Sometimes contractual relationships are relatively simple—two parties conclude one contract under which each party is required to provide consideration. Often though, the contractual matrix is more complex and involves additional parties such as guarantors, subcontractors, suppliers, distributors, parent companies, etc. Furthermore, in such situations there is often more than one contract concluded.

The more contracts and parties involved in a legal relationship, the greater the need for diligence in choosing the dispute resolution mechanism. If the dispute resolution clause is poorly drafted, a party may become entangled in multiple parallel proceedings, which increase the cost and time spent on their resolution.

In arbitration, one of the methods of avoiding parallel proceedings resulting from the same or connected set of facts or agreements is consolidation of the disputes into one process.

When can arbitrations be consolidated?

The arbitration rules chosen by the parties in their arbitration agreement govern whether and when consolidation of proceedings is permissible.

In case of ad hoc arbitration, the consolidation is dependent on the consent of the parties involved.

Similarly, in case of institutional arbitration, rules of major arbitration institutions [1] permit consolidation when parties consent to it [2]. However, they also permit consolidation in a wider range of situations, even without the parties’ explicit consent. This includes situations where:

• all claims in the arbitrations are made under the same arbitration agreement(s) [3], or
• all claims are made under compatible arbitration agreements, but the cases pertain to the same legal relationship or series of transactions [4].

Some rules require the arbitrations subject to the consolidation request to involve the same parties [5], while others allow related parties [6]. In some cases, the existence of the legal relationship between parties is sufficient [7].

In deciding whether to consolidate the proceedings the following factors are also considered:

• the law applicable to the dispute,
• the stage of the proceedings, including whether any arbitrators have been appointed in more than one arbitration and whether they are the same or different persons,
• whether the claims raise common issues of law or fact,
• whether the language of the proceedings is the same in all arbitrations, or
• whether consolidating the cases will make the dispute resolution process more efficient.

Who initiates and decides on consolidation of proceedings?

Depending on the applicable arbitration rules, consolidation may be initiated either by one of the parties to the dispute or the arbitral institution.

Depending on the applicable arbitration rules, the decisions whether to consolidate or not may be issued either by the tribunal, by the arbitral institution, or a body designated by it.  

Opposition to consolidation

While on paper consolidation seems simple, in practice it may be jeopardized by the actions of a party opposing hearing all disputes together.

Respondents often try to prevent the consolidation in hope that the increased cost of handling parallel proceedings will deter the claimant from pursuing further claims. This may be particularly the case if the respondent refuses to cover their share of the advance on arbitration costs, leaving the claimant obliged to cover it all or staying the arbitration. Sometimes, the party opposing consolidation hopes that, by having multiple tribunals hear the case, it increases the chances of getting a partially positive outcome. Other times, the decision is motivated by more personal than strategical reasons.

Irrespective of the reasons, there are tactics that a party opposing consolidation may employ.

A party may oppose to consolidation by formally objecting to it. This itself will not make it impossible to consolidate the proceedings, but consolidation is rarely granted forcibly. As such, unless there is no doubt that the requirements for consolidation are met, the chances for consolidation are significantly decreased by such objection.

To counter this, parties should use foresight when negotiating the arbitration agreement and consider including provisions explicitly pertaining to consolidation. Especially if there are multiple connected contracts and different parties involved, the language of the arbitration agreement should be clear and refer to all existing or planned agreements with an explicit statement that the parties agree to consolidate the disputes arising from this specified contractual matrix.

Guerrilla tactics and how to overcome them

Even if there is an agreement to consolidate in the arbitration agreement, it may not be enough. A party opposing consolidation may resort to guerrilla tactics and jeopardize the consolidation by appointing different arbitrators in each parallel arbitration.

The equal power to choose the arbitrators is considered one of the key rights of a party in arbitration. As such, in some jurisdictions, its breach may result in the setting aside of the final award. When faced with this situation, the body deciding the consolidation request will have to choose. Whether to consolidate the proceedings and as a result remove one of the arbitrators appointed by the party opposing consolidation, which this party may then use as an argument to annul or oppose the enforcement of the award. Or whether to keep the proceedings separate, which will affect the efficiency of the process, but is less likely to affect the enforceability of the arbitral award. In most cases, the body deciding on the consolidation will choose the latter.

But this analysis may not be always correct, depending on the applicable law and the wording of the arbitration agreement. This is because, another reason for annulment or refusal of enforcement of the arbitral awards is if the arbitration was not conducted in accordance with the parties’ agreement. If the arbitration agreement included an explicit agreement to consolidate the disputes, the body’s decision not to consolidate the proceedings would be breaching the arbitration agreement. This in turn, may again create grounds for annulment or refusal of enforcement of the final award.

What adds to the complexity is that decisions on consolidation cannot be instantly challenged in courts, as they are not arbitral awards. This means that irrespective of the contents of the decision on consolidation, no party can be certain that the final award it obtains in the future will enforceable.

So what is the solution? Prevention.

Drafting the arbitration agreement to include not only the agreement to consolidation, but also including specific wording eliminating the right to appoint different arbitrators in the parallel proceedings, or undertake any other actions that would frustrate the agreement to consolidate. The parties could consider (depending on the applicable law) classifying the actions that would frustrate the arbitration agreement, including the agreement to consolidate, as non-existent. They could also consider adding remedies for the breach of the agreement to consolidate, such as cost-shifting or liquidated damages.

While the above could solve the issues arising from the described guerrilla tactics, it may be tedious to discuss these points if the arbitration agreement is added to the contract at the last stretch of lengthy negotiations. However, if the circumstances during negotiations suggest that the contract may turn into one of the complex disputes which could benefit from consolidation and there is a likelihood that there might be opposition to consolidation, it is worth giving this clause additional attention.

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[1] This analysis focuses on the ICC Rules (2021), LCIA Rules (2020), SIAC Rules (2016), and ICDR Rules (2021). While these are among the prominent arbitration institutions frequently selected by parties, there are numerous other global and regional institutions that parties may choose in their arbitration agreements.

[2] Art. 10 a) ICC Rules, Art. 22.7(i) LCIA Rules, Art. 8.1 a) and 8.7 a) SIAC Rules, and Art. 9.1 a) ICDR Rules.

[3] Art. 10 b) ICC Rules, Art. 8.1 b) and 8.7 b) SIAC Rules, and Art. 9.1 b) ICDR Rules.

[4] Art. 10 c) ICC Rules, Art. 22.7(ii) LCIA Rules, Art. 8.1 c) and 8.7 c) SIAC Rules, Art. 9 c) ICDR Rules.

[5] Art. 10 c) ICC Rules.

[6] Art. 9.1 c) ICDR Rules.

[7] Art. 22.7(ii) LCIA Rules, Art. 8.1 c) and 8.7 c) SIAC Rules.