Multi-Party Arbitration - (SAR) 2002 - 1
Mary Woollett, Assistant Solicitor, Herbert Smith, London.
Monique Sasson, Admitted as a Solicitor in Italy, assistant in the arbitration group of Herbert Smith, London.
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In recent years there has been increasing discussion concerning the problems encountered in multi-party arbitrations. Various efforts have been made to solve these problems, but with limited success.
The term “multi-party” can apply to a number of different situations. First, it is used, perhaps inaccurately, to describe a dispute which involves a claimant and a respondent which each comprise several individuals or entities. Thus two joint creditors may together assert their rights against a common debtor or vice versa. In this case the dispute is between two distinct camps, one claimant and one respondent. There are unlikely to be any conflicting interests within either camp and the interests of one side are opposite to those of the other. This is the simplest form of multi-party dispute and is perhaps more accurately described as a “multi-participant” dispute. The typical problems associated with multi-party disputes rarely arise in these situations.
True multi-party arbitrations, which present significant practical difficulties are those which arise under a contract to which there are more than two parties and therefore more than two parties bound by the same arbitration clause (for example, a joint venture or a consortium agreement). When a dispute arises, it is often the case that all these parties will be drawn into the dispute, bringing with them all their own differing interests. It is therefore unlikely that there will be a neat split of the parties into two opposing “sides”. Instead, there may by three or more “sides”, each asserting its own rights and interests and each being entitled to be heard and considered in the resolution of the dispute.
The term “multi-party arbitration” also applies to more complex arbitrations arising among parties linked together by a series of related contracts, where there is no single contract or single arbitration clause linking all the parties together (for example, in the case of construction contracts, disputes often arise involving the employer, the contractor and the subcontractor. Although there are contracts between the employer and the contractor and between the contractor and the subcontractor, no contract links the employer and the subcontractor). If a dispute arises, between two parties, the respondent is likely to seek to blame a third party. The difficulty then is obvious, not only are there more than two sides to the dispute, but also there may be conflicting agreements between the parties as to how that dispute should be resolved.