Introduction

Bifurcation is a subject on which the number of decisions available to the public remains limited. This doubtless explains the arbitration community’s thirst for practical examples of tribunal rulings on the subject. The eight procedural orders that follow will help assuage that thirst. They show that arbitral tribunals have consistently taken a flexible and balanced approach to bifurcation, not in a vacuum, but assessing the particularities of the case and the specific consequences of separating preliminary issues from the merits of the dispute.

The ICC Rules of Arbitration provide that the arbitral tribunal has the power to decide on procedural issues, of which bifurcation is an example. Article 22 states that the ‘arbitral tribunal and the parties shall make every effort to conduct the arbitration in an expeditious and cost-effective manner’, specifying that in ‘order to ensure effective case management, the arbitral tribunal, after consulting the parties, may adopt such procedural measures as it considers appropriate, provided that they are not contrary to any agreement of the parties’.

Furthermore, Article 24 of the ICC Rules of Arbitration provides as follows: ‘the arbitral tribunal shall convene a case management conference to consult the parties on procedural measures that may be adopted pursuant to Article 22(2)’, adding that the tribunal ‘may adopt further procedural measures or modify the procedural timetable’, after consulting with the parties.

Those measures may include any of the case management techniques described in Appendix IV of the ICC Rules of Arbitration. Specifically, Appendix IV offers examples of various case management devices ‘that can be used by the arbitral tribunal and the parties for controlling time and cost’, including ‘a) Bifurcating the proceedings or rendering one or more partial awards on key issues, when doing so may genuinely be expected to result in a more efficient resolution of the case’.

The Secretariat’s Guide to ICC Arbitration explains as follows with regard to bifurcation:

Where such issues may be truly dispositive of part of the dispute or the entire dispute, bifurcation can ultimately save time and cost. Conversely, it can sometimes result in protracted proceedings and significant additional costs. Parties and the arbitral tribunal will also need to consider the extent to which issues can be dealt with separately or whether evidence relating to different issues is so inextricably linked that separate phases would result in needless repetition.1

The eight procedural orders published here confirm that the decision on bifurcating arbitral proceedings ultimately hinges on an efficiency analysis. When dealing with bifurcation, arbitrators have considered the following: (i) the issue(s) on which an early decision is sought and its connection to the merits of the dispute; (ii) the impact that bifurcation may have in terms of time and costs; (iii) the different interests at stake; and (iv) the effects of the decision on the enforceability of the final award, when the parties raise due process concerns. <page_47>

In Case 1 the arbitral tribunal decided not to bifurcate the proceeding. It emphasised the need to demonstrate that bifurcation is really necessary and beneficial to the efficient and expeditious resolution of the dispute.

According to the decision, bifurcation would not have benefitted the subsequent development of the case, as it would have resulted in unnecessary repetition of substantive discussions. In analysing the issue on which bifurcation was sought, it would have been necessary to determine the legal relationship between the parties, the applicable law and the possible rights and obligations of the parties, all of which were intrinsically related to the merits of the dispute.

The arbitral tribunal also took into account the fact that the respondent raised the issue at a very late stage, and that bifurcation would have led to increased costs and efforts, which Articles 22(1) and 22(2) of the ICC Rules of Arbitration specifically seek to avoid.

A sole arbitrator refused bifurcation in Case 2, having regard to the stage of the proceeding, the actions that the parties had already taken, and the requirement to resolve the dispute efficiently. The arbitrator explained that bifurcation was neither necessary nor pertinent in this case, as the preliminary objections could be decided in the final award in order to save time and efficiently manage the arbitration.

In Case 3 the arbitral tribunal confirmed that tribunals must assess bifurcation in light of the precise circumstances of the case and the specific consequences it would have for the subsequent development of the proceeding. Besides referring to time and cost-efficiency, the order also explained that tribunals should take into account the subject matter of the request, the form of the decision to be made, and the advantages or risks that may arise.

This decision affirms that tribunals should analyse efficiency in the overall framework of the arbitration, rather than in the short term. The arbitral tribunal explained that, although bifurcation creates an additional stage in the proceedings, which may take time and generate costs for the parties, in this case it was justified.

The decision granted bifurcation for the purpose of dealing with allegations of lack of jurisdiction and lack of legal representation. The tribunal considered that it could decide those issues independently of the merits, and reasoned that the risks from leaving them undetermined would outweigh any time and cost saving in the short term. Two other procedural objections raised (res judicata and statute of limitations) were postponed to the final award as the facts and evidence on which they were based were closely related to the merits of the dispute.

Finally, the arbitral tribunal rejected the argument that bifurcation would create a risk of prejudgment of the dispute. It considered this a purely speculative claim that provided no basis on which the alleged risk could be analysed.

Case 4 confirms the principle that arbitrators have the power to determine any procedural issues, including bifurcation. The arbitral tribunal rejected the request, explaining that it was more appropriate and efficient to examine all the issues in the final award. Specifically, the tribunal balanced the following: whether the preliminary issues were sufficiently distinct from those to be determined in the merits phase, and whether they could be examined and decided independently of each other; the likely extra time and cost of a separate, early determination, as opposed to dealing with all issues in the final award; and whether bifurcation could be accommodated within the time constraints of the procedural timetable agreed by the parties.

The arbitral tribunal decided to separate jurisdictional issues from the merits in Case 5, given the nature of those issues and the fact that it was possible to examine them without entering into the merits. The tribunal explained that bifurcation would be an efficient and appropriate management technique for this case.

In Case 6 the arbitral tribunal confirmed that the appropriateness of bifurcating the arbitration must be examined in the light of the factual background and specific circumstances of each dispute.

The tribunal assessed the potential effects of bifurcation and decided against, as it would probably not lead to any significant saving of time, effort or money. After asking itself whether the preliminary objections were sufficiently distinct from the merits and could be resolved expeditiously in a separate phase of the proceeding, the tribunal concluded that they would require the same type of evidence to be examined as later in the proceedings, if the claims were to continue to the next phase. The tribunal also addressed the interests of the parties, explaining that bifurcation could unnecessarily delay the dispute if the preliminary objections failed, and that refusing to treat those objections separately from the merits was unlikely to cause any undue harm to the respondent.

In Case 7 the arbitral tribunal acknowledged the discretion it enjoyed in this matter and decided not to bifurcate the arbitration. While recognising that bifurcating a proceeding can save time and costs if the <page_48> issues raised are dispositive of all or part of the dispute, it pointed out that bifurcation may also result in delays and additional costs. It was therefore necessary to weigh up the relative gains and losses: ‘it all boils down to striking the right balance between probable cost and efficiency gains that could result from an early dismissal or narrowing of the claims, on the one side, and the possibility of extending the proceedings and increasing its costs, on the other’.

In Case 8 the request to bifurcate the arbitration was rejected on the basis of the following considerations: bifurcation would not necessarily save time and costs or reduce the complexity of the dispute; bifurcation would prolong the procedural timetable indefinitely; the costs of the arbitration would increase; the evidence was difficult to separate; witnesses might end up being involved in two hearings, which could lead to inconsistencies; and the issues would in any case need to be considered in the final resolution of the dispute.

The conclusion to be drawn from the above is that tribunals must examine the issue of bifurcation in light of the particularities of each case. The decision needs to be appropriate, given its importance for the development of the arbitration. When properly granted, bifurcation becomes an effective tool to avoid unnecessary delays and costs, precisely because it can allow claims to be dismissed early or narrowed down for more efficient handling later. When properly denied, the refusal to allow bifurcation undoubtedly saves time and costs, and reduces the risk of prejudging issues better addressed in the final award in cases where the relevant facts are intertwined or closely related to the merits of the dispute.

1
J. Fry, S. Greenberg, F. Mazza, The Secretariat’s Guide to ICC Arbitration: A Practical Commentary on the 2012 ICC Rules of Arbitration from the Secretariat of the ICC International Court of Arbitration (2012) at 263.