Defective arbitration awards and the res judicata doctrine

Czech Republic: Supreme Court decision on how to proceed in the case of a wrongful arbitration award

Even previously, Supreme Court case law clearly allowed for the conclusion that an arbitration clause is invalid if it does not determine a specific arbitrator (or body of arbitration) but instead merely refers to the rules of arbitration of a legal entity that does not qualify as a permanent arbitral institution established based upon a law. The parties to a dispute in which an arbitration award has been handed down based upon such an invalid arbitration clause may ask a court to nullify such award.

Within this context, some asked whether a party to the dispute could bring the matter in question before a general court without having to first obtain the annulment of the defective arbitration award by a court – given that, as a general principle, a matter which has already been decided with final force (and be it by way of an award handed down by an arbitral institution) cannot be heard again in court; this is known as the res judicata (or claim preclusion) defense.

In this respect, the Supreme Court has ruled more recently that claim preclusion does not apply where the same case, concerning the same disputed matter and the same parties, has previously been decided by an arbitrator who lacked the authority to issue the relevant arbitration award (Supreme Court resolution 23 Cdo 4460/2014 of 30 September 2015).

The upshot is that a party to a dispute in which such a defective arbitration award was handed down may turn to a court to enforce its rights without having to file a claim for nullification of the award first.

Source: Czech Supreme Court resolution 23 Cdo 4460/2014


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