GUEST-POST PART II: ICSID Accepts First-Ever Class-Type Arbitration

By S.I. Strong

Another aspect of the consent analysis involved the question of whether this sort of mass claim was permitted under the ICSID Convention and the Argentina-Italy BIT. See id. ¶¶ 467-92. This posed an interesting dilemma, given that both documents are silent on the issue of mass proceedings. Perhaps unsurprisingly, the tribunal’s inquiry was reminiscent of the type of analyses that arise in the class arbitration context with respect to whether contracts that are silent or ambiguous as to class treatment may nevertheless support a class arbitration. See Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S.Ct. 1758 (2010). Thus, the tribunal considered arguments regarding the silence of the ICSID framework on the possibility of mass proceedings (a topic that was also addressed in the context of the tribunal’s discussion on admissibility), the fact that claims of this sort were unknown at the time the BIT was entered into, and the ability of the parties to mount individualized defenses or affirmative cases (an issue that was also addressed in the section on admissibility).

One of the most important aspects of the section on consent involved the tribunal’s discussion of the nature of the claims at issue, found on pages 188 to 191 of the award. See Award dated August 4, 2011, ¶¶ 480-88. Here, the tribunal noted that there were two major means of dealing with large-scale claims: representative proceedings (which would include U.S.-style class actions and arbitrations as well as various other types of procedures) and aggregate proceedings (best typified by the English Group Litigation Order or GLO). See id. ¶ 483 (citing S.I. Strong (mistakenly attributed to “Stacy I. Starck”), “From Class to Collective: The De-Americanization of Class Arbitration,” 26 Arbitration International 493 (2010), discussed on this blog here. Furthermore, the tribunal noted that:

all these various forms of collective proceedings share a common “raison d’etre”: Collective proceedings emerged where they constituted the only way to ensure an effective remedy in protection of a substantive right provided by contract or law; in other words, collective proceedings were seen as necessary, where the absence of such mechanism would de facto have resulted in depriving the claimants of their substantive rights due to the lack of appropriate mechanism.

Id. ¶ 484 (citing Strong (misattributed to Starck)).

An evaluation of the claims at issue in this dispute suggested the existence of both representative and aggregative elements. See id. ¶¶486-87. As a result, the tribunal characterized the arbitration as “a sort of a hybrid kind of collective proceedings, in the sense that it starts as aggregate proceedings, but then continues with features similar to representative proceedings due to the high number of Claimants involved.” Id. ¶ 488.

This conclusion had a significant effect on how the tribunal analyzed matters involving its jurisdiction over mass claims. According to the tribunal, the central legal issue in representative proceedings involves consent while the primary concern in aggregative proceedings is admissibility, particularly “whether ordering the parties to proceed collectively is within the scope of the Tribunal’s discretion and authority.” Id. ¶ 485; see also id. ¶ 491. Because the proceedings in this case were primarily aggregative, the tribunal turned its attention to admissibility concerns. See id. ¶ 485.

Admissibility is considered on pages 201 to 216 of the award. This analysis also had several constituent elements, including some that had been introduced in the section on consent. For example, the tribunal began by revisiting the question of how to determine the appropriate procedure, given the silence of the relevant treaties (ICSID and the Argentina-Italy BIT) regarding the possibility of mass claims. This problem is similar to that which arises in many class arbitrations, when arbitrators must construe contractual silence regarding the possibility of class treatment. However, Abaclat was slightly different in that it involved questions of public international law and policy rather than simple contract law. In particular, the arbitrators had to determine whether the treaties’ failure to address collective proceedings resulted in a “‘qualified silence’ that should be interpreted to mean that collective arbitration is not possible and not admissible under the current ICSID framework” or whether the silence should “be considered a ‘gap,’ which was unintended and which the Tribunal has the power to fill.” Id. ¶ 517. Ultimately, the tribunal concluded that the latter was the better interpretation. See id. ¶¶ 520-33.

The tribunal next had to determine what procedures should be used to resolve this dispute and indeed whether any appropriate procedures could be identified in light of the existing ICSID framework. In considering this issue, the tribunal explicitly took into account the fact that mass proceedings could affect the rights of individual claimants to control the conduct of the case and the right of the defendant to mount an individualized defense. See id. ¶¶ 536-47. This is a particularly important matter in many civil law jurisdictions, where the individual right to pursue and defend against a claim is constitutional in nature. See Strong, Due Process, supra, at 32.

[This is the second installment in a three-part series on the Guest-Post: ICSID Accepts First-Ever Class-Type Arbitration. Part I is here and Part III 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.