Gleeson Privies: Can non-parties to an arbitration be estopped by it?

The recent judgment in PJSC National Bank Trust and others v Boris Mints and others(1) clarifies that arbitral proceedings can give rise to an issue estoppel or abuse of process claim against a non-party who is a "privy" of a party to the arbitration. However, the court observed that this would be exceptional given the contractual and confidential nature of arbitration.

Background

This judgement arose in the context of a fraud claim by two Russian banks against several Russian parties. 

i) The court proceedings, in which this judgment was given, was commenced by the two Russian banks against three defendants (Mr Boris Mints and his two sons). 

ii) However, there were prior related LCIA arbitrations, including proceedings between the banks and three companies alleged to be under the defendants' control in which award(s) had been rendered. 

The Banks argued that the Respondents in this case were precluded from challenging certain findings made by an LCIA arbitration tribunal in the arbitration between the banks and the companies under the control of the respondents either on grounds of issue estoppel or to prevent an abuse of process (the Preclusion Arguments) and sought summary judgment on this basis. 

The court noted the following features as regards the banks' "Preclusion Arguments": 

i) The determination which is said to give rise to them was an arbitral award, rather than a court decision. 
ii) The defendants were not parties to the LCIA arbitrations.
iii) The counterclaims advanced by the banks in the LCIA arbitrations asserted causes of action against the LCIA claimants under Cypriot law, while the present action was concerned with Russian law claims against the defendants personally.

Gleeson Privies in the arbitral context 

Issue estoppel prevents parties or their 'privies' from relitigating issues that are the subject of a court judgment or arbitral award. Gleeson v Wippell [1977] 1 WLR 510 established that ‘privies’ includes not only successors in title but also third parties that are sufficiently closely connected to a party such that it is just for them to be bound by a decision binding the party. The court referred to these as ‘Gleeson privies’. 

In this case, the Court was asked to consider if and how the Gleeson principle applied in the context of arbitration. 

While the issue had arisen in previous cases, those cases proceeded on the basis that the principle applied without hearing argument on the issue. Therefore, there was no definitive guidance on this point. 

The court confirmed that an arbitral award was capable of giving rise to an issue estoppel in relation to non-parties to the arbitration. However, the court considered that the following features of arbitration require a more restrictive approach to giving an award a preclusive effect in the context of Gleeson privies: 

• The contractual foundation of arbitration significantly impacts the ability of third parties to the arbitration agreement to participate in the arbitration and to challenge any award. 
  
  
• Some arbitral rules – including the LCIA Rules which applied in this case – did contain provisions for joinder of third parties. However, the ability of a non-party to join and participate in LCIA arbitrations is much more circumscribed than the power of a non-party to intervene and participate in English proceedings.
  
  
• The powers to challenge an award are heavily circumscribed under the English Arbitration Act 1996 and do not appear to extend to persons falling outside the narrow definition of "parties to an arbitration agreement". This is to be contrasted with the wider powers of appeal available for court judgments, which in appropriate cases can extend to non-parties.
  
  
• The confidential nature of arbitration proceedings, as compared with the generally public nature of court proceedings militates against the award binding non-parties save in exceptional cases, both as a matter of practicality, and because it illustrates the difference between the private, bilateral and consensual character of arbitral proceedings, as against the public, sovereign and coercive character of court proceedings.

Was there issue estoppel or abuse of process? 

On the facts of this case, there were a number of reasons to support the view that there was privity between the companies that were parties to the arbitration and the defendants, including that the defendants were the ‘moving spirits’ behind the arbitration and had funded it and voluntarily given disclosure and evidence. However, this was insufficient to establish that the defendants were privies for the purposes of issue estoppel, to the summary judgment standard. In other words, the issue had to be determined at trial. 

As regards abuse of process, the court similarly held that it may be an abuse of process to seek to relitigate an issue that has been decided in an arbitral award, even where there is no ‘identity of parties’ for issue estoppel purposes. However, it noted that it will be a very rare case where court proceedings against a non-party to an arbitration can be said to be an abuse of process. The court found that the same reasons for not finding issue estoppel, provided compelling grounds for concluding that there can be no summary determination as regards abuse of process either. 

Conclusion

This case confirms that it is possible for non-parties to an arbitration to be restricted by issue estoppel or abuse of process applications in subsequent proceedings before the English Courts by virtue of being "Gleeson privies". However, given the court's comments as to the restrictive approach to be adopted in the arbitral context, it remains to be seen to what extent, if at all, this already exceptional doctrine will be applied on the facts of future cases.

(1) [2022] EWHC 871 (Comm)