Appointing Arbitrators in Multi-Party International Arbitrations: Ensuring Fairness and Equality Post-Dutco?

International commercial projects and transactions are increasingly complex, often involving multiple stakeholders, numerous interconnected contracts, and diverse interests. When disputes arise in such multi-party scenarios, the traditional bilateral model of arbitration—one claimant versus one respondent, each appointing an arbitrator—faces significant challenges. The process of constituting an arbitral tribunal, particularly ensuring fairness and equality among all parties, becomes a critical hurdle. The landmark decision of the French Cour de cassation (Supreme Court) in Siemens AG and BKMI Industrieanlagen GmbH v. Dutco Construction Co., Ltd., dated January 7, 1992, profoundly impacted how the international arbitration community approaches arbitrator appointments in multi-party disputes and continues to offer vital lessons.

I. The Multi-Party Dilemma: The Facts of the Dutco Case

The Dutco case originated from a consortium agreement formed in 1981 between three companies: a German entity (BKMI Industrieanlagen GmbH), a UAE entity (Dutco Construction Co., Ltd.), and another German entity (Siemens AG). The consortium was established for the construction of a cement plant in Oman. Their agreement included an arbitration clause stipulating that disputes would be resolved under the Rules of Conciliation and Arbitration of the International Chamber of Commerce (ICC), by three arbitrators, with Paris as the seat of arbitration.

In 1986, Dutco initiated ICC arbitration proceedings against both BKMI and Siemens, alleging breaches of the consortium agreement. Dutco's claims against BKMI and Siemens were distinct, based on different alleged defaults, even though they were named as joint respondents in a single arbitration. BKMI and Siemens contested the initiation of a single multi-party arbitration, arguing that the claims should be heard in separate proceedings. However, the ICC Court of Arbitration, in line with its then-practice for disputes arising under a single multi-party contract, allowed the single arbitration to proceed against both respondents jointly.

The challenge intensified during the arbitrator appointment phase. For a three-member tribunal, the prevailing ICC practice was for the claimant (or claimant side) to nominate one arbitrator and the respondent (or respondent side) to jointly nominate another, with the ICC Court typically appointing the chairman. Dutco duly nominated its arbitrator. The ICC then requested BKMI and Siemens to jointly nominate their arbitrator. Both BKMI and Siemens objected, asserting that each company, as a distinct legal entity with potentially divergent interests even as co-respondents, was entitled to nominate its own arbitrator. Despite these objections, the arbitral tribunal was constituted according to the ICC's prevailing approach.

II. The Lower Courts and the Prevailing Institutional Practice (Pre-Dutco)

The constituted arbitral tribunal, in an interim award dated May 19, 1988, affirmed the validity of its own composition. It reasoned that the single consortium agreement implied an intention for a single, unified arbitration for disputes arising thereunder. By unreservedly agreeing to the ICC Rules (Article 2(4) of the then-applicable 1975 ICC Rules stated "each party shall nominate... one arbitrator"), the parties were deemed to have accepted the ICC's interpretation that "each party" effectively meant "each side" in a multi-party context. The tribunal found no violation of party equality or public policy.

BKMI and Siemens challenged this interim award before the Paris Court of Appeal. The Court of Appeal upheld the tribunal's decision and the ICC's methodology. It considered the joint nomination imposed on BKMI and Siemens to be a "necessary consequence" of their being members of the same consortium and found no breach of international public order, including principles of due process, equal treatment, or the rights of defense. This outcome was consistent with the common institutional practice at the time when dealing with multiple claimants or respondents under a single arbitration agreement.

III. The Cour de cassation's Landmark Ruling in Dutco

The case then ascended to the French Cour de cassation, which, in its seminal judgment of January 7, 1992, overturned the Paris Court of Appeal's decision. This ruling sent ripples throughout the international arbitration world.

The Cour de cassation's core findings were:

1. Equality in Arbitrator Appointment as a Matter of Public Policy: The Court declared that the principle of equality of the parties in the appointment of arbitrators is a matter of international public policy (ordre public international) under French law. This elevated the right to equal participation in the tribunal's formation to a fundamental tenet that could not be easily derogated from.
2. Violation of Equality: Forcing BKMI and Siemens—two distinct legal entities who, despite being co-respondents, could have differing interests, defenses, and strategies—to share a single arbitrator nomination, while the claimant, Dutco, had the right to its own individual nomination, fundamentally breached this principle of equality. Each respondent was effectively given only "half" an appointment right compared to the claimant.
3. No Advance Waiver of Public Policy Rights: Crucially, the Cour de cassation held that the right to equal treatment in the constitution of the arbitral tribunal, being a matter of public policy, could not be validly waived by parties before a specific dispute had arisen. Therefore, even if the reference to the ICC Rules in the consortium agreement was interpreted as an advance agreement by BKMI and Siemens to the ICC's joint nomination practice for respondents, such a waiver was ineffective because it concerned a fundamental right of public policy. Since BKMI and Siemens had clearly objected to the joint nomination method after the dispute arose, they had not forfeited their right to equal treatment.

The Dutco judgment effectively invalidated the ICC's (and by extension, other institutions') then-standard practice for appointing arbitrators in multi-party cases where multiple parties on one side were compelled to nominate a single arbitrator, at least under the scrutiny of French courts when Paris was the seat.

IV. The Aftermath of Dutco: Reshaping Multi-Party Arbitrator Appointments

The Dutco decision was a catalyst for significant reform in how arbitral institutions manage multi-party arbitrator appointments. Recognizing the legitimacy of the concerns about party equality, major institutions revised their rules to address these complexities more effectively.

• ICC Rules: The ICC was directly impacted by the Dutco decision, particularly for Paris-seated arbitrations. Subsequent revisions of the ICC Rules (notably in 1998, and further refined in later versions like the 2012 and 2021 Rules) have sought to provide a more robust framework. For instance, Article 12(8) of the 2021 ICC Rules states that where there are multiple claimants or multiple respondents, and where the dispute is to be referred to three arbitrators, the multiple claimants, jointly, and the multiple respondents, jointly, shall nominate an arbitrator for confirmation. However, if these joint nominations are not made by the multi-party "sides," the ICC Court is empowered to appoint each member of the arbitral tribunal and shall designate one of them to act as chairman. This grants the ICC Court significant flexibility to ensure that the tribunal is constituted in a fair manner, especially if parties on one side have conflicting interests and cannot agree on a common nominee. The underlying principle is that if party autonomy on one side cannot be exercised collectively without prejudice to fairness, the institution may step in to ensure the integrity of the tribunal's formation.
• Other Institutional Rules: Many other leading arbitral institutions, including the London Court of International Arbitration (LCIA), the Singapore International Arbitration Centre (SIAC), the Hong Kong International Arbitration Centre (HKIAC), and the American Arbitration Association's International Centre for Dispute Resolution (AAA/ICDR), have also incorporated provisions in their rules that grant the institution or a court the authority to appoint all arbitrators in multi-party situations if the parties cannot agree or if the standard bilateral appointment process would result in unfairness or inequality. For example, Article 8.1 of the LCIA Rules (2020) gives the LCIA Court the power to appoint the entire tribunal in multi-party cases if a fair and equal appointment by the parties is not possible.
• National Laws: The UNCITRAL Model Law on International Commercial Arbitration (Art. 11) and national laws based upon it, such as Japan's Arbitration Law (Art. 17(4)), also provide mechanisms for court-assisted appointment of arbitrators when parties (including in multi-party settings) fail to agree on an appointment procedure or on an arbitrator. Revisions to the Japan Commercial Arbitration Association (JCAA) Rules, effective in 2014, also adopted an approach similar to the ICC, allowing the JCAA to appoint all three arbitrators if a multi-party side cannot make a joint nomination.

This trend reflects a broad consensus that while party autonomy in arbitrator selection is a core value, it must be balanced against the overriding need to ensure procedural fairness, equality of arms, and the practical ability to constitute a tribunal in complex multi-party disputes.

V. Defining "Equality" in Multi-Party Appointments

The Dutco case forced a deeper consideration of what "equality of parties" truly means in the context of arbitrator appointments.

• Does it mean every single named party gets to appoint an arbitrator? This interpretation, if applied rigidly, could lead to unwieldy, very large, and potentially unbalanced tribunals, especially if there is a significant disparity in the number of parties on the claimant versus respondent "sides." For example, if one claimant sues five respondents, allowing each to appoint an arbitrator would result in a six-person tribunal (plus a chair if an odd number is mandated), which is generally impractical.
• Does it mean equality between defined "sides" (claimant side vs. respondent side)? This was the traditional ICC approach that Dutco found problematic. The issue, as highlighted by Dutco, is that parties on the same "side" (e.g., co-respondents or co-claimants) may not have homogenous interests. Forcing them to agree on a single nominee can put those with minority views or distinct defenses at a disadvantage.
• The Modern Consensus: The prevailing view, reflected in current institutional rules, is that equality means ensuring that no individual party or sub-group of parties is structurally disadvantaged in the constitution of the tribunal relative to their opponents. It’s about "equality of opportunity" in the appointment process. When multiple parties on one side cannot genuinely exercise a collective right to appoint due to divergent interests, or where doing so would create an imbalance, the default power of the institution (or a court) to appoint all members of the tribunal is seen as the most practical way to achieve both fairness and a workable tribunal. This ensures that the process is not stymied and that the resulting tribunal is, and is perceived to be, impartial and independent of undue influence from any single faction.

VI. Strategic Considerations for Drafting Arbitration Clauses in Multi-Party Contexts

The complexities highlighted by Dutco and subsequent developments underscore the need for careful foresight when drafting arbitration clauses for transactions or projects that inherently involve multiple parties.

1. Anticipate Multi-Party Scenarios: During contract negotiations for joint ventures, consortia, large construction projects with multiple contractors and subcontractors, or syndicated loan agreements, proactively consider how disputes involving more than two parties are likely to arise and how they should be managed.
2. Express Intent for Single vs. Multiple Arbitrations: If the intention is for all disputes under a core multi-party agreement, or across a suite of related contracts in a single project, to be resolved in a consolidated or single multi-party arbitration, this should be stated as clearly as possible. Ambiguity can lead to preliminary battles over whether separate arbitrations are required.
3. Incorporate Rules of a Major Arbitral Institution: Given the sophisticated mechanisms now embedded in the rules of leading arbitral institutions to handle multi-party appointments, often the simplest and safest approach is to choose such an institution and incorporate its rules by reference. This outsources the difficult task of managing potential deadlocks or inequalities in appointments to an experienced neutral body.
4. Joinder and Consolidation Provisions: Where multiple contracts are involved, consider including compatible arbitration clauses across all related agreements. Some parties also include specific clauses allowing for the joinder of third parties to an existing arbitration or the consolidation of related arbitrations, subject to the consent of all involved and the applicable institutional rules or national law. Such clauses need to be drafted with precision to be effective.
5. Bespoke Ad Hoc Multi-Party Clauses (Use with Extreme Caution): If parties opt for ad hoc arbitration in a multi-party setting and wish to draft their own appointment mechanism, this requires a very high degree of skill and foresight. The mechanism must be demonstrably fair to all potential configurations of claimants and respondents and robust enough to handle disagreements. The Dutco case serves as a warning about the public policy limits that may apply, particularly at the seat of arbitration.
6. Fallback Mechanisms: Even in ad hoc clauses, or when modifying institutional rules, it is wise to include fallback provisions. For example, if parties on one "side" cannot agree on an arbitrator within a specified timeframe, the clause might provide for appointment by a designated neutral appointing authority or a court at the seat.

VII. Conclusion: Striving for Fairness and Workability in a Complex World

The Dutco decision was a pivotal moment in international arbitration, compelling a critical re-evaluation of how arbitral tribunals are constituted in multi-party disputes. It underscored that while party autonomy in selecting arbitrators is a fundamental principle, it does not exist in a vacuum and cannot be used to create a process that is fundamentally unequal or unfair, particularly when such fairness touches upon matters of international public policy at the seat of arbitration.

In the decades since Dutco, international arbitral institutions have largely risen to the challenge, developing sophisticated rules and practices to manage the appointment of arbitrators in these complex scenarios. These rules generally empower the institution to intervene where necessary to ensure that a fair, impartial, and properly constituted tribunal can be formed, even in the face of multiple parties with potentially conflicting interests on one or more "sides" of a dispute.

For U.S. companies and other international businesses engaging in multi-party ventures, the lessons from Dutco remain highly relevant. Proactive and careful drafting of arbitration clauses, often by incorporating the well-developed rules of a major arbitral institution, is the most effective strategy to ensure that, should disputes arise, a fair and workable mechanism for appointing the arbitral tribunal is already in place, thereby preserving the integrity and efficiency of the international arbitration process.