Originially from Conflict of Laws in International Commercial Arbitration

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I.INTRODUCTION 

There is great uncertainty surrounding the application of the res judicata doctrine in international arbitration, including misunderstandings about the doctrine’s nature and purpose as well as the situations in which it applies. Does it serve essentially private interests and is to be invoked by the parties, or is it part of a state’s public policy, to be raised ex officio by the court or arbitral tribunal? Questions also abound regarding the requirements that must be met in order for the res judicata doctrine to apply, the doctrine’s objective and subjective scope, as well as the precise effects that a judgment or award with res judicata effect has in further proceedings.2 

One of the main reasons for this uncertainty is the lack of clarity regarding the law governing res judicata. The determination of the applicable law plays a pivotal role in international arbitration because the doctrine of res judicata varies considerably among jurisdictions. One often hears that the doctrine’s scope is wider in common law countries than in civil law countries, encompassing not only claim preclusion, but also issue preclusion and abuse of process. While this is true in principle, the problem extends beyond the civil law – common law divide, with differences existing also among countries belonging to the same legal tradition.3 

Consequently, the question of the law governing res judicata is not of a mere academic interest; it constitutes a real issue with potentially unpredictable and outcome-determinative implications. Indeed, depending on the law governing res judicata, a party may (or may not) be allowed to re-litigate a certain issue that was finally and necessarily determined in the reasons of an earlier decision, but not in its operative part, such as the question of the validity or interpretation of a contract. Conversely, depending on the applicable law, a party may (or may not) be precluded from re-opening a certain claim or issue in further proceedings, even though the opposing party was not a party to the earlier proceedings, or despite the fact that the particular claim or issue was not - but could have been - raised in the other proceedings. As a result, the parties will not know, at the time when the arbitral award is rendered, whether and to what extent their award is final. This will depend on the law applied by the state court or arbitral tribunal in subsequent proceedings to determine the res judicata effect of the award, which law is usually unknown in advance.4