Author: Tom Childs*
Published: October 2015
The issuance of a “final” arbitral award may only mark the midway point in an international commercial dispute. The losing party (the award-debtor) can bring proceedings to set aside the award before the courts in the country where the arbitration was seated, while the winning party (the award-creditor) may have to apply to enforce the award before the courts in one or more other countries if the award-debtor fails to pay. In many cases, the same legal and factual issues relating to the validity and enforceability of the award will arise in each of these post-award proceedings.
Courts in the U.S. and England regularly give effect to the judgments of foreign courts, applying well-developed rules on the recognition of foreign judgments and claim or issue preclusion. These rules are intended (among other things) to promote harmony and consistency in judicial outcomes, to conserve judicial resources, and to achieve finality by preventing a party from relitigating the same issues that it has already litigated and lost before another court – i.e., from taking multiple bites at the apple.
In the context of post-award proceedings, however, the granting of effect to a foreign court’s judgment may arguably encourage forum shopping, violate a state’s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (commonly known as the New York Convention), and undermine the parties’ intent to have their dispute decided in a neutral forum of their choosing. This article surveys the current approach in the U.S. and England with respect to the effect of foreign post-award judgments. It then analyzes the principal criticisms of this approach and suggests a possible adjustment.
II. CURRENT APPROACH IN THE U.S. AND ENGLAND
Courts in the U.S. and England generally give effect to foreign judgments enforcing, refusing to enforce, confirming or setting aside an international arbitral award. However, the scope of the effect that they give to such judgments differs depending on whether the particular judgment in question was rendered by a court at the seat of the arbitration (a “primary jurisdiction” court) or by a court in any other country (a “secondary jurisdiction” court). By contrast with the approach in the U.S. and England, courts in France do not give any effect to foreign postaward judgments, regardless of which court rendered the judgment.
A. Judgments of Secondary Jurisdiction Courts
Where the foreign judgment was rendered by a secondary jurisdiction court, U.S. and English courts grant issue-preclusive effect to the foreign judgment under the forum’s generally applicable rules on the recognition of foreign judgments and issue preclusion (also known as collateral estoppel or issue estoppel). These rules require a two-step analysis. The first step is to determine whether the foreign judgment is entitled to recognition in the forum. Generally speaking, recognition is granted unless it would violate the forum’s public policy or the foreign court lacked jurisdiction. If the foreign judgment is entitled to recognition, the second step is to determine whether any of the factual findings or legal conclusions contained in the judgment are entitled to issue-preclusive effect. While the U.S. and English requirements for issue preclusion differ in some respects, they both include that the issue determined by the foreign court must be identical to the issue arising in the forum and that the foreign court’s determination of that issue must have been necessary for its decision.
The Reporters of the Draft Restatement on the U.S. Law of International Commercial Arbitration have endorsed this approach. Section 4-8 of the Draft Restatement provides that in post-award proceedings, a U.S. court should give preclusive effect to a foreign judgment in accordance with “the forum’s applicable principles governing . . . claim and issue preclusion, and recognition of foreign…
*Tom Childs is counsel in the New York office of King & Spalding. The author thanks James H. Carter for his comments on a draft of this article.