Filling the blank page to create multi-party arbitration success

Craig Sida, senior consultant, EC Harris International - Contract Advisory Service and committee member of the Chartered Institute of Arbitrators, looks at what still needs to be done to create a local framework for multi-party arbitration.

COMMENT, Business

On 23 April at the Dubai International Chamber of Commerce/FIDIC conference, his Honour Humphrey Lloyd QC concluded an excellent presentation on the subject of 'Dealing with Disputes Among Third Parties', with the words 'it's a blank page for you to write upon'.

The Dubai International Arbitration Centre (DIAC) was the first to put pen to that page, when on 18 May it gazetted its new arbitration rules, which provide for multi-party arbitrations. Third-party or multi-party arbitrations involve more than two parties.

Multi-party arbitrations are complex, which has led to nervousness about such arbitration agreements.

Worldwide, multi-party arbitrations are on the increase. The ICC records that approximately 25% of its arbitrations involved more than two parties. The London Court of International Arbitration (LCIA) reports a figure of 20%. They are relevant in commercial situations where a number of parties have integrated or linked contractual relations. The GCC's construction market, with its large projects involving numerous consultants, contractors and subcontractors with linked contractual relationships, is an obvious example.

Yet experience of multi-party arbitrations within the UAE is limited. It is more common to have multi arbitrations. This is a concern, as it is generally more expensive and less efficient than having one arbitration on linked disputes. It also raises the spectre of inconsistent decisions.

Experience shows that concern over the occurrence of inconsistent decisions is predominantly a theoretical issue, but the repercussions for enforcement are serious. It is therefore worth avoiding even the slightest chance that it may occur.

Arbitration is about party choice and, so far, parties here have chosen to avoid multi-party arbitrations. This may be down to a number of factors.

While the UK's Joint Contracts Tribunal (JCT) has incorporated multi-party arbitration agreements into their standard forms, FIDIC hasn't. The notes attached to the 1999 edition of the 'Yellow Book' state: "No satisfactory standard form of multi-party arbitration clause for international use has yet been developed."

Multi-party arbitrations are complex, which has led to nervousness about such arbitration agreements. The concerns expressed are that they appear to jeopardise the equal treatment of the parties, and be inconsistent with the parties' consent. The involvement of another party can be disruptive to arbitration. It may deprive a party of judicial access. Confidentiality and privacy is an issue. There are also issues with the just apportionment of fees and enforcement.

These concerns may be dealt with in the wording of the arbitration agreement, and by the appointment of suitably skilled arbitrators.

A greater level of legal skill may be required manoeuvring around the potential pitfalls of multi-party arbitrations. This should be reflected in the composition of the tribunal.

To further fill that blank page we require a standard multi-party arbitration agreement that works in GCC jurisdictions. Specialist legal advice should be sought. However, I suggest that some of the main points that might be considered should be:

  • What constitutes a 'dispute' for the purpose of multi-party proceedings, and the nature of the link between related disputes?
  • Who or what is to decide whether a link is to be operated and by when must the decision be taken to link the disputes?
  •  What action must be taken to link the disputes to the proceedings? What is the time period within which the parties may exercise their rights?
  •  Who else must consent to link the disputes and how should this consent be given? When and how should the consent of any "third party" be given or be construed to have been given?
  •  How should the tribunal be composed?
  •  When and how should the consent of the tribunal be obtained?
  •  How many tiers of contract and how many parties are to be permitted?
  •  Who shall be bound by the decisions, orders or directions of the tribunal?
  •  How should the payment of fees and costs be addressed?
  •  How will the issue of confidentiality and privacy be addressed?

The size and quantity of construction projects in the GCC demand that we have a workable multi-party arbitration standard because the cost and efficiency benefits could be enormous. The DIAC has provided the local rules, it is now for others to continue the process.

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