Multiple-Respondent Proceedings in International Investment Arbitration: How to Safeguard Fundamental Principles of International Arbitration

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MULTIPLE-RESPONDENT PROCEEDINGS

IN

I

NTERNATIONAL

I

NVESTMENT

A

RBITRATION

:

How to Safeguard Fundamental Principles of International Arbitration

What conditions must be met in order to institute proceedings against multiple Respondents, and how is the arbitral tribunal to be composed in these proceedings?

LL.M. Thesis

International and European Law: International Trade and Investment Law

by Manuela Staudenmann manuela.staudenmann@gmail.com 12813575 under supervision of Dr. Vid Prislan 24 July 2020

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Abstract

Multi-party proceedings have become a recurring feature in international investment arbitra-tion. Similarly recurring have been debates and controversies on how these proceedings should be handled to ensure due observation of fundamental principles of arbitration. While the last years have seen several prominent investment proceedings with multiple Claimants, no attempt at proceedings with multiple Respondents has thus far been made. The ongoing expansion of multilateral investment agreements (esp. by the European Union) may however incite a large-scale investor facing similar impairment of his investment in multiple States to break new ground.

This thesis aims to shed light on this underdeveloped topic and assess how tribunals should handle investment proceedings with multiple Respondents. To this end, the thesis identifies the principles at stake and assesses the extent to which current regulation and jurisprudence suc-ceed at respecting these. The piece draws from international commercial arbitration and mul-tiple-Claimant investment arbitration, distinguishing where relevant.

Keywords

multi-party arbitration – investment arbitration – multiple Respondents – party autonomy – party equality – consent – constitution of the tribunal

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List of Abbreviations

Art. Article

BIT bilateral investment treaty

CETA EU-Canada Comprehensive Trade and Investment Agreement

CIETAC China International Economic and Trade Arbitration Commission ECHR European Convention on Human Rights

ECT Energy Charter Treaty

esp. especially

etc. et cetera (“and other similar things”)

EU European Union

i.a. among others

i.e. that is

IBA International Bar Association

ICC International Chamber of Commerce

ICCPR International Convenant on Civil and Political Rights ICSID International Centre for Settlement of Investment Disputes IIA international investment agreement

ISDS investor-state dispute settlement

LCIA London Court of International Arbitration PCA Permanent Court of Arbitration

SIAC Singapore International Arbitration Centre

UNCITRAL United Nations Commission on International Trade Law UNCTAD United Nations Conference on Trade and Development VCLT Vienna Convention on the Law of Treaties

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I. Introduction

„No generally acceptable solution to the manifold issues arising from multiparty arbitrations has yet been found by (…) any of the dozens of (…) scholars, lawyers and arbitral institutions working on this issue.“1

With increasingly globalized and interconnected business realities and the need for efficient and cost-effective dispute resolution, multi-party proceedings have emerged as a hot topic in international investment arbitration. Practitioners, scholars and arbitral institutions alike have attempted to provide concise solutions to the challenges these proceedings pose to fundamental principles of arbitration, i.e. party equality, party autonomy, consent and party appointment of the arbitrators. While for commercial arbitration these questions have been debated since the 1990s,2 it is only in the aftermath of prominent cases brought by multiple bondholders against Argentina3 that these discussions are taking place for international investment arbitration. Thus far, these discussions have been limited to proceedings involving multiple Claimants. How these challenges may be met in proceedings involving multiple Respondents has as yet not been addressed. This is hardly surprising, given that to date there have been no investor-state arbitration proceedings involving one or more investor(s) going against multiple States. This may however change: Recent years have seen the European Union take action in the field of international investment protection, negotiating and concluding IIAs like the ECT, CETA and the EU-Vietnam Agreement. All Member States of the European Union are party to these agreements. While EU-IIAs are not the first multilateral investment treaties, they are novel in two regards: 1) the State parties committing to one IIA form part of a common regulatory area4 and 2) the importance of these States for international investment activities is profound.5 As such, the chance of an investor initiating claims against multiple (Member) States has become conceivable.

1_{Stephen Bond, ‘Recent Developments in International Chambre of Commerce Arbitration’ in Practising Law}

Institute (ed), International Commercial Arbitration: Recent Developments (International Chamber of Commerce 1988) 89.

2_{Bernard Hanotiau and Eric Schwartz (eds), Multiparty Arbitration, vol 7 (Kluwer Law International &}

Interna-tional Chamber of Commerce 2010) 8.

3_{Abaclat and Others v The Argentine Republic [2011] ICSID Case No. ARB/07/5; Ambiente Ufficio SPA and}

Others v The Argentine Republic [2013] ICSID Case No. ARB/08/9; Giovanni Alemanni and Others v The Ar-gentine Republic [2014] ICSID Case No. ARB/07/8.

4_{Duncan Watts, The European Union (Edinburgh University Press 2008) 97.}

5_{Currently, EU Member-State BITs amount to almost half of all existing BITs worldwide. The EU is the world’s}

top provider and destination of foreign investment. Angelos Dimopoulos, ‘The Involvement of the EU in Investor-State Dispute Settlement: A Question of Responsibilities’ (2014) 51 Common Market Law Review 1671, 1672; European Commission, ‘Investment’ (European Commission Trade Policy: Accessing Markets, Investment, 4 July 2020) <https://ec.europa.eu/trade/policy/accessing-markets/investment/> accessed 18 June 2020.

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This thesis aims to fill the current gap regarding how investment arbitration proceedings with multiple Respondents are to be handled to safeguard fundamental principles of international investment arbitration. To this end, the thesis aims to answer the following questions: What conditions must be met in order to institute proceedings against multiple Respondents, and how is the arbitral tribunal to be composed in these proceedings?

The answers to these questions are to be provided by drawing from fundamental principles of international arbitration. Part II provides a scenario in which multiple-Respondent proceedings may occur. Part III lays out the fundamental principles of arbitration that are universally ac-cepted to guide and discipline all arbitration proceedings. The thesis then addresses the research questions in turn: Part IV investigates the jurisdictional grounds for proceedings involving multiple Respondents, Part V the constitution of the tribunal. Each part presents possible solu-tion approaches by drawing from case-law involving multiple Claimants and cross-institusolu-tional study. Focusing on and expounding the features and particularities of multiple-Respondent proceedings in international investment arbitration, the thesis critically examines to what extent these solution approaches succeed at safeguarding fundamental principles of arbitration, where and why they fall short and which approach is to be preferred. Part VI concludes.

II. Proceedings with multiple Respondents under EU-IIAs

EU-IIAs thus far have been negotiated as mixed agreements, meaning that both the EU and all Member States are party to the agreement (e.g. CETA, EU-Vietnam, EU-Singapore).6 As such, EU-IIAs oblige multiple States to afford investors the same substantive standards of protection. The enforcement of these standards is guaranteed by one uniform arbitration clause.

This uniform arbitration clause may incite a large-scale foreign investor facing impairment of his investment in multiple Member States to initiate one all-embracing arbitration against all infringing Member States, instead of proceeding against every Member State separately. An example of such a scenario may be found in States’ recent response to the COVID-19 pan-demic: As a result of the global health and economic crisis caused by the sudden emergence and rapid spread of the COVID-19 virus, essentially all EU Member States took drastic

6_{Elsa Sardinha, ‘The New EU-Led Approach to Investor-State Arbitration: The Investment Tribunal System in}

the Comprehensive Economic Trade Agreement (CETA) and the EU–Vietnam Free Trade Agreement’ (2017) 32 ICSID Review 625, 627; Dimopoulos (n 5) 1687.

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measures to address its severe impacts.7_{These measures may give rise to ISDS claims: For} instance under CETA, measures aiming at ensuring affordable drugs, tests and vaccines, in-cluding compulsory licenses, may give rise to expropriation claims by large Canadian pharma-ceuticals as Anogen, Apotex and Teva Canada.8 State aids to only national businesses may infringe the standard of national treatment.9 Finally, measures restricting virus-spreading busi-ness activities (i.e. lockdowns and limitations) may entitle the vast majority of foreign investors to bring a claim as their scope of impairment includes practically all businesses.

Large-scale foreign investors may see their investment in multiple Member States impaired by very similar measures. Seeing that resulting claims would be based on the same factual back-ground (similar measures in response to COVID-19) and the same legal basis (an agreement with all Member States being party), an investor may try to claim for compensation in one proceeding involving more than one Member State, instead of proceeding against each Member State separately. But is this permitted, and if yes, what challenges does this entail?

III. Challenges arising from proceedings with multiple Respondents

The arbitral process was designed as bi-partite, with two parties holding opposing interests and submitting opposing claims to the tribunal.10 Proceedings with multiple Respondents depart from this notion and give rise to complex procedural questions, the answers to which must comply with the fundamental principles of arbitration. This section addresses what fundamen-tal principles of arbitration may be challenged by multiple-Respondent proceedings.

7_{Nathalie Bernasconi-Osterwalder, Sarah Brewin and Nyaguthii Maina, ‘Protecting Against Investor–State}

Claims Amidst COVID-19: A Call to Action for Governments’ (International Institute for Sustainable Develop-ment 2020) 2 <https://www.iisd.org/library/investor-state-claims-amidst-covid-19> accessed 17 June 2020.

8_{Corporate Europe Observatory, ‘Cashing in on the Pandemic: How Lawyers Are Preparing to Sue States over}

COVID-19 Response Measures’ (Corporate Europe Observatory, 18 May 2020) 8 <https://corporateeu-

rope.org/en/2020/05/cashing-pandemic-how-lawyers-are-preparing-sue-states-over-covid-19-response-measures> accessed 13 June 2020.

9_{Sam Meredith, ‘Coronavirus: EU Countries Deny Bailouts to Firms Linked to Tax Havens’ CNBC (19 May}

2020) <https://www.cnbc.com/2020/05/19/coronavirus-eu-countries-deny-bailouts-to-firms-linked-to-tax-ha-vens.html> accessed 30 June 2020; Melissa Stear Gorsline and others, ‘COVID-19 and Investment Treaties: Bal-ancing the Protection of Public Health and Economic Interests’ (Jones Day, 6 May 2020) <https://www.jonesday.com/en/insights/2020/05/covid19-and-investment-treaties> accessed 29 June 2020.

10_{Nathalie Voser, ‘Multi-Party Disputes and Joinder of Third Parties’, 50 Years of the New York Convention, vol}

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3.1 Principle of party autonomy; consent

Arbitration is a “creature of agreement”11_{. Unlike in litigation, the sole source of the arbitral} tribunal’s power to resolve a particular dispute is the arbitration agreement between the disput-ing parties:12 “Obviously, no arbitration is possible without its very basis, the arbitration agree-ment.”13_{This key requirement of arbitration brings two implications:}

The first implication is the importance of consent: The formation of a valid arbitration agree-ment requires mutual consent by the parties, and the agreeagree-ment is only valid to the extent that the parties have expressed consent to it. 14_{The scope of consent is within the discretion of the} parties;15 parties are at liberty to delimit their consent to arbitration by defining it in general terms, by excluding particular disputes or by requiring specific procedures.16 The existence of a valid consent is therefore one of the most frequently disputed issues in international invest-ment dispute settleinvest-ment:17 It determines whether the tribunal has jurisdiction to hear the type of dispute in question, what breaches may be alleged and what procedural requirements need to be met.18 In short, whether valid consent exists determines whether the tribunal may enter-tain a claim or not.

In international investment arbitration, the issue of consent requires particularly great care. As the Respondent is a sovereign state, the question of its consent to the jurisdiction of the

11_{Diane Wood, ‘The Brave New World of Arbitration’ (2003) 31 Capital University Law Review 384, 391; Gary}

Born, ‘BITS, BATS and Buts: Reflections on International Dispute Resolution’ (WilmerHale, 13 May 2015) 10 <https://www.wilmerhale.com/-/media/files/Shared_Content/Editorial/News/Documents/BITs-BATs-and-Buts.pdf>.

12_{Diego Fernández Arroyo, ‘Arbitrator’s Procedural Powers: The Last Frontier of Party Autonomy?’ in Franco}

Ferrari (ed), Limits to Party Autonomy in International Commercial Arbitration (JurisNet LLC 2016) 202; Klas Laitinen, ‘Multi-Party and Multi-Contract Arbitration Mechanisms in International Commercial Arbitration’ (University of Helsinki 2014) 23; Voser (n 10) 350.

13_{Albert Jan Van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial}

Inter-pretation (Kluwer Law and Taxation 1981) 145.

14_{Christoph Schreuer, ‘Consent to Arbitration’ in Peter Muchlinski, Federico Ortino and Christoph Schreuer}

(eds), The Oxford Handbook of International Investment Law (Oxford University Press 2008) 831 <https://opil- ouplaw-com.proxy.uba.uva.nl:2443/view/10.1093/law:iic/9780199231386.001.1/law-iic-9780199231386-chap-ter-21> accessed 14 May 2020; Gary Born, International Arbitration: Law and Practice (2nd edn, Kluwer Law International 2015) 54.

15_{Guiguo Wang, ‘Consent in Investor-State Arbitration: A Critical Analysis’ (2014) 13 Chinese Journal of}

Inter-national Law 335, 337.

16_{Subject to any limitations imposed by international or domestic law. Stephan Wittich, ‘The Limits of Party}

Autonomy in Investment Arbitration’ in Christina Knahr and others (eds), Investment and Commercial

Arbitra-tion: Similarities and Divergences, vol 3 (Eleven International Publishing 2010) 53.

17_{Schreuer (n 14) 866; Born, International Arbitration: Law and Practice (n 14) 66.}

18_{Schreuer (n 14) 866; Abaclat and Others v The Argentine Republic, Dissenting Opinion [2011] ICSID Case No.}

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international instance deserves special attention and needs to be examined by the tribunal

pro-prio motu.19

The second implication of the consensual nature of arbitration is party autonomy: As drafters of the arbitration agreement, the parties may determine its content and thus decide on the ap-plicable law and procedure, the adjudicator, the language of the proceedings, the place of arbi-tration and its confidentiality.20 The freedom of the parties to set forth these aspects constitutes party autonomy. Party autonomy is seen as arbitration’s major selling-point21: By allowing the parties to tailor the arbitral procedure to the particular wants and needs of the involved parties and the particular dispute,22_{a time- and cost-efficient procedure can be selected and the} appli-cable procedure and the resulting award enjoys enhanced party acceptance.23_{In sum, the} prin-ciple of party autonomy dictates that the arbitral procedure is subject to the will of the parties.24 Party autonomy is one of the fundamental characteristics of international arbitration.25 As such, it is acknowledged by the New York Convention26 and the UNCITRAL Model Law27, which serves as basis for a substantial number of States’ domestic arbitration legislation. Furthermore, the rules of most arbitration institutions permit the parties to adopt by agreement such proce-dures as they choose.28

However, although party autonomy has been described as the “cornerstone” and “heart and soul” of international arbitration,29 it is by no means absolute, and needs to respect other prin-ciples of arbitration.

3.2 Party appointment of the tribunal

One of the distinguishing characteristics of international arbitration is the freedom of the parties to choose the persons who will decide upon the dispute.30 Unlike in litigation, where the

19_{Mihaly International Corporation v Democratic Socialist Republic of Sri Lanka [2002] ICSID Case No.}

ARB/00/2 [56].

20_{Richard Garnett, ‘International Arbitration Law: Progress Towards Harmonisation’ (2002) 3 Melbourne Journal}

of International Law 400, 402.

21_{Karl-Heinz Böckstiegel, ‘The Role of Party Autonomy in International Arbitration’ (1997) 52 Dispute}

Resolu-tion Journal 24, 26.

22_{Fernández Arroyo (n 12) 201.}

23_{Born, International Arbitration: Law and Practice (n 14) 12.} 24_{Fernández Arroyo (n 12) 202.}

25_{Born, International Arbitration: Law and Practice (n 14) 156.} 26_{Art. V(1)(d) and Art. II New York Convention.}

27_{Art. 19(1), 18, 24(1) UNCITRAL Model Law.}

28_{See Born, International Arbitration: Law and Practice (n 14) 157.}

29_{Jamshed Ansari, ‘Party Autonomy in Arbitration: A Critical Analysis’ (2014) 6 Researcher 47, 47.} 30_{Gary Born, International Commercial Arbitration (2nd edn, Kluwer Law International 2014) 1638.}

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members of the Court are pre-determined, parties of arbitral proceedings are left with the task to decide on the constitution and appointment method of the tribunal.31

The importance of the parties selecting the arbitrators cannot be understated: “The right of choosing one’s own judges” is “of the very essence of arbitral justice”,32_{and it has frequently} been observed that “in international arbitration, the choice of arbitrators may be the single most important task the parties face.”33

Why is that so? Firstly, party appointment enables the parties to choose the ‘best adjudicator for their case’.34 The tribunal shall be composed of arbitrators possessing the qualities that in

the eyes of the parties are indispensable for rendering an award in the concrete dispute.35 These qualities may include the arbitrator’s education, experience, reputation, profession, cultural background, language skills, communication skills, etc.36 As the factors a party considers im-portant may differ greatly, this choice is left to the purely subjective view of the parties.37

Secondly, while the party-appointed arbitrator is by no means an agent of the appointing party,

he can ensure that arguments and positions are considered and understood by the other arbitra-tors.38 This task is particularly important as international arbitration may involve counsel and arbitrators from diverse languages, legal training and culture and thus the risk of misunder-standings is inherent.39_{Also, misunderstandings must be avoided due to the very limited} avail-able remedies against the final award.40 Thirdly, party appointment gives the parties a sense of

31_{ibid 1641.}

32_{James Brown Scott, The Proceedings of the Hague Peace Conference, Translation of the Official Texts,The}

Conference of 1907, Meetings of the First Commission (Oxford University Press 1920) 85.

33_{Michael Reisman and others, International Commercial Arbitration (2nd edn, Foundation Press 2015) 640;}

William W Park, ‘Income Tax Treaty Arbitration’ (2002) 10 George Mason Law Review 803, 813.; Ann Ryan Robertson, Derrick Carson and David E Harrell Jr., ‘Arbitrator Selection in Multiparty Disputes’ (Corporate

Counsel, 16 July 2015) 1

<https://www.lockelord.com/-/media/files/newsandevents/news/2015/07/arbitrator-se-lection-in-multiparty-disputes-part-2-of-4.pdf?la=en&hash=87CC277377DF2818688C9E080AD96430> ac-cessed 15 July 2020; Pablo Agustín Alonso, ‘Impartiality and Independence of Arbitrators in International Arbi-tration: Issue Conflicts as Grounds for Disqualification with Special Regard to ICSID Arbitrations’ (2017) 20 Max Planck Yearbook of United Nations Law Online 535, 544.

34_{Bazil Oglinda, ‘Key Criteria in Appointment of Arbitrators in International Arbitration’ (2015) 5 Juridical}

Trib-une 124, 124.

35_{Alfonso Gomez-Acebo, Party-Appointed Arbitrators in International Commercial Arbitration, vol 34 (Kluwer}

Law International 2016) 41.

36_{Nathalie Voser and Pascale Gola, ‘The Arbitral Tribunal’ in Gabrielle Kaufmann-Kohler and Blaise Stucki}

(eds), International Arbitration in Switzerland: A Handbook for Practicioners (Kluwer Law International 2004) 36.

37_{Gomez-Acebo (n 35) 40.}

38_{Richard M Mosk, ‘The Role of Party-Appointed Arbitrators in International Arbitration: The Experience of the}

Iran-United States Claims Tribunal’ (1988) 1 Global Business & Development Law Journal 253, 253.

39_{Alan Redfern and others, Law and Practice of International Commercial Arbitration (4th edn, Sweet &}

Max-well 2004) 185.

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proximity and control. This not only increases their cooperation with the tribunal, leading to a more efficient procedure, but more importantly inspires confidence in the arbitral process and raises the legitimacy of the resulting award.41 The right to appoint the arbitrators is “a condition upon which the confidence in arbitration rests”.42

In sum, party appointment is central to the arbitral process and to the parties’ confidence in the award. The importance of this right is reiterated by the fact that the failure to respect it can have severe implications on the validity and enforceability of the award.43

3.3 Principle of party equality

The principle of party equality requires equal treatment of the disputing parties.44 Based on the premise that procedural equality is inextricably linked to the right to a fair trial,45 the principle of party equality forms an integral part of due process and the notion of justice underlying every system based on the rule of law.46 Consequently, it finds expression in most national legal systems47_{and a variety of notable international legal instruments: The Universal} Decla-ration of Human Rights and the International Covenant on Civil and Political Rights recognize the right to equal treatment as part of fair trial protections, 48 _{and the often-quoted term} “equal-ity of arms” has been coined under the European Convention on Human Rights.49 _In interna-tional investment arbitration, the principle of party equality is widely accepted to be enshrined in the New York Convention, either in Art. V(1)(b) prohibiting the enforcement of an award if a party “was unable to present its case”,50 _{or in Art. V(2)(b) as a matter of procedural public}

41_{Gomez-Acebo (n 35) XV; Born, International Commercial Arbitration (n 30) 1641.} 42_{Gomez-Acebo (n 35) 39.}

43_{Ricardo Ugarte and Thomas Bevilacqua, ‘Ensuring Party Equality in the Process of Designating Arbitrators in}

Multiparty Arbitration: An Update on the Governing Provisions’ (2010) 27 Journal of International Arbitration 9, 10.

44_{Thomas W Wälde, ‘Procedural Challenges in Investment Arbitration under the Shadow of the Dual Role of the}

State: Asymmetries and Tribunals’ Duty to Ensure, Pro-Actively, the Equality of Arms’ (2010) 26 Arbitration International 3, 11.

45_{Maxi Scherer, Dharshini Prasad and Dina Prokic, ‘The Principle of Equal Treatment in International}

Arbitra-tion’ [2018] SSRN Electronic Journal 2 <https://www.ssrn.com/abstract=3377237> accessed 13 May 2020.

46_{Stefan Huber, ‘Equality of the Parties in Investment Arbitration - Private International Law Aspects’ (Conflict}

of Laws, 18 May 2020) para 4

<https://conflictoflaws.net/2020/equality-of-the-parties-in-investment-arbitration-private-international-law-aspects/> accessed 6 March 2020.

47_{Fernández Arroyo (n 12) 203.}

48_{Art. 10 Universal Declaration of Human Rights; Art. 14 ICCPR.} 49_{Art. 6 ECHR; see Wälde (n 44) 38.}

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policy.51 _{Furthermore, party equality is guaranteed in Art. 18 UNCITRAL Model Law and has} been referred to by tribunals in investment dispute cases.52

The principle of party equality has an expansive reach: It not only guides the tribunal in con-ducting the arbitral proceedings, but also extends to the parties in drafting the proceedings.53 “The principle of equality (…) should be observed not only by the arbitral tribunal but also by the parties when laying down any rules of procedure.”54

3.4 Conclusion

Arbitration is governed by fundamental principles that extend to all stages of the arbitral pro-cess. The principle of party autonomy is the result of the sole legitimacy source of arbitration being the arbitration agreement which the disputing parties mutually consent to. As drafters of the arbitration agreement, the parties may determine all aspects of the arbitration – given they all consent. Another defining characteristic of arbitration and key to its legitimacy and success is the parties’ right to appoint the arbitrators. The decision-maker plays a crucial role in any dispute resolution mechanism, and it is the freedom of the parties to determine the decision-maker that makes arbitration so attractive. Finally, the arbitral process is a process of justice and as such must ensure that the principle of party equality is respected.

IV. Jurisdictional basis for multiple-Respondent proceedings

In order to allow multiple-Respondent proceedings to advance, the tribunal must be satisfied that these find a jurisdictional basis. If this jurisdictional basis is not met, multi-party proceed-ings are unavailable and claims must be filed in separate proceedproceed-ings. Objections to multi-party proceedings are generally raised by the Respondent State, as the Claimant chose to file the claim in this fashion instead of initiating separate proceedings.55 In determining whether to allow the initiation of multi-party proceedings, tribunals have considered three factors: Con-sent, a link between the claims (connexity) and judicial efficiency.

51_{Albert Jan Van den Berg, ‘The New York Convention of 1958: An Overview’ in Emmanuel Gaillard and}

Domenico Di Pietro (eds), Enforcement of Arbitration Agreements and International Arbitral Awards: The New

York Convention in Practice (Cameron May 2008) 64.

52_{See e.g. Maritime International Nominees Establishment (MINE) v Government of Guinea, Annulment Decision}

[1988] ICSID Case No. ARB/84/4 [5.06].

53_{Scherer, Prasad and Prokic (n 45) 4.}

54_{United Nations Commission on International Trade Law, ‘Report of the Working Group on International}

Con-tract Practices on the Work of Its Seventh Session’ (United Nations General Assembly 1984) A/CN.9/246 para 62 <https://undocs.org/pdf?symbol=en/A/CN.9/246> accessed 6 March 2020.

55_{Orkun Akseli, ‘Appointment of the Arbitrators as Specified in the Agreement to Arbitrate’ (2003) 20 Journal}

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4.1 Consent

In addition to general objections to consent (such as the party not being bound by the arbitration agreement), multi-party proceedings give rise to another objection: Respondents may claim that while they did consent to arbitral proceedings, they did not consent to multi-party proceed-ings.56 As multi-party proceedings are rarely addressed in arbitration agreements, tribunals need to interpret the agreement to determine whether it establishes consent to multi-party pro-ceedings. This issue has generated much debate.57

4.1.1 No requirement of secondary consent

There seems to be consensus that no secondary consent is needed. Arguments by parties claim-ing that there need not only be consent to arbitration (“primary consent”), but also an additional consent to the multi-party form of arbitration (“secondary consent”), have consistently been rejected.58 Tribunals’ reasons for reaching this decision diverge: Adamakopoulos holds that the notion of double or dual consent does not find any basis in the BIT and this silence is not capable of establishing such requirement.59 Ambiente points to other cases where tribunals had taken no issue with the Respondent State not expressly consenting to multi-party proceedings (but notably also not objecting).60 Alemanni states that consent is not less valid by only being given once or more valid by being given twice.61 Abaclat holds that secondary consent may arguably be a requirement for “representative”, but not for “aggregate” proceedings.62 The cri-terion advanced for delimiting aggregate from representative proceedings is whether each in-dividual party is aware of and consented to the arbitration proceedings.63 The tribunal found this to be the case and determined the proceedings to be aggregate – which, in the tribunals reasoning, meant that no secondary consent was required. However, the proceedings were found to possess representative elements due to 1) the large number of Claimants (18’000), 2) them mandating a third party to represent their interests in the proceedings and 3) the

56_{Matthew Secomb, ‘Multi-Party, Multi-Contract Rules and the Arbitrators’ Role in Finding Consent’ in Patricia}

Louise Shaughnessy and Sherlin Tung (eds), The Powers and Duties of an Arbitrator: Liber Amicorum Pierre A.

Karrer (Kluwer Law International 2017) 335.

57_{Cristián Conejero Roos, ‘Multi-Party Arbitration and Rule-Making: Same Issues, Contrasting Approaches’ in}

Albert Jan Van den Berg (ed), 50 Years of the New York Convention, vol 14 (ICCA & Kluwer Law International 2009) 414; Born, International Arbitration: Law and Practice (n 14) 233.

58_{See Abaclat (n 3) para 490; Ambiente (n 3) para 141; Alemanni (n 3) paras 268–269; Theodoros Adamakopoulos}

and Others v Republic of Cyprus [2020] ICSID Case No. ARB/15/49 [201].

59_{Adamakopoulos (n 58) paras 201, 270.} 60_{Ambiente (n 3) para 141.}

61_{Alemanni (n 3) para 269.} 62_{Abaclat (n 3) para 485.} 63_{ibid 486.}

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impossibility of this third party to take into account all individual interests.64_{As such, the} tri-bunal re-examined the necessity of a secondary consent.65_{Multiple-Respondent cases would} hardly involve more than a handful of parties and as such not possess representative elements. Following Abaclat, they would classify as purely aggregate proceedings, to which no second-ary consent is necesssecond-ary.

In sum, following all tribunals’ reasoning multiple-Respondent proceedings would not require secondary consent.

This deserves support: For one, it is widely recognized that “primary consent” can be given by

implicit means.66 Making multi-party proceedings a carve-out from this doctrine would require reasonable and convincing grounds. No such grounds are apparent, quite the contrary is true: While “primary consent” constitutes a core question of arbitration, “secondary consent” con-cerns purely procedural issues.67 These being farther away from the “core” of arbitration, it is inappropriate to subject them to stricter conditions,68 i.e.“it would be illogical to require a more rigorous standard of consent in situations involving matters of secondary (i.e. subordinate) concern than in matters of primary concern.”69_{Further, introducing the requirement of a} sec-ondary consent through of jurisprudence would reduce the afforded protection and as such “overturn the equilibrium” of investment arbitration, in which a host State consents to arbitra-tion in advance in order to stimulate and attract foreign investment.70 For these reasons, intro-ducing the rigid requirement of a secondary consent through jurisprudence is undesirable, and the thus far rendered awards are to be endorsed.

4.1.2 Interpreting the scope of consent

Instead of requiring secondary consent, tribunals turn on examining whether the instrument establishing Respondents’ consent “can properly be interpreted, on the particular facts of the

64_{ibid 487.}

65_{The necessity of a secondary consent for this proceeding with representative elements was ultimately denied}

for reasons irrelevant for purposes of this thesis (the BIT covering bonds as investment, which are susceptible of involving high numbers of Claimants). ibid 491.

66_{Manish Aggerwal and Simon Maynard, ‘Investment Treaty Arbitration Post-Abaclat: Towards a Taxonomy of}

“Mass” Claims’ (2014) 3 Cambridge Journal of International and Comparative Law 825, 837; Born, International

Commercial Arbitration (n 30) 2084; Stacie I Strong, ‘Does Class Arbitration “Change the Nature” of Arbitration?

Stolt Nielsen, AT&T and a Return to First Principles’ (2012) 17 Harvard Negotiation Law Review 201, 252.

67_{This may be open for debate in large-scale arbitration. Stacie I Strong, Class, Mass, and Collective Arbitration}

in National and International Law (Oxford University Press 2013) para 4.112, 4.118-4.121.

68_{Alan Scott Rau, ‘Arbitral Jurisdiction and the Dimensions of “Consent”’ (2008) 24 Arbitration International}

199, 203.

69_{Stacie I Strong, ‘Case Comment: Ambiente Ufficio SpA and Others v Argentine Republic: Heir of Abaclat?}

Mass and Multiparty Proceedings’ (2014) 29 ICSID Review 149, 151.

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case, as covering the particular multiplicity of [parties] within that consent”.71_{To this end,} tribunals must follow the general rules of treaty interpretation as codified in Art. 31 and 32 of the VCLT.72 Focusing on the wording of the arbitration agreement has however consistently been found to be inappropriate (i.e. examining whether singular or plural forms are used to describe the parties).73 This deserves support: Arbitration clauses are seldomly custom-tai-lored,74 and as such a broader inquiry into the parties’ intent should be undertaken.

One approach is to regard consent as given if the applicable legal framework allows for multi-party proceedings. This was taken in Abaclat: With the arbitration agreement neither clearly permitting nor dismissing multi-party proceedings, the tribunal turned to whether such pro-ceedings are in general permissible in ICSID arbitration propro-ceedings.75_{The tribunal found the} latter to be the case and as such saw Respondent’s consent to arbitration to include consent to multi-party proceedings.76_{Respondent’s objection was rejected even in light of the tribunal} finding that the multi-party form required alterations of the agreed-upon procedure.77 Ambiente followed this approach.78

Turning solely to the applicable arbitration rules and disregarding the arbitration agreement is however problematic: Parties’ consent to arbitration rests solely on the arbitration agreement, and thus it is this agreement that determines whether the scope of parties’ consent encompasses multi-party proceedings. This approach was therefore rightly criticized for failing to discern the general jurisdiction available under certain rules from the special jurisdiction parties con-sented to.79

Another approach is to regard consent as given if the multiple claims constitute one single

dispute. This approach was taken in Alemanni and Adamakopoulos.80 A single dispute exists where there is a “substantive unity” due to connexity between the claims (see infra 4.2).81

71_{Alemanni (n 3) para 286.} 72_{Ambiente (n 3) para 129.}

73_{Alemanni (n 3) paras 265, 270; Adamakopoulos (n 58) paras 197–200.} 74_{Voser (n 10) 348.}

75_{Abaclat (n 3) para 491.} 76_{ibid 551.}

77_{ibid 531.}

78_{Ambiente (n 3) para 146.}

79_{Abaclat Diss. (n 18) paras 12–15, 162–165.}

80_{Alemanni (n 3) para 280; Adamakopoulos (n 58) para 205.} 81_{Alemanni (n 3) para 287.}

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4.2 Necessary link between claims (connexity)

4.2.1 Nature and ratio of the requirement

Connexity has been addressed both as condition to establish consent (see supra 4.1) and as

additional jurisdictional requirement for the initiation of multi-party proceedings. The tribunal

in Alemanni held that consent to multi-party proceedings is given if the claims can be seen as forming a single dispute due to their connexity.82 Nonetheless, the tribunal went on to define connexity as “the link that must exist between a group of claimants and between their claims,

in the absence of consent by the Respondent to the hearing of their claims together”.83 The tribunal in Ambiente considered the connexity requirement to be an additional requirement.84 Whatever the exact nature of the connexity requirement, there seems to be consensus on its existence. Tribunals and disputing parties have consistently required some degree of connexity, i.e. the multiple claims must be linked to a certain extent in order to be admissible. This practice is to be endorsed, as it fosters consent: The underlying rationale is that connected claims were

foreseeable and thus parties’ have given their implied consent. That connexity can point to

implied consent has been recognized in the context of counterclaims: Although IIAs rarely contain provisions specifically permitting counterclaims, they are widely regarded to be al-lowed if they are sufficiently connected to the original claim.85

While in commercial arbitration connexity is not a requirement as the parties are seen to have accepted the possibility of multi-party proceedings by way of entering into a multi-party agree-ment with a uniform arbitration clause,86 in investment arbitration this cannot hold true: First, no acceptance to multiple parties on the Claimant side can be inferred due to investment arbi-tration’s characterization as “arbitration without privity”.87_{As opposed to commercial} arbitra-tion, the host State(s) do not enter into an agreement to arbitrate with defined parties, but rather extend(s) an offer to arbitrate to a unknown pool of potential investors, i.e. gives an open-ended consent.88 Second, no acceptance to multiple parties on the Respondent side can be inferred, as the motives for entering into an agreement with multiple State parties is not to enable

multiple-82_{ibid 286.}

83_{ibid 292. [emphasis added].} 84_{Ambiente (n 3) paras 152–153.}

85_{Kamran Musayev, ‘Counterclaims in Treaty-Based Investment Arbitration’ (University of Oslo 2017) 34}

<https://www.duo.uio.no/bitstream/handle/10852/57333/LLM-Thesis--Kamran-Musayev-.pdf?sequence=1&is-Allowed=y> accessed 21 July 2020.

86_{Voser (n 10) 355; ibid 354.} 87_{Wang (n 15) 336.}

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Respondent proceedings, but rather to establish a more coherent global framework of invest-ment protection.89_{The conclusion of multi-party agreements in investment arbitration is thus} explainable with other motives, and as such it cannot be inferred from this alone that the host State(s) accepted to arbitrate with multiple parties. Rather, an additional connection between the claims is necessary to establish implied consent. But what degree of connection?

4.2.2 Degree of connexity

According to Alemanni, connexity is given if “the interest represented on each side of the dis-pute is in all essential respects identical for all of those involved on that side of the disdis-pute”.90 This is the case if the Claimants’ actual rights and the host State’s measures’ effect on these rights are sufficiently the same.91

Abaclat and Ambiente advanced more elaborate connexity requirements. These cases suggest

that connexity exists only where claims are homogenous, meaning that they are brought under the same BIT, based on the same allegation of illegality and the same factual background, and having the same prayer for relief.92

A combination of these two approaches was taken by the most recent investment arbitration case involving multiple parties, Adamakopoulos: The tribunal followed Alemanni in finding that the decisive issue is whether multiple claims constitute a single dispute, which is the case if they are in all essential respects the same. Nonetheless, the homogeneity requirements (Abaclat and Ambiente) “may be useful to consider in deciding whether claims constitute a single dispute” – they are however not decisive.93 The tribunal consequently tested whether the claims fulfilled each homogeneity requirement, and found them to constitute a single dispute albeit them having arisen under two different BITs (and thus not fulfilling each homogeneity requirement).

Which approach is to be preferred? In principle, the single dispute requirement acknowledges

that claims must be sufficiently similar to fall within States’ implied consent, thus setting clear outer borders. However, the definition of it in Alemanni (similar rights of Claimants and similar effects on these rights) focuses on the connection between Claimants, not between claims.

89_{UNCTAD, ‘The Rise of Regionalism in International Investment Policymaking: Consolidation or Complexity?’}

(UNCTAD 2013) 3 4 <http://unctad.org/en/PublicationsLibrary/webdiaepcb2013d8_en.pdf> accessed 20 July 2020.

90_{Alemanni (n 3) para 292.} 91_{ibid 293.}

92_{Ambiente (n 3) paras 159–163; Abaclat (n 3) paras 540–543.} 93_{Adamakopoulos (n 58) para 218.}

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Multiple-Respondent proceedings lacking a multitude of Claimants, this approach is difficult to translate into this context. Better suited in this regard may be the homogeneity requirements of Abaclat and Ambiente, as they focus on the connection between claims, not Claimants. List-ing definite criteria may however prove to be too rigorous and formalistic and may exclude clearly connected claims from being heard together. A good balance seems to be struck by

Adamakopoulos: It allows flexibility by building on the notion of a single dispute, but at the

same time puts forward non-exhaustive criteria for determining whether claims constitute a single dispute, thus increasing transparency and the quality of tribunals’ reasoning.

Setting universally valid criteria for what constitutes a single dispute and thus providing tribu-nals with an actual “checklist” may be inappropriate as it overlooks that a decision on connexity is strongly dependent on the specific facts of each case. The criteria advanced may however provide a useful point of reference for determining whether claims constitute a single dispute. The advanced criteria require connexity to be met for multiple matters. Yet, no tribunal has thus far found that multiple claims did not meet this standard. This may suggest that the stand-ard is too lenient. However, seeing that the assessed cases are of very few multi-party cases where the Respondent State actually raised an objection to consent,94 and three of the cases involve the same Respondent State and underlying measure, one should be wary of drawing general conclusions.

The question poses itself whether this standard should be higher for multiple-Respondent pro-ceedings. Multiple-Respondent proceedings differ from multiple-Claimant proceedings as they may come with a loss of participation rights (see infra 5.2). As such, the threshold for consent may need to be higher.

Finally, the argument may be made that the connexity requirement should be the same for the initiation of multi-party proceedings as for the consolidation of proceedings. It has been sug-gested that allowing Claimant(s) to initiate multi-party proceedings against Respondent’s ob-jection may violate the principle of party equality, as “at the end of the day, it is the Claimants’ choice that is imposed on the Respondent to have the case organized in the manner they wish.”95_{Respondents lack the ability of Claimants to decide whether claims are submitted}

94_{Alexis Martinez and Rostislav Pekar, ‘A Modest Proposal for Preventing Multipartite Arbitrations from Being}

a Burden to the Parties and for Making Them Beneficial to the Parties’ (2016) 5 American University Business Law Review 355, 365.

95_{Theodoros Adamakopoulos and Others v Republic of Cyprus, Dissenting Opinion [2020] ICSID Case No.}

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jointly or separately; however, they may have the tool of consolidation of proceedings.96_To preserve party equality, it may be required that conditions for the institution of multi-party proceedings be the same as for consolidation of proceedings.

However, this line of argumentation quickly proves to be faulty: If the conditions for the initi-ation of multi-party proceedings need to be the same as for consolidiniti-ation so as to preserve party equality, what happens if there is no consolidation agreement? Are multi-party proceedings impermissible due to inequality if Respondents do not have the right to consolidate? Certainly not; all above-discussed ICSID cases have allowed multi-party proceedings despite the ICSID Convention not permitting consolidation.97_{The conditions for multi-party proceedings thus} need not converge with those for consolidated proceedings. This conclusion notwithstanding, it seems that this approach would often not considerably alter the connexity standard employed; e.g. CETA allows consolidation of claims if they have a “question of law or fact in common and arise out of the same events or circumstances, and consolidation would best serve the in-terests of fair and efficient dispute resolution”.98

4.3 Judicial efficiency

In arguing the tribunal’s jurisdiction, parties routinely bring forward arguments of judicial ef-ficiency.99 Firstly, multi-party proceedings avoid the risk of conflicting awards. This risk only exists if the connexity requirement is met: Sufficiently linked claims pose the same legal and/or factual questions, the separate answering of which may lead to irreconcilable awards.100 This risk is made even more real by the fact that the award is not subject to appeal, but only to limited review.101 Secondly, multi-party proceedings may be more efficient and economic than separate proceedings, as they avoid a multiplicity of hearings and evidentiary procedures on closely connected matters.102

96_{Berk Demirkol, ‘Does an Investment Treaty Tribunal Need Special Consent for Mass Claims?’ (2013) 2}

Cam-bridge Journal of International and Comparative Law 612, 631.

97_{Alonso (n 33) para 31.} 98_{Art. 8.43 (8) CETA.}

99_{Abaclat (n 3) para 513; Ambiente (n 3) para 110; Alemanni (n 3) para 96; Voser (n 10) 353; Kristina Siig,}

‘Multi-Party Arbitration in International Trade: Problems and Solutions’ (2007) 1 International Journal of Liability and Scientific Enquiry 72, 77.

100_{Gabrielle Kaufmann-Kohler and others, ‘Consolidation of Proceedings in Investment Arbitration: How Can}

Multiple Proceedings Arising from the Same or Related Situations Be Handled Efficiently?: Final Report on the Geneva Colloquium Held on 22 April 2006’ (2006) 21 ICSID Review 59, 81.

101_{ibid 82.}

102_{Fritz Nicklisch, ‘Multi-Party Arbitration and Dispute Resolution in Major Industrial Projects’ (1994) 11}

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Tribunals have handled such arguments differently: According to Ambiente, policy considera-tions “do not add to answering the question of whether the tribunal has jurisdiction” over multi-party proceedings.103 Alemanni took a more differentiated view: While the tribunal agreed that mere convenience or cost savings for Claimant resp. inefficiency for Respondent cannot be considered jurisdictional grounds, judicial efficiency considerations may render multi-party proceedings inadmissible if they reached the severity of due process violations.104

Adama-kopoulos found that multi-party proceedings would not be allowed if they posed

“insurmount-able problems”.105_{Conversely, Abaclat found that a tribunal might need to assume jurisdiction} over a multi-party proceeding if separate cases are found to be cost prohibitive and practically impossible for the tribunal to deal with, so that the rejection of multi-party proceedings amounts to a denial of justice.106 In sum, most tribunals have taken into account efficiency considerations to a certain extent in deciding whether to allow multi-party proceedings. Is this

to be endorsed?

Efficiency considerations do and should influence the tribunal in interpreting the scope of con-sent. Lack of efficiency, i.e. lengthy proceedings with prohibitive costs, call the availability of adequate legal remedies into question and as such seriously impair the institution of interna-tional investment arbitration as a whole.107

Efficiency considerations can however not replace parties’ consent where there is none.108 Still, they may provide assistance in scenarios of ambiguous or uncertain consent.109_{The rebuttable} presumption may be made that a party in all cases a priori intends disputes to be resolved

efficiently and as such has given consent to every method improving efficiency.110 However, while this argument may be used successfully for assuming Respondent’s consent in multiple-Claimant cases, it works to the reverse in multiple-Respondent cases: Multiple-Respondent cases improve efficiency for the investor, not for the Respondent States. While multi-party proceedings do improve overall efficiency by reducing the absolute costs compared to the

103_{Ambiente (n 3) para 172.} 104_{Alemanni (n 3) paras 323–324.} 105_{Adamakopoulos (n 58) para 224.} 106_{Abaclat (n 3) para 537.}

107_{Lars Markert, ‘Improving Efficiency in Investment Arbitration’ (2011) 4 Contemporary Asia Arbitration 215,}

217.

108_{Conejero Roos (n 57) 432; Strong, Class, Mass, and Collective Arbitration in National and International Law}

(n 67) para 3.74-3.76. See also Hanotiau and Schwartz (n 2) 25. (“without consent, no amount of connections between multiple parties (…) would be sufficient to give an arbitral tribunal jurisdiction.”).

109_{Jeffrey Maurice Waincymer, ‘Complex Arbitration’, Procedure and Evidence in International Arbitration}

(Kluwer Law International 2012) 500.

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cumulative costs of separate proceedings, the relative costs to the individual party may be higher.111_{Additional parties not only add procedural complexities (scheduling hearings,} ap-pointment of arbitrators, right to present one’s case), but also expand the legal and factual questions to be addressed.112 These additional costs only apply to the parties that would not be involved in all individual cases, meaning the “multiple” parties, co-claimants or co-respond-ents.113 While in multiple-Claimant cases the objecting Respondent State is the beneficiary of these absolute cost savings, in multiple-Respondent cases the objecting States pay the addi-tional relative costs. Respondents can therefore not be assumed to have consented to proceed-ings that reduce efficiency for them.

Furthermore, investment arbitration frequently raises issues of state regulatory interests, which, due to their potential effects on all citizens of the host State, require particular diligence and due care.114_{As such, tribunals will be wary of opting for speedy procedures risking the} pro-ceedings becoming a “tangled web”115. Also, the involvement of public interests makes it de-batable whether procedural efficiency gains should be measured by the parties’ interests alone.116 In sum, procedural efficiency considerations in multiple-Respondent cases are not in favor of assuming Respondents’ consent to multi-party proceedings.

4.4 Conclusion

Practice shows that increasingly fewer tribunals restrain from exercising jurisdiction.117_To date, States have been generally unsuccessful when objecting to consent to multi-party arbitra-tion.118 This endangers the principle of consent, which is particularly important when sovereign States are involved.119 The conceptualization of ISDS as arbitration without privity makes it difficult for States to predict, at the time of giving consent, what this consent will entail;120 in

111_{Matthew D Schwartz, ‘Multiparty Disputes and Consolidated Arbitrations: An Oxymoron or the Solution to a}

Continuing Dilemma’ (1990) 22 Case Western Reserve Journal of International Law 341, 343; Born, International

Arbitration: Law and Practice (n 14) 228.

112_{Thomas J Stipanowich, ‘Arbitration and the Multiparty Dispute: The Search for Workable Solutions’ (1987)}

72 Iowa Law Review 473, 505; Kaufmann-Kohler and others (n 100) 83.

113_{Andrea Marco Steingruber, Consent in International Arbitration (Oxford University Press 2012) 296.} 114_{Claudia Reith, ‘Investor-State Arbitration: A Tale of Endless Obstacles?’ in Mark Fenwick and Stefan Wrbka}

(eds), Flexibility in Modern Business Law (Springer 2016) 129.

115_{Maria Theresa Trofaier, ‘Multi-Party Arbitration The Organisation of Multi-Party Proceedings - The Problems}

Faced by Parties and Arbitrators’ [2009] Annals of the Faculty of Law in Belgrade International Law Edition 64, 79.

116_{Markert (n 107) 220.} 117_{Wang (n 15) 339.}

118_{Martinez and Pekar (n 94) 365.}

119_{David N Cinotti, ‘How Informed Is Sovereign Consent to Investor-State Arbitration’ (2015) 30 Maryland}

Jour-nal of InternatioJour-nal Law 105, 111.

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order to fall within the implied consent, claims brought in multi-party proceedings must be sufficiently connected. Connexity is met if the claims constitute a single dispute due to i.a. the invocation of the same BIT, the same illegality and factual background and the same prayer for relief. A closer connection should be required in proceedings involving multiple Respond-ents as opposed to Claimants. As opposed to multiple-Claimant proceedings, efficiency con-siderations in multiple-Respondent proceedings speak against the assumption of Respondents’ consent.

V. Constitution of the Tribunal

In multi-party proceedings, the constitution of the tribunal is one of the most complex as-pects.121 The reason for this is the inevitable conflict between fundamental principles of arbi-tration: The principle of party equality requires an appointment method that treats the parties equally. The principle of party autonomy requires that the appointment method which was agreed upon by the parties be followed. The right to appoint the arbitrators requires that all parties have a say in the arbitrators’ appointment.

The constitution of the arbitral tribunal in multi-party proceedings requires a careful balancing act between these principles. While some claim that arbitration in its present state is not well-equipped to handle multi-party disputes,122 others find that, while in the past the issue of ap-pointment was critical, today there are solutions in place.123 In the following, the different methods of constitution advanced by arbitral institutions are to be presented and examined for their conformity with party equality, party autonomy and the principle of party appointment. The presented methods refer to the constitution of three-member tribunals. These are the most common number of arbitrators in international arbitration.124 Prominent institutional rules pro-vide for this absent parties’ deviating agreement.125

121_{Born, International Arbitration: Law and Practice (n 14) 235.} 122_{Voser (n 10) 345.}

123_{ibid 362.}

124_{Chiara Giorgetti, ‘The Arbitral Tribunal: Selection and Replacement of Arbitrators’ in Chiara Giorgetti (ed),}

Litigating International Investment Disputes: A Practitioner’s Guide, vol 8 (Brill | Nijhof 2014) 145.

125_{Art. 7 (1) PCA; Art. 16 (2) SCC; Art. 5.2 SIAC; Art. 25 (2) CIETAC; Art. 37(2)(b) ICSID Convention; but}

not: ICC, LCIA and ICDR, which provide for a sole arbitrator, unless the dispute is such as to warrant a three-member tribunal. Investment arbitration natively involves such complex deliberations as to warrant three arbitra-tors.

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5.1 With agreement on appointment in multi-party proceedings

Parties may agree, in their arbitration agreement or ad casum, on how the tribunal is to be constituted when multiple parties are involved. How should tribunals treat this agreement? As a rule, this agreement should be given effect as an expression of party autonomy.126 Some arbitration rules even contain an explicit reference to the parties’ freedom to designate the con-stitution mechanism.127

However, this rule came under severe attack by the landmark case Dutco (1992)128: Three par-ties (Siemens, BKMI and Dutco) entered a consortium agreement for the construction of a cement factory. The arbitration agreement provided for a three-member tribunal under the ICC Arbitration Rules. After Dutco initiated proceedings and appointed his arbitrator, the ICC Court instructed BKMI and Siemens to appoint one arbitrator jointly. The latter followed suit, but under protest. The tribunal nevertheless upheld its jurisdiction, which was confirmed by the Court of Appeals. The French Cour de Cassation however overturned this ruling, holding that 1) joint appointment violated BKMI and Siemens’ right to equal treatment, 2) the right to equal treatment is a part of public policy and 3) as such cannot be waived in advance. Dutco thus calls into question the validity of all arbitration clauses providing for joint appointment. If

Dutco is good law, joint appointment is prohibited.

However, the Dutco principle is by no means set in stone: The decision was criticized fiercely for elevating party equality over party autonomy in an absolute fashion;129 “If party autonomy is the first principle to be applied in relation to the arbitral procedure, equality of treatment is the second – and it is of the same importance.”130 While the decision certainly did well in addressing the problematic of equal treatment in multi-party proceedings, the attempt at reso-lution in this absoluteness and inflexibility aggravates the promotion of multi-party arbitra-tion.131

126_{Voser (n 10) 362.}

127_{E.g. Art. 10 (1) UNCITRAL Arbitration Rules (“unless the parties have agreed to another method of}

appoint-ment of arbitrators”); Art. 12 (8) ICC Arbitration Rules (“where all parties are unable to agree to a method for the constitution of the arbitral tribunal”).

128_{Siemens AG and BKMI Industrieanlagen GmbH v Dutco Construction Co (1992) XVIII ICCA Yearb Commer}

Arbitr 140 (Cour de Cassation (1re Chambre Civile)).

129_{Scherer, Prasad and Prokic (n 45) 9.}

130_{Redfern and others (n 39) 317. [emphasis added].}

131_{Okuma Kazutake, ‘Party Autonomy in International Commercial Arbitration: Consolidation of Multiparty and}

Classwide Arbitration’ (2003) 9 Annual Survey of International & Comparative Law 189, 200; Eric Schwartz, ‘Multi-Party Arbitration and the ICC in the Wake of Dutco’ (1993) 10 Journal of International Arbitration 5, 5.

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Controversy also arose surrounding the decision’s scope of application: Some hold that Dutco addresses only the specific circumstance where all parties clearly hold diverging interests.132_It has been claimed that “sooner or later the French Supreme Court will find this decision to be excessive and limit it to the specific underlying facts.”133_{Also, it is by no means certain that} tribunals with seat in a jurisdiction other than France would follow the Dutco decision; for instance, the Swiss Federal Court in Westland134 did not consider the ICC’s appointment of a

joint arbitrator to violate the parties’ right to equality.135_{Furthermore, no institution has of yet} chosen to incorporate the part holding that party equality may not be waived before the dispute arises.136 Seeing that naturally most arbitration clauses are negotiated and agreed upon before the dispute arises,137 this would have far-reaching consequences and is therefore rightly seen as not justified.138

Dutco should therefore not be seen for more than it is: A valuable reminder that party autonomy

is not without its limits and courts may interfere to ensure that the parties’ agreement complies with the fundamental principles of fairness and equality.139

So how should tribunals handle party agreements violating party equality post-Dutco? In

prin-ciple, the agreement is to be followed as expression of party autonomy. It should be interpreted in a way that preserves the primary attributes of arbitration proceedings, including party equal-ity.140 Only if no compliant interpretation is possible and the agreement clearly violates party equality (the Dutco scenario) shall the agreed-upon constitution be disregarded. This decision should not be taken lightly, as it opens the resulting award to risks of non-enforcement and setting-aside,141 as such destabilizing parties’ confidence in the procedure and frustrating the

132_{Ugarte and Bevilacqua (n 43) 12; Schwartz (n 131) 14; Ugarte and Bevilacqua (n 43) 15; Olivier Caprasse,}

‘The Setting Up of the Arbitral Tribunal in Multi-Party Arbitration’ [2006] International Business Law Journal 197, 23–24.

133_{Christopher Seppala, ‘Multi-Party Arbitrations at Risk in France’ (1993) 12 International Financial Law}

Re-view 33, 35.

134_{Westland Helicopters Ltd v Arab Republic of Egypt, Arab Organization for Industrialization, Arab British}

Helicopter Co [1985] Tribunal Féderal ATF 112 Ia 344.

135_{Caprasse (n 132) para 25; Kazutake (n 131) 202; Julia Mair, ‘Equal Treatment of Parties in the Nomination}

Process of Arbitrators in Multi-Party Arbitration and Consolidated Proceedings’ (2007) 12 Austrian Review of International and European Law 59, 66.

136_{Ugarte and Bevilacqua (n 43) 17.} 137_{Kazutake (n 131) 199.}

138_{Voser (n 10) 363.}

139_{Ugarte and Bevilacqua (n 43) 12; Mair (n 135) 66.}

140_{Michal Malacka, ‘Party Autonomy in the Procedure of Appointing Arbitrators’ (2017) 17 International and}

Comparative Law Review 93, 99.

141_{Art. V(1)(d) NY Convention allows non-enforcement if “the composition of the arbitral authority (…) was not}

in accordance with the agreement of the parties”, Art. V(1)(b) if “enforcement of the award would be contrary to the public policy of that country”. Party autonomy, i.e. freedom of contract, may constitute an aspect of public policy. Schwartz (n 111) 369.

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goals of the arbitral process itself.142_{However, as the Dutco decision shows, not disregarding} parties’ agreement may also lead to non-enforcement or setting-aside.143

As a consequence to this case, most institutions made amendments to their rules for multi-party proceedings.144 Today, only ICSID proceedings still force multiple parties to nominate an ar-bitrator jointly. All other arbitration rules, while still requesting multiple parties to nominate jointly,145 provide for the involvement of the appointing authority if joint nomination is re-fused. Whether these rules are better equipped to safeguard fundamental principles of arbitra-tion shall be discussed in the following (infra 5.2).

5.2 Absent an agreement on appointment in multi-party proceedings

In line with the general notion of arbitration being a swift and efficient dispute resolution method, arbitration agreements are often kept simple and straight-forward.146 Consequently, in many cases the parties’ arbitration agreement does not explicitly address multi-party proceed-ings.147_{The question arises as to how the tribunal is to be composed absent parties’ agreement.}

5.2.1 Standing tribunal

The tribunal may be in the form of a standing tribunal. Investment disputes shall be decided by a pre-established permanent body,148 preventing the disputing parties from deciding which judges rule on their case.149 This breaks with the classic notion of the tribunal existing only on a case-by-case basis,150 being constituted by the disputing parties and dissolved by virtue of rendering the final award.151 As such, it approximates the nature of the arbitral tribunal to tra-ditional court systems.152

142_ibid.

143_{The notion of public policy of Art. V(1)(b) NY Convention entails party equality. Van den Berg, The New York}

Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation (n 13) 324.

144_{Akseli (n 55) 253.}

145_{Art. 10 (1) UNCITRAL Arbitration Rules; Art. 12 (6) ICC Rules on Arbitration; Art. 10 (1) PCA Arbitration}

Rules; Art. 17 (5) SCC Arbitration Rules; Art. 9.2 SIAC Arbitration Rules; Art. 29 (1) CIETAC Arbitration Rules.

146_{Conejero Roos (n 57) 414.}

147_{Born, International Arbitration: Law and Practice (n 14) 231; Caprasse (n 132) 203.} 148_{Born, International Commercial Arbitration (n 30) 1639.}

149_{European Commission, ‘The Multilateral Investment Court Project’ (European Commission News Archive:}

Dispute Settlement, 21 December 2016) <http://trade.ec.europa.eu/doclib/press/index.cfm?id=1608> accessed 6

June 2020.

150_{Kazutake (n 131) 190.}

151_{Gabrielle Kaufmann-Kohler and Michele Potestà, ‘The Composition of a Multilateral Investment Court and of}

an Appeal Mechanism for Investment Awards’ (CIDS - Geneva Center for International Dispute Settlement 2017) Supplemental Report 14.

152_{Council of the EU, ‘Multilateral Investment Court: Council Gives Mandate to the Commission to Open}

Nego-tiations’ (20 March 2018) <https://www.consilium.europa.eu/en/press/press-releases/2018/03/20/multilateral-in-vestment-court-council-gives-mandate-to-the-commission-to-open-negotiations/pdf>.

Multiple-Respondent Proceedings in International Investment Arbitration: How to Safeguard Fundamental Principles of International Arbitration