We have previously examined the pitfalls of multi-party and multi-contract arbitration.1 With the introduction in January this year of new rules for ICC arbitrations, now is a good time to recap the key issues and highlight how some of the major arbitral institutions approach this potentially difficult area.

Issues surrounding multi-party/multi-contract disputes

Not every transaction or contract is executed by two counter-parties. Often there may be one contract but more than two parties ("multi-party"), or a number of contracts possibly involving different parties ("multi-contract").2 In these cases, parties should carefully consider how they would like their disputes to be resolved, what issues may arise out of the contractual arrangements and, importantly, who should be a party to arbitration. Failure to do so can cause difficulties, including:

  • Jurisdictional arguments over who may arbitrate against whom, and how; and
  • Commencement of parallel proceedings (i.e. where more than one arbitration is commenced involving the same issues and/or the same parties) which may in turn lead to conflicting results, significant duplication and unnecessary additional costs.  

To address these issues, and to allow for a smoother arbitral process, parties can consider "joining" parties to an arbitration, allowing a party to "intervene" in an existing arbitration, and "consolidating" two or more arbitrations together. We set out below how four of the major arbitral institutions approach each of these techniques.  

Joinder

Joinder refers to the joining of parties (usually contracting parties, but potentially other third parties as well) to an arbitration by an existing party.

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Intervention

Intervention refers to the voluntary intervention in an existing arbitration by a third party.

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Consolidation

Consolidation refers to the merging of separate but related arbitrations, often where the related arbitration has been commenced pursuant to a different arbitration agreement and/or involves a different party.

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Recommended action

In multi-contract transactions, parties should consider bespoke drafting to ensure that the arbitration agreements in the different contracts are compatible. Alternatively, an umbrella agreement6 may be executed to satisfy the requirement for an arbitration agreement binding on all parties. Where consent of the parties is required for joinder or consolidation, parties are advised to consider bespoke drafting to record their consent in the arbitration agreement(s).  

Concluding comments

There is a risk, even where an arbitral institution's rules permit joinder of third parties, intervention or consolidation of parallel claims, that complex contractual arrangements will not be properly accommodated. We therefore advise the following:

  • If institutional arbitration is chosen, parties should check the rules carefully to see how they deal with joinder, intervention and consolidation;
  • When drafting an arbitration agreement, parties should consider what bespoke provisions will be required to accommodate their contractual arrangements, particularly if the intended arrangements diverge from institutional rules; and
  • Specialist legal advice should be obtained when drafting complex arbitration clauses in multi-party and multi-contract transactions.