Who Decides Consolidation Issue? A New Arbitration Panel or the Old One?
It is pretty well settled under modern arbitration law, including reinsurance arbitrations, that procedural issues like consolidation are questions for the arbitrators and not the courts. But what happens if there are multiple arbitration panels? Which panel decides the consolidation application? And what if one arbitration has been completed and a motion to consolidate is made to join the second arbitration to the first one? Which panel decides the consolidation question? The Third Circuit took a crack at this issue in a recent not precedential decision.
In Pennsylvania National Mutual Casualty Insurance Co. v. New England Reinsurance Corp., No. 19-1805, 2019 U.S. App. LEXIS 36388 (3rd Cir. Dec. 6, 2019) (Not Precedential), cross-petitions to compel arbitration were made. The cedent wanted the consolidation issue heard by a new panel of arbitrators and the reinsurer wanted a previous arbitration panel that heard a previous dispute between the cedent and two other reinsurers to hear the consolidation issue. The fundamental question was whether the new dispute was the same as the previously arbitrated dispute. As the court noted, if the two disputes were the same, then under the reinsurance agreement the disputes would be consolidated and heard by the same panel of arbitrators that decided the first arbitration. The district court sent the consolidation question to a new panel of arbitrators and the reinsurer appealed.
The circuit court affirmed the district court’s order. The court held that the reinsurance agreement provided for a specific method of choosing arbitrators. Even though the treaty provided that “if more than one reinsurer is involved in the same dispute, all such reinsurers shall constitute and act as one party,” the court stated that sending the consolidation question to the arbitration panel that decided the first arbitration would invite the court to prejudge the consolidation question and ignore the express language of the reinsurance agreement. The court held that it could only compel arbitration of the consolidation issue before a new panel chosen according to the express terms of the agreement. Thus, the two disputes will be consolidated, according to the court, “if and only if” a new panel determines that the current dispute is the same as the prior dispute and that the new panel finds that the prior panel is still available to handle the new dispute.
The court also noted in a footnote that, in this case, the first panel had already issued a final award in a non-consolidated arbitration before the cedent sought to arbitrate with this reinsurer. Here, said the court, the consolidation issue was not before the first panel and, therefore, a new panel was necessary to resolve the consolidation issue.