INTERNATIONAL LAW ASSOCIATION

TORONTO CONFERENCE (2006)

INTERNATIONAL COMMERCIAL ARBITRATION
Members of the Committee:

Professor Filip De Ly (Netherlands): Chair

Mr Audley Sheppard (UK): Rapporteur

Mr Guillermo Aguilar Alvarez (Mexico) The Hon Rodney Purvis (Australia)

Judge Koorosh H Ameli (HQ/) Alternate: Judge Andrew Rogers
Professor David J Attard (HQ/) Alternate: Mr Damian Sturzaker
Professor Sidnei Beneti (Brazil) Professor Luca G Radicati di Brozolo (Italy)
Alternate: Ms Adriana Braghetta Mr Klaus Reichert (Ireland)
Mr Denis Bensaude (France) Dr Andreas Reiner (Austria)
Professor Karl-Heinz Bockstiegel (Germany) Alternate: Dr Florian Kremslehner
Alternate: Dr Norbert Wuehler Professor Toshio Sawada (Japan)
Professor Bengt Broms (Finland) Professor Christophe Seraglini (France)
Alternate: Judge Gustaf Moller Mr Stewart Shackleton (Canada)
Charles Brower (USA) Professor Jose Luis Siqueiros (Mexico)
Professor Bernardo M Cremades Sanz-Pastor (HQ) Mr Ole Spiermann (Denmark)
Lord Dervaird QC (UK) Dr Atef Suleiman (HQ)
Direktor Ulf Franke (Sweden) Professor Yasuhei Taniguchi (Japan)
Alternate: Professor Lars Hjerner Professor Louise Ellen Teitz (US)
Professor Julio Gonzalez Soria (Spain) Mr Joe Tirado (UK)
Dr Horacio Alberto Grigera Naon (Argentina) Alternate: Dr Paul Key
Alternate: Mr Ignacio Suarez Anzorena Dr Andrzej Tynel (Poland)
Mr Mustapha Hamdane (HQ) Dr J J barones van Haersolte-van Hof (Netherlands)
Professor Bernard Hanotiau (HQ/Belgium) Mr V V Veeder QC (UK)
Alternate: Professor Hans van Houtte Alternate: Mr Robert Volterra
(HQ) Professor Bernd von Hoffmann (Germany)
Dr Pierre A Karrer (Switzerland) Alternate: Mr Hilmar Raeschke-Kessler
Alternate: Mrs Teresa Giovannini Professor Dragica Wedam-Lukic (Slovenia)
Dr Mojtaba Kazazi (Iran) Mr David Williams QC (New Zealand)
Mr Barry Leon (Canada) Advokat Tore Wiwen-Nilsson (Sweden)
Dr A F M Maniruzzaman (Bangladesh) Alternate(Egypt): Professor Ahmed El-
Mr Fernando Mantilla-Serrano (HQ) Kosheri
Mr Paul Morrison (Canada) Alternate(Korea): Professor Young-Gil
Mr F S Nariman (India) Park
Alternate: Mr S K Dholakia
Professor Nikolay Natov (Bulgaria)
Mr Philip D O'Neill (USA)

FINAL REPORT ON LIS PENDENS AND ARBITRATION

Table of Contents Page

Part 1 Introduction ?
Part II Parallel proceedings in domestic law ?
A. Common Law ?
B. European Civil Law ?
C. European Council Regulation ?
D. ALI / UNIDROIT Transnational Principles ?
Part III Parallel proceedings in international law ?
Part IV Parallel proceedings and international arbitration ?
A. Parallel arbitration and court proceedings ?
B. Parallel arbitration proceedings ?
C. Parallel arbitration and supra-national proceedings ?
 2

Part V Conclusion and Recommendations ?

A.Conclusion ?
B.Commentary to Recommendations ?
C. Recommendations ?

I. INTRODUCTION

1.1. This is the Committee's final report on lis pendens.1 After a conceptual introduction (Part I),
the report gives an overview of lis pendens from the perspective of domestic law and public
international law (Parts II and III). Thereafter, the doctrine of lis pendens is discussed and
analysed from an international commercial arbitration perspective (Part IV). Finally, the
Committee sets out it conclusions and recommendations (Part V).

(1) The doctrine of lis pendens

1.2. James Fawcett, in his authoritative 1994 Report to the International Academy of Comparative
Law on Declining Jurisdiction in Private International Law,2 describes lis pendens3 as a
"situation in which parallel proceedings, involving the same parties and the same cause of
action, are continuing in two different states at the same time."4

1.3. Fawcett identifies four possible ways in which a court might deal with a lis pendens
situation:5

i. the forum could decline jurisdiction or suspend (or stay) its own proceedings;

ii. the forum could seek to restrain the foreign proceedings;

iii. both sets of proceedings could be allowed to continue, and rules of res judicata
could be used to prevent two judgments being given; and/or

iv. mechanisms could be adopted to encourage the parties to opt for trial in just one
forum.

1.4. The rationale for taking such steps is threefold: to avoid conflicting judgments; to prevent
costly parallel litigation; and to protect parties from oppressive litigation tactics. These
justifications are very similar to those underpinning the doctrine of res judicata.6

1.5. As with the doctrine of res judicata, a state court applies the established rules of lis pendens
applicable in its jurisdiction to determine whether it should proceed to hear the action of

1
The Chairman and Rapporteur are very grateful to all those members who contributed to the Committee's work,
and attended the meetings and submitted comments. Written reports/comments concerning lis pendens were
received from Damian Sturzaker (Australia), Florian Kremslehner (Austria); Prof. Bernard Hanotiau
(Belgium/Luxembourg), Barry Leon (Canada), Prof. Ole Spiermann (Denmark), Prof. Bernd von Hoffmann
(Germany), Shishir Dholakia (India), Mojtaba Kazazi (Iran), Klaus Reichert (Ireland), Prof. Luca Radicati (Italy),
David Williams QC (New Zealand), Prof. Dragica Wedam Lukic (Slovenia), Tore Wiwen-Nilsson (Sweden),
Teresa Giovannini (Switzerland), Pierre Karrer (Switzerland), and Prof. Louise Ellen Teitz (USA).
2
James Fawcett (ed.), "Declining Jurisdiction in Private International Law", Report to the XIVth Congress of the
International Academy of Comparative Law, Athens, 1994 (Oxford University Press, Oxford, 1995), at 27.
3
Lis pendens literally means a "law suit pending" (and lis alibi pendens, which is the phrase more often used in
Common Law jurisdictions, means a "law suit pending elsewhere"). There was a debate within the Committee
whether it would be preferable to use the phrase "parallel proceedings" in this report, but it was decided that use of
Latin was acceptable to describe parallel litigation because the phrase is well recognised and customarily used in
that context; nevertheless, the phrase "parallel proceedings" is adopted in the recommendations, for the reasons
explained in Part V below.
4
Lis pendens in some jurisdictions, such as India, has an additional and quite separate meaning relating to real
property, namely that any interest in property created pending litigation will be subject to the outcome of that
litigation, referred to in s. 52, India Transfer of Property Act 1882 (see India national report from Shishir
Dholakia).
5
Fawcett, supra fn 2, at 28.
6
See the Committee's Interim Report on "Res Judicata and Arbitration", Report of the Seventy-First ILA
Conference, Berlin, 2004, available from the International Law Association and in pdf format at <www.ila-
hq.org>.
 3

which it is seised. The application of the lis pendens doctrine varies between the Civil Law
and Common Law legal systems (see Part II below): a Common Law court has a discretion
whether or not to stay its proceedings on the basis of forum non conveniens and the order in
which the proceedings were commenced is only one of several factors that the court will take
into account; whereas a Civil Law court will generally apply a first-in-time rule.

1.6. In addition, consistent with the policy objectives referred to in paragraph 1.4 above, in
situations where the parties and/or the causes of action are not identical, state courts have
powers to suspend their own proceedings to await the outcome of the other parallel
proceedings.

(2) Lis pendens and international arbitration

1.7. Commercial arbitral tribunals are increasingly faced with parallel proceedings giving rise to
issues of lis pendens.7 Such situations include parallel proceedings between:

• an arbitral tribunal and a state court

• two arbitral tribunals
• an arbitral tribunal and a supra-national court or tribunal.8

1.8. It needs to be emphasised at the outset that there is often a fundamental difference between,
on the one hand, parallel proceedings taking place between two domestic courts and, on the
other hand, parallel proceedings, one of which is an arbitration. In the former, it is generally
the case that parallel proceedings have been commenced before two courts both of which
have jurisdiction to hear the case pursuant to their respective domestic rules on jurisdiction.
For this reason, it is generally not necessary to decide which court has legitimate jurisdiction,
but instead it is necessary only to have a rule that determines which court should proceed to
hear the merits of the case (e.g. the most convenient court or the court first seised rule - see
Part II below).9

1.9. A valid agreement to arbitrate, by its nature, confers exclusive jurisdiction on an arbitral
tribunal constituted pursuant to its terms to decide the dispute referred to arbitration, to the
exclusion of all domestic courts (save in order to support the arbitration, or to review or
enforce any final award, as prescribed in applicable arbitration laws)(see e.g. Article II New
York Convention 1958 and Article 8(1) UNCITRAL Model Law). A party to an arbitration
agreement (which is not null and void, inoperative or incapable of being performed) is
generally entitled to a mandatory stay of court proceedings brought in breach of the
agreement to arbitrate (or an order of similar effect such as one declining jurisdiction). There
is, therefore, limited need to have a rule which determines which of two legitimate fora,
should proceed to determine the dispute, because the jurisdiction of the arbitral tribunal will
trump the jurisdiction of any court. Arbitral tribunals, however, need guidance as to what
they should do when it is asserted that a competing forum is the only legitimate one
(especially tribunal versus court), i.e. who should decide whether the arbitration agreement is
valid and binding and/or whether the dispute falls within the scope of that agreement. Should
an arbitral tribunal always defer to a state court and suspend the arbitration until the court has
reached a conclusion? Does it depend whether the court seised is a court at the place of

7
For previous consideration of this topic, see e.g. Schweizer and Guillod, "L'exception de litispendence et
l'arbitage international", in Le juriste Suisse face aux droits et jugements etrangers (Editions Universitaires
Fribourg, Fribourg, 1988) at 71; Douglas Reichert, "Problems with parallel and duplicate proceedings: the
litispendence principle and international arbitration", (1992) 8 Arbitration International 237; Luis Andrés
Cucarella, “Litispendencia y Arbitraje”, in Anuario de Justicia Alternativa, (2001) 1 Tribunal Arbitral de
Barcelona at 43; various authors, in Arbitral Tribunals or State Courts, Who must defer to whom?, ASA Special
Series No. 15 (2001); Elliott Geisinger & Laurent Levy, "Lis alibi pendens in international commercial
arbitration", in Complex Arbitrations: Perspectives on their Procedural Implications (ICC Special Supplement,
Paris, 2003) at 53; Pierre Mayer, "Litispendance, connexité et chose jugée dans l’arbitrage international", in Liber
amicorum Claude Reymond (Litec, Paris, 2004) at 195; Francisco Orrego Vicuna, "Lis pendens arbitralis", in
Parallel State and Arbitral Procedures in International Arbitration (ICC Dossiers, Paris, 2005) at 207.
8
For examples of each of these situations, see the Committee's Interim Report on Res Judicata, supra fn 6.
9
In some cases, of course, there may be jurisdictional issues, for example where there is an exclusive jurisdiction
clause or whether there is a dispute over whether the domestic jurisdictional criteria are met, and the court first
seised may subsequently determine that it does not have jurisdiction and the matter may revert to the other court.
 4

arbitration or is in another country? Should the forum first seised (court or tribunal) be the
one to decide any dispute as to jurisdiction? Should an arbitral tribunal generally proceed to
determine its own jurisdiction irrespective of parallel court proceedings?

1.10. In considering these questions, the Committee has had to consider whether an arbitral
tribunal should apply the rules of the place of arbitration or whether there is or should be an
accepted international arbitration practice. It has been suggested that the question "does an
arbitral tribunal have legitimate jurisdiction" should be determined by the application of the
principle of "competence-competence".10 According to that principle, arbitral tribunals have
the power to rule on their own jurisdiction, and domestic courts should defer considering the
question of the tribunal's jurisdiction until after the tribunal has made an award on that issue
(see Part IV below). The Committee has made recommendations on this issue (see Part V
below).

1.11. In some situations, two tribunals might both have legitimate jurisdiction over a dispute, For
example, if a second arbitral tribunal is constituted under the same arbitration agreement and
same arbitration rules and requested to determine the same dispute in parallel with another
tribunal. More commonly, a second tribunal is constituted under the same arbitration
agreement and same arbitration rules, but is asked to decide a different dispute. The first
situation gives rise to lis pendens in its strict sense, whereas the second situation gives rise to
case management objectives of efficiency and consistency.

1.12. It is also possible, again in rare cases, that a supra-national court or tribunal has concurrent
jurisdiction over a dispute arising out of the same facts. In such situations, the cause of action
is likely to be different (e.g. a claim under international law rather than national law) or the
parties are likely to be different (e.g. involving a government and/or parent company and/or
additional parties). Again, this raises issues of case management rather than lis pendens in its
strict sense. Issues of case management, which are more closely related to the Common Law
application of lis pendens (i.e. forum non conveniens), are also considered in this Report, and
the Committee has made recommendations on this question (see Part V below).

(3) The Committee’s Objectives

1.13. As with the Committee's report on res judicata, the Committee is not seeking to give
guidance as to how state courts should apply their domestic laws. The Committee, instead, is
seeking to give guidance to arbitrators, when faced with an argument that other proceedings
dealing with the same matter are running in parallel and that the arbitral tribunal should
suspend or terminate the arbitration.

(4) Limitations on the scope of the Committee’s work

1.14. As to the scope of this report, some limitations on the Committee's work should be noted.
This report proceeds on the basis that parallel proceedings are pending in different
jurisdictions (arbitral proceedings, on the one hand, and state court/other arbitral/supra-
national tribunal proceedings, on the other hand) regarding jurisdiction and/or the merits of
the case. Parallel proceedings as to interim measures are outside the scope of this report,
because they do not prejudice a decision on jurisdiction and/or the merits.

1.15. As with our study of res judicata, the question arose within the Committee whether anti-suit
injunctions should be addressed. Anti-suit injunctions clearly are at the heart of any debate as
to the relationship between state courts and arbitral tribunals, especially in Common Law
countries. Does the institution of an anti-suit injunction provide a defence for a claimant in
arbitration based on lis pendens raised by a respondent?11 This is a complex issue and the

10
Meaning "jurisdiction concerning jurisdiction", also referred to as "compétence-compétence" and "Kompetenz-
Kompetenz" (see Part IV.A.2 below). For differences between the French and German concepts, see Peter
Schlosser, in Arbitral Tribunals or State Courts, Who must defer to whom?, ASA Special Series No. 15 (2001), at
15.
11
For example, in 2002, the Pakistani Supreme Court prohibited Société Générale de Surveillance SA from
pursuing its claims in an ICSID arbitration; nevertheless, the ICSID tribunal accepted jurisdiction notwithstanding
the Pakistani order: (2003) 19 Arbitration International 179.
 5

Committee decided to limit its consideration to the less complicated situation of parallel
proceedings taking place with no anti-suit injunction having been made.12

1.16. Post-award proceedings are also not addressed in this report, such as parallel setting aside
and enforcement proceedings.13

1.17. The time at which proceedings might be said to commence may vary from country to country
(e.g. at the time of filing the originating claim or at the time of service on the defendant). For
the purposes of this report, it is assumed that both parallel proceedings have been validly
commenced and are afoot.

1.18. Parallel administrative or criminal proceedings before state courts or regulatory authorities
might raise issues of lis pendens and/or case management for an arbitral tribunal. The effect
of such proceedings justifies separate study and would have taken the Committee's report
beyond acceptable limits.14

1.19. In Part II below, we consider the application of lis pendens in domestic law.

II. PARALLEL PROCEEDINGS IN DOMESTIC LAW

2.1. systems to a situation where there are parallel court proceedings, and in particular the In this
Part of the report, we summarise the approach of national courts in a few selected legal
application of the doctrine of lis pendens.

A. COMMON LAW JURISDICTIONS

2.2. In Common Law jurisdictions such as England, parts of Canada, Australia, New Zealand and
Israel, in cases not falling within the scope of an applicable convention or regulation,15 lis
pendens (i.e. the existence of parallel proceedings) is a factor which is considered when
applying the wider doctrine of forum non conveniens and when deciding whether to decline
jurisdiction in favour of another court.16

2.3. In the United States, lis pendens and forum non conveniens are distinct doctrines, with
different jurisprudential underpinnings, although there is some overlap in that parties often
join motions to dismiss for forum non conveniens with an alternative motion to stay.17 The
traditional rule in US courts as to litigation in multiple fora has been developed in the context
of purely domestic litigation, where it is impossible to consolidate actions in two different
state courts without first departing from one system, either through dismissal or stay. When
there are parallel suits in two different federal courts, it isoften possible to transfer the cases
to one forum and then consolidated the cases. Thus the general rule in domestic cases is to
allow both suits to proceed to judgment. Once one suit has reached judgment, the prevailing
party generally seeks to foreclose further action in the remaining suit under the applicable
Full Faith and Credit Clause or statute.

12
On this topic, see e.g. Emmanuel Gaillard (ed.), Anti-Suit Injunctions in Arbitration, IAI series no. 2 (Juris
Publishing, New York, 2005); David Scott, "Commentary: practical options when faced with an injunction against
arbitration", (2002) 18 Arbitration International 333; and Peter Gross, "Anti-suit injunctions and arbitration",
(2005) LMCLQ 10.
13
For example, an issue that often arises is whether enforcement should be suspended while challenge proceedings
at the place of arbitration are ongoing.
14
For a discussion on the desirability of continuing arbitral proceedings notwithstanding the pendency of related
criminal proceedings before a court ("le criminal tient le civil en état"), see the Working Session debate, Report of
the ILA Sixty-Seventh Conference, Helsinki, 1996, and Poncet and Macaluso, "La suspension de la procedure
arbitrale comme dependant penal", in Mélanges en l'honneur de Franz Kellerhals, (M. Jametti Greiner / B.Berger /
A.Güngerich éd., Berne, 2005) at 65, and the ongoing study of the ICC Commission Working Group (2006).
15
E.g. European Council Regulation No. 44/2001 - see Part II.C below.
16
Fawcett, supra fn 2, at 29. See also Dicey & Morris, The Conflict of Laws, 13th edn (Sweet & Maxwell, London,
2000), Vol. 1, at 385-424.
17
See e.g. Andreas Lowenfeld, International Litigation and Arbitration, 3rd edn, (West Group, Eagan, 2006) at
300-349; Louise Ellen Teitz, Transnational Litigation, (Michie, Charlottesville, 1996 & Supp. 1999) at 112-130,
233-250.
 6

2.4. This same approach, namely allowing parallel proceedings to continue simultaneously, has
been applied in the United States to litigation dispersed in multiple countries or fora. Parallel
proceedings on the same in personam claim will ordinarily be allowed to proceed
simultaneously, at least until a judgment is reached in one which can be pled as res judicata
in the other.

(1) Forum non conveniens

2.5. Common Law courts have an inherent jurisdiction to stay or strike out their own proceedings,
whenever it is necessary to prevent injustice.18

2.6. The reason a party to proceedings applies to have them stayed on grounds of forum non
conveniens is very often because litigation is being conducted abroad. In such cases, where
the forum court and the foreign court are both recognised as having jurisdiction (according to
the forum court's rules of private international law), the forum court has a discretion to
determine in which forum the dispute will be resolved, by using its power to grant or refuse a
stay of the proceedings commenced before it, or by exercising or refusing to exercise its
power to authorise service of originating process out of the jurisdiction, and by using its
power to enjoin a party who is (or who is threatening to become) a claimant in the foreign
court from commencing or continuing proceedings in that court.

2.7. The basic principle is that a stay will only be granted on the ground of forum non conveniens
where the court is satisfied that there is some other available forum, having competent
jurisdiction, which is the appropriate forum for the trial of the action, i.e. in which the case
may be tried more suitably for the interests of all the parties and the ends of justice.

(2) Lis alibi pendens

2.8. As noted above, in many Common Law countries, the existence of parallel proceedings is
simply an additional factor relevant to the determination of the appropriate forum (in the
application of the doctrine of forum non conveniens).

2.9. In some cases, the foreign proceedings may be of no relevance at all, for example, because of
their subject matter or timing. But if genuine proceedings have been started and have had
some impact on the dispute between the parties and/or are likely to have a continuing effect,
then this may be a relevant (but not necessarily decisive) factor when considering whether the
foreign jurisdiction provides the appropriate forum.

2.10. There has been an increasing interest in the United States in reducing parallel litigation and
incorporating a modified rule of lis pendens that is tied to recognition and enforcement. The
most recent and significant example of this is the American Law Institute’s International
Jurisdiction and Judgments Project,19 which includes a proposed federal statute that “adopts
the position that parallel litigation is generally undesirable, and that properly implemented,
the doctrine of lis pendens promotes both justice and efficient use of judicial resources.”
Section 11 of the draft, “Declination of Jurisdiction When Prior Action is Pending,” adopts a
basic lis pendens principle that presumes that the first-filed matter should proceed, if that
judgment would be entitled to recognition under the Act.

(3) Abuse of process

2.11. The most common reason for granting a stay is that a foreign court is the natural or
appropriate forum. However, there are some cases where a stay will be given even though

18
See Fawcett, supra fn 2, at 11 ff. In some Common Law countries, the courts are encouraged to avoid parallel
proceedings by statute, e.g. in England, Supreme Court Act 1981, s. 49(2), states: "Every court … shall so exercise
its jurisdiction … [so as] to secure that … all multiplicity of legal proceedings with respect to [all matters in
dispute] is avoided”. As to restrictions in the application of the discretion in the EU context, see Owusu v Jackson,
Case C-281/02.
19
Proposed Final Draft, April 2005. The ALI statute builds on concepts similar to those in the ILA's project
covering both forum non conveniens and parallel proceedings, the "Leuven/London Principles on Declining and
Referring Jurisdiction in Civil and Commercial Matters" (Report of Litigation Committee in the Report at the
Seventiteh ILA Conference, London, 2000) and the ABA Conflict of Jurisdiction Model Act (1987).
 7

the forum where the stay is sought is the natural forum, because the court concludes that the
case before it is an abuse of process, because it is abusive, or oppressive, or vexatious, or
brought in bad faith. As Dicey & Morris note, such cases are rare and the onus on the
defendant to prove injustice is a heavy one.20

(4) Stay of proceedings awaiting the outcome of another action

2.12. A Common Law court has an inherent jurisdiction to stay its own proceedings, in the
interests of justice, and it is not a strict requirement that the parallel proceedings are between
the same parties and/or concern the same cause of action.21

2.13. For example, the English Court of Appeal approved the granting of a stay of litigation
proceedings (between A and B) to await the outcome of a related claim in separate arbitration
proceedings (between A and C).22 The court took into account the relationships between all
the parties, and the defendant's (i.e. B) costs and convenience and the overall interests of
justice. The Court of Appeal noted, however, that such stays should only be granted in rare
and compelling circumstances.

2.14. In New Zealand, the High Court stayed court proceedings being conducted in parallel with an
ICSID arbitration.23

2.15. In the United States, Supreme Court Judge Cardozo has said:24

"The power to stay proceedings is incidental to the power inherent in every court to
control the disposition of the causes in its docket with economy of time and effort for
itself, for counsel and for litigants. How this can best be done calls for the exercise of
judgment, which must weigh competing interest and maintain an even balance. ….
True, the supplicant for a stay must make out a clear case of hardship or inequity in
being required to go forward, if there is even a fair possibility that the stay for which he
prays will work damage to someone else. Only in rare circumstances will a litigant in
one cause be compelled to stand aside while a litigant in another settles the rule of law
that will define the rights of both."

B. EUROPEAN CIVIL LAW JURISDICTIONS

2.16. Peter Schlosser has stated that there is no uniform interpretation of the notion of lis pendens
in European jurisdictions, mainly because of the dichotomy of right and remedy is not known
in Civil Law.25 However, it can be said that Civil Law courts generally give effect to a first-
in-time rule if proceedings are pending before another court with equally competent
jurisdiction involving the same dispute between the same parties.

2.17. The strict lis pendens principle was, until relatively recently, not even deemed applicable in
the international context (but applied only as between courts in the same country). Absent an
applicable international convention, this is still the position in Sweden and Denmark.

20
Dicey & Morris, supra fn 16, at 391.
21
In Ireland, this power is confirmed by statute: Supreme Court of Judicature (Ireland) Act 1877, section 27(5).
22
Reichhold Norway ASA v Goldman Sachs International [2000] 1 WLR 173 (CA). More recently, the English
court applied its case management powers to suspend court proceedings to await the outcome of a related ICC
arbitration in ET Plus SA & Ors v Welter & Ors [2005] EWHC 2115 at [91]. And see e.g. David Joseph,
Jurisdiction and Arbitration Agreements and their Enforcement, (London, Sweet & Maxwell, 2005), at 303-307.
23
Attorney-General v Mobil Oil NZ Ltd, (1987) 4 ICSID Reports 117. In a recent New Zealand case, the court
concluded that it had power to stay arbitration proceedings where the issues before the court and the tribunal were
sufficiently close that there was a material risk of inconsistent findings on fact or law: Carter Holt Harvey Ltd v
Genesis Power Ltd & Or, unreported, 22 February 2006, High Court.
24
Landis v North American Co., 299 US 248, 255.
25
Peter Schlosser, "The 1968 Brussels Convention and Arbitration", (1991) 7 Arbitration International 227.
 8

(1) France

2.18. In France,26 the rule is called "l'exception de litispendance", and it may be raised in any
proceedings started after another.

2.19. As between two domestic courts, the second seised must deny jurisdiction. Article 100 of the
New Code of Civil Procedure ("NCCP") provides:

"Where a same cause of action is pending before two forums of the same hierarchy
equally competent, the court seised last shall relinquish jurisdiction in aid of the first
seised one where one of the parties so requests. In default thereof, this may be
proceeded with ex proprio motu."

The same cause of action is required, which implies the same parties.

2.20. The principle was applied in an international context only after 1974. Within the EC,
Regulation No. 44/2001 applies (see Part II.C below).

2.21. Article 101 NCCP is also of relevance for our study. It concerns related proceedings and
states:

"Where matters currently apprised by different forums shall exhibit links between them
so that it is in the interest of justice to manage and to determine them together, one of
forums seised may be asked to relinquish jurisdiction and to remit the matter as it shall
stand before the other."

2.22. A French court which has jurisdiction may suspend its proceedings to await the outcome of
other related proceedings (sursis à statuer).

2.23. Article 102 NCCP is also of interest:

"Where the forums seised are not of the same hierarchy, pleas of litispendens or those
against double cognisance may only be raised before the inferior one."

(2) Switzerland

2.24. In Switzerland,27 where two Swiss court are seised, Article 35 of the Federal Act on the Place
of Jurisdiction in Civil Matters of 1 January 2001 applies a first-in-time rule. Article 35
requires identity of the parties and identity of the cause of action.

2.25. Where a foreign court is seised and the Swiss court is second seised, the Lugano Convention
(which is similar to the EC Regulation) or the Federal Act on Private International Law of 18
December 1987 will apply. Article 9 PIL provides:

“1. When an action having the same subject matter is already pending between the
same parties in a foreign country, the Swiss court shall stay the case if it is to be
expected that the foreign court will, within a reasonable time, render a decision capable
of being recognized in Switzerland.

3. The Swiss court shall terminate its proceedings as soon as it is presented with a
foreign decision capable of being recognized in Switzerland.”

2.26. Again, there must be identity of parties and identity of cause of action. Article 9 PIL includes
the requirement that the first court must be expected to render a decision within a reasonable
time and that the decision must be capable of recognition in Switzerland.

26
See e.g. Vincent and Guinchard, Procédure Civile, 26th edn (Dalloz, Paris, 2001); Jeuland, Droit Judiciaire
Privé, 4th edn (Litec, Paris, 2004).
27
See Switzerland national report from Teresa Giovannini. See also Spühler/Tenchio/Infanger (Hrsg.), Kommentar
zum schweizerischen Zivilprozessrecht, Bundesgesetz über den Gerichtsstand in Zivilsachen, (Verlag Helbing &
Lichtenhahn, Basel, 2001), ch. 6.
 9

2.27. Swiss courts have discretion to stay their own proceedings, pending the outcome of other
related proceedings, but again this is unusual.

2.28. Swiss courts may decline jurisdiction if they consider the bringing of proceedings to be an
abuse of rights, but this rarely happens.

(3) Italy

2.29. In Italy,28 where the same dispute is pending before different domestic courts, Article 39.1 of
the Italian Code of Civil Procedure ("ICCP") prescribes a first-in-time rule.

2.30. Where the same dispute is pending before a domestic court and a foreign court, the EC
Regulation or Article 7 of the Statute on Private International Law applies. The latter
provides:

"When, during the proceedings, it is objected that prior litigation is pending between
the same parties and dealing with the same subject matter and based on the same
grounds before a foreign judge, the Italian judge, if it deems that the foreign decision
may produce effects within the Italian system, shall suspend the proceedings. If the
foreign judge declines jurisdiction or if the foreign decision is not recognised within the
Italian system, the proceedings in Italy may continue, subject to their resumption at the
instance of the party in interest."

2.31. Italian courts have discretion to stay their own proceedings pending the outcome of other
proceedings. They may decline jurisdiction if they consider the bringing of proceedings to be
an abuse of rights, but again this is unusual.

(4) Germany

2.32. In Germany,29 §261 ZPO provides that "lis pendens is caused by commencement of
proceedings" and "during the continuation of lis pendens, none of the parties may bring the
same action before another court". The identity of the parties and identity of the subject
matter of the proceedings (Streitgegenstand) are decisive. 30 Lis pendens may be considered
ex officio although the court has no duty to investigate. 31

2.33. In the case of proceedings in a foreign country to which the EC Regulation or other
international convention does not apply, the pendency of such proceedings has to be
respected by a German court provided that the foreign court has international competence and
a decision of the foreign court is likely to be recognised in Germany.32 §261 ZPO is applied
by analogy.

(5) Sweden and Denmark

2.34. In Sweden,33 Chapter 13, Section 6 of the Code of Judicial Procedure provides that “while an
action is pending, a new action involving the same issue between the same parties may not be
entertained”. The Svea Court of Appeal has confirmed that one of the fundamental conditions
for lis pendens is identity of parties, and that a controlling shareholder and the company are
not identical for this purpose. 34

28
See Italy national report from Prof. Luca Radicati di Brozolo and Lorenzo Melchionda.
29
See German national report from Prof. Bernd von Hoffmann. See also e.g. Musielak-Foerste, ZPO Kommentar,
4th ed., (Vahlen, Munich, 2005), §261 Rn. 9; Baumbach and Lauterbach and Albers-Hartmann,
Zivilprozessordnung, 64th ed., (Beck, Munich, 2006), §261 Rn 3.
30
Zöller, Zivilprozessordnung Kommentar, 25th ed. (O. Schmidt, Cologne, 2005), §261 Rn. 8a and 9.
31
Bosch, Rechtskraft und Rechtshängigkeit im Schiedsverfahren, (Bosch, Tübingen, 1991), at 166; Musielak-
Foerste, supra fn 28, §261 Rn. 9, and BGH, NJW 1989, at 2064
32
Musielak-Foerste, supra fn 29, §261 Rn. 5; Baumbach et al, supra fn 29, §261 Rn. 7.
33
See Sweden national report from Tore Wiwen-Nilsson.
34
Czech Republic v CME Czech Republic BV, Case 8735-01, Stockholm Arbitration Report 2003:2. Reprinted in
(2003) 15 World Trade and Arbitration Materials 171.
 10

2.35. The position is similar in Denmark.35

C. EUROPEAN JURISDICTION CONVENTION

(1) 2001 European Council Regulation

2.36. European Council Regulation No. 44/2001 on jurisdiction and the recognition of judgments
in civil and commercial matters (and its predecessor the 1968 Brussels Convention36 and the
related Lugano Convention37) prescribe which Member State has jurisdiction over a
particular matter. The Regulation (and its predecessors) also contains specific rules, which
deal with the problem of actions pending in different Member States.38

2.37. In Section 9, under the heading "Lis pendens - related actions", Article 27 (ex Art. 21
Brussels) addresses lis pendens and states:

"1. Where proceedings involving the same cause of action and between the
same parties are brought in the courts of different Member States, any court other than
the court first seised shall of its own motion stay its proceedings until such time as the
jurisdiction of the court first seised is established.

2. Where the jurisdiction of the court first seised is established, any court other
than the court first seised shall decline jurisdiction in favour of that court."

2.38. Article 28 addresses related proceedings and states:

"1. Where related actions are pending in the courts of different Member States,
any court other than the court first seised may stay its proceedings.

2. Where these actions are pending at first instance, any court other than the
court first seised may also, on the application of one of the parties, decline jurisdiction
if the court first seised has jurisdiction over the actions in question and its law permits
the consolidation thereof.

3. For the purposes of this Article, actions are deemed to be related where they
are so closely connected that it is expedient to hear and determine them together to
avoid the risk of irreconcilable judgments resulting from separate proceedings."

2.39. Thus, the Council Regulation (like its predecessors) applies a first-in-time rule to all judicial
proceedings involving civil and commercial matters. This rule applies even when the first
proceedings have been commenced prime facie in breach of an exclusive jurisdiction
agreement.39

(2) The same parties

2.40. For the purpose of Article 27 (ex Art. 21, Brussels), the actions in the different Member
States must be "between the same parties." However, the European Court of Justice has
concluded that proceedings may also be regarded as being between the same parties on the
ground that there is identity of interest.

35
See Denmark national report from Prof. Ole Spierman.
36
Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, Done at
Brussels on 27 September 1968, 29 ILM 1413 (1990).
37
Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, Done at
Lugano on 16 September 1988, 28 ILM 620 (1989).
38
See e.g. Peter Kaye, Law of the European Judgments Convention (Barry Rose Publishers Ltd, Chichester, 1999);
and Helène Gaudemet-Tallon, Compétence et exécution des jugements en Europe, Règlement n°44/2001 et
Conventions de Bruxelles et de Lugano, 3rd edn (LGDJ, Paris, 2002).
39
See Erich Gasser GmbH v MISAT Srl, Case C-116/02. The contract included a forum selection clause in favour
of Austria, but the Austrian court was required to defer to the Italian court, which was first seised, and await that
court's decision on jurisdiction. The ECJ has also held that English courts cannot grant anti-suit injunctions to stop
parties pursuing cases before other EU courts in breach of a jurisdiction agreement: Turner v Grovit, Case C-
159/02.
 11

2.41. Thus, in Drouot Assurances S.A. v. Consolidated Metallurgical Industries (1998)40, the Court
held that when an insurer invokes its right of subrogation to defend proceedings in the name
of its insured, the insurer and the insured may be regarded as the same party for the purposes
of Article 27.

2.42. By contrast, it was noted in the same case that claims brought (i) by the insurer of the hull of
a vessel against the insurer of the cargo for a contribution to general average, and (ii) by the
insurer of the cargo against the owner and charterer of the vessel for a declaration that they
were not liable to contribute to the general average, are not the same parties unless it is
established that, with regard to the subject matter of the disputes, the interests of the insurer
of the hull of the vessel are identical to and indissociable from those of the insured, the owner
and the charterer of that vessel.

2.43. The test of identity and indissociability of interest is for the national court to apply.

(3) Same cause of action

2.44. Article 27 also requires the same cause of action in the two proceedings. In the French
version: "le même objet et la même cause".

2.45. In Gubisch Maschinenfabrite KG v Palumbo (1987)41, the European Court held that the
concept of the "same cause of action" had to be given an independent Convention
interpretation and did not depend on the procedural law of the courts concerned (contrast the
test for the "same parties" - see above). In that case, a German seller was suing an Italian
buyer in the German court for the price: the Italian subsequently sued the German seller in
the Italian court for a declaration that he was not liable on the contract, or for its rescission.
The European Court held that where the same parties were suing each other in two legal
proceedings in different Member States, which were based on the same contractual
relationship, the "same cause of action" was involved, and it was not necessary for the two
claims to be identical for them to involve the same subject matter.

2.46. In The Tatry (1999)42, it was held that actions have "le même objet" when the ends they have
in view are the same, and "la même cause" when the facts and the rule of law relied on as the
basis of the actions are the same.

(4) Related actions

2.47. When the actions fall outside Article 27, they may still come within the scope of Article 28
(ex Art. 22, Brussels). Article 28 provides that where related actions are brought in the
courts of different Member States, any court other than the court first seised has the power
(but not the duty), while the actions are pending at first instance, to stay its proceedings or to
dismiss the proceeding in order that they may be consolidated.

2.48. Actions are "related" for the purpose of Article 28 if they are so closely connected that it is
expedient to hear and determine them together to avoid the risk of irreconcilable judgments
resulting from separate proceedings (Article 28, third paragraph). The European Court has
ruled that the "risk of irreconcilable judgments" covers cases where the judgments may
contain conflicting decisions without necessarily giving rise to mutually exclusive legal
consequences.43 The English House of Lords in Sorrio SA v Kuwait Government Authority44
interpreted this condition to be satisfied if common issues of fact may arise and be recorded
in two sets of proceedings, rejecting the narrower interpretation that the test of potential
irreconcilability had to be assessed by reference to those issues which the courts would be
required to determine in order to give judgment.

40
Case C-351/96, [1998] ECR I -3075
41
Case 144/86 [1987] ECR 4861; see also Case C-351/89 Overseas Union Insurance Ltd v New Hampshire
Insurance Co. [1991] ECR I-3317.
42
Case C-406/92 [1994] ECR I-5439.
43
The Tatry, idem.
44
[1999] 1 AC 32.
 12

2.49. Dicey & Morris notes that if the court orders a stay of proceedings, it will presumably be in
the situation where the action in the court first seised appears in the eyes of the court seised
second to be likely to render res judicata issues raised for determination in the action in the
court second seised, and therefore should be imposed until the court first seised gives
judgment.45

2.50. It is also worth noting that Article 6(1) addresses the situation of multiple defendants. That
article seeks to avoid duplication of proceedings. It provides that a person domiciled in a
Member State may be sued, where he is one of a number of defendants, in the courts of the
place where any one of them is domiciled, provided the claims are so closely connected that
it is expedient to hear and determine them together to avoid the risk of irreconcilable
judgments resulting from separate proceedings. It has been held that in applying this test, a
"broad commonsense approach" is to be adopted and an "over sophisticated analysis" to be
avoided.46

D. ALI / UNIDROIT Transnational Principles

2.51. The Principles of Transnational Civil Procedure,47 adopted in April/May 2004 by the
American Law Institute and UNIDROIT, is an attempt to develop an internationally
harmonised approach to procedure.48

2.52. As to parallel proceedings, the Principles provide:

"2.5. Jurisdiction may be declined or the proceedings suspended when the court is
manifestly inappropriate relative to another more appropriate court that could exercise
jurisdiction.

2.6. The court should decline jurisdiction or suspend the proceedings, when the
dispute is previously pending in another court competent to exercise jurisdiction, unless
it appears that the dispute will not be fairly, effectively, and expeditiously resolved in
that forum."

2.53. The Working Group’s Commentary notes that the concept recognised in Principle 2.5 is
comparable to the common law rules of forum non conveniens, and that in some civil law
systems, the concept is that of preventing abuse of the forum (see P-2F). Later in the
Commentary, it is noted that some systems have strict rules of lis pendens whereas others
apply them more flexibly, particularly having regard to the quality of the proceeding of both
forums (see P-28B).

2.54. Principle 28, which is entitled "Lis pendes and res judicata", states at paragraph 28.1 that in
applying the rules of lis pendens, the scope of the proceedings is determined by the claims in
the parties' pleadings. The Commentary notes that the objective is to avoid repetitive
litigation, whether concurrent (lis pendens) or successive (res judicata) (see P-28A).

III. PARALLEL PROCEEDINGS IN INTERNATIONAL LAW

3.1. It is disputed whether international courts and tribunals have any power to suspend their own
proceedings absent express authority.49 The procedural rules of some international courts and

45
Dicey & Morris, supra fn 16, at 413.
46
Regulation 6(1) codifies the test in Kalfelis v Schroeder, Muenchmeyer, Hengst & Co. [1988] ECR 5565 at
5584. For a recent application by the English court, see ET Plus SA & Ors v Welter & Ors [2005] EWHC 2115 at
[59] - [90].
47
Available at <www.unidroit.org/English/principles/civil procedure/ali-unidroit principles-e.pdf>.
48
See also ALI's International Jurisdiction and Judgments Project in the United States (Proposed Final Draft, April
2005), ILA's "Leuven/London Principles on Declining and Referring Jurisdiction in Civil and Commercial
Matters" (2000), and the ABA Conflict of Jurisdiction Model Act (1987), all at supra fn 16.
49
See Vaughan Lowe, "Overlapping jurisdiction in international tribunals", 20 Australian Year Book of
International Law 191; August Reinisch, "The use and limits of res judicata and lis pendens as procedural tools to
avoid conflicting dispute settlement outcomes", (2004) 3 The Law and Practice of International Courts and
 13

dispute settlement institutions make express provision for parallel proceedings. Some
tribunals have suspended their own proceedings as a matter of inherent jurisdiction or case
management. The recent phenomenon of arbitrations brought under bilateral investment
treaties has given rise to lis pendens issues, as between arbitral tribunals and also between
arbitral tribunals and domestic courts. Some examples are given below.

3.2. The application of lis pendens in this context assumes that the parallel proceedings are before
fora of equal status. Lis pendens does no apply as between supra-national tribunals and
domestic courts so as to require the supra-national court to suspend its procedings. As
Douglas Reichert has noted: 50

"The relevant rules under international law are different since, at least in theory,
international tribunals are not in conflict with national tribunals. When a court or
arbitral tribunal is created on the basis of a treaty between States, the international
tribunal is considered to be hierarchically superior to any national court or private
arbitral tribunal (the generally international composition of private arbitral tribunals
does not affect this status). Such supranational tribunals typically determine that their
jurisdiction takes precedence, and is not subject to the litispendence principle."

3.3. Nevertheless, a national court might decide to suspend its proceedings pending the outcome
of the supra-national proceedings.51

3.4. It is possible that more than one supra-national tribunal has jurisdiction to consider a dispute.
Some tribunals are given express power to deal with parallel proceedings. In the absence of
such a power, some tribunals consider that they have an inherent jurisdiction to do so.

(1) NAFTA / GATT

3.5. NAFTA Article 2005(6) addresses the possibility of parallel proceedings as between NAFTA
and GATT Dispute Settlement:

"Once dispute settlement procedures have been initiated under Article 2007 [NAFTA]
or dispute settlement proceedings have been initiated under the GATT, the forum
selected shall be used to the exclusion of the other ...".

3.6. As to the standard of identity, Article 2005 (2) refers to "grounds that are substantially
equivalent to those available ... under this Agreement."

(2) ECHR

3.7. According to Article 35(2)(b) European Convention of Human Rights (ex Art. 27(2)(b)
ECHR):

"The [European] Court [of Human Rights] shall not deal with any application submitted
under Article 34 that is substantially the same as a matter that has already been
examined by the Court or has already been submitted to another procedure of
international investigation or settlement and contains no relevant new information."

3.8. In Martin v Spain,52 the European Commission on Human Rights held that a claim by 23
Union activists, presented in their personal capacity, which was identical in its object and
scope to a previous claim brought before the ILO Committee on Freedom of Association by
the trade organisation to which the applicants belonged, was precluded. Although, formally
speaking the parties were different, the Commission held that they were "essentially the
same".

Tribunals 37; and Yuval Shany, The Competing Jurisdictions of International Courts and Tribunals, (Oxford
University Press, Oxford, 2003).
50
Reichert, supra fn 7.
51
See e.g. Christoph Schreuer, "Concurrent jurisdiction of national and international tribunals", (1976) 13 Houston
Law Review 508.
52
Case 16358/90, Admissibility Decision, 12 October 1992. See also European Commission of Human Rights,
Application 16717/90, Pauger v Austria, Decision on Admissibility of 9 January 1995, 80 D&R 24 (1995).
 14

(3) Exercise of inherent jurisdiction

3.9. In the absence of specific EC Treaty provisions, the European Court of Justice has
nevertheless applied principles of lis pendens in its judicial practice.53

3.10. The Iran-US Claims Tribunal in one case ordered a stay of parallel ICC arbitration, and in
another case declined to do so.54

3.11. It has been the practice of the UN Compensation Commission not to suspend proceedings,
notwithstanding the existence of parallel proceedings.55

3.12. In the MOX Plant litigation, concerning Ireland's objection to the UK's operation of a
processing plant at Sellafield in England, Ireland brought separate proceedings before an
arbitral tribunal under the Convention for the Protection of the Marine Environment of the
North-East Atlantic (OSPAR), the International Tribunal for the Law of the Sea (ITLOS),
and the European Court of Justice (ECJ). There were overlapping issues of law and treaty
interpretation. The OSPAR tribunal saw no impediment to the pursuit of multiple
proceedings.56 Likewise, an initial ITLOS tribunal saw no need to suspend its proceedings.57
However, a differently constituted tribunal at the next stage of the ITLOS proceedings took a
radically different approach, and decided to stay its proceedings until the ECJ proceedings
were resolved, citing considerations of mutual respect, comity, propriety and effectiveness.58

(4) Bilateral Investment Treaty Arbitrations

3.13. Investment protection treaty cases may raise issues of lis pendens as between the tribunal
established under the treaty and domestic law fora (be it national courts or arbitral tribunals
constituted pursuant to contractual arbitration clauses) and also possibly between different
treaty tribunals that have been called upon to decide on the basis of the same facts.

3.14. It is beyond the mandate of this Committee's work to consider the relationship between treaty
tribunals and domestic law fora, and issues such as fork-in-the-road, and exhaustion of local
remedies.59 The Committee has, however, noted the decisions concerning the relationship
between two treaty arbitrations made in the parallel Lauder/CME/Czech Republic cases.

3.15. Proceedings against the Czech Republic were commenced by Mr Ronald Lauder under the
US-Czech Republic BIT in August 1999, alleging that his investment in connection with
operation of a commercial television station had been expropriated. Six months later, a
company he controlled, CME Czech Republic BV, commenced proceedings under the
Netherlands-Czech Republic BIT, making the same allegation, based on the exact same facts.
In addition, there were various other court and arbitral proceedings also taking place. The
Czech Republic sought to resist the parallel BIT claims on the basis of, inter alia, lis pendens
and abuse of process.

3.16. The Lauder tribunal (which was the first constituted) concluded:

"This Arbitral Tribunal considers that the Respondent's recourse to the principle of lis
alibi pendens to be of no use, since all the other court and arbitration proceedings
involve different parties and different causes of action … . Therefore, no possibility
exists that any other court or tribunal can render a decision similar to or inconsistent
with the award which will be issued by this Arbitral Tribunal, i.e. that the Czech

53
See e.g. Cases 172, 226/83, Hoogovens Groep v Commission [1985] ECR 2831, at 2843; Cases 358/85, 51/86,
France v Parliament [1988] ECR 4821, 4846.
54
Reading and Bates Corp. v Iran (1983) 2 Ir-USCTR 401; Flour Corp. v Iran, (1986) 11 Ir-USCTR 296.
55
Norbert Wuhler, "The United Nations Compensation Commission: A new contribution to the process of
international claims resolution", (1999) 2 Journal of International Economic Law 249, 260.
56
OSPAR Award, para. 142, 2 July 2003, available at <www.pca-cpa.org>.
57
ITLOS Provisional Measures Order, 3 December 2001, available at <www.ITLOS.org>.
58
ITLOS Order No. 3, 24 June 2003, 42 ILM 1187 at 1191.
59
Issues of lis pendens in investment treaty arbitration are being considered by the ILA Committee on
International Law on Foreign Investment. See also Mark Friedman, "Related dispute resolution regimes: parallel
proceedings in BIT arbitration", paper at ICCA Conference, Montreal, June 2006.
 15

Republic breached or did not breach the Treaty, and is or is not liable for damages
towards Mr Lauder."60

3.17. The CME Czech Republic BV tribunal (by majority) concluded:61

"There is also no abuse of the Treaty regime by Mr Lauder in bringing virtually

identical claims under two separate Treaties. …. should two different Treaties grant
remedies to the respective claimants deriving from the same facts and circumstances,
this does not deprive one of the claimants of jurisdiction, if jurisdiction is granted under
the respective Treaty. A possible abuse by Mr Lauder in pursuing his claim under the
US Treaty as alleged by the Respondent does not affect jurisdiction in these arbitration
proceedings."

3.18. The award in the CME Czech Republic BV arbitration was challenged before the Svea Court
of Appeal in Stockholm and the award was upheld.62 The court applying Swedish law
acknowledged that lis pendens might apply, but held that the requirement of identity of
parties was not met in that case.

3.19. Likewise, the Danish Maritime & Commercial Court accepted that lis pendens could apply
in arbitration brought under the Latvian-Swedish BIT, such that a case pending between two
parties prevented a new case being brought between the same parties concerning the same
subject matter.63 However, the court held that a second notice of arbitration, which had been
issued, constituted a new notice in the same case, and not a new case.

3.20. In one BIT case, the tribunal stayed its proceedings pending the outcome of related
commercial arbitration commenced under the relevant contract, but this approach has not
been universally approved.64

IV. PARALLEL PROCEEDINGS AND INTERNATIONAL ARBITRATION

4.1. The objective of this report is to give guidance to arbitral tribunals when faced with an
argument that the arbitration before it should be suspended or terminated because of relevant
parallel proceedings. The Committee has considered three scenarios, the first of which is the
most common:

(a) parallel proceedings between the arbitral tribunal and a state court
(b) parallel proceedings between two arbitral tribunals
(c) parallel proceedings between the arbitral tribunal and a supra-national court or
tribunal.

We consider each of these in turn.

A. PARALLEL ARBITRATION AND COURT PROCEEDINGS

(1) Introduction

60
Lauder v The Czech Republic, Final Award, dated 3 September 2001. Reprinted in (2002) 14 World Trade and
Arbitration Materials 109.
61
CME Czech Republic BV v The Czech Republic, Partial Award, dated 13 September 2001, (2002) 14 World
Trade and Arbitration Materials 288.
62
Case 8735-01, Stockholm Arbitration Report 2003:2; also (2003) 15 World Trade and Arbitration Materials 171.
63
UfR 2003.886.
64
SGS v Philippines, Award on Jurisdiction dated 29 January 2004, ICSID Case No. ARB/02/6; but contrast
Bayindir v Pakistan, Decision on Jurisdiction dated 14 November 2005, ICSID Case No. ARB/03/29. The
relationship between treaty and contract claims is a complex, often involving consideration of so-called "umbrella
clauses" in some BITs, and has attracted much comment. See e.g. the papers at supra fn 59. See also the approach
in SPP v Egypt, referred to in infra para. 4.27.
 16

4.2. Two different sequences of events can be envisaged giving rise to parallel proceedings
between an arbitral tribunal and a state court: (1) a claimant commences arbitration and the
defendant subsequently files a suit before a domestic court; and (2) a party institutes
proceedings in a domestic court and the other party subsequently commences arbitration. In
both scenarios, it is assumed for the purposes of this report that the party commencing
arbitration seeks a stay of the parallel litigation, invoking the parties' agreement to arbitrate.

4.3. The foregoing summary of national law and international law (Part III above) presupposes
that more than one court or tribunal has competent jurisdiction over a dispute and lis pendens
may apply to determine in which forum the matter should proceed. The situation in
arbitration is fundamentally different, because a valid arbitration agreement confers exclusive
jurisdiction on the constituted arbitral tribunal in respect of the disputes referred to it, to the
extent that they come within the scope of the arbitration agreement (save where a party
waives its right to insist on arbitration).65

4.4. Accordingly, a number of authors deny the existence of any question of lis pendens in the
context of arbitration (at least between an arbitral tribunal and a State court) based on the
notion that a contractual undertaking to arbitrate is sufficient, in and of itself, to preclude the
concurrent excise of jurisdiction by public authorities, thus rendering moot the problem of lis
pendens.66

4.5. Nevertheless, because of the exclusive consequences of a valid agreement to arbitrate, the
commencement of parallel proceedings - in court or arbitration - requires a determination as
to whether the arbitration agreement takes effect. The question is who should make that
determination? While this may not be a situation of lis pendens in its strict sense (i.e. two
fora both with prima facie competent jurisdiction), it is undoubtedly a situation of parallel
proceedings very akin to lis pendens, and the arbitral tribunal must decide whether or not to
suspend its proceedings to await the outcome of the court's determination on jurisdiction.67
An example of such a situation is the Swiss Fomento case, where one party started litigation
in Panama and the other started ICC arbitration in Geneva (see infra para. 4.36).

4.6. In theory, three basic solutions may be proffered. A first solution, based on the sovereignty of
state courts, would refuse to consider that arbitration has equal standing to state court dispute
settlement, and would accept jurisdiction over the case notwithstanding the existence of an
agreement to arbitrate. Consequently, no lis pendens would arise and state court litigation and
arbitration might run in parallel without any mechanism of coordination. This solution does
not accord with international arbitration law and practice (see e.g. New York Convention -
see Part IV.A.c below). A second solution, based on the equivalence of state courts and
arbitration tribunals, might transpose lis pendens principles, applicable under domestic law as
between a domestic court and a foreign court, to the relationship between state courts and
arbitral tribunals. That solution has the disadvantage of not avoiding the risk of possible
conflicting decisions and of divergent solutions worldwide, since the rules on lis pendens
vary considerably between Common Law and Civil Law countries. Furthermore, if a first-in-
time rule applied, a prospective defendant might "run to court" to frustrate an anticipated
arbitration. A forum non conveniens approach would be too unpredictable, and begs the
question of who (court or tribunal) should make the decision. A third solution would be to
give priority to arbitration and for a state court to review the issue of jurisdiction only later in
the context of setting aside and enforcement proceedings. This has the advantage of reducing
the opportunity for a defendant to adopt litigation strategies aimed at frustrating the arbitral
process. However, the disadvantage is that a defendant who has a legitimate objection to
arbitral jurisdiction has to wait until an award on jurisdiction is made before it can get before

65
We have not considered the effect of a contract provision which makes arbitration optional, say at the unilateral
election of one of the parties, see e.g. Law Debenture Trust Corp plc v Elektrim Finance BV [2005] EWHC 1412.
66
See e.g. Schweizer and Guillod, "L'exception de litispendance et l'arbitrage international", in Le juriste Suisse
face aux droits et jugements étrangers, (Editions Universitaires Fribourg, Fribourg, 1988); and Lachmann,
Handbuch für die Schiedsgerichtsbarkeit, 2nd ed., (O. Schmidt, Cologne, 2002), Rn 499; and Musielak-Foerste,
ZPO Kommentar, 4th ed., (Vahlen, Munich, 2005), §261 Rn. 16. See also e.g. in ICC Case No. 5103 (1988), the
tribunal recognised the applicability of the lis pendens principle only as between concurrent judicial proceedings,
(1988) Journal de Droit International 1206.
67
For a discussion of this topic, see Arbitral Tribunals or State Courts, Who must defer to whom?, ASA Special
Series No. 15 (2001), at 65.
 17

the court, in a setting aside application. Such a defendant has the dilemma whether or not to
participate in the arbitration while reserving all its rights. This third solution accords with the
widely accepted principle of competence-competence (as giving an arbitral tribunal authority
to rule on its own jurisdiction).

4.7. Another critical issue is what is the effect of a prior court decision? Does it have res judicata
effect on the tribunal? Does it depend upon whether the decision is of a court at the place of
arbitration, or does a foreign court judgment have the same effect?

4.8. National arbitration law and practice generally offers a solution where the arbitration and
court proceedings are taking place in the same jurisdiction, both as to whether a court or
tribunal has propriety, and the effect of a prior court decision on the arbitral tribunal. The
Committee does not presume to suggest that arbitral tribunals should act contrary to the
applicable law at the place of arbitration. National laws are generally less clear as to the
solution, or approach tribunals should adopt, where the court proceedings have been
commenced in a different jurisdiction, and it is in respect of that situation that the Committee
seeks to give guidance.

4.9. The Committee considered the significance of the principle of competence-competence, and
the position under various international instruments and national laws.

4.10. In additional to separate proceedings being commenced in arbitration and court between the
same parties, there may be parallel court proceedings which do not give rise to a strict lis
pendens, because the parties or issues are not identical. We also consider the law and practice
relating to tribunals suspending their own proceedings to await the outcome of the related
proceedings.

(2) Competence-Competence

4.11. An arbitral tribunal is deemed to have an inherent power to determine its own jurisdiction.
This is referred to as competence-competence68 (i.e. competence to decide its owns
jurisdiction). It is a legal fiction, which derives from the separability of the arbitration
agreement. 69

4.12. The power of an arbitral tribunal to determine its own jurisdiction is expressly set out in
many procedural rules (e.g. Article 21 UNCITRAL Arbitration Rules, Article 6.4 ICC Rules,
Article 15.1 ICDR International Rules, Article 23.1 LCIA Rules) and national laws (see
below). This is often referred to as positive competence-competence.

4.13. In some jurisdictions, competence-competence has a further connotation, namely that the
arbitral tribunal should be the first to make a determination as to jurisdiction, and national
courts should defer to the tribunal, while retaining a right of review in any setting-aside
application. This is referred to as negative competence-competence, and is more
controversial.

(3) Exclusive arbitral jurisdiction and mandatory stay of litigation

4.14. There is no doubt that a valid arbitration agreement - if properly invoked - deprives state
courts of jurisdiction. Pursuant to the New York Convention and many national laws, a party
against whom court litigation is commenced concerning a dispute covered by the valid
arbitration agreement is entitled to invoke that agreement and is further entitled to a
mandatory stay.

4.15. Article II of the New York Convention 1958 states:

68
Also referred to as Compétence de la compétence in French and Kompetenz/Kompetenz in German.
69
See Gaillard and Savage (eds), Fouchard, Gaillard & Goldman on International Commercial Arbitration
(Kluwer, The Hague, 1999) at para. 416 ff.; Lew, Mistelis and Kroll, Contemporary International Commercial
Arbitration, (Kluwer, The Hague, 2003) at para. 14-13 ff.; Redfern and Hunter, Law and Practice of International
Commercial Arbitration, 4th edn. (Sweet & Maxwell, London, 2004) at para. 5-36 ff.; W Park, "An Arbitrator's
Jurisdiction to Determine Jurisdiction", ICCA Conference, Montreal, June 2006.
 18

“(1) Each Contracting State shall recognise an agreement in writing under which
the parties undertake to submit to arbitration all or any differences which have arisen or
which may arise between them in respect of a defined legal relationship, whether
contractual or not, concerning a subject matter capable of settlement by arbitration.

(3) The court of a Contracting State, when seized of an action in a matter in

respect of which the parties have made an agreement within the meaning of this article,
at the request of one of the parties, shall refer the parties to arbitration, unless it finds
that the said agreement is null and void, inoperative or incapable of being performed.”

4.16. Article II(3) is reflected in Article 8(1) UNCITRAL Model Law, and many national laws
(e.g. section 9 English Arbitration Act 1996).

4.17. Significantly, the Model Law adds that the party requesting the stay of litigation must do so
"not later than when submitting his first statement on the substance of the dispute". The
English Act, similarly, provides that an application may not be made "after [the applicant]
has taken any step in those proceedings to answer the substantive claim".

4.18. Pursuant to any national law provision based on Article II(3) New York Convention, a state
court may accept jurisdiction over a dispute and not refer it to arbitration if: (1) the dispute
concerns subject matter not capable of settlement by arbitration; or (2) the agreement to
arbitration is null and void, inoperative or incapable of being performed. This entitles the
court to review the dispute and the arbitration agreement and, thus, raises a lis pendens issue
as soon as an arbitral tribunal is seised of the same dispute and a res judicata issue as soon as
either a state court or an arbitral tribunal has rendered a final decision concerning jurisdiction.

4.19. In the event that arbitration is commenced, the claimant in the litigation (and respondent in
the arbitration) is likely to raise the same arguments before the tribunal relating to
arbitrability and/or the invalidity of the arbitration agreement as it wil raise before the court
in its attempt to resist the stay application. Should the court and arbitral tribunal both decide
on jurisdiction, there is a possibility of inconsistent decisions. This is due, of course, to the
fact that different people can come to different conclusions on the same facts and arguments,
but also because questions going to arbitrability and validity can give rise to complex issues
where even very experienced jurists could well disagree (e.g. evidence of the arbitration
agreement itself,70 the policy issues relating to arbitrability, distinction between void and
voidable, what is meant by inoperative and incapable of performance, what is the applicable
law,71 has a substantive step been taken in the litigation72).

(4) Should tribunals defer to courts, or vice versa, on jurisdiction?

4.20. The New York Convention does not prescribe what is to happen when an arbitral tribunal is
facing a jurisdictional challenge which raises the same issues as raised in a stay application
before a national court.

70
A typical case is Marc Rich & Co. AG v Società Italiana Impianti, [1992] ECR I-3855 (ECJ) in which English
proceedings regarding the constitution of an arbitral tribunal went together with Italian proceedings for a
declaration of non-liability. The question in Marc Rich was whether an amendment to the original contract
supplementing an arbitration clause had been agreed upon by the Italian seller.
71
The Deutsche Schachtbau- und Tiefbohrgesellschaft v R’As Al Khaimah National Oil Co. case provides an
example of the difficulties that may arise in this respect. In that case, conflicting decisions ensued from a Geneva
ICC award and a court decision in R’As al-Khaimah. The ICC award endorsed the validity of the agreement
whereas the state court decision annulled the contract on the basis of misrepresentation. The ICC award was
dormant for seven years until some assets were located in England, which could be attached. The English courts
found that the agreement was valid under the governing law (Swiss law) and that the local courts of R’As al-
Khaimah, thus, had no jurisdiction and no account could be had of their decision (see D. Scott, Commentary:
practical options when faced with an injunction against arbitration, (2002) 18 Arbitration International 333).
72
See e.g. Fomento v Colon - see part IV.A.8 below.
 19

4.21. In contrast, the European Convention on International Commercial Arbitration 1961 provides
that generally a court, which is subsequently seised, should defer to the arbitral tribunal.
Article VI(3) states:

"Where either party to an arbitration agreement has initiated proceedings before any
resort is had to a court, courts of Contracting States subsequently asked to deal with the
same subject-matter between the same parties or with the question whether the
arbitration agreement was non-existent or null and void or had lapsed, shall stay their
ruling on the arbitrator's jurisdiction until the arbitral award is made, unless they have
good and substantial reasons to the contrary."

4.22. While it is not explicit, one might infer from Article VI(3) that a consistent approach would
be for a tribunal subsequently seised to stay its proceedings until the court had ruled on
jurisdiction.

4.23. The UNCITRAL Model Law 1985 does not include any indication as to which forum should
have priority. However, Article 8(2) states:

"Where an action referred to in paragraph (1) of this article has been brought [i.e.
application to a court for stay of litigation], arbitral proceedings may nevertheless be
commenced or continued, and an award may be made, while the issue is pending before
the court.”

Article 8(2) is significant in that it does not prescribe an automatic stay of the arbitral
proceedings by the mere introduction of court proceedings. Also, it permits the arbitral tribunal
to proceed and to render an award.73

4.24. The LCIA Rules 1998, unusually, seek to exclude the possibility of parallel proceedings
relating to jurisdiction. Article 23.4 states:

"By agreeing to arbitration under these Rules, the parties shall be treated as having
agreed not to apply to any state court or other judicial authority for any relief regarding
the Arbitral Tribunal's jurisdiction or authority, except with the agreement in writing of
all parties to the arbitration of the prior authorisation of the Arbitral Tribunal or
following the latter's award ruling on the objection to its jurisdiction or authority."

(5) Should tribunals stay proceedings pending the outcome of related court proceedings?

4.25. Assuming that there are parallel and related arbitral and court proceedings, in which the latter
dispute is not subject to arbitration, can and should an arbitral tribunal suspend its own
proceedings? This is not an issue of lis pendens or competence-competence, but of case
management. On the one hand, the tribunal should seek to avoid inconsistent decisions, but
on the other hand a tribunal is mandated to decide the dispute referred to it without
unnecessary delay and a claimant has a right to have its claims determined (see e.g. Article 6,
ECHR).

4.26. Undoubtedly, domestic courts can stay their own proceedings, and Common Law courts
appear more willing to do so (see Part II.A above). An EU court can stay its own
proceedings, but "related claims" in the EC Regulation has been given a somewhat narrow
interpretation (see Part II.C above).

73
See e.g. Binder, International Commercial Arbitration and Conciliation in UNCITRAL Model Law
Jurisdictions, 2nd edn. (Sweet & Maxwell, London, 2005), p. 91. Binder notes that the purpose of this provision,
according to the Analytical Commentary, was "to reduce the risk and effects of dilatory tactics of a party reneging
on his commitment to arbitration" (A/CN.9/264, Art.8, para.5). Nevertheless, Binder concludes that: "In cases
where the tribunal's jurisdiction is seriously in dispute, the above-mentioned point [i.e. risk of potential cost of
simultaneous arbitration proceedings] will surely convince most arbitral tribunals and arbitration-willing counter-
parties to wait until the court has decided the jurisdiction issue, as otherwise the (possibly wasted) arbitral
proceedings will cause substantial expense."
 20

4.27. As noted above, some supra-national tribunals have concluded that they have an inherent
power to suspend their own proceedings (e.g. second Mox Plant ITLOS tribunal, and the BIT
tribunal in SGS v Philippines). A flexible approach was adopted by the ICSID tribunal in SPP
v Egypt, which said:74

"When the jurisdictions of two unrelated and independent tribunals extend to the same
dispute, there is no rule of international law which prevents either tribunal from
exercising jurisdiction. However, in the interest of international judicial order, either of
the tribunals may, in its discretion and as a matter of comity, decide to stay the exercise
of its discretion pending the decision of the other tribunal."

The tribunal did, in fact, suspend its proceedings while parallel litigation was pursued before
the Cour de Cassation in France.

4.28. There is Common Law authority that an arbitral tribunal may stay its proceedings to await
the outcome of related court proceedings (see below).

(6) England

4.29. Under the Arbitration Act 1996, unless otherwise agreed by the parties, the arbitral tribunal
may rule on its own jurisdiction (section 30), which award may be challenged in court
(section 67). In addition, a party at the commencement of the proceedings may apply to the
court to determine any question as to substantive jurisdiction, but only with the agreement of
all the parties or with the permission of the tribunal, and the court is satisfied inter alia that
there is good reason why the matter should be decided by the court (section 32).

4.30. A party to an arbitration agreement against whom legal proceedings are brought may apply to
the court for a stay of the legal proceedings (section 9). A stay shall be granted unless the
arbitration agreement is null and void, inoperative or incapable of being performed.

4.31. The question has arisen whether the court, when faced with a stay application and arbitration
proceedings already commenced, should await the tribunal's decision on jurisdiction.75

4.32. As noted above, the English court can stay its own proceedings awaiting the outcome of a
related arbitration. There is also authority that an arbitral tribunal can stay its proceedings.
For example, Browne-Wilkinson LJ (as he then was) has observed:76 "I agree … that in law
the arbitrator is entitled to refuse to decide any issues which overlap with the High Court
proceedings and that he is the best position to decide whether such overlap does exist."

(7) France

4.33. In French law, an arbitral tribunal may determine its own jurisdiction (Article 1466 NCCP).

4.34. French arbitration law embraces negative competence-competence. Article 1458 of the New
Code of Civil Procedure obliges French courts – without qualification – to refer a
jurisdictional issue to arbitration if the arbitral tribunal has been seised of the dispute. Article
1458 states:

"Where in a dispute regarding which the arbitration tribunal is seised by virtue of an

arbitration agreement is brought before a court of law of the State, the latter shall have
to decline jurisdiction. Where the arbitration tribunal is not yet seised, the court shall
equally have to decline jurisdiction save where the arbitration agreement is manifestly
null. In both cases, the court may not raise ex proprio motu its lack of jurisdiction."77

(8) Switzerland

74
Decision on Jurisdiction I, 27 November 1985, 1 ICSID Reports 112 at 129, para. 84.
75
See Merkin, Arbitration Law, (Informa Legal Publishing, London, looseleaf), paras 8.28 - 8.31.
76
Northern Regional Health Authority v Derek Crouch Construction Co. Ltd [1984] 2 All ER 175. See also
University of Reading v Miller Construction 52 Con. LR 31. And recently confirmed by the New Zealand High
Court in Carter Holt Harvey Ltd v Genesis Power Ltd & Or, unreported, 22 February 2006, supra fn 23.
77
See also, e.g. Article 13, Egyptian Arbitration Act (Law No. 27/1994).
 21

4.35. Article 186(1) of the Swiss PIL Act provides that the arbitral tribunal shall decide on its own
jurisdiction. A party may invoke an agreement to arbitrate and apply to the court for a stay of
litigation, under Article 7 of the PIL Act. According to Swiss doctrine, a Swiss court decision
that it has jurisdiction (e.g. because the arbitration agreement is null and void), is binding on
the arbitral tribunal. However, if the court decided that it does not have jurisdiction, the
tribunal must still decide its own jurisdiction. 78

4.36. The effect on a tribunal sitting in Switzerland of parallel court proceedings elsewhere was
considered in the Fomento case.79 Colon (of Panama) employed Fomento (of Spain) to
construct a port terminal in Panama. The contract provided for ICC arbitration in Geneva.
Disputes arose and Fomento started court proceedings against Colon in Panama. Colon took
some time before it raised a jurisdictional defence based on the arbitration agreement. The
Panama court of first instance held that Colon was too late to raise that defence according to
the rules of the Panama Civil Procedure Code, but the Court of Appeal allowed Colon's
appeal. Meanwhile, Colon had started ICC arbitration, and the tribunal issued an award
confirming that it had jurisdiction, in particular in light of the Panama Court of Appeal
decision. Subsequently, the Panama Supreme Court allowed Fomento's appeal and held that
Colon had been too late in raising the arbitration agreement. Fomento then challenged the
arbitration award.

4.37. The Court held that the tribunal in such a situation must consider: (1) whether both
proceedings concern the same subject matter and are between the same parties; (2) whether it
is expected that the foreign court will render a judgment within a reasonable time; and (3)
whether the foreign court's decision would be enforceable in Switzerland, These three
conditions reflect Article 9 PIL (see Part II.B.2 above). If the conditions are met, a tribunal
sitting in Switzerland should stay its proceedings. The Court controversially opined:80

"Since res judicata and lis pendens are tightly linked principles that serve the same
purpose, it seems logical to deal in the same way with the principle of lis pendens and
admit that the arbitrator seised in the second place has to stay its proceedings until the
firstly seised state court renders its decision as long as the latter is liable to be
recognised at the seat of the arbitration."

The Court held that it would be contrary to Swiss public policy to have two equally
enforceable decisions circulating in Switzerland and that the lis pendens mechanism in Article
9 PIL is precisely aimed at avoiding that risk. In addition, the Court held that the is no priority
rule under Swiss law that would give the arbitral tribunal precedence to decide upon the
validity of an arbitration agreement and the tribunal's jurisdiction (i.e. negative competence-
competence). Because the tribunal had not carried out the examination required in Article 9,
the Court set aside the tribunal's jurisdiction award.

4.38. With respect to parallel arbitrations, Swiss authors consider that the arbitral tribunals should
have regard to lis pendens, and the tribunal second seised should probably stay its
proceedings.81

78
See Jean-François Poudret and Sébastien Besson, Droit comparé de l’arbitrage international, (Schulthess,
Zurich, 2002) at 456; and Francois Perret, "Parallel actions pending before an arbitral tribunal and a state court: the
solution under Swiss law", in Arbitral Tribunals or State Courts, Who must defer to whom?, ASA Special Series
No. 15 (2001), at 65.
79
See Formento de Construccuones y Contratas SA v Colon Container Terminal SA, 14 May 2001, ATF 127 III
279, [2001] ASA Bulletin 544. The decision followed the approach if the Swiss Federal Tribunal in two earlier
cases: UAE & Ors v Westland Helicopters, 19 April 1994, ATF 120 II 155; and Compania Minera Condesa SAL v
BRGM-Perou SAS, 19 December 1997, AFTF 124 III 83.
80
Idem, at 284. See e.g. Elliott Geisinger & Laurent Levy, "Lis alibi pendens in international commercial
arbitration", in Complex Arbitrations: Perspectives on their Procedural Implications (ICC Special Supplement,
Paris, 2003) at 53; Christian Oetker, "The principle of lis pendens in international arbitration: the Swiss decision in
Fomento v Colon", (2002) 18 Arbitrational International 137; The Fomento decision has been heavily criticised by
some commentators and we understand that the Swiss Parliament is considering amending the PIL Act to overrule
it.
81
Poudret and Besson, op. cit., at 471-472; Pierre Lalive, Jean-François Poudret and Claude Reymond, Le droit de
l’arbitrage interne et international en Suisse, (Payot, Lausanne, 1989) at 346.
 22

(9) Italy

4.39. Italian law provides that the arbitral tribunal shall decide on its own jurisdiction. A party may
invoke an agreement to arbitrate and apply to the court for a stay of litigation.82

4.40. According to the Italian Supreme Court, because of the private nature of arbitration, the lis
pendens rule is inapplicable to arbitration.83 Nevertheless, the Supreme Court in the same
case held that once the arbitral tribunal is constituted, a court subsequently seised must
decline jurisdiction and abstain from examining the case, including the validity of the
arbitration agreement, leaving to the arbitrators the power to determine their own jurisdiction.

4.41. The situation is uncertain in respect of foreign legal proceedings commenced in parallel with
an Italian arbitration.

4.42. Italian arbitration law expressly gives an arbitral tribunal power to suspend its own
proceedings in certain limited circumstances. Article 819 ICCP provides:

"If during the course of the proceedings a question arises which, according to law is not
arbitrable, the arbitrators, if they deem that the matter submitted to them depends upon
the resolution of said question, shall stay the proceedings. In all other cases, the
arbitrators shall decide all questions arising in the course of the arbitration
proceedings."

It might be inferred that in "all other cases", a tribunal may not suspend its own proceedings.

4.43. The issue of lis pendens between two arbitral tribunals has not received much attention in
Italy. The few scholars who have dealt with it consider that Article 30 ICCP is applicable.

(10) Germany

4.44. According to §1040 ZPO, an arbitral tribunal has competence to decide on its own
jurisdiction, but this decision is not binding and can be overruled by a state court. This is
sometimes called an "unreal competence-competence",84 on the basis that the arbitral tribunal
does not have the final say (i.e. it is subject to review by the court).85

4.45. Prior to the constitution of the arbitral tribunal, a party may apply to have court proceedings
rejected as inadmissible on grounds of a valid agreement to arbitrate (§1032 ZPO).86 Where
such an action has been brought, arbitral proceedings may nevertheless be commenced or
continued, and an arbitral award may be made, while the issue is pending before the courts.

4.46. Concerning parallel arbitrations, some scholars argue that only one arbitral tribunal can have
jurisdiction over the same dispute, whereas other authors argue that there is no priority rule
applicable between different tribunals.

B. PARALLEL ARBITRATION PROCEEDINGS

4.47. It is possible that parties to the same contract and same agreement to arbitrate commence
separate arbitration proceedings concerning the same dispute (perhaps because the
respondent in the first arbitration did not like the tribunal which had been constituted), giving
rise to parallel arbitrations, and a true lis pendens. A more likely scenario is two arbitrations
between the same parties raising different claims, albeit closely related. Another more likely
scenario is two arbitrations between the same parties in which each relies on different
formulations of the agreement to arbitrate (e.g. because it is alleged that the arbitration

82
See e.g. M Rubino Sammartano, L'arbitrato internazionale, (Cedam, Padua, 1989).
83
Cass., 8 July 1996, n. 6205 Montedison ed altri c. Eni ed Enichem, in Riv. Arb. 1997, at 324. See also e.g. C.
Consolo, "Litispendenza e connessione fra arbitrato e giudizio ordinario", in Riv. Arb. 1998, at 659.
84
Triebel and Coenen, Parallelität von Schiedsverfahren und staatlichen Gerichtsverfahren, BB 2003, IDR-
Beilage, S. 2.
85
Schwab and Walter, Schiedsgerichtsbarkeit Kommentar, 7. Aufl., (Beck, Munich, 2005), Kap.16, Rn 4 and 10.
86
Henn, Scheidsverfahrensrecht, Handbuch fuer die Praxis, 3rd ed., (Müller, Heidelberg, 2000), Rn. 316;
Baumbach, Lauterbach and Albers-Hartmann, ZPO, 64rd ed., (Beck, Munich, 2006), §261 Rn. 11.
 23

agreement was amended, perhaps changing the applicable procedural rules). Another
situation is where closely related disputes are running in parallel between parties that are not
identical.87

4.48. In the situation of a true lis pendens, the issue arises as to whether one of the tribunals is
entitled to stay its own proceedings. It is argued by some commentators that the tribunal is
mandated to determine the dispute referred to it by the claimant, and should proceed to do so.
The Committee disagrees. Lis pendens is recognised in most legal systems, and has also been
recognised as prima facie applicable in international arbitration. The Committee submits that
the second tribunal should stay its proceedings.

4.49. In the situation of related claims between the same parties, the issue may not be one of lis
pendens but of case management. Here, the argument that an arbitral tribunal should comply
with its mandate is powerful. Nevertheless, the Committee concluded that in some
circumstances, arbitral efficiency and doing justice between the parties should persuade
tribunals to stay their own proceedings pending the outcome of the other proceedings, or
encourage the parties to consolidate the disputes.

4.50. In the situation of related claims between non-identical parties, the issue may be one of lis
pendens (if the parties are so closely related that they are deemed identical), but it is again
more likely to be an issue of case management. The Committee concluded that arbitral
efficiency and justice may dictate that one of the proceedings should be stayed pending the
outcome of the other.

C. PARALLEL ARBITRATION AND SUPRA-NATIONAL PROCEEDINGS

4.51. It is possible that an international commercial arbitration will be conducted in parallel to

proceedings before a public international or supra-national court or tribunal. This is unlikely
to give rise to a true lis pendens, because the parties or the cause of action will most probably
be different.

4.52. Nevertheless, the Committee concluded that, in some circumstances, arbitral efficiency may
dictate that the commercial arbitration should be stayed pending the outcome of the other
proceedings.

V. CONCLUSION AND RECOMMENDATIONS

A. CONCLUSION

5.1. Douglas Reichert remarked in 1992 that decisions of arbitral tribunal on lis pendens are
"generally too sparse and contradictory to constitute in any way representative statements of
an accepted practice amounting to a procedural rule for international arbitration".88

5.2. Hans van Houtte (our Committee colleague) commented in 2000: 89

"There does not yet exist a clear and global transnational lis alibi pendens - exception in
the arbitration and jurisdiction conventions. Arbitration and court proceedings belong to
separate worlds with their own jurisdiction and enforcement conventions, which have
neglected the interface between arbitration and court jurisdiction. However, some of the
conventions, such as the New York Convention, already contain the gremia to allow

87
See e.g. the situation that arose in the dispute Arthur Andersen v Andersen Consulting. After ICC arbitration had
been commenced between virtually all the relavant parties, one Arthur Andersen member commence ad hoc
arbitration against one Andersen Consulting member firm based on an earlier signed version of the arbitral clause.
In the second arbitration, the respondent refused to appoint an arbitrator, which was confirmed by the Swiss court
as being premature (referred to in Geisinger & Levy, supra fn 80 at 66).
88
Reichert, supra fn 7.
89
Hans van Houtte, "Parallel proceedings before state courts and arbitration tribunals: is there a transnational lis
alibi pendens - exception in arbitration or jurisdiction conventions?" in Arbitral Tribunals or State Courts: Who
must defer to whom?, ASA Special Series No. 15 (2001) pp. 53-54.
 24

courts to refuse jurisdiction over disputes, which are within the arbitrator's jurisdiction
and to refuse enforcement of court judgment which did not respect the arbitrators'
jurisdiction. Others, like the European Arbitration Convention or the Brussels and
Lugano Conventions, unfortunately, do not curb parallel proceedings in courts and
before arbitrators."

5.3. Given this uncertainty, the Committee concluded that it could assist arbitrators if the
Committee were to make a number of recommendations.

B. COMMENTARY TO RECOMMENDATIONS

(1) Recommendation 1

5.4. The Committee identified widespread support within the arbitral community for the principle
of positive competence-competence and therefore concluded that generally the arbitral
tribunal should proceed to determine its own jurisdiction, notwithstanding that the issue of
jurisdiction might be being considered by a state court or other tribunal. This
recommendation was considered to be particularly apposite where there were court
proceedings started other than at the place of arbitration.

5.5. The Committee recalls its own resolution of ten years ago:90

"… that the fact that a pending or forthcoming court case, whether civil or criminal, is
related to an arbitral proceedings should not, in itself, cause the discontinuance or
suspension of the arbitral proceeding."

5.6. The recommendation defines "Parallel Proceedings" in terms of parties and issues that are the
same or substantially the same, rather than in terms of the triple identity test (of identical
parties, causes of action and relief). This reflects the Committee view of lis pendens in
arbitration to be largely about case management rather than the application of a rigid
criteria.91

(2) Recommendation 2

5.7. Nevertheless, the Committee recognised the important policy objectives of arbitral efficiency,
the avoidance of conflicting decisions, and the avoidance of cosly duplication and oppressive
tactics, and therefore concluded that an arbitral tribunal should have a discretion to stay its
own proceedings in appropriate circumstances.

(3) Recommendation 3

5.8. The Committee's principal aim was to give guidance to arbitrators when faced with court
proceedings in a jurisdiction other than the place of arbitration. The Committee was mindful
that an arbitral tribunal should apply the law and respect the practice at the place of
arbitration, not least because the courts of that country will ultimately have the power to set
aside the tribunal's award and are very unlikely to allow inconsistent decisions on jurisdiction
to stand. Accordingly, if the law and practice at the place of arbitration prescribes that it is for
the tribunals to defer to the courts on issues of jurisdiction, then the tribunal should act
accordingly.

(4) Recommendation 4

5.9. As noted above, the Committee has sought principally to give guidance concerning the
situation such as that in Fomento, i.e. the respondent in the arbitration has commenced court
proceedings elsewhere. In such a situation, the Committee has given a strong
recommendation that the arbitral tribunal proceed to determine its own jurisdiction. This
recommendation is based on a number of considerations. First, the arbitral tribunal in most

90
Report of the ILA Sixty-Seventh Conference, Helsinki, 1996.
91
See also the conclusion of the Committee regarding the triple identity test with respect to res judicata, Final
Report on Res judicata and Arbitration, Report of the ILA Seventy-First Conference, Toronto, 2006, at paras 41-
49.
 25

jurisdictions is authorised and even obliged to determine its own jurisdiction. Second, the
arbitral tribunal often will be informed by the parties regarding the parallel court proceedings
abroad and will be able to give appropriate weight to a respondent’s arguments contesting
jurisdiction. Third, parallel court proceedings abroad may take a long time before coming to a
final decision and may provide compelling reasons not to stay the arbitration until such time.
Fourth, the recognition of a foreign decision on jurisdiction may not be available at the place
of arbitration. Fifth, a setting aside court at the place of arbitration or a court requested to
grant recognition or enforcement may still review the award for lack of jurisdiction and, in its
assessment, may take into account a conflicting court decision rendered abroad. There may
be some exceptional circumstances where the above approach is not appropriate, for example
where there is prima facie evidence that the claimant in the arbitration has taken a substantive
step in the foreign litigation thereby waiving its right to rely on the agreement to arbitrate. In
that situation, it may be more appropriate for the foreign court to determine whether such a
waiver has occurred pursuant to its procedural rules, and for the tribunal to stay its
proceedings pending the outcome of that issue.

(5) Recommendation 5

5.10. Where there are two parallel arbitrations raising the same or substantially the same issues, the
Committee concluded that the secondly constituted tribunal should give consideration to case
management issues. The Committee concluded that it would be wrong for the second tribunal
to proceed with its arbitration, blinkered to the existence of the other arbitration. This
recommendation is based on the consideration that, in the case of parallel arbitrations, there is
a real lis pendens situation because there is parallel jurisdiction and a policy need for
coordination in order to avoid conflicting awards. But the Committee does not recommend
that the rigid first-in-time rule as applied in many Civil Law jurisdictions should apply.
Instead, the tribunal should have considerable discretion to order a stay the arbitration on
such terms as it sees fit. This might be a stay of only some of the issues. It might be a stay for
a limited period, in order to avoid the successful application slowing down the other
arbitration unfairly.

(6) Recommendation 6

5.11. The Committee concluded that arbitral tribunals should have confidence to exercise case
management powers and be empowered to stay their own proceedings, even when the
situation did not fulfil the traditional criteria of lis pendens. The ultimate objective should be
to achieve a fair result as between the parties, and in some circumstances this may mean
waiting for the outcome of other proceedings. A possible situation where this might be
appropriate includes one where a tribunal hearing a dispute between an owner and contractor
might decide to suspend that arbitration until legal proceedings between the contractor and its
relevant sub-contractor have been determined. Or a tribunal hearing a dispute between two
parties in a string contract or long supply chain might decide that it would be right to await
the outcome of legal proceedings between the original seller or manufacturer and the original
buyer. Nevertheless, the Committee envisages such power being exercised very sparingly.

(7) Recommendation 7

5.12. Finally, the Committee sought to clarify that lis pendens is not generally considered to be part
of public policy and therefore need not be raised by an arbitral tribunal of its own motion. By
and large, the private interests of the parties are at stake and, furthermore, the arbitral tribunal
will be informed by the parties about parallel proceedings and will not be in a position to
have any such information. The Committee considered it important to note that a party that
seeks to raise issues relating to the effects of Parallel Proceedings should do so as soon as a
possible. The Committee was not minded, however, to recommend a deadline (e.g. before
taking a substantive step in the arbitration), because such effects may not become apparent
until some way through the arbitration.

B. RECOMMENDATIONS

5.13. The Committee recommends the following principles:

 26

1. An arbitral tribunal that considers itself to be prima facie competent pursuant to the
relevant arbitration agreement should, consistent with the principle of competence-
competence, proceed with the arbitration (“Current Arbitration”) and determine its own
jurisdiction, regardless of any other proceedings pending before a domestic court or
another arbitral tribunal in which the parties and one or more of the issues are the same or
substantially the same as the ones before the arbitral tribunal in the Current Arbitration
(“Parallel Proceedings”). Having determined that it has jurisdiction, the arbitral tribunal
should proceed with the arbitration, subject to any successful setting aside application.

2. Nevertheless, in the interest of avoiding conflicting decisions, preventing costly

duplication of proceedings or protecting parties from oppressive tactics, an arbitral
tribunal requested by a party to decline jurisdiction or to stay the arbitration on the basis
that there are Parallel Proceedings should decide in accordance with the principles set out
in paragraphs 3., 4. and 5. below.

3. Where the Parallel Proceedings are pending before a court of the jurisdiction of the seat of
the arbitration, in deciding whether to proceed with the Current Arbitration, the arbitral
tribunal should be mindful of the law of that jurisdiction, particularly having regard to the
possibility of annulment of the award in the event of conflict between the award and the
decision of the court.

4. Where the Parallel Proceedings are pending before a court of a jurisdiction other than the
jurisdiction of the seat of the arbitration, consistent with the principles of competence-
competence, the tribunal should proceed with the Current Arbitration and determine its
own jurisdiction, unless the party initiating the arbitration has effectively waived its rights
under the arbitration agreement or save in other exceptional circumstances.

5. Where the Parallel Proceedings have been commenced before the Current Arbitration and
are pending before another arbitral tribunal, the arbitral tribunal should decline
jurisdiction or stay the Current Arbitration, in whole or in part, and on such conditions as
it sees fit, for such duration as it sees fit (such as until a relevant determination in the
Parallel Proceedings), provided that it is not precluded from doing so under the applicable
law and provided that it appears that:

5.1 the arbitral tribunal in the Parallel Proceedings has jurisdiction to resolve the
issues in the Current Arbitration; and

5.2 there will be no material prejudice to the party opposing the request because of:
(i) an inadequacy of relief available in the Parallel Proceedings; (ii) a lack of due
process in the Parallel Proceedings; (iii) a risk of annulment or non-recognition
or non-enforcement of an award that has been or may be rendered in the Parallel
Proceedings; or (iv) some other compelling reason.

6. Also, as a matter of sound case management, or to avoid conflicting decisions, to prevent

costly duplication of proceedings or to protect a party from oppressive tactics, an arbitral
tribunal requested by a party to stay temporarily the Current Arbitration, on such
conditions as it sees fit, until the outcome, or partial or interim outcome, of any other
pending proceedings (whether court, arbitration or supra-national proceedings), or any
active dispute settlement process, may grant the request, whether or not the other
proceedings or settlement process are between the same parties, relate to the same subject
matter, or raise one or more of the same issues as the Current Arbitration, provided that
the arbitral tribunal in the Current Arbitration is:

6.1 not precluded from doing so under the applicable law;

6.2 satisfied that the outcome of the other pending proceedings or settlement process
is material to the outcome of the Current Arbitration; and

6.3 satisfied that there will be no material prejudice to the party opposing the stay.

7. The effects of Parallel Proceedings need not be raised on its own motion by an arbitral
tribunal. If not waived, such effects should be raised as soon as possible by a party.
 27

FINAL REPORT ON RES JUDICATA AND ARBITRATION

INTRODUCTION

1. This is the Final Report of the ILA International Commercial Arbitration Committee on
the topic of res judicata and arbitration. This Report should be read together with the
Committee’s Interim Report presented and adopted at the Berlin Conference in August
2004 (‘Interim Report’)92. In this Final Report, references will be made in footnotes to the
Interim Report, the content of which is incorporated in this Final Report.

2. The Committee has agreed upon certain Recommendations as to res judicata in relation to
international commercial arbitration. This Final Report provides a brief commentary on
each. This Final Report is followed by a list of relevant literature additional to the
literature cited in the Interim Report.

3. These Recommendations are the culmination of a four year study of res judicata by the
Committee, starting just before the New Delhi Conference in 2002. The
Recommendations have been discussed and agreed by the Committee at meetings in
Auckland (October 2004), Geneva (March 2005), Paris (May 2005), Prague (September
2005) and Zürich (January 2006) and discussed at the Conference Working Session in
Toronto (June 2006). A number of Committee members have made written comments or
have sent documentation regarding the project. Also, scholars and practictioners have sent
observations regarding the Interim Report. The Chairman and the Rapporteur wish to
thank all those who have contributed to this project.

4. In conducting this project, the Committee has noted that there was both academic and
practical interest and a need for analysis and recommendations regarding res judicata in
international commercial arbitration.

5. The Recommendations do not intend to be comprehensive, but only to cover some aspects
of res judicata in international commercial arbitration. The Committee believed that a
compromise was to be struck between those aspects addressed by the Recommendations
(where it considered that transnational rules could be developed) and other aspects (where
it perceived that development of transnational rules was premature and reference to
conflict rules was more appropriate)93.

6. In this respect, the Committee considered that, pursuant to Recommendation 2,

transnational rules can be developed regarding the following issues:

• a more extensive notion of res judicata than is known in some civil law jurisdictions
regarding claim preclusion, which not only covers the dispositive part of an arbitral
award but also the underlying reasoning, as in Recommendation 4.1

• a more extensive notion of res judicata than is known in civil law jurisdictions in
relation to issue estoppel, as in Recommendation 4.2

• the introduction of a standard of abuse of process and procedural unfairness, as in

Recommendation 5

• the procedural status of res judicata, as in Recommendations 6 and 7.

7. On the other hand, the Committee has refrained from formulating transnational rules in
relation to the following issues:

92
Published in the Report of the Seventy-first Conference, International Law Association, 2004, 826-861
(available from the International Law Association) and in pdf format at www.ila-hq.org .
93
Interim Report, p. 5 (page reference to the Report on the ILA website).
 28

• the definition of arbitral awards which qualify for res judicata effects

• res judicata effects of decisions of tribunals from different legal orders

• res judicata effects on third parties in using a more lenient “identity of the parties”
standard

• res judicata effects if the requirement of mutualtiy was to be abolished as in the

United States

• an extension of issue estoppel benefiting third parties as in the United States by

application of the doctrine of collateral estoppel.

8. The exclusion of those aspects identified in the preceding paragraph does not imply that
further development may not be needed. It only implies that the Committee considered
that it should not give guidance as this stage regarding any such development, because of
the complexity of those issues and in order not to preempt any such development.

9. The Recommendations concern the effect of an international commercial arbitral award

upon further or subsequent arbitration proceedings between the same parties94. Thus, they
concern both distinct arbitration proceedings, where the effects of a prior arbitral award
are raised in the subsequent arbitration, as well as the question as to res judicata effects
within the same arbitration where a prior award has been rendered which is invoked at a
later stage of the same proceedings (e.g., bifurcation of the arbitration proceedings).

10. These Recommendations are for the benefit of international commercial arbitrators faced
with res judicata issues. They are not directly addressed to state courts faced with res
judicata effects of arbitral awards in relation to jurisdiction, setting aside or enforcement
questions95, but they may constitute persuasive authority for domestic courts when
considering res judicata effects of international commercial arbitral awards.

11. However, international arbitrators may be faced with res judicata problems not only in
relation to prior arbitral awards but also in relation to prior state court judgments,
specifically regarding the existence of an arbitration agreement. Where a prior state
judgment is invoked in arbitral proceedings, arbitrators may have to determine the res
judicata effects of the prior judgment. Since the Recommendations do not deal with the
relationship between state courts and arbitral tribunals, they will equally not apply to the
question what the arbitral tribunal is to do when faced with a prior state judgment. Also in
this respect, arbitrators may consider that they should not automatically apply the res
judicata doctrine of the law governing the previous state judgment and/or of the
arbitration seat, but to take the Recommendations into consideration.

12. Although the Recommendations primarily follow a procedural approach to questions of

res judicata, they are not intended to bar alternative perspectives, as for instance
contractual characterizations such as interpretation of the agreement to arbitrate or
waiver, as means to reach results similar to those embedded in the Recommendations96.

13. The Committee recognized that confidentiality of awards may have an impact on res
judicata issues, but that this was less likely in further proceedings between the same
parties.

94
Interim Report, p. 3-4. Subsequent arbitration proceedings refer to different arbitration proceedings while
further arbitration proceedings refer to both subsequent proceedings and arbitration proceedings which
continue within the same arbitration proceedings in which the prior arbitral award was rendered (e.g., after a
partial final award).
95
For a discussion, see Interim Report, p. 4-5.
96
See Interim Report, p. 25.
 29

14. Finally, this Report does not separately address the issues identified at the end of the
Interim Report. The answers to those questions are incorporated in this Report and in the
Recommendations.

RECOMMENDATION 1: AWARDS AND EFFECTS

15. In defining res judicata in international commercial arbitration, Recommendation 1 does

not refer to domestic law nor does it use res judicata terminology. Both domestic law and
res judicata notions differ significantly as between jurisdictions and, for that reason,
Recommendation 1 uses the terminology of “conclusive and preclusive effects of arbitral
awards” to encompass both the positive and negative effects of awards (positive and
negative res judicata). Regarding the former, res judicata may be invoked by a claimant in
further proceedings to develop his case (i.e., to rely on previous findings). As to the latter,
res judicata works as a defense to stop relitigation of subject-matter, which has been
disposed of in a previous decision. The terminology of conclusive and preclusive effects
of arbitral awards has the added advantage in that it covers the full scope of application of
the doctrine of res judicata and similar concepts (see Recommendations 4 and 5: claim
estoppel, former recovery, issue estoppel and abuse of process).

16. In this respect, res judicata is to be distinguished from97:

• invoking previous arbitral awards rendered between different parties as persuasive

precedent

• correction of arbitral awards rendered between the same parties in order to have an
error in an arbitral award corrected, which in many countries is covered by specific
rules in the applicable arbitration law

• interpretation of arbitral awards rendered between the same parties in order to obtain
a clarification of the meaning and scope of such arbitral awards, which in many
countries is covered by specific rules in the applicable arbitration law

• supplementation of arbitral awards rendered between the same parties in order to

obtain an additional award regarding claims formulated during the arbitration
proceedings but not dealt with in the arbitral award (infra petita), which in many
countries is covered by specific provisions in the applicable arbitration law

• revision of arbitral awards rendered between the same parties on the basis of facts
discovered after the rendering of the award that were unavailable at the time of
rendering of the award and which the party invoking the facts was unaware of and
could not reasonably be expected to have been aware of at the time the award was
made, which in some countries is covered by specific provisions in the applicable
arbitration law

• remission of arbitral awards rendered between the same parties to the arbitral tribunal
for reconsideration in order to avoid partial or complete setting aside, which in some
countries is covered by specific provisions of the applicable arbitration law.

17. The Committee’s Recommendations apply only to international commercial arbitration. It

is up to domestic courts to determine res judicata effects regarding domestic arbitrations.
However, these Recommendations may also be useful in a domestic arbitration context
and the Recommendations may inform arbitrators in domestic cases as well as domestic
courts when seized of a res judicata question regarding a domestic award.

18. Because law and practice in different jurisdictions do not have uniform standards for the
characterization of different forms of awards and procedural decisions and no

97
See in relation to public international law, Bowett, D.W., Res judicata and the limits of rectification of
decisions by international tribunals, Afr.J.Int.Comp.L., 1996, 577-591.
 30

international consensus has emerged or is likely to emerge in the near future regarding
characterization of awards and procedural orders, the Recommendations refrain from
defining such awards or procedural decisions and leave that to the lex arbitri. Thus, the
law of the place of arbitration of the prior award by and large will govern the question
whether determinations in the prior award, in view of the nature of the award, may qualify
for conclusive and preclusive effects.

19. Notwithstanding the reservation in the preceding paragraph and in order to give some
guidance, it may be added that the Recommendations are intended to apply to partial final
awards, final awards (including awards on agreed terms98) and awards on jurisdiction.
Only these awards seem to qualify for conclusive and preclusive effects, because they
contain final determinations. Contrary to § 13 Restatement Second Judgments, which
gives res judicata effects to issues of fact and law contained in judgments that are not
final, the Recommendations are not intended to cover any such preliminary or provisional
determinations since this solution does not correspond to practice and perceptions in
international commercial arbitration.

20. As to awards on jurisdiction99 and subject to the applicable law, the Recommendations do
not exclude giving such awards conclusive and preclusive effects100. An award declining
jurisdiction entails a decision that there is no agreement to arbitrate or that the dispute
does not fall within the ambit of the arbitration agreement, and accordingly the general
jurisdiction of domestic courts may revive. Positive rulings on jurisdiction in which an
arbitral tribunal accepts jurisdiction, may also constitute res judicata. Of course, these
rulings may be reviewed in setting aside proceedings, but that creates a question of
validity and res judicata is predicated on the assumption that an award is valid. Either the
setting aside court will confirm the arbitrators’ decision on jurisdiction or the setting aside
court will nullify the award and in that case there is no longer a valid award and no res
judicata issue. The problem arises, then, primarily if domestic courts in countries in
applying article II of the New York Convention deny arbitral jurisdiction and assume
jurisdiction themselves. If a setting aside court accepts arbitral jurisdiction, there will be a
situation of conflicting decisions on jurisdiction, but that does not imply that the award
has no res judicata effect. Under those circumstances, lis pendens rules may not have
been able to avoid conflicting decisions and a party may invoke res judicata of the arbitral
decision on jurisdiction, which will be followed in the country of the place of arbitration
and probably not in the country where the conflicting judgment denying arbitral
jurisdiction was made. In third countries, there will be the question whether under article
V, § 1 a) New York Convention the arbitral award on jurisdiction can be recognized (see
under 3.1 of the Recommendations as to requirements for res judicata).

21. Furthermore, the Recommendations have not attempted to deal with any single situation
which may arise. Situations such as awards declaring that the request for arbitration is
withdrawn (with or without prejudice) or that the request was premature, will have to be
dealt with on a case-by-case basis (compare Restatement Second Judgments § 20 where
solutions to these problems are given) and have been left to further development.
Similarly, the question whether the granting of a primary claim for relief bars the
relitigation of an alternative claim is not resolved by the Recommendations, because it is
primarily a question of interpretation of the prior award.

22. The Recommendations generally are not intended to be applicable to provisional awards,
awards regarding interim measures or procedural decisions, and the characterization of

98
See G.R. Shell, Res judicata and collateral estoppel effects of commercial arbitration, 35 UCLA L.Rev. 659
(1988) emphasizing the limited issue estoppel effects of consent awards as well as of default awards (at p.
648) and unreasoned awards (at p. 660). Similar observations may apply regarding awards based on “amiable
composition” (compare Shell at p. 659).
99
In some jurisdictions, an arbitral tribunal may give procedural orders that the arbitration may proceed on
the basis that the tribunal has jurisdiction (subject to confirmation in an award on the merits) and these
preliminary orders do not constitute res judicata in the sense that the tribunal may still dismiss the case for
want of jurisdiction, for instance on the basis of new evidence.
100
For a discussion, see Interim Report, pp. 7 and 18.
 31

these awards and decisions is to be governed by the law of the seat of the prior
arbitration.

RECOMMENDATION 2: TRANSNATIONAL APPROACH

23. Some aspects of res judicata as set forth in the Recommendations are to be characterized
autonomously and are to be governed by transnational substantive or procedural rules and
not by domestic or transnational conflict rules.

24. The Interim Report had indicated that there were important differences between the
various legal systems regarding res judicata effects of judgments and arbitral awards.
Thus, the Committee was faced with the question whether and to what extent those
differences were acceptable in arbitration and were to be coordinated by appropriate
conflict rules or whether and to what extent uniform transnational rules should be
developed to the benefit of international commercial arbitration.

25. Res judicata regarding international arbitral awards should not necessarily be equated to
res judicata effects of judgments of state courts and, thus, may be treated differently than
res judicata under domestic law. International arbitral awards in accordance with the
Recommendations are to be treated differently than judgments. This is due to the
differences between international commercial arbitration and domestic court dispute
settlement, as well as to the international character of arbitration, which should not be
reduced to domestic notions regarding res judicata that are valid in a domestic setting but
are hardly appropriate in an international context101.

26. At its meeting in Auckland on October 26, 2004, the Committee opted for a mixed model
under which transnational rules on certain aspects of res judicata would be adopted and
remaining issues were to be referred to domestic law under an acceptable conflict rule.

27. In reaching this conclusion, the Committee took into consideration the following
arguments. First, a conflict of laws approach raises difficult characterization issues as to
the substantive or procedural nature of conclusive and preclusive effects. Second, a
conflict of laws perspective implies a difficult choice between three different legal
systems: the law of the place of arbitration of the proceedings leading to the prior award;
the law of the place of arbitration of the proceedings where res judicata is invoked; and
the law governing the contract102. Third, the Committee believed that, for some aspects of
res judicata, a uniform approach was feasible, which would by-pass the difficult conflict
of laws issues mentioned above and would also generally provide more satisfactory
answers assuring procedural efficiency and finality than answers provided by domestic
law.

28. The mixed model can be found in the Committee’s Recommendations. Recommendations
3 thru 7 contain the transnational rules, which in the opinion of the Committee may be
appropriate and beneficial in international commercial arbitration. Aspects other than
those covered by the Recommendations are to be governed by domestic law referred to by
a conflict rule but, in view of the complexity of the issue, no specific recommendation is
made regarding the characterization of res judicata and the choice as between the three
competing conflict rules mentioned above.

101
This departs from § 84 (1) Restatement Second Judgments stating that awards should have the same legal
effects as judgments. First, the Restatement has not addressed international commercial arbitration and has
been written primarily from a US domestic perspective. Further, the Restatement from a comparative law
perspective contains the most extensive approach to res judicata. This implies, on the one hand, that the US
model is interesting for these Recommendations, but, on the other hand, that a proposition that awards are to
be equated to judgments may be arguable for a liberal set of rules regarding effects of judgments but are not
necessarily suitable on a worldwide level where more restrictive notions of res judicata exist.
102
See Hascher, D., L’autorité de la chose jugée des sentences arbitrales, Trav. Com. fr. dr. int. privé, 2000-
2002, Paris, Pedone, 2004, 18-21.
 32

RECOMMENDATION 3: REQUIREMENTS FOR CONCLUSIVE AND PRECLUSIVE

EFFECTS

29. The Committee identified five traditional conditions for arbitral awards to have
conclusive and preclusive effects:

• The prior award must be final and binding and capable of recognition in the country
where the arbitral tribunal of the subsequent arbitration proceedings has its seat

• The arbitration proceedings in which the res judicata issue is raised, must pertain to
the same legal order as the prior award

• Identity of the subject matter

• Identity of the cause of action

• Identity of the parties

These conditions are generally thought to be cumulative.

30. As the discussion below will show, the Committee decided to retain four of the five
conditions above, but not the requirement as to the “same legal order”.

31. The conditions above are not exhaustive. For instance, the Recommendations do not deal
with the moment at which arbitral awards constitute res judicata103. Although arbitral
awards may constitute res judicata between the parties as of the time the award is
rendered, sent to or received by the parties or at such time as means of recourse can no
longer be instituted against the award (depending on the applicable law), the
Recommendations proceed on the basis that the award can no longer be challenged before
domestic courts at the place of arbitration. This implies that the Recommendations apply
as of such time as arbitral awards have become final and binding at the place of
arbitration (i.e., that no challenge can be brought against any such awards or that a
challenge has been denied by a final decision of a domestic court at the place of
arbitration).

32. Recommendation 3.1, thus, proceeds on the basis that arbitral awards are valid and have
conclusive and preclusive effects in accordance with the lex arbitri of the prior arbitral
award.

33. In international cases, the prior award will also need to be recognized at the place of
arbitration of the further arbitration proceedings, if different from the place of arbitration
of the prior award. Recommendation 3.1, thus, also proceeds on the basis that the prior
award can be recognized abroad and will have res judicata effects until such effects are
suspended in recognition proceedings. In this regard, Recommendation 3.1 intends to
provide a link with the New York Convention which proceeds on the assumption of a
single legal system determining the validity of arbitral awards (i.e., at the place of
arbitration) and provides in article V, § 1 (e) for a coordination mechanism regarding
recognition of arbitral awards which are subject of setting aside proceedings104.
Recommendation 3.1 suggests following the global standard of the New York
Convention, which implies that those validity questions will not come into play if no
challenge has been brought or when challenge proceedings have finally been dismissed at

103
See Interim Report, p. 6.
104
Other grounds for refusal of recognition may, of course, be available under Article V of the New York
Convention. Also, recognition may be based on the more favourable treatment provision of the New York
Convention as well as on other international conventions or domestic recognition rules. In the context of the
recognition of the prior award in the subsequent arbitration proceedings, the second arbitral tribunal may, for
instance, have to determine whether there was an arbitration agreement regarding the proceedings leading to
the prior award, whether due process was observed, whether the subject matter was capable of settlement by
means of arbitration or whether there was a violation of public policy.
 33

the place of arbitration. On the other hand, a prior award which is set aside at the place of
arbitration by a final judgment, will no longer be valid, not be capable of recognition and,
thus, no longer produce conclusive and preclusive effects105.

34. The second requirement (“same legal order”) recognizes that arbitral awards rendered
between States, which are deemed awards of a public international law character, do not
have res judicata effects in international commercial arbitration and vice versa106.
Generally, this requirement does not create problems in practice because this situation
does not occur frequently.

35. The requirement is, however, more relevant in the context of the relationship between
state courts and international commercial arbitral tribunals which – the Committee
submits – both belong to the same legal order since both are dealing with a relationship
between the parties which is governed by private law (and not by public international
law). Since the Committee has refrained from expressing recommendations to state courts
or to arbitral tribunals faced with a prior state court judgment, this requirement needs no
further discussion. However, to the extent that state courts or arbitral tribunals may infer
indirect support from these Recommendations (see above), the requirement of the same
legal order is to be interpreted as expressing the view that state courts and arbitral
tribunals pertain to the same legal order and that this requirement is met.

36. The preceding paragraphs express traditional views which have recently been challenged
by the rise of investment arbitrations where foreign investors under Bilateral Investment
Treaties (“BITs”) have a direct cause of action against States for violation of investment
protection by the State giving rise to State responsibility. This has created novel issues
regarding conclusive and preclusive effects of arbitral awards. The many BITs and the
wide scope of application regarding the notion of “investor” have created possibilities for
treaty shopping and parallel arbitrations, which may raise res judicata issues. These issues
include the application of the identity of the causes of action and identity of the parties (as
in the Lauder/CME/Czech Republic arbitrations)107. The Recommendations do not
address these issues, because they pertain more to public international law than to
international commercial arbitration or at least to the hybrid legal order of BIT
arbitrations108. However, the Recommendations may still have some indirect relevance for
BIT arbitrations.

37. The Recommendations also do not directly envisage parallel arbitrations between a BIT
arbitration and a commercial arbitration. To the extent different parties are involved, there
would not be res judicata under Recommendation 3.4, but the Recommendations do not
exclude further development and refinement regarding these issues.

38. To the extent that a State is also the counterpart to the contractual relationship, there
would not be a Recommendation 3.4 problem. However, parallel BIT and commercial
arbitrations would still face the traditional same legal order requirement (as well as the
same cause of action requirement).

39. Similarly, there may be an impact of European Union law, which may also create a same
legal order impediment to res judicata.

40. In order not to prejudge further developments on the subjects above, the Committee
decided not to include the same legal order as a requirement in its Recommendations.
That decision was also inspired by the complexity of the issues raised as well as the
Committee’s impression that a process of permeation and interaction between different
legal orders is only beginning and may result in the legal community no longer viewing
private law and public law as operating in separate legal orders.

105
But see footnote 13 for exceptions.
106
Interim Report, p. 21.
107
See Interim Report, pp. 21-24.
108
The Committee understands that the ILA Committee on Law of Foreign Investment is studying res
judicata of BIT awards.
 34

41. The Recommendations maintain the traditional triple identity test (identity of the claims,
of the causes of action and of the parties).

42. For an arbitral award to have conclusive and preclusive effects, the same claim or relief
must be sought in the further arbitration proceedings. Conversely, new claims and new
prayers for relief in principle will not be barred by a prior award. Recommendation 3.2
expresses a principle that is accepted both in the civil and common law and does not seem
to be controversial. However, under Recommendation 5, a party may still be barred from
litigating new claims and relief if any such litigation constitutes procedural unfairness or
abuse.

43. For an arbitral award to have conclusive and preclusive effects, the claims or relief sought
in further arbitration proceedings must be based on the same cause of action109 as in the
prior arbitration proceedings (Recommendation 3.3). Conversely, a claim or relief based
on a different cause of action is not barred by res judicata. This rule is also
uncontroversial both in civil and common law jurisdictions. Again, Recommendation 3.3
is subject to the procedural unfairness or abuse defense of Recommendation 5.

44. For an arbitral award to have conclusive and preclusive effects in further arbitration
proceedings, it must have been rendered between the same parties as the parties in the
further arbitration proceedings (Recommendation 3.4). This principle is by and large also
generally accepted. Conversely, if there are different parties in the further arbitration
proceedings, the prior award will not have conclusive and preclusive effects on a different
party.

45. The Recommendations refrain from formulating new rules in relation to the requirement
of the identity of the parties.

46. First, they do not formulate a requirement as to mutuality (i.e., that the parties are only
identical if they act in the same capacity in the prior and further arbitration proceedings).
Although many jurisdictions, except for the United States, require mutuality110, this
requirement has not been included expressly in order not to block further developments if
so required.

47. Second, the Recommendations also refrain from formulating definitions as to the notion
of parties. They do not seek to make any comment on the common law concept of
“privies”, save to note that this concept is applied far less often than civil lawyers fear. In
addition, there are too many different situations in relation to the question whether a
party, by virtue of assignment, succession, close relationship or otherwise, is bound to
obligations of a predecessor that these issues are left to the applicable law. Moreover,
different jurisdictions have sometimes very different rules regarding succession of title
that it is best that these aspects are left to the applicable law.

48. The Committee notes that, in practice, important and delicate problems arise in relation to
the identity of the parties, particularly in relation to groups of companies and BIT
arbitrations. These issues are, however, too complex to deal with in a report which is
focused on res judicata. On the other hand, Recommendation 3.4 is not intended to
preempt further development and refinement.

49. In relation to the issue discussed in the previous paragraph, the Committee has considered
§ 39 Restatement Second Judgments, which provides that a person not a party to an action
but controlling or substantially participating in the control of the presentation on behalf of
a party is bound by the determination of issues decided as though he were a party.
However, the Committee assessed that international acceptance of any such
recommendation would be weak and, thus, to be omitted. Moreover, different countries

109
Cause of action may be construed broadly as all facts and circumstances arising from a single event and
relying on the same evidence which are necessary to give rise to a right to relief (see Interim Report, p. 7-8.
110
Interim Report, p. 9-10 and 13.
 35

have different methods and theories for identification of third parties to a legal action,
which do not necessarily have the same requirements and do not lead to the same
conclusion (e.g., alter ego, agency, protection of legitimate expectations). Furthermore,
the most important application of identification questions is in the field of piercing the
veil of corporations and raises fundamental issues of international corporate law regarding
limited liability of subsidiaries in multinational corporate groups, which – the Committee
believed – could not be treated within the scope of the res judicata project and deserved
better and more elaborate treatment elsewhere.

50. Finally, the application of the identity of parties test in recent BIT arbitrations also
warrants extensive treatment, but exceeded the scope of the Committee’s project on res
judicata. All this does not, however, exclude that further legal developments can take
place in relation to the identity of the parties test, but guidance regarding these
developments will not be found in the Recommendations.

RECOMMENDATION 4: SCOPE OF CONCLUSIVE AND PRECLUSIVE EFFECTS

51. Recommendation 4 deals with claim estoppel, former recovery and issue estoppel.

52. As to the first, they endorse a more extensive notion of res judicata, which is also
followed in public international law111, under which res judicata not only is to be read
from the dispositive part of an award but also from its underlying reasoning112. More
restrictive notions of the scope of res judicata, limiting conclusive and preclusive effects
to the dispositive part of awards, have not been followed in the Recommendations,
because the Committee considered the latter notion to be overly formalistic and literal. If
it is clear from an arbitral tribunal’s reasoning that the dispositive part is to be interpreted
in a way to bar further or subsequent arbitration proceedings, claim preclusion ought to
follow for the sake of arbitral efficiency and finality. Claims estopped on the basis of the
same cause of action by virtue of the res judicata effects of both the dispositive part of the
award as well as its underlying reasoning prevent that some evidence or legal argument
regarding that cause of action being reargued.

53. Rules on claim estoppel apply not only to claims but also to counterclaims. The
Recommendations do not expressly reflect this because it seems evident that, since
counterclaims are also claims, claim estoppel also applies to them. This rule has also been
adopted by § 23 of the Restatement Second Judgments.

54. The Recommendations also endorse claim estoppel if it relates to former recovery.
Further relief than the one formerly recovered or obtained cannot be claimed if it is based
on the same cause of action.

55. The Recommendations have not taken a position regarding claim preclusion in relation to
claims related to the same transaction or connected transactions. In the United States,
such claim preclusion is accepted, but the Committee considered that it could not yet
recommend that it be extended to other jurisdictions. In this respect, § 24 (2) Restatement
Second Judgments formulates an open-ended standard under which transactions and
series of connected transactions are to be determined pragmatically, giving weight to such
considerations as whether the facts constituting a transaction or series of connected
transactions are related in time, space, origin, or motivation, whether they form a
convenient trial unit, and whether their treatment as a unit conforms to the parties’
expectations or business understanding or usage. The fact that the Recommendations have
not adopted a test similar to § 24 (2) Restatement Second Judgments does not, however,
imply that the Committee rejected any such standard, but only that the Committee
considered it premature to adopt it as a transnational principle in international arbitration.

111
Interim Report, p. 24.
112
However, it will not extend to subsidiary and collateral matters of fact or law and to obiter dicta (see
Interim Report, p. 8).
 36

56. Furthermore, Recommendation 4.2 endorses common law concepts of issue estoppel113,
which for reasons of procedural efficiency and finality, seem to be acceptable on a
worldwide basis, notwithstanding the fact that they are yet unknown in civil law
jurisdictions114. To accept issue preclusion, it is required that a particular issue of fact or
law has actually been arbitrated and determined by the award and that the determination
of the issue was essential or fundamental to the arbitral award. Conversely, if an issue was
not the subject of debate between the parties, determined in the prior award or incidental
in the arbitral tribunal’s determination, it would not be a bar to further or subsequent
arbitration proceedings in relation to that issue.

57. Issue estoppel, under the conditions above, not only applies regarding the same claim but
also regarding different claims in further arbitral proceedings.

58. The Committee acknowledges that issue estoppel may be subject to certain exceptions as
indicated in § 28 Restatement Second Judgments (e.g., unrelated claims in both
proceedings, changes in the law, different burden of proof regarding different claims,
fairness in the proceedings), but has chosen not to take a position as to possible
exceptions.

59. However, similar to the requirement of mutuality and the identity of the parties test, the
Committee was reluctant to follow United States law in relation to extending issue
estoppel to third parties (collateral estoppel) (see § 29 Restatement Second Judgments),
by which a third party in subsequent proceedings may invoke issue preclusion for its
benefit against a party to prior proceedings115. The Committee considered that there was
insufficient worldwide support for any such extension and that third party effects of issue
estoppel at this stage is to be left to further legal development.

RECOMMENDATION 5: PROCEDURAL UNFAIRNESS

60. The Recommendations have also chosen a cautious approach to procedural unfairness or
abuse116. In arbitration, party autonomy to a large extent reigns and parties and their
counsel should be given wide discretion in determining their strategies. Costs,
psychological influences, relational elements, cross-cultural considerations,
persuasiveness, political constraints and other aspects may be responsible for not
instituting certain claims or for not raising certain causes of action or issues of fact or law,
and caution is in order to avoid res judicata amounting to a patronizing review of what
parties and counsel ought to have done in managing their case.

61. On the other hand, policy objectives of efficiency and finality can also be taken into
account to protect respondents from being exposed to further arbitration if a claimant fails

113
Interim Report, pp. 8 and 12-13. These Recommendations follow the approach of R.W. Hulbert (Arbitral
procedure and the preclusive effect of awards in international commercial arbitration, 7 Int. Tax & Bus. Law.
155 ff. (1989)) advocating that arbitration is not to be treated differently from domestic judgments in terms of
issue estoppel. In doing so, the contractual model of Shell (Res judicata and collateral estoppel effects of
commercial arbitration, 35 UCLA L.Rev. 623 ff. (1988)) and the exclusion model of G. Sanders (Rethinking
arbitral preclusion, 24 L. & Pol. Int. Bus. 101-121 (1992)) are rejected. Shell’s model has been considered as
being too conjectural as to the parties’ intent regarding issue estoppel and Sanders’ theory as being contrary to
finality of arbitration.
114
A decision of the Swedish Supreme Court indicates that broader concepts regarding preclusive effects of
arbitral awards are also acceptable in a civilian context. In that case, it was accepted that dismissal of a set-off
defense did not entitle a party to file fresh arbitration proceedings to have its case retried again. Under
traditional civil law notions of res judicata, a dismissal of a set-off defense would only constitute res judicata
as to the amount of the alleged set-off, but would not prevent having new proceedings to the extent that a
claim exceeds the amount invoked for set-off purposes. The Swedish Supreme Court went further and
accepted that the claim filed in a second arbitration to the extent it exceeded the amount of the set-off claimed
in the prior arbitration was also covered by res judicata and, thus, accepted in this specific context an
application of issue estoppel. For a more extensive discusssion of this case, see Söderlund, C., Lis pendens,
res judicata and the issue of parallel judicial proceedings, 22 J.Int.Arb., 2005, 317-318.
115
Interim Report, p. 12.
116
For a description, see Interim Report, pp. 8-9, 13, 24 and 27.
 37

to raise claims, causes of action or issues of fact or law in prior proceedings117. Also,
there is a legitimate public interest in having an end to arbitration as well as an end to the
supportive and corrective powers of domestic courts supervising and reviewing the
arbitral process and assisting at the recognition and enforcement stage.

62. The doctrines of procedural fairness and abuse, in the view of the Committee, provide an
acceptable compromise regarding the private and public interests at stake. The open-
textured nature of these doctrines give arbitral tribunals wide powers to assess, on the
basis of the specific circumstances of the case, whether there is procedural unfairness
and/or abuse. Finally, the compromise between a claimant’s right to have access to justice
and a respondent’s right to have a fair trial in conformity with constitutional and human
rights standards (as under Article 6 of the European Convention on Human Rights) also
seems to be acceptable if arbitral tribunals exercise their powers with wisdom and
restraint.

63. Procedural unfairness and abuse equally apply to counterclaims, for instance if the
relationship between the counterclaim and the claim is such that successful prosecution of
the second action would nullify the initial arbitral award or would impair rights
established in the initial action (see the wording of § 22 Restatement Second Judgments).
If, however, there are acceptable reasons for late filing of counterclaims, which can no
longer be filed in the first proceedings (as was the case with the preclusion of filing new
claims after signing of the Terms of Reference under the 1988 ICC Arbitration Rules), a
second arbitration may have to be instituted to deal with the counterclaim. The first
proceedings would, then, not constitute res judicata as to the second proceedings.

64. The limited acceptance of procedural unfairness or abuse regarding res judicata does not
imply that the Committee endorses a general theory of procedural unfairness or abuse in
international commercial arbitration. The broader ramifications of any such theory need
further research including its characterization (contractual and/or procedural) and its
scope of application which exceeds the ambit of the res judicata project.

65. Finally, the Committee accepts that there ought to be exceptions to conclusive and
preclusive effects of arbitral awards, for instance if the award was procured by fraud.
Other exceptions may be left to the lex arbitri (e.g., revision of awards by means of
recourse such as the requête civile or tierce opposition under which in certain
circumstances discovery of new documents may provide a way to reopen a case118 or
where a third party who is affected by an award may be entitled to reopen a case) or the
lex causae which provide the background under which the parties have had their dispute
arbitrated.

RECOMMENDATIONS 6 AND 7: PROCEDURAL STATUS OF CONCLUSIVE AND

PRECLUSIVE EFFECTS

66. The Recommendations suggest that a distinction is to be made between the conclusive
and preclusive effects of arbitral awards in relation to their characterization. Their
conclusive effects pertain much more to the substance of the dispute on which a succesful
claimant may build further arbitral proceedings. Thus, it is recommended that a claimant
can invoke the conclusive effects of an award in further arbitral proceedings as long as

117
This situation is to be distinguished from late filing of new claims and late submission of amendments to
causes of actions and issues, if the arbitral tribunal were to bar these amendments from being litigated. In
exercising their powers, tribunals in further or subsequent proceedings will have to balance claimant’s due
process rights against respondent’s right not to have this relitigated for reasons of procedural unfairness or
abuse.
118
In this respect, reference can be made to established practice in the WIPO Domain Name Administrative
Panel Decisions which, under common law precedents, accept relitigation of a dispute in cases of serious
misconduct, perjured evidence, discovery of credible and material evidence which could not have reasoably
foreseen or known at trial and breach of natural justice or due process (see Case No. D2001-1041, Jones
Apparel Group Inc. v. Jones Apparel Group.com at www.wipo.int which discusses previous cases).
 38

this is permissible under the rules applicable to the arbitration (arbitration rules,
applicable law at the seat).

67. The preclusive effects on the other hand pertain more to procedure and, thus should be
raised as soon as possible after a party has become aware of or should have been aware of
the prior award119. Since preclusion is a bar to arbitration, efficiency dictates that this is
raised as soon as possible.

68. In this respect, the Committee does not express an opinion as to the question whether
preclusive effects of a prior arbitral award go to jurisdiction or to admissibility120.
Jurisdictions give different answers to this question and the Committee prefers to leave
this question to the applicable law. On the other hand, the question is to a large extent
moot since under both characterizations a preclusion defense is to be raised early in
proceedings.

69. The Committee does not believe that conclusive or preclusive effects of arbitral awards
pertain to public policy121. These effects primarily relate to the parties’ interests in having
final, fair and efficient arbitral proceedings. Public interest is limited to the costs and time
related to the supportive and reviewing powers of domestic courts. Furthermore, as a
consensual and private process, arbitration does seem to be distinguishable from court
proceedings, where some jurisdictions consider that res judicata belongs to public policy.

70. The conclusion of the preceding paragraph implies that conclusive and preclusive effects
of arbitral awards are not to be invoked by arbitrators on their own motion and that their
application is to be left to the initiative of the parties122. Also, the parties may waive the
application of conclusive and preclusive effects of arbitral awards.

71. The Recommendations do not deal with review by domestic courts of the second award in
the context of setting aside or enforcement proceedings in circumstances where the
second award is said to have violated the preclusive effects of the first award. However,
the fact that Recommendation 7 is based on the principle that res judicata does not pertain
to public policy123 and can be waived by a party, the Recommendations implicitly call for
restraint by setting aside and enforcement courts. To the extent that waiver is accepted,
the issue would not arise. If a party raises res judicata in the further arbitration, but is
overruled by the arbitral tribunal, it will be up to the reviewing domestic court to assess
whether this amounts to one of the grounds for setting aside or for refusal of enforcement
under the rules applicable in that court124.

72. Finally, the Committee does not see reasons for having specific recommendations
regarding matters of evidence regarding conclusive and preclusive effects of arbitral
awards and, thus, recommends that general discretion given to arbitral tribunals
concerning evidence.

Professor Filip De Ly Audley Sheppard

Chairman Rapporteur

119
Given the identity of party requirement, it is likely that in most cases, a party will know of or been
expected to know of the prior award.
120
Interim Report, p. 28.
121
See Interim Report, p. 16.
122
See Interim Report, p. 16 and Söderlund, C., l.c., 304.
123
The European Court of Human Rights has held that res judicata is a fundamental principle in a democratic
society and that disrespect by States may violate Article 6 of the European Convention on Human Rights
guaranteeing fair trial (see for instance ECHR, January 12, 2006, Kehaya and others v. Bulgaria available at
www.echr.coe.int/echr). However, the Court’s case law relates to court judgments and it may be doubted
whether and to what extent this applies to a consensual process such as arbitration.
124
See Hascher, D., l.c., 28-32 for an analysis under French law.
 39

LIST OF ADDITIONAL LITERATURE

Brant, L., L’autorité de la chose jugée en droit international public, Paris, L.G.D.J., 2003

Brekoulakis, S., Arbitral Effect and Third Parties in International Arbitration: Res Judicata Revisited,
16 Am. Rev. Int.Arb. (2005) (forthcoming)

Casad, R.C., Issue Preclusion in the law of Spain, Cosa Juzgada Positiva, in Law and Justice in a
Multistate World, Esaays in honor of Arthur T. Von Mehren, Ardsley NY, Transnational, 2002, 595-
608

Gallagher, N., Parallel Proceedings, res judicata and lis pendens: problems and possible solutions, in
Pervasive Problems in International Arbitration, 20th Anniversary Conference Of School of
International Arbitration, L. Mistelis and J.D.M. Lew (ed.), The Hague, Kluwer, 2006, 329-356

Hascher, D., L’autorité de la chose jugée des sentences arbitrales, Trav. Com. fr. dr. int. privé, 2000-
2002, Paris, Pedone, 2004, 17-36

Horn, N., Inflationsverluste des Geldgläubigers als Verzugsschaden und Res Judicata in
internationalen Schiedsverfahren, SchiedsVZ 2006, 17-21

Hulbert, R.W., Arbitral Procedure and the Preclusive Effect of Arbitral Awards in International
Commercial Arbitration, 7 Int’l Tax and Bus. Lawyer 158-200 (1989)

Sanders, G., Rethinking Arbitral Preclusion, 24 Law & Policy Int’L Bus. 101-121 (1992)

Sheppard, A., The scope and res judicata effect of arbitral awards, in Arbitral Procedure at the Dawn
of the new Millenium, Cepani-Series No. 5, Brussels, Bruylant, 2005, 263 ff.

Sheppard, A., Res judicata and estoppel, in Parallel State and Arbitral Procedures in International
Arbitration, Dossiers, ICC Institute of World Business Law, Cremades, B. and Lew, J. (ed.), Paris, ICC
Publishing, ICC Publication No. 692, 2005, 219-242

Söderlund, C., Lis pendens, res judicata and the issue of parallel judicial proceedings, 22 J.Int.Arb.
301-322 (2005)

Wagner, G., Bindung des Schiedsgerichts an Entscheidungen anderer Gerichte und Schiedsgerichte, in
Die Beteiligung Dritter an Schiedsverfahren, Böckstiegel, K.H., Berger, K.P. and Bredow, J. (ed.),
Schriftenreihe der Deutschen Institution für Schiedsgerichtsbarkeit, Volume 16, Cologne, Heymanns,
2005, 7-53

Professor Filip De Ly, Chairman

and Audley Sheppard, Rapporteur.