33.01  Parties readily agree that arbitration awards should be final and binding. Quite often they agree to comply with any award immediately and without delay. But once an award is issued, the losing party often takes a rather different view of those obligations. That party might commence a second set of proceedings on slightly different grounds from the first (so that strict principles of res iudicata are not applicable) in an attempt to raise doubt over the status and enforceability of the first award and/or to delay enforcement.

33.02  In England, the doctrine of abuse of process has been utilized to prevent a second action being pursued, the purpose of which is to relitigate issues previously decided or issues which should have been raised in prior proceedings, but where the strict technical requirements of res iudicata are not satisfied. The English courts have developed the principle so as to prevent collateral attacks on prior judgments and, now, arbitral awards, and by so doing, ensure the finality of judgments and awards.

33.03  The purpose of this chapter is to outline the reasoning behind these decisions and to ask whether there is a basis upon which such powers should be available in arbitration more generally, whatever the seat, rules, procedural or governing law. Should the principle of abuse of process, in so far as it prevents a collateral attack on a prior arbitration award, be a power which is generally available to tribunals? If so, what is the source of that power and how should it be exercised? Will arbitration benefit from the recognition of this principle?

33.04  This chapter will suggest that the source of the principle of abuse of process (and indeed res iudicata) can in most cases be more readily found in the private agreement of the parties rather than having to be located in the public policy of any system of law which might be applicable.

33.05  The principle of abuse of process was developed in English law to prevent the relitigation of disputes in circumstances where the strict principles of res iudicata (cause of action and issue estoppel) were not available, eg because there was no identity of parties or because the facts (p. 371) or issues raised in the second proceedings were different from those in the first.¹ The leading case in England which defined abuse of process is Johnson v Gore Wood & Co.² Johnson was a case where neither cause of action nor issue estoppel were in play as there was no identity of the parties between the two sets of proceedings. In those circumstances, could the plaintiff in the second set of proceedings bring claims similar to those brought by his company in previous proceedings and which had been compromised?

33.06  In that case, Lord Bingham defined abuse of process as follows:

But Henderson v Henderson abuse of process as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same; that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceedings involve what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abuse. This is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgement which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.³

33.07  Abuse of process is thus a more flexible weapon than cause of action or issue estoppel and can operate so as to prevent relitigation of issues which could and should have been brought in prior proceedings, even between different parties.

33.08  As Lord Bingham noted above, a collateral attack on a previous decision by raising in subsequent proceedings issues which could and should have been raised in the prior proceedings ‘will be much more obviously abusive’.

33.09  This aspect of the application of the abuse of process doctrine was developed in the 2003 case of Secretary of State for Trade & Industry v Bairstow.⁴ The Court of Appeal said:

A collateral attack on an earlier decision of a court of competent jurisdiction may be but is not necessarily an abuse of the process of the courts … If the earlier decision is that of a court (p. 372) exercising a civil jurisdiction then it is binding on the parties to that action and their privies in any later civil proceedings. If the parties to the later civil proceedings were not parties to or privies of those who were parties to the earlier proceedings then it will only be an abuse of the process of the court to challenge the factual findings and the conclusions of the judge or jury in the earlier action if (i) it would be manifestly unjust to a party to the later proceedings that the same issues should be re-litigated or (ii) to permit such re-litigation would bring the administration of justice into disrepute.⁵

33.10  In the Bairstow case, what was in issue was the effect of a prior judgment of the court on subsequent proceedings. What was not decided in that case was whether this type of abuse of process would also be applicable if a party made a collateral attack on a previous decision of an arbitral tribunal.

33.11  That was the issue squarely considered in the English case of Michael Wilson and Partners v Sinclair,⁶ a decision of Teare J. The claimant brought proceedings against the defendant asserting allegations of wrongdoing that had previously been dismissed in an earlier arbitration between the same claimant and a different respondent. Although the defendant to the litigation, Mr Sinclair, had not himself been a party to the previous arbitration in name, he had financed the defence of that arbitration and was a director of one of the respondents. However, because there was no identity of parties between the respondents to the previous arbitration and Mr Sinclair in the court proceedings, conventional res iudicata was not applicable. Further, the claims made in the litigation were not precisely identical to the claims alleged in the arbitration.

33.12  Notwithstanding the lack of identity between the parties and the claims in the two proceedings, Teare J struck out the court proceedings as an abuse of process holding that they constituted a collateral attack on the previous award, basing his decision firmly on the principles set out in the Bairstow case. His reasoning was that, in substance, Mr Sinclair had been centrally involved in the previous arbitration as was demonstrated by the fact that he had financed it and was a director of one of the principal respondents. Furthermore, the claims being brought in the court case were, in substance, claims which had been considered and dismissed in the previous arbitration.

33.13  In these circumstances, the judge held that it would be an abuse of process to permit the claimant to continue the litigation and he struck the case out on the basis that it constituted a ‘collateral attack on an earlier decision of a court of competent jurisdiction’ and that a decision of an arbitral tribunal was equivalent to a decision of a court of competent jurisdiction.

33.14  In the later case of OMV Petrom SA v Glencore International AG,⁷ Blair J reached the same conclusion as Teare J that the doctrine of abuse of process could arise where there had been a previous arbitration award. In that case, the claimant alleged that it was an abuse (p. 373) of process for the defendant to seek to litigate an issue previously decided against it by an arbitration award in which the defendant had been the respondent, albeit the claimant in the arbitration proceedings was a different but related party to that in the subsequent litigation. The judge expressly cited the decision of Teare J in Michael Wilson and Partners v Sinclair in holding that it could be ‘an abuse of the process of the court to seek to re-litigate in court proceeding issues which have been the subject of prior proceedings before an arbitral tribunal’.

33.15  Blair J went further in holding that it could ‘be an abuse of process for a party which was successful overall in earlier proceedings to seek to re-litigate an issue on which it was unsuccessful’. Where abuse of process was under consideration, the judge held that the focus was on ‘the undesirability of having the same matter adjudicated upon again where it would be manifestly unfair to do so, or would bring the administration of justice into disrepute’. Having decided that the abuse of process argument was available where the issue had been decided in prior arbitration proceedings, the judge held on the facts that there was no abuse of process in the present case.

33.16  In further confirmation of this development, Flaux J in Injazat Technology Capital Ltd v Dr Hamid Najafi⁸ held that the bringing of a second arbitration by a party was an attempt to reopen matters decided in a first arbitration and was an abuse of process. It necessarily follows that the judge formed the view that the process being abused was the arbitral process of the second arbitration rather than any court proceedings.

33.17  As a matter of English law, there is now little doubt that an argument of abuse of process can be based on a prior arbitral award notwithstanding the fact that there may not be an identity of parties between the two sets of proceedings.

33.18  In the 2003 Court of Appeal decision in Hussmann v Pharaon, Rix LJ held that an arbitral tribunal could itself apply the doctrine of abuse of process:

The trouble with this submission, however, as with the more homespun argument that Mr Pharaon was trying to have ‘two bites at the cherry’, is that properly analysed, it constitutes a submission that Mr Pharaon had irrevocably elected to have his rights in the arbitration determined solely on the basis that the Respondent was a Company; or that he had waived the right to an award in the name of himself or the Establishment; or that the attempt to seek a second award in the name of himself or the Establishment would amount to an abuse of process (see Henderson v Henderson [1843] 3 Hare 100, Johnson v Gore Wood & Co [2002] 2 AC 1). We are far from saying that such a submission could not succeed: but it goes either to matters of substantive law (election, waiver) which are for the arbitrators to decide, or to matters of procedure which are equally for the arbitrator. The rule in Henderson v Henderson used to be regarded as a branch of the law of res iudicata or issue estoppel; now it is recognised as being a broader merit-based rule designed to prevent abuse of process (Johnson v Gore Wood): in either event, and however it should be categorised, it is a rule, like any rule of res iudicata or abuse of process, which is for the Tribunal itself to determine and does not go to the tribunal’s substantive jurisdiction but to its willingness to act …⁹

(p. 374) 33.19  In Nomihold Securities Inc v Mobile TeleSystems Finance SA (No 2),¹⁰ Smith J considered whether the defendant, Mobile TeleSystems Finance, could raise in a new arbitration matters which the claimant, Nomihold, asserted it could and should have raised in the first arbitration. The judge said this:

… if the new arbitrations proceed, the arbitrators in them would be entitled to determine Nomihold’s contention based upon estoppel per rem iudicatam, issue estoppel and what it calls the principle of Henderson v Henderson (and might more exactly be called the doctrine of Smith v Johnson (15 East 213). I cannot see, and it was not suggested, that there is any relevant difference between the ambit of the powers available to tribunals in the new arbitrations to dispose of claims and the power that a court would have to dispose of the complaints on the basis of arguments such as Nomihold’s re-arbitration complaints, including the principle in Henderson v Henderson.¹¹

33.20  The position in England, therefore, is that an arbitral tribunal has the same ability as a court to deal with abusive claims in circumstances where one party seeks to bring a second arbitration as a collateral attack on the award in the first. There seems no valid point of distinction between court and arbitration proceedings. Why should only a court be in a position to prevent a collateral attack on a previous arbitration award?

33.21  Since the Nomihold and Injazat judgments, there has been at least one decision of an arbitral tribunal in an English seat in which a claim has been dismissed for abuse of process as distinct from res iudicata. The context in which this arbitration arose is interesting in demonstrating the limitations of strict cause of action or issue estoppel. There had been a previous arbitration in which the tribunal had dismissed claims of misrepresentation in upholding the validity of the contracts in dispute. Allegations of money laundering had been raised but not pleaded or pursued by the losing party to the first arbitration.

33.22  The losing party then commenced a second arbitration against the victorious party under the same contracts that had been the subject of the first arbitration, asserting that they were invalid as a consequence of money laundering allegations raised but not pursued in the first arbitration.

33.23  The respondent in the second arbitration (the successful claimant in the first arbitration) made an application to the tribunal to dismiss the claim on the basis, inter alia, of res iudicata and/or abuse of process. The experienced tribunal decided that the claims based on money laundering were not precluded by the traditional res iudicata doctrine of issue estoppel (it was not asserted that the claim was precluded by cause of action estoppel).

33.24  The tribunal then considered whether the claim in the second arbitration should be dismissed by reference to the doctrine of abuse of process. The tribunal accepted that the concept of abuse of process, as developed in English law, was applicable to an arbitration with an English seat as a matter of procedural law. It rejected the argument by the claimant (p. 375) that the abuse of process doctrine was only applicable to proceedings in court where there was a public interest to protect (the same conclusion to which the English court had come in the Sinclair, OMV Petrom, and Arts & Antiques cases). The tribunal considered that the rationale of abuse of process included consideration of private interests; and in any case, there was a public interest in ensuring that arbitrations were conducted properly or, at least, not abusively.

33.25  In light of the authorities considered by the tribunal, the necessary implications drawn from the agreement of the parties in the 1998 LCIA Rules, the tribunal concluded that the doctrine of abuse of process could be applied in appropriate circumstances by a tribunal sitting in England under the LCIA Rules and held that the claims based on money laundering advanced in the second arbitration could and should have been pursued in the first arbitration. Furthermore, the tribunal considered that the bringing of the claims in the second arbitration constituted in effect a collateral attack on the award in the first arbitration as it was the avowed intent of the claimant to the second arbitration to use any award in its favour in that arbitration to prevent enforcement of the first award.

33.26  The tribunal concluded that the motivation behind the bringing of the second arbitration was to raise an unwarranted and indefensible obstacle to the enforcement of the first award and had no doubt that the respondent in the second arbitration was being harassed by the pursuit of that arbitration. Accordingly, the tribunal dismissed the claims made in the second arbitration on the basis of abuse of process without any requirement for a full (and expensive) merits hearing. The principle of abuse of process was utilized to reinforce the final and binding nature of the first award in circumstances where the strict requirements of res iudicata were not met.

33.27  As the foregoing makes evident, in the English jurisdiction both courts and arbitral tribunals can and have dismissed claims which constitute collateral attacks on previous awards or judgments. But is there any reason why that power should be confined to tribunals in an English seat or applying English law?

33.28  The source of the doctrine of abuse of process (and in particular that preventing a collateral attack on a previous judgment or award) may suggest an answer. As Lord Bingham observed in Johnson v Gore Wood, the public interest underlying abuse of process is the same as that underlying cause of action and issue estoppel, namely that there should be finality in litigation and a party should not be proceeded against twice in the same matter. In the Bairstow case, the Court of Appeal focused on the unfairness of the respondent having to relitigate what were in essence the same issues.

33.29  There will, of course, be jurisdictions in which the principle of abuse of process is unknown in the domestic court system and it might be thought anomalous that a tribunal should have the power to dismiss a claim which constitutes a collateral attack on an award in circumstances where the court in that jurisdiction does not have a similar power. However, the distinction may lie in the fact that judgments in many jurisdictions (particularly civil law) do not contain the kind of full reasoning characteristics of common law judgments (where the abuse of process doctrine has been developed). By contrast, most arbitral awards are reasoned in the common law style, and it is therefore much easier to review the reasons (p. 376) set out in the award in order to determine whether the subsequent arbitration represents a collateral attack on that award.¹²

33.30  Support for the wider applicability of the principle of abuse of process can also be found in the ‘International Law Association Recommendations on Lis Pendens and Res Judicata and Arbitration’. Recommendation II.5 states:

An arbitral award has preclusive effects in the further arbitral proceedings as to a claim, cause of action or issue of fact or law, which could have been raised, but was not, in the proceedings resulting in that award, provided that the raising of any such new claim, cause of action or new issue of fact or law amounts to procedural unfairness or abuse …¹³

33.31  It will be seen that this Recommendation was based on extensive discussion among the ILA Committee.¹⁴

33.32  But the availability of the principle can also be justified by reference to what the parties intended and agreed, as demonstrated by the applicable rules or laws governing the arbitration. Indeed, in most circumstances it is perhaps unnecessary to look to public policy justifications for applying the principles of res iudicata or abuse of process. All developed judicial systems recognize some form of res iudicata, even if there is no consensus as to the precise content of that principle. Applicability of that principle is, however, complicated by the necessity to identify the system of law which might be applicable to the issue in dispute; is it the substantive governing law, the law of the seat, the law of the enforcing jurisdiction, or some other law? However, if the source of the principle can be found in the agreement of the parties, then this makes it much easier to identify the scope and content of the principle and obviates the need to identify the law which might be applicable to this issue.

33.33  Almost all arbitration rules provide that an award will be final and binding. See, by way of example, Article 34.2 of the UNCITRAL Rules (‘awards … shall be final and binding on the parties’); Article 34.6 of the ICC Arbitration Rules (‘Every award should be binding on the parties’); Article 26.8 of the LCIA Rules (‘Every award (including reasons for such award) shall be final and binding on the parties’); Rule 28.9 of the SIAC Rules (‘an award should be final and binding on the parties from the date it is made’); Article 24.2 of the HKIAC Rules (‘Awards … shall be final and binding on the parties and any person claiming through or under any of the parties’); Article 30.1 of the ICDR Rules (‘Awards … shall be final and binding on the parties’).

33.34  Curiously, the CIArb Arbitration Rules (2000 edition) had no express provision that an award should be final and binding. However, this has been remedied by Article 34(2) of the 2015 edition of the Rules.

(p. 377) 33.35  Most rules also provide that the parties should carry out any award immediately or without delay. See, eg, Article 34.2 of the UNCITRAL Rules (‘The parties shall carry out all awards without delay’); Article 34.6 of the ICC Arbitration Rules (‘the parties undertake to carry out any award without delay’); Article 26.8 of the LCIA Rules (‘the parties undertake to carry out any award immediately and without any delay’); Rule 28.9 of the SIAC Rules (‘the parties undertake to carry out the award immediately and without delay’); Article 34.3 of the HKIAC Rules (‘The parties undertake to comply without delay with any award’); and Article 30.1 of the ICDR Rules (‘The parties shall carry out any such award without delay’).

33.36  Again, the CIArb Arbitration Rules (2000 edition) were silent on the obligation of the parties to carry out awards made under those Rules. This has again been remedied by Article 34(2) of the 2015 edition of the Rules.

33.37  Most recognized arbitration laws also provide that awards shall be final and binding; see, by way of example, section 58(1) of the English Arbitration Act 1996, which provides that an award ‘is final and binding both on the parties and the persons claiming through or under them’. Article 190.1 of the Swiss PIL also provides that awards shall be final. Interestingly, the new French law on arbitration provides at Article 1484 that an award shall be res iudicata with regard to the claims adjudicated in that award. The German ZPO similarly provides that an arbitral award shall have the same effect between the parties as a final and binding court judgment. Article 35(1) of the UNCITRAL Model Law provides that an award shall be ‘recognized as binding’.

33.38  Accordingly, through a combination of the relevant rules and law, almost invariably the parties to an arbitration will be taken to have agreed that any award made will be final and binding and that they will carry out any award immediately or without delay. This is supportive of a doctrine of abuse of process in so far as that protects the finality of awards.

33.40  A collateral attack on an award in the second set of proceedings is plainly an attack on the binding nature of such an award and, as such, contrary to the terms of the New York Convention, which sets out in Article V the limited grounds upon which recognition and enforcement of an award may be refused.

33.41  It might be argued that there is a public interest in bringing an end to litigation but not a private interest; the resources of the state judicial system should not be abused by relitigation, but the same principle does not apply to private arbitration where the parties pay for the process.

(p. 378) 33.42  The cases in England make it clear that the private interests of the parties are just as important as the public interest in bringing an end to abusive proceedings. Thus, in the leading case on collateral attack of Bairstow, Vice-Chancellor Morritt held that it would be an abuse of the process of the court to challenge the factual findings and conclusions of the judge or jury in the earlier action in subsequent proceedings involving a different party if ‘it would be manifestly unfair to a party to the later proceedings that the same issue should be relitigated’.

33.43  It is clear that the English court took the position that it was the unfairness to a party of the relitigation which was of itself sufficient reason to have proceedings struck out on the basis of abuse of process. In the Michael Wilson case, Teare J was strongly influenced by the unfairness which would have been caused to the defendants in the second set of proceedings if those had been allowed to proceed and therefore struck out the proceedings on the basis of abuse of process, notwithstanding the fact that there was no strict identity of parties in the two proceedings.

33.44  The lack of any obvious public interest is therefore not a good reason for not recognizing the principle of abuse of process in arbitration; the private interest of the party is sufficient. Having said that, there is arguably a public interest in ensuring the finality of arbitration as well as litigation. The public resources of the state are utilized to enforce arbitration awards both through domestic procedures and the New York Convention, so there is, to that extent, a public interest in protecting the state process of enforcement of awards from being abused by attempts by private parties to obtain duplicative awards or awards which would have the purpose of undermining previous awards.

33.45  The above suggests that there is a sound juridical basis for tribunals to utilize the principle of abuse of process to prevent a second arbitration being brought which has the purpose of undermining the final and binding nature of a previous award (or, indeed, judgment). That power arises from the agreement of the parties; but there is also a public policy interest in preventing abusive arbitration. This is not to suggest that tribunals should have some form of wide-ranging power to punish or prevent any abuse of the arbitral process; the suggestion in this chapter reflects the recommendations of the ILA in arguing that tribunals have a power to prevent parties to a subsequent arbitration raising issues of fact or law which could and should have been raised in prior proceedings if to do so would be unfair to the respondent. This is focused and limited power.

33.46  The English courts have recognized that tribunals sitting in England have this power and, as noted above, such a tribunal has indeed dismissed a second arbitration for abuse of process on the basis that the claims raised in that arbitration could and should have been raised in the prior arbitration. The wider recognition and utilization by tribunals of such a power will have the effect of preserving the integrity of arbitration awards and discouraging abusive challenges to such awards. This surely must be good for the health of arbitration.