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Res judicata: a question of admissibility to be determined by the tribunal
Practical Law Legal Update 7-503-8160 (Approx. 4 pages)
Res judicata: a question of admissibility to be determined by the tribunal
| Published on 03 Nov 2010 • France |
James Clark (Associate), Herbert Smith LLP
The Paris Court of Appeal has rejected an application for the annulment of an arbitral award and held that res judicata is a question of admissibility that can only be assessed by an arbitral tribunal. The fact that an arbitral tribunal proceeds to hear and determine claims that are arguably res judicata cannot therefore constitute a ground for the annulment of an award before the French courts.
Background
Article 1502 of the French Code of Civil Procedure provides five grounds for annulment. Four of those grounds are:
- That the arbitrator has ruled in the absence of an arbitration agreement or on the basis of an agreement that was void or had expired (Article 1502(1)).
- That the arbitrator has ruled without complying with the mission conferred upon him or her (Article 1502(3)).
- That due process has not been respected (Article 1502(4)).
- That the recognition or enforcement of the award is contrary to international public policy (Article 1502(5)).
Facts
In 1994, a landowner, JNAH Development S.A.L. (JNAH) (a Lebanese company), entered into five agreements relating to the construction and the management of a hotel with Marriott International Hotels Inc. (Marriott) (an American company). All five agreements contained an arbitration clause that provided for ICC arbitration.
Disputes arose between the parties and Marriott commenced arbitration proceedings seeking a declaration that it had complied with its contractual obligations. In an award issued in 2003, a tribunal rejected Marriott's claims and partially upheld JNAH's counterclaim for damages.
In 2005, JNAH commenced a second arbitration proceeding in Paris and claimed for damages. JNAH's claim was brought under the same five ICC arbitration clauses. On 4 June 2009, the arbitral tribunal rendered an award in favour of JNAH. Marriot sought the annulment of the award before the Paris Court of Appeal on four of the five grounds for annulment that are set out at Article 1502 of the French Code of Civil Procedure:
- Article 1502(1): Marriott first argued that the arbitration agreements had lapsed. It argued, on the basis of the res judicata doctrine, that JNAH was barred from presenting claims that had already been litigated in the first arbitration. Furthermore, Marriott submitted, with reference to the English case of Henderson v Henderson [1843-1860] All ER Rep 378, that the res judicata doctrine established a rule of principle that prevented parties from advancing causes of action that could have been advanced in earlier proceedings.
- Article 1502(3): Marriott submitted that the tribunal had stepped beyond its reference in its award of damages. It argued that by granting damages calculated over a six year period instead of a three year period, that the tribunal had ruled extra petita (that is, ruled beyond issues presented by the parties) and as amiable compositeur (that is, without reference to strict rules of law, but to general considerations of equity, fairness and justice) although not invested with the power to do so.
- Article 1502(4): Marriott argued that the adversarial principle had not been respected in this instance as, in calculating damages, the arbitral tribunal used a method of quantification that had not been submitted by the parties and that the parties therefore had not had an opportunity to comment on.
- Article 1502(5): Marriott argued that failure to apply the res judicata doctrine constituted a breach of international public policy.
Decision
The Court of Appeal rejected the application for annulment of the award.
Article 1502(1)
The Court of Appeal held that the question of whether a party's claims ought to be struck out under the res judicata doctrine is a question of the admissibility of the claims before the arbitral tribunal. Here, the tribunal had determined that JNAH's claims were admissible, and the Court held that it was not its role to review the arbitral tribunal's factual and legal conclusions that led it to admit the claims.
The Court also noted that the English principle that parties cannot submit causes of action or arguments that they could have submitted in earlier proceedings was not applicable in international arbitration.
The Court of Appeal thus rejected Marriott's first ground of appeal.
Article 1502(3)
The Court of Appeal held that the tribunal had reached its conclusions by applying the contract's governing law, the law of Maryland, and on the basis of the parties' submissions, and had therefore not ruled extra petita or as amiable compositeur.
Article 1502(4)
The Court of Appeal found that the arbitrators based their reasoning on the parties' submissions, and that the quantification of the claim was based on financial projections that the parties had had the opportunity to comment on. It noted in passing that the adversarial principle did not require that the arbitrators submit their reasoning to the parties for comment prior to issuing the award.
Comment
The Court of Appeal's decision once again emphasises the principle of kompetenz-kompetenz by confirming that the admissibility of claims, including the question of whether they should be precluded by operation of the res judicata doctrine, is a question for the arbitral tribunal only.