Author: Rodolfo Donatelli*
Published: July 2020
Third Parties in Arbitral Proceedings
Description: The main concern with anti-suit injunctions is that, while nominally directed at the parties, they de facto intrude on the jurisdiction of other courts and tribunals. Only the parties may be bound, but by implication the adjudicatory body is also deprived of the power to rule on its own jurisdiction.
Such indirect intrusion, however, becomes direct and more conspicuous in investor-state arbitration. In this context, anti-suit injunctions are often used to bar a sovereign state, as a party to the arbitral proceeding, from starting or continuing any other judicial or administrative proceeding that encroaches on, and sometimes tangentially touches upon, the subject of the arbitration proceeding. Investor-state arbitral tribunals have deployed anti-suit injunctions not simply to interrupt parallel state proceedings, but to interfere with related proceedings, i.e., bankruptcy proceedings and criminal investigations.
Anti-suit injunctions clearly have a long reach and a heavy hand. Nonetheless, tribunals established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“Convention” or “ICSID Convention”) do not distinguish between anti-suit injunctions and other provisional measures. The ICSID Convention does not provide for a specific rule regarding anti-suit injunctions. Article 47 of the Convention only states that a tribunal, “if it considers that the circumstances so require,” may recommend “any provisional measures which should be taken to preserve the respective rights of either party.” Furthermore, the ICSID jurisprudence surreptitiously recognizes the importance and peculiarity of anti-suit injunctions, yet it applies the same “necessity and urgency” standard used for all provisional measures. Tribunals have not tried to establish a specific test to guide future tribunals and parties in assessing when an anti-suit injunction is appropriate, as they have attempted to in respect of other key issues arising under the Convention even in the silence of the treaty itself (e.g., the meaning of investment, etc.).
The objective of this article is to make that attempt. After considering the authority of arbitral tribunals to issue anti-suit injunctions under the Convention, this article proposes a flexible but explicit framework, utilizing a multi-factor test, to assist the tribunals in the exercise of their power. This test is based on the idea that the “intrusive” character of anti-suit injunctions makes them distinguishable from ordinary provisional measures. Therefore, extending the standard applied to ordinary provisional measures is inadequate.
To account for the complexity surrounding the issuance of these injunctions, arbitral tribunals should consider three elements in determining whether to issue an anti-suit injunction. First, the tribunal should assess the nature of the proceedings that the anti-suit injunction is aimed at blocking. Second, the tribunal should consider whether the anti-suit injunction affects the parties to the arbitration alone or if it might impact the rights and interests of third parties. Third, arbitrators should evaluate the purpose of the anti-suit injunction, that is, whether the goal is to protect the exclusive character of the arbitration, to preserve the integrity of the arbitration proceedings, or merely not to aggravate the parties’ dispute.
This multi-factor test would force the arbitrators to observe what is happening beyond the contours of their arbitration proceeding. This test, which admittedly overlaps in some respects, would establish a holistic approach that would improve the application of anti-suit injunctions in investor-state arbitrations.
*Associate at Latham & Watkins. He is indebted to Professor George A. Bermann and Kabir Duggal whose courses in international arbitration, research supervision and generous mentorship inspired the inquiry in this article. All opinions expressed in this article are those of the author and do not necessarily reflect the views of Latham & Watkins LLP.