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

By S.I. Strong

Some interesting new arguments found their way into the dissenting opinion. For example, the dissent considered how mass claims are treated under various United Nations mass claims processes, claiming that these processes are analogous to ICSID arbitrations. See Award dated October 28, 2011, ¶¶ 176-81. This is an interesting proposition that bears closer analysis, since there are likely a variety of ways that the Permanent Court of Arbitration could help address certain cross-border collective injuries. See S.I. Strong,Class and Collective Relief in the Cross-Border Context: A Possible Role for the Permanent Court of Arbitration, 23 The Hague Yearbook of International Law __ (forthcoming 2011).

The next critique was aimed at the procedural measures adopted by the majority. First, the dissent took the view that these procedures are not gap-fillers, as the majority claimed, but are instead measures that conflict with existing ICSID Arbitration Rules, most particularly Article 19. See Award dated October 28, 2011, ¶¶ 198-99. Although the majority said that it was not modifying the ICSID Arbitration Rules in an impermissible manner, the dissent believed that such a modification was both unavoidable and unwarranted. See Award dated October 28, 2011, ¶¶ 210-12.

To support its position, the dissent considered the extent to which the proposed changes regarding the taking of evidence affected the rights of the parties. See Award dated October 28, 2011, ¶¶ 223, 236. In particular, the dissent noted that Argentina’s procedural rights – particularly those relating to the right to mount an individualized defense to individualized claims – would be detrimentally affected by the majority’s proposed procedures. See Award dated October 28, 2011, ¶ 238. To a large extent, the dissent’s position on this point was driven by the dissent’s belief that the claimants’ allegations are not homogenous. However, the dissent was also not persuaded by the majority’s view that the rights in question are “merely” procedural. Instead, the dissent concentrated on the fact that substantive rights are built on procedural rights and that both need protection. See Award dated October 28, 2011, ¶ 225.

The dissenting opinion, which runs over 100 pages in length, is obviously much more nuanced than this very brief summary suggests. Although more analysis is necessary before any firm conclusions can be drawn, several points may nevertheless be made.

First, the dissent interpreted the silence of the relevant treaties in a relatively conservative manner. While the approach may be similar in ways to that adopted by several justices of the U.S. Supreme Court, there are larger questions to be answered about whether that is the best course of action as a matter of contract or treaty interpretation and as a matter of policy. (Notably, the dissent embarks on a limited policy discussion at the end of the opinion. See Award dated October 28, 2011, ¶¶ 263-74.) These are issues that the international legal community will have to debate in the coming months and years.

Second, the dissent made several important points about the importance of procedural rights and the need to limit collective relief to situations where it is truly necessary. See Award dated October 28, 2011, ¶ 254 (noting the possibility of relief in Italian courts). While this point was also made by the majority, see Award dated August 4, 2011, ¶484, it bears repeating that collective redress in the international investment context is and should remain an extraordinary remedy.

Third, much of the dissent’s analysis turned on the characterization of the bondholders’ claims as non-homogenous in nature. However, this is a matter of perspective. See Award dated October 28, 2011, ¶ 142. On the one hand, there are numerous similarities regarding questions of liability, as noted by the majority. On the other hand, there may be certain elements that must be determined on a more individualized basis, as the dissent suggested. Whether such matters can be determined through the use of subclasses has yet to be determined. However, differences in the way the question is considered are somewhat typical in the realm of class and collective redress and will doubtless be repeated in other disputes in the future.

At the end of the day, the dissent reflects an effective enunciation of the concerns of states that do not wish to be subject to mass claims in ICSID proceedings. While states – like many corporate respondents – may not appreciate being subject to such claims, collective redress may in fact be a necessary remedy for some of the types of legal injuries suffered today. However, the international legal community would be well advised to consider the advantages and disadvantages of cross-border collective redress on a proactive basis rather than let such issues be decided case by case.

Fortunately, there are a variety of measures currently underway in this regard, ranging from the 5^th Annual International Conference on the Globalization of Class Actions, held on December 8 and 9, 2011, in The Hague, to the recent public consultation by the European Commission on cross-border collective relief. See European Commission, Public Consultation: Towards a Coherent European Approach to Collective Redress, SEC(2011) 173, Feb. 4, 2011. Other efforts include joint efforts between the American Bar Association (ABA) and Canadian Bar Association (CBA) to facilitate cross-border class actions involving the two countries and guidelines published by the International Bar Association (IBA) regarding the international recognition and enforcement of judgments arising out of collective redress. See ABA, Protocol on Court-to-Court Communications in Canada-U.S. Cross-Border Class Actions and Notice Protocol: Coordinating Notice(s) to the Class(es) in Multijurisdictional Class Proceedings (Aug. 2011), available here; CBA, Consultation Paper: Canadian Judicial Protocol for the Management of Multijurisdictional Class Actions (June 2011); IBA Guidelines for Recognising and Enforcing Foreign Judgments for Collective Redress (Oct. 16, 2008), available here. Doubtless similar initiatives will be organized in the coming years as the international legal community seeks a reasoned and reasonable solution to the problems associated with large-scale legal injuries in investment and other fields.

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