THE EIGHTH JUDICIAL SEMINAR ON COMMERCIAL LITIGATION
Hong Kong, 14-15 March 2024
Res judicata and issue (collateral) estoppel in transnational litigation and arbitration: The United States position in comparative perspective
The Honourable Justice Timothy McEvoy* 
Federal Court of Australia

Introduction
1.	The papers on the subject of res judicata and issue estoppel in transnational litigation and arbitration submitted by Menon CJ, Bell CJ and Lam JA provide a detailed and substantial insight into this subject and its attendant difficulties from the perspectives of the law of England, Australia, Singapore and Hong Kong.

2.	These contributions traverse the well known phenomena of the ‘race to judgment’ in one jurisdiction and the subsequent attempt to enforce that judgment in another (favourable) jurisdiction, as well as attempts to re-litigate or arbitrate in a different forum in an effort to achieve a more favourable result. 

3.	There are obvious public and private interests at play in there being some measure of international uniformity in limiting re-litigation and preserving the integrity of pending and prior proceedings. Ideally parties ought not be vexed twice, or more frequently, by litigation on the same subject matter; and international judicial comity, where appropriate, serves to minimise the burden on courts, particularly major commercial courts, and reduce the risk of uncertainty created by the risk of conflicting judgments. These considerations support the functionality of the private international legal order as a driver of economic growth and prosperity. The Kabab-Ji and Putribali cases examined by Menon CJ in his paper highlight the dilemma for certainty and finality in legal decision-making which an asymmetrical application of principle can produce. 
4.	These interests underpin the doctrine of res judicata, where a final judgment on the merits of a claim bars further claims by parties or their privies; and issue estoppel (or collateral estoppel, to use the US terminology), which seeks to restrain re-litigation of specific factual and legal issues that have been decided in prior litigation based on a different claim.

5.	This paper aims to contribute to the discussion by offering a comparative perspective of the approach of the United States to the recognition of foreign court judgments and arbitral awards. The US, as a leading commercial jurisdiction, offers a valuable point of contrast to the position of other common law jurisdictions which more closely reflect the development of the English common law. This manifests itself particularly in the wider application of res judicata and issue estoppel principles to non-parties. The first part of this paper will consider the US approach to res judicata and collateral estoppel in the context of transnational litigation. The second part will discuss the approach in the context of international commercial arbitration. 

Res judicata and collateral estoppel in transnational litigation
A.	The US position
6.	As is well known, the US is not party to any operative treaty regime that governs the circumstances in which US courts may recognise foreign court judgments. Nor does the US have a system of uniform federal legislation to recognise foreign judgments. Although a majority of states have adopted either the 1962 or the 2005 version of the Uniform Law Commission’s Uniform Foreign Money-Judgments Recognition Act, it is limited in scope to the enforcement of judgments granting or denying the recovery of money judgments and does not deal with circumstances where re-litigation of claims or issues are sought before US courts.

7.	Nonetheless, there is no doubt that US courts will consider res judicata and collateral estoppel issues raised in relation to foreign judgments under comity of nations and principles of the common law.

8.	The foundational decision of the US Supreme Court which establishes the application of res judicata to foreign judgments is Hilton v Guyot. Hilton concerned an appeal against a decision of a federal district court in New York which held that a French court judgment against the plaintiffs for an amount allegedly owed to a French firm was enforceable without a retrial on the merits. 

9.	The Supreme Court, in discussing how foreign judgments should be approached in the US, concluded that comity was an important, if not overriding, factor. The Court observed:
‘Comity,’ in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other. But it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens, or of other persons who are under the protection of its laws.

…

where there has been opportunity for a full and fair trial abroad before a court of competent jurisdiction, conducting the trial upon regular proceedings, after due citation or voluntary appearance of the defendant, and under a system of jurisprudence likely to secure an impartial administration of justice between the citizens of its own country and those of other countries, and there is nothing to show either prejudice in the court, or in the system of laws under which it was sitting, or fraud in procuring the judgment, or any other special reason why the comity of this nation should not allow it full effect, the merits of the case should not, in an action brought in this country upon the judgment, be tried afresh, as on a new trial or an appeal, upon the mere assertion of the party that the judgment was erroneous in law or in fact. 

10.	Hilton represented the early development of private international law in the US, and established a doctrine of reciprocity whereby US courts would only give res judicata effect to foreign judgments if the foreign country would respect and enforce a US judgment in similar circumstances. This doctrine has since been rejected by most US states, in whose purview the recognition and enforcement of foreign judgments has come to rest, bringing the US position in line with (at least) England and Australia. It is relevant to note, however, that the Singapore Court of Appeal left open the question of whether reciprocity should be required as an element of res judicata in Merck Sharp & Dohme Corp (formerly known as Merck & Co, Inc) v Merck KGaA (formerly known as E Merck).

11.	The application of principles of collateral estoppel to foreign judgments was confirmed in the US in Bata v Bata. Bata concerned a dispute in the Delaware Supreme Court between plaintiffs from Czechoslovakia and Canada, and a Czech defendant, over the ownership of shares in three corporations. In two prior cases involving the same parties, a Dutch court had found that under the applicable Czech law a valid testamentary disposition had been made to the defendant, whereas a Swiss court subsequently found that it had not. The plaintiffs conceded that the Swiss finding should not bind the Delaware court on the issue of the testamentary disposition, because it would not be binding even in later litigation in Switzerland. The defendant contended, however, that the Dutch determination should be given effect by way of collateral estoppel as it conclusively established the existence of a valid disposition.

12.	The court in Bata reasoned that principles of res judicata, which apply to foreign judgments, should be extended to collateral estoppel, even though collateral estoppel may operate more harshly than res judicata in that findings made on a small claim may become binding in a later action involving more significant interests. The court observed: 

We see no reason in principle why the rule of collateral estoppel should not in a proper case be applied to a foreign judgment. … We are unwilling to hold that the rule of collateral estoppel may never be applied to a foreign judgment. The same fundamental consideration—the end of litigation—applies as well to collateral estoppel as to res judicata.

13.	The principles of collateral estoppel in the US largely mirror the operation of the doctrine in England, Australia, Hong Kong and Singapore. In AB Dick Co v Burroughs Corporation, the United States Court of Appeals for the Federal Circuit articulated the four requirements of collateral estoppel as: 

(1)	the issue is identical to one decided in the first action;
(2)	the issue was actually litigated in the first action;
(3)	resolution of the issue was essential [or necessary] to a final judgment in the first action; and 
(4)	the plaintiff had a full and fair opportunity to litigate the issue in the first action.

14.	US courts have taken a strict approach to the identity of issues requirement. In Bata, the Delaware Supreme Court cautioned the application of principles of collateral estoppel to prior determinations made by courts from civil law systems. The Court noted the: 
marked difference between the Code system of civil law and the common law system derived from case law. The apparent absence of citations of decided cases in continental opinions may will create especial difficulty in determining, first, the scope of the foreign determination, and second, the effect that would later be given to it by the foreign courts.

15.	To establish collateral estoppel, the fact or issue must have been necessary to the final decision; merely subsidiary facts or issues are insufficient. This reflects the position in multiple common law jurisdictions and is evident in the recent decision of the Full Federal Court of Australia in Kazal v Thunder Studios Inc (California). Similarly, a fact or issue that was not raised in prior proceedings but could have been raised will not generally satisfy the necessity requirement to found a collateral estoppel.

16.	It may be observed, however, that the US adopts a more expansive view than other common law countries with respect to which parties may be bound by the preclusive effects of a foreign judgment. As is canvassed by Menon CJ and Lam JA in their papers, the general position is that only parties and their privies may be bound by the effects of res judicata or collateral estoppel. The US, however, has abandoned the requirement of ‘mutuality of parties’ and permits the use of non-mutual collateral estoppel, which permits a non-party to a prior foreign judgment to assert its preclusive effect on the re-litigation of issues. 

17.	A recent illustrative case is Trikona Advisers Limited v Chugh. Trikona concerned an appeal from a decision of a Federal District Court in Connecticut which granted summary judgment to the defendants on an allegation of a breach of fiduciary duty. The District Court held that the plaintiff’s claims had been previously determined in favour of the defendants in a winding-up proceeding in the Cayman Islands, and that the plaintiff was collaterally estopped from asserting them in the Connecticut action. 

18.	The plaintiff argued that the District Court had incorrectly applied the doctrine of collateral estoppel. One of the plaintiff’s arguments was that both of the parties to the Connecticut proceedings had not been parties to the Cayman Islands winding-up proceeding. 

19.	The United States Court of Appeals for the Second Circuit dismissed the plaintiff’s arguments on the basis that only the party against which the collateral estoppel is asserted must have been represented in both proceedings. Although the plaintiff was not directly a party to the Cayman Islands winding-up proceedings, it had privity with Asia Pacific, which was a party in those proceedings. Relevantly, the Court of Appeals considered that Asia Pacific’s defences as asserted in the winding-up were based entirely on the alleged violations of the plaintiff’s rights, and the same purported violations formed the basis of the plaintiff’s complaint in the Connecticut proceedings. 

20.	US courts also recognise a general requirement that a determination by a foreign court can be given no greater preclusive effect in the US than it would receive before courts of the originating jurisdiction. This prevents US courts from according preclusive effects to judgments originating from jurisdictions that do not recognise a concept of collateral estoppel. 

B.	Qualification on res judicata and collateral estoppel 
21.	Unlike the position in England, and apparently Hong Kong and Singapore, the US has not adopted a qualification on the operation of res judicata and issue estoppel in relation to foreign judgments on the scope of exclusive jurisdiction clauses.

C.	Multiple conflicting judgments 
22.	In one sense, at a theoretical level, the problem of inconsistent foreign judgments on the same claim or issue should not exist given the doctrines of res judicata and collateral estoppel. In practice, however, it is apparent that the possibility of inconsistent judgments remains. Parties may fail to assert the preclusive effect of previous judgments out of ignorance, or as a litigation strategy to seek a fresh adjudication. Courts may also fail to apply preclusive principles to prior judgments, either by erroneously refusing to afford them preclusive effect or by correctly refusing to do so under the applicable conflict laws of the forum. The corollary is that a subsequent court may be seised with a claim or issue that is the subject of conflicting judgments of different foreign courts.

23.	Byblos Bank Europe S.A v Sekerbank Turk Anonym Syrketi is of interest in terms of the manner in which US courts approach the problem of inconsistent judgments on the same claim or issue. Byblos commenced proceedings in Belgium, Turkey and Germany, alleging that Sekerbank had breached a series of loan agreements by issuing fraudulent loan guarantees and refusing to make loan repayments. In Turkey, the courts dismissed the action on the merits. In the German proceedings, the German court of first instance granted Sekerbank’s application for recognition of the Turkish judgment, and that judgment was affirmed on appeal the following year.

24.	The Belgian court of first instance held that Byblos’ claims were barred by res judicata arising from the decision of the Turkish court. On appeal, however, the Belgian intermediate appellate court reversed the first instance decision and declined to accord the Turkish judgment preclusive effect, relying on a now-repealed section of the Belgian Judicial Code that required merits review of foreign judgments prior to their recognition. The Belgian High Court declined Sekerbank’s petition for the cancellation of that judgment. 

25.	Byblos subsequently sought to enforce the Belgian appellate decision in New York, arguing that it was entitled to recognition as the last-determined judgment on the issue. 

26.	The New York Court of Appeals considered that the general position is that effect should be accorded to the judgment that was rendered ‘last-in-time’, on the basis that the last-in-time court has considered the preclusive effect of any earlier judgment. However, courts may depart from the ‘last-in-time’ rule where the last-in-time court departed from normal res judicata principles by permitting a party to relitigate the merits of an earlier judgment.

27.	On that basis, the Court of Appeal declined to accord preclusive effect to the Belgian judgment which departed from normal res judicata principles and comity by declining to accord recognition to the earlier Turkish judgment which had been recognised by the German court.

28.	The American Law Institute has observed that the policy reason for preferring a last-in-time approach is that the party who could have benefitted from the preclusive effect of the first-rendered judgment should have asserted it in the second action: 
The considerations of policy which support the doctrine of res judicata are not so strong as to require that the court apply them of its own motion when the party himself has failed to claim such benefits as may flow from them. Accordingly, when a prior judgment is not relied upon in a pending action in which it would have had conclusive effect as res judicata, the judgment in that action is valid even though it is inconsistent with the prior judgment. It follows that it is this later judgment, rather than the earlier, that may be successfully urged as res judicata in a third action, assuming that other prerequisites are satisfied. Indeed, the later of the two inconsistent judgments is ordinarily held conclusive in a third action even when the earlier judgment was relied on in the second action and the court erroneously held that it was not conclusive.

29.	The US approach in this regard stands in contrast to that adopted by other common law jurisdictions insofar as conflicting foreign judgments are concerned. In England, courts adopt a first-in-time approach. In Showlag v Mansour, the Privy Council held at 440 that: 
the correct general rule is that where there are two competing foreign judgments each of which is pronounced by a court of competent jurisdiction and is final and not open to impeachment on any ground then the earlier of them in time must be recognised and given effect to the exclusion of the later.

30.	Similarly, the Singapore Court of Appeal held in Merck that:
Where there are multiple competing foreign judgments, the foreign judgment that is the first in time should be recognised for the purposes of creating an estoppel … This not only promotes finality and reduces the risk of dissatisfied parties seeking to undermine the last-rendered judgment by engaging in satellite litigation to obtain a further judgment in their favour, but is also in line with the legislative policy reflected in s 15(1)(e) of the CCAA and s 5(1)(b) of the REFJA.

(emphasis added.)

31.	The position differs when a foreign judgment conflicts with an inconsistent local judgment. The US and Singapore take the position that the local judgment should be accorded priority, irrespective of whether it was delivered prior or subsequent to the foreign decision. This reflects the important discretion conferred upon domestic courts to safeguard and advance the rule of law within their jurisdictions, and to uphold the public policy of their states.

32.	A more complex situation arises where proceedings are pending but not resolved before a domestic court and a party seeks to recognise or enforce a foreign judgment rendered during the pendency of the domestic proceedings. As Menon CJ and Bell CJ canvass in their papers, this issue was left open by the Singapore Court of Appeal in Merck. The question is also unresolved in the US. 
Res judicata and collateral estoppel in international commercial arbitration
33.	Plainly enough, once an award has been issued by an international arbitral tribunal, it falls to domestic courts to determine whether to give it effect. In this context it is relevant to consider two situations where res judicata and collateral estoppel may apply with respect to international commercial arbitration. The first is the circumstance where a party seeks to use a prior decision or finding in an arbitral award as an estoppel in a subsequent judicial proceeding. The second circumstance concerns parallel enforcement actions between different national courts.

A.	Applying a factual or legal finding in a prior award to subsequent litigation 

34.	The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) requires that principles of res judicata apply to international arbitral awards. Article III of the Convention provides that a contracting state shall recognise and enforce arbitral awards as binding, subject to the limited and exhaustive grounds contained in Art V. Importantly, the grounds of refusal to enforce an award under Art V do not include an erroneous decision in fact or law made by the arbitral tribunal; a court in a contracting state may not review the merits of an arbitral tribunal’s decision. 

35.	The US is one of some 172 state parties to the Convention. Accordingly, courts in the US will preclude parties from re-litigating a claim that has been the subject of a recognisable and enforceable arbitral award. It is apparent that, due to the uniform enforcement system under the Convention, transnational litigants are less likely to encounter difficulties enforcing their foreign arbitral awards than parties seeking to enforce foreign judgments before a US court. 

36.	The recognition and enforcement of an arbitral award under the Convention does not specifically require that issues of fact or law determined in the arbitral proceeding should be precluded from subsequent consideration in relation to a different claim before a national court. 

37.	However, in the US, courts have held that findings of fact and law in arbitral awards may be preclusive in subsequent judicial proceedings. 

38.	Although the same principles of collateral estoppel that apply to foreign judicial decisions apply with respect to an international arbitral award, US law imposes an additional requirement that any finding of collateral estoppel comports with the parties’ agreement and reasonable expectations. This reflects the risk that the parties to the arbitration agreement come from legal systems without a doctrine similar to collateral estoppel, and may have no expectation that an issue determined by an arbitral tribunal might have a preclusive effect in a subsequent and wholly unrelated proceeding before a national court. 

39.	Unlike the application of collateral estoppel to foreign court judgments, where no greater preclusive effect will be given to the foreign judgment than it would receive in its originating jurisdiction, there is no requirement that equal preclusive effect would be given to the award if the subsequent litigation was commenced at the seat of arbitration. The Restatement on the US Law of International Commercial and Investor-State Arbitration (the Arbitration Restatement) makes clear that the rationale for this difference is that, contrary to a judgment rendered by a national court, an arbitral award is not a product of the judicial system of the seat. The law of the seat in relation to collateral estoppel will only be relevant in assessing the parties’ expectations about whether collateral estoppel might be applied by a court where post-award relief is sought.   

40.	Some US courts have taken a cautious approach to finding a collateral estoppel in relation to issues determined in arbitral awards. In Shtab v Greate Bay Hotel & Casino, Inc, a Federal district court observed:  

Because arbitrations are not conducted in courts of law and arbitrators are not bound by the same rules of evidence and procedure that judges are, ‘courts must be cautious of procedural variances between arbitral procedures and judicial proceedings when deciding whether to give preclusive effect to the former’.

41.	Concerns include that parties may not have a full and fair opportunity to present their case due to an absence of robust procedure concerning discovery, evidence, witness examination and presentation of submissions. Moreover, courts have been concerned with the fact that the lack of a requirement to present extensive written findings in an arbitral award complicates the inquiry of whether there is an identity of issues. 

42.	Some observations may be made about this line of authority. First, it may be that concerns regarding a lack of robust procedure in international arbitration no longer carry great weight. International arbitrations largely occur under the auspices of the procedural rules of a sponsoring institution. The rules of the more significant arbitral institutions include rules relating to evidence and the examination of witnesses, and they provide for written submissions to be made by both parties. Moreover, most procedural rules contain a requirement that each party is afforded an opportunity to present its case, allowing the facts and issues to be properly ventilated. 

43.	Secondly, requiring that arbitrations must have specific procedural rules in order to allow a party to ‘fully and fairly’ present its case might be said to run the risk of requiring arbitration to resemble domestic litigation too closely. This may be contrary to the attraction and purpose of international commercial arbitration which, axiomatically, is to provide a flexible form of alternative dispute resolution to parties contracting from different legal traditions. 

44.	Thirdly, the objection that arbitral awards lack reasons may be less than persuasive. It is standard practice for arbitrators to deliver written awards that are frequently no less reasoned or detailed than a judicial opinion.

45.	Finally, and critically, the adoption of a cautious approach to finding that arbitral awards may give rise to a collateral estoppel undermines the international system of pro-enforcement and recognition of arbitral awards under the New York Convention. It encourages unsuccessful parties to an arbitration to forum-shop for courts which are sceptical of arbitral procedure and willing to modify or amend findings of fact or law made by arbitral tribunals. This can have a tendency to allow litigants a second go: to reframe their claim in a different jurisdiction. In this sense it runs contrary to the pro-arbitration approach of the Convention.

46.	Indeed, as long ago as 1985 the US Supreme Court specifically acknowledged the value of international commercial arbitration in a landscape of increasing transnational enterprise. In Mitsubishi Motors Corp v Soler Chrysler-Plymouth, Justice Blackmun (delivering the opinion of the Court) stated:
As international trade has expanded in recent decades, so too has the use of international arbitration to resolve disputes arising in the course of that trade. The controversies that international arbitral institutions are called upon to resolve have increased in diversity as well as in complexity. Yet the potential of these tribunals for efficient disposition of legal disagreements arising from commercial relations has not yet been tested. If they are to take a central place in the international legal order, national courts will need to “shake off the old judicial hostility to arbitration,” and also their customary and understandable unwillingness to cede jurisdiction of a claim arising under domestic law to a foreign or transnational tribunal. To this extent, at least, it will be necessary for national courts to subordinate domestic notions of arbitrability to the international policy favoring commercial arbitration. 

(citations omitted.)

47.	In the same vein, the Supreme Court in The Bremen v Zapata Off-Shore Co observed that:
The expansion of American business and industry will hardly be encouraged if, notwithstanding solemn contracts, we insist on a parochial concept that all disputes must be resolved under our laws and in our courts … We cannot have trade and commerce in world markets and international waters on our terms, governed by our laws, and resolved in our courts. 

48.	It is also relevant in the context of the applicability of a factual or legal finding in a prior award in subsequent litigation to consider which parties may be bound by the preclusive effects of an arbitral award in the US. 

49.	As is the position in England, Australia, Singapore and Hong Kong, US courts agree on the relatively obvious point that non-parties to the original arbitration generally cannot be precluded by findings by the arbitral tribunal because they did not consent to arbitral jurisdiction in the first place. 

50.	US courts accept that third parties may become bound by the preclusive effect of an arbitral award where they are a privy of a party to the arbitration. However, the US position can be contrasted to that which prevails in England. In England, although a party’s successors in title are bound by the arbitral award, the extended notion of ‘Gleeson privies’, where there is a ‘sufficient degree of identification’ between the parties, was held to have a narrower application in the context of arbitral awards in National Bank Trust PJSC & Anor v Mints. There does not appear to be a similar restrictive approach taken in the US towards whether a collateral estoppel arising from an arbitral award also applies to privies in the extended ‘Gleeson’ sense. 

51.	Rather, US courts have extended the preclusive effect of arbitral awards to a range of parties which did not participate in the arbitration, including corporate alter egos of a party to the arbitration, indemnitors who are vouched in but refuse to participate in the arbitration, and a party who directed the arbitration from behind the scenes. 

52.	Furthermore, US courts have sometimes applied the doctrine of non-mutual collateral estoppel to extend the preclusive effects of the arbitral award beyond the parties and their privies. In PenneCom B.V. v Merrill Lynch & Co, the Second Circuit Court of Appeals considered whether a third party could rely on the findings of an arbitral award to estop a party to that award from relitigating an issue as to damages. 

53.	PenneCom sought damages against Merrill Lynch for tortious interference in a contract between PenneCom and Elektrim. PenneCom had previously instituted arbitral proceedings against Elektrim for breach of contract, seeking specific performance or alternatively $100 million in damages. The arbitrators found that although Elektrim had breached its contractual obligations, specific performance was not an appropriate remedy and awarded $38 million in damages. PenneCom successfully obtained judgment in Poland for that amount.

54.	Subsequently, PenneCom instituted proceedings in the US against Merrill Lynch, the investment advisor to Elektrim, seeking $100 million in damages. Merrill Lynch sought to rely on the prior arbitral award finding that PenneCom’s loss did not exceed $38 million.

55.	Although the Second Circuit Court of Appeals rejected Merrill Lynch’s collateral estoppel claim on the basis that PenneCom lacked a full and fair opportunity to prove its loss in the arbitration and that Merrill Lynch was not asserting estoppel with clean hands, it accepted in principle that a non-mutual collateral estoppel action is available to a third party against a party to an award.

56.	PenneCom reflects the broader perspective taken in US courts in relation to which parties may be bound in international arbitration. In GE Energy Power Conversion France SAS, Corp v Outokumpu Stainless USA, LLC, the US Supreme Court recently dealt with the question of whether a non-signatory could enforce an arbitral agreement. The Supreme Court found that the New York Convention does not preclude non-signatories to the arbitral agreement from seeking to enforce it under domestic equitable estoppel principles. This approach, as Justice Sotomayer’s separate opinion notes, may raise issues of whether consent to arbitrate can be established. 

57.	The decisions of US courts that apply non-mutual collateral estoppel to arbitral awards do not often contemplate why a third party should obtain the benefits of a contractual agreement to arbitrate between two other parties. However, some US courts have expressed reluctance to extend the preclusive effects of arbitral awards beyond the parties and their privies. In Vandenberg v The Superior Court of Sacramento County, the Supreme Court of California observed:

Private arbitration is a process in which parties voluntarily trade the safeguards and formalities of court litigation for an expeditious sometimes roughshod means of resolving their disputes. … An agreement to arbitrate particular claims reflects each party’s conclusion that the immediate stakes make it preferable to avoid the delay and expense of court proceedings, and instead to resolve the matter between themselves without resort to the judicial process. Under such circumstances, each party is willing to risk that the arbitration will result in a ‘final’ and ‘binding’ defeat with respect to the submitted claims, even though that party would have won in court, and even though the arbitrator’s errors must be accepted without opportunity for review. … But this does not mean each arbitral party also consents that the issues decided against him by this informal, imprecise method may bind him, in the same manner as a court trial, in all future disputes, against all adversaries, known and unknown.

(emphasis added.)

58.	The Arbitration Restatement provides that non-mutual offensive use of issue preclusion in international arbitration is “generally not appropriate”. This is premised on the fact that arbitral jurisdiction is based on, and limited by, the consent of the parties. In circumstances where arbitral proceedings involve parties who are unaware of issue preclusion as a general matter, “they could not conceivably have consented to its invocation by a non-party in a future litigation on entirely different claims”. However, the Arbitration Restatement maintains that courts retain discretion to determine whether non-mutual collateral estoppel should apply in the circumstances of a particular case.

59.	It may thus be accepted that, contrary to the position in other common law jurisdictions, US courts do not strictly require identity of parties where collateral estoppel is sought on the basis of a prior arbitral award. It is at least apparent that the preclusive effects of an award may be more expansive against third parties in the US than in other common law jurisdictions.

B.	Parallel enforcement actions between different national courts
60.	Where a court in one jurisdiction has ruled on questions determinative to the recognition and enforcement of an award, it is relevant to consider whether that ruling may have preclusive effects on enforcement sought in another jurisdiction. 
(i)	Set aside decisions at the seat of arbitration
61.	Article V(1)(e) of the New York Convention provides that, where an award has been set aside by a court at the seat of the arbitration, a state court may refuse to recognise and enforce that award. Plainly, the Convention does not require an enforcement court to set aside an award merely because it has been successfully challenged at the seat, but rather gives enforcement courts a discretion on the basis of which they “may” set aside such an award. However, the Convention does not provide any guidance as to how the discretion should be exercised.

62.	The Arbitration Restatement similarly does not provide guidance on how a US court will treat a set aside decision by a seat court, stating merely that “[e]ven if the award has been set aside by a competent authority, a court of the United States may recognise or enforce the award if the judgment setting it aside is not entitled to recognition under the principles governing the recognition of judgments […]”. 

63.	This issue has given rise to recent appellate consideration in the US. 

64.	The Second Circuit Court of Appeals decision in Thai-Lao Lignite (Thailand) Co v Government of Law Peoples’ Democratic Republic (Thai-Lao) is illustrative. The case involved arbitration in Malaysia arising from terminations by the Government of the Lao People’s Democratic Republic (Laos) of contracts granting Thai-Lao Lignite, a Thai company, the right to mine lignite and erect a power plant in the Hongsa region of Laos. The tribunal entered an award in favour of Thai-Lao Lignite, which subsequently sought to enforce the award in the US.

65.	The US District Court for the Southern District of New York upheld the award in enforcement proceedings in August 2011 (the August 2011 decision). However, in 2012 Laos successfully sought an annulment of the award at the seat of arbitration before Malaysian courts. Returning to the US with the Malaysian annulment decision, Laos argued that the August 2011 decision should be vacated. In vacating the August 2011 decision, the New York District Court concluded that the New York Convention required it to give effect to the Malaysian annulment unless doing so would offend the basic standards of justice in the US. 

66.	Thai-Lao Lignite appealed. The Second Circuit Court of Appeals upheld the District Court’s decision to vacate the award on the grounds that it had been annulled at the seat of arbitration. The court reasoned that:

[a]though Article V(1)(e)’s text appears to leave the District Court with discretion to enforce an award that has been annulled in the primary jurisdiction – after all, it does not say that enforcement of the award “must” be refused … the scope of that discretion is “constrained by the prudential concern of international comity”.
	(citations omitted.)

67.	Further, the court noted its earlier observation that:
 
Any court should act with trepidation and reluctance in enforcing an arbitral award that has been declared a nullity by the courts having jurisdiction over the forum in which the award was rendered.

68.	A decision to enforce an arbitral award which has been annulled at the seat of arbitration is countenanced only in circumstances where enforcing the award is needed to “vindicate the fundamental notions of what is decent and just in the United States”. 

69.	The Second Circuit has accepted that there is a high bar to establishing the public policy exception. In Corporacion Maxicana de Mantenimiento Integral v Pemex-Exploracion y Produccion, the Court identified four considerations where the exception may apply, namely: (i) the vindication of contractual undertakings and the waiver of sovereign immunity; (ii) the repugnancy of retroactive legislation that disrupts contractual expectations; (iii) the need to ensure that legal claims find a forum; and (iv) the prohibition against government expropriation without compensation. In Thai-Lao, Laos’ delay in filing the action to set aside the award at the seat and dilatory tactics in discovery matters arising in the US litigation were insufficient to “rise to the level of violating basic notions of justice such that [it] should ignore comity considerations” and continue enforcement of the annulled award.

70.	These decisions bear substantial similarity to the “primacy principle” that sounds in Australia and Singapore and has been discussed in the other papers. Enforcement courts are called to defer to the set aside decisions of seat courts – even where an award has previously been upheld in the enforcement jurisdiction – unless doing so is contrary to public policy in the enforcement jurisdiction.

71.	This approach reflects a view of the New York Convention that differentiates between the ‘primary’ jurisdiction of the seat, and the ‘secondary’ enforcement jurisdictions. A secondary jurisdiction only has a limited ability to assess whether it can domestically enforce an award. As the Fifth Circuit Court of Appeals observed in OJSC Ukrnafta v Carpatsky Petroleum Corporation: 

As a secondary enforcement jurisdiction, we can deny enforcement only on a ground listed in Article V. And we construe Article V defences narrowly to encourage the recognition and enforcement of commercial arbitration agreements in international contracts. 

72.	Unlike the approach of the Privy Council in Gol Linhas, and that of the Singapore Court of Appeal in Republic of India, US courts do not appear to have directly considered the application of principles of collateral estoppel to set-aside decisions made by seat courts. 

73.	It is as well to note that there has been some criticism of the elevation of seat court set-aside decisions by common law jurisdictions. Arguably, by eliminating the double exequatur requirement that an award needed to be recognised both at the seat and in the relevant enforcement jurisdiction, the drafters of the New York Convention aimed to place emphasis on the award itself and to reduce the significance of the fate of the award at the seat. This approach sounds in the civil law jurisprudence and is particularly evident in the Cour de Cassation’s decision in PT Putrabali Adyamulia (Indonesia) v Rena Holding. That case is considered in detail in Menon CJ’s paper, and perhaps reflects the tendency of French courts to scrutinise the award de novo rather than review court decisions ancillary to the award. This paper does not endeavour to enter the merits of this debate, but only to note the differences of approach between common law and civil law jurisdictions.

(ii)	Confirmation decisions at the seat of arbitration
74.	The New York Convention does not explicitly address the opposite circumstance: where the seat court has either confirmed or refused to set aside an arbitral award, but enforcement proceedings have been brought in another jurisdiction. It is, however, apparent that it does not prevent a subsequent enforcement court from refusing to recognise the award on an Art V basis despite it being upheld at the seat. 

75.	Where a seat court judgment has confirmed or refused to set aside the award, US courts have generally permitted award creditors the option of either seeking to enforce the award itself, or alternatively seeking to enforce the seat court judgment confirming or refusing to set aside the award: see, by way of example, Seetransport Wiking Trader Schiffahrtgesellschaft mbH & Co v Navimpex Centrala Navala 29 F.3d 79 (2d Cir. 1994). 

76.	The Arbitration Restatement provides that US courts may grant preclusive effect to the seat confirmation judgment in enforcement proceedings. There does not appear to be US judicial consideration of whether the same primary consideration should be afforded to a seat court decision affirming, rather than setting aside, an arbitral award. 

(iii)	Enforcement decisions not at the seat of arbitration
77.	The situation differs for decisions made by enforcement courts not located at the seat. The New York Convention does not address the relationship between different sets of enforcement proceedings. A decision in one enforcement jurisdiction to refuse to enforce an award does not provide a ground for refusal to enforce the award in another jurisdiction, unlike the decision of a seat court under Art V(1)(e). 
78.	However, presumably the doctrines of res judicata or collateral estoppel may be available as a matter of domestic law to prevent a second enforcement court from reaching a different conclusion to the first enforcement court. 
79.	Guidance on this issue in the US is sparse. The Arbitration Restatement provides that in post-award proceedings US courts must determine whether they can re-examine a matter decided at an earlier stage of proceedings by a foreign court by applying regular principles applicable to foreign judgments, including those of res judicata or collateral estoppel. 
80.	This reflects the approach taken by the English courts in Yukos Capital SarL v OJSC Rosneft Oil Company. That dispute concerned the decision of an arbitral tribunal seated in Russia, which had rendered four awards in favour of the claimant, Yukos Capital. Rosneft successfully challenged those awards before Russian courts, and the awards were set aside.
81.	Yukos Capital sought to enforce the awards in the Netherlands. The Amsterdam Court of Appeal affirmed the awards despite the fact that they had been set aside in Russia, finding that the Russian set aside judgments should not be recognised as they were the result of a partial and dependent judicial process. Yukos Capital obtained payment of the award but sought recognition and enforcement of the award in the UK in order to collect post-award interest. 
82.	In the English proceeding the question arose whether Rosneft could re-litigate the partiality of the judicial proceedings that led to the Russian set-aside judgments, or whether this was precluded due to the findings in the Dutch enforcement proceedings.
83.	Hamblen J found that an issue estoppel arose to prevent Rosneft from re-litigating the partiality of the Russian judicial proceedings, as it had been the subject of a final and binding judgment by the Amsterdam Court of Appeal. Rosneft appealed.
84.	Although the Court of Appeal found that the elements of issue estoppel were not satisfied because the standard of whether judicial proceedings were ‘partial and dependent’ differed between the Netherlands and England, the Court nonetheless appeared to accept that an issue estoppel could apply in relation to a foreign enforcement decision.
85.	Some decisions have extended this reasoning further and have applied preclusive effect to a foreign enforcement judgment even where the second enforcement proceedings are brought before a court at the seat of arbitration. 
86.	In Belmont Partners LLC v Mina Mar Group, Inc, a US District Court in Virginia held that an enforcement decision by the Ontario Superior Court upholding the validity of an arbitral award precluded a claim to vacate the award in the US under principles of res judicata. The dispute arose from a US-seated arbitration between Belmont Partners (BP) and Mina Mar (MM). The subject of the arbitration was whether, in precontractual negotiations of a settlement agreement, BP had agreed to transfer MM the stock certificates of two clean shell corporations. The tribunal rendered an award in favour of BP, finding that no such agreement had been made and requiring MM to comply with the terms of the settlement agreement.
87.	BP sought enforcement of the award before the Superior Court of Justice in Ontario. In the enforcement proceedings, MM contended that the award was procured by fraud and should not be recognised. The Ontario Court found that the award had not been procured by fraud and accordingly affirmed the award.
88.	BP subsequently sought enforcement of the award in the US, and MM opposed the US enforcement proceedings on the same grounds as it had opposed enforcement in Canada. The District Court held that res judicata mandated that it grant comity to the Canadian decision that the award had not been procured by fraud, and accordingly recognised the award. 
89.	Similar conclusions have been reached before English courts. In Chantiers de l’Atlantique SA v Gaztransport & Technigaz SAS, the English Commercial Court dealt with an award in which the London tribunal had dismissed all claims. The successful respondent had sought recognition and enforcement of the award before French courts, and the claimant resisted on the ground that the award had been obtained by fraud. The Cour de Cassation dismissed this argument and held that the award was enforceable. The unsuccessful party to the arbitration also commenced proceedings at the seat before the High Court to set aside the award on the basis that it had been obtained by fraud. Flaux J stated in obiter that, as the unsuccessful party had already raised those matters before French courts and lost, it was barred under principles of issue estoppel from raising such matters again before the English court.
90.	In each of Yukos, Belmont and Chantiers, the relevant court did not engage in discussion of whether it is appropriate to apply preclusive foreign judgment principles to award enforcement judgments. This contrasts to the approach of the Singapore Court of Appeal to this issue in the recent Republic of India case, which has been discussed in Menon CJ and Bell CJ’s papers. In that case, the Court of Appeal left open the question of whether issue estoppel could apply between different sets of enforcement proceedings, noting that applying such principles:
… could incentivise forum-shopping and the emergence of parallel and possibly conflicting award proceedings, with the award creditor first seeking enforcement in a forum with the most arbitration-friendly approach and then using a presumably favourable decision to bind subsequent enforcement courts.
91.	In some sense, the reservations outlined in Republic of India are an argument against estoppel arising from foreign judgments in general: any estoppel is based on a rule of priority that the earlier judgment prevails and may encourage forum-shopping. However, preclusion appears particularly problematic in the context of the New York Convention enforcement regime. The New York Convention individualises the enforcement of arbitral awards to the particular enforcement jurisdiction: Art III provides that recognition within each contracting state leads to the enforcement of the award “in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles”. Further, many of the grounds for non-recognition in Art V are determined by the domestic law of the enforcement jurisdiction, such as arbitrability and public policy considerations. In other words, an enforcement judgment does nothing more than determine the status of the award within that court's national boundaries. In Yukos, Belmont and Chantiers, arguments based on the New York Convention were not before the relevant courts.
92.	Other US decisions have been more circumspect in applying preclusive doctrines to enforcement court decisions, based on an interpretation of the New York Convention regime. In Karaha Bodas Co v Perusahaan Pertambagan Minyak Dan Gas Bumi Negara, the Fifth Circuit Court of Appeals held that a secondary jurisdiction   judgment on the validity of an award should not automatically receive res judicata effect.
93.	Karaha Bodas concerned an arbitral award rendered in Switzerland in favour of Karaha Bodas Company (KBC), imposing liability and damages against Perusahaan Pertambagan Minyak Dan Gas Bumi Negara (Pertamina), which was owned by the Indonesian government. KBC sought enforcement of the award in the District Court for the Southern District of Texas, which was granted summarily. 
94.	Subsequently, Pertamina brought an action before the Central District Court of Jakarta seeking the annulment of the award. KBC successfully sought an injunction from the Texas District Court, ordering Pertamina not to take any action to pursue the Indonesian annulment action and to advise the Indonesian court that it would no longer pursue an annulment. Although Pertamina informed the Indonesian court of the anti-suit injunction, that court nevertheless annulled the award on the ground that it was contrary to the New York Convention and to Indonesian arbitration law, and permanently enjoined KBC from seeking to enforce the award. 
95.	The Fifth Circuit considered whether the District Court had authority to issue the antisuit injunction against Pertamina. In finding that the District Court abused its discretion to exercise the antisuit injunction, the Fifth Circuit considered that the injunction was not necessary, because the decision of the Indonesian court in no way affected the authority of the Federal District Court to enforce the award in the US under the New York Convention regime.
96.	The Court reasoned:
By allowing concurrent enforcement and annulment actions, as well as simultaneous enforcement actions in third countries, the Convention necessarily envisions multiple proceedings that address the same substantive challenges to an arbitral award. For instance, Article V(1)(d) enables a losing party to challenge enforcement on the grounds that the arbitral panel did not obey the law of the arbitral situs, i.e., the lex arbitri, even though such a claim would undoubtedly be raised in annulment proceedings in the rendering State itself. … In short, multiple judicial proceedings on the same legal issues are characteristic of the confirmation and enforcement of international arbitral awards under the Convention.
(emphasis added.)
97.	On this basis the Court found that where the US acts as a court of secondary jurisdiction, “it only enforces, or refuses to enforce, awards arbitrated elsewhere, and those decisions do not automatically receive res judicata effect”.
98.	A similar conclusion was reached in parallel enforcement proceedings by the High Court of Hong Kong. Pertamina opposed KBC’s application for enforcement of the arbitral award in Hong Kong on the same grounds as pleaded before the US District Court. KBC argued that issue estoppel applied to prevent reconsideration of Pertamina’s arguments that had been unsuccessfully advanced in the US. The High Court of Hong Kong held that, while the requirements of issue estoppel may have been satisfied by Pertamina’s arguments, it was unnecessary to apply the doctrine as the Court would independently deal with the various grounds.
99.	Although US courts have not explicitly rejected the application of preclusive principles to foreign enforcement judgments, the Arbitration Restatement takes the position that judicial determinations by a foreign court of secondary jurisdiction of the entitlement of a foreign award to recognition or enforcement should not ordinarily be given issue-preclusive effect in a post-award action. The rationale is that because such determinations are, by definition, intended to apply within the national boundaries of the issuing court, they are not intended to have extraterritorial impact. The Arbitration Restatement also provides that treating determinations by foreign courts of primary and secondary jurisdiction differently is consistent with the fundamental difference between primary and secondary jurisdictions under the New York Convention. 
Conclusion 
100.	The recognition and enforcement of foreign judgments and awards has long been a subject of international significance. In some respects, however, the US position on foreign preclusion doctrine remains unsettled and the area is ripe for further judicial (if not legislative) consideration. It is apparent that, despite some similarities, there is far from complete uniformity in the approaches of common law jurisdictions to the application of res judicata and collateral estoppel in the transnational context, particularly insofar as their application to non-parties is concerned. 
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