Analysing the Applicability of Res Judicata in International Commercial Arbitration: A Deep Dive into Murky Waters

Introduction

Res judicata, is a precept of regulation that seeks to carry finality to a dispute by making certain that issues, as soon as settled/adjudicated by an order, judgement, award, or decree, usually are not relitigated. Whereas being a cornerstone of conventional litigation, res judicata has additionally seeped into worldwide business arbitration (“ICA”). Nonetheless, the framework governing its applicability in ICA exists in an unsure state. This text seeks to critically study the moment situation by figuring out: Firstly, the adequacy of worldwide regulation in offering a constant and coherent framework; Secondly, the effectiveness of home authorized methods in governing the applying of res judicata in ICA; and thirdly, the extent to which divergence between home and worldwide approaches trigger procedural inconsistencies, resulting in adoption of assorted practices throughout arbitral boards. After figuring out these three key points, the writer will set up their core argument that present authorized frameworks are unsuitable for efficient governance of res judicata in ICA, necessitating the adoption of uniform and efficient pointers.

Worldwide Regulation Governing Res Judicata in Worldwide Industrial Arbitration: Codified but Ineffectual

Res judicata is recognized as a common precept of procedural regulation beneath worldwide regulation. Worldwide devices and jurisprudence (from Article 34 UNCITRAL Guidelines and Article 60 of ICJ Statute to ICSID follow) recognise that awards ought to be remaining. Nonetheless, these devices hardly ever prescribe when an award bars subsequent proceedings. The result’s that tribunals both import home preclusion guidelines or resolve on an advert hoc foundation, producing inconsistent outcomes fairly than a coherent, enforceable commonplace.

Curiously, as a basic follow, whereas investor-state or funding tribunals primarily utilise worldwide legal guidelines, they’re seldom adopted by worldwide business arbitral boards in governing the applicability of res judicata. Although the doctrine of res judicata is nicely established in worldwide regulation, inconsistency and non-uniformity negatively have an effect on its place in ICA. The first purpose behind that is rooted within the present disparities in home legal guidelines, as worldwide legal guidelines governing res judicata had been initially derived from the previous. The prevailing disjunction between completely different home legal guidelines has been mentioned in Half II.

As a consequence, important inconsistencies persist concerning the scope and software of res judicata in ICA. On a number of events, the arbitral tribunals utilized res judicata per contra the rules envisaged within the home legal guidelines. For example, the triple-identity check prescribes software of res judicata the place the events, reason behind motion and claims are the identical in each proceedings. Nonetheless, in a number of cases, worldwide arbitral tribunals have irregularly utilized the triple id check. In Dieter Baumann v. Worldwide Olympic Committee, the tribunal utilized the triple id check as a typically accepted precept and never as per the provisions of the relevant legal guidelines. Whereas in ICC Case No. 4126, 1995, the arbitral tribunal utilized res judicata, regardless of understanding that the events weren’t an identical to these within the prior award, compromising upon the triple-identity check.

Such cases exemplify the ineffectiveness of worldwide legal guidelines in governing the applying of res judicata in ICA. Consequently, worldwide arbitral tribunals are pushed in direction of adopting divergent home legal guidelines in ICA, thereby driving all the follow into an unsure territory.

Res Judicata in Home Legal guidelines: Disentangling the Disjunction

As said earlier, worldwide legal guidelines primarily depend on home legal guidelines to undertake rules governing res judicata. This necessitates unveiling home legal guidelines to hint the roots of the present situation.

Within the civil regulation system, the applicability of res judicata is principally confined to the procedural a part of the judgement and excludes substantial questions of regulation from its ambit. Article 1355 of the French Civil Code applies the precept of res judicata primarily based on the triple-identity check. Therefore, the civil-law methods sometimes restrict preclusion to the operative end result of earlier selections with out extending it to the reasoning behind that ruling. The common-law methods, against this, usually lengthen preclusion to particular points determined and, in some instances, even to the underlying reasoning. Within the arbitration context, this divergence implies that the identical prior award may be thought of binding and conclusive in a single jurisdiction, but considered non-preclusive and open to re-litigation in one other. This elementary mismatch creates fertile floor for inconsistent outcomes, particularly in cross-border disputes the place events would possibly strategically select a seat of arbitration primarily based on the way it treats preclusion.

Additional, as home legal guidelines differ considerably throughout jurisdictions, conflict-of-law guidelines are utilized to find out an acceptable regulation, and the identical requires characterisation of res judicata as a substantive or procedural query of regulation. Nonetheless, controversy over the very nature of res judicata, as a procedural or substantive side of regulation, renders the conflict-of-law strategy unsuitable.Apart from, the direct software of home regulation additionally compromises the transnational id of ICA, whose procedures stand in stark distinction to the traditional litigating mechanism that the home legal guidelines primarily sought to manipulate.

Applicability Of Res Judicata by Worldwide Industrial Arbitral Boards: A Foggy State of affairs

Alongside the ineffectiveness of worldwide regulation and present disparities in home legal guidelines, the inconsistency in figuring out appropriate home regulation makes the scenario much more foggy. The present follow of making use of res judicata leans on three completely different anchors, together with, firstly, the place the worldwide arbitral boards think about the lex arbitri, the regulation chosen by the events to manipulate the arbitral process, of the rendering discussion board. Secondly, the reliance is positioned on lex arbitri of the next arbitral discussion board, and thirdly, the regulation governing the contract, i.e. lex contractus, is considered.

For example, in ICC Case No. 2745, 1977, the worldwide arbitral boards thought of the lex arbitri, i.e., the regulation chosen by events to manipulate the arbitral process of the rendering discussion board,  to find out the applicability of res judicata. Whereas in ICC Case No. 7438 of 1949, the worldwide arbitral boards resorted to the lex arbitri of the next arbitral discussion board. Additional in Fiona Belief & Holding Corp. v. Privalov, 2007, the Courtroom mirrored on the plausibility of recognising the regulation governing the contract in resolving disputes via arbitration.

Thus, the prevailing discord within the follow of making use of res judicata by worldwide arbitral boards brings non-uniformity and uncertainty within the business. Such inconsistencies set a non-uniform precedent and diminish events’ belief and confidence within the arbitration process. It compromises the finality of dispute settlement and permits the events to maintain relitigating the problems, leaving the disputes unresolved indefinitely.

Apart from, the direct software of home legal guidelines doesn’t think about the particular necessities of ICA, compromising the versatile and resilient nature of arbitration. Additional, such an strategy additionally runs opposite to the expectations of events who resort to arbitration to eliminate the normal litigating procedures.Lastly, the inconsistent selections culminate in a state of authorized uncertainty and considerably scale back the predictability of a case.

Makes an attempt In direction of Reformation: Forging Pathways to the Future  

Now, it turns into amply clear that the shortage of a uniform and commonplace regulatory mechanism results in procedural uncertainty concerning the applicability of res judicata in ICA. Therefore, the writer argues that it’s essential to put down uniform pointers that particularly govern the applicability of res judicata in ICA.

At this juncture, it’s pertinent to confer with the stories launched by the Worldwide Regulation Affiliation’s Suggestions on Worldwide Industrial Arbitration between 2002 and 2006. Whereas acknowledging the necessity for codifying particular worldwide guidelines and the versatile and party-centric nature of arbitration, the Committee advisable the adoption of a extra intensive notion of res judicata. The Committee additionally advocated for the adoption of a blended mannequin, beneath which the points of a res judicata will probably be ruled partly by worldwide and home legal guidelines. The final word goal of the report was to enact a set of worldwide legal guidelines that cater to the issues of events and the particular necessities of ICA.

Additional, a current report by the Worldwide Bar Affiliation (“IBA”) famous that due to the unsure software of res judicata, the events by no means know to what extent their dispute has been lastly settled, inflicting unpredictability. It additional famous that the moment choice-of-law strategy, the place the events and arbitral tribunal choose an acceptable provision for governance of res judicata, results in appreciable waste of time, making arbitral tribunals much less environment friendly in resolving disputes. Thus, IBA has advisable its Arbitration Committee to undertake an autonomous strategy to res judicata in ICA, which can solidify the arbitral tribunal’s procedural powers and occasion autonomy.

Creator’s Observations and Suggestions

Along with the stories mentioned above, the writer supplies additional suggestions to facilitate codifying uniform and efficient worldwide rules governing res judicata in ICA.

Firstly, any such change should be led to by adopting a multi-stakeholder strategy. For this function, the Worldwide Regulation Affiliation or IBA should seek the advice of on a number of fronts, together with governments, firms, academicians, authorized practitioners, arbitrators, and most significantly, worldwide arbitral establishments. For example, the arbitral establishments equivalent to Singapore Worldwide Arbitration Centre (“SIAC”), Hong Kong Worldwide Arbitration Centre (“HKIAC”), London Courtroom of Worldwide Arbitration (“LCIA”), Worldwide Chamber of Commerce (“ICC”), and many others., should take the lead by laying down draft pointers on the applicability of res judicata in worldwide business arbitration. For example, Article 26 of LCIA’s Amended Guidelines not too long ago offered that- “each award (together with causes for such award) shall be remaining and binding on the events”. This would offer traction to the worldwide discourse, inflicting the ball to roll in direction of the adoption of uniform transnational pointers.

Secondly, such multi-stakeholder consultations should not keep away from home legal guidelines totally, fairly keep a balanced strategy. For example, the worldwide regulation could take inspiration from the frequent regulation strategy, whereby the results of res judicata lengthen to the operative and substantive a part of the judgment. This could guarantee finality of disputes and stop the potential for events relitigating the problems as a result of narrower scope of software of res judicata. Nonetheless, the overly intensive strategy whereby even the error of regulation or growth of recent details or variation in regulation is inadequate to carry the bar should be performed away with. That is essential to stability the broader strategy of frequent regulation and the narrower strategy envisaged beneath civil regulation. Moreover, the writer recommends that such worldwide regulation undertake an in depth notion of res judicata by together with each declare and situation preclusion, which might carry procedural effectivity and finality to dispute settlement.

Thirdly, hanging a typical chord between the scholarly divergence on the applicability of res judicata turns into extremely related. At present, scholarly divergence is on the very nature of res judicata as a procedural or substantive query of regulation. This not solely brings disparities within the adoption of the precept, but in addition brings uncertainties within the follow. Thus, it’s essential to settle the disagreements on the character of the precept and as an alternative give attention to the very goal of res judicata, which is to keep away from the re-litigation of an identical points.

Fourthly, owing to extended worldwide consultations, it’s protected to conclude that the enactment of uniform worldwide laws stays a long-drawn course of. Therefore, within the meantime, worldwide arbitral establishments equivalent to SIAC, HKIAC, LCIA, ICC, and many others., can undertake a blended strategy. Such an strategy should not merely depend on a selected home regulation however undertake unbiased pointers governing res judicata. Nonetheless, this doesn’t imply utterly discarding home legal guidelines; as an alternative, adopting them along with the unbiased pointers, thereby selling a dynamic fairly than inflexible strategy. For example, in Abu Dhabi Funding Authority v. Citigroup, 2015, the arbitral tribunal adopted a blended strategy by adopting worldwide legal guidelines to find out the check and scope of res judicata and home regulation to find out lex arbitri. Worldwide arbitral establishments should additionally be certain that these unbiased pointers are in step with the particular necessities of ICA and the upkeep of occasion autonomy.

Conclusion

In gentle of the persisting state of uncertainty, the worldwide arbitral boards have decided the applicability of res judicata in an advert hoc method. This has led to a widespread disparity within the follow, taking this facet of regulation on board a rudderless ship. This analysis aimed to highlight the present points within the applicability of res judicata in worldwide business arbitration. It turns into pertinent to put down a uniform and strengthened worldwide regulation particularly governing the precept of res judicata in ICA. On this regard, the Worldwide Regulation Affiliation Committee’s Report and the IBA’s Report on the enactment of autonomous regulation can act as a pole star within the current scenario.

Vishnu Sharma is a third-year B.A. LL. B (Hons.) pupil at Symbiosis Regulation College, Pune.

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