www.swissarbitration.org

Workshop II

Multi-party and Multi-contract Scenarios under the Swiss Rules

Dr. Vladimir Djeric, MIKIJELJ JANKOVIC & BOGDANOVICDr. Philipp Habegger LL.M., LALIVE SA, President of the Arbitration Court

Belgrade, 9 December 2015

Multi-party and Multi-contract disputes

- more and more frequent (ICC statistics for 2012: almost one third of all cases)- issues:

- Equal treatment of parties in the constitution of the arbitral tribunal

- Can all claims be heard in a single arbitration (principle of privity of contracts)?

Gatekeeper Function of the Court

3(12) Swiss RulesIf the Respondent does not submit an Answer to the Notice of Arbitration, or if the Respondent raises an objection to the arbitration being administered under these Rules, the Court shall administer the case, unless there is manifestly no agreement to arbitrate referring to these Rules.

6(3) ICC RulesIf any party against which a claim has been made does not submit an answer, or raises one or more pleas concerning the existence, validity or scope of the arbitration agreement or concerning whether all of the claims made in the arbitration may be determined together in a single arbitration, the arbitration shall proceed and any question of jurisdiction or of whether the claims may be determined together in that arbitration shall be decided directly by the arbitral tribunal, unless the Secretary General refers the matter to the Court for its decision pursuant to Article 6(4).

Gatekeeper Function of the Court

3(12) Swiss Rules 6(4) ICC RulesIn all cases referred to the Court under Article 6(3), the Court shall decide whether and to what extent the arbitration shall proceed. The arbitration shall proceed if and to the extent that the Court is prima facie satisfied that an arbitration agreement under the Rules may exist. In particular: (i) where there are more than two parties to the arbitration, the arbitration shall proceed between those of the parties, including any additional parties joined pursuant to Article 7, with respect to which the Court is prima facie satisfied that an arbitration agreement under the Rules that binds them all may exist; and

Gatekeeper Function of the Court3(12) Swiss Rules

Decision of Court to administer the case is without prejudice to authority of arbitral tribunal to decide whether it has jurisdiction to hear the claims and if so whether in a single arbitration!

6(4) ICC Rules cont’d(ii) where claims pursuant to Article 9 are made under more than one arbitration agreement, the arbitration shall proceed as to those claims with respect to which the Court is prima facie satisfied (a) that the arbitration agreements under which those claims are made may be compatible, and (b) that all parties to the arbitration may have agreed that those claims can be determined together in a single arbitration. The Court’s decision pursuant to Article 6(4) is without prejudice to the admissibility or merits of any party’s plea or pleas.

Gatekeeper Function of the Court

C

Art. 3(12) Swiss Rules>< Art. 6(4)(i) ICC («arbitration agreement that binds them all»)

R1

R3R2

Contract A

Contract A

Contract A

Gatekeeper Function of the Court

C

Art. 3(12) Swiss Rules >< Art. 6(4)(ii) + 9 ICC («prima facie test (i) whether arbitration agreements are compatible and (ii) whether parties may have agreed that claims can be determined in single arbitration»)

R1

R2

Contract A

Contract B

Gatekeeper Function of the Court

C1

C2

Art. 3(12) Swiss Rules >< Art. 6(4)(ii) + 9 ICC

R1

R2

Contract A

Contract B

Appointment of arbitrators in multi-party proceedings

- traditionally: each group of parties (several claimants or several respondents) to agree on an arbitrator – otherwise: default appointent by institution (or state court in ad-hoc arbitration)

- Dutco decision of Cour de Cassation (France): interests of two respondents were not aligned

Appointment of arbitrators in multi-party proceedings

Westland (Court of Justice Geneva, 26 Nov 1982; Swiss Federal Supreme Court 16 May 1983)– 1 claimant, 6 respondents; ICC appointed one

arbitrator for all respondents– 1 respondent claimed unequal influence by the

parties on the appointment of the tribunal– Swiss Supreme Court: not against ordre public; no

unequal influence as long as arbitrator appointed by Claimant is independent and impartial less rigid than French Court of Cassation

Appointment of arbitrators in multi-party proceedings

Cantonal Court of Neuchâtel (17 June 1994) and Swiss Federal Supreme Court (4 Jan 1995)

– Dissolution of a partnership: 7 claiming partners against multiple responding partners. According to arbitration clause in partnership agreement each group must jointly appoint an arbitrator

– Group of claimants refer to Partner A as one of the respondents in their preliminary claim, although he substantially shares the claimants’ point of view

– the respondents refuse the joint appointment of an arbitrator with A and appoint joint arbitrator without the involvement of A

– A goes to court and demands judicial appointment of an arbitrator for all defendants court rejects

Appointment of arbitrators in multi-party proceedings

High Court Zurich (11 September 2001)– Simple partnership with three members X, Y und Z.

Arbitration clause: each member appoints an arbitrator und they appoint by majority vote a chairman amongst themselves

– X sues Y and Z. X requires that the latter jointly designate an arbitrator. Y and Z refuse. X goes to court for substitute appointment for Y and Z jointly

– Court granted the request: Respondents’ side would otherwise be "over-represented" in the arbitration or would be outbalanced in the appointment of the Chairman equal treatment!

Appointment of arbitrators in multi-party proceedings

Swiss Federal Supreme Court (4 August 2006)– Claimant group appointed its arbitrator. CAS appointed

arbitrator for the two defendants X and Judicial Committee of the International Equestrian Federation (decision of the Judicial Committee was challenged before the CAS arbitral tribunal)

– X challenged award with argument he alone should have been allowed to make an appointment or all arbitrators should have been appointed by CAS

– Challenge dismissed because of (i) forfeiture and (ii) aligned interests between X and Judicial Committee

Appointment of arbitrators in multi-party proceedings

₋ Equal treatment less stringent than under Dutco (new French arbitration law?)

₋ But: "indivisible claims" or necessary joinder of parties in accordance with the applicable substantive law ("Necessary consority" or "compulsory joinder")

₋ Previous waiver of right of appointment in arbitration clause valid (directly or indirectly by reference to arbitration rules)?

Appointment of arbitrators in multi-party proceedings

Art. 8 (3-5) Swiss Rules3. In multi-party proceedings, the arbitral tribunal shall be constituted in

accordance with the parties’ agreement.4. If the parties have not agreed upon a procedure for the constitution of

the arbitral tribunal in multi-party proceedings, the Court shall set an initial thirty-day time-limit for the Claimant of group of Claimants to designate an arbitrator, and set a subsequent thirty-day time-limit for the Respondent or group of Respondents to designate an arbitrator. If the party or group(s) of parties have each designated an arbitrator, Article 8(2) shall apply to the designation of the presiding arbitrator.

5. Where a party or group of parties fails to designate an arbitrator in multi-party proceedings, the Court may appoint all of the arbitrators, and shall specify the presiding arbitrator.

Appointment of arbitrators in multi-party proceedings

Situations that may lead to Article 8(5): • the group of claimants cannot agree (rare) • the group of respondents cannot agree • the respondents fail to participate in the proceedings (600331,

600334)

Note: the Court is free to (nevertheless) appoint an arbitrator designated by a party or group of parties (600334)

Appointment of arbitrators in multi-party proceedings

Art. 5 (3) Swiss Rules3. In the event of any failure in the constitution of

the arbitral tribunal under these Rules, the Court shall have all powers to address such failure and may, in particular, revoke any appointment made, appoint or reappoint any of the arbitrators and designate one of them as the presiding arbitrator.

Appointment of arbitrators in multi-party proceedings

Party autonomy prevails (Art. 8(3)) options:– Appointment of all arbitrators jointly by all parties, if failed

appointment of entire arbitral tribunal by the institution?– Each party has right to appoint its own arbitrator, regard-

less of number of parties? May lead to more than three arbitrators. At most, "padding/filling" on the side with fewer parties?

– Exclusion of multi-party proceedings? (reservation of applicable substantive law)

– But: Party autonomy (Art. 8(3)) does not require that Court implement party agreement which is invalid under applicable arbitration law (Art. 1(5), Art. 5(3)).

ConsolidationArt. 4(1) Swiss RulesWhere the Notice of Arbitration is submitted between parties already involved in other arbitral proceedings pending under these Rules, the Court may decide, after consulting with the parties and any confirmed arbitrator in all proceedings, that the new case shall be consolidated with the pending arbitral proceedings. The Court may proceed in the same way where a Notice of Arbitration is submitted between parties that are not identical to the parties in the pending arbitral proceedings.

Art. 10 ICC RulesConsolidation of ArbitrationsThe Court may, at the request of a party, consolidate two or more arbitrations pending under the Rules into a single arbitration, where:a) the parties have agreed to consolidation; orb) all of the claims in the arbitrations are made

under the same arbitration agreement; orc) where the claims in the arbitrations are

made under more than one arbitration agreement, the arbitrations are between the same parties, the disputes in the arbitrations arise in connection with the same legal relationship, and the Court finds the arbitration agreements to be compatible.

ConsolidationArt. 4(1) Swiss Rules cont’dWhen rendering its decision, the Court shall take into account all relevant cicurmstances, including the links between the cases and the progress already made in the pending arbitral proceedings. Where the Court decides to consolidate the new case with the pending arbitral proceedings, the parties to all proceedings shall be deemed to have waived their right to designate an arbitrator, and the Court may revoke the appointment and confirmation of arbitrators and apply the provisions of Section II (Composition of the Arbitral Tribunal).

Art. 10 ICC Rules cont’dIn deciding whether to consolidate, the Court may take into account any circumstances it considers to be relevant, including whether one of more arbitrators have been confirmed or appointed in more than one of the arbitrations and, if so, whether the same or different persons have been confirmed or appointed.When arbitrations are consolidated, they shall be consolidated into the arbitration that commenced first, unless otherwise agreed by all parties.

Consolidation

- The Court may consolidate under the terms of Article 4(1) SR:

• two cases between the same parties

• two cases between parties that are not identical

- To be distinguished:

• “voluntary” consolidation (with the consent of all parties)

concerned most cases of consolidation so far

• “forced” consolidation (against the will of a party)

rarely applied thus far (e.g. 600237)

Consolidation

Example of “forced consolidation”:

600237

Party A

Party A

Party B

Party B

Contract 1

Claim for USD 1.1m

Counterclaim for USD 4.2m

Contract 2Claim for USD 4.2m

600285

Contract 2

Consolidation

- If consolidation is ordered, the Court may revoke the

appointment and confirmation of arbitrators and re-apply

Arts. 5-8 (incl. Art. 8(5))

• Tool designed to ensure procedural fairness in (rare) cases

of “forced” consolidation, in particular when between

parties that are not identical.

• No case under Swiss Rules 2012 so far.

Consolidation

- Art. 4(1) Swiss Rules allows consolidation even if parties in both/multiple arbitrations are not identical (><ICC) (see Art. 15 VIAC: seems possible if the same arbitrators)

- Court has right to revoke earlier appointment(s) (cf. already competence in Art. 5(3)) and can re-constitute tribunal in the consolidated case (in accordance with Art. 8(3-5), i.e. Court may appoint all members in the consolidated case, but does not have to (Art. 8(5) Swiss Rules >< Art. 28.6 HKIAC Rules 2013)

JoinderArticle 4(2) Swiss RulesWhere one or more third persons request to participate in arbitral proceedings already pending under these Rules or where a party to pending arbitral proceedings under these Rules requests that one or more third persons participate in the arbitration, the arbitral tribunal shall decide on such request, after consulting with all of the parties, including the person or persons to be joined, taking into account all relevant circumstances.

Art. 7(1) ICC RulesA party wishing to join an additional party to the arbitration shall submit its request for arbitration against the additional party (the “Request for Joinder”) to the Secretariat. The date on which the Request for Joinder is received by the Secretariat shall, for all purposes, be deemed to be the date of the commencement of arbitration against the additional party. Any such joinder shall be subject to the provisions of Articles 6(3)-6(7) and 9. No additional party may be joined after the confirmation or appointment of any arbitrator, unless all parties, including the additional party, otherwise agree. The Secretariat may fix a time limit for the submission of a Request for Joinder.

Joinder

- additional Claimant- additional Respondent

- side intervention- amicus curiae- Joinder after

constitution?- Decision by:

Swiss Rules ICC Rulesyes noyes yesyes noyes yes?yes, but no, but

arbitral tribunal ICC Court

Joinder

• Problems («all relevant circumstances»):– Implicit consent by agreeing to Swiss Rules? No, Art. 4(2) does

not provide jurisdictional basis, but:• Claim made under same arbitration agreement?• Multiple related contracts containing the same or compatible

arbitration clauses?

– Specific cirumstances:• Connection, common issues of fact/law• Risk of conflicting results if third person is not joined• Timing of request, progress made in procedure, other efficiency

considerations• Compatibility of clauses, type of procedure etc.• Confidentiality (Art. 44), privacy of arbitration

Joinder

• Problems («all relevant circumstances»):– Joinder of third person after tribunal has been

constituted:• In the context of intervention: third person to be deemed

to have accepted the constitution of the arbitral tribunal?• If third person requested to join at request of an initial

party:– Third person accepts tribunal as constituted– If no acceptance: joinder probably not possible (unequal

treatment in constitution of tribunal) file new arbitration and request consolidation?

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