Absence of Consent Trumps Arbitral Economy: Consolidation of Arbitrations under U.S. Law - Vol. 12 Nos. 3-4 ARIA 2001
Rona G. Shamoon & Irene M. TenCate - Rona G. Shamoon is a senior litigation associate at Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden, Arps”) and a member of the International Arbitration Group.
Originally from American Review of International Arbitration - ARIA
This article examines the extent to which courts and arbitral tribunals may order consolidation of related arbitrations under federal and state laws in the United States without the consent of all parties involved.
Based on an analysis of recent case law, the authors conclude that U.S. courts are unlikely to compel consolidation, unless they find a basis for such in an agreement between the parties (pre-dispute—express or implied—or postdispute), governing law, or the applicable arbitration rules. The law remains unsettled, however, with regard to the power of a court to order consolidation in the face of a party's objection, even where there is a statutory basis for consolidation. Parties can reduce uncertainty if they address consolidation issues when they enter into an arbitration agreement; the authors will address how parties can deal with consolidation issues at the drafting stage.
II. CONSOLIDATION SCENARIOS
Consolidation issues may arise in two-party and in multiparty relationships. In both situations, the issue may come up either when parties initiate separate arbitrations for various disputes under the same contract, or when the parties' disputes arise from separate but related contracts.
The multiparty context presents a variety of contractual situations. In the first situation, the same parties (A, B and C) are all signatories to the same agreements.1 In the second situation, the “horizontal contractual relationship,” A enters into a contract with B, a second contract with C, and a third contract with D.2 The third situation is the “vertical contractual relationship”: A contracts with B, B with C and C with D.