anniversary second - storyblok · 2018-08-28 · should or not be construed a hurdle to icsid...

1 • YAR • JANUARY 10, 2013

©2013. YAR - Young Arbitration Review • All rights reserved.

[MESSAGE FROM THE DIRECTORS] by Pedro Sousa Uva and Gonçalo Malheiro • [PREFACE] João Bosco Lee • [THE IMPOUNDED BOEING 737] by Vanina Sucharitkul and Gregory Travaini • [CONFIDENCE/CONFIDENCE] by Clifford J. Hendel • [CIVIL VS COMMON LAW APPROACHES TO PROCEDURE IN INTERNATIONAL ARBITRATION] by Alejandro López Ortiz • [ABACLAT VS ARGENTINA: WHAT’S IT ABOUT] by Sofia Martins • [THE EFFECTS OF THE STATUTORY ARBITRATION CLAUSE OVER COMPANIES’ SHAREHOLDERS IN BRAZIL] by Amanda Lobão Torres and Fernanda Dias de Almeida • [ARBITRATION ON EMPLOYMENT DISPUTES: IS BRAZIL DOING IT RIGHT?] by Fábio Werneck de Mendonça and Daniel Becker Paes Barreto Pinto • [ASPECTS OF CONFIDENTIALITY IN INTERNATIONAL COMMERCIAL ARBITRATION] by Stavroula Angoura • [THE ARBITRABILITY OF CORRUPTION CLAIMS] by Chiara Catti • [INTERNATIONAL ARBITRATION IN BELARUS: RECENT TRENDS AND DEVELOPMENTS] by Alexey Anischenko and Elena Kumashova • [COMMERCIAL ARBITRATION IN ANGOLA: WHERE ARE WE NOW?] by Alexandra Gonçalves • [EVALUATING THE PROGRESS OF THE FIRST FEW MONTHS OF THE SPANISH MEDIATION LAW] by Adriana Aymamí Garcés • [ARBITRATION IN THE PORTUGUESE INDUSTRIAL PROPERTY CODE] by João Veiga Gomes

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Under40 International Arbitration Review

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SECOND

ANNIVERSARY

2 • YAR • JANUARY 10, 2013


1 - MESSAGE FROM THE DIRECTORSby Gonçalo Malheiro and Pedro Sousa Uva

2 - PREFACE by João Bosco Lee

3 - THE IMPOUNDED BOEING 737 by Vanina Sucharitkul and Gregory Travaini

4 - CONFIDENCE/CONFIDENCE by Clifford J. Hendel

5 - CIVIL VS COMMON LAW APPROACHES TO PROCEDURE IN INTERNATIONAL ARBITRATION

by Alejandro López Ortiz

6 - ABACLAT VS ARGENTINA: WHAT’S IT ABOUT? by Sofia Martins

7 - THE EFFECTS OF THE STATUTORY ARBITRATION CLAUSE OVER COMPANIES’ SHAREHOLDERS IN BRAZIL

by Amanda Lobão Torres and Fernanda Dias de Almeida

8 - ARBITRATION ON EMPLOYMENT DISPUTES: IS BRAZIL DOING IT RIGHT?

by Fábio Werneck de Mendonça and Daniel Becker Paes Barreto Pinto

9 - ASPECTS OF CONFIDENTIALITY IN INTERNATIONAL COMMERCIAL ARBITRATION

by Stavroula Angoura

10 - THE ARBITRABILITY OF CORRUPTION CLAIMS by Chiara Catti

11 - INTERNATIONAL ARBITRATION IN BELARUS: RECENT TRENDS AND DEVELOPMENTS

by Alexey Anischenko and Elena Kumashova

[ARTICLES]

3 • YAR • JANUARY 10, 2013


12 - COMMERCIAL ARBITRATION IN ANGOLA: WHERE ARE WE NOW? by Alexandra Gonçalves

13 - EVALUATING THE PROGRESS OF THE FIRST FEW MONTHS OF THE SPANISH MEDIATION LAW

by Adriana Aymamí Garcés

14 - ARBITRATION IN THE PORTUGUESE INDUSTRIAL PROPERTY CODE

by João Veiga Gomes

[ARTICLES]

4 • YAR • JANUARY 10, 2013


ABACLAT VS ARGENTINA: WHAT’S IT ABOUT?

Have class arbitrations reached international arbitration?

By Sofia Martins

1. Introduction

All of us interested in arbitration subscribe to

innumerous newsletters that tell us about important decisions but

many times do not have the time to actually read them through.

This text will, as such, try to provide all those who have not had

the time or opportunity to read the Abaclat vs Argentina1 award

on jurisdiction to find out what it is about and why it is at the same

time extremely interesting and important, notably in connection

to the discussion on the existence (or not) of class arbitrations

(namely in an international context).

In fact, when one is asked “is there such a thing as class

arbitration in international arbitration?”, the truth is that there

is no clear answer. There are no international guidelines in this

respect, although many discuss the matter, some sustaining that

international class arbitration would have great advantages2, others

alerting to the problems that may arise from international class

arbitrations. Take the following quote, for instance: “Arbitration

without privity is a delicate mechanism. A single incident of an adventurist

arbitrator going beyond the proper scope of his jurisdiction in a sensitive

case may be sufficient to generate a backlash. But if the mechanism is

applied judiciously, it will help fill a void that now exists in the absence of

compulsory jurisdiction, and thus contribute to enhancing the legal security

of international economic life”3.

Some of the advantages usually pointed out are, for

example, the following: (i) in a situation where there is an

arbitration agreement but class actions are not available, a small

injured party with limited means could probably not afford

resorting to arbitration; but at the same time such person could

be prevented from resorting to state courts due to the existence

of the arbitration agreement; as a consequence, such a person

would be faced with a denial of justice; (ii) traditional mechanisms

available for consolidation of claims or even joinder appear to be

insufficient for plaintiffs to litigate their claims, namely where a

large number of common facts are asserted or where numerous

victims suffer only limited damages but where the total damages

caused are significant and justify the filing of a claim (eg. consumer

or securities litigation); (iii) international arbitrators are more used

to and equipped to handle international matters; and (iv) arbitral

awards are usually easier to enforce internationally.

However, there are also strong arguments against

5 • YAR • JANUARY 10, 2013


international class/collective arbitration mechanisms: (i) collective

arbitration may be detrimental to individual class members with

legitimate claims if someone files an abusive claim; (ii) there are

evident practical difficulties, such as how to reach all class members

with notices; and (iii) there could be potential enforceability

problems in jurisdictions that do not accept class arbitrations.

This topic has recently been brought to discussion due to

the award rendered in the ongoing Abaclat vs Argentina dispute (as

it has come to be known) - and of the request for disqualification4

and dissenting opinion that followed it5.

The aim of the present paper is to provide some background

on this specific case - that some sustain to be an international class

arbitration, others not -, and of some of the many difficult issues

that have had to be addressed in this respect and that may, at least

to a certain extent, be considered as transversal to the discussion

on the possibility of international class arbitration.

2. Background

The dispute in Abaclat vs Argentina arose when the latter

went into default on approximately US$100bn worth of sovereign

debt back in 2001, as a consequence of which the investments of

thousands of Italian bondholders were rendered worthless.

As such, a year later, some major Italian banks formed an

associazione non riconosciuta (an unincorporated association) called

l’Associazione per la Tutela degli Investitori in titoli Argentini (‘Task

Force Argentina’ - TFA). This association entered into agreements

with individual bondholders according to which these authorized

the association to negotiate with Argentina on their behalf and

eventually to initiate an investment arbitration based on the BIT

between Argentina and Italy6. After failure of negotiations an

arbitration was filed with ICSID in September 2006.

On 4 August 2011 a preliminary award on jurisdictional

issues was rendered, allowing 60,000 Italian bondholders to bring

this joint claim7. This award was issued by only two members of

the three member Tribunal, and lead to the presentation by the

Republic of Argentina of a request for disqualification of such two

members (among which, the President) on 15 September 20118.

Over a month later, on 28 October 2011, the third arbitrator

issued his dissenting vote9.

Considering the scope of this paper, out of the eleven issues

submitted as to be addressed during the jurisdictional phase of the

proceedings10, there is one to be singled out, as follows:

“Does the consent of Argentina to the Jurisdiction of the Centre

include claims presented by Claimants in a single proceeding? If so, are the

claims admissible?”

In fact, Argentina argued that neither the ICSID Convention

nor the Argentina-Italy BIT allowed for such collective claim and

that it had not consented to such a proceeding in any of the

relevant instruments, which would amount to a denial of due

process. And this is precisely one of the main matters that gave

rise to the dissenting opinion.

3. The decision(s)

a) Starting point

The majority decision, in its analysis regarding the above-

mentioned issue, essentially focused on providing an answer to

the question of whether the arbitral Tribunal had the ability to

hear these sort of ‘mass’ claims, of whether Argentina’s consent

provided in the BIT covered such ‘mass claims’.

In doing so, the majority decision framed its analysis in

the context of both jurisdiction and admissibility, differentiating

the two as follows: (i) if the issues raised by the parties related to

ICSID requirements on jurisdiction should there have been only

one claimant, the issue would be a matter of jurisdiction (stricto

sensu); (ii) if such issues related to other aspects that would not

apply should there only be one claimant, then the matter would

pertain to admissibility.

In carrying out its analysis the majority decision also

pointed out that:

(i) The extremely large number of claimants would render

it impossible to treat and examine each individual claim and so

“certain generalizations and/or group examinations will be unavoidable”,

having concluded that the issue of whether such characteristics

should or not be construed a hurdle to ICSID jurisdiction or

admissibility must be answered; and

(ii) Neither ICSID framework nor the BIT addressed the

issue of mass proceedings, providing no clear answer. As such,

another question required an answer: should this mean that such

mass proceedings are contrary to ICSID system or should the mass

aspect of the claim be deemed as a mere procedural aspect that

does not raise any issue of consent or jurisdiction. In a nutshell,

and as the majority decision put it, “Is the multiplicity of claimants

an element that must be covered by Argentina’s consent or is it only a

procedural modality”? 11

b) Consent

Proceeding with its analysis on the consent issue, the

majority then began by formulating an interesting disclaimer: the

Tribunal took great care not to qualify the type of proceedings

as a class arbitration or as any other known form of collective

arbitration due to the fact that there is no universal terminology as

regards types of proceedings involving a high number of parties. As

such, considered the majority decision, reference would be made to

“‘mass proceedings’ as a qualification for the present proceedings, whereby

this term should be understood as referring simply to the high number of

Claimants appearing together as one mass, and without any prejudgment

on the procedural classification of the present proceedings as a specific kind of

‘collective proceedings’ recognized under any specific legal order” 12.

In fact, says the majority decision, there are two types of

collective proceedings, as follows:

(i) Representative proceedings, in which there are various

persons and claims, but a single action, with a representative,

6 • YAR • JANUARY 10, 2013


as in the generally well known American style class actions, and

regarding which, when related to arbitration, consent issues arise,

namely for those who believe that arbitration requires parties’

explicit consent not only to arbitration of the dispute but also to

the procedure to be used;

(ii) Aggregate proceedings, in which several individual claims

are brought together for management purposes, and regarding

which, when in the context of state jurisdiction, mechanisms such

as joinder, intervention or consolidation easily apply but that,

when in the context of arbitration, gives way to more delicate

issues, such as if the Tribunal has the authority and discretion to

proceed collectively.

It then concludes the case at hand is a hybrid species: at first

it appears to be an aggregate proceeding given that consent was

individually given by claimants who are aware of the proceedings

(far from those types of class actions where classes may comprise

unidentified or hard to identify persons). However, considers the

majority, after this initial moment the position of the claimants

is passive in the sense that it is TFA who conducts the proceedings

on behalf of individual claimants, making decisions on the conduct

thereof. With the extra detail that, given the amount of claimants, TFA

cannot take into account individual interests and, as such, limits the

proceedings to the defence of interests common to the entire group.

In light of the foregoing line of reasoning, the majority

ended up by deciding that it had jurisdiction.

On one hand, argued the majority, if it had jurisdiction over

each one of the individual claimants - which it considered to have

-, there appeared to be no reason for which it should cease to have

jurisdiction because the number of claimants exceeded a certain

threshold; if that were to be the case, what such threshold would be

and why it should lead to loss of jurisdiction would remain to be seen.

On the other hand, considered the majority ruling, the

collective nature in this case draws essentially from the nature

of the investment that was made: the BIT between Italy and

Argentina covers investments such as bonds and these can involve,

in the context of the same investment, a high number of investors;

if such investments require a collective relief so that effective

protection may be provided to such an investment, then the mere

consent to ICSID arbitration must be interpreted in the sense

of including any form of arbitration necessary to provide such

protection and remedy (i.e. arbitration in the form of collective

proceedings); to require an additional and express consent to the

form of the arbitration would be contrary to the purpose of the

BIT and to the spirit of ICSID.

The majority then concluded that the question was not after

all, a question of consent but rather - as the claimants to a certain

extension pointed out - a question of if an ICSID arbitration can

be conducted in a manner adequate to mass proceedings, that

is, if the Tribunal can adapt certain procedural rules. As such,

considered the majority, the issues should be analysed in the realm

of admissibility and not of consent.

The dissenting opinion disagreed with what it called a “legal

recharacterization of Argentina’s plea by the majority award”13.

Essentially, the dissenting opinion considered that

Argentina’s objection was the following: “Argentina’s consent cannot

be interpreted to cover the power of the Tribunal to hear collective mass

claims actions requiring resort to atypical or abnormal procedures”14. It

further considered that this is a question of jurisdiction and not

of admissibility because, according to the dissenting opinion,

admissibility has nothing to do with the scope of consent but

rather to conditions relating to the claim (such as if it can be

judicially examined) or to the claimant (such as if the claimant is

legally empowered to bring a given claim)15.

c) Mass actions and ICSID Rules

Regardless of the legal classification of the issues to be

discussed the truth is that both the majority award and the

dissenting opinion ended up analysing essentially the same

questions: can this particular proceeding be carried out with this

many claimants before ICSID and does the Tribunal have the

power to make any eventual necessary changes/adaptations to the

procedural rules16.

In fact, the majority then determined that the questions to

be answered were the following:

(i) Are mass actions - like the case at hand - compatible with

the current ICSID framework and spirit;

(ii) If so, what procedural adaptations would the Tribunal

need to implement in order to make such an action workable in

an ICSID arbitration; and

(iii) Does the Tribunal‘s power to decide on procedural

issues cover such adaptations.

i. Compatibility and/or need for adaptation

In its answer to the first of these questions the Tribunal

departed from the silence of the ICSID framework in respect of

collective actions, concluding that the question would then be how

to interpret such silence: either as a ‘qualified silence’ (intended

and prohibiting something not actually provided for) or as a ‘gap’

(unintended and to be filled by the Tribunal within its power)

and, in the latter case, if articles 4417 of the ICSID Convention

and article 1918 of the ICSID Arbitration Rules did in fact grant

the necessary powers to do so.

Following the same line of reasoning it did when analysing

the consent issue, the Tribunal found that “it would be contrary to

the purpose of the BIT and to the spirit of ICSID to interpret this silence

as a “qualified silence” categorically prohibiting collective proceedings, just

because it was not mentioned in the ICSID Convention”19. And this for

essentially two reasons. First of all, when the ICSID Convention

was concluded collective proceedings were almost non-existent;

and even the discussions that took place at the time concerning

multi-party arbitrations were non-conclusive as to whether these

should be accepted or not, even less so with regard to admissibility

of collective proceedings. Secondly, despite the fact that there is

7 • YAR • JANUARY 10, 2013


a standard arbitration mechanism in ICSID arbitration, given

the possible variety in nature and scope of investments, possibly

current ICSID procedure may not be fully adapted to resolve all

disputes: certain characteristics of a given dispute may influence

the way of conducting the arbitration and, as such, the Tribunal

may have to adapt standard procedure to render the choice of

ICSID arbitration effective. This because it is simply not possible

to anticipate all types of disputes, and this should not be a reason

not to allow certain investors to access the system. Obviously,

underlines the majority decision, any adaptation must take into

account the due process principle and seek balance between

procedural rights and interests of each party.

In this respect the dissenting opinion once again stressed

that the issue was related to consent and not to admissibility,

that the question was if a regular arbitration clause covered class

actions, concluding, resorting to references to the well known

Stolt Nielsen20 and AT&T Mobility21 cases brought before the US

Supreme Court22, that it did not.

The dissenting opinion further adds, in relation to the

argument brought forward by the majority that at time of

conclusion of the ICSID Convention collective proceedings were

almost non-existent, that this was because such proceedings

were “way beyond ‘the horizon of foresee ability’ of the drafters”, no

reason existing to conclude that they would have included such

proceedings given the fundamental differences between bilateral

and collective proceedings. It adds that “they were not establishing an

openended standing court of general jurisdiction [...] covering all possible

present and future disputes”23. And, as such, one must endeavour to

ascertain if the consent to arbitrate within the ICSID framework

can comprise mass claims. In order to do so, one must look at the

legal and factual circumstances surrounding the ‘silence’, which

the dissenting opinion indicates to be the following: on the factual

side, the dissenting opinion calls upon the already mentioned

astounding differences in volume and number of claims and

claimants, which implies that individual aspects may no longer be

assessed; on the legal side, the dissenting opinion points out that

for a collective arbitration to proceed, besides the usual assessment

of the existence of an agreement to arbitrate (primary consent),

another type of consent (secondary consent) must be assessed,

said consent relating to the particular type of proceeding24.

ii. Power to adapt

As seen above, the majority concluded that it could fill in

what it qualified as an unintended gap. However, a new question

arose. As the Tribunal put it: “Can the Tribunal fill the gap created by

the collective aspect of the claim on an ad hoc basis and through the design

of specific rules, or would this require the creation and/or modification

of general rules which are under the competence of the Administrative

Council?”25.

The majority decision considers that in order to answer

this question another two questions arise, as follows: (i) what

concrete rules would be needed in the case at hand and (ii) does

the Tribunal have the power to adapt the rules according to the

applicable framework (articles 4426 of the ICSID Convention and

article 1927 of the ICSID Arbitration Rules).

Analysing both articles, the majority considers that the

silence of the ICSID framework should be construed as meaning

that if such silence refers to a procedural question and there has

been no agreement by the parties on such procedural question,

then the Tribunal shall decide. In summary, the majority considers

the following:

(i) the Tribunal has the power to fill in gaps, which is not

the same as modifying existing rules (which, in turn, can only be

done by agreement of the parties and as long as the rules are not

mandatory);

(ii)this power to fill in gaps is limited to the proceedings at

hand;

(iii) the Tribunal can only, as such, design specific rules for

8 • YAR • JANUARY 10, 2013


specific problems in a given proceeding;

concluding that:

(i) the Tribunal cannot change the current rules without

party consent or adopt a full set of rules (unless the parties agree

that the ICSID rules should not apply and do not replace them by

others, commonly agreed to);

(ii) the Tribunal can and should fill gaps if the application

of the existing rules is not adapted to the specific dispute, where

the filling of the gap is not an amendment but a mere adaptation

of the application in the case at hand.

Having made this abstract analysis the majority then

considers that the issue must be analysed in a concrete manner,

asking itself which rules would be required so as to enable the

conduct of the proceedings and if such rules would fall within the

power of the Tribunal to adapt, taking care also to consider not

only if it can do so but also it should do so.

The majority decision then considers (in respect to the

scope of this paper) that the issue at hand refers to the method

of the Tribunal’s examination. In this regard, considers the

majority, the extremely high number of claimants does not allow

for an examination of all elements and documents as if there

were only a few claimants, which would require the Tribunal to

“implement mechanisms allowing for a simplified verification of evidentiary

material”28 (such as accepting scanned copies of documents or

random selection of samples as opposed to in-depth analysis

of each document). This, adds the majority decision, is not

equivalent to lack of examination and does not affect the object

of examination, relating rather and strictly to the manner of

conducting examination, which may be different from standard

ICSID proceedings. Which the Tribunal can do, according to its

previous line of reasoning.

And should it? This question must, according to the

majority decision, be analyzed based on the aim and purpose of

the ICSID Convention, namely in respect to the equilibrium of

parties’ rights. As such, the majority decision goes on to say that it

will not be possible to treat each claimant as if there was only one

claimant, certain issues having to be analyzed collectively, which

will imply that claimants must waive individual interests in favour

of common interests; on the other hand, Argentina will not be

able to develop in-depth arguments as to the individual situation

of each claimant.

The majority decision further highlights that (i) many

claimants could not afford filing individual arbitrations and (ii)

ICSID would most probably not be able to deal with 60,000

individual arbitrations. This could, at the end of the day, mean

denial of justice (considering, as the majority decision did, that the

investments at stake were indeed protected by the BIT).

The balance to be achieved, says the majority decision, is the

following: can boundaries be imposed on the parties’ procedural

rights in order to achieve effective protection to the investment?

In the case at hand, the relevant issues and respective answers are

the following, says the majority decision:

(i) Are the claims identical or sufficiently homogeneous

to allow for group examination? Yes, given that the rights of the

claimants, the obligations of the respondent and the facts are the

same for all claimants in respect of the treaty claims (considering

that specific circumstances surrounding individual purchases would

only be relevant in respect of eventual contractual claims): claimants

rights for compensation for damages caused by potential breach by

Argentina of obligations provided for in BIT are essentially the same;

(ii) Is it necessary for the respondent to be able to detail

the individual circumstances of each claimant in order to ensure a

full defence? No, given the homogeneity of claims. On the other

hand, the alternative would be for Argentina to defend itself

against thousands of individual claims, which would be much

more challenging.

As such, the Tribunal finds that it can adapt the rules and

that it should, in this case29.

The dissenting opinion opposed this line of reasoning stating

first and foremost that articles 19 of the Arbitration Rules and 44

of the ICSID Convention must be interpreted as applicable only

to situations where no rule exists at all and not to others, as the

case at hand, where rules do exist but may not be suitable to solve

the concrete issue; this would lead to the revision or replacement

of such rule and not to filing in a gap.

The dissenting opinion adds that the possibility of filling in

gaps only applies to “the odd missing rule” and not to “whole sets or

chapters of rules that cover complete segments of the procedure (such as the

administration of proof or the role and due process rights of the parties in

the proceedings”30), which would require a legislative amendment.

In the matter at hand the dissenting opinion concludes that

what is at stake is, as such, not merely filling in a gap but rather

changing or replacing detailed existing rules and that the suitability

argument is a totally different issue that has nothing to do with

filling gaps, suggesting that the majority’s proposed adaptations

would greatly affect the procedural rights of the parties, namely

of the respondent (as opposed to the majority, that considered

that the effects of a change in the method of examination would

be limited and relative). This because, for the dissenting opinion,

“it is an absolute due process right of a respondent in a judicial or arbitral

proceeding, to have every element of the claim or claims presented against

him, examined by the Tribunal, through adversarial debate that affords

him full opportunity to contest and refute these elements one by one, if

he can”31, namely because in this case the claims would preserve

individualized aspects that would necessarily lead to the need for

an individual and adversarial examination.

The dissenting opinion further disagrees with the exercise

of balancing of interests carried out by the majority, which is not,

first and foremost, for the dissenting opinion, included in the

powers of the Tribunal: the Tribunal must apply the law and not

enforce rights or not depending on other considerations (such as

the consequences of refusing jurisdiction, as the majority did).

Besides this, argues the dissenting opinion, such exercise is based

9 • YAR • JANUARY 10, 2013


Sofia Martins

1. Decision on jurisdiction and admissibility rendered on 4 August 2011, ICSID Case no. ARB/07/5 (http://italaw.com/documents/AbaclatDecisiononJurisdiction.pdf). 2. See S.I. Strong, Resolving Mass Legal Disputes Through Class Arbitration: The United States and Canada Compared, 37 N.C J. Int’l L & Com. Reg. (forthcoming

2012) (manuscript at 16-17) (available at http://ssrn.com/abstract=1967101). See Gary B. Born, International Commercial Arbitration, 1231-32 (2009).3. See Jan Paulsson, Arbitration Without Privity, 10 ICSID Review – Foreign Investment Law Journal 232-257 (1995). Arbitration without privity is, according to

the author, arbitration “where the claimant need not have a contractual relationship with the defendant and where (...) the defendant could not have initiated the arbitration, nor is it certain of being able even to bring a counterclaim”.

4. Request for disqualification filed on 15 September 2011 by the Republic of Argentina (http://italaw.com/sites/default/files/case-documents/ita0238.pdf).5. Dissenting opinion rendered on 28 October 2011 by arbitrator Georges Abi-Saab (http://italaw.com/sites/default/files/case-documents/ita0237.pdf). 6. Signed on 22 May 1990, with entry into force on 14 October 1993 (http://www.investmentclaims.com/subscriber_article?script=yes&id=/ic/BITs/law-iic-bt1034&re

cno=15&country=Argentina ). 7. See endnote 1.8. See endnote 4.9. See endnote 5.10. See § 130 of the decision on jurisdiction. 11. See § 468 (ii) of the decision on jurisdiction.12. See § 480 of the decision on jurisdiction.13. See § 126 of the dissenting opinion.14. See § 127 of the dissenting opinion.15. See §§ 7 to 19 of the dissenting opinion.16. See § 507 of the majority decision and § 120 of the dissenting opinion.17. “Any arbitration proceeding shall be conducted in accordance with the provisions of this Section and, except as the parties otherwise agree, in accordance with the

Arbitration Rules in effect on the date on which the parties consented to arbitration. If any question of procedure arises which is not covered by this Section or the Arbitration Rules or any rules agreed by the parties, the Tribunal shall decide the question”.

18. “The Tribunal shall make the orders required for the conduct of the proceeding”.19. See § 518 of the majority decision.20. In this case, the US Supreme Court stated that “An implicit agreement to authorize class-action arbitration [...] is not a term that the arbitrator may infer solely

from the fact of the parties’ agreement to arbitrate. This is so because class action arbitration changes the nature of arbitration to such a degree that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes to an arbitrator”. (http://case.lawmemo.com/us/stolt.pdf).

21. In this case, the US Supreme Court stated that “Class arbitration [...] interferes with fundamental attributes of arbitration...class arbitration greatly increases risks to defendants. The absence of multilayered review makes it more likely that errors will go uncorrected. That risk of error may become unacceptable when damages allegedly owed to thousands of claimants are aggregated and decided at once. Arbitration is poorly suited to these higher stakes”. (http://www.supremecourt.gov/opinions/10pdf/09-893.pdf)

22. While it is true that both cases appear to point out to fundamental differences between bilateral and class-action arbitration, it should, however, be noted, that a complete analysis of the texts of both decisions will evidence that the reasons pointed out by the Supreme Court would probably not apply in the Abaclat case and also that in both cases there are dissenting opinions that believe the Supreme Court’s reasoning is incorrect, namely in this stance.

23. See § 164 of the dissenting opinion.24. The dissenting opinion resorts to the words of S. I. Strong in “Does Class Arbitration ‘Change the Nature’ of Arbitration ? Stolt Nielsen, AT&T and Return to

First Principles”, 17 Harvard Negotiation Law Review, (Spring 2012), available electronically at http://ssm/abstract=179128. However, it should be pointed out that this author does not believe that the consent issue changes the nature of arbitration and does not assume a clear position on if such secondary consent may or not be inferred. In fact, in another paper the same author sustains that (i) the question of whether silent arbitration clauses prohibit arbitration is a question of interpretation and (ii) such interpretation may derive solely from the wording of the clause itself, pointing out that one of the fundamental principles should be that of giving “full effect to the parties’ intention to refer their disputes to arbitration” (see S. I. Strong in “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), available electronically at http://ssrn.com/abstract=1359353.

25. See § 526 of the decision on jurisdiction.26. “Any arbitration proceeding shall be conducted in accordance with the provisions of this Section and, except as the parties otherwise agree, in accordance with the

Arbitration Rules in effect on the date on which the parties consented to arbitration. If any question of procedure arises which is not covered by this Section or the Arbitration Rules or any rules agreed by the parties, the Tribunal shall decide the question”.

27. “The Tribunal shall make the orders required for the conduct of the proceeding”.28. See § 531 of the decision on jurisdiction.29. The majority decision does decide on a range of procedural aspects, i.e. in §§ 663 et seq.. Given the scope of the present paper such aspects will not be analysed.30. See § 202 of the dissenting opinion.31. See § 236 of the dissenting opinion.32. See § 276 of the dissenting opinion.33.“Class Action in Arbitration and Enforcement Issues: an Arbitrator’s Point of View”, Dossier VII – Multiparty Arbitration, ICC Institute of World Business Law ( 2010).

on false premises, both from a legal and factual perspective, such as

the following (among others): (i) the claimants would have other

alternatives than filing individual ICSID claims (which would

have been evidenced clearly in the pleadings); for example, Italian

courts were seized by some bondholders who even succeeded in

obtaining relief against the bank that had sold them the bonds

(which would be precisely the reason why such banks created

the TFA); (ii) the majority assumes jurisdiction over mass claims

actions, which is untrue according to the dissenting opinion; (iii)

the majority assumes the power to revise the arbitration rules

absent consent of both parties, also incorrect according to the

dissenting opinion; and (iv) the majority assumes, wrongly, that

the object and scope of the ICSID Convention and the BIT are

exclusively the protection of investment, blatantly disregarding

the interests of the host State.

The dissenting opinion concludes, naturally and in light of

the above, that the Tribunal does not have jurisdiction under the

ICSID Convention and the BIT in the mass action at hand in

light of the consent of Argentina and also that it does not have the

power to “devise new procedures to hear such an action”32.

4. Conclusion

The present journey through the Abaclat decision on

jurisdiction is aimed alerting to the fact that although class

or collective arbitrations in international arbitration (namely

in investment arbitration) cannot be considered at all as being

peacefully accepted, we may come to be faced with similar realities,

such as this one, and should be aware of the relevant issues. Two

of the major issues to be addressed in any eventual scenario will

most certainly relate to the consent (existence and/or type) and to

the applicable rules (possibility of joinder, consolidation, latitude

for amendment, etc.). And ultimately to complicated practical

and enforceability issues that may prove difficult to overcome.

As Gerald Asken put it “The whole topic of class arbitration is so new

that I can pose many questions about it without giving many, if any,

definitive answers. This is not a problem, because you cannot start getting

the answers until you first ask the questions”33. Hopefully the present

paper succeeded in highlighting some of the questions.

10 • YAR • JANUARY 10, 2013


YAR YOUNG ARBITRATION REVIEW

The First Under 40 Portuguese International Arbitration Review


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