costs and the effects of the abuse are borne by the parties responsible for such complex proceedings, the same 'abuse' cannot be accepted when a State is involved, as the State, respondent in all proceedings, is not responsible for the multiplication of these proceedings.

In conclusion, differences do exist in the consolidation regimes of commercial versus investment disputes. However, as seen above, these differences find their 'raison d'être' in the very differences that exist between these two forms of arbitration. [Page121:]

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1
As observed by Emmanuel Gaillard: 'Discussions concerning related or parallel proceedings in the context of international arbitration very rarely turn on the possible consolidation of court proceedings and arbitral proceedings. Rather, the topics that are normally discussed are the consolidation of different arbitral proceedings or the consolidation of different court proceedings'. See E. Gaillard, 'The Consolidation of Arbitral Proceedings and Court Proceedings: Complex Arbitrations Perspectives on their Procedural Implications', ICC International Court of Arbitration Bulletin (Special Supplement, 2003) at p.35.

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2
The consent of the parties involved is an indispensable condition for validly consolidating parallel arbitrations. A judicially ordered consolidation, without the consent of even one party, makes it very difficult to enforce such an award under the New York convention. See A.J. Van Den Berg, 'Consolidated Arbitrations and the 1958 New York Arbitration Convention', 2 Arbitration International (1986)at pp.367 et seq.; S. Jarvin, 'Consolidated Arbitrations, the New York Arbitration Convention and the Dutch Arbitration Act 1986 - A Critique of Dr. van den Berg', 3 Arbitration International (1987) at p.254; A.J. Van Den Berg, 'Consolidated Arbitrations, the New York Arbitration Convention and the Dutch Arbitration Act 1986 - A Replique to Mr. Jarvin', 3 Arbitration International (1987) at p.257. Multiparty and multicontract arbitrations were also the subject of several articles by B. Hanotiau, 'Complex - Multicontract-Multiparty - Arbitrations', 14 Arbitration International (1998), pp.369 et seq.; 'Arbitration and Bank Guarantees - An illustration of the Issue of Consent to Arbitration in Multicontract - Multiparty Disputes', 16 Journal of International Arbitration (1999) at pp.15 et seq.; Problems Raised by 'Complex Arbitrations Involving Multiple Contracts-Parties-Issues - An Analysis', 18 Journal of International Arbitration (2001), pp.253 et seq.; 'A New Development in Complex Multiparty-Multicontract Proceedings: Classwide Arbitration', 20 Arbitration International (2004) at pp.39 et seq.

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3
This situation is analysed in P. Leboulanger, 'Multi-Contract Arbitration', Journal of International Arbitration (1996) at p.42.

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4
See the cases analysed in M.E. Schneider, 'Multi-Fora Disputes, Arbitration International', 1990 at p.103; M. Platte, 'When Should an Arbitrator Join Cases?',18 Arbitration International (2002) at pp.67 et seq.

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5
In addition to M.E. Schneider, ibid., see Redfern and Hunter, Law and Practice of International Commercial Arbitration(London, Sweet & Maxwell, 1999) at pp.177 et seq.; H. Lloyd, Multi-Party Arbitration - Views from International Arbitration Specialists(Paris, ICC Publishing, 1991) at p.61; F. Nicklisch, 'Multi-Party Arbitration and Dispute Resolution in Major Industrial Projects', Journal of International Arbitration (1994) at p.57.

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6
A case largely commented is Abu Dhabi Gas Liquefaction Co. Ltd. v. Eastern Bechtel Corp, in which Lord Denning plainly wished to consolidate two sets of arbitral proceedings so as to save time and money and to avoid the risk of inconsistent awards. In this case, an arbitration was initiated by an employer against a contractor claiming the defective supply of a tank which formed part of a gas plant. A parallel arbitration was initiated by the contractor against the subcontractor who had supplied the allegedly defective tank. However, the court was forced to accept that it had 'no power' to order the consolidation of the two proceedings without the consent of all the concerned parties. Had the matter been litigated in an English court, there is little doubt that the subcontractor 'would have been joined as a party to the action'. This is also the opinion of Redfern and Hunter, ibid.at p.177, who quote several passages from Lord Denning's decision, 2 Lloyd's Rep.425, CA (1982). The decision is also quoted in 1982 International Legal Materials at p.1057; Revue de l'Arbitrage (1983) at p.119 (with comments by J. Paulsson); Yearbook Commercial Arbitration (1984) at p.448.

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7
E. Gaillard, supra note 1 at p.36.

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8
E. Gaillard, supra note 1 at pp.37 et seq.

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9
This critique has already been made by F. Mantilla Serrano, 'La nouvelle législation colombienne sur l'arbitrage', Revue de l'arbitrage (1992) at p.54.

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10
Art.1046 of the Dutch Code of Civil Procedure allows for court-ordered consolidation even without the agreement of the parties concerned, but this provision applies only to parallel arbitrations held in the Netherlands. According to A.J. Van Den Berg, 'Consolidated Arbitrations and the 1958 New York Arbitration Convention', 2 Arbitration International (1986) at pp.367 et seq., court-ordered consolidation of related arbitrations may also occur in the United States and Hong Kong. As to US practice, see D.J. Branson and R.E. Wallace, 'Court-Ordered Consolidated Arbitrations in the United States: Recent Authority Assures Parties the Choice', 5 Journal of International Arbitration (1988) at pp.89 et seq.; R. E. Wallace, 'Consolidated Arbitration in the United States - Recent Authority Requires Consent of the Parties', 10 Journal of International Arbitration (1993)at pp.5 et seq.

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11
See cases and examples in E. Gaillard, supra note 1 at p.41.

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12
See cases and examples in E. Gaillard, supra note 1 at pp.39-40.

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13
D.D. Reichert, 'Problems With Parallel and Duplicate Proceedings: The Litis Pendence Principle and International Arbitration', 8 Arbitration International 237 at p.243.

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14
E. Gaillard, 'L'effet négatif de la compétence-compétence', Etudes Jean-François Poudret, Lausanne (1999) at pp.387 et seq., according to whom the principle of competence-competence 'interdit aux juridictions étatiques saisies par une partie du fond du litige en dépit de l'existence, au moins prima facie, d'une convention d'arbitrage de statuer sur les contestations relatives à l'existence ou validité de celle-ci avant que les arbitres euxmêmes n'aient eu l'occasion de se prononcer sur ces questions', at p.390.

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15
Art.8 (1) of the Model Law reads as follows: 'A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.'

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16
The New York Convention applies to 'foreign' awards, i.e., awards in which the place of the arbitration is not in the same State as the one of the court which is seized of the case.

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17
See for instance, J.F. Poudret and S. Besson, Droit comparé de l'arbitrage international (2002) at pp.440-445; A. Dimolitsa, 'Separability and Kompetenz-Kompetenz', ICCA, Congress Series N° 9 (1999) at pp.217 et seq.; P. Schlosser, 'The Competence of Arbitrators and of Courts', 8 Arbitration International (1992) at pp.189 et seq.

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18
For an in-depth comparative analysis of the national laws on this topic, see J.F. Poudret and S. Besson, ibid. at pp.445-465.

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19
See F. De Ly and A. Sheppard, 'Res judicata and Arbitration', Interim Report of the Committee on International Commercial Arbitration, International Law Association (Berlin Conference, 2004) at p.2.

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20
See P. Mayer, 'Litis pendence, connexité et chose jugée dans l'arbitrage international', Liber Amicorum Claude Reymond, Litec (Paris, 2004)at pp.195 et seq.

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21
F. De Ly and A. Sheppard, supranote 18 at pp.6-14.

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22
Mustill and Boyd, Commercial Arbitration (London, 2001)at pp.409 et seq.

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23
G. Born, International Commercial Arbitration in the United States (Kluwer, The Hague, 2001) at p.914.

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24
See Art.1476 and Art.1500 of the French NCPC; Art.1703 of the Belgian Judicial Code; Art.1059(1) of the Dutch Code of Civil Procedure; Art.1055 of the German Code of Civil Procedure; Art.190 of Swiss Act on Private International Law; Art.823 of the Italian Code of Civil Procedure. According to Art.829(8) of the Italian Code of Civil Procedure, an arbitral award may be annulled if it is contrary to a preceding award which can no longer be challenged or to a preceding court decision that is res judicata between the parties.

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25
Art.28(6) of the ICC Rules; Art.26(9) of the LCIA Rules; Art.32(2) of the UNCITRAL Arbitration Rules.

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26
Art.25(2) ICC Rules; Art.26(1) LCIA Rules; Art.32(3) UNCITRAL Arbitration Rules.

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27
V.V. Veeder, 'Issue Estoppel, Reasons for Awards and Transnational Arbitration: Complex Arbitrations Perspectives on their Procedural Implications', ICC International Court of Arbitration Bulletin (Special Supplement, 2003)at p.73.

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28
Fouchard, Gaillard, Goldman, International Commercial Arbitration (Kluwer, The Hague,1999), Para.1419; M. Rubino Sammartano, International Arbitration Law and Practice (Kluwer, The Hague, 2001) at pp.787-797; Redfern and Hunter, supra note 5 at pp.395 et seq.; B. Hanotiau, 'The Res Judicata Effect of Arbitral Awards, Complex Arbitrations: Perspectives on their Procedural Implications', ICC International Court of Arbitration Bulletin (Special Supplement, 2003)at p.43.

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29
The same Art.25(1) also defines this consent as one of the conditions which must be satisfied for establishing ICSID jurisdiction.

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30
See ICSID Case No. ARB/02/09, Champion Trading Company and Others v. Egypt, Decision on Jurisdiction at p.19 (ICSID website).

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31
J. Lew, ICSID Arbitration: Special Features and Recent Developments, Arbitrating Foreign Investment Disputes - Procedural and Substantive Legal Aspects (by N. Horn, Kluwer, The Hague, 2004) at p.281.

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32
The parallel arbitration was ICSID Case No. ARB /00/6, Consortium R.F.C.C.v. Kingdom of Morocco.

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33
ICSID Case No. ARB/02/6 - SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, Decision of the Tribunal on Objections to Jurisdiction of 29 January 2004, Paras.144 to 148 (ICSID website).

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34
ICSID Case No. ARB/02/8 - Siemens A.G.v. Argentina, Decision on Jurisdiction of 3 August 2004, Para.181 (published at http://www.asil.org/ilib/Siemens_Argentina.pdf).

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35
ICSID Case No. ARB/84/4 - M.I.N.E. v. Guinea, Award of 6 January 1988,14 Yearbook Commercial Arbitration (1989) at pp.82-92.

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36
ICSID Case No. ARB/97/6 - Lanco International Inc.v. Argentina, Decision on jurisdiction of 8 December 1998, 40 International Legal Materials 457 (1998).

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37
C.H. Schreuer, The ICSID Convention: A Commentary (Cambridge University Press, 2001) at p.359.

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38
C.H. Schreuer, ibid. at p.369.

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39
G. Delaume, 'ICSID Arbitration in Practice', 58 International Tax and Business Lawyer (1984)at p.64.

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40
S.J. Toope, 'Mixed International Arbitration: Studies in Arbitration Between States and Private Persons', Grotius (1990) at pp.231 et seq.

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41
P. Lalive, 'The First World Bank Arbitration (Holiday Inns v. Morocco) - Some Legal Problems', British Yearbook of International Law (1980)at pp.123 et seq.

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42
P. Lalive, ibid. at p.160. The case was registered as ICSID Case No. ARB/72/1 - Holiday Inns S.A. and Others v. Morocco.

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43
P. Lalive, ibid. at p.136.

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44
ICSID Case No. ARB/81/1 - Amco Asia Corporation and Others v. Indonesia, Award of 20 November 1984, 1 ICSID Reports 376 at pp.376 et seq.

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45
ICSID Case No. ARB/97/4 - C.S.O.B.v. Slovak Republic, Procedural Order of 11 January 1999.

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46
ICSID Case No. ARB/01/13 - SGS v. Pakistan, Procedural Order of 16 October 2002 (ICSID website).

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47
SGS v. Pakistan, ibid. at pp.299 et seq.

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48
See the historical case law analysis by D.D. Reichert, supra note 13 at pp.246 et seq.

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49
Socaciu v. Austria, Decision of 14 May 1927, Recueil des Décisions des Tribunaux Arbitraux Mixtes, Vol. VII at pp.785 et seq.

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50
S.A.M.I. Case, Franco-Italian Conciliation Commission, Decision of 13 November 1951, (1951) 18 International Law Reports at pp.471 et seq.

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51
E-System Incv. Iran and Bank Melli, Decision of 4 February 1983, Iran-US Claims Tribunal Reports, Vol. 2 at pp.51 et seq.

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52
Jean-Baptiste Caire, Case, International Mixed Claim Commission, Decision of 7 June 1929, Annual Digest of Public International Law Cases, Vol. 5 at pp.444 et seq. See also Santa Rosa Mining Co. v. Mexico, British-Mexican Claims Commission, Decision of 3 August 1931, Reports of International Arbitral Awards, Vol. 5 at pp.252 et seq.

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53
Selwyn Case, British-Venezuela Claims Commission, Reports of International Arbitral Awards, Vol. 9 at pp.380 et seq.

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54
Case Concerning Certain German Interests in Polish Upper Silesia, Permanent Court of International Justice, Series A, No. 6 at pp.19 et seq., and No. 9 at pp.31 et seq.

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55
Boskowitzc. S.A. Haditerményet Etat Hongrois, 'Mixed Tribunal', Recueil des Décisions des Tribunaux Arbitraux Mixtes, Vol. I at pp.791 et seq.

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56
See above at p.93.

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57
See ICSID Case No. ARB/97/3 - Compañía de Aguas del Aconquija S.A. and Vivendi Universalv.Argentine Republic, Award of 21 November 2000, 16 ICSID Review - Foreign Investment Law Journal 641 (2001); ICSID Case No. ARB/00/4 - Salini Construttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, Decision on Jurisdiction of 23 July 2001, 129 Journal du droit international196 (2002) (French original) and 42 International Legal Materials 609 (2003) / 6 ICSID Reports 400 (2004) (English translations of the French original); ICSID Case No. ARB/01/13 - SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, Decision on Objections to Jurisdiction of 6 August 2003, 18 ICSID Review-Foreign Investment Law Journal 301 (2003).

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58
ICSID Case No. ARB/98/2 - Waste Management Inc. v. United Mexican States, Award of 2 June 2000. For comments on this case see Bernardo Cremades and David Cairns, 'The Brave New World of Global Arbitration', Journal of World Investment (2002)at pp.189 et seq. and C. Brower and J.K. Sharpe, 'Multiple and Conflicting International Arbitral Awards', Journal of World Investment (2003) at pp.211 et seq.

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59
ICSID Case No. ARB/97/7 - Maffezini v. Kingdom of Spain, Decision on Jurisdiction of 25 January 2000 and Award of 13 November 2000 (ICSID website).

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60
For further comments on the Maffezini case see Bernardo Cremades and David Cairns, 'Contract and Treaty Claims and Choice of Forum in Foreign Investment Disputes, Arbitrating Foreign Investment Disputes - Procedural and Substantive Legal Aspects', (by N. Horn, Kluwer, The Hague, 2004) at pp.344 et seq.

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61
H. C. Alvarez, 'Arbitration Under the North America Free Trade Agreement', 16:4 Arbitration International 393 (2000).

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62
The two conflicting arbitrations are, on the one hand, an UNICITRAL arbitration in London, and, on the other, an UNCITRAL arbitration in Stockholm. The relevant decisions in this saga are the following: (i) the final award of the UNCITRAL London tribunal(3 September 2001); (ii) the partial award of the UNCITRAL Stockholm tribunal (13 September 2001); (iii) the final award of the UNCITRAL Stockholm tribunal (14 March 2003); and (iv) the judgement of the Court of Appeal of Stockholm (15 May 2003). All four decisions are published online at http://www.cetv-net.com/arbitration.asp.

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63
See W. Kühn, 'How to Avoid Conflicting Awards - The Lauder and CME Cases', 5:1 The Journal of World Investment and Trade (2004) at pp.7 et seq. (and the references contained therein).

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64
See the authorities cited in note 2.

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65
This was the situation in the Eurodif/Sofidif cases. See E. Gaillard, 'L'affaire Sofidif ou les difficultés de l'arbitrage multipartite' (à propos de l'arrêt rendu par la Cour d'appel de Paris le 19 décembre 1986), Revue de l'arbitrage (1987) at pp.275 et seq.; C. Jarrosson, Note - Cour de cassation (1ère Chambre civile) 8 mars 1988 - Sociétés Sofidif et autresc. O.I.A.E.T.I.et autre, Revue de l'arbitrage (1989) at pp.481 et seq.; P. Fouchard, Note - Cour de cassation (1ère Chambre civile) 20 mars 1989 - République islamique d'Iran et autres c. société Framatome et autres, O.E.A.I. et autres c. Eurodif et autres; Cour de cassation (1ère Chambre civile) 28 juin 1989 - Eurodif c. République islamique d'Iran, Revue de l'arbitrage (1989) at pp.653 et seq.; E. Loquin, Note - Cour d'appel de Versailles (Chambres réunies) 7 mars 1990 - OIAETI et Sofidif c. Cogema, Seru, Eurodif, CEA, Revue de l'arbitrage (1991)at pp.326 et seq. 66 This was the situation in the Dutco cases. See: P. Bellet, Note - Cour d'appel de Paris ère Chambre suppl.) 5 mai 1989 - Société B.K.M.I. Industriean Lagen et Siemens c. Dutco construction, Revue de l'arbitrage (1989) at pp.723 et seq.; P. Bellet, Note - Cour de cassation (1ère Chambre civile) 7 janvier 1992 - sociétés BKMIet Siemensc. société Dutco, Revue de l'arbitrage (1992) at pp.473 et seq.; E. A. Schwartz, Multi-Party Arbitration and the ICC In the Wake of Dutco, Journal of International Arbitration (1993)at pp.5 et seq.

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