Abstract

Parallel proceedings in investor-State disputes are a recurring phenomenon that creates considerable uncertainty for both investors and States. Its causes lie in the particular complexities of the international framework for investment protection, which make traditional coordination mechanisms such as lis pendens and res judicata largely unsuitable in a treaty arbitration context. This contribution suggests that a solution can be found in the general international law principle of prohibition of abuse of process, which mandates tribunals to dismiss abusive claims. When applied in the appropriate manner, this principle not only helps to draw a clear line between legitimate and non-legitimate parallel proceedings, but also encourages litigants to agree on a single forum for resolving their disputes. By establishing a framework in which the self-interest of parties prompts them to resolve their dispute in a single action, the principle has the potential to prevent parallel proceedings from arising in the first place and thus to produce sensible outcomes for everyone involved. Clarifying the requirements for applying the principle of prohibition of abuse of process is therefore likely to be the best approach available to address the problems associated with parallel proceedings.

I. INTRODUCTION

With the growing number of investor-State disputes over the last two decades has come the realization that a single set of facts can often give rise to several sets of proceedings with a significant degree of overlap between them. Whilst this overlap can take many forms, the most striking cases are those that involve either identical or at least substantially related parties 2 as well as substantially identical requests for relief. 3 These cases (as opposed to others that merely involve unrelated parties or different requests for relief) will be referred to as parallel proceedings for purposes of the present article. 4

Parallel proceedings can take place simultaneously or consecutively and can involve tribunals as well as domestic courts. 5 For purposes of this article the term parallel proceedings will be limited to cases where the roles of claimant and respondent in two forums are identical and the duplication of the proceedings therefore reflects the claimant’s attempt to maximize his chances of securing an overall successful outcome. 6 In addition, the article focuses on parallel proceedings involving at least one tribunal and where at least part of the claims arise under an international investment agreement (IIA). 7

Parallel proceedings defined in this manner can cause a number of significant problems. These include the risk of double recovery, 8 the possibility of conflicting outcomes 9 and associated lack of legal security, 10 as well as increased costs and inefficiencies for the parties involved. 11 In addition, arguably the most fundamental problem of parallel proceedings is the systematic distortion of the chances of success in favour of claimant investors. 12 Allowing claimants to try their luck in several forums (rather than just one) typically increases the chances that one of these forums will grant the requested relief beyond the odds justified by the facts. 13

As a consequence, there is agreement that parallel proceedings should ideally be avoided and, if this is not possible, at least be coordinated. The remainder of this article addresses the question of how these aims can best be achieved. For that purpose, in a first step, the article looks at the particular complexities of investor-State disputes that tend to be at the origin of parallel proceedings (II). In a second step, it proceeds to examine the regulatory framework for the coordination of parallel proceedings and discusses the various available coordination mechanisms (III). In a third step, it considers how the application of this framework might be improved (IV), before concluding at (V).

II. THE COMPLEXITY OF INVESTOR-STATE DISPUTES

If parallel proceedings are a relatively frequent phenomenon in the context of investor-State disputes, the fundamental reason for this is one of complexity. Investor-State disputes tend to be complex in that they often relate to claims arising under different legal instruments (A), they often involve formally distinct yet economically related entities (B), and it is often possible to think of more than a single forum for resolving these disputes (C).

A. The Legal Instruments Underlying Investor-State Disputes

Investors are frequently in a position to assert claims arising under various legal instruments that can broadly be summarized under the four headings of investor-State contracts, the law of the host State, international treaties, and general international law. 14 In particular, in many cases a foreign investor or its local subsidiary will have entered into a contractual arrangement with the host State, a special State agency or a sub-State entity, which may become the source of a contractual claim. 15 Next to these, investors often have claims arising under bilateral or multilateral IIAs signed by the host State. 16 In addition, one may also need to consider claims of an investor under a host State’s domestic legislation, international human rights treaties, and general international law. 17

While different types of claims do not necessarily have to be invoked in separate proceedings, the source of a claim constitutes a potential criterion for differentiation when determining the scope of jurisdiction of a particular forum. In particular, when combined with a disintegrationist approach to jurisdiction, 18 the multiplicity of legal instruments applicable in an investment context may give rise to jurisdictional fragmentation and thus be at the origin of parallel proceedings.

B. The Legal Entities Involved in Investor-State Disputes

Investment operations often involve not only numerous legal instruments, but also multiple legal entities, in particular on the side of investors. 19 This adds a further layer of complexity and creates the possibility of parallel proceedings involving formally distinct, yet economically related parties. In a typical foreign investment scenario, the investing party does not directly acquire physical or other non-corporate assets in the host State, but rather sets up a company there to run the day-to-day business of the investment. 20 Control of such a locally incorporated company may be effectuated through an indirect shareholding, and the investor itself may be owned by other foreign investors (including portfolio investors with a minority shareholding), thus potentially adding further entities to the investment structure.

The specific characteristics of the international investment framework mean that all these entities may be in a position to assert claims against the host State, thus multiplying the number of potential procedural relationships. Rights arising from an investment contract, an operating licence or domestic legislation will typically pertain to a locally incorporated company. By contrast, treaty claims may arise in any of the above-mentioned entities. In particular, investment treaties frequently extend their protection both ‘upstream’ to shareholders and indirect investors, 21 and ‘downstream’ to foreign-controlled corporate entities in the host State. 22 As a consequence, groups of companies may be in a position to bring multiple claims with regard to the same investments and against the same incriminated measures through a number of different entities. 23

C. The Forums for the Resolution of Investor-State Disputes

A third important aspect contributing to the potential for parallel proceedings in investor-State disputes is the multitude of forums that can in principle have jurisdiction with regard to such disputes, including contract-based and treaty-based tribunals, as well as the national courts of a host State. 24 Most IIAs feature a dispute resolution clause that allows investors to initiate proceedings against the host State before one or several specified forums. In particular, many of these provisions contain an offer of the host State to arbitrate disputes, which the investor can accept through a simple declaration. 25 Since the offer contained in an IIA’s dispute resolution mechanism gives investors the possibility to perfect an arbitration agreement, yet leaves this acceptance entirely to the investors’ discretion, it effectively provides them with a forum selection option. 26

Before a forum selection option is exercised, the jurisdiction with regard to an investor-State dispute is usually either with the forum determined in an investor-State contract or, by default, with the host State’s domestic courts. 27 An investor’s exercise of a forum selection option therefore typically leads to a transfer of jurisdiction from the originally competent forum to the chosen tribunal. 28 Depending on the scope of the option, this transfer may only relate to some of the investor’s claims, meaning that any other claims will still have to be asserted in the original forum. 29 Similarly, any transfer of jurisdiction will be limited to the entities protected under the relevant treaty.

The fact that different types of claims and claims pertaining to different legal entities may have to be asserted in different forums means that there can be situations where investors need to start proceedings in more than a single forum if they want to assert all of their claims against a host State.

III. THE FRAMEWORK REGULATING PARALLEL PROCEEDINGS IN INVESTOR-STATE DISPUTES

There are various mechanisms to avoid and, if necessary, coordinate parallel proceedings. 30 One helpful way of classifying these mechanisms is to group them in accordance with the order in which they apply. Each of the relevant mechanisms can be placed into one of five groups, where the mechanisms in the first group apply as a matter of priority, whilst those in the fifth group are strictly subsidiary to all other mechanisms. These five groups can be described as follows: jurisdiction-regulating mechanisms (A); agreed coordination mechanisms (B); hierarchical (or vertical) mechanisms (C); first-in-time (or horizontal) mechanisms (D); and general coordination mechanisms (E). If one reaches the level of general coordination mechanisms and none of the mechanisms in that group applies, then proceedings will be left uncoordinated.

A. Jurisdiction-regulating Mechanisms

Before applying any other coordination principles, it is necessary to determine whether the forums invoked by an investor actually have jurisdiction over the dispute. This is a logical first step, since if in fact only one forum has jurisdiction, this should prevent multiple proceedings from the outset and make the application of any other coordination mechanisms unnecessary.

A number of issues can arise in this context. Many of them have to do with the question of whether a particular dispute resolution mechanism must be limited to claims arising under the instrument containing it or whether it can also extend to claims arising under other instruments. 31 In particular, one may need to consider whether a forum designated in a contract or a domestic law can have jurisdiction with regard to treaty claims 32 and whether the forum selection option under a treaty can extend to claims arising under a contract or another public international law instrument. 33 Tribunals may also have to address the issue of whether investors have the faculty to waive forum selection options granted to them under a treaty, in particular by agreeing on the exclusive jurisdiction of a contractual forum. 34

In addition, many IIAs seek to limit the occurrence of parallel proceedings through specific provisions regulating the jurisdiction of the relevant forums. Older IIAs often use fork in the road provisions to achieve this aim, conditioning the possibility for an investor to accept a host State’s arbitration offer under a treaty on the investor not previously having submitted the same dispute elsewhere. 35 Differently, waiver provisions make the submission of a claim to international arbitration under a treaty mechanism subject to the requirement that the investor formally waive his right to initiate or continue proceedings with regard to the same host State measure before any other forum. 36

Recent treaty practice suggests that waiver provisions can now be seen as the mechanism of choice for regulating parallel proceedings. 37 This seems sensible in that waiver clauses address a larger number of relevant situations than fork in the road provisions and allow for more nuanced solutions. In particular, by referring to any proceedings with respect to a specific ‘measure’ of the host State, waiver clauses clearly cover situations where the sources of the claims asserted in parallel proceedings are not identical. 38 Waiver clauses can also address situations where there are claimants situated at different levels of an investment structure that at least partially represent the same economic interests, even if they are not formally identical. 39 At the same time, by allowing proceedings before a different forum if these are conducted before the treaty mechanism is invoked, waiver provisions do not discourage investors from seeking local recourse 40 and cannot cause them to inadvertently give up any procedural rights. 41

B. Agreed Coordination

If more than one forum has jurisdiction with regard to a dispute, logically the next question to ask is whether the parties are willing to agree for their dispute to be adjudicated in a single forum 42 or otherwise for proceedings to be coordinated in a way that avoids the problems associated with parallel proceedings. 43 Under the principle of party autonomy such an agreement would take precedence over any other coordination mechanisms. Whilst agreements to consolidate or coordinate investor-State proceedings have been reached in a number of instances, 44 there seems to be further scope for encouraging disputing parties to avoid parallel proceedings by mutual agreement. Ways of achieving this, in particular by clarifying the circumstances in which parallel proceedings must be regarded as abusive, will be addressed in Section IV below. 45

C. Hierarchy

In the absence of an express agreement between disputing parties as to how parallel proceedings should be coordinated, it may still be possible to identify an implicit understanding on how the relevant forums relate to one another. If one of the forums has been accorded a hierarchically superior position, this implies the application of certain ‘vertical’ coordination principles, under which the decisions of the superior forum have binding effect in proceedings before the inferior forum, but not the other way around.

Interpreting an IIA in the light of its object and purpose will typically reveal a hierarchical relationship between parallel treaty and non-treaty proceedings. 46 One of the reasons for having this kind of hierarchy is that an investor may effectively be required to have recourse to a non-treaty forum before he is in a position to assert his treaty claims. 47 This is the case not only where an IIA explicitly establishes an exhaustion of local remedies 48 or prior recourse to courts 49 requirement, but potentially also where an investor-State contract submits contractual matters to the exclusive jurisdiction of a local forum 50 or where a particular host State measure of itself does not yet constitute a treaty breach, but would if the host State’s courts failed to remedy it. 51 In all these situations the protective scope of the relevant treaty would be significantly curtailed if a treaty tribunal were bound (even if only as a matter of domestic law 52 ) by a decision rendered in parallel proceedings in the host State’s domestic courts. 53

In other cases, in particular those of treaties containing a waiver clause, the relevant IIA may not make local recourse a requirement for the submission of treaty claims to arbitration, but may still allow such recourse as an attempt to solve the dispute before escalating it to the next level. 54 If treaty tribunals were bound by the decisions of domestic courts in those instances, this would likely dissuade investors from seeking local recourse before starting a treaty arbitration—again in apparent contradiction to the intention of the signatories to the relevant IIA. 55 Finally, if the decisions of the courts of a host State were binding on a treaty tribunal, this would also create potential for abuse by host States, who might then be tempted to seek convenient decisions in their own courts with a view to defeating an investor’s treaty claims. 56

Many of the above considerations also apply with regard to the relationship between treaty and non-treaty tribunals. An exclusive forum selection clause in a contract may force an investor to have recourse to a contractually determined tribunal before being able to assert his rights under an IIA. This can be a problem in that the contractual tribunal may not always be the full equivalent of the forum available under the treaty mechanism, for instance where the contractual tribunal has its seat in the host State and proceedings are therefore exposed to interference by the host State’s judicial system. 57 If in such a case the decision of the contractual tribunal could not later be reviewed by the treaty tribunal, this might ultimately prevent the adjudication of the dispute in a neutral forum, contrary to the intention of the signatories to the IIA. 58

Similarly, respondent States may want to encourage an escalated approach to adjudication 59 even where a first set of non-treaty proceedings is conducted before a tribunal, bearing in mind that the initiation of a treaty arbitration is frequently seen as a more serious threat to the State’s public image than its involvement in a ‘simple’ contractual dispute. 60 Finally, if one were to treat the decisions of contractual tribunals as binding on treaty tribunals, whilst denying such a binding effect to the decisions of a host State’s domestic courts, investors who successfully negotiated the inclusion of arbitration clauses into their contracts with host States would be worse off than investors who agreed to refer their disputes to a host State’s domestic courts. 61 It is therefore also a matter of coherence to regard treaty tribunals as hierarchically superior to all non-treaty forums, whether they be tribunals or domestic courts. 62

For all these reasons it must be concluded that if treaty tribunals are to fulfil their function as neutral forums for the adjudication of claims under IIAs, their decisions must be binding on non-treaty forums, 63 but not the other way around. 64

D. First-in-time Rules

Where ‘vertical’ coordination mechanisms are not applicable because two forums are situated at the same level of judicial hierarchy, one may have to consider to what extent ‘horizontal’ coordination mechanisms apply. These mechanisms make up for the absence of hierarchy between two forums by relying on a ‘first in time’ criterion. Specifically, where a first set of identical proceedings has already resulted in a final decision, the principle of res judicata may be applicable, preventing a new decision on issues that have already been decided. 65 Where a first set of proceedings has been started and is still pending elsewhere, the principle of lis pendens may render a second set of proceedings inadmissible. 66

The fact that treaty tribunals will typically have to be regarded as hierarchically superior to non-treaty forums 67 means that there is only limited scope for the application of horizontal coordination mechanisms in investor-State proceedings. Where only one tribunal deals with claims arising under a treaty and the forum in the parallel proceedings has, for instance, been asked to look exclusively at contractual claims, an application of the principles of lis pendens and res judicata would not be appropriate, since the treaty tribunal is hierarchically superior to the contractual forum and this hierarchical relationship itself prescribes the applicable coordination principles. 68

Horizontal coordination mechanisms may in principle apply where each of two tribunals in parallel proceedings deals with treaty claims. In such a case public international law would govern the application of lis pendens and res judicata principles. 69 However, there are serious doubts as to whether lis pendens is actually recognized as a principle of general international law. 70 The Mexican–American General Claims Commission, for instance, suggested that the filing of one action would not necessarily prevent the initiation of a second set of proceedings relating to the same claim. 71 Similarly, the PCIJ expressed its reservations regarding the applicability of lis pendens in Certain German Interests , 72 and completely ignored the principle in its Legal Status of the South-Eastern Territory of Greenland decision, even though the circumstances of that case would have suggested its application. 73

In any event, it is clear that, even if lis pendens were recognized as a matter of public international law, its practical application would be severely limited by the principle’s strict requirements. 74 Similarly, with regard to the principle of res judicata , whilst its applicability as a principle of general international law is beyond doubt, 75 its requirements are fairly restrictive, 76 and the principle can, in particular, only apply where the parties in both sets of proceedings are formally identical. 77 In sum, therefore, res judicata will only be relevant if one and the same entity pursues treaty claims (possibly under two different treaties) against the same host State in two different sets of proceedings. Apart from this scenario, ‘horizontal’ mechanisms are unlikely to play any role with regard to the coordination of parallel investor-State disputes.

E. General Mechanisms

The last and most subsidiary level of coordination mechanism includes two very general principles that reflect fundamental conceptions shared by all legal systems on how parallel proceedings should be conducted, namely the principle of comity and the prohibition of abuse of process. The principle of comity can be described as calling on international forums ‘to defer, when appropriate, to other courts and to treat their procedures and decisions with courtesy and respect’. 78 It involves, in particular, the power of a forum to stay the proceedings before it to await the outcome of related proceedings in a different forum and the faculty to consider the decision reached in another set of proceedings. 79

The power of a tribunal to temporarily suspend proceedings is generally recognized as part of a tribunal’s inherent authority to conduct an arbitration in line with the requirements of justice and efficiency. 80 There are no strict requirements for ordering a stay, but merely criteria to guide tribunals in exercising their discretion in this regard. 81 In the context of parallel proceedings, these arguably include the principle that where parties and issues are strictly identical the second set of proceedings should normally be stayed, 82 and that in the absence of strict identity in this regard proceedings should be stayed more readily the greater the similarity between them. 83 In addition, considerations of good faith, the finality of decisions, the timing of proceedings, and the ability of a forum to fulfil its judicial function should also be taken into account. 84 Where a tribunal decides to stay the proceedings to await the outcome in a parallel action, it should accord due consideration to the decision rendered in the other forum and justify any deviation in this regard. 85

By contrast, the prohibition of abuse of process can generally be defined as preventing ‘the use of procedural instruments or rights … for purposes that are alien to those for which the procedural rights were established’. 86 In the context of parallel proceedings, the principle is most likely to become relevant where an investor has already obtained a decision on the merits in one forum, yet continues to pursue the same dispute in a second set of proceedings. Whilst arbitral practice so far does not seem to have delivered a case where parallel proceedings would have been characterized as abusive, 87 there can be little doubt that investors will be prevented from relitigating issues if doing so would give rise to an abuse of process. 88

The present article suggests that clearly distinguishing between situations where parallel proceedings must be regarded as legitimate and those where they should be qualified as abusive, and thereby clarifying the requirements for the application of the principle, could significantly improve the coordination of parallel proceedings and help to encourage parties to agree on a single forum for the resolution of their dispute. The detailed considerations in this regard will be discussed in Section IV. 89

IV. IMPROVING THE APPLICATION OF THE REGULATORY FRAMEWORK

As the previous Section illustrates, the framework for coordinating parallel proceedings is in fact fairly comprehensive. If the regulation of parallel proceedings could nevertheless be improved, this arguably has less to do with the absence of adequate coordination mechanisms as such than with the limited availability of authoritative guidance on how the existing mechanisms will be applied. The resulting uncertainty can make it difficult for litigating parties not only to understand when exactly parallel proceedings will be considered admissible, but also to reach sensible agreements on coordination. In particular, investors have few incentives to bring all of their claims in a single action if they believe they can get away with adjudicating their claims in several sets of proceedings. 90 At the same time, host States are unlikely to offer investors the possibility to bring all of their claims in a single forum if, by restricting investors to proceedings in a forum with limited jurisdiction, they can hope to force them to abandon some of their claims. 91

This Section considers how the framework for coordinating parallel proceedings can be made more predictable for investors and host States, helping them to agree on mutually beneficial solutions in the process. It discusses the general possibility of inserting specific coordination provisions in IIAs (subsection A) and how the principle of prohibition of abuse of process can be applied to achieve an ideal outcome with regard to the coordination of proceedings (subsection B). Finally, it proposes some language that could be inserted into future IIAs to explicitly address this principle as a coordinative mechanism in parallel proceedings (subsection C).

A. Specific Coordination Provisions in IIAs

Better clarity with regard to the application of the regulatory framework might in principle be achieved by inserting specific coordination provisions in IIAs. One of the more comprehensive recent attempts in this regard can be found in Article 9.17 of the EU-Singapore FTA (‘Conditions to the Submission of Claim to Arbitration’), which effectively combines a requirement to withdraw already pending proceedings with a waiver requirement and a provision regarding the binding effect of final awards rendered by other international tribunals. Paragraph 1 of Article 9.17 provides as follows: 92

[A] claim may be submitted to arbitration under this Section only if …

(f) the claimant: (i) withdraws any pending claim submitted to a domestic court or tribunal concerning the same treatment as alleged to breach the provisions of Section A (Investment Protection); and (ii) declares that it will not submit such a claim before a final award has been rendered pursuant to this Section;

(g) the claimant: (i) withdraws any pending claim concerning the same treatment as alleged to breach the provisions of Section A (Investment Protection) submitted to another international tribunal established pursuant to this Section, or any other treaty or contract; and (ii) declares that it will not submit such a claim in the future; and

(h) no final award concerning the same treatment as alleged to breach the provisions of Section A (Investment Protection) has been rendered in a claim submitted by the claimant to another international tribunal established pursuant to this Section, or any other treaty or contract.

Paragraph 2 of the same provision further specifies that:

For the purposes of subparagraphs 1(f), 1(g) and 1(h), the term “claimant” refers to the investor and, where applicable, to the locally established company. In addition, for the purposes of subparagraphs 1(f)(i), 1(g)(i), and 1(h), the term “claimant” includes all persons who directly or indirectly have an ownership interest in, or who are controlled by the investor or, where applicable, the locally established company.

As the provision illustrates, attempts at addressing parallel proceedings in a comprehensive manner can make for rather complex drafting, and even then questions may remain as to the effect intended by the signatories. Specifically, Article 9.17 seems to draw a distinction between proceedings before a ‘domestic court or tribunal’ on the one hand and proceedings before an ‘international tribunal’ on the other. 93 The latter would appear to be hierarchically superior to the former in that decisions of a ‘domestic court or tribunal’ do not prevent proceedings before an ‘international tribunal’ (which presumably will not be bound by the decision in the domestic forum). 94 By contrast, a decision rendered in proceedings before another ‘international tribunal’ triggers the first-in-time rule contained in paragraph 1(h), thus preventing a further set of ‘international’ proceedings. 95

Paragraph 2 of Article 9.17 extends the prohibition of simultaneously pending proceedings and the binding effect of a decision previously rendered by another ‘international tribunal’ to any company controlled by the investor and ‘all persons who directly or indirectly have an ownership interest in … the investor’. 96 The effects of this provision seem potentially far-reaching, as the clause appears to imply that if a minority shareholder in a potential claimant investor has previously started proceedings against a respondent State, this will not only prevent the investor from submitting his own claim whilst the action is still pending, but even after an award has been rendered in those proceedings. If this is correct, then a minority shareholder would be in a position to torpedo an investor’s claim simply by bringing his own claim against the host State. 97

In sum, Article 9.17 of the EU–Singapore FTA provides a good illustration of some of the mechanisms likely to be considered by the negotiators to modern IIAs when trying to coordinate parallel proceedings, and the complexities they are facing when drafting these provisions. It also shows that, whilst a provision on coordination will necessarily involve some policy choices, the rationale for making these choices will not always be apparent. The more guidance treaty drafters provide in this regard, the better the chance of avoiding ambiguities and ensuring that the agreement will be applied in accordance with the intention of its signatories.

B. Encouraging Agreed Coordination Through the Prohibition of Abuse of Process

Where IIAs do not contain specific provisions on coordination, tribunals and parties will have to consider to what extent the mechanisms in the five groups described above are applicable. 98 As explained earlier, in the absence of appropriate jurisdictional regulation or agreed coordination, hierarchical principles and first-in-time rules will often leave parallel proceedings uncoordinated. This makes defining the requirements for the application of the general rule of prohibition of abuse of process particularly relevant. 99

Once investors and host States are put in a position where they can know in advance whether parallel proceedings will be considered legitimate or whether an investor’s seeking of a second decision will be regarded as abusive, this should also make it easier for them to agree on coordinating proceedings. In particular, respondent States dispose of a simple yet very effective tool for ensuring that investors can bring only a single set of proceedings against them—namely by offering investors the opportunity to do so in their preferred forum. This link between the offer of a host State for all the claims of an investor to be heard in a single forum and the otherwise applicable coordination mechanisms deserves to be discussed in a little more detail.

(i) The prohibition of abuse of process as a fundamental regulatory principle

As a starting point, prevention being better than cure, the guiding principle for coordinating parallel proceedings must be to avoid such proceedings from occurring in the first place. Unless the signatories to an IIA have expressed a preference for an escalated arbitration process, 100 the ideal solution to the problems associated with parallel proceedings will therefore be to ensure that investors bring all of their claims in a single set of proceedings. To achieve this aim, two fundamental requirements need to be fulfilled, in that: (i) investors need to be put in a position where they can bring all of their claims in the same forum; and (ii) they need to have the incentives to actually do so. Another fundamental requirement for coordinating proceedings, following from basic considerations regarding the preservation of acquired rights, is that, (iii) investors must not be forced to give up any rights granted to them cumulatively, unless the cumulative exercise of their rights would clearly have to be regarded as abusive. 101

Requirement (i) is in principle in the hands of host States, who are always free to offer investors the possibility to bring all of their claims in a single forum. 102 With regard to Requirement (ii), the principal challenge is posed by the fact that investors may have an incentive to strategically split their claims in order to increase their overall chances of success. 103 This incentive needs to be countered with a mechanism ensuring that an investor loses any claims he fails to bring in a first action, unless he has a valid justification for asserting his claims in parallel proceedings. The prohibition of abuse of process is precisely such a mechanism, which—if correctly applied—also fulfils Requirement (iii).

Where a decision has already been rendered in a first set of parallel proceedings, the fundamental test for identifying an abuse of process has been said to be whether the claims asserted in the second set of proceedings ‘could and should have been raised in [the] earlier proceedings’. 104 Whilst this formulation points in the right direction, the above considerations suggest that it may be too narrow. In particular, an unjustified split of proceedings may also exist where, whilst the claims asserted in a second action could not have been brought in a first set of proceedings, the claims asserted in the first proceedings could equally have been brought in the second forum. The basic question therefore really must be whether the claims asserted in separate actions ‘could and should have been raised in a single set of proceedings’.

As discussed earlier, 105 there can be situations where investors have no choice but to bring their claims in proceedings before different forums, simply because no single forum has jurisdiction with regard to all of them. 106 In these situations, it is clear that conducting parallel proceedings cannot be qualified as abusive.

By contrast, where an investor could have brought all of his claims in a single action, but nevertheless conducts parallel proceedings against a host State, he will have to justify his approach. 107 One can in principle think of three possible justifications in this regard:

First, there may be situations where, whilst an investor can bring all of his claims in one forum, he can only bring some of them in another, and this other forum is the one he actually prefers. 108 In such a situation the investor would seem to be justified in bringing any claims he can in his preferred forum, whilst (of necessity) bringing his remaining claims elsewhere.

Second, parallel proceedings may also be justified where a first set of proceedings relates exclusively to non-treaty claims, a second set of (treaty) proceedings is only initiated after the non-treaty proceedings have been terminated, and the investor could reasonably believe that the respondent State agreed with him taking an escalated approach to dispute settlement. 109

Third, a valid justification for conducting parallel proceedings may also exist where the claimants in two sets of proceedings are not strictly identical and can plausibly assert that they could not agree on a preferred forum or procedural strategy. 110 Such a claim will in particular not be plausible where the claimants are under the same control.

These situations where multiple proceedings seem ‘necessary to obtain adequate remedies’ must be distinguished from cases where an investor tries ‘to take advantage of the general lack of means to compel coordination of claims … for the purpose of maximising its chances of success’ in a manner that is ‘undesirable from a general point of view’. 111 Based on the above considerations, an investor’s seeking of a second decision in parallel proceedings will, in particular, have to be regarded as abusive where the following three requirements are fulfilled:

  • The claimant in the second action (or another entity under the same control) has already obtained a judgment on the merits based on the same facts and addressing the same request against the same respondent (or a closely related entity).

  • The claimant (and, if applicable, any other relevant entity under the same control) was in a position to bring all of the relevant claims in a single set of proceedings in his preferred forum.

  • A split of proceedings could not be justified on the basis of an escalated approach to dispute settlement (eg because the first action already related to treaty claims or because the respondent State expressed a preference for all claims to be heard in a single set of proceedings).

(ii) The possibility of host States to prevent parallel proceedings by offering to extend the jurisdiction of an investor’s preferred forum

To understand how a host State’s offer to an investor to bring all of his claims in a single set of proceedings might affect the application of the principle of abuse of process, one should bear in mind not only that for an offer to stand a realistic chance of being accepted it will have to relate to a neutral forum, but also that even amongst various neutral forums an investor might have legitimate preferences. For instance, if the relevant dispute resolution provisions referred part of an investor’s claims to UNCITRAL arbitration and part of his claims to arbitration under the ICSID Convention, and assuming that the latter were the investor’s preferred forum, it would be legitimate for the investor to reject an offer to bring all of his claims in proceedings under the UNCITRAL Rules. Similarly, if in the same scenario the investor’s preferred dispute resolution method were arbitration under the UNCITRAL Rules, it would be legitimate for him to reject an offer for all of his claims to be heard in ICSID proceedings.

By contrast, if a host State offered an investor the opportunity ‘to extend the jurisdiction of any of the forums having jurisdiction with regard to part of the investor’s claims, at the investor’s choice, to all the claims arising in the context of the dispute’, such an offer could not legitimately be rejected. To stay with the example, if the respondent State offered to extend either ICSID or UNCITRAL jurisdiction to all of the relevant claims of the investor, there could be no valid justification for rejecting that offer, since the investor would necessarily have a preference for one or the other of the two forums. As a consequence, the only right the investor could possibly lose by choosing between them would be the right to split his claims (and bring some of his claims in his non-preferred forum). A right to bring claims in parallel proceedings, however, is precisely one that could not possibly have been intended by the signatories to IIAs.

By offering an investor the opportunity to bring all of his claims in his preferred forum, a host State therefore puts the ball in the court of the investor—if the latter rejects the offer and later seeks a second decision against the host State, the claims brought in that second action will be considered abusive. At the same time, the offer of a host State to extend the jurisdiction of a forum that already has jurisdiction over part of the dispute seems like a fair price to pay to avoid the possibility of parallel proceedings. If the host State is not ready to pay that price, it implicitly accepts that possibility, with the consequence that uncoordinated proceedings (in favour of the investor and to the detriment of the host State) become acceptable. 112

It may be useful to illustrate these considerations and their practical application by looking at a hypothetical scenario. Let’s assume that investor A (a national of State X), controlled by its shareholder B (a national of State Y), has invested in State Z through a locally incorporated company C. A has rights based on an investment contract with Z, which refers disputes to UNCITRAL arbitration. In addition, both A and C are protected under the X-Z BIT, referring disputes to arbitration under the ICSID Convention, whilst B is protected under the Y-Z BIT, again providing for arbitration under the UNCITRAL Rules.

If A initiates UNCITRAL proceedings against Z under the contractual mechanism and Z wishes to avoid the risk of later being confronted with separate proceedings brought by A or C under the ICSID Convention or by B under the UNCITRAL Rules, Z can respond to A’s notice of arbitration by stating its preference for all the relevant claims, including those of any entities affiliated to A, to be brought in a single arbitration. This statement would have to be accompanied by an offer enabling A, B, and C to bring all of their claims, at their choice, in the already pending UNCITRAL proceedings (which B and C would have to join) or, alternatively, in ICSID proceedings after the UNCITRAL proceedings had been withdrawn. Whether or not A, B, and C accepted this offer, if any of them, after a decision in the initial proceedings had been rendered, were to seek a second decision in separate proceedings against Z, the claims asserted in those proceedings would have to be rejected as abusive, since they could and should have been brought in the initial proceedings. 113

C. Potential Treaty Language on Abuse of Process

To clarify which situations involving parallel treaty proceedings will be regarded as abusive (and, at the same time, encourage disputing parties to agree on a single forum for the resolution of their dispute), treaty negotiators might want to consider including language along the following lines in future IIAs:

Article X (Parallel Proceedings and Abuse of Process)

  1. This provision shall apply to proceedings before any arbitral tribunal adjudicating claims arising under this treaty (the “Tribunal”).

  2. If, at any time before the Tribunal renders a final decision (including at a time before proceedings before the Tribunal are initiated), the Claimant (or an entity with economic interests that are fully or partly identical to those of the Claimant) initiates proceedings against the Respondent (or a sub-State or State-controlled entity of the Respondent) in a different forum, based on the same facts and relating to the same request for relief (the “parallel proceedings”), and a decision on the merits is rendered in those parallel proceedings, the Tribunal shall dismiss the claims before it as abusive, unless one of the exceptions listed in paragraph 3 applies.

  3. The claims before the Tribunal shall not be dismissed as abusive in the following situations:

    •     (a) the claims brought before the Tribunal and the claims brought in the parallel proceedings could either

      •     (i) not be adjudicated in a single set of proceedings; or

      •     (ii) only be adjudicated in a single set of proceedings in a forum other than the forum preferred by the Claimant, and by initiating two sets of proceedings the Claimant could bring at least part of his claims in his preferred forum;

    •     (b) the parallel proceedings related exclusively to non-treaty claims and were terminated before the initiation of the proceedings before the Tribunal, and the Respondent did not, within [30] days of the initiation of the parallel proceedings, request the Claimant to bring treaty and non-treaty claims in the same proceedings; 114

    •     (c) the Claimant is not identical with, and does not control or is controlled by, the claimant in the parallel proceedings, and can plausibly assert that he and the other claimant could not agree on a preferred forum or procedural strategy.

  4. When assessing the situation described in paragraph 3(a), regard shall be had to any offer by the Respondent in relation to the adjudication of the relevant claims made within [30] days of the initiation of the parallel proceedings or the initiation of the proceedings before the Tribunal, whichever was earlier.

Whilst the drafting is complex, if this type of mechanism were universally applied by tribunals (whether based on an explicit treaty provision or as part of the general principle of prohibition of abuse of process), this would largely do away with the need for any other coordination mechanisms. Even more, there would be reason to hope that litigants would rationally agree to resolve their disputes in a single set of proceedings before the forum preferred by the investor. From an objective viewpoint, this would seem to be the most sensible way of avoiding the problems associated with parallel proceedings.

V. CONCLUSION

In sum, parallel proceedings in investor-State disputes tend to be linked to the specific characteristics of the investment protection framework, and this needs to be reflected in the mechanisms used to address the issue. One important consequence in particular is that the first-in-time rules of lis pendens and res judicata , which many legal systems rely on to coordinate parallel proceedings, can only have limited application in the context of investment treaty arbitration.

Inserting detailed, well-considered coordination provisions in future IIAs would be a good way to address the uncertainty that disputing parties are facing when they consider the consequences of parallel proceedings. At the same time, satisfactory outcomes can be achieved on the basis of the current legal framework, notably through an appropriate application of the general principle of prohibition of abuse of process. If situations in which parallel proceedings are admissible are clearly identified and distinguished from those where parallel proceedings must be regarded as abusive, this will make it easier for disputing parties not only to understand the exact extent of their procedural rights, but also to agree on a single forum for resolving their dispute.

In this context, the current considerations by UNCITRAL on mandating its Working Group II on Arbitration and Conciliation to undertake work in the field of concurrent proceedings in investment arbitration 115 constitute a welcome initiative. By clarifying the mechanisms available to tribunals when dealing with parallel proceedings and providing guidance on the application of principles such as the prohibition of abuse of process, 116 the Commission could make a valuable contribution to establishing greater certainty and ultimately ensuring better coordination in this field.

2 The term “substantially related parties” will be used to refer to affiliated entities representing fully or partly congruent economic interests.
3 The most famous examples in this regard are the CME and Lauder arbitrations, the underlying facts of which can be summarized as follows: Lauder, an American businessman, had invested in a Czech television services company via the Dutch holding company CME, which he controlled. When the investment relationship turned sour, both Lauder and CME initiated UNCITRAL proceedings against the Czech Republic, based on two different treaties. Both sets of proceedings were based on the same facts and essentially concerned identical requests for relief. Whilst the tribunal in Lauder only found a minor treaty breach that had not caused the claimant any damage, the majority in CME awarded approximately 270 million US dollars in damages to CME, See Ronald Lauder v Czech Republic , UNCITRAL, Final Award (3 September 2001) para 319; CME Czech Republic BV v Czech Republic , UNCITRAL, Partial Award (13 September 2001) para 624; CME Czech Republic BV v Czech Republic , UNCITRAL, Final Award (14 March 2003) para 650. A constellation involving claims brought by companies situated at different levels of the same investment structure under two different treaties is also understood to be at issue in parallel arbitrations Yosef Maiman and others v Arab Republic of Egypt , UNCITRAL and Ampal-American Israel Corporation and others v Arab Republic of Egypt , ICSID Case No ARB/12/11, neither of which is public, See Emmanuel Gaillard, ‘Le concours de procédures arbitrales dans le droit des investissements’ in Vincent Heuzé, Rémy Libchaber and Pascal de Vareilles-Sommières (eds), Mélanges en l'honneur du Professeur Pierre Mayer (LGDJ 2015) 230. Similarly, it appears that parallel proceedings based on the same treaty have been initiated by entities situated at different levels of the same investment structure in OI European Group BV v Bolivarian Republic of Venezuela , ICSID Case No ARB/11/25 and Fábrica de Vidrios Los Andes, CA and Owens-Illinois de Venezuela, CA v Bolivarian Republic of Venezuela , ICSID Case No ARB/12/21, See Gaillard (n 3) 231. From the award rendered in OI European Group , it appears that, whilst the respondent State reserved its rights with regard to the parallel proceedings, it did not further pursue that point, See OI European Group v Bolivarian Republic of Venezuela , ICSID Case No ARB/11/25, Award (10 March 2015) para 175. For an instance of consecutive parallel ICSID proceedings, See eg Rachel S Grynberg, Stephen M Grynberg, Miriam Z Grynberg and RSM Production Corporation v Grenada , ICSID Case No ARB/10/6, Award (10 December 2010) paras 1.1.1–1.4.5. For parallel proceedings involving the national courts of a host State or domestic arbitration, See eg Pantechniki SA Contractors & Engineers v Republic of Albania , ICSID Case No ARB/07/21, Award (30 July 2009) paras 21–7; Malicorp Limited v Arab Republic of Egypt , ICSID Case No ARB/08/18, Award (7 February 2011) paras 44–89; Iberdrola Energía SA v Republic of Guatemala , ICSID Case No ARB/09/5, Award (17 August 2012) paras 92–114; TECO Guatemala Holdings, LLC v Republic of Guatemala , ICSID Case No ARB/10/23, Award (19 December 2013) paras 157–235.
4 This article is therefore not concerned with the situation where a host State measure of general application (such as a change to a host State’s legislation) simultaneously affects multiple investors in the same industry (unless the relevant investors represent the same economic interests). Proceedings of this kind involving unrelated parties have recently been brought, for instance, by numerous investors in the solar energy sector against Spain, Italy, and the Slovak Republic. Whilst tribunals in these scenarios often have to deal with partially identical facts and similar legal issues that raise questions regarding the efficient conduct of the proceedings and the avoidance of conflicting decision rationales, they usually do not have to address problems of double compensation, the systematic distortion of the chances of success in favour of investors, or conflicting dispositifs that are typical of parallel proceedings as defined here, See below 3. See also Gaillard (n 3) 225, 231. The problems associated with proceedings involving unrelated parties can usually be addressed through mechanisms of a purely procedural nature, such as the exchange of information or the coordination of procedural schedules (including a temporary stay of proceedings). Again, this is different from parallel proceedings discussed in this article, where a decision rendered by one forum may (depending on the circumstances) lead to the dismissal of the case in the other forum, See below 10, 11. A detailed discussion of how proceedings involving unrelated parties should be coordinated is beyond the scope of this article.
5 Whilst one can, in principle, also envisage parallel proceedings involving specialized human rights forums, these seem to be considerably less relevant in practice and will therefore not be considered in this article. For an analysis and references in this regard See Hanno Wehland, The Coordination of Multiple Proceedings in Investment Treaty Arbitration (OUP 2013) paras 2.65, 2.70, 3.75–3.77.
6 These cases can be contrasted with situations where the positions of claimant and respondent in two sets of proceedings are inverted, with the respondent in action A (claimant in action B) requesting a negative declaration against the claimant in action A (respondent in action B) that the claims asserted in action A do not exist. The reason for the duplication of proceedings in these cases is the disagreement between the parties as to which forum should adjudicate their dispute, See Campbell McLachlan, Lis Pendens in International Litigation (Martinus Nijhoff 2009) 38; Wehland (n 5) para 1.23.
7 The article therefore does not deal with parallel court proceedings or scenarios involving exclusively contractual claims or claims arising under a host State’s domestic law. Whilst parallel proceedings can also arise in a purely ‘commercial’ non-treaty context, these types of proceedings tend to raise issues different from those specific to treaty proceedings discussed here. In particular, the below considerations regarding hierarchical coordination mechanisms (see below 8) and the application of the principles of lis pendens and res judicata (see below 10) do not apply outside a treaty context. For a detailed analysis of the application of the res judicata principle in non-treaty arbitrations See Silja Schaffstein, The Doctrine of Res Judicata Before International Commercial Arbitral Tribunals (OUP 2016).
8 See eg CME v Czech Republic (n 3) paras 419, 525; Wena Hotels Limited v Arab Republic of Egypt , ICSID Case No ARB/98/4, Decision on Annulment (28 January 2002) para 49; Azurix Corp v Argentine Republic , ICSID Case No ARB/01/12, Decision on Jurisdiction (8 December 2003) para 101; Camuzzi International SA v Argentine Republic , ICSID Case No ARB/03/2, Decision on Objection to Jurisdiction (11 May 2005) para 91; Sempra Energy International v Argentine Republic , ICSID Case No ARB/02/16, Decision on Objections to Jurisdiction (11 May 2005) para 102; Bayindir Insaat Turizm Ticaret Ve Sanayi AS v Islamic Republic of Pakistan , ICSID Case No ARB/03/29, Decision on Jurisdiction (14 November 2005) para 270. For a detailed analysis of the risks in this regard see Wehland (n 5) paras 1.32–1.33.
9 See eg Bayindir (n 8) para 270. See also Wehland (n 5) para 1.35 with further references.
10 See Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (OUP 2008) 220; Christoph Schreuer, ‘Calvo’s Grandchildren: The Return of Local Remedies in Investment Arbitration’ (2015) 4 LPICT 1, 12; Zachary Douglas, ‘The Hybrid Foundations of Investment Treaty Arbitration’ (2003) 74 BYBIL 151, 257; Robin Hansen, ‘Parallel Proceedings in Investor-State Treaty Arbitration: Responses for Treaty Drafters, Arbitrators and Parties’ (2010) 73 MLR 523, 529.
11 See Christoph Schreuer, The ICSID Convention (2nd edn, CUP 2009) art 26 para 109; Schreuer (n 10) 12; Christoph Schreuer, ‘The Coexistence of Local and International Law Remedies’ in Federico Ortino and others (eds), Investment Treaty Law—Current Issues , vol 1 (BIICL 2006) 158, 162; Hansen (n 10) 529; Dolzer and Schreuer (n 10) 220; Douglas (n 10) 257; August Reinisch, ‘The Issues Raised by Parallel Proceedings and Possible Solutions’ in Michael Waibel and others (eds), The Backlash against Investment Arbitration (Kluwer 2010) 113, 115; Gilles Cuniberti, ‘Parallel Litigation and Foreign Investment Dispute Settlement’ (2006) 21(2) ICSID Rev—FILJ 381, 395; Vaughan Lowe, ‘Res Judicata and the Rule of Law in International Arbitration’ (1996) 8 Afr J Intl Comp L 38, 48; Jamie Shookman, ‘Too Many Forums for Investment Disputes? ICSID Illustrations of Parallel Proceedings and Analysis’ (2010) 27 J Intl Arb 361, 362; Jan Ole Voss, The Impact of Investment Treaties on Investor-State Contracts (Martinus Nijhoff 2011) 281.
12 See also Christer Söderlund, ‘Multiple Judicial Proceedings and the Energy Charter Treaty’ in Clarisse Ribeiro (ed), Investment Arbitration and the Energy Charter Treaty (JurisNet 2006) 237, 245; Gaillard (n 3) 233.
13 This is particularly true for cases that could arguably be decided either way. To give a simple example, if the normal odds for an investor to win his case in a given forum are 50% and the investor is allowed to bring the case in two forums deciding the dispute independently of one another, the overall odds of being successful in at least one of them are 75%—a significant increase on the prospects of being successful in a single set of proceedings. See also Wehland (n 5) para 1.34.
14 For a systematic analysis see Wehland (n 5) paras 2.04–2.31. See also Andrew Newcombe and Lluís Paradell, Law and Practice of Investment Treaties: Standards of Treatment (Kluwer 2009) 85.
15 See Yuval Shany, ‘Contract Claims vs. Treaty Claims: Mapping Conflicts between ICSID Decisions on Multisourced Investment Claims’ (2005) 99 AJIL 835, 836; Bernardo Cremades and David Cairns, ‘The Brave New World of Global Arbitration’ (2002) 3 JWIT 173,189.
16 See Shany (n 15) 837; Cremades and Cairns (n 15) 189.
17 For details see Wehland (n 5) paras 2.08–2.10.
18 See below 6.
19 Multiple legal entities may also be involved on the side of the host State, so that claims of investors may have to be directed against distinct legal entities, See Bernardo Cremades and David Cairns, ‘Contract and Treaty Claims and Choice of Forum in Foreign Investment Disputes’ in Bernardo Cremades and Julian Lew (eds), Parallel State and Arbitral Procedures in International Arbitration (ICC Publishing 2005) 13, 16; Alexandra Koutoglidou, ‘Multiple Party Investment Dispute Resolution: Who Are the Proper Parties?’ in Belinda Macmahon (ed), Multiple Party Actions in International Arbitration (OUP 2009) 255, 263; Wehland (n 5) paras 2.63–2.64.
20 See Panayotis Glavinis, ‘Multiparty, Multi-Contract Investment Disputes’ in Nikolaos Nikas and others (eds), Studia in Honorem Pelayia Yessiou-Faltsi (Sakkoulas 2007) 235, 236.
21 The concepts of shareholders and indirect investors are not identical and their application is in principle subject to different requirements, See Wehland (n 5) paras 2.36–2.53. They are, however, frequently conflated in the practice of investment treaty tribunals, See also Christoph Schreuer, ‘Shareholder Protection in International Investment Law’ in Pierre-Marie Dupuy and others (eds), Völkerrecht als Wertordnung: Festschrift für Christian Tomuschat (Norbert Paul Engel 2006) 601, 617.
22 See Wehland (n 5) paras 2.54–2.59; Gaillard (n 3) 227. Tribunals have consistently held that the protection of an entity further down the corporate chain does not prevent a shareholder or indirect investor from being protected under an investment treaty, See eg Antoine Goetz and others v Republic of Burundi , ICSID Case No ARB/95/3, Award (10 February 1999) para 89; Pan American Energy LLC and BP Argentina Exploration Company v Argentine Republic , ICSID Case No ARB/03/13, Decision on Preliminary Objections (27 July 2006) paras 212–3.
23 See Zachary Douglas, The International Law of Investment Claims (CUP 2009) 24; Katia Yannaca-Small, ‘Parallel Proceedings’ in Peter Muchlinski and others (eds), The Oxford Handbook of International Investment Law (OUP 2008) 1008, 1011; Kaj Hobér, ‘Parallel Arbitration Proceedings—Duties of the Arbitrators: Some Reflections and Ideas’ in Bernardo Cremades and Julian Lew (eds), Parallel State and Arbitral Procedures in International Arbitration (ICC Publishing 2005) 243, 246; Hansen (n 10) 542; McLachlan (n 6) 255. With regard to the challenges raised by the possibility of investors claiming for ‘reflective loss’ see David Gaukrodger, ‘Investment Treaties as Corporate Law: Shareholder Claims and Issues of Consistency’ (2013) OECD Working Papers on International Investment 1, 32; Wehland (n 5) para 2.51. Another effect of this extension of protection is that one and the same legal entity may be protected under different IIAs, See Wehland (n 5) para 2.61.
24 See Norah Gallagher, ‘Parallel Proceedings, Res Judicata and Lis Pendens’ in Loukas Mistelis and others (eds), Pervasive Problems in International Arbitration (Kluwer 2006) 329, 331; Voss (n 11) 278. In addition, specialist human rights forums may also be competent with regard to certain aspects of investment-related disputes, See Walid Ben Hamida, ‘L’Arbitrage Transnational Face à un Désordre Procédural: La Concurrence des Procédures et les Conflits de Juridictions’ (2006) 3 Transnatl Disp Mgmt 20; Yannaca-Small (n 23) 1012; Douglas (n 10) 237; Yuval Shany, The Competing Jurisdictions of International Courts and Tribunals (OUP 2003) 8, 67; Wehland (n 5) 2.65.
25 See Asian Agricultural Products Limited v Democratic Socialist Republic of Sri Lanka , ICSID Case No ARB/87/3, Award (27 June 1990) para 18. Acceptance is usually expressed at the moment of filing a notice of arbitration, See eg Eureko BV v Slovak Republic , UNCITRAL, PCA Case No 2008-13, Award on Jurisdiction, Arbitrability and Suspension (26 October 2010) para 223; Hansen (n 10) 527. Similar clauses can also be found in some foreign investment laws, See eg Antonio Parra, ‘Provisions on the Settlement of Investment Disputes in Modern Investment Laws, Bilateral Investment Treaties and Multilateral Instruments on Investment’ (1997) 12(2) ICSID Rev-FILJ 287 317–21.
26 For a detailed analysis of forum selection options and how they differ from instances of parallel jurisdictions see Wehland (n 5) 3.35–3.38.
27 See Christoph Schreuer, ‘Concurrent Jurisdiction of National and International Tribunals’ (1976) 13 Hous L Rev 508, 518; McLachlan (n 6) 254. The large majority of national legal orders will give effect to a contractual forum choice between the parties, See Hélène van Lith, International Jurisdiction and Commercial Litigation (TMC Asser Press 2009) 8.
28 See Wehland (n 5) para. 3.85.
29 For instance, given that the forum selection options under Article 26 ECT are limited to disputes concerning ‘an alleged breach of an obligation … under Part III’ of the ECT, where an investor submits a dispute to arbitration under Article 26(4) ECT, he will need to assert any contractual claims in the contractual forum, See Wehland (n 5) para 3.57.
30 Parallel proceedings could, of course, also be avoided by changing the features of the system of international investment protection that cause them, in particular by introducing limitations regarding the protection of shareholders and indirect investors, See above 4. This possibility will not be discussed in the present article. For suggestions in this regard, See eg Elizabeth Wu, ‘Addressing Multiplicity of Shareholder Claims in ICSID Arbitrations under Bilateral Investment Treaties: A “Tiered Approach” to Prioritising Claims?’ (2010) 6 AIAJ 134, 143.
31 See also Hanno Wehland, ‘Competing Dispute Resolution Mechanisms in Public Contracts and International Investment Agreements’ in Mathias Audit and others (eds), Transnational Law of Public Contracts (Bruylant 2016) 375, 376. These two views are sometimes referred to as ‘disintegrationist’ and ‘integrationist’, respectively. An ‘integrationist’ approach to jurisdiction interprets jurisdictional norms broadly and admits the possibility of their extension to claims arising under instruments other than the instrument containing the jurisdictional norm, See eg SGS Société Générale de Surveillance SA v Republic of the Philippines , ICSID Case No ARB/02/6, Decision of the Tribunal on Objections to Jurisdiction (29 January 2004) para 128; Compañiá de Aguas del Aconquija SA and Vivendi Universal SA v Argentine Republic , ICSID Case No ARB/97/3, Decision on Annulment (3 July 2002) paras 55, 76; James Crawford, ‘Treaty and Contract in Investment Arbitration’ (2008) 24 Arb Intl 351, 352; Douglas (n 23) 239, 277; Douglas (n 10) 257. By contrast, a ‘disintegrationist’ approach is more likely to construe jurisdictional norms in a narrow fashion and restrict their scope to claims arising under the instrument containing the norm itself, See eg SGS Société Générale de Surveillance SA v Islamic Republic of Pakistan , ICSID Case No ARB/01/13, Decision of the Tribunal on Objections to Jurisdiction (6 August 2003) para 161; IBM World Trade Corp. v Republic of Ecuador, ICSID Case No ARB/02/10, Decision on Jurisdiction and Competence (22 December 2003) para 70; Toto Costruzioni Generali SpA v Republic of Lebanon , ICSID Case No ARB/07/12, Decision on Jurisdiction (11 September 2009) para 214; Abaclat and others v Argentine Republic , ICSID Case No ARB/07/5, Decision on Jurisdiction and Admissibility (4 August 2011) para 316. An ‘integrationist’ approach to jurisdiction should in principle help to avoid fragmented jurisdictions and thus reduce the need for parallel proceedings, See Wehland (n 5) paras 3.12–3.17.
32 For a detailed analysis in this regard see Wehland (n 5) paras 3.41–3.53.
33 For a detailed analysis in this regard see Wehland (n 5) paras 3.55–3.78.
34 See Wehland (n 5) paras 3.88–3.116.
35 See eg art 7(3)(a) of the Treaty between the United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment (signed 14 November 1991, entered into force 20 October 1994). For a detailed analysis of fork in the road provisions see Wehland (n 5) paras 3.119–3.158.
36 See eg North American Free Trade Agreement (opened for signature 17 December 1992, entered into force 1 January 1994) (NAFTA) art 1121. See also Wehland (n 5) paras 3.159–3.163.
37 See eg art 9.17 of the (initialled but unsigned) Free Trade Agreement Between the European Union and Singapore (EU-Singapore FTA); art 8.22(1)(g) of the draft Comprehensive Economic and Trade Agreement Between Canada and the European Union (final draft of 29 February 2016) (CETA); art 9.21(2)(b) of the Trans-Pacific Partnership Agreement (signed on 4 February 2016, not entered into force) (TPP).
38 See Wehland (n 5) para 3.161. This is different from fork in the road provisions, where the reference to the ambiguous term ‘dispute’ has caused much uncertainty, See Wehland (n 5) paras 3.119–3.158. In addition, the required waiver is usually not limited to the same request for relief. As a consequence, waiver clauses can have a coordinatory function beyond situations of parallel proceedings as defined for purposes of this article, See above 1.
39 See eg NAFTA art 1121(1)(b) and (2)(b); US Model BIT (2012) art 26(2)(b). See also Wehland (n 5) para 3.161.
40 See also UNCTAD, World Investment Report 2015: Reforming International Investment Governance , UNCTAD/WIR/2015 (2015) 148.
41 With regard to these concerns in the context of fork in the road provisions see Wehland (n 5) paras 3.141–3.142.
42 Without agreement of the parties, consolidating proceedings will usually not be possible, See Gabrielle Kaufmann-Kohler, Laurence Boisson de Chazournes, Makane Mbengue and Victor Bonnin, ‘Consolidation of Proceedings in Investment Arbitration: How Can Multiple Proceedings Arising from the Same or Related Situations Be Handled Efficiently?’ (2006) 21(1) ICSID Rev-FILJ 59, 87, 119; Wehland (n 5) paras 4.20-4.23. Whilst some IIAs contain express provisions on consolidation (See eg art 1126 NAFTA), their usefulness is normally limited in that they only allow the consolidation of proceedings initiated under the same treaty, See also Hansen (n 10) 540. With regard to the possibility of ‘ ex ante consolidation’ at the moment of initiating arbitral proceedings where several arbitration agreements refer disputes to the same forum see Cambodia Power Company v Kingdom of Cambodia , ICSID Case No ARB09/18, Decision on Jurisdiction (22 March 2011) paras 138, 141 and Wehland (n 5) paras 4.24–4.36 with further references.
43 See above 2. For examples of this type of ‘quasi-consolidation’ see Wehland (n 5) para 4.09.
44 For references see Wehland (n 5) para 4.13.
45 See below 13.
46 See also Pierre Mayer, ‘Contract claims et clauses juridictionnelles des traités relatifs à la protection des investissements’ (2009) 136 JDI 71, 94; Douglas (n 10) 270, 284. For a detailed analysis in this regard see Wehland (n 5) paras 5.01–5.71.
47 See also Wehland (n 5) paras 5.45–5.62.
48 For some examples in this regard see Wehland (n 5) para 5.50.
49 See Wehland (n 5) paras 5.54–5.56.
50 See SGS v Philippines (n 31) para 177. See also Wehland (n 5) para 5.52.
51 See eg SGS v Philippines (n 31) para 161; Waste Management, Inc v United Mexican States , ICSID Case No ARB(AF)/00/3, Award (30 April 2004) para 116; Parkerings-Compagniet AS v Republic of Lithuania , ICSID Case No ARB/05/8, Award (11 September 2007) para 319; Wehland (n 5) paras 5.57–5.59.
52 Tribunals have occasionally taken the view that local court decisions should be given binding effect based on the principle of res judicata as a matter of domestic law, See eg Gami Investments, Inc v Government of the United Mexican States , UNCITRAL, Final Award (15 November 2004) para 41; Helnan International Hotels A/S v Arab Republic of Egypt , ICSID Case No ARB/05/19, Award (3 July 2008) para 107. For a discussion of this approach see Wehland (n 5) paras 5.42–5.66.
53 See also William Dodge, ‘National Courts and International Arbitration: Exhaustion of Remedies and Res Judicata Under Chapter Eleven of NAFTA’ (2000) 23 Hastings Intl Comp LR 357, 359; Glavinis (n 20) 255.
54 See also Yuval Shany, Regulating Jurisdictional Relations Between National and International Courts (OUP 2007) 128; Wehland (n 5) paras 5.63–5.64.
55 See Wehland (n 5) para 5.64.
56 See also Industria Nacional de Alimentos SA and Indalsa Perú SA v Republic of Perú , ICSID Case No ARB/03/4, Decision on Annulement (5 September 2007), para 87; Sophie Lemaire, ‘Treaty Claims et Contract Claims: la compétence du Cirdi à l’épreuve de la dualité de l’Etat’ (2006) Rev Arb 353, 398; Wehland (n 5) para 5.65.
57 See eg Bayindir v Pakistan (n 8) para 39; Saipem SpA v People’s Republic of Bangladesh , ICSID Case No ARB/05/07, Award (30 June 2009), paras 37–50.
58 See also Wehland (n 5) para 5.68.
59 See above 8.
60 See also Lars Markert, Streitschlichtungsklauseln in Investitionsschutzabkommen (Nomos 2010) 230.
61 See also Wehland (n 5) para 5.70.
62 These considerations do not, of course, prevent the signatories to an IIA from agreeing on a different type of hierarchical relationship, See below 14 with regard to the EU–Singapore FTA.
63 See also Marvin Roy Feldman Karpa v United Mexican States , ICSID Case No ARB(AF)/99/1, Award (16 December 2002) para 88; Wehland (n 5) para 5.77. Occasionally it has been assumed that treaty-based tribunals would be hierarchically superior to national courts or ‘private’ tribunals on the basis that they derive their authority from inter-State agreements (See eg Chittharanjan Felix Amerasinghe, Local Remedies in International Law (2nd edn, CUP 2004) 140) or that they operate in the international sphere, whereas other tribunals and national courts would operate in the domestic one (See eg Cuniberti (n 11) 392). For a discussion of these considerations see Wehland (n 5) paras 5.10–5.16.
64 See also Industria Nacional de Alimentos v Perú (n 56) para 87; EDF International SA, SAUR International SA and León Participaciones Argentinas SA v Argentine Republic , ICSID Case No ARB/03/23 Award (11 June 2012) para 1131; TECO Guatemala Holdings, LLC v Republic of Guatemala (n 3) para 483; Douglas (n 10) 274; Newcombe and Paradell (n 14) 474; Charles Brower and Jeremy Sharpe, ‘Multiple and Conflicting Arbitral Awards’ (2003) 4 JWIT 211, 221; Wehland (n 5) para 5.76.
65 See Wehland (n 5) paras 4.52–4.69.
66 See Wehland (n 5) paras 4.70–4.80. With regard to the common requirements of the concepts of lis pendens and res judicata see Wehland (n 5) paras 4.81–4.93.
67 See above 9.
68 See above 9.
69 For a detailed analysis of the law applicable in this regard see Wehland (n 5) paras 6.02–6.39.
70 See also McLachlan (n 6) 406; Yannaca-Small (n 23) 1015; Shany (n 54) 158. For a detailed analysis see Wehland (n 5) paras 6.95–6.99.
71 See American Bottle Company (USA) v United Mexican States (2 April 1929) 4 RIAA 437.
72 See Certain German Interests in Polish Upper Silesia (Germany v Poland) (Preliminary Objections) PCIJ Rep Series A No 6, 20.
73 See Legal Status of the South-Eastern Territory of Greenland (Denmark v Norway) PCIJ Rep Series A/B No 48, 270. Support for the application of the principle in decisions of international forums has largely been limited to minority opinions, See eg ‘Camouco’ Case (No 5) (Panama v France) (Application for Prompt Release, Judgment of 7 February 2000) ITLOS Reports 2000 para 55. In favour of recognizing lis pendens as a general principle of international law see also Reinisch (n 11) 121; Vaughan Lowe, ‘Overlapping Jurisdiction in International Tribunals’ (1999) 20 AYBIL 191, 202; Hansen (n 10) 531.
74 See also Karin Oellers-Frahm, ‘Multiplication of International Courts and Tribunals and Conflicting Jurisdiction – Problems and Possible Solutions’ (2001) 5 Max Planck YB UN L 67, 78. The question of whether lis pendens can be seen as a general principle of international law has repeatedly been left open by international forums on the basis that, in any event, the requirements for the principle’s application were not fulfilled, See eg Certain German Interests (n 72) 20; Estate of Jean-Baptiste Caire (France) v United Mexican States (7 June 1929), 5 RIAA 516, 525; The Santa Rosa Mining Company (Ltd.) (Great Britain) v United Mexican States (3 August 1931), 5 RIAA 252, 253.
75 See Wehland (n 5) paras 6.42–6.50.
76 See Wehland (n 5) paras 6.51–6.90.
77 See TECO Guatemala Holdings v Guatemala (n 64) para 517 and Wehland (n 5) para 6.117 with further references. For an apparently different view see Apotex Holdings Inc and Apotex Inc v United States of America , ICSID Case No ARB(AF)/12/1, Award (25 August 2014) para 7.40. For a detailed discussion of the requirements for applying the principle of res judicata see Wehland (n 5) paras 6.104–6.130.
78 See Shany (n 54) 166. See also James Crawford, Ian Brownlie’s Principles of Public International Law (8th edn, OUP 2012) 24; Robert Jennings and Arthur Watts (eds), Oppenheim’s International Law, Volume I, Introduction and Part 1 (9th edn, Longman Group 1992) 51.
79 See Wehland (n 5) paras 7.02–7.28.
80 See eg Southern Pacific Properties (Middle East) Limited v Arab Republic of Egypt , ICSID Case No ARB/84/3, Decision on Jurisdiction (14 April 1988) paras 65, 84; SGS v Philippines (n 31) para 173; Shany (n 54) 172; Douglas (n 10) 387; Newcombe and Paradell (n 14) 473.
81 See SPP v Egypt (n 80) para 84; SGS v Philippines (n 31) para 170.
82 See also McLachlan (n 6) 40, 70.
83 See Shany (n 54) 194.
84 See Cuniberti (n 11) 424–6; Newcombe and Paradell (n 14) 474; Wehland (n 5) para 7.23.
85 See SPP v Egypt (n 80) para 65; Shany (n 54) 181.
86 See Robert Kolb, ‘General Principles of Procedural Law’ in Andreas Zimmermann, Christian Tomuschat and Karin Oellers-Frahm, The Statute of the International Court of Justice (2nd edn, OUP 2012) 904. See also John Gaffney, ‘“Abuse of Process” in Investment Treaty Arbitration’ (2010) 11 JWIT 515, 538.
87 In the CME and Lauder arbitrations, both tribunals denied the existence of an abuse of process, despite the fact that in economic terms the proceedings essentially related to the same dispute, See Lauder v Czech Republic (n 3) paras 174, 177; CME v Czech Republic (n 3) para 412. However, these decisions arguably need to be seen in the context of the fact that the respondent in that case had previously rejected several offers to coordinate the proceedings, See Lauder v Czech Republic (n 3) paras 173, 178; CME v Czech Republic (n 3) para 412. Treaty tribunals have found abusive behaviour of investors in a number of other situations, See in particular Phoenix Action Ltd v Czech Republic , ICSID Case No ARB/06/5, Award (15 April 2009), para 143; Cementownia ‘Nowa Huta’ SA v Republic of Turkey , ICSID Case No ARB(AF)/06/2, Award (17 September 2009) para 159; Europe Cement Investment and Trade SA v Republic of Turkey , ICSID Case No ARB(AF)/07/2, Award (13 August 2009) para 180; Renée Rose Levy and Gremcitel SA v Republic of Perú , ICSID Case No ARB/11/17, Award (9 January 2015) para 195; Philip Morris Asia Limited v Commonwealth of Australia , UNCITRAL, PCA Case No 2012-12, Award on Jurisdiction and Admissibility (17 December 2015) para 585.
88 See eg Waste Management, Inc v United Mexican States , ICSID Case No ARB(AF)/00/3, Decision on Mexico’s Preliminary Objection concerning the Previous Proceedings, Decision of the Tribunal (26 June 2002) para 49; Chevron Corporation and Texaco Petroleum Company v Republic of Ecuador , UNCITRAL, PCA Case No 2009-23, Interim Award (1 December 2008) para 143; Bernardo Cremades and Ignacio Madalena, ‘Parallel Proceedings in International Arbitration’ (2008) 24 Arb Intl 507, 538; Bernardo Cremades, ‘Parallel Arbitration Tribunals and Awards’ in Clarisse Ribeiro, Investment Arbitration and the Energy Charter Treaty , 304, 313; Shany (n 54) 192; Shany (n 15) 849; Shany (n 21) 258; Audley Sheppard, ‘Res Judicata and Estoppel’ in Bernardo Cremades and Julian Lew (eds), Parallel State and Arbitral Procedures in International Arbitration (ICC Publishing 2005) 219, 236; Chester Brown, ‘The Relevance of the Doctrine of Abuse of Process in International Adjudication’ (2010) Transnatl Disp Mgmt 1, 7; Filip De Ly and Audley Sheppard, ‘ILA Final Report on Res Judicata and Arbitration’ (2009) 25 Arb Intl 67, 80.
89 See below 15.
90 See below 16.
91 See below 18.
92 The EU-Singapore FTA has been initialled, but has not been signed so far, and the European Commission has requested an opinion from the European Court of Justice pursuant to Article 218(11) TFEU regarding its competences for concluding the agreement in proceedings currently pending as Opinion 2/15, See < http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=OJ%3AJOC_2015_363_R_0022 > accessed 3 May 2016. For the different provision in the Canada–EU CETA (which also has not entered into force so far) see art 8.22 of that agreement.
93 This distinction is clearly different from the one advocated earlier in relation to treaty tribunals and non-treaty forums, See above 9. Whilst the EU–Singapore FTA does not specify how ‘international’ and ‘domestic’ tribunals would be distinguished from one another, it seems to regard tribunals deciding on contractual claims as being on the same level as tribunals deciding on treaty claims.
94 Paragraph 1(f)(ii) appears to suggest that it would equally be possible for an investor to submit a claim to a domestic forum once an ‘international tribunal’ has rendered its final decision. Whilst the provision is not explicit in this regard, it must be assumed that the decision of the ‘international tribunal’ would be binding in the subsequent proceedings before the domestic forum, See also above 8.
95 Neither the waiver clause nor the res judicata rule in Article 9.17 make any special provision for claims that are rejected for reasons other than the merits. For instance, it would appear that if an investor previously brought claims under a different treaty and the tribunal found that it lacked jurisdiction, this would still preclude the investor from initiating proceedings pursuant to paragraph 1(h). Conversely, a waiver declared in accordance with paragraph 1(g) would not seem to be affected if a tribunal established under the treaty dismissed the claims before it for reasons other than the merits. This is notably different from the provision contained in Article 8.22(5) of the Canada–EU CETA.
96 In an interesting twist, the provision limits the waiver requirement to locally incorporated companies rather than any affiliated entities. The reasons for this differentiation with regard to preventing simultaneously pending proceedings on the one hand and the waiver requirement on the other are not immediately apparent—it may be that requiring a waiver from any indirect shareholder in a claimant investor was simply not considered a practical solution.
97 As a consequence, the majority shareholders would appear to be limited to relying on any protection available to them as separate legal entities.
98 See above 6.
99 According tribunals large discretion regarding the application of this principle would not seem to be the best solution, as doing so would only add to the existing uncertainty and encourage speculative behaviour by the parties to a dispute. The discretionary application of coordinative principles may be appropriate where procedural mechanisms (such as a stay of proceedings) are concerned, but not when it comes to matters with a direct and definite effect on the outcome of an action, such as whether a claim will be dismissed for abuse of process.
100 In this regard see above 9.
101 The signatories to IIAs can of course always decide to make treaty rights available to investors only if investors in turn give up any rights they might have under other legal instruments. This seems to be the approach under the EU–Singapore FTA, which combines a disintegrationist investor-State dispute resolution mechanism in Article 9.11(1) (‘This Section [Section B on Investor-State Dispute Settlement] shall apply to a dispute between a claimant of one Party and the other Party concerning treatment alleged to breach the provisions of Section A (Investment Protection) which breach allegedly causes loss or damage to the claimant or its locally established company.’) with a strict first-in-time rule regarding the decisions rendered in proceedings before ‘international tribunals’ in Article 9.17(h), See above 13. As a consequence, it would seem that an investor with contractual claims to be asserted, eg in SCC proceedings and claims under the FTA (which, in the absence of a different agreement between the disputing parties, could not be brought in SCC proceedings) would have to choose between asserting one or the other.
102 Respondent States have a fundamental incentive to make such an offer, since (unlike investors) they in principle only stand to benefit from avoiding parallel proceedings, See above 3.
103 See above 3, 13. Whilst investors would obviously prefer to avoid the additional expenses associated with parallel proceedings, they may consider them money well spent if they provide them with a second shot at the same issues, See also Thomas Wälde, ‘How to Avoid Conflicting Awards: The Lauder and CME Cases—Discussion Session’ (2004) 5 JWIT 37, 43; Van Vechten Veeder, ‘Issue Estoppel, Reasons for Awards and Transnational Arbitration’ in Complex Arbitrations (ICC Intl Ct Arb Bull (Special Supplement) 2003) 73, 78. The outcome of the proceedings in the parallel CME and Lauder arbitrations clearly illustrates this idea, See also Antonio Crivellaro, ‘Consolidation of Arbitral and Court Proceedings in Investment Disputes’ in Bernardo Cremades and Julian Lew (eds), Parallel State and Arbitral Procedures in International Arbitration (ICC Publishing 2005) 79, 112; Julian Lew, ‘Concluding Remarks: Parallel Proceedings in International Arbitration—Challenges and Realities’ in Bernardo Cremades and Julian Lew (eds), Parallel State and Arbitral Procedures in International Arbitration (ICC Publishing 2005) 305, 309.
104 See Lowe (n 73) 202. See also Brown (n 88) 7.
105 See above 12. As discussed, this type of ‘jurisdictional fragmentation’ can be greatly reduced through an ‘integrationist’ approach to jurisdiction, See above 6. In addition, one needs to take into account the possibilities of ex ante consolidation, See above 7.
106 An example would be the situation where an indirect investor is protected under a treaty that refers disputes to UNCITRAL arbitration, whilst a more direct investor (of different nationality) is protected under a treaty referring disputes to ICSID arbitration.
107 See also Shany (n 54) 192; SPP v Egypt (n 80) para 62; Fluor Corporation v Iran and National Iranian Oil Company (1986) 11 Iran-USCTR 298.
108 See Wehland (n 5) para 7.40.
109 See above 9. See also Wehland (n 5) para 7.41.
110 See Wehland (n 5) paras 7.47–7.51.
111 See Hobér (n 23) 242.
112 In particular, where a respondent State rejects the offer of an investor to consolidate proceedings, the investor can hardly be blamed for asserting his rights before two different forums. This was obviously a relevant consideration for the tribunal in the CME arbitration when rejecting the argument of abuse of process, See above n 87.
113 If the original proceedings brought by A were still pending at the time when the second set of proceedings were initiated, those second proceedings would likely have to be stayed under the principle of comity, See above 11. Once a decision on the merits had been rendered in the first proceedings, any continued pursuit of the claims in the second proceedings would be rejected as abusive, See above 12.
114 The reference to the situation described in paragraph 3(b) could be omitted if signatories generally did not want to allow investors to take an escalated approach to dispute settlement by limiting themselves to bringing non-treaty claims in a first set of proceedings.
115 See UNCITRAL, ‘Concurrent Proceedings in International Arbitration, Note by the Secretariat’ (8 April 2016) UN Doc A/CN.9/881 para 1.
116 See UNCITRAL (n 115) para 44.