In The Republic of India v. Deutsche Telekom AG, [2023] SGCA(I) 10, the Singapore Court of Appeal held that India could not resist recognition and enforcement of an arbitral award based on arguments that had already been rejected in a set-aside proceeding in Switzerland, the seat of the arbitration. Applying the doctrine of transnational issue estoppel, the Court of Appeal held that parties to a proceeding to set aside an award at the seat are generally precluded from resisting recognition and enforcement of the award on grounds raised before the court at the seat and rejected by that court.
The underlying dispute – This enforcement case is one of several arising from India’s cancellation of an agreement for satellite-related services with Devas Multimedia Services, of which Deutsche Telekom was a major shareholder. Deutsche Telekom commenced an investor-state arbitration against India pursuant to the bilateral investment treaty between India and Germany, seated in Switzerland and subject to the UNCITRAL Arbitration Rules. The arbitration process resulted in a USD $140 million final award in Deutsche Telekom’s favour.
Set-aside rejected in Switzerland – India sought to set aside the award on the basis that the arbitral tribunal did not have jurisdiction over the dispute because (1) Deutsche Telekom did not have an “investment” in India within the meaning of the treaty, (2) the investment did not comply with Indian law, (3) the treaty does not cover investments made through intermediate holding companies, and (4) India was permitted to act in protection of its essential security interests. The Swiss court rejected these arguments.
Enforcement in in Singapore – Deutsche Telekom then sought to have the award enforced in Singapore. India resisted enforcement, relying on the same jurisdictional grounds that the Swiss court had already rejected. The Singapore International Commercial Court enforced the award. India appealed to the Singapore Court of Appeal.
Transnational issue estoppel – The Singapore Court of Appeal began its detailed analysis by referring to the doctrine of transnational issue estoppel, which is issue estoppel adapted to cases in which the judgment giving rise to issue estoppel is a foreign one. The elements of transnational issue estoppel under Singapore law are: (a) the foreign judgment must be capable of being recognised in Singapore, (b) there must be commonality of the parties to the prior proceedings and to the proceedings in which the estoppel is raised, and (c) the subject matter of the estoppel must be the same as that decided in the prior judgment.
The Court explained that while the doctrine of issue estoppel is grounded in the principle of finality, the analysis is more nuanced in a transnational setting. Citing the Supreme Court of Canada’s decision in Morguard Investments Ltd v. De Savoye, [1990] 3 SCR 1077, the Court highlighted that enforcing the judgments of foreign courts is informed by the principle of comity. There is a balance to be struck between comity and courts’ role as guardians of the rule of law in their own jurisdictions.
The Court cited the decision of the Court of Appeal of England and Wales in Good Challenger Navegante SA v Metalexportimport SA, [2003] EWCA Civ 1668, which identified four considerations unique to applying issue estoppel in a transnational context. First, it is irrelevant whether the court considering transnational issue estoppel disagrees with the foreign court either on the facts or on the law. Second, the court must take care to determine whether the foreign court has made a final decision on the relevant issue, because the procedures applied by the foreign court may be different. Expert evidence may be needed to determine precisely the issues that were finally decided. Third, the determination of the issue must be a necessary part of the foreign court’s decision (i.e., not obiter dicta). Fourth, the application of issue estoppel is subject to the overriding consideration that it, “must work justice and not an injustice”. Thus, the doctrine should not be applied if there are special circumstances that make it unjust to do so.
(a) Transnational issue estoppel applied to setting aside and enforcing arbitral awards – The Court held that “the doctrine of transnational issue estoppel can and should be applied by a Singapore enforcement court when determining whether preclusive effect should be accorded to a seat court’s decision going towards the validity of an arbitral award.”
The Court found that the doctrine of transnational issue estoppel is compatible with the provisions of the Convention on the Recognition of Foreign Arbitral Awards (the New York Convention). In doing so, the Court reviewed U.K. case law, and concluded that the prevailing position under English law is that transnational issue estoppel will be applied where the requirements are met, except where questions of English public policy are raised.
(b) No transnational issue estoppel where there are public policy concerns – The Court agreed that this exception is warranted, since the public policy concerns of the enforcement court will not necessarily be the same as those of the seat court, and the seat court will not have addressed the public policy concerns of any given enforcement court. For example, issue estoppel need not be applied where the underlying allegation was that the arbitral tribunal had been intentionally misled by a party, or that there had been witness tampering, or that the dispute was not arbitrable according to the enforcing court’s public policy. Similarly, the Court noted English case law that transnational issue estoppel does not arise where the court considers the foreign judgment to be “perverse in the sense that the law of the foreign country that was applied in and formed the basis for the foreign judgment is at variance with generally accepted doctrines of private international law.”
According to the Court, applying the doctrine in a way that draws a distinction between grounds for set-aside that have a “transnational resonance”, such as procedural irregularities, and those that have a “domestic flavour”, such as arbitrability and public policy violations, “safeguards the domestic concerns of the enforcing court, while adhering to comity to the greatest extent possible.”
(c) Expert evidence about the effects of the foreign court’s decision – There may be a need for expert evidence on whether the findings made in the foreign court would give rise to an issue estoppel under its own law. In other words, the enforcing court should not give the foreign decision greater preclusive effect than the decision would have in the foreign court.
(d) Application where the earlier decision is of another enforcement court rather than the seat court – The Court noted that different policy considerations apply to the question of whether transnational issue estoppel applies where the foreign court decision is from another enforcement court, rather than the seat court. Concerns have been raised in academic commentary that such a rule could provide an incentive for forum shopping and the emergence of parallel post-award enforcement proceedings, where an award creditor may rush to get an enforcement judgment in a jurisdiction perceived to be “pro-enforcement” and then seek to bind subsequent enforcement courts. Since the question was not before the Court, it was left for another day.
(e) The primacy principle – The Court also left for another day the issue of whether the primacy principle should also apply in this context. That principle holds that decisions of the seat court on matters that go to the validity of the award should enjoy “primacy” in modern international arbitration. While acknowledging that this approach has found favour in Australia and the United States, the Court noted the concern that the primacy principle could lead to unprincipled or arbitrary decisions by enforcement courts. The Court found limited guidance in Australian and American case law on how the primacy principle could or should be applied in circumstances in which the requirements for transnational issue estoppel are not met.
The Court nevertheless fleshed out how the primacy principle could be applied in future cases, “subject to further elaboration as the law develops”. The enforcement court “will act upon a presumption that it should regard a prior decision of the seat court on matters pertaining to the validity of an arbitral award as determinative of those matters.” Subject to further development, the presumption may be displaced in three circumstances. First, by public policy considerations applicable in the jurisdiction of the enforcement court. Second, by demonstrating procedural deficiencies in the decision making of the seat court or that upholding the seat court’s decision “would be repugnant to fundamental notions of what the enforcement court considers to be just.” Third, where the enforcement court’s view is that the decision of the seat court was plainly wrong.
(f) The grounds for transnational issue estoppel were met – The Court found that the grounds for resisting enforcement raised by India were identical to the grounds it had raised before the Swiss court, and that the Swiss court rejected. The Court considered competing expert evidence as to whether the Swiss court’s decision was final and binding in Switzerland, and found that it was. The parties were the same. There was no reason for thinking that the Swiss court’s decision was contrary to Singapore public policy or “obviously wrong to the extent of being perverse”. Thus, the Court upheld the lower court’s decision enforcing the award.
Contributor’s Notes:
Canadian courts have not yet considered transnational issue estoppel as a distinct branch of issue estoppel raising its own unique considerations. The principles underlying both transnational issue estoppel and the primacy principle – international comity, respect for the parties’ choice of arbitral seat, and avoiding re-litigation – are well-established in Canada. But there has not yet been a Canadian case that takes a deep dive into how these principles apply in the set-aside/enforcement context, and how to address the various concerns raised in Deutsche Telekom.
Canadian courts have applied issue estoppel in this same context, but have not analyzed the pitfalls and contours of the doctrine with the detail that the Singapore Court of Appeal has done. For example, in Prospector PTE Ltd. v. CGX Energy Inc., 2023 ONSC 4207, the Ontario Superior Court of Justice found that issue estoppel applied to prevent a party from resisting enforcement on the same procedural grounds that had already been rejected by an English court (the seat court) (Case Note No. 777 – High bar to oppose enforcement of international arbitral award), by applying the well-established three-part test for issue estoppel. In Tianjin Dinghui Hongjun Equity Investment Partnership v. Du, 2023 ONSC 1808 (see my post about this case, Case Note No. 738 – Ontario – International award not enforced because of improper notice), the Ontario Superior Court of Justice agreed that issue estoppel is applicable in this context, but found that it was not engaged. Neither decision delves into a deep analysis of issue estoppel in this context akin to the Singapore Court of Appeal’s.
Recall the Ontario Court of Appeal’s decision in The Russian Federation v Luxtona Limited, 2023 ONCA 393, that international decisions concerning the application of the UNCITRAL Model Law on International Commercial Arbitration are “strongly persuasive in Ontario” and that the “very nature of international arbitration makes it highly desirable that Ontario’s regime should be coherent with those of other countries, especially (but not exclusively) those that have also applied the Model Law.” The Court of Appeal relied on three Singapore decisions in that case (see my post about this case, Case Note No. 748 – Ontario – Courts must decide arbitral jurisdiction de novo – #748 – Arbitration Matters).
Canadian courts may thus find it helpful to refer to the Singapore Court of Appeal’s decision in framing their analysis of issue estoppel in this context, as well as considering whether to formally recognize a principle according “primacy” to the decisions of the courts at the seat.
A few points strike me as particularly significant in this context.
First, what happens when the grounds for set-aside at the seat are different than the grounds for refusing recognition and enforcement? These grounds are the same in Model Law jurisdictions, but they can vary in important ways in other jurisdictions. In applying transnational issue estoppel or the primacy principle, it will be important not to take for granted that the court at the seat was applying the same standards. The importance of this is highlighted in Tianjin. The court found that issue estoppel did not arise because the Chinese seat court had determined only that the respondents were deemed to have received notice under the applicable arbitration rules and law, not whether they had received “proper notice” under Article 36(1)(a)(ii) of the Model Law.
This issue also arose in Gol Linhas Aereas SA v. MatlinPatterson Global Opportunities Partners (Cayman) II LP, [2022] UKPC 21, an appeal before the Judicial Committee of the Privy Council from a decision of the Cayman Islands Court of Appeal enforcing an award in a Brazil-seated arbitration. There, issue estoppel applied to the validity of the arbitration agreement, but not to whether the respondent had been “unable to present its case” within the meaning of Article V(1)(b) of the New York Convention. The Brazilian courts had decided whether the principle of due process under the Brazilian Arbitration Law had been breached, which was not an identical issue.
Parties to enforcement proceedings in which issue estoppel is invoked may wish to put forward expert evidence explaining the grounds applied by the seat court and how they are, or are not, identical to the grounds the enforcement court will be applying. This may be especially important in jurisdictions in which court decisions do not typically include as much legal analysis as Canadian courts may be used to, or for jurisdictions with which Canadian courts may be less familiar.
Second, it will be interesting to see how these issues play out in cases involving arbitrator bias and serious procedural irregularities. Despite efforts to define and apply international standards in this regard, courts cannot help but be influenced by local standards of due process and impartiality in analyzing these issues. This is also evident from the decision in Tianjin, which draws heavily on Canadian standards of proper notice (going so far as to reference the Ontario Rules of Civil Procedure). Assuming that the issues decided are identical, will enforcement courts apply issue estoppel rigorously when the seat court’s conceptions of due process and impartiality varies significantly from their own? Will they resort to public policy to avoid applying issue estoppel in this context? The court avoided this question in Tianjin given the finding that issue estoppel was not engaged. Considering the rest of the reasons, it is reasonable to think that the court may have refused to enforce the award on public policy grounds even if the requirements for issue estoppel had been met.
Third, enforcement courts should also be on their guard about procedural irregularities and impartiality issues before the seat court. No transnational issue estoppel arises where the foreign set-aside judgment does not itself meet the requirements for being enforced as a foreign judgment. Thus, a set-aside proceeding tainted by procedural unfairness, bias or corruption would not give rise to issue estoppel before an enforcement court. Fourth, issue estoppel and the primacy principle are only some of the tools in an enforcement court’s arsenal to prevent a party from relitigating issues in an enforcement proceeding that were previously decided elsewhere. Another is abuse of process, recently invoked by the Ontario Court of Appeal in La Française IC2, SICAV-FIS v. Wires, 2024 ONCA 171 (see Case Note No. 827, Ontario – Abuse of process precludes re-litigating arbitrator bias allegation).