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Consolidation of Arbitral Proceedings in India: A Call for Statutory Recognition
Arbitration stands as a preferred alternative dispute resolution method in India, particularly for intricate commercial disputes involving numerous parties and complex transactions. Despite its popularity, the existing legal framework overseeing arbitration in India lacks explicit and comprehensive guidelines on consolidating arbitral proceedings. Consolidation, the process of merging two or more related arbitrations into a unified proceeding, holds the potential for various advantages, including time and cost savings, resource efficiency, the prevention of conflicting awards, and the enhancement of arbitration outcomes' quality and consistency. Nonetheless, navigating consolidation presents challenges, requiring careful consideration of factors such as upholding parties' autonomy and consent, ensuring procedural fairness and efficiency, and striking a balance among diverse stakeholders' interests.
In this article, we examine the current state of consolidation of arbitral proceedings in India, the advantages and disadvantages of consolidation, and the need for statutory recognition and regulation of consolidation under the Arbitration and Conciliation Act, 1996 (the Act).
The Difference between Consolidation and Joinder
Consolidation and joinder are two related but distinct concepts in arbitration. Joinder refers to the addition of a new party to an existing arbitration proceeding, while consolidation refers to the combination of two or more existing arbitration proceedings into a single proceeding. Joinder can be either voluntary or involuntary, depending on whether the new party consents or objects to joining the arbitration. Consolidation can be either total or partial, depending on whether all or some of the issues or claims are consolidated.
Both joinder and consolidation aim to achieve similar objectives, such as saving time, costs, and resources, avoiding conflicting awards, and enhancing quality and consistency. However, both joinder and consolidation also raise similar challenges, such as respecting autonomy and consent, ensuring procedural fairness and efficiency, and balancing the interests of different stakeholders.
According to some sources, the main difference between joinder and consolidation is that joinder requires a common question of law or fact among all parties involved in the arbitration, while consolidation requires a common question of law or fact among all claims involved in the arbitration. Another difference is that joinder affects the composition of the arbitral tribunal, while consolidation affects the number of arbitral tribunals. Lastly, joinder requires the existence of an arbitration agreement between the new party and at least one existing party, while consolidation requires the compatibility of arbitration agreements among all parties involved in the arbitration.[1]
The Current State of Consolidation of Arbitral Proceedings in India
The Act does not expressly provide for the consolidation of arbitral proceedings, nor does it empower the courts or arbitral tribunals to order consolidation. The only provision that indirectly deals with consolidation is Section 8 of the Act, which allows a court to refer parties to arbitration if there is an arbitration agreement between them. However, this provision does not address the situation where there are multiple arbitration agreements between different parties arising out of different contracts.
The Indian courts have adopted a case-by-case approach to dealing with consolidation issues, depending on the facts and circumstances of each case. The courts have generally recognized the principle of consolidation but have also emphasized the need for consent and commonality among the parties and the disputes. For instance, in Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc.,[2] the Supreme Court held that a non-signatory party can be referred to arbitration under a composite reference if there is a direct relationship with the signatory party, a commonality of subject matter, and an intention to bind all parties by a single arbitration agreement. Similarly, in M/s Elite Engineering & Construction (Hyd.) Pvt. Ltd. v. M/s Techtrans Construction India Pvt. Ltd.,[3] the Supreme Court held that multiple contracts can be referred to a single arbitration if they are interlinked and form part of a composite transaction.
However, the judicial approach to consolidation has also been inconsistent and unpredictable, as different courts have applied different criteria and tests to determine whether consolidation is appropriate or not. For example, in M/s Duro Felguera S.A. v. M/s Gangavaram Port Limited,[4] the Andhra Pradesh High Court refused to consolidate two arbitrations arising out of two separate contracts between the same parties on the ground that they had different scopes, terms, and conditions. On the other hand, in M/s Young Achievers v. IMS Learning Resources Pvt. Ltd.,[5] the Supreme Court allowed consolidation of two arbitrations arising out of two distinct franchise agreements between different parties on the ground that they had similar subject matters and issues.
The lack of statutory guidance and uniformity in judicial decisions has created uncertainty and confusion among the parties and practitioners regarding the consolidation of arbitral proceedings in India. Moreover, the reliance on judicial intervention for consolidation may also undermine the autonomy and efficiency of arbitration as a preferred mode of dispute resolution.
The Advantages and Disadvantages of Consolidation of Arbitral Proceedings
Consolidation of arbitral proceedings can offer several advantages for parties involved in complex commercial disputes that involve multiple contracts or parties. Some of these advantages are:
Saving time, costs, and resources: Consolidation can reduce the duration and expenses of arbitration by avoiding duplication of proceedings, evidence, arguments, and awards. Consolidation can also save human resources by appointing a single arbitral tribunal instead of multiple tribunals for different arbitrations.
Avoiding conflicting awards: Consolidation can prevent the possibility of contradictory or inconsistent awards arising out of related disputes that may affect the rights and obligations of the parties or third parties. Consolidation can also enhance the finality and enforceability of awards by reducing the scope for challenges or appeals.
Enhancing quality and consistency: Consolidation can improve the quality and consistency of arbitration outcomes by allowing a single arbitral tribunal to have a comprehensive understanding of the facts, issues, claims, and defences involved in related disputes. Consolidation can also promote uniformity and coherence in applying legal principles and rules to similar situations.
However, consolidation of arbitral proceedings also poses some challenges and disadvantages for parties involved in complex commercial disputes that involve multiple contracts or parties. Some of these challenges are:
Respecting autonomy and consent: Consolidation may infringe upon the autonomy and consent of parties who have entered into separate arbitration agreements with different terms and conditions. Consolidation may also affect the choice and appointment of arbitrators by parties who may have different preferences and expectations. Consolidation may also violate the confidentiality and privacy of parties who may not wish to disclose or share information with other parties or third parties.
Ensuring procedural fairness and efficiency: Consolidation may compromise the procedural fairness and efficiency of arbitration by creating difficulties in managing and conducting a single proceeding that involves multiple parties, contracts, claims, and defences. Consolidation may also increase the complexity and length of arbitration by introducing additional issues, such as jurisdiction, joinder, intervention, representation, and allocation of costs and fees.
Balancing the interests of different stakeholders: Consolidation may create conflicts of interest or prejudice among different stakeholders, such as parties, arbitrators, counsel, experts, witnesses, and institutions. Consolidation may also affect the rights and interests of third parties who may not be part of the arbitration agreement or the consolidation process.
The Need for Statutory Recognition and Regulation of Consolidation of Arbitral Proceedings
In light of the advantages and disadvantages of consolidation of arbitral proceedings, there is a need for statutory recognition and regulation of consolidation under the Act. The Act should provide clear and comprehensive guidelines for the consolidation of arbitral proceedings, taking into account international best practices and the specific needs and challenges of the Indian arbitration scenario. The Act should address the following aspects of consolidation:
The scope and criteria for consolidation: The Act should define the scope and criteria for consolidation, such as the existence of common questions of law or fact, the compatibility of arbitration agreements, the consent or objection of parties, and the impact on third parties. The Act should also provide for different types or modes of consolidation, such as consolidation by agreement, consolidation by request, consolidation by order, or consolidation by institution.
The authority and procedure for consolidation: The Act should specify the authority and procedure for consolidation, such as whether it should be done by courts, arbitral tribunals, or arbitration institutions. The Act should also prescribe the timing and manner of consolidation, such as whether it should be done before or after the constitution of arbitral tribunals, or whether it should be done by a joint decision or a majority decision.
The effect and consequences of consolidation: The Act should clarify the effect and consequences of consolidation, such as whether it would result in a single arbitration agreement, a single arbitral tribunal, or a single award. The Act should also address the issues arising from consolidation, such as jurisdiction, joinder, intervention, representation, evidence, costs, fees, challenges, appeals, enforcement, etc.
Conclusion
Consolidation of arbitral proceedings is a beneficial process for resolving complex commercial disputes that involve multiple contracts or parties. However, the current legal framework governing arbitration in India does not provide clear and comprehensive guidelines for consolidating arbitral proceedings. This creates uncertainty and confusion among parties and practitioners regarding consolidation issues. Therefore, there is a need for statutory recognition and regulation of consolidation under the Act. The Act should provide clear and comprehensive guidelines for the consolidation of arbitral proceedings, taking into account international best practices and the specific needs and challenges of the Indian arbitration scenario.
References
[1] Joinder and Consolidation Provisions under 2021 ICC Arbitration Rules: Enhancing Efficiency and Flexibility for Resolving Complex Disputes, Kluwer Arbitration Blog, https://arbitrationblog.kluwerarbitration.com/2021/01/03/joinder
[2] (2013) 1 SCC 641
[3] (2018), 4 SCC 281
[4] (2017), 9 SCC 729
[5] (2013) 10 SCC 535
- Consolidating arbitral proceedings is a process of combining two or more related arbitrations into a single proceeding.
- The courts in India have adopted different approaches to deal with consolidation requests i.e. the Group of Companies doctrine, interpreting arbitration clauses broadly, or relying on inherent powers.
- There is a need for statutory recognition of consolidation in India to provide clarity, uniformity and certainty to the parties and the courts.
