GUEST-POST PART I | No Mass Arbitration in ICSID Cases – The Abaclat Dissent

By S.I. Strong

On October 28, 2011, a dissenting opinion regarding the preliminary decision on jurisdiction and admissibility was issued in the ground-breaking case of Abaclat (formerly Beccara) v. Argentine Republic, ICSID Case No. Arb/07/5 (available here ). The majority award was issued on August 4, 2011 (available here ) and was discussed on this blog here.

The majority decision was remarkable in that it constituted the first time that an arbitral tribunal allowed a large group of individual claimants – in this case, 60,000 Italian bondholders – to join together to bring a claim in an investment arbitration filed with the International Centre for Settlement of Investment Disputes (ICSID). However, the very novelty of the claimants’ approach worked against them, at least in the dissent’s mind, constituting one of the reasons why the dissent opposed the majority decision. See Award dated October 28, 2011, ¶¶ 164-65 (stating the unforeseeability of this type of claim at the time the relevant treaties were signed augured against permitting collective relief).

The facts of the dispute are outlined in an earlier posting and will not be repeated herein. Furthermore, one of the dissenting opinion’s major concerns – whether the dispute in question constituted an “investment” under the relevant treaties – will not be addressed in this discussion. See Award dated October 28, 2011, ¶¶ 34-117. Instead, the focus here is on the dissent’s views regarding the collective nature of the claims at issue.

The dissent framed its analysis in terms of three related issues. See Award dated October 28, 2011, ¶ 121. First, did Argentina’s consent to arbitration include collective or mass actions? Second, what was the nature of the collective claims at issue, and what effect did that characterization have on the interpretation of the relevant arbitral clauses? Third, did the tribunal have the ability to impose the special collective procedures outlined in the majority award?

The dissenting opinion began by considering the nature of the claims asserted by the Italian bondholders. Unlike the majority, the dissent did not view these claims as “hybrid” in nature. See Award dated October 28, 2011, ¶ 138. Instead, the dissent took the view that these were individualized claims with none of the representative elements that are necessary for an action to be characterized as a class arbitration. See Award dated October 28, 2011, ¶¶ 131, 140-41 (citing S.I. Strong, From Class to Collective: The De-Americanization of Class Arbitration, 26 Arbitration International 493 (2010) (unfortunately misattributed to “Stacy I. Strong”)). Furthermore, the dissent did not agree with the majority that the claims asserted by the Italian bondholders were “homogenous,” instead finding the claims to be highly individualized, particularly with respect to a number of elements relating to the claimants’ security entitlements. See Award dated October 28, 2011, ¶ 143. The lack of homogeneity, along with the absence of any representative element, boded against the collective treatment of the claims, at least to the dissent.

In an interesting interplay between international and domestic law, the dissenting opinion suggested that the majority’s decision to allow the claims to go forward as a mass proceeding was strongly influenced by the approach taken by U.S. courts with respect to judicial class actions. See Award dated October 28, 2011, ¶¶ 146-47. However, the dissent noted that an ICSID tribunal is not a court of general jurisdiction and therefore does not have the same power as a court to order certain remedies and procedures. See Award dated October 28, 2011, ¶ 147.

Reference was also made to recent case law from the U.S. Supreme Court regarding the expansion of U.S.-style class actions into the arbitral realm. See Award dated October 28, 2011, ¶ 148. For example, the dissent looked to Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 130 S.Ct. 1758 (2010), for the proposition that arbitrators cannot infer that class or collective treatment is proper simply because the arbitration agreement is silent on that issue. See Award dated October 28, 2011, ¶ 150. The opinion then cited AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), for the proposition that class arbitration differs from bilateral arbitration in certain fundamental respects. See Award dated October 28, 2011, ¶¶ 152. These references are very interesting, since they suggest a merging of analyses regarding public and private forms of class and collective arbitration, a possibility that was noted in an earlier posting discussing the majority opinion in Abaclat.

The dissent then disputed the majority’s analysis of the relevant treaties as reflecting a “qualified silence.” See Award dated October 28, 2011, ¶ 161. Instead, the dissent suggested that any sort of silence in the treaties should be read as prohibiting class or collective treatment. See Award dated October 28, 2011, ¶ 166. This approach is very common among those who take a strict constructionist view of arbitral agreements in the private law realm. See S.I. Strong The Sounds of Silence: Are U.S. Arbitrators Creating Internationally Enforceable Awards When Ordering Class Arbitration in Cases of Contractual Silence or Ambiguity? 30 Michigan Journal of International Law 1017, 1043-45 (2009).

The dissent therefore took the view that permitting collective treatment in this case constituted a quantum leap in arbitral procedure that could not be inferred from mere silence. See Award dated October 28, 2011, ¶¶ 171-72. Instead, the dissent believed that the parties would need to establish “secondary consent” to these types of procedures before they could be permitted. See Award dated October 28, 2011, ¶ 173 (citing S.I. Strong, Does Class Arbitration “Change the Nature” of Arbitration? Stolt-Nielsen, AT&T and a Return to First Principles, 17 Harvard Negotiation Law Review __ (forthcoming 2012, currently available on SSRN here.) ). However, in doing so, the dissent did not mention that secondary consent may be found through implicit means. See Strong, Sounds of Silence, supra, at 1055-83.

[This is Part I of the Guest- Post: No Mass Arbitration in ICSID Cases – The Abaclat Dissent. Part II is here.]

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S.I. Strong is currently Associate Professor of Law at the University of Missouri and Senior Fellow at the award-winning Center for the Study of Dispute Resolution, having previously taught law at the University of Cambridge and the University of Oxford in the United Kingdom. Prior to joining the faculty at Missouri, Dr Strong was Counsel specializing in international dispute resolution at Baker & McKenzie LLP and a dual-qualified practitioner (U.S.-England) in the New York and London offices of Weil, Gotshal & Manges LLP. Dr Strong has acted in arbitral proceedings under a wide range of institutional rules and is listed as a neutral on various national and international rosters. Dr Strong is the author of numerous works on international arbitration, including the award-winning article, The Sounds of Silence: Are U.S. Arbitrators Creating Internationally Enforceable Awards When Ordering Class Arbitration in Cases of Contractual Silence or Ambiguity? 30 Michigan Journal of International Law 1017 (2009), as well as the books Research and Practice in International Commercial Arbitration: Sources and Strategies (2009) and Class Arbitration and Collective Arbitration: Mass Claims in the National and International Sphere (forthcoming), both from Oxford University Press. Dr Strong, who is qualified as a lawyer at the New York and Illinois bars and as a solicitor of the Supreme Court of England and Wales, holds a Ph.D. in law from the University of Cambridge, a D.Phil. from the University of Oxford, a J.D. from Duke University, an M.P.W. from the University of Southern California and a B.A. from the University of California.