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    

We are happy to share with you that our blog Disputing turns six today! Disputing was originally conceived by Karl Bayer and Rob Hargrove as a forum for discussion of legal developments as they happen. We have come a long way since our very first blog post: Four Law Review Articles have cited Disputing (here, here, here , and here). Disputing was mentioned by the Wall Street Journal for covering consumer arbitration clauses and the “Arbitration Fairness Day” as well as for discussing the mandatory mediation in Italy (our post is here), and a high-profile case from Houston (our post is here). Disputing has also been cited by several CLE presentations. Disputing is listed by Lex Monitor. Disputing blog-master was invited to guest-blog at the Loree Reinsurance and Arbitration Law Forum and at Peter Vogel‘s Internet, Information Technology, & e-Discovery Blog (post available here). The Supreme Court of Texas Blog feeds Disputing‘s case summaries of decisions rendered by the Texas Supreme Court. Disputing is listed by Mediation World under mediation developments around the world. Diane Levin, blog-master of the award-winning Mediation Channel blog, has named Disputing as One of the Five ADR Blogs to Add to your Reading List. Disputing has teamed up with Don Philbin’s ADR Highlight Reel and the Loree Reinsurance and Arbitration Law Forum to create the Commercial and Industry Arbitration and Mediation Group on LinkedIn. Disputing is also featured at Michael VanDervort’s ADR, Conflict Resolution and Exchange LinkedIn Group. Disputing is a mediate.com Featured Blog (read our posts here and here). Disputing is listed as a resource at the University of Oregon Master’s Degree Program in Conflict and Dispute Resolution program. We would like you to celebrate with us by leaving a reply on this post! The Disputing team,   Karl Bayer, Alyson Chaky & Victoria VanBuren