Parallel proceedings occur when the same cause of action is adjudicated in more than one forum, either before multiple domestic courts, domestic and international courts, or before multiple international forums. Parallel proceedings are problematic at both the national and international levels as they waste money and conflicting results undermine legal certainty. The doctrines of lis pendens and res judicata are the most common solutions to managing the problem, yet both are difficult to apply in the arbitration context. Other mechanisms, such as anti-suit injunctions, so-called umbrella clauses, and fork-in-the-road clauses, are therefore intended to target the problem of parallel proceedings in international arbitration. Parallel proceedings are particularly problematic in investment arbitration because of features in investment treaties such as bilateralism, non-exclusivity, exclusion of local remedies and multiple investor claims.
Two recent ICSID cases, SGS v. Pakistan and Toto v. Lebanon, reveal some of the current problems with creating rules on parallel proceedings in investment arbitration. The cases demonstrate that the distinction between treaty claims (which trigger ICSID jurisdiction) and contract claims (which are typically adjudicated in national courts) is untenable and likely to increase future parallel proceedings. The distinction is especially difficult to maintain because determining the nature of a claim is often a question of interpretation, and arbitral tribunals are hesitant to scrutinize a claimant’s formulation of its cause of action. The two cases also show the uncertain force of choice-of-forum clauses and how they often allow arbitrators to simply bypass parties’ previous agreements. Finally, umbrella clauses have created much confusion, as previous arbitral tribunals have interpreted nearly identical clauses in four different ways. The uncertainty surrounding the future management of parallel proceedings highlights deeper, unsolved questions regarding the power private international law affords multinational enterprises vis-à-vis sovereign states in an increasingly global legal order.Journal of International Arbitration