1. INTRODUCTION

Complex arbitrations involving multiple parties and/or multiple contracts raise various difficulties as previously illustrated in the other contributions to this dossier. Where the arbitrator fails to anticipate such difficulties, or believes that they can be overcome, these difficulties can reappear at the later stage of enforcement of the award.

An arbitral award rendered against multiple parties, or based on a series of contracts, will have little effect if the judge views the award as having violated the laws ensuring its validity and enforceability. At the start of such complex arbitrations, therefore, a claimant can make one of two strategic choices: splitting the dispute into several procedures or bringing all parties and/or contracts into one single procedure. Before making this choice, the claimant must ask itself the following question: in the case of splitting, and assuming the award is rendered in its favour, will it be able to rely on the award, rendered in the two-party and single contract arbitral proceeding in another proceeding (whether judicial or arbitral) involving another party or another contract?

In order to fully address the claimant's options in such multiparty and multicontract situations, I will cover the two scenarios in the following two sections.

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2. BRINGING ALL PARTIES AND/OR CONTRACTS INTO A SINGLE PROCEDURE

An award rendered against (or in favour of) two or more respondents, or on the basis of two or more contracts, risks being refused enforcement on the same grounds as those that were, or should have been, in the mind of the claimant at the time it initiated the proceedings. One need only refer back to the provisions of Article V of the New York Convention on the recognition and Enforcement of Foreign Arbitral Awards (the 'New York Convention') to understand the challenges an award of this kind faces.

It will first be recalled that recognition and enforcement of the award may be refused if, according to Article V.1.c,

"the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration […]."

Under this article, a court can deny enforcement on the basis that one of the parties to the proceedings was not a party to the arbitration clause or because one of the contracts in dispute did not have an arbitration clause or had an arbitration clause that was incompatible with the one upon which jurisdiction was established.

Article V.1.d of the New York Convention mentions another obstacle:

"The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties […]."

this situation can arise when there is consolidation - stricto sensu - of two arbitral tribunals into one, based on the fact that the two arbitrations are closely related but against the will of one of the parties.

Another defence to enforcement is lack of due process under Article V.1.b of the New York Convention. According to this provision, an award may be refused enforcement if:

"the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case."

This can occur, for instance, when one of the parties is forced to join proceedings already underway.

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In an international context, the existence of those potential obstacles to the enforcement of an award raises specific issues in one of the following situations (which can also be combined):

(a) Two co-respondents, both subject to an unfavourable award, reside in different countries.

(b) The award was rendered in one country and enforcement is sought in another.

a. First situation: two co-respondents, both subject to an unfavourable award, reside in different countries

Under this hypothetical set of facts, an order to pay was made against the two co-respondents jointly and severally, or in solidum. Alternatively, the main respondent was ordered to pay a certain amount to the claimant and the other respondent was ordered to indemnify the main respondent. A serious problem will arise if the award is recognized in one country and refused enforcement in the other.

In the case of jointly and severally liable respondents, the claimant will seek enforcement for the full amount of the award against the party that resides in the country where enforcement is possible, and that party will not be able to recover the other respondent's share in the debt. Similarly, in the other case, the respondent that will have complied with the award made against it will not be able to obtain indemnification from the other respondent.

There is no doubt that these outcomes are fundamentally unfair. The question remains, therefore, whether there is a remedy to avoid these kinds of situations.

Before the Milan Court of Appeal, a jointly and severally liable respondent pleaded that it could never request its co-respondent, residing in Malaysia, to contribute to its part of the debt1. On this basis, it tried to resist enforcement of the award. The Court of Appeal, by a judgment rendered on 5 November 2003, rejected this defence, which it rightly found to be incompatible with the very notion of joint and several liability.

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b. Second situation: the award is rendered in one country and enforcement is sought in another

Most arbitral tribunals will not take the risk of seeing the award annulled by the courts at the place of arbitration. They will only find that they have jurisdiction and are duly constituted, with regard to multiple parties or multiple contracts, after having verified that the award will not run any serious risk of being set aside. Notwithstanding Article 35 of the ICC rules, pursuant to which: 'the Arbitral tribunal […] shall make every effort to make sure that the Award is enforceable at law', they will, however, rarely verify at the outset whether the award is enforceable in one or several of the countries in which enforcement can be envisaged. As a consequence, even if the risk that the award will be set aside by the courts of the place of arbitration appears minimal or non-existent, this does not guarantee that the award will be found enforceable in a foreign country.

This is the issue that the claimant might face once it has obtained a favourable award. Supposing, for instance, that the arbitral tribunal assumed jurisdiction over a party that had not signed the arbitration clause and that this appears to be in conformity with what the local courts would accept, it remains to be seen whether the court requested to enforce the award will have the same understanding of the issue regarding the extension of the arbitration clause

to non-signatories.

The ICC case of Dallah Estate v. the Ministry of Religious Affairs, Government of Pakistan is an illustrative example. 2

In this case, a contract was concluded between a Saudi company, Dallah Estate, and a Pakistani trust called Awami Hajj trust, whereby Dallah agreed to build accommodations suitable for pilgrims travelling from Pakistan to Mecca. The negotiations had been led, on the side of Pakistan, by the government, which ultimately decided to promulgate an ordinance providing for the establishment of the trust that would act as a vehicle to undertake the project. A few months after the execution of the contract, the Ministry of religious Affairs, by a letter on its headed paper, put an end to the contract, alleging that Dallah had breached certain fundamental obligations. Dallah started an ICC arbitration in Paris against the government of Pakistan. The arbitral tribunal was presided over by Lord Mustill.

The Government rejected any suggestion that it was a party to the contract or that it had consented to the arbitration agreement, and denied the arbitral tribunal's jurisdiction on those bases. the tribunal decided that the question whether the government of Pakistan was a party was to be determined 'by [Page226:] reference to those transnational general principles and usages which reflect the fundamental requirements of justice in international trade and the concept of good faith in business'. 3

More concretely, the tribunal observed that the arbitration agreement extended 'to parties that did not actually sign the contract but were directly involved in the negotiation and performance of such contract […]'.

This last formula is a quotation from French case law as it was formulated at the time.

The arbitral tribunal concluded that Dallah had demonstrated that the government of Pakistan had been, and considered itself to be, a party to the contract with Dallah. On the merits, the tribunal found that the government owed Dallah GBP 20 million in damages.

The government did not seek annulment of the award in France. The claimant, on its part, made an ex parte application to the Commercial Court for leave to enforce the award as a judgment of the High Court of England. 4 An order giving Dallah such leave was issued, which led in turn to an application by the government to set aside the order on the grounds that the arbitration agreement on which the award was based was not valid within the meaning of section 103(2)(b) of the English Arbitration Act, which reflects Article V.1.a of the New York Convention. 5

Article V.1.a provides, in so far as is material to this decision, as follows:

"Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

[…] the agreement referred to in article II […] is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made."

Since the parties had not agreed on the law by which the arbitration agreement should be governed, the High Court and, on appeal, the Court of Appeal, found it was subject to French law, as the law of the country where the award was made. 6One could therefore hope that a convergence might be reached between the position that a French court would adopt, if seized of a request to set aside the award, and the position of the English court. If [Page227:] only English law was applied, for example, the court would have most certainly refused enforcement, since English judges will rarely extend an arbitration clause to a party that is not a signatory to the contract. What remained to be seen, however, is how the English courts would apply the principles of French law.

What the High Court and the Court of Appeal each understood in the application of French law is that: 7

"[…] in order to determine whether an arbitration clause upon which the jurisdiction of an arbitral tribunal is founded extends to a person who is neither a named party nor a signatory to the underlying agreement containing that clause, it is necessary to find out whether all the parties to the arbitration proceedings, including that person, had the common intention (whether expressed or implied) to be bound by said agreement and, as a result, by the arbitration clause […].

To this effect, the courts will consider the involvement and behaviour of all the parties during the negotiation, performance and, if applicable, termination of the underlying agreement."

The High Court therefore established that it would seek to ascertain the subjective intention of each of the parties through their objective conduct. 8 In doing so, it found that it was not the subjective intention of all the parties that the government of Pakistan should be bound by the agreement or the arbitration clause: 9

"In fact, I am clear that the opposite was the case from the beginning to end. That is why the GoP distanced itself from the contractual arrangements in the Agreement and that is why it sought to argue from the time of the Termination Letter that the Agreement was void and illegal."

Similarly, the Court of Appeal found that this subjective intention - or implicit intention - was lacking.

According to Lord Justice Moore-Bick, who wrote the lead opinion, there was no doubt that prior to the establishment of the trust, the government of Pakistan was the only party with which Dallah could negotiate. There was, however, a fundamental change in that position when the government established the trust and, most importantly, when the final contract was signed

[Page228:] only between Dallah and the trust. Lord Justice Moore-Bick therefore posited, in the most commonsensical fashion, that '[i]f it had been [the parties'] common intention, the Government would surely have been named as a party to the Agreement, or would at least have added its signature in a way that reflected that fact'. 10 As to the termination letter sent to Dallah on the Ministry of religious Affairs' letterhead, the Court of Appeal found it ambiguous as it was sent by the Minister of religious Affairs, who is evidently a member of the government but was also the chairman of the board of directors of the trust (although at that point it had already been dissolved). 11 As a consequence, the English courts refused to grant the claimant leave to enforce the award.

While the English judges' conclusions were reasoned and sophisticated, they failed to fully capture some essential points of French law. According to the French Cour de cassation, following the most recent version of the rule: 12

"The effect of an international arbitration clause extends directly to parties involved in the performance of the contract and in the ensuing disputes."

This criteria is in essence objective. If it had been applied to the Dallah case, it would have inevitably led a French judge to confirm the arbitral tribunal's jurisdiction over the government of Pakistan.

I do not conclude therefrom that Dallah should not have sought its remedy against the government of Pakistan. Given the circumstances, it did not have much choice, since the trust (the only signatory to the contract) no longer existed by the time Dallah launched the ICC arbitration proceedings. If, however, the claimant had had the option to pursue two respondents, it would have had to consider the dépeçage option.

3. SPLITTING THE DISPUTE INTO SEVERAL PROCEDURES

The key question here is whether, if it has opted to split its claims, the claimant will be allowed to rely on the contents of an award obtained in its favour in a subsequent proceeding introduced on the basis of another contract or against another respondent?

The answer to this question will depend on whether the parties are different or the same.

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a. Two or more contracts involving the same parties

At this point, it is necessary to make a further distinction.

1. The fate of contract no. 2 depends on the validity or interpretation of contract no. 1, which is the subject of the earlier proceedings.

The outcome of this situation is relatively straightforward. Since the validity or interpretation of contract no. 1 will necessarily have been decided in the dispositive part of the first award, the solution will be binding on the subsequent arbitrator or judge seized with matters concerning contract no. 2.

2. Contracts nos. 1 and 2 concern the same issues of fact or law, but they are subject to separate proceedings (before two arbitral tribunals or before one tribunal and one court).

The question that arises here is whether the way the issue is resolved in the award concerning contract no. 1 is binding on the tribunal (or court) dealing with contract no. 2.

While each country has its own interpretation of the res judicata effects of an earlier and final adjudication by a court, international arbitration would greatly benefit from a system of universal rules of application for arbitral awards.

In this regard, the recommendations of the International law Association (IlA) adopted in 2006 on res judicata constitute appropriate guidelines:

"4. An arbitral award has conclusive and preclusive effect in the further arbitral proceedings as to:

4.1 determinations and relief contained in its dispositive part as well as in all reasoning necessary thereto;

4.2 issues of fact or law which have actually been arbitrated and determined by it, provided any such determination was essential or fundamental to the dispositive part of the arbitral tribunal." [Page230:]

The latter part of Article 4.2, which makes the res judicata effect of the first tribunal's findings conditional, is justified in that it is preferable not to impose on the second arbitral tribunal the first tribunal's findings on a given issue if such issue was only superficially discussed between the parties in the earlier proceedings, because they had found it to be of minor importance in the context of those proceedings.

b. Different parties

An award cannot be used against third parties, nor can third parties assert the award in their favour. this position is confirmed in Article 3.4 of the IlA's 2006 recommendations on res judicata:

"3. An arbitral award has conclusive and preclusive effects in further arbitral proceedings if: […]

3.4 it has been rendered between the same parties."

Even if the matters at issue are the same - for example if all contracts are identical in content or were negotiated in the same factual context - each arbitral tribunal will in principle issue its own independent decision.

For example, in Sun Life Assurance Company of Canada13, a case that was on appeal with the English Court of Appeal, the res judicata issue in dispute concerned two claimants (Lincoln and Cigna), which had been involved in separate proceedings against Sun Life in relation to reinsurance policies entered into with Sun Life. In its arbitration, Lincoln believed it was entitled to avoid the application of its reinsurance on grounds of misrepresentation and non-disclosure as decided by the Cigna tribunal. The Lincoln tribunal, however, disagreed. It made it clear that an earlier arbitral award would not bind a party to the award in any later proceedings against a third party. Hence, it would generally be free to contradict the findings of the award.

However, the impossibility of invoking the findings of an arbitral award against a third party must be nuanced in the following three ways.

First, an award may be relied upon by another arbitral tribunal as a source of inspiration. In ICC case no. 7061, the arbitrator, while confirming that the arbitral tribunal was not bound by the earlier award, stated that the prior award contained: 13

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"[…] a helpful analysis of the common factual background to this dispute. Accordingly, we have borne its findings and conclusions in mind, whilst taking care to reach our own conclusions on the materials submitted by these parties in these proceedings."

Second, res judicata must not be confused with opposabilité (to use a French legal term which has no equivalent in the English language).

The binding effect of an award only exists between the parties - l'autorité de chose jugée est relative - whether it relates to findings of law or fact. That being said, what has been decided, that is the decision itself, establishes a legal situation constituting an objective reality that, although it does not directly affect the legal situation of third parties, cannot simply be ignored by the latter.

The Sun Life decision of the English Court of Appeal contrasted the res judicata issue, which it resolved in the way described above, with a hypothetical situation that would be one of opposabilité in the French terminology, and for which the award could be regarded 'as a relevant fact for the purposes of the second dispute': 15

"For example, if a certain amount of damages had been award by the arbitral tribunal, the party seeking to claim damages from a third party could assert that the amount that he had to pay as damages in the earlier dispute was the amount of damages that he suffered, for which the third party was therefore liable."

There may be a third nuance to be made. It would distinguish between the situation in which a finding of law or fact in the earlier award is used against a third party and the situation in which it is the third party that relies on the prior award against the original party for the purposes of its own case.

In the former case, there would be violation of due process if the third party was denied the right to submit its own arguments and/or evidence.

In the latter case, the original party, against which a finding of law or fact is invoked, had every opportunity to present its case before the earlier tribunal. It can be argued that there is no reason, in that situation, why the third party could not borrow from the prior award to make its case before the tribunal. If anything, it reduces the possibility for contradiction between awards deriving from the same factual context. This is the majority view among the courts in the united states.

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1
Polcon Italiana srl (Italy) v. P.T. Perkebunan Nusantara III Persero (Indonesia), Corte di Appello [Court of Appeal], Milan, 5 november 2003, rivista dell'Arbitrato 2 (2005) pp. 295-298, with note by Atteritano pp. 298-310.

2
Dallah Estate and tourism holding Company v. the Ministry of religious Affairs, Government of Pakistan, in the supreme Court of Judicature Court of Appeal (Civil division) on appeal from the High Court of Justice Queen's Bench division (Commercial Court), [2009] EWCA Civ. 755 (20 July 2009) (hereinafter, 'Dallah, Court of Appeal, [2009] EWCA Civ. 755').

3
Dallah real Estate & tourism holding Company v. Ministry of religious Affairs, Government of Pakistan, [2008] EWhC 1901 (Comm), [2008] App.l.r. 08/01 (1 August 2008), at para. 49 (hereinafter, 'Dallah, High Court, [2008] EWhC 1901 (Comm)').

4
Ibid., at para. 54.

5
The High Court as well as the Court of Appeal rendered their decisions in application of the New York Convention as embodied in the English Arbitration Act of 1996.

6
Dallah, High Court, [2008] EWhC 1901 (Comm), at para. 3.

7
Ibid., at para. 85 (referencing the Joint Memorandum submitted by the parties to the High Court encapsulating the principles of French law which the parties agreed were applicable to the case). see also Dallah, Court of Appeal, [2009] EWCA Civ. 755, at para. 26.

8
Dallah, High Court, [2008] EWhC 1901 (Comm), at para. 87. see also Dallah, Court of Appeal, [2009] EWCA Civ. 755, at para. 27.

9
Dallah, High Court, [2008] EWhC 1901 (Comm), at para. 129.

10
Dallah, Court of Appeal, [2009] EWCA Civ. 755, at para. 32.

11
Ibid., at para. 34.

12
Cour de cassation, Chambre Civile 1, n° 04-20842, 27 March 2007: 'Mais attendu que l'effet de la clause d'arbitrage international s'étend aux parties directement impliquées dans l'exécution des contrats et les litiges qui peuvent en résulter.'

13
Sun Life Assurance Company of Canada (Canada), American phoenix life and reassurance Company (u.s.A.), phoenix home life Mutual Insurance (u.s.A.) v. lincoln life Insurance Company, Judgment by the supreme Court of Judicature Court of Appeal (Civil division) on appeal from the High Court of Justice Queen's Bench division (Commercial Court), [2004] EWCA Civ. 1660 (hereinafter, 'Sun Life, [2004] EWCA Civ. 1660'). see also B. Hanotiau, Complex Arbitrations (2006) para. 546.

14
Award of 28 november 1997 in ICC case no. 7061 (unpublished), cited in Hanotiau, supra n. 13, at para. 551.

15
Sun Life, [2004] EWCA Civ. 1660.