In its landmark decision DFT 141 III 229 – also known as the “US law firm decision” –, the Swiss Federal Tribunal confirmed its previously established doctrine on the controlled transfer of a foreign award’s effects (“Kontrollierte Wirkungsübernahme”) when determining the objective scope of res judicata of a foreign arbitral award. The concept implies that the binding effect of a foreign award cannot go beyond the determinations contained in its operative (or dispositive) part.
Such narrow approach to res judicata has been criticised by various authors. It is considered inappropriate in the context of international arbitration because arbitrating parties ordinarily wish to have their disputes resolved in a comprehensive manner. Given the lack of any pertinent and authoritative transnational principles, it is further argued that arbitral tribunals should be vested with the power to discretionarily determine the scope of res judicata of a previous award. In doing so, arbitral tribunals are expected to notably take into account the legal traditions and the parties’ expectations involved in a specific arbitration.
It is suggested by the author of this article that an arbitral tribunal’s entitlement to discretionarily determine the objective scope of res judicata of a previous award not only conflicts with the provisions of the Swiss lex arbitri but also with the parties’ need for legal certainty and, as the case may be, their interest to have certain aspects of a dispute omitted from a final adjudication. The legitimate interest of parties in having a dispute settled in a comprehensive manner should be addressed by enabling them to flexibly decide what aspects of a dispute they wish to submit to a final adjudication, and at what point in time. The respective intentions of the parties should be communicated to the arbitral tribunal by filing or abstaining from filing corresponding applications for prejudicial declaratory relief.