International Arbitration and Lis Pendens: Theory, Case Law, and Practical Implications
International arbitration has emerged as a key mechanism for resolving disputes arising from commercial contracts, investments, and cross-border transactions. Its speed, confidentiality, and flexibility distinguish it from state courts. Yet one recurring challenge is the problem of international arbitration and lis pendens — the existence of parallel proceedings concerning the same dispute in different fora.
This issue is not theoretical. It directly affects businesses and individuals engaged in international transactions, as it can lead to duplicate proceedings, contradictory judgments, higher costs, and significant delays.
What does lis pendens mean?
The term originates from Latin and literally means “pending litigation.” It refers to the situation where a case is already pending before one court or arbitral tribunal while an attempt is made to litigate the same dispute in another forum.
In most legal systems, three conditions must be met for lis pendens to arise:
- Identity of parties (the same persons in the same capacity).
- Identity of subject matter (same legal and factual basis).
- Identity of claims (petitum).
If these are not cumulatively satisfied, lis pendens is not established.
Lis pendens before national courts
In civil law jurisdictions, the general rule is that the second-seized court must decline jurisdiction in favor of the first. The Court of Justice of the European Union (CJEU) has reinforced this “first-seized” principle. However, the CJEU’s broad interpretation of identity of subject matter has allowed for abusive practices, namely the so-called torpedo actions, where parties strategically file suits before slow-moving courts to delay arbitration.
By contrast, common law jurisdictions do not apply lis pendens. Instead, they rely on the doctrine of forum non conveniens, under which a court considers which forum is most appropriate.
Lis pendens in international arbitration
The situation is more complex. There is no unified international legislative framework. The 1958 New York Convention governs the recognition and enforcement of arbitral awards but contains no lis pendens rule.
The only international instrument that provides such a rule is the 1961 European Convention, which recognizes priority for the arbitral tribunal if it was first seized. In practice, however, its application is limited.
Arbitral tribunals generally retain discretion. They may proceed with the case even if parallel litigation is pending before state courts. Their stance depends on factors such as:
- the arbitration clause,
- the applicable law,
- the principle of good faith,
- the risk of abusive tactics.
Case law and examples
- Marc Rich (C-190/89): The CJEU confirmed priority of the first-seized court, even at the cost of delays. This approach fueled torpedo actions.
- Certain German Interests in Polish Upper Silesia: The Permanent Court of International Justice dismissed a lis pendens objection, holding that there was no full identity of parties and claims. This illustrates how a strict formal test may allow proceedings to continue.
- Fomento v. Colon (Swiss jurisprudence): The Swiss courts held that arbitrators could proceed despite parallel litigation before a state court, prioritizing effectiveness and protection of the arbitration agreement.
International commercial arbitration and lis pendens
International commercial arbitration typically involves disputes arising from cross-border contracts between private parties or companies (e.g., sale of goods, transportation, joint ventures). Here, lis pendens issues often arise: parties may pursue proceedings both in arbitration and in state courts, creating parallel tracks.
The risks include:
- delays and increased costs,
- uncertainty in enforcement,
- forum shopping by parties seeking a favorable forum.
Thus, commercial arbitration illustrates clearly the limits of the international framework in dealing with lis pendens.
International investment arbitration and lis pendens
Investment arbitration concerns disputes between investors and states, usually under BITs, the Energy Charter Treaty, or through ICSID. Lis pendens here is even more complex. Parallel proceedings may occur in national courts and before arbitral tribunals, or multiple claims may be filed by different investors regarding the same state measure.
The consequences are significant:
- legal uncertainty for investors,
- reputational damage for the state as an investment destination,
- “grey zones” within ICSID and other fora enabling strategic maneuvering.
Lis pendens in investment arbitration thus affects not only the parties but also the legitimacy of the international investment protection system itself.
Practical implications for businesses and investors
Lis pendens creates substantial risks: duplicate proceedings, higher costs, delays, uncertain enforcement, and contradictory outcomes.
A sound strategy requires:
- careful drafting of arbitration clauses,
- choosing institutional rules that minimize parallel proceedings,
- timely legal advice to prevent abusive practices.
Conclusion
Lis pendens in international arbitration remains one of the most debated issues in international procedural law. It affects both commercial and investment arbitration, posing challenges for legal certainty and system efficiency.
Understanding this phenomenon and preventing it through well-crafted arbitration clauses are crucial tools for safeguarding interests in cross-border disputes. In today’s global business environment, proper management of lis pendens may determine the outcome of a dispute and avoid protracted, costly proceedings.
Our approach
At Papatriantafyllou & Thanasenari, we closely monitor developments in international arbitration and particularly lis pendens issues. We analyze theory and case law with the aim of providing practical insights, and we integrate these findings into our practice. With expertise in high-stakes commercial and investment disputes, we approach each case with legal precision and strategic thinking, supporting both businesses and individuals in cross-border matters and offering guidance tailored to each client’s needs.
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Disclaimer: This publication is intended for informational purposes only and does not constitute legal advice. Professional legal guidance should always be sought before acting on any information contained herein.