Multiple Contracts in a Single Arbitration Art. 10 CEPANI and beyond

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1 Multiple Contracts in a Single Arbitration Art. 10 CEPANI and beyond 3rd Hanover PreMoot Conference, 6 March 2014 Tom Christopher Pröstler, LL.M. (Sydney) Overview The Problem Solutions Preconditions Consequences 2

2 The Problem - Definition Complex business relationships produce complex conflicts multi-contract conflicts multi-party conflicts Complex conflicts require unified, all-encompassing solutions Based on state sovereignty most state courts can force claims arising out of multiple contracts to be heard in one single set of court proceeding under certain circumstances Arbitral institutions and tribunals do not have such sovereign power, nevertheless it may also be desirable to hear claims arising out of multiple contracts in one single set of arbitral proceeding 3 The Problem - Origin Arbitration is a consensual dispute resolution mechanism Arbitral tribunals and institutions only have power to the extent that it has been granted by the parties Any decision to arbitrate multiple contracts in one set of proceedings must be rooted in the consensus of the parties 4

3 The Problem - Relevance Multi-contract arbitrations may go practically unnoticed if all parties consider it beneficial This may be the case for contracts involving the same parties or regarding the same overall business relationship However, in many cases one party will have an interest to sever the proceedings This may be due to genuine concerns, have tactical reasons or be aimed at delaying the proceedings 5 Solutions - Arbitration Agreement The parties may agree on provisions dealing with multi-contract arbitrations in their arbitration agreement Such provisions may appear in case of a framework agreement and following subsidiary agreements in case of a stand-alone arbitration agreement relating to ongoing and complex business relationships where groups of companies are involved However, such provisions will be rare in such cases an agreement might still be implied Including such provisions in general cannot be the answer, as it would lead to overly complex arbitration agreements 6

4 Solutions - Arbitration Law States could introduce provisions dealing with multi-contract arbitrations into their arbitration laws There may be uncertainty which state laws should be applicable (lex arbitri, lex causae, international principles of arbitration) Parties often choose arbitral venues and substantive law with little regard to the connected arbitration law Introducing such provisions in arbitration laws cannot be the answer, as it would be too distant from the parties 7 Solutions - Arbitration Rules Institutions can introduce provisions dealing with multicontract arbitrations into their arbitration rules Some modern arbitration rules include explicit provisions on multicontract arbitration (Artt. 10 CEPANI, 9, 6(3)-(7) ICC, 29 HKIAC) Many modern arbitration rules include provisions on joinder and consolidation of proceedings (CEPANI, ICC, Swiss Rules, etc.) Parties agreeing on a set of arbitration rules consent to all provisions contained therein, unless they exclude them Introducing such provisions into arbitration rules is the most appropriate solution, as it is in line with the consensual nature of arbitration and allows for sophisticated mechanisms 8

5 Preconditions - Specific Rules The existing arbitration rules stipulate preconditions for arbitrating multiple contracts in a single arbitration Art. 10 CEPANI Requires parties' agreement to CEPANI and single arbitration "Matters that are not related" give rise to a presumption of nonagreement Different applicable laws and languages do not give rise to any presumption of incompatibility Art. 9, 6(3)-(7) ICC Requires that parties "may have agreed" to a single arbitration Arbitration agreements need to be "compatible" 9 Preconditions - General Independent of the applicable rules, there are certain general preconditions that have to be met Non-detrimental elements Applicable law Language Parties Detrimental elements Seat of arbitration Number of arbitrators Institution Decisions to arbitrate multiple contracts in a single arbitration must be taken with regard to the specific facts of the case 10

6 Consequences - Jurisdiction If a tribunal decides that it cannot arbitrate multiple contracts together, this has implications for its jurisdiction Arbitrators are appointed in relation to a specific dispute: in multicontract cases this is the dispute arising out of all contracts As a consequence, a tribunal would have to decline jurisdiction as a whole and refer the Claimant to initiate individual proceedings for each contract However, the parties may have agreed or may agree that the tribunal can continue to arbitrate one of the contracts Decisions to continue the arbitration of one contract must again be taken with regard to the specific facts of the case 11 Consequences - Parallel Proceedings If claims deriving from multiple contracts cannot be arbitrated together, this will usually result in parallel proceedings Parallel proceedings can take different forms Same tribunal: maximum consistency of proceedings and award, mostly only possible with the parties' consent Coordinated proceedings: synchronised schedule and submissions, conjoined hearings or joint deliberations, dependent on parties' consent Full separation: proceedings may interfere with each other and awards may be contradictory In all forms of parallel proceedings issues of confidentiality, impartiality and use of knowledge may become relevant 12

7 Contact Tom Christopher Pröstler, LL.M. (Sydney) Rechtsanwalt Associate CMS Hasche Sigle Nymphenburger Str München T F E tom.proestler@cms-hs.com 13 CMS Legal Services EEIG is a European Economic Interest Grouping that coordinates an organisation of independent member firms. CMS Legal Services EEIG provides no client services. Such services are solely provided by the member firms in their respective jurisdictions. In certain circumstances, CMS is used as a brand or business name of, or to refer to, some or all of the member firms or their offices. CMS Legal Services EEIG and its member firms are legally distinct and separate entities. They do not have, and nothing contained herein shall be construed to place these entities in, the relationship of parents, subsidiaries, agents, partners or joint ventures. No member firm has any authority (actual, apparent, implied or otherwise) to bind CMS Legal Services EEIG or any other member firm in any manner whatsoever. CMS member firms are: CMS Adonnino Ascoli & Cavasola Scamoni (Italy); CMS Albiñana & Suárez de Lezo (Spain); CMS Bureau Francis Lefebvre S.E.L.A.F.A. (France); CMS Cameron McKenna LLP (UK); CMS DeBacker SCRL/CVBA (Belgium); CMS Derks Star Busmann N.V. (The Netherlands); CMS von Erlach Henrici Ltd (Switzerland); CMS Hasche Sigle Partnerschaft von Rechtsanwälten und Steuerberatern mbb (Germany); CMS Reich-Rohrwig Hainz Rechtsanwälte GmbH (Austria) and CMS Rui Pena, Arnaut & Associados RL (Portugal). CMS offices and associated offices: Aberdeen, Algiers, Amsterdam, Antwerp, Barcelona, Beijing, Belgrade, Berlin, Bratislava, Bristol, Brussels, Bucharest, Budapest, Casablanca, Cologne, Dubai, Duesseldorf, Edinburgh, Frankfurt, Geneva, Hamburg, Istanbul, Kyiv, Leipzig, Lisbon, Ljubljana, London, Luxembourg, Lyon, Madrid, Mexico City, Milan, Moscow, Munich, Paris, Prague, Rio de Janeiro, Rome, Sarajevo, Seville, Shanghai, Sofia, Strasbourg, Stuttgart, Tirana, Utrecht, Vienna, Warsaw, Zagreb and Zurich. 14