UNIVERSITY OF LONDON UNIVERSITY OF GENEVA QUEEN MARY AND WESTFIELD COLLEGE FACULTY OF LAW CENTRE FOR COMMERCIAL LAW STUDIES THE DOCTRINE OF RES JUDICATA BEFORE INTERNATIONAL ARBITRAL TRIBUNALS PHD THESIS presented at the Centre for Commercial Law Studies Queen Mary and Westfield College, University of London and at the Faculty of Law of the University of Geneva under the joint supervision of PROFESSOR LOUKAS MISTELIS and PROFESSOR GABRIELLE KAUFMANN-KOHLER by SILJA SCHAFFSTEIN Geneva 2012 I hereby declare that the work presented in this thesis is my own ABSTRACT There are currently no rules in international commercial arbitration law and practice assuring the coordination between (partial or final) arbitral awards and/or national court judgments rendered in identical or related cases. This lack of coordination is unsatisfactory, particularly in light of the ever-growing tendency of parties to submit their commercial disputes to international arbitration and the increasing complexity of international arbitration. Today, international commercial transactions and the disputes to which they give rise regularly involve multiple parties, contracts and issues. As a consequence, these disputes (or certain aspects of these disputes) are increasingly tried in multiple fora. In such circumstances, difficult issues regarding the res judicata effects of prior judgments or awards are likely to arise before international commercial arbitral tribunals. The central hypothesis underlying this research is that transnational principles of res judicata should be elaborated for international commercial arbitral tribunals. This solution is justified for several reasons. First, it is justified given the differences among domestic laws regarding res judicata and the difficulties surrounding the formulation of appropriate conflict-of-laws rules. Second, it avoids inappropriate analogies between international arbitration proceedings and litigation. Finally, the solution provides guidance and ensures a certain degree of fairness, certainty and predictability, which is expected by arbitration users. This PhD thesis seeks to achieve its aims in two stages: Part One examines the doctrine of res judicata in litigation, analysing the doctrine as applied in different domestic laws, as well as in private and public international law. Part Two will determine whether and to what extent the res judicata doctrine may be applied by international commercial arbitral tribunals. It will demonstrate that transnational principles of res judicata should be elaborated and will seek to formulate such principles. The Moving Finger writes; and, having writ, Moves on: nor all your Piety nor Wit Shall lure it back to cancel half a Line, Nor all your Tears wash out a Word of it. (Omar Khayyám) TABLE OF CONTENTS Introduction.................................................................................................................... 1 Part I : The Doctrine of Res Judicata in Litigation ..................................................... 10 Chapter 1: The Doctrine of Res Judicata in Domestic Laws ....................................... 14 1. Common Law ....................................................................................................... 15 1.1. England .......................................................................................................... 15 1.1.1. Constituent elements of a res judicata .................................................................... 15 1.1.2. Effects of a res judicata ............................................................................................. 19 1.1.3. The same parties...................................................................................................... 25 1.2. United States .................................................................................................. 28 1.2.1. Constituent elements of a res judicata .................................................................... 29 1.2.2. Effects of a res judicata ............................................................................................. 32 1.2.3. The same parties...................................................................................................... 34 2. Civil Law ............................................................................................................... 39 2.1. France ............................................................................................................. 39 2.1.1. Constituent elements of a res judicata .................................................................... 40 2.1.2. Effects of a res judicata ............................................................................................. 44 2.1.3. Requirements for the application of the doctrine of res judicata ....................... 45 2.2. Switzerland ..................................................................................................... 49 2.2.1. Constituent elements of a res judicata .................................................................... 50 2.2.2. Effects of a res judicata ............................................................................................. 53 2.2.3. Requirements for the application of the doctrine of res judicata ....................... 54 3. Conclusion ............................................................................................................ 56 Chapter 2: The Doctrine of Res Judicata in International Law ................................... 60 1. Private international Law ..................................................................................... 61 1.1. The EC Regulation No. 44/2001 ................................................................... 61 1.2. The Convention on Choice of Court Agreements ......................................... 67 1.3. The ALI/UNIDROIT Principles of Transnational Civil Procedure ............ 71 2. Public International Law ...................................................................................... 73 2.1. Constituent Elements of a Res Judicata ........................................................ 76 I 2.2. Effects of a Res Judicata ................................................................................ 83 2.3. Requirements for the Application of the Doctrine of Res Judicata ............... 85 3. Conclusion ............................................................................................................ 93 Part II : The Doctrine of Res Judicata in International Commercial Arbitration ....... 95 Chapter 3 : Res Judicata Issues Arise in International Commercial Arbitration ........ 97 1. Issues of Res Judicata Between Arbitral Tribunals and State Courts .................. 98 2. Issues of Res Judicata Between Different Arbitral Tribunals ............................. 101 3. Issues of Res Judicata Before a Same Arbitral Tribunal .................................... 105 4. Conclusion .......................................................................................................... 105 Chapter 4 : Res Judicata in International Commercial Arbitration – A Problem ...... 107 1. Interests at Stake Due to the Occurrence of Res Judicata Issues in International Commercial Arbitration ............................................................................................. 108 2. How are Res Judicata Issues Currently Dealt With in International Commercial Arbitration Law and Practice?..................................................................................... 112 2.1. International Commercial Arbitration Law ................................................. 112 2.1.1. Domestic Arbitration Laws .................................................................................113 2.1.2. Institutional Arbitration Rules ............................................................................133 2.1.3. International Commercial Arbitration Conventions........................................135 2.1.4. International Arbitration “Soft Law”: The ILA Reports and Recommendations on Res Judicata and Arbitration ............................................................137 2.1.5. Conclusion .............................................................................................................138 2.2. International Commercial Arbitration Practice ........................................... 140 2.2.1. Which law governs res judicata issues in arbitration proceedings? ..................141 2.2.2. Which res judicata requirements must be met before international arbitral tribunals? .................................................................................................................................147 2.2.3. To what extent have international arbitral tribunals afforded res judicata effects to prior decisions? ...................................................................................................................154 2.2.4. In what circumstances have international arbitral tribunals denied res judicata effects to prior decisions that were res judicata? ...................................................................156 2.2.5. What effects have international arbitral tribunals afforded to prior decisions that were not res judicata? ........................................................................................................157 2.2.6. Conclusion .............................................................................................................159 II 3. Conclusion ........................................................................................................... 161 Chapter 5 : Search for an Appropriate Approach ....................................................... 164 1. Possible Approaches to Res Judicata Before International Arbitral Tribunals. 164 1.1. Conflict-of-laws Approach ........................................................................... 167 1.2. Comparative Law Approach ........................................................................ 172 1.3. Transnational Approach .............................................................................. 173 2. The Appropriate Approach: Transnational Res Judicata Principles for International Commercial Arbitration ....................................................................... 175 2.1. Analogy between International Commercial Arbitration and Domestic Litigation for Res Judicata Purposes ..................................................................... 176 2.1.1. What is international arbitration? .......................................................................176 2.1.2. Fundamental features of international commercial arbitration ......................178 2.1.3. Conclusion .............................................................................................................202 2.2. Sources of Transnational Res Judicata Principles ....................................... 203 2.3. Legal Basis for the Application of Transnational Res Judicata Principles . 206 3. Conclusion .......................................................................................................... 208 Chapter 6 : Transnational Res Judicata Principles for International Commercial Arbitral Tribunals ....................................................................................................... 210 1. Res Judicata in Case of Prior State Court Judgments Before International Arbitral Tribunals ........................................................................................................ 211 1.1. Constituent Elements of a Res Judicata ...................................................... 214 1.1.1. A judicial decision .................................................................................................214 1.1.2. A judicial tribunal ..................................................................................................215 1.1.3. A final and conclusive decision ...........................................................................215 1.1.4. A judicial tribunal with jurisdiction over the parties and the subject matter? .... ..................................................................................................................................216 1.1.5. A decision “on the merits” ..................................................................................217 1.2. The Scope of Res Judicata Effects to be Afforded to Prior Judgments in Arbitration Proceedings ......................................................................................... 229 1.3. Requirements for the Application of the Res Judicata Doctrine ................. 234 1.3.1. The triple identity test ..........................................................................................235 1.3.2. Is the prior judgment capable of recognition in the country of the arbitral III seat? . ................................................................................................................................241 1.4. Conclusion .................................................................................................... 243 2. Res Judicata in Case of Prior Arbitral Awards Before International Arbitral Tribunals .................................................................................................................... 244 2.1. Constituent Elements of a Res Judicata ...................................................... 245 2.1.1. An arbitral award ...................................................................................................245 2.1.2. A final and binding arbitral award ......................................................................247 2.1.3. A valid arbitral award............................................................................................249 2.1.4. An arbitral tribunal with jurisdiction over the parties and the subject matter?...... ........................................................................................................................ ........250 2.1.5. An arbitral award “on the merits” ......................................................................251 2.2. The Scope of Res Judicata Effects to be Afforded to Prior Arbitral Awards in Arbitration Proceedings ........................................................................ 258 2.3. Requirements for the Application of the Res Judicata Doctrine ................. 263 2.3.1. The triple identity test ..........................................................................................263 2.3.2. Is the prior award capable of recognition in the country of the arbitral seat of the subsequent arbitration? ....................................................................................................265 2.4. Conclusion .................................................................................................... 267 3. Transnational Res Judicata Principles for International Commercial Arbitral Tribunals .................................................................................................................... 269 3.1. Transnational Res Judicata Principles with Respect to Prior National Court Judgments .................................................................................................... 269 3.2. Transnational Res Judicata Principles with Respect to Prior Arbitral Awards………… ..................................................................................................... 271 Conclusion .................................................................................................................. 274 BIBLIOGRAPHY ............................................................................................................ 278 TABLE OF CASES .......................................................................................................... 308 TABLE OF ABBREVIATIONS .......................................................................................... 334 IV INTRODUCTION Introduction We are not final because we are infallible, but we are infallible only because we are final. (Robert H. Jackson J.) 1. International arbitration is widely considered to be the principal method of dispute resolution for international commercial disputes. Every year international arbitration institutions report increasing activity and new arbitration institutions are established “to catch this wave of new business”1. 2. As a consequence of this ever-growing tendency of parties to submit their commercial disputes to international arbitral tribunals, international arbitration has also become increasingly complex. Today international commercial transactions and the disputes to which they give rise regularly involve multiple parties, contracts and issues2. One aspect of this growing complexity is the increasing number of multi-fora disputes, i.e. disputes which (or aspects of which) are tried in two or more fora3. When disputes involve multiple parties, contracts or issues, conflicts concerning the proper forum to deal with such disputes are likely to arise. Sometimes it may simply be impossible to bring such multiparty, multicontract or multi-issue arbitrations to one single forum. 1 REDFERN/HUNTER/BLACKABY/PARTASIDES, para. 1.01. See also NICHOLAS/LUKER, p. 6. 2 On the issue of “multiparty, multicontract and multi-issue” arbitrations see, in particular, HANOTIAU, Complex Arbitrations. A growth in multiparty cases has been observed over recent years. For instance, the ICC has observed a continuing increase in multiparty cases in 2009, with the number of multiparty cases accounting for slightly less than a third of all cases (ICC, 2009 Statistical Report, p. 9). The number of cases involving multiple contracts has also increased (see, e.g., WHITESELL/SILVA-ROMERO, p. 7). 3 SCHNEIDER, p. 101. See also LIATOWITSCH/BERNET, p. 142. 1 The Doctrine of Res Judicata Before International Arbitral Tribunals Thus, the same or a related dispute might be brought before an arbitral tribunal and a state court or before different arbitral tribunals. 3. Difficult questions may arise from this situation: if a court renders a decision on the jurisdiction of the arbitral tribunal, would the arbitrators be bound by the prior decision or could they decide anew whether they have jurisdiction? If the arbitrators are bound by a prior judgment denying arbitral jurisdiction, the parties’ arbitration agreement may be frustrated. On the other hand, if the arbitrators are not bound by the prior judgment and decide that there is a valid arbitration agreement, parallel court and arbitration proceedings on the merits may ensue. This may result in a waste of valuable resources and contradictory decisions on the merits. The parallel enforcement in different countries of such contradictory decisions may give rise to even further problems. To avoid such results, should arbitral tribunals be bound by a prior judgment on the merits of the dispute? If so, under which conditions and to what extent? Would the answers to the above questions be different if the prior decisions were rendered not by a state court but by another (or the same) arbitral tribunal? 4. The above questions all concern the finality of judgments and awards; they all raise issues of res judicata before an international arbitral tribunal. Arbitrators will find little guidance as to how to efficiently resolve these issues in international arbitration law and practice in its current state. However, the finality of decisions is fundamental in any legal system as it ensures fairness, efficiency, certainty and predictability in the dispute resolution process. Adequate solutions for dealing with res judicata issues in international arbitration must therefore be found. 5. The way in which res judicata issues are currently dealt with differs from one arbitral tribunal to another. This might create feelings of uncertainty and unpredictability among arbitration users which is potentially harmful for international arbitration. Parties to arbitration proceedings expect to be treated fairly and equally, especially since at the end of the arbitration there will be a final and binding award determining their legal rights, and this award will be enforceable virtually worldwide4. Pre-established res judicata principles will provide the fairness, certainty and predictability 4 PARK, e.g., para. 7-23 and para. 7-33. 2