In investment arbitration, it is rather common for arbitral tribunals to deal with preliminary issues prior to any consideration of the merits of a case. In such scenarios, the main question is whether to asses these issues together with other matters to be ruled upon in the final award or to deal with them in a separate phase of the arbitral proceedings. In other terms, arbitral tribunals need to decide whether the bifurcation of arbitral proceedings, i.e., whether to separate preliminary issues from the other matters, is warranted.
Bifurcation in investment arbitration is usually requested in cases when the respondent raises an objection to the jurisdiction of the arbitral tribunal. However, far from being exclusive to jurisdictional objections, bifurcation can occur regarding a variety of other preliminary matters, such as document authenticity issues,[1] issues regarding the applicable law or issues regarding the admissibility of claims.[2] Sometimes bifurcation can be requested in order to separate a phase on jurisdiction/preliminary issues/merits from the quantum (damages) phase of the case.[3] In exceptional cases, arbitral proceedings can be trifurcated into three different phases, e.g., into a phase of jurisdiction/preliminary issues, merits and quantum, although this is rarely efficient.
The main idea behind bifurcation/trifurcation of arbitral proceedings is to promote cost-efficiency and time effectiveness and, hence, to ensure procedural economy, especially in cases marked by great factual and legal complexity. As stated by the Caratube v. Kazakhstan tribunal after having ruled that the claimant had failed on the first hurdle of jurisdiction, “the majority of the costs and expenses of each party and of the dispute, both in duration and expense, would have been avoided had Respondent opted for bifurcation and the preliminary determination of its equivalent of Rule 41(1) objections under the Rules.”[4]
Bifurcation and Arbitration Rules
In general, arbitration rules do not contain any specific provision pertaining to bifurcation or trifurcation. The power of arbitrators to order bifurcation is grounded on the principle that arbitral tribunals have discretionary powers to conduct arbitral proceedings as they deem appropriate. For instance, both the ICSID Convention (Article 41(2))[5] and the 2010 UNCITRAL Arbitration Rules (Article 23(3))[6] provide that arbitral tribunals enjoy great discretion in deciding whether any objection to their jurisdiction shall be treated as a preliminary matter or along with the merits of the case.
However, this was not always the case regarding the UNCITRAL Arbitration Rules. In fact, Article 21(4) of the 1976 UNCITRAL Arbitration Rules[7] contained a presumption that jurisdictional objections should be treated as a preliminary question. In this respect, the Glamis Gold v. USA tribunal ruled that “[i]n examining the drafting history of Article 21(4) of the UNCITRAL Rules, the Tribunal finds that the primary motive for the creation of a presumption in favor of the preliminary consideration of a jurisdictional objection was to ensure efficiency in the proceedings.”[8] However, such a presumption was not deemed to be absolute, especially “when the preliminary objection is frivolous or dilatory or when the facts it involves are the same or closely linked to those pertinent to the merits.”[9] As decided in the Pey Casado v. Chile case, arbitral tribunals enjoy “a significant degree of discretion when determining whether the efficient administration of the proceedings counsels in favor of hearing an objection to jurisdiction separately from, or joined to, the merits.”[10]
Arbitral Tribunals’ Assessment
Although the power to bifurcate proceedings is an exercise of the arbitral tribunals’ discretion, case law has generated a number of conditions to be met for tribunals to consider that bifurcation is warranted.
Some arbitral tribunals have relied on the following conditions set out in the Glamis Gold v. USA case:[11]
- whether the objection is substantial inasmuch as the preliminary consideration of a frivolous objection to jurisdiction is very unlikely to reduce the costs of, or time required for, the proceeding;
- whether the objection to jurisdiction if granted results in a material reduction of the proceedings at the next phase; and
- whether bifurcation is impractical in that the jurisdictional issue identified is so intertwined with the merits that it is very unlikely that there will be any savings in time or cost.
Other tribunals, however, have ruled that they should not be placed in the “straightjacket”[12] of considering the issue of bifurcation solely through the lens of the Glamis Gold criteria as they do not form a “stand-alone test”.[13] Be that as it may, while deciding upon the application for bifurcation, even these tribunals have taken into account the procedural economy that would result, or not result, from bifurcation.
[1] Churchill Mining PLC and Planet Mining Pty Ltd v. Republic of Indonesia, ICSID Case No. ARB/12/14 and 12/40, Procedural Order No. 13, 18 November 2014.
[2] A. Carlevaris, “Chapter 6 – Preliminary Matters: Objections, Bi-furcation, Request for Provisional Measures” in Ch. Georgetti, Litigating International Investment Disputes – A Practitioner’s Guide, Brill/Nijhoff (2014), pp. 173-205.
[3] Eco Oro Minerals Corp. v. Republic of Colombia, ICSID Case No. ARB/16/41, Procedural Order No. 2, Decision on Bifurcation, 28 June 2018; Glencore Finance (Bermuda) Limited v. The Plurinational State of Bolivia, PCA Case No. 2016-39, Procedural Order No. 2: Decision on Bifurcation, 31 January 2018; Burimi S.R.L. and Eagle Games SH.A. v. Republic of Albania, ICSID Case No. ARB/11/18, Procedural Order No. 1 and Decision on Bifurcation, 18 April 2012
[4] Caratube International Oil Company LLP v. Republic of Kazakhstan, ICSID Case No. ARB/08/12, Award, 5 June 2012, para. 487.
[5] ICSID Convention, Article 41(2): “Any objection by a party to the dispute that that dispute is not within the jurisdiction of the Centre, or for other reasons is not within the competence of the Tribunal, shall be considered by the Tribunal which shall determine whether to deal with it as a preliminary question or to join it to the merits of the dispute.”
[6] 2010 UNCITRAL Arbitration Rules, Article 23(3): “The arbitral tribunal may rule on a plea referred to in paragraph 2 either as a preliminary question or in an award on the merits. The arbitral tribunal may continue the arbitral proceedings and make an award, notwithstanding any pending challenge to its jurisdiction before a court.”
[7] 1976 UNCITRAL Arbitration Rules, Article 21(4): “In general, the arbitral tribunal should rule on a plea concerning its jurisdiction as a preliminary question. However, the arbitral tribunal may proceed with the arbitration and rule on such a plea in their final award.”
[8] Glamis Gold Ltd. v. The United States of America, Procedural Order No. 2 (Revised), 31 May 2005, para. 11.
[9] Mesa Power Group, LLC v. Government of Canada, PCA Case No. 2012-17, Procedural Order No. 2, 18 January 2013, para. 16.
[10] President Allende Foundation, Victor Pey Casado, Coral Pey Grebe v. The Republic of Chile, PCA Case No. 2017-30, Procedural Order No. 2, 29 November 2017, para. 64.
[11] Glamis Gold Ltd. v. The United States of America, Procedural Order No. 2 (Revised), 31 May 2005, para. 12(c). See also A11Y Ltd. v. The Czech Republic, ICSID Case No. UNCT/15/1, Procedural Order No. 2: Decision on Bifurcation, 5 October 2015; Standard Chartered Bank (Hong Kong) Limited v. United Republic of Tanzania, ICSID Case No. ARB/15/41, Procedural Order No. 3 on Bifurcation, 11 October 2016; Michael Ballantine and Lisa Ballantine v. The Dominican Republic, PCA Case No. 2016-17, Procedural Order No. 2, 21 April 2017.
[12] Gavrilović and Gavrilović d.o.o. v. Republic of Croatia, ICSID Case No. ARB/12/39, Decision on Bifurcation, 21 January 2015, para. 66.
[13] Cairn Energy PLC, Cairn UK Holdings Limited v. The Republic of India, PCA Case No. 2016-7, Procedural Order No. 4: Decision on the Respondent’s Application for Bifurcation, para. 77.