1. Introduction
In Blair v Curran, issue estoppel was described as a ‘judicial determination directly involving an issue of fact or of law [which] disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies’.Footnote 1 Issue estoppel was recognised by the House of Lords as far back as 1776.Footnote 2 Its applicability to foreign judgments, however, was recognised only in 1966 by a majority of the House of Lords in Carl Zeiss Stiftung v Rayner and Keller Ltd (No 2). Footnote 3
Different considerations surface when considering whether an estoppel arises from a foreign judgment compared to whether it arises from a domestic judgment. Lord Reid in Carl Zeiss pointed out that unfamiliarity with the modes of procedure in foreign courts may lead to difficulties in ascertaining whether a specific issue was decided by the court of origin or if its decision on that issue was fundamental, as opposed to collateral, to the foreign judgment.Footnote 4 Only decisions of the former type give rise to issue estoppels. Further, ascertaining if the same issue is before the two courts is not altogether straightforward, not least because the court of origin may have applied a different rule or framework to resolve the issue compared to the EnglishFootnote 5 court if the latter were to decide the issue. Is the issue whether a foreign court had been ‘partial and dependent’ simpliciter or whether a foreign court had been ‘partial and dependent’ according to a specific system of law?Footnote 6 Is the issue what is the proper law of the contract or what is the proper law of the contract as determined by English choice of law rules? The answer turns on how the process of ‘refining down’ or ‘salami-slicing’—terms memorably adopted by Evans LJ in Desert Sun Loan v Hill Footnote 7—should be conducted. Should the slice be thick or thin? A thinner slice or, in other words, a narrower framing of the issue, would lead to fewer estoppels, compared to a thicker slice or broader framing of the issue. There is potential for ‘clever lawyers … to bamboozle’Footnote 8 the court by strategic framing of the issue to either raise or deny an issue estoppel.
This article explores issue estoppel in relation to foreign decisions on the governing law of the claim. While there has been no direct English decision on this point, recent decisions in other common law jurisdictions show that the argument that the issue decided by the court of origin and the forum court are not the same due to a difference in choice of law rules and hence, the applicable substantive laws, is increasingly utilised as a litigation strategy.Footnote 9 Re-litigation on the governing law issue is normally attempted when the two substantive laws would lead to different results on the merits. In addition, the difference in applicable laws is now more frequently cited as a justification by courts in their refusal to recognise an estoppel over a specific issue, bringing into question conventional understanding of when a foreign judgment is given effect in the forum.Footnote 10 Clarity on whether a foreign decision on the governing law of the claim can give rise to an issue estoppel would be helpful for litigants as they would be able to work out the likely decision of the court on the substance of the dispute. This would, in turn, inform their decision on whether to pursue an out-of-court settlement or to expend time and money litigating. Further, the main questions which arise in relation to issue estoppel and foreign decisions on the governing law of the claim—whether a difference in the applicable choice of law rules matters and whether a different approach is warranted for choice of law categories underlined by public policy considerations—can be extrapolated into broader questions concerning the operation of issue estoppels arising from foreign judgments generally. Should a difference in the applicable laws or legal frameworks in the two courts mean that issue estoppel ought to be denied? Should the interposition of forum international public policy militate against the finding of an issue estoppel? It is thus hoped that exploration of this specific question may yield some principles of general application.
The structure is as follows. Section 2 offers an overview of the principles underlying the operation of issue estoppel. Section 3 focuses on foreign decisions on the governing law of the claim. The contexts in which an estoppel over this issue may arise are articulated. Whether this issue is one which can and should give rise to an estoppel is discussed for claims covered by general and special choice of law rules. While the discussion mainly centres on contractual and tortious claims, it applies to most private law claims. The problem of identifying the relevant issue is considered more generally in Section 4. Lastly, Section 5 offers some concluding comments.
2. Overview of the operation of issue estoppelFootnote 11
2.1. Underlying principles
Issue estoppel, along with cause of action estoppel, is part of estoppel per rem judicatam. Estoppel per rem judicatam precludes a party from contradicting something which has previously been determined. It is based on the Latin maxims ‘interest reipublicae ut sit finis litium’ and ‘nemo debet bis vaxari pro una et eadem causa’,Footnote 12 which mean, respectively, that it is in the interest of the State that there should be an end in litigation and no one should be tried twice in relation to the same matter. The former is part of public policy while the latter is part of private justice.Footnote 13
The private interest protected by estoppel per rem judicatam is the prevention of unjust harassment.Footnote 14 Forcing a party to participate in proceedings in multiple jurisdictions increases costs and often leads to significant delays in bringing the matter to a close.Footnote 15 Procedural fairness between the parties is maintained by ensuring finality in litigation.Footnote 16
The public interest in preventing re-litigation has been observed as having two aspects: first, the proper allocation of adjudicative resources to ensure efficient resolution of disputes and, second, avoiding a system of justice being discredited, which would occur if its decisions were constantly challenged.Footnote 17 International comity also suggests that courts ought to respect each other’s decisions.Footnote 18 More broadly, it has been suggested that cross-border issue estoppel is an aspect of a transnational system of commercial justice where cooperation between different courts would facilitate cross-border trade and the development of transnational legal norms.Footnote 19
As far as English law is concerned, the operation of estoppel is a procedural matter for the lex fori.Footnote 20 The requirements for issue estoppel from a foreign judgment were set out authoritatively by Lord Brandon in D S V Silo-Und Verwaltungsgesellschaft Mbh v Owners of the Sennar (The Sennar (No 2)):
The first requirement is that the judgment in the earlier action relied on as creating an estoppel must be (a) of a court of competent jurisdiction, (b) final and conclusive and (c) on the merits. The second requirement is that the parties (or privies) in the earlier action relied on as creating an estoppel, and those in the later action in which that estoppel is raised as a bar, must be the same. The third requirement is that the issue in the later action, in which the estoppel is raised as a bar, must be the same issue as that decided by the judgment in the earlier action.Footnote 21
These requirements are in substance identical to the requirements imposed for the recognition of an in personam foreign judgment under the common law rules. A foreign judgment must be recognised in order for it to have effect in the forum. Recognition is thus a pre-condition to according a foreign judgment preclusive effect. Given that the requirements for recognition and res judicata are substantively identical, recognition of a foreign judgment will in most cases accord it res judicata effect at the same time.Footnote 22
Lastly, estoppels are supposed to ‘work justice and not injustice’.Footnote 23 As a result, issue estoppel operates flexibly and will be denied in ‘special circumstances’ where its application would cause injustice.Footnote 24
2.2. When is issue estoppel precluded?
Yukos Capital Sarl v OJSC Rosneft Oil Co (No 2) Footnote 25 established that matters which are subject to forum international public policy will not give rise to an issue estoppel because each court is applying its own public policy and, consequently, there is no identity of issue.Footnote 26 In that case, Russian arbitral awards against Rosneft, a company within Russian state control, had been annulled by the Moscow Arbitrazh Court. The Amsterdam Court of Appeal held that the Russian annulment judgment was a ‘partial and dependent’ decision and refused recognition of it on grounds of Dutch public policy.Footnote 27 In enforcement proceedings in England, Yukos relied on the Dutch decision to argue that Rosneft was estopped from asserting that the awards no longer existed in the legal sense. The Court of Appeal held:
“[P]ublic order” or “public policy” is inevitably different in each country. The standards by which any particular country resolves the question whether the courts of another country are “partial and dependent” may vary considerably … It is our own public order which defines the framework of any assessment of this difficult question; whether such decisions are truly to be regarded as dependent and partial as a matter of English law is not the same question as whether such decisions are to be regarded as dependent and partial in the view of some other court according to that court’s notions of what is acceptable or otherwise according to its law.Footnote 28
The Singapore Court of Appeal suggested obiter dicta in Merck Sharp & Dohme Corp v Merck KGaA that an issue which is subject to a forum overriding mandatory rule is also not subject to estoppel.Footnote 29 There is little concrete authority on this point, but the proposition can be supported on the basis of parliamentary supremacy. If Parliament intends a particular rule to apply regardless of party intentions or the cross-border nature of the dispute, the court would, of course, have to yield to parliamentary intention instead of giving effect to the otherwise applicable foreign rule. Parliamentary supremacy could be argued to extend to the courts ignoring a prior foreign decision on the issue covered by the forum overriding mandatory rule.Footnote 30
The preclusion from issue estoppel of matters subject to forum international public policy and forum overriding mandatory rules can also be justified because the forum court retains the prerogative to determine these matters for itself.Footnote 31 One can add to this list decisions on sensitive matters which give rise to comity considerations.Footnote 32 In Yukos, the Court of Appeal observed that a matter of ‘high policy’ is raised if the interests of the country of origin are involved.Footnote 33 This comment suggests that, on the facts of Yukos, the English court should be pre-disposed to recognise the Moscow Arbitrazh Court annulment decision absent ‘cogent evidence of partiality and dependency’,Footnote 34 rather than accept the decision of the Amsterdam Court of Appeal on this point. In addition, the Court went on to state that even if it had decided that an issue estoppel arose from the Amsterdam Court of Appeal decision, it would have been inclined to invoke the exception to issue estoppel because the question whether a foreign judgment is ‘partial and dependent’ is a ‘question so central to the respect and comity normally due from one court to another that to accept the decision of a court of a third country on the matter would be an abdication of responsibility on the part of the English court’.Footnote 35
In sum, subject to the overriding consideration to ‘work justice and not injustice’, the reasons underlying res judicata and estoppel per rem judicatam suggest that the court ought to recognise an issue estoppel over a foreign decision unless the decision involves a matter of forum international public policy, forum overriding mandatory rules or is an issue which the forum court retains the prerogative to decide for itself, with there being an overlap between these three categories.Footnote 36
3. Foreign decisions on the governing law of the claim
This section focuses on foreign decisions on the governing law of the dispute or claim. First, how two courts may face the same question is examined, followed by a discussion of whether, in principle, an estoppel ought to arise. Next, it considers whether the requirements for issue estoppel are satisfied, with particular attention paid to the requirement of identity of issue. The authorities on this topic are canvassed. Lastly, the approach towards special choice of law categories is discussed.
3.1. Contexts in which an issue estoppel over the governing law could arise
A decision on the governing law could be made at trial on the merits or as a preliminary issue.Footnote 37 The court may also pronounce on the governing law of the dispute at the jurisdictional stage: it is a factor under the doctrine of forum (non) conveniens and is relevant for some of the gateways to service out of jurisdiction.Footnote 38 In addition, the court could be required to identify the governing law in order to interpret a choice of court agreement for the purposes of determining its jurisdiction.Footnote 39
The two courts may have to identify the governing law in the same or different situations. If the two courts face this issue at trial on the merits, ordinarily issue estoppel on the governing law would not arise if the same claim and same parties are involved because cause of action estoppel would be pleaded and prevent re-litigation in the second court. However, it could be that the proceedings in the second court are related, not identical, proceedings.Footnote 40 For example, the application of the mosaic principleFootnote 41 in a situation where damage is spread across a few jurisdictions may lead to multiple proceedings in different jurisdictions where each claim is for damage suffered only in that particular jurisdiction. Common issues as to whether a duty of care arose and whether the alleged tortfeasor has breached this duty may arise in the various courts. In this type of situation, there is scope for the operation of issue estoppel on the governing law notwithstanding a prior decision on the substance by the first court.
3.2. The nature of choice of law rules
It has been argued in Section 2.2 that an issue estoppel cannot arise over a matter concerning forum international public policy or forum overriding mandatory rules. Therefore, the question which arises is whether, generally speaking, choice of law rules are part of forum international public policy or forum overriding mandatory rules.
International public policy is a narrow category of public policy which applies regardless of international elements in the dispute. Similarly, overriding mandatory rules are rules which apply irrespective of the identity of the governing law. They are defined in the Rome I Regulation on the law applicable to contractual obligationsFootnote 42 as:
provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation.Footnote 43
Choice of law rules cannot be said to satisfy the high threshold of being either part of forum international public policy or forum overriding mandatory rules. The forum court is willing to apply another country’s choice of law rules in certain circumstances, as is illustrated by the doctrine of renvoi, which applies in some choice of law categories. Foreign law and, as a precursor to that, the applicability of choice of law, must be pleaded and proved by the party who wishes to rely on it.Footnote 44 Otherwise, the lex fori will usually apply by default.Footnote 45
Thus, as a matter of principle, an issue estoppel can arise from foreign decisions on the governing law. This is subject to three caveats. First, where the first court has applied the lex fori as the governing law because of the failure of the parties to plead and prove the applicability of foreign law, no issue estoppel can arise that the law of the first court is the governing law. Unless the failure to raise foreign law is a clear indication of the parties making an implied choice of law for the lex fori,Footnote 46 there may have been good reasons for the failure to raise foreign law; it may not have been cost-effective to do so if trial was merely at the preliminary stages or the party who would have benefited from the foreign law chose not to participate in the proceedings. The procedural fall-back to the default application of the lex fori should not affect the substantive issue of identity of the governing law in a later trial. Second, there is no estoppel if it would be perverse to give effect to the foreign court’s decision on the governing law.Footnote 47 Such situations are rare, being limited to cases where the foreign choice of law rule contravenes established doctrines of private international law.Footnote 48 Third, certain choice of law rules are underscored by public policy considerations, such as those dealing with consumer contracts,Footnote 49 individual employment contractsFootnote 50 and environmental damage.Footnote 51 A difficult question concerns whether an issue estoppel ought to arise over foreign decisions on the governing law for these special choice of law categories. This is discussed separately in Section 3.5. The discussion which follows deals with situations falling within the general choice of law rules.
3.3. Are the requirements for issue estoppel satisfied?
Of the requirements set out in The Sennar (No 2),Footnote 52 three of them require further exploration for a foreign decision on the governing law: first, whether that decision is on the merits (Section 3.3.1); second, whether it is final and conclusive (Section 3.3.2); and, third, whether the issue is identical in the two courts (Section 3.3.3).
3.3.1. A decision ‘on the merits’
Lord Reid observed that it is unclear how the requirement that the foreign judgment must be ‘on the merits’ applies to issue estoppel.Footnote 53 This is particularly so when the relevant decision is on the governing law. The ‘merits’ referred to when speaking of trial on the merits are the merits of the claimant’s action. However, the natural meaning of ‘on the merits’ is wider: ‘on the merits’ involves a ‘determination of the parties’ substantive rights’.Footnote 54 This wider meaning would cover a decision on the governing law.
Further, the argument that a decision on the governing law is not ‘on the merits’ because it is procedural rather than substantive in nature was rejected by the Hong Kong Court of Final Appeal in First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd. Footnote 55 Moreover, even if choice of law rules are procedural in nature, issue estoppel can arise over a foreign decision on a procedural issue. Lord Brandon adopted an expanded definition of ‘on the merits’ for issue estoppel in The Sennar (No 2) Footnote 56 and the Court of Appeal in Desert Sun Loan v Hill Footnote 57 explicitly recognised that an issue estoppel could arise from a foreign interlocutory judgment on a procedural, non-substantive issue. Thus, on either a substantive or procedural construction, a decision on the governing law will be one ‘on the merits’.Footnote 58
3.3.2. Final and conclusive
A decision on the governing law made during trial on the substantive underlying claim will be final and conclusive.Footnote 59 The same cannot unequivocally be said of a decision made during interlocutory proceedings. If the decision on that issue cannot be reopened or varied by the court of origin, it will be final and conclusive in nature.Footnote 60 Thus, a decision on the governing law made as a preliminary issue at the interlocutory stage of proceedings is considered final and conclusive. However, a decision made by a court on the governing law when considering forum (non) conveniens is not to the normal civil standard of proofFootnote 61 and can be revisited at trial. A decision based on a lower standard of proof will logically not preclude a different decision at a later point in time based on a higher standard of proof.Footnote 62
Some of the gateways for service out of jurisdiction are dependent on the governing law of the claim being the lex fori. For example, paragraph 3.1(6)(c) of the English Civil Procedure Rules Practice Direction 6B confers jurisdiction on the court over a claim made in respect of a contract which is governed by English law. The usual threshold for the claimant to satisfy is a ‘good arguable case’.Footnote 63 However, if a question of law arises which goes to the existence of jurisdiction, the court will normally decide the question of law and not merely assess if there is a good arguable case on that issue of law.Footnote 64 If so, that decision would qualify as a final and conclusive decision. This is in contrast with the position in some other jurisdictions where the ‘good arguable case’ standard prevails.Footnote 65
3.3.3. Identity of issue: relevance of adoption of different choice of law rules?
Each court applies its own choice of law rules to identify the governing law. Within the common law countries, the choice of law rules are similar or identical in many areas. However, in certain areas, such as contractual and non-contractual obligations in civil and commercial matters, United Kingdom (UK) courts apply harmonised choice of law rules applicable in the European Union (EU). The Rome I and Rome II Regulations deviate from the common law choice of law rules for contractual and non-contractual obligations, respectively, in some significant respects.
If the two courts adopt the same choice of law rule, the requirement of identity of issue is clearly satisfied. What if the two courts adopt different choice of law rules for that issue? Is there identity of issue in this situation?Footnote 66
Guidance on the requirement of identity of issue has largely been concerned with two points: first, whether the issue in the second court is the same issue as that decided by the first court; and, second, whether the issue decided by the first court was fundamental or merely collateral to its decision, as only the former will give rise to an estoppel.
The second point does not arise because, in the ordinary course of events, a decision on the identity of the governing law is clearly material to a court’s decision resolving the claim. That decision would thus be ‘legally indispensable’Footnote 67 to the judgment of the first court. The first point is relevant to a decision on the governing law but, importantly, the concern is different from that which normally arises. In most cases, the differences in the nature of the dispute in the two proceedings and unfamiliarity with the procedural rules in the first courtFootnote 68 may obfuscate the exact issue which was decided in the first court. The tests are therefore geared towards determining if the same issue is at stake in both courts despite the differences in context and procedure. Thus, it has been said that there is identity of issue if the second court’s decision may entail disagreeing with the findings of the first courtFootnote 69 or if the decision of the second court ‘depends on precisely the same facts, circumstances and arguments’.Footnote 70
Where a decision on the governing law is concerned, obfuscation is not the problem. Rather, identity of issue depends on whether a broad or narrow approach is taken to framing the relevant issue. Is the relevant issue ‘what law governs the dispute or issue?’ or ‘what law is identified by our (forum) choice of law rules to govern the dispute or issue?’. A broad framing of the issue will result in an estoppel arising whereas a narrow framing will give rise to an estoppel only if the two courts adopt the same choice of law rule. This, then, is essentially a question of principle.
3.3.4. Identity of issue: broad or narrow approach?
Considering, first, contract choice of law, the choice of law process usually begins with determining if the parties have expressly chosen a governing law. If not, the second stage is to consider if the parties have made an implied choice of law by looking at the terms of the contract and the surrounding circumstances. If no express or implied choice of law can be discerned, the third stage is to identify the law of closest connection to the contract. This three-stage process is adopted in the common law and under the Rome I Regulation.Footnote 71
When identifying the express governing law of the contract, is the relevant issue ‘what is the governing law of the contract?’ or ‘did the parties agree to this choice of law clause?’.Footnote 72 The mere fact of agreement to the choice of law clause is not determinative of the identity of the governing law of the contract. The first court could have decided that the parties did agree, but their choice should not be given effect due to public policy considerations.Footnote 73 That specific decision on public policy is, of course, not subject to issue estoppel.
In relation to the governing law of the contract in the absence of choice, the common law approach involves weighing up various factors to determine the law of closest and most real connection.Footnote 74 The process differs under the Rome I Regulation. Articles 4(1) and 4(2) identify the applicable law as the law of habitual residence of the characteristic performer of the contract.Footnote 75 Thus, similarly to the first stage of the search for the governing law of the contract, it is possible to frame the relevant question for issue estoppel either broadly or narrowly. The broad question is: ‘what is the governing law of the contract in the absence of choice?’. A narrow query would differ depending on which set of rules is applied by the court: ‘what is the law of closest connection?’ (common law) or ‘what is the law of habitual residence of the characteristic performer of the contract?’ (Rome I Regulation).
If framed broadly, the same issue is faced by the two courts regardless of the mode of identifying the governing law in the absence of a choice by the parties. Even if framed narrowly, it is submitted that an issue estoppel could still arise even if one court applies the common law rule and the other court applies the Rome I Regulation. This is because Rome I treats the law of habitual residence of the characteristic performer of the contract as a proxy for the law of closest connection to the contract.Footnote 76 Subparagraphs (3) and (4) of Article 4 provide for a discretionary balancing exercise similar, albeit not identical, to that found under the common law. The law of a country which is manifestly more closely connected with the contract will prevail over the law of habitual residence of the characteristic performer of the contractFootnote 77 or, if no law can be identified pursuant to Articles 4(1) or 4(2), the law of the country with which the contract is most closely connected will apply.Footnote 78 The word ‘manifestly’ in Article 4(3) indicates that a high threshold is necessary to displace the law of habitual residence of the characteristic performer of the contractFootnote 79 and this may not necessarily lead to the same result as under the common law balancing approach of identifying the objective proper law of the contract. Nevertheless, the same core issue—what is the law of closest connection?—underlies both the common law and Rome I approaches.
As the three-stage process of identifying the governing law of the contract is widely accepted, contract choice of law may present an easy case study in support of issue estoppel on the governing law. What about areas in which there is less unanimity on choice of law? For example, there is more diversity for choice of law for non-contractual obligations due to greater policy considerations in this area. Take choice of law for tort as an example. The traditional common law approach is the double actionability rule, where liability is assessed under both the lex fori and the lex loci delicti (law of the place of the tort).Footnote 80 The double actionability rule is still adopted by some jurisdictionsFootnote 81 and for defamation actions in the UK.Footnote 82 Most jurisdictions, however, adopt the lex loci delicti rule. Even so, modes of identifying the locus delicti differ. Under the common law, the test is ‘where in substance did this cause of action arise’Footnote 83 whereas the Rome II Regulation pinpoints the country in which the ‘direct’ damage occurs.Footnote 84 Under Part III of the Private International Law (Miscellaneous Provisions) Act 1995, the general rule is in favour of the law of the country in which the events constituting the tort or delict in question occur.Footnote 85 Further, adoption of a flexible exception allowing the law with a closer connection to prevail over the lex loci delicti is not consistent,Footnote 86 and whether party autonomy is permitted for tort choice of law, and if so, the permissible scope for its exercise, also differs.Footnote 87
Is there identity of issue when one court applies the lex loci delicti as a general choice of law rule and the other court applies the double actionability rule? What if both courts adopt the lex loci delicti rule but the first court invoked the flexible exception, whereas the choice of law rule in the second court does not include the flexible exception? Is the same issue involved if one court identifies damage as ‘direct’ damage whereas the other court applies the substance test? How about the situation where both courts adopt the double actionability rule where the lex fori limb would clearly be different laws in the two courts? What if party autonomy is permitted for tort choice of law in one court but not in the other?
The issue could variously be said to be: ‘what is/are the law(s) governing the tort?’, ‘what is the lex loci delicti?’, ‘where in substance did the tort arise?’ or ‘where was direct damage suffered?’. Only the first query would lead to identity of issue regardless of whether the two courts adopt the same tort choice of law rule or the same means of identifying the place of damage.
This, like the situation for contract choice of law, boils down to the question whether a difference in choice of law rules matters for issue estoppel purposes. Thus, two questions go hand-in-hand: first, whether a difference in choice of law rules is relevant; and, second, whether the issue should be framed broadly or narrowly. The answer to one question will at the same time provide the answer to the other question.
3.4. Authorities and reasons
In First Laser v Fujian,Footnote 88 the Supreme People’s Court of the People’s Republic of China had held that the disputed agreement was governed by Chinese law and that it was invalid due to a failure to seek Chinese governmental approval for the transfer of some shares. There being no choice of law clause in the agreement, the Chinese court had reached this decision by identifying, in accordance with Chinese choice of law rules, ‘the law of the country with to which the contract is most closely connected’.Footnote 89 First Laser, which lost in China, commenced proceedings in Hong Kong alleging breach of the same agreement. The Hong Kong Court of Final Appeal held that the decision of the Chinese court on both the validity of the agreement and its applicable law gave rise to issue estoppels. Counsel for First Laser conceded that an issue estoppel would have arisen if the relevant issue had been whether First Laser had expressly agreed to a choice of law clause. Lord Collins NPJ commented:
The same result must follow if a foreign court decides there has been an implied choice, for example by agreeing to arbitration in a particular country. It would be very odd if the same result did not follow where the court applied the third stage (which is in effect what the Supreme People’s Court did) of considering with what system of law the contract was most closely connected.Footnote 90
First Laser thus supports an issue estoppel arising over the governing law of the dispute. However, contract choice of law rules under Chinese and Hong Kong laws are largely identical. An alternative ground for the Hong Kong Court’s decision was that Chinese law would also be the applicable law under Hong Kong choice of law rules.Footnote 91 The case, therefore, does not deal with the question whether a difference in choice of law rules in the two courts is material.Footnote 92
In the arbitration context, the UK Supreme Court in Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) Footnote 93 held that English law as the proper law of the arbitration agreement should apply under section 103(2)(b) of the Arbitration Act 1996 (Arbitration Act) to determine the validity of an arbitral award against a party, KFG, who claimed not to be bound by the arbitration agreement. This was despite the existence of a prior French court decision that KFG was so bound and the award valid. The French court had applied ‘a substantive rule of international arbitration law’Footnote 94 in reaching its decision. The UK Supreme Court commented: ‘Because the law which the French court will apply is different, under English law any decision by the French court about whether KFG became a party to an arbitration agreement with the claimant will not give rise to an issue estoppel’.Footnote 95
This decision is perhaps less obviously correct compared to Yukos, not least because the French court was the court of the seat of arbitration and it is sometimes suggested that decisions of the court of the seat should be accorded primacy.Footnote 96 Nevertheless, Kabab-Ji can be justified on the basis that the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention, Convention)Footnote 97 imposes an obligation on each Contracting State to determine for itself whether an award complies with the terms of the Convention and is entitled to recognition.Footnote 98 Alternatively, it could be argued that the grounds of refusal to recognise and enforce a New York Convention award in section 103 of the Arbitration Act, which enacts Article V of the Convention, are overriding mandatory rules. This is suggested from a reading of Carpatsky Petroleum Corp v PJSC Ukrnafta, where Butcher J considered himself bound to apply the ‘statutorily prescribed’ grounds of refusal in section 103(2) of the Arbitration Act.Footnote 99 Thus, there was no identity of issue when the Ukrainian courts considered the existence of an arbitration agreement under Ukrainian law, whereas Swedish law was the applicable law to this issue in England.
Kabab-Ji therefore falls within the category of matters which the forum court retains the prerogative to determine for itself, and which is thus excluded from estoppel. A narrow framing of the relevant issue was justifiable. It is submitted that Kabab-Ji does not stand for any wider proposition that a difference in the applicable laws leads to a rejection of issue estoppel.
Nevertheless, this wider interpretation appeared to be adopted by the Singapore Court of Appeal in Gonzalo Gil White v Oro Negro Drilling Pte Ltd. Footnote 100 In this case, Mexican insolvency proceedings were commenced on behalf of the respondents who were all Singaporean incorporated companies. The respondents argued that the proceedings were in breach of Article 115A of their articles of association. The Mexican court eventually decided that Article 115A was a nullity as it contravened Mexican insolvency law and public policy and allowed the insolvency proceedings to continue.
In Singapore, the respondents sued their former director, alleging that his breach of Article 115A enabled the commencement of the Mexican proceedings. The director argued that an estoppel arose from the Mexican judgments. The Singapore Court of Appeal considered, in particular, Kabab-Ji and Yukos. It analysed these decisions as having involved two levels: first, whether the issues have been framed in the same manner before the two competing courts; and, if so, whether the legal issues arose from different laws of competing jurisdictions, these differences being differences of substance not form.Footnote 101 On the facts, the Court held that the issues before the two courts were clearly different. In Mexico, the issue revolved around the validity of Article 115A pursuant to Mexican insolvency law and public policy; in Singapore, the issues concerned a breach of Article 115A and the relief granted pursuant to the breach. Although there was no identity of issue, the Court went on to consider the second-level question. It emphasised that the issues in the Mexican proceedings were subject to Mexican law, whereas the issues in the Singaporean proceedings were subject to Singaporean law.
On the broadest reading, the manner in which the second-level question was articulated suggests that the Court considered an issue estoppel is precluded if the applicable laws in the competing courts are different. If so, the decision supports the proposition that a difference in choice of law rules would prevent an issue estoppel from arising. However, the Court had relied specifically on Kabab-Ji and Yukos for its decision, both of which are explicable on the basis that the issues therein remained the prerogative of the court to determine for itself, raising international obligations and forum international public policy, respectively. These two cases cannot stand for a wider proposition that issue estoppel is rejected whenever the competing courts would apply different laws to the same issue. Insofar as the Singapore Court of Appeal may have relied on Kabab-Ji and Yukos for this proposition, it is suggested that it was mistaken to do so.
It is, however, possible to read the second-level question regarding a difference in the applicable laws more narrowly. The Court of Appeal had referred to its comments in earlier cases on the importance of balancing comity and its constitutional role to protect the domestic legal regime and rule of law in Singapore.Footnote 102 On the facts of White, Singaporean law applied to the allegation of a breach of Article 115A by the former director as duties of a director are subject to the lex incorporationis. Thus, a narrow reading of the second-level question is that issue estoppel is precluded where the Singaporean court, as the second court, would apply Singaporean law pursuant to its choice of law rules but the foreign court applied another law. In further support of this reading are extra-judicial comments of Menon CJ of the Singapore Supreme Court that ‘national courts retain a core duty to apply the laws of their jurisdictions where this is mandated by their domestic conflict of law rules and also to uphold the public policies of their states’.Footnote 103 He viewed this as part of the ‘constitutional responsibilities’Footnote 104 imposed on courts.
The narrow reading, if correct, would likely not be adopted in England. As can be seen, it stems from the specific concern of the Singaporean court to safeguard application of Singaporean law. In line with this, the Singapore Court of Appeal has raised the possibility that it may refuse to give effect to a foreign judgment which involved an incorrect application of Singaporean law, bearing in mind its role as custodian of Singaporean law.Footnote 105 This same concern is not shared, at least not to the same degree, by English courts,Footnote 106 for whom an error in applying English law by the foreign court would not bar an issue estoppel arising from that decisionFootnote 107 or suffice as a ground for refusal to recognise or enforce a foreign judgment.Footnote 108 As a matter of principle, the narrow construction should also not be adopted in England. Only if the relevant English law forms part of English international public policy or is an overriding mandatory rule should an issue estoppel be precluded. As discussed in Section 3.2, choice of law rules fall within neither category.
However, a couple of Canadian decisions indicate that a difference in choice of law rules is relevant. In both Croman Corp v Sikorsky Canada Inc Footnote 109 and Sydney Steel Corp v Canadian National Railway Co,Footnote 110 issue estoppel was denied, inter alia, because the first court applied different principles than would have been applied by the forum court.
Balanced against these are decisions such as The Sennar (No 2). Successors in title to buyers of a cargo of groundnuts had sued the shipowners in tort for a misdated bill of lading. The District Court of Rotterdam held that the plaintiffs could found an action only for breach of the contract of carriage and that it was bound to decline jurisdiction on the basis of an exclusive Sudanese jurisdiction clause in the bill of lading. This was confirmed by the Dutch Court of Appeal. The District Court had applied Dutch law, while the Dutch Court of Appeal upheld the decision on both Dutch and Sudanese law.Footnote 111 The plaintiffs tried again in England, arguing that an English court applying English law would classify the action as falling in tort and therefore outside the scope of the Sudanese jurisdiction clause.Footnote 112 Kerr LJ stated: ‘I do not think it is open to [the plaintiffs] to say simply, in effect, “What we seek to litigate here are issues under English law, and it does not matter that we litigated precisely the same issues under other systems of law in Holland”’.Footnote 113 Buckley LJ agreed.Footnote 114 The Sennar (No 2) was cited by the Hong Kong Court of Appeal in First Laser to prevent an attempt by First Laser to relitigate the same issue under the guise of different applicable laws in the Chinese and Hong Kong courts.Footnote 115
The Federal Court of Australia has adopted the same stance. In Armacel Pty Ltd v Smurfit Stone Container Corporation, a United States (US) District Court had applied US law as the lex fori to determine that a jurisdiction clause was non-exclusive in nature, whereas the New South Wales court would apply the law of New South Wales as the proper law of the contract. The Federal Court of Australia noted that ‘it is not possible to avoid the consequence of issue estoppel by simply re-characterising the issue as one which is sought to be litigated in accordance with the law of a different jurisdiction’.Footnote 116 In Merck KGaA v Merck Sharp Dohme Corp, Nicholas J supported the view that a difference in the applicable tests in the competing courts was irrelevant, albeit with the caveat that he was not expressing a ‘definitive opinion’.Footnote 117
It is suggested that the English and Australian decisions are preferable to the Singaporean and Canadian decisions. Ignoring the first court’s determination of the governing law would lead to inconsistent results as it may be held that there is a breach of contract, tortious act or other liability arising in one court, but no liability in another court due to the application of different substantive laws on the merits. This will incentivise the losing party, subject to the operation of cause of action estoppel, to re-litigate in a court whose choice of law rules would lead to the identification of a different, more favourable governing law.
Indeed, this was attempted in the Merck litigation. A coexistence agreement between Merck KGaA, a German company, and MSD, a New Jersey company, specified which entity had the right to use the ‘Merck’ name in different jurisdictions. Multiple proceedings were commenced by Merck KGaA against MSD in various jurisdictions, including England, Australia and Singapore, with each proceeding focused on alleged contractual breaches and infringement of trademarks in that particular jurisdiction. The English court found that German law governed the agreementFootnote 118 and held MSD liable.Footnote 119 In the Australian proceedings, MSD argued that the Australian court should determine the identity of the governing law of the agreement afresh and that it was the law of New Jersey. Nicholas J held that an issue estoppel on this point arose from the English judgment.Footnote 120 Similarly, the Singapore High Court stated that: ‘[s]o long as the four requirements set out by The Sennar (No 2) are satisfied, I see no reason why the governing law of a contract is an issue which cannot be the subject of an estoppel’.Footnote 121 To deny an issue estoppel arising from the English judgment could have led to the unpalatable result of inconsistent rulings stemming from the same agreement.
In addition, allowing the argument that an issue estoppel over the governing law of the dispute can arise if and only if the two courts adopt the same choice of law rule is tantamount to allowing the argument that a foreign judgment is to be accorded res judicata effects if and only if the two courts would apply the same substantive law to determine the issue. For instance, embedded within a foreign decision on the validity of a contract or that one of the parties is in breach of contract is a prior question on the governing law of the contract. If issue estoppel is denied over the question of the governing law of the contract, it is but a small further step to the argument that decisions based on that prior question should logically also be unravelled. This would foster endless litigation and undermine the principle of res judicata. As observed by the Hong Kong Court of Appeal in First Laser, this type of reasoning:
would mean that no foreign judgment can ever be used as the subject matter of issue estoppel in Hong Kong because such judgment may be based on that Court’s application of its own law which may not be exactly the same as Hong Kong law, notwithstanding that the foreign Court may have decided on the very same issue that the Hong Kong Court will have to decide.Footnote 122
Further, it has never been a condition to the recognition or enforcement of foreign judgments that the foreign court must have reached the same decision which the forum court would have reached if the trial took place before the forum court. That is also why it has never been the practice for cause of action estoppel purposes to investigate what law the foreign court applied to determine the claim. It should also be noted that an error by the foreign court is not a defence to the recognition or enforcement of foreign judgments.Footnote 123 All these show that identical rules in the two courts are not a prerequisite to giving res judicata effect to a foreign judgment.
While the discussion so far has primarily focused on the governing law of contract and tort claims, the same position can and ought to be adopted for most private law claims generally. The following discussion is not intended to be comprehensive and is subject to the operation of international conventions and agreements in certain fields. The same broad framing of the issue ought to be adopted for claims in unjust enrichment, negotiorum gestio and culpa in contrahendo as none of these claims raise inherent public policy considerations.Footnote 124 Intellectual property rights give rise to private rights and claims for infringement of those rights are not different in character from usual contract or tort claims.Footnote 125 Thus, it should be immaterial if, in an infringement claim, the foreign court applied their tort choice of law rule which is different from Article 8(1) Rome II. In Banner Universal Motion Pictures Ltd v Endemol Shine Group Ltd,Footnote 126 an estoppel arose from a decision of a Swedish court that a document setting out a game show format did not contain a trade secret under the Swedish Trade Secrets Act and prevented the claimant from advancing a breach of confidence claim involving the same document under English law before the English court.
What about judgments on the validity and revocation of registered intellectual property rights? In the first place, it is generally accepted that the law of the protecting country or, in other words, the law of the country where the right is registered, governs the question of the validity of the registered right.Footnote 127 Thus, where the validity of the same patent or other registered right is at issue in the two courts, there would be identity of issue in terms of the governing law whether on the broad or narrow approach. However, the well-established rule that the court of the place where the right is registered has exclusive jurisdiction to hear actions on the validity of the rightFootnote 128 will foreclose decisions from other courts from raising an estoppel in that forum. It should also be noted that, because of the territorial nature of intellectual property rights, a patent registered in one country is legally distinct from a patent registered in another country, even if both patents are identical.Footnote 129 Thus, issue estoppel will not arise from a US judgment on the validity of a US patent for proceedings in Canada involving the validity of an identical Canadian patent.Footnote 130 In addition, some intellectual property rights may raise public policy considerations, such as a patent over military equipment, or where the claim involves human rights considerations. No issue estoppel can arise over foreign decisions on such sensitive matters.Footnote 131 Thus, claims on the validity and revocation of registered intellectual property rights require more careful deliberation, especially given the operation of international treaties in this area.
The suggested broad approach is appropriate for claims founded on family law. A foreign religious divorce, such as the Islamic talaq and Jewish ghet, which satisfies the requirements of Part II of the Family Law Act 1986, is eligible for recognition notwithstanding the fact that a religious divorce obtained in England would be legally invalid.Footnote 132 The Full Court of the Family Court of Australia held that the division of matrimonial property orders made by a Californian court pursuant to Californian law gave rise to cause of action estoppel in a claim pursued under Australian statutory law for an adjustment in title to property covered by the Californian order.Footnote 133 Thus, dissimilarity in the applicable laws in the forum and foreign courts is irrelevant for the recognition of foreign judgments on divorces and the division of matrimonial property, and should likewise be generally irrelevant for issue estoppel purposes.
Therefore, it is submitted that any difference in choice of law rules should be ignored for most private law claims. Absent any forum international public policy or forum overriding mandatory rules considerations, the core principle of finality in litigation ought to be upheld. The issue should be framed simply and broadly as: what is the governing law of the contract, tortFootnote 134 or whatever other choice of law category may be relevant on the facts. The specific test applied by the foreign court to reach its decision on this issue should not matter.Footnote 135
3.5. Choice of law categories raising public policy considerations
The discussion above needs to be re-examined when considering choice of law categories which are underlined by public policy considerations.Footnote 136 The Rome I Regulation contains special choice of law rules for specific categories of contracts. Some of these categories deal with contracts involving an imbalance in contracting power, namely consumer contracts and individual employment contracts. Article 6 and Article 8 contain choice of law rules which reflect a policy choice of providing a more protective regime to parties in a weaker bargaining position compared to the general choice of law rules in Article 3 and Article 4. For example, the applicable law in the absence of choice would ordinarily be the law of habitual residence of the seller in a contract for the sale of goods.Footnote 137 Where a consumer contract is concerned, the applicable law in the absence of a choice by the parties is instead the law of habitual residence of the consumer, provided that the professional either pursues their professional activities in the country of habitual residence of the consumer or directs such activities to that country or to several countries including that country.Footnote 138 Further, while Article 6(2) preserves party autonomy for consumer contracts, that choice cannot deprive the consumer of the protection afforded to them under ‘provisions that cannot be derogated from by agreement’ or, in other words, mandatory rulesFootnote 139 of the law of habitual residence of the consumer. A similar protective regime for employees is in place for individual employment contracts.Footnote 140 The policy of protecting the weaker party is also evident in national legislation on consumersFootnote 141 and employees.Footnote 142
The Rome II Regulation also contains provisions which deviate from the general choice of law rule in Article 4(1). Special choice of law rules apply for non-contractual obligations arising in specific contexts, such as product liability, unfair competition, environmental damage and industrial action. In relation to Article 5, which deals with product liability, the rules were drafted with a view to a fair spreading of the risks between consumers and suppliers.Footnote 143 The purpose of Article 6 is the protection of fair competition by imposing the same rules on all participants.Footnote 144 Article 7, which allows the victim of environmental damage a choice of either the law identified pursuant to the general choice of law rule in Article 4(1) or the law of the country in which the event giving rise to the damage occurred, is aimed at optimising the level of protection for the victim and incentivising higher standards of environmental protection.Footnote 145 Worker and employer rights in the event of an industrial action are safeguarded by Article 9.Footnote 146
While the categories referred to above can be said to involve underlying public policy considerations,Footnote 147 this is not the case for all the categories for which special choice of law rules exist. For example, Article 5 Rome I covers contracts of carriage, but the development of unique choice of law rules for this category of contracts is not due to any public policy concerns. Rather, it was thought that the ‘peculiarities’ of this type of contract meant that it merited its own choice of law rule.Footnote 148 Unjust enrichment, negotiorum gestio and culpa in contrahendo each have their own choice of law rule in Rome II but, as mentioned in Section 3.4, none of these claims raise public policy considerations. The discussion which follows must be understood to be limited to those categories of case which are underpinned by public policy considerations.
In relation to these categories, three questions arise. First, where the first court is an EU Member State court and it has applied the general choice of law rules, does an issue estoppel arise where the English court may take the view that the situation falls within one of the special choice of law regimes (or vice versa)? To put it in another way, is the English court as the second court free to re-characterise the claim? Second, what if the English court is in agreement with the first court that one of the special choice of law regimes applies, but would interpret the provisions differently? Third, the complex nature of some of the special choice of law regimes are unlikely to be adopted outside of the Rome I and Rome II Regulations. Indeed, in many countries, special choice of law rules for specific categories of contractual and non-contractual obligations have not been developed or, if they exist, are unlikely fully to replicate the rules in Rome I and Rome II. For example, no special choice of law rule applies to consumer contracts under US law.Footnote 149 The traditional common law approach, still adopted in most common law countries, is that the normal choice of law rules apply to employment contracts.Footnote 150 The Chinese choice of law rules for consumer and employment contracts share some broad principles with Articles 6 and 8 Rome I, respectively, but differ in the details.Footnote 151 The third question is thus: should an issue estoppel arise over a foreign decision on the governing law for these special categories of contractual or non-contractual obligations when the first court has applied diametrically different choice of law rules to reach its decision?
Brexit is relevant to the first two questions. UK courts can now diverge from the Court of Justice of the European Union’s (CJEU) interpretations of Rome I and Rome II.Footnote 152 The position is only the lower courts are bound by CJEU jurisprudence on or before 31 December 2020 on assimilated EU law.Footnote 153 CJEU decisions made on or after 31 December 2020 do not bind any UK court although it ‘may have regard’ to them.Footnote 154 Recent statutory developments effected by the Retained EU Law (Revocation and Reform) Act 2023 further cut the Gordian knot. A looser test will apply when the Supreme Court and Court of Appeal are deciding whether to depart from any assimilated case lawFootnote 155 or its own assimilated domestic case law.Footnote 156 The principle of supremacy of EU law is abolished.Footnote 157 Further, the Brussels I bis Regulation,Footnote 158 Rome I and Rome II are intended to operate as a cohesive unit.Footnote 159 Within the EU, when interpreting one of the Regulations, the provisions of, and CJEU decisions on, the other two instruments are generally relevant.Footnote 160 The fact that the Brussels I bis Regulation is no longer part of UK lawFootnote 161 may hasten the process of divergence between UK and EU approaches to the Rome Regulations. In addition, the proper functioning of the internal market, which is stated to be one of the objectives of the Regulations,Footnote 162 will no longer apply to the UK. Many of the special choice of law categories are supported by EU Directives, which have ceased to apply in the UK save for those already transposed into and retained in national legislation. Further divergence in terms of matters covered by EU Directives can be expected as they are updated or new Directives enacted as time goes on,Footnote 163 potentially affecting choice of law approaches in the EU.
Therefore, it is possible that a UK court and an EU Member State court are each required to identify the governing law in circumstances where the two courts may not necessarily agree on the applicability of the special choice of law provisions or, if they do, may not interpret the provisions in a like manner. For example, the CJEU has interpreted the special choice of law rules for consumer and individual employment contracts in such a manner as to lead to the application of a law which is less favourable to the weaker party.Footnote 164 The UK court may well decide to take a different approach in the future.Footnote 165
In sum, it is inevitable that the UK’s standards and approaches to policy matters will diverge from that of the EU over time. Despite the original common root source, it is suggested that identification of the governing law for claims underpinned by public policy considerations should be seen as an aspect of unique UK public policy, to be decided by UK courts afresh regardless of a prior EU Member State court decision on the same issue.
The reason to preclude an issue estoppel in the third situation, where the prior decision is from a non-EU jurisdiction with presumably very different choice of law rules for these categories, is even stronger. The various areas were chosen due to underlying policy considerations which were considered sufficiently important to merit a deviation from the usual choice of law rules. Those policy considerations may not be reflected in the choice of law rules applied by the first court.
To take a closer look at one specific category, parties are allowed to choose the applicable law of an individual employment contract under Rome I.Footnote 166 The applicable law in the absence of choice is determined by a cascading and hierarchical scheme of rules, the first of which is Article 8(2). This identifies the applicable law as the law of the country in which, or failing that, from which the employee habitually carries out their work in performance of the contract. Countries with no special choice of law rule for employment contracts will also likely allow party choice of law and, at least where a common law country is concerned, apply the law of closest and most real connection where there is no party choice.Footnote 167 The latter law may be the same law identified on application of Article 8(2).Footnote 168 Thus the central difference between Article 8 and a potential competing choice of law rule will probably turn on the effectiveness of a party choice of law. Under Article 8(1), party choice of law is subject to the ‘provisions that cannot be derogated from by agreement’ of the applicable law in the absence of choice. Should it be the case then that an issue estoppel arises over the identity of the governing law, but the English court remains free to superimpose on that law the mandatory rules of the applicable law in the absence of choice? Such an approach would advance the underlying objectives of estoppel per rem judicatam while preserving the protective parts of Article 8. In one sense, it may provide a ‘best of both worlds’ solution. Nevertheless, it is submitted that this solution should not be pursued, being rather complicated. In addition, if the choice of law clause is contained in a standard form contract, attitudes may also differ as to its validity when one of the parties is in a weaker bargaining position. This is, again, a reflection of each forum’s policy choice on the extent of protection which ought to be offered to the weaker party. It is suggested that the simpler solution should be adopted, that is, no issue estoppel ought to arise over the entire question of the identity of the governing law where the relevant category raises public policy considerations.
4. Wider lessons?
There are no easy answers as to how the process of ‘refining down’ the issue for the purposes of applying rules on issue estoppel ought to be conducted. There is an inherent degree of flexibility in how courts determine whether there is identity of issue. As demonstrated by the discussion on the governing law of the claim, it is usually possible to make a case that the same issue arises, if one is willing to stop the process of ‘salami-slicing’ early on so that the issue is broadly framed. It is suggested that whether a broad or narrow approach should be adopted depends on balancing the principles underlying res judicata against the considerations arising in each specific context.
The instances where the plea of issue estoppel failed have included issues which are subject to forum international public policy, forum overriding mandatory rules or involved issues which the forum court retained the prerogative to determine for itself. As discussed in Section 3.4, Yukos and Kabab-Ji can be explained in this manner, as can the Singaporean decision of White as the Singaporean court evidently viewed it as its prerogative and responsibility to apply Singaporean law when this is indicated by its choice of law rules. Despite the suggestion to the contrary in the majority decision of Desert Sun Loan v Hill,Footnote 169 the question whether a foreign court had international jurisdiction for the purposes of the recognition and enforcement of its judgment should also be reserved for the forum court to determine alone: for example, the question is not whether the defendant had submitted to the foreign court’s jurisdiction simpliciter but, rather, whether they had done so according to English eyes.Footnote 170
While the discussion in the preceding section focused on foreign judgments on the governing law of the claim, the same broad–narrow question also arises in relation to more discrete issues within a claim. For example, in a contractual claim, issues which could arise include whether the contract was formed, whether the contract is formally valid and one’s capacity to contract.Footnote 171 In line with the overarching argument, unless the specific issue raises international public policy considerations, is covered by a forum overriding mandatory rule or raises comity considerations, a broad approach should be adopted. It is suggested that none of the issues just mentioned merit a narrow framing as they do not raise inherent public policy considerations, with the exception of the formal validity of consumer contracts.Footnote 172 To take the formation of contract as an example, there is no generally accepted solution for this classic conflict of laws problem. Article 10 Rome I adopts the putative applicable law approach with a proviso in favour of the law of habitual residence of the party who did not consent if it would not be reasonable to apply the putative applicable law to assess the issue of consent. Solutions adopted elsewhere include application of the lex foriFootnote 173 and the putative applicable law without any proviso.Footnote 174 Each rule represents that jurisdiction’s attempt to reconcile competing considerations in an effort to fashion the best choice of law solution to a genuinely intractable choice of law issue. It would be contrary to the aims of res judicata to refuse to recognise an estoppel just because the foreign court’s resolution of that specific issue differs from our own approach.
Both Rome I and Rome II contain fetters on the scope of the law chosen by the parties. If a foreign court decides that the mandatory rules of the law of country X apply pursuant to Article 3(3) Rome I or Article 14(2) Rome II, or that certain mandatory European Community provisions apply pursuant to Article 3(4) Rome I or Article 14(3) Rome II, there does not seem to be any good reason for the forum court to override a prior foreign decision on these points. Just because the choice of law rule provides for the application of a rule of a mandatory nature does not mean that the forum court ought to decide this issue for itself, as opposed to a situation where the issue is governed by a forum overriding mandatory rule. Similarly, a foreign decision that a party choice of law is bona fide under the common lawFootnote 175 should prevail in the forum court. In any event, it is always open for the forum court to refuse to recognise a foreign decision on a particular issue if the effect of that decision contravenes forum international public policy.
How about decisions which go towards the jurisdiction of the forum court?Footnote 176 The Sennar (No 2) Footnote 177 establishes that decisions on the validity and scope of a jurisdiction agreement can give rise to an issue estoppel, although this principle is now subject to section 32 of the Civil Jurisdiction and Judgments Act 1982.Footnote 178 What about a decision with softer edges which depends on the exercise of the court’s discretion, such as a decision on which court is forum (non) conveniens,Footnote 179 or whether ‘strong cause’Footnote 180 justifying breach of an exclusive jurisdiction agreement is shown? If the Ruritanian court determined that the MoҫambiqueFootnote 181 or equivalent rule applied to confer exclusive jurisdiction to the Utopian court, can a claimant ask the English court to decide that the personal equities exceptionFootnote 182 applies on the facts? Insofar as foreign decisions on forum (non) conveniens are concerned, the applicable test is not consistent. The classic test set out in The Spiliada Footnote 183 considers whether the forum court is a clearly and distinctly more appropriate forum in comparison with the competing forum. The test in The Spiliada is the law in many common law jurisdictions,Footnote 184 whereas under Australian law, the test is whether the Australian forum is a ‘clearly inappropriate forum’.Footnote 185 Assuming that the same test is adopted in the two competing courts, should an issue estoppel arise over the question of which court is forum (non) conveniens? It has been argued that it would amount to ‘absolutism and inflexibility’ to deny an estoppel on this issue given a world in which multiple proceedings between the same parties on the same cause of action are a regular occurrence;Footnote 186 balanced against this are considerations of State sovereignty.Footnote 187
International arbitration also throws up intriguing questions. The underlying rationales in the field—such as the importance of giving effect to party autonomy due to the consensual nature of arbitration, the strength of any national pro-arbitration policy and international obligations deriving from the New York Convention—suggest a different sort of balancing exercise with respect to issue estoppel compared to international litigation. For example, can an issue estoppel arise over a foreign decision on subject-matter arbitrability?Footnote 188 Does it matter if this issue is decided at the pre-award stage or at the post-award stage by a court asked to recognise and enforce an arbitral award? How relevant is it whether the decision from which an estoppel is said to arise is a decision of the court of the seat?Footnote 189 Different policy considerations may be in play, depending on the context.
Clarity in the process of ‘salami-slicing’ is helpful for streamlining the course of litigation. Prolonged arguments by parties on whether identity of issue exists defeat the very purposes of the doctrine of issue estoppel, which include minimising the costs of litigation and the efficient use of judicial resources. If the court ends up having to devote substantial time to arguments on whether the same issue had been decided by the first court, it might as well just decide the question for itself. Open articulation of why a narrow approach is adopted, as in Yukos or the Singaporean courts’ acknowledgement of the extent of their constitutional responsibilities, is helpful in clarifying the underlying considerations rather than simply denying identity of issue merely on the basis that the foreign court applied a different law compared to an English court. The crux of the issue is why does the difference in applicable laws or legal frameworks matter?
When deciding that a plea of issue estoppel does not succeed, the court could base its decision on lack of identity of issue by refining down the relevant issue. An alternative would be for courts to adopt a broad framing of the issue and thus find that there is identity of issue but acknowledge that other considerations negate a successful plea of issue estoppel. Thus, in Yukos, an alternative approach would have been for the court to acknowledge that there was identity of issue but the interposition of public policy and, as the court acknowledged, comity considerations, mandated that the English court ought to decide the issue for itself. Both techniques bring forth the same result. Whichever technique is used, an explanation by the court as to why it stopped the process of refining the issue at the point it did, or why the plea fails despite there being identity of issue, would help to overcome any uncharitable, and unfounded, assumptions that courts find whether there is an estoppel or not depending on how palatable they find the decision of the foreign court.
It is also not beyond contemplation that the reliability of and standard of justice in the first court may be a factor in the second court’s assessment of whether an issue estoppel ought to arise. Any doubts as to the quality of justice in the foreign court must, however, be established by cogent evidenceFootnote 190 and, if established, the denial of issue estoppel ought to be grounded on contravention of forum international public policy or breach of natural justice, rather than manipulation of the relevant issue to avoid there being identity of issue in the two courts.Footnote 191
5. Conclusion
In Carl Zeiss v Rayner, Lord Reid observed that: ‘[i]t seems to me that there is room for a good deal more thought before we settle the limits of issue estoppel’.Footnote 192 These comments were made in 1966 but remain true today.
It has been argued that a foreign decision on the governing law of the claim or specific issue is generally capable of giving rise to an issue estoppel. As a matter of principle, a broad framing of the relevant issue should be adopted. Any difference in applicable laws in the two courts should be disregarded. The relevant issue should be framed as ‘what law governs the dispute or issue?’ rather than ‘what law is identified by our (forum) choice of law rules to govern the dispute or issue?’.Footnote 193 Otherwise, as Kerr LJ noted in The Sennar (No 2), this would disregard the policies underlying estoppel and condone forum shopping.Footnote 194 To deny an estoppel on the basis of difference in choice of law rules is to embark on a slippery slope culminating in insisting that the foreign court had to apply the same law as the forum court would have before an estoppel arises. This undermines the entire thrust of the system for the recognition and enforcement of foreign judgments and estoppels. The interests of the parties and of the State in upholding finality in litigation apply with full force in relation to foreign decisions on the governing law.
Nevertheless, a caveat has to be noted for special choice of law categories and rules underpinned by public policy considerations. This is because estoppels are precluded where the decision is one which raises forum international public policy, forum overriding mandatory rules or the forum court retains the prerogative to decide the issue for itself. For disputes involving these concerns, the balance of competing policy considerations is one which the forum court ought to weigh and decide for itself.
In sum, central to the question of issue estoppel is whether the relevant issue should be framed broadly or narrowly. A broad rather than narrow construction increases the possibility of an issue estoppel arising. It is suggested that whether a broad or narrow approach should be adopted depends on a delicate balancing exercise which weighs the principles underlying res judicata against the specific considerations arising in the context at hand. Admittedly, it may sometimes be difficult to assess if Occam’s razor or the process of ‘salami-slicing’ has been taken too far or not far enough. It is hoped that this article has demonstrated some of the relevant considerations to bear in mind.
Acknowledgments
I would like to thank Adrian Briggs, Tiong Min Yeo and the anonymous referee for very helpful comments on previous drafts of this article. All errors are mine.
Open access
