Abuse of Process in
International Arbitration
KLADJOLA SPAHIU
KATEŘINA PALKOVSKÁ
• International arbitration is not as homogeneous as it
once was
• It has become more complex and fragmented and in
some instances, more polarized than it used to be
• Parties are trying more and more to find grey
areas to ensure their triumph and as a result
they might be damaging/risking the
Arbitration Process.
International Arbitration
‘Abuse of process’
• An abuse of process ought to be distinguished from a sheer
violation of an established rule.
- not violating any hard and fast legal rule and cannot be
tackled by the application of classic legal tools.
- can cause significant disadvantage to the party against
whom it is aimed
- can undermine the fair and orderly resolution of disputes by
international arbitration.
First Type of Abuse of Process:
Schemes Designed at Securing Jurisdiction
under an Investment Treaty
-Corporate investors seeking to secure the jurisdiction of an
arbitral tribunal
- Investors tend to design their corporate structure in such
ways that allows them to maximize their protection by
putting their investment under multiple investment treaties.
Jurisdiction ratione temporis
• Investor who is not protected by an investment treaty
restructures its investment in order to fall within the scope
of protection
• Fictitious investments in order to
fall under certain treaties area
• Restructure of its investment in order to gain
access to a dispute with the host State that is
foreseeable, but may not yet have crystallized
• Investor change its seat in order to fall under
protection of a certain BIT
A Second Type of Abuse of Process:
The Multiplication of Arbitral Proceedings to
Maximize Chances of Success
• To initiate more than one proceeding
to resolve the same or related
dispute in order to maximize its
chances of success and to secure a
tribunal that might render an award
in its favor
1. excessive costs and delays
2. dozens of claims submitted
in separate arbitrations by
opportunistic claimants
• Might some of this abuse be even the fault of
tribunal?
• Mr Yosef Maiman case
A Third Type of Abuse of Process:
Gaining a Benefit Which Is Inconsistent with
the Purpose of International Arbitration
Some parties recently try to initiating one or more
arbitrations with no intention of resolving a
genuine disputes. In fact they tend to go after
another ‘reward‘.
Tools for Redressing Abuse of Process
 Arbitrators have a number of classic tools at their disposal
 Full costs
 Wide discretion regarding damages
 These tools will not deter investors from abusive tactics
 More effective tools are required
Lis Pendens?
 Not applicable in international arbitration
 Not effective in cases where a party submits only a portion of its claims to
a first tribunal and its remaning claims to a second tribunal
 Lauder/CME v Czech Republic
The Duty to Concentrate a Dispute
 Requirement to raise all arguments and claims relating to the same dispute
 French Court of Cassation - Cesareo
 English flexible and discretionary rule
 Henderson v Henderson
Abuse of Rights and Abuse of Process
 A party may have a valid right, and yet exercise it in an abnormal, excessive or abusive way
 Sole purpose of causing injury to another party
 Hunter v Chief Constable of the West Midlands Police
 Part of Public International Law
 Investment treaty tribunals relied on these principles when claimant investors exercised their
procedural rights in a manner that undermines the arbitral process
 Phoenix Action v Czech Republic
 Renée Rose Levy and Gremcitel S v Republic of Peru
Conclusions
 Call for arbitral tribunals to apply and refine the doctrine of abuse of
process
 Arbitrators should look beyond the literal application of the law
 Consider the entire context of a party‘s conduct