New Year, Same Problems: Joinder Issues
PCERA encourages discussion on arbitration. The views in this article are those of the authors and do not reflect the views of PCERA, its directors, or members. Authors who contribute material that is published by PCERA are responsible for that material.
New Year, Same Problems: Joinder Issues
Caitlin Moustaka and Alistair Marchesi[i]
This piece is intended as a brief, but critical, look at the joinder provisions of the CIETAC Rules, our best hopes being to kick off further discussion on the topic.[ii]
Article 18 of the CIETAC Rules allows parties to apply to join third parties to arbitral proceedings (joinder application). It is plainly directed at what is often seen as a fundamental, arguably inherent, limitation of a private and consensual arbitral forum that is so often at odds with the realities of multinational and multi-party commercial relationships. We wonder, however, whether a provision such as this in fact goes too far, challenging the assumption on which it is based. Whilst the CIETAC Rules set out to facilitate joining third parties, we propose that in reality CIETAC awards delivered subsequent to a joinder application risk being set aside.
The institutional rules of most arbitral forums contain provision to join, and thereby bind, third or additional parties to proceedings. Those forums adopting joinder provisions include the ICC, UNCITRAL, LCIA, HKIAC, SIAC, KLRCA and CIETAC.[iii] Unsurprisingly, there are differences between forums. These differences include:
- the stage of proceedings at which a joinder application can be made;
- whether a joinder application can be made by existing parties or on third parties’ own motion;[iv] and
- the relationship required between the current parties to proceedings and the third party for a joinder application to be considered.
The tenor of joinder provisions can be separated into two strands of a spectrum across the forums we have mentioned.
On one side is the approach which is explicitly deferential to party autonomy and consent taken in the LCIA and SIAC rules.[v] Such rules explicitly require the consent of the party to be joined, expressed in either the arbitral or subsequent agreement. Following this approach, the provisions don’t really allow the joinder of third parties, as that term implies. Rather, the provisions are an avenue to formalise the involvement of additional parties bound by an arbitration agreement, either through the original arbitral agreement or one entered into at a later date.
The countervailing approach can be seen in the rules of the ICC, HKIAC and CIETAC and to an extent UNCITRAL.[vi] Under these arbitral rules, the tribunal or institution is afforded far greater discretion in whether to grant a joinder application made by an existing party, or in the case of the HKIAC Rules, by the third party themselves.[vii] This move is a relatively recent one. The HKIAC and ICC gave effect to their broader multi-party provisions in 2012 and at the end of 2013, respectively. CIETAC has done so from the beginning of this year.
Under the HKIAC, CIETAC and ICC Rules, the tribunal or court of the institution has the power to join a third party where that party is prima facie bound by the arbitration agreement that has been the source of the tribunal’s jurisdiction in those proceedings.[viii] Under a prima facie test, it is sufficient that there is a “reasonable possibility” that a common arbitration agreement “might be found to exist” if the contested issues of fact and law are presented to the tribunal in more detail.[ix]
Arguably, the difference between the two approaches in the arbitral rules considered boils down to the same question: is there consent to be bound by the arbitration agreement? However, we say that to the extent that there is a difference: the net which is cast by the ICC, HKIAC and, now, CIETAC Rules over the school of parties who might be bound by arbitral proceedings is wider there than under other institutions. Each of the CIETAC, ICC and HKIAC Rules make the tribunal, court or institution, rather than the parties, the final arbiter of the proceedings’ jurisdiction following joinder.[x]
Does this matter?
First, consider that under the HKIAC rules, Article 27.13 purports to act as an express waiver by each party of a right of challenge to the validity enforcement of an award on the basis of the outcome of a joinder application. The integrity of such a waiver could be attacked in the context of enforcement proceedings.
Additionally, the CIETAC Rules are unclear as to who is responsible for determining a joinder application at each stage of proceedings. Further, it appears that existing parties are able to make a joinder application at any stage of the arbitral proceedings under the CIETAC and HKIAC Rules. This is a significant departure from other arbitral rules, such as the ICC (created in the wake of the Dutco decision).[xi] The CIETAC Rules also fail to clearly specify who is responsible for the determination of a joinder application at the different stages of proceedings.[xii]
Concerns over the future enforceability of an award delivered following a tribunal taking a liberal approach to a joinder application are real.[xiii] If the tribunal incorrectly assumes jurisdiction over a non-signatory, parties may object to the validity or enforcement of an award on the basis of several grounds contained in the New York Convention, UNCITRAL Model Law and domestic arbitration legislation. These include that the:
- arbitration agreement is not valid;[xiv] and
- composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties.[xv]
Recent statistics from ICC arbitrations reveal that a third of all arbitrations involve more than two parties, of which multiparty disputes will typically involve between three and five different parties.[xvi] Obviously these statistics don’t elucidate how many of these proceedings were ‘multiparty’ by virtue of a successful joinder application; we suspect, however, that the answer is very few of them. The ability for arbitration – a fundamentally private and consensual forum of dispute resolution – to compel the involvement of independent third parties (irrespective of the wishes of any party, existing or otherwise) is an intractable issue which exposes the limits of arbitral jurisdiction. Ultimately, the first best solution is the drafting of an arbitral agreement that ensures all of the relevant parties are identified, and expresses the necessary consent for all parties to be bound by the terms of the arbitration agreement. We suggest that the likely effect of the new CIETAC joinder provision is that parties will tend to steer away making a joinder application, in all but the most plain of cases, as a cautious response to the risk that the utility of a final award is diminished for a lack of enforceability.
[i] Caitlin is a final year student and Alistair a graduate of the University of Western Australia, both have an interest in International Arbitration and involvement with the Perth Centre for Energy and Resources Arbitration (PCERA).
[ii] Of course there are potentially many issues in multi-party arbitrations, see for example: Simon Greenberg and José Ricardo Feris and Christian Albanesi, ‘Consolidation, Joinder, Cross-Claims, Multiparty and Multicontract Arbitration: Recent ICC Experience’ in B. Hanotiau and E.A. Schwartz (eds), Multiparty Arbitration, Dossier VII, ICC Institute of World Business Law (ICC Publication No. 701 178, 2010); Natalie Voser, ‘Multi-party Disputes and Joinder of Third Parties’ in Albert Jan van den Berd (ed), 50 Years of the New York Convention: ICCA International Arbitration Conderence (Kluwer Law International, ICCA Congress Series, Dublin, 2009); Bernard Hanotiau, Complex Arbitrations: Multiparty, Multicontract, Multi=issue and Class Actions (Kluwer Law International, 2005); B. Hanotiau and E.A. Schwartz (eds), Multiparty Arbitration, Dossier VII, ICC Institute of World Business Law (ICC Publication No. 701 178, 2010) Final Report on Multi-Party Arbitrations, ICC International Court of Arbitration Bulletin Vol. 6, No. 1 (1995); Stavros Brekoulakis, Third Parties in International Commercial Arbitration (Oxford International Arbitration Series, 2010).
[iii] International Chamber of Commerce (ICC); United Nations Commission on International Trade Law (UNCITRAL); London Court of International Arbitration (LCIA); Hong Kong International Arbitration Centre (HKIAC); Singapore International Arbitration Centre (SIAC); Kuala Lumpur Regional Centre for Arbitration (KLRCA); China International Economic and Trade Arbitration Commission (CIETAC).
[iv] Whilst technically an application by a third party to become involved an bound by arbitral proceedings is an application for intervention, because it arises in the HKIAC Rules within the joinder provision, we use the banner of joinder application.
[v]LCIA Rules Art 22.1(viii); SIAC Rules Art 24.1(b).
[vi]UNCITRAL Rules Art 17.5 does require the joined party to have been bound by the arbitral agreement, however there is no prima facie threshold question as under the HKIAC, CIETAC and ICC rules .
[vii] HKIAC Rules, Art 27.6.
[viii] HKIAC Rules, Art 27; CIETAC Rules, Art 18; ICC Rules, Art 6, 7.
[ix] Andrea Meier, ‘Commentary on the ICC Rules, Introduction to Articles 7-10 ICC Rules’ in Manuel Arroyo (ed), Arbitration in Switzerland: The Practitioner’s Guide (Kluwer Law International, 2013.
[x] ICC Rules Art 6(5); HKIAC Rules Art 27.2; CIETAC Rules Art 18.3.
[xi] Siemens AG v Dutco Construction Co (‘Dutco’), Cour de Cassation (1re Ch civile), 7 January 1992. For a summary of Dutco, see Natalie Voser, ‘Multi-party Disputes and Joinder of Third Parties’ in Albert Jan van den Berd (ed), 50 Years of the New York Convention: ICCA International Arbitration Conderence (Kluwer Law International, ICCA Congress Series, Dublin, 2009) 343, 346.
[xii] The request for joinder, being the initiation of a joinder application, is by Article 18.1 to be submitted to CIETAC in each case. It appears through a reading of Articles 18.1 and 18.4 of the CIETAC Rules that the outcome will be that for a joinder application made prior to the formation of the arbitral tribunal it is the CIETAC Arbitration Court and following appointment the arbitral tribunal that will determine the outcome of the joinder application. Yet the process is not as clear, as for example that provided for under the ICC rules or even the HKIAC rules.
[xiii] See, for example, PT First Media TBK v Astro Nusantara International BV  SGCA 57.
[xiv] Model Law Art 36(1)(a)(i); New York Convention Art V(1)(a).
[xv] Model Law Art 36(1)(a)(iv); New York Convention Art V(1)(d).
[xvi] (2014) ICC ICArb Bull Vol. 25 No. 1.