Arbitration – Two (Or Three?) Can Play That Game

Arbitration is consensual by nature. An arbitral tribunal only has jurisdiction over those parties that have entered into the underlying arbitration agreement. However, in certain circumstances, findings made by a tribunal can have an effect on subsequent legal proceedings, including litigation before the English Courts. This article considers recent decisions of the Commercial Court in which the parties sought to strike out their opponents' cases, as being inconsistent with prior findings in arbitrations. Some, but not all, succeeded in establishing that seeking to go behind the arbitral determination was an abuse of the process of the court.

Res Judicata, abuse of process and arbitration proceedings

There is obvious merit in protecting the finality of judicial rulings, ensuring that the same claims and issues are not relitigated save for the appellate process. Once a competent Court has made a ruling, the matter becomes res judicata. It cannot be opened up again between the same parties, or their 'privies' – meaning other (third) parties where there is a sufficient relationship, degree of identification or dependency with the claimant or defendant in the relevant proceedings. Privity in this context is a question of fact. Any such parties seeking to circumvent a judicial determination made against them in subsequent litigation may be found to have 'abused the process of the court'. A claim or defence that amounts to such an abuse of process can be struck out, but the English Court retains a discretion as to this.

A so-called collateral attack on a prior judicial determination by persons who were not themselves party to the relevant earlier litigation (and were not anyone's 'privy') can still be an abuse of process, but the test is more restrictive as regards such third parties. In Secretary of State for Trade and Industry v Bairstow [2003] EWCA Civ 321, the Court of Appeal held that as regards non-parties to the original proceedings:

"... it will only be an abuse of the process of the court to challenge the factual findings and conclusions of the judge or jury in the earlier action if (i) it would be manifestly unfair to a party to the later proceedings that the same issues should be relitigated or (ii) to permit such relitigation would bring the administration of justice into disrepute."

Bearing in mind that arbitration depends on privity created by agreement, where do the findings of a tribunal come in this in context? Can they be opened up in court, or before a different tribunal, at least if the same party against whom the finding was made is involved?

The general rule as regards findings by arbitral tribunals

The starting point is that a determination by an arbitral tribunal will not be binding in any subsequent arbitration between different parties. This applies both to the determination of contractual (or other) rights and claims and findings of fact. In Sun Life Assurance Company of Canada v The Lincoln National Life Assurance Company [2004] EWCA 1660, the Court of Appeal noted that:

"Different arbitrations on closely inter-linked issues may as a result lead to different results, even where, as in the present case, the evidence before one tribunal is very largely the same as that before the other."

In practice, parties to international arbitration proceedings can seek to mitigate the risk of inconsistent findings through joinder by consent, mechanisms set out in institutional rules for the consolidation or proceedings, or the use of multi-party and reciprocal arbitration clauses that might be included in contracts that all form...