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.] Technorati Tags: law, ADR, arbitration 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 […]

By S.I. Strong On August 4, 2011, a preliminary award on jurisdiction was rendered in Abaclat (formerly Beccara) v. Argentine Republic, ICSID Case No. Arb/07/5. The nearly 300-page award, which is available here, addresses a number of concerns, such as whether the dispute falls within the scope of the relevant bilateral investment treaty (BIT) and whether the claims are contractual or treaty-based. Many of these issues are not themselves unique, although the individual nuances provide interesting reading. However, the award does break new ground in one important regard. For the first time, a tribunal has stated that a large group of individual claimants – in this case, 60,000 Italian bondholders – can join together to bring a claim in an investment arbitration filed with the International Centre for Settlement of Investment Disputes (ICSID). Many people’s immediate response might be to classify Abaclat as a class arbitration, based on sheer number of claims asserted, but that would be incorrect for reasons discussed further below. Instead, Abaclat is a sui generis proceeding, the first and thus far only known treaty-based arbitration to address claims of this magnitude. Although the case’s status as an ICSID arbitration can make analogies to class arbitration difficult in some ways, the analyses reflected in this award can shed new light on certain issues that the arbitral community has found difficult to resolve in the context of large-scale contract-based arbitration. The following discussion will briefly review a number of the more interesting issues, although it is impossible to provide a comprehensive analysis in the limited space available. The dispute arose when a large number of Italian bondholders found their investments had become worthless in the wake of Argentina’s default on approximately $100 billion worth of sovereign debt in 2001. In September of 2002, eight major Italian banks formed l’Associazione per la Tutela degli Investitori in titoli Argentini, or “Task Force Argentina” (TFA), which was organized as an associazione non riconosciuta under Italian law. The TFA subsequently entered into agreements with individual bondholders giving the TFA the ability first to negotiate with Argentina and then to initiate an investment arbitration with ICSID based on the BIT between Argentina and Italy. That arbitration was filed with ICSID in September 2006. The dispute is still in the preliminary stages, so the award of August 4, 2011, focuses solely on jurisdictional issues. The most important of these, at least for purposes of this discussion, involves the question of whether the arbitral tribunal had the ability to hear what was characterized as “mass” (rather than class) claims. The tribunal analyzed this question in two phases, first considering consent and then addressing admissibility. Issues involving consent are discussed on pages 166 to 195 of the award. The tribunal began by considering preliminary matters such as the extent to which the tribunal must go to verify the existence of consent, whether this inquiry should include matters involving the formal and substantive validity of consent, and what documents or evidence may be used to demonstrate the requisite consent. See Award dated August 4, 2011, ¶ 431. Although consent is as important in multilateral arbitration as bilateral arbitration, many of these issues have not been discussed at length in class arbitration, possibly because very few class arbitrations have progressed past what is known as the clause construction stage, which is when the arbitrators construe the arbitration agreement(s) to determine whether class proceedings are proper as a matter of contract law. However, it is likely that issues of consent will eventually become more important in class arbitrations, and the Abaclat analysis may prove helpful to future arbitrators. The tribunal found it relevant that questions regarding consent were not raised by the claimants. See id. ¶ 445. Instead, objections to the nature and quality of claimants’ consent were made by the respondent. This kind of reverse objection can appear in other aspects of mass arbitration and can give rise to some interesting analytical issues. See S.I. Strong, “Enforcing Class Arbitration in the International Sphere: Due Process and Public Policy Concerns,” 30 University of Pennsylvania Journal of International Law 1, 90 (2008). In this case, the tribunal took the view that “the fact that Claimants themselves do not invoke such lack of consent . . . may impose a higher standard of proof than if the mistake or fraud [was] invoked by the affected party itself.” Award dated August 4, 2011, ¶ 445. The tribunal then considered the scope and nature of the consent found in the documents authorizing the TFA to act. See id. ¶¶ 450-54. Although this analysis may seem analogous to inquiries regarding the scope of authority given to class counsel, the issues were slightly different in Abaclat because the parties were not operating in the shadow of U.S. class action law. Instead of having a relatively standard template from which to work, the tribunal had to consider matters such as the type of information given to the claimants and the scope of the authority vested in the TFA and the attorneys hired to represent the claimants on a more individualized basis. See id. ¶¶ 457-65. [This is the first installment in a three-part series on the Guest-Post: ICSID Accepts First-Ever Class-Type Arbitration. Part II is here and Part III is here. ] Technorati Tags: law, ADR, arbitration 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 […]

The ABA Section of Litigation published recently Does a Federal Arbitration Privilege Apply in Arbitration Proceedings? The article, written by P.Jean Baker, discusses the federal mediation privilege as well as the federal arbitration privilege. Here is an excerpt: The federal courts are now debating whether a federal evidentiary privilege applies to documents used in arbitration proceedings. This article will discuss this recent development, the scope of existing federal discovery privileges, and whether the courts should create a new one. Federal Mediation Privilege A federal mediation privilege didn’t exist prior to the 1998 decision in Folb v. Motion Picture Industry Pension & Health Plans 16 F.Supp.2d 1164 (C.D. Cal. 1998). In Folb, the court addressed whether documents used in conjunction with mediation conducted outside the court system should be afforded the same confidentiality protection as that afforded to documents used in conjunction with court-connected mediation. The court relied on Federal Rules of Evidence 501, the sole federal rule on evidentiary privileges. Applying the test for establishing new privileges enunciated by the Supreme Court in Jaffee v. Redmond (518 U.S. 1 (1996)), the court balanced the need for confidentiality in mediation against the modest loss of likely evidentiary benefit provided by documents created solely for introduction during mediation. The court held that the new privilege applied only to information disclosed in conjunction with formal mediation proceedings conducted by a neutral. Protection extends to communications to the mediator and between the parties during mediation, as well as communications in preparation for and during the course of mediation with a neutral. Subsequent negotiations between the parties, however, are not protected even if they include information initially disclosed in mediation. To protect additional communications, the parties are required to return to mediation. The full article is available here. Technorati Tags: law, ADR, arbitration

The Wall Street Journal (WSJ) reports that some banks are embracing mandatory arbitration in consumer contracts on the wake of AT&T v. Concepcion. The WSJ says that now nearly three-quarters of 265 accounts offered by the 10 largest U.S. banks included mandatory arbitration provisions. Read the story here. Related Posts: ABA Journal: After Supreme Court Win Forcing Customers to Arbitrate, AT&T Now Sues to Stop the Arbitration, Disputing, (Aug. 18, 2011) No Day in Court for Bank Clients, Wall Street Journal (Aug. 2, 2011) 2009 Developments in Arbitration Consumer and Employment Arbitration, Disputing (Dec. 23, 2009) Technorati Tags: law, ADR, arbitration