Tuesday, July 26, 2022
Ballas, Pelecanos & Associates LPC, representing Respondent, a Subcontractor, won a resounding victory in a second ICC Arbitration against Claimant, a Contractor, which followed on a first ICC Arbitration between the same parties and which had previously been resolved for Respondent. In both arbitrations Claimant had filed claims for nearly €10.000.000,00.
Due to confidentiality obligations the identities of the Parties and specifics of the dispute cannot be revealed. Extracts from the Award can be accessed here.
In this case, the Claimant’s Second Action failed, following from the dismissal on its merits of the First Action. In both actions, the factual background consisted of allegations of bribery/collusion and overpricing of the Works. In both actions, the request for relief was that of compensation in tort. In the First Action the Subcontracts (treated as voidable) had been expressly accepted as valid by the Claimant while in the Second Action the Claimant treated them as totally null and void and sought a declaration to that effect by the ICC Arbitral Tribunal.
Either as a result of deliberate strategy spanning throughout the two Actions or as an argument borne out of the need to have a second bite at the apple, the Claimant argued that it could, in effect, dress up its claims in different legal grounds and cherry-pick them, so to speak, so as to produce in effect multiple disputes from what in essence is one and the same dispute, with danger of contradictory awards.
However, having accepted the Subcontracts’ validity in the First Action, the Claimant found itself caught in a web itself had spun when it attempted to argue the “legally opposite” (as per the Tribunal’s words) in the Second Action. To get around this problem, the Claimant argued that the validity of the Subcontracts had not been determined either at all or at least not as a main issue in the First Action. In doing so Claimant purported to take advantage of Greek procedural law provisions concerning the scope of the res judicata doctrine and its variation as concerns arbitral awards. This in particular relates to a provision stating that in arbitration res judicata emanating from an award does not extend to issues adjudicated as preliminary issues. Such arguments would never stand in an ordinary (civil law) court (where preliminary issues are within scope of a competent court’s decision) but the Claimants took their chances in arbitration.
It is interesting to note that such an argument may probably not to come up ever again in arbitration with seat in Greece and Greek applicable law, since the change in law is imminent on this and other issues concerning international arbitration with seat in Greece. A proposed amendment to the Greek Civil Procedure Code expressly states that preliminary issues are within the scope of res- judicata created from an arbitral award.
The Arbitral Tribunal closed the door very early on in such arguments, holding that the validity of the Subcontracts was determined as a main issue in the First Action, thus falling squarely within the scope of the res judicata doctrine, suggesting that whether an issue has been determined as a main or preliminary issue is just a matter of viewpoint and not one of law. However, the Arbitral Tribunal also stated that even if this issue had not had been determined as main issue in the First Action, it (the Tribunal) would still consider it as covered under the res judicata ambit of the First Final Award.
This is so because the Arbitral Tribunal proceeded to a purposive (“teleological”) interpretation of the relevant Greek law provisions, influenced by the “persuasive argumentation” on the issue of Greek theory. Indeed, Greek theory on the issue suggests that where the preliminary issue under examination is within the scope of the parties’ arbitration agreement, then it is covered by the scope of the res judicata effect created by the first award.
It is interesting to note in that respect, that the Claimants had ab initio accepted that this issue (validity of the Subcontracts) was within the scope of the arbitration agreement, since their first request for relief in the Second Action (recognition of the Subcontracts’ invalidity) was indeed premised on that actual consideration!
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