This article was originally published in Arbitration: The International Journal of Arbitration, Mediation and Dispute Management.
No man is good enough to govern another man without the other’s consent
Arbitration is a creature of consent: parties agree to contract out of a state court system and into a private dispute resolution mechanism. Subject to some mandatory provisions to safeguard the process, parties can agree on most things. Joining third parties is a complex area of consent. Consent may take many forms but most typically will come from the incorporation of institutional rules that provide for joinder or consolidation. There is a good degree of similarity between the claim to be joined and the existing claim, and both claims generally share the same seat, governing laws and institutional rules. In many cases the same agreement to arbitrate is required. The entity deciding the joinder is likely to be most influenced by considerations of efficiency.
Keywords: Joinder, Consolidation, Consent, Rules, Laws, Tribunal
Modern contractual supply chains are extremely complex with parts travelling across borders and many on a ‘just in time’ basis. This permits specialist component manufacturers to reduce production costs and ultimately gives producers the opportunity to reduce inventory levels and hence costs. When something goes wrong, however, there are potentially many linked claims, both in a supply chain scenario and in modern trade (as well as other commercial arrangements such as banking and finance agreements).
In litigation before courts, a variety of mechanisms exists for consolidating claims between different parties to a dispute into a single proceeding, or for permitting intervention, joinder, or ‘vouching in’ of additional parties into an ongoing proceeding. For example, if A, B and C enter into related contracts (A with B and B with C), separate actions between A and B and B and C can often be consolidated into a single action; alternatively, C can either intervene in, or be joined in, an existing action between A and B. In this article the term ‘joinder’ is used to cover all mechanisms of intervention, joinder, vouching in and consolidation, unless the contrary appears.
In each of these instances, there is generally no requirement that all parties consent to joinder. Rather, national courts have broad discretion to order joinder, typically based on perceived considerations of fairness and efficiency. One crucial element of fairness is the avoidance of inconsistent results.
Court rules regarding joinder are intended to permit proceedings to occur more efficiently and to avoid the possibility of inconsistent results. These considerations are, at least partially, applicable to international arbitration. In general, however, joinder in international arbitration raises additional, or at least different, issues.
In general terms, permitting joinder of additional parties in international arbitration can provide some obvious advantages. First, as with litigation, a single arbitration can in some circumstances be more efficient than two or more separate arbitrations. A single proceeding permits the same savings of overall legal fees, witness time, preparation and other expenses (including tribunal and institutional fees).
Second, joinder reduces the risk of inconsistent results in two or more separate arbitrations. This can apply both to the overall merits and to interim measures such as to injunctive relief. Third, there is a benefit of similar subject matter, common facts, and common issues of law, and tribunals have a fuller view of a transaction.
Joinder is not, however, a panacea. It can raise significant problems with respect to the appointment of arbitrators and the composition of the tribunal.
First, many arbitrations involve three-person tribunals, with each party nominating one member of the tribunal, and the two party-nominated arbitrators agreeing upon a third (or the appointing authority selecting a third). If there are three (or more) parties to the arbitration, all of whom have distinct interests, each party cannot appoint an arbitrator.
Second, there will be issues over confidentiality. Joinder entails a real, albeit limited, loss of confidentiality. Although this may be warranted, or outweighed by other considerations, it can also be inconsistent with the parties’ original agreement to arbitrate, raising concerns not present in national court litigation.
Third, although multi-party proceedings may well be more efficient as a general matter, the savings in cost and time will not always be distributed evenly among the parties. Some parties may even see an increase in costs. This can be mitigated by awarding costs and permitting parties not to participate in some bifurcated issues.
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