Multiple disputes - Consolidation and concurrent hearings
The London-based Grain and Feed Trade Association (GAFTA) continues its longstanding dominance as the guiding institution in respect of international trade in agricultural commodities. Buyers and sellers overwhelmingly continue to trade under GAFTA standard-form contracts as a reliable set of terms and conditions for doing business. Those contracts incorporate GAFTA arbitration dispute resolution clauses such as GAFTA Standard Form 125, meaning that disputes between the parties must be resolved by GAFTA arbitration under the ultimate supervision of the English Courts.
Due to the nature of international trade, it is increasingly common in bulk purchases for bulk shipments of commodities to be shipped together, divided into several parcels with each parcel governed by a contract on materially identical terms to the others. Often, some event occurs which affects the whole shipment, meaning identical or similar disputes arise under each of these contracts. In such cases, where arbitration is required, parties may view it as economically and practically desirable for these multiple disputes to be decided at one time. As well as being cheaper and quicker, this reduces the risk of contradictory awards.
We set out below the options available to parties who may seek to arbitrate several contracts together, explaining certain procedural requirements and identifying pitfalls to avoid when commencing arbitrations which involve multiple contracts.
What options do I have?
There are two principal ways in which a GAFTA Tribunal can streamline its determination of a number of disputes involving similar facts.
Consolidation – all of the cases are combined and treated as a single claim. A single Tribunal hears all of the matters in dispute and usually delivers a single award dealing with all of those matters.
Concurrent determination – separate arbitration proceedings are commenced for each contractual dispute. The same Tribunal may be appointed for all of the arbitrations and the determinations are often scheduled to be heard simultaneously or one after the other. This allows Tribunals to examine witnesses and make findings of fact which it can apply across all of the concurrent disputes. Separate awards will usually be issued for each contract.
It is good practice for the parties to insert a clause in each contract allowing for consolidation or concurrent determination of disputes, and explaining under what circumstances each may come about.
What makes dispute suitable to be decided together?
This is a question of practicality. There may be a number of disputes arising between the same parties, however if there is a wide divergence in the factual or legal matters arising in those disputes, then attempting to hear them together may create a confusing and unwieldy result. Equally, if all of the disputes are of a similar nature (for instance they relate to the same shipment or emerge from the same incident), it may be appropriate to determine many disputes at once even if there are multiple parties involved.
The suitability of consolidation or concurrent determination is therefore primarily dependent on the similarity of the facts and legal issues in dispute.
In some cases, the question may arise whether disputes should be decided together despite the relevant contracts having different dispute resolution provisions. For instance, one contract may apply GAFTA institutional rules, while another may apply LMAA, LCIA or ICC rules. In such cases, unless the parties agree to amend the dispute resolution clauses, our experience is that consolidation is usually impractical. Concurrent determination of the separate arbitrations, where the same Tribunal is appointed under the auspices of separate institutions, may still be feasible in such a case.
Can I serve a single notice of arbitration for several contracts?
It is crucial that a party states with certainty in its arbitration notice the contractual dispute which is being referred to arbitration. Therefore, while it should in theory be possible to commence numerous arbitrations under one notice (so long as the relevant contracts do not prohibit this) the party serving such a notice must be careful to avoid any ambiguity. If there is a potential formal defect in the notice, a Tribunal may decline its jurisdiction to arbitrate the dispute.
If consolidation has been agreed between the parties before a Tribunal has been constituted, the notice should state in clear terms that pursuant to the parties’ agreement a single arbitration for the agreed consolidated contract disputes is requested.
However, if consolidation has not been agreed at the time of issuing the arbitration notice, we recommend that a party issue separate arbitration notices for each contract. This also applies to those arbitrations in which the parties have agreed to concurrent determination, since those disputes technically remain separate arbitrations.
Can a Tribunal order consolidation or concurrent hearing of multiple arbitrations without the agreement of all parties?
The general rule of arbitration is that it is a consensual process. Accordingly, section 35 of the Arbitration Act 1996 states that a Tribunal has no power to direct consolidation of proceedings or concurrent hearings without the consent of all of the parties.
GAFTA’s rules on multiple arbitration
As of the date of this Q & A, there is possibly a provision in the GAFTA rules which may permit a tribunal to hear disputes together without the specific consent of the parties. Rule 7.2 of GAFTA 125 provides:
“ In the absence of an agreement from all the parties involved, the tribunal has the right to conduct arbitral proceedings concurrently with other arbitral proceedings, and, in particular, concurrent or consolidated hearings may be held, but separate awards shall be made pursuant to each contract.”
However, there are ambiguities to this provision. Rule 7 is, headed “STRING ARBITRATIONS – CONSOLIDATED ARBITRATIONS AND CONCURRENT HEARINGS”, and Rule 7.1 makes reference to a “string of contracts” being held as a “single arbitration”. The question then arises as to whether Rule 7.2 is limited to string contract arbitrations (as the heading suggests), or alternatively widely applies to arbitrations in general, where string contracts may or may not be involved. Regarding the Tribunal’s power to consolidate, despite reference to “consolidated hearings”, the language in in 7.2 does not expressly suggest that the GAFTA tribunal can direct consolidation of multiple disputes without the consent of all parties.
Unless the Rules are clarified, the individual GAFTA Tribunal will need to decide whether it has the power to direct consolidation or concurrent hearings of multiple disputes where this has not been agreed by the parties. Where a Tribunal does decide that it has such a power, our belief is that this is likely a special power to be used sparingly on a case-by-case basis.
As ever, the safest way to avoid any ambiguity, delay or uncertainty, and to save the time and costs of the Tribunal in deciding procedural matters, will be for the parties to reach an agreement as to whether to consolidate or for concurrent determination of arbitrations.
Conclusion
The rules on consolidation and concurrent determination in arbitrations can be complex, and parties should seek legal advice before commencing arbitrations for multiple contracts.
If you have any further questions, please do contact
Varun.zaiwalla@zaiwalla.co.uk or Daniel.powell@zaiwalla.co.uk
