Recent Developments in the Enforcement of Foreign Arbitral Awards in Australia

Author:Gregory Nell SC
Position:Seven Wentworth Chambers, Sydney NSW. This is an updated version of a paper presented in December 2011 at the joint 2011 Conference between the Maritime Law Association of Australia and New Zealand, and the US and Canada Maritime Law Association
Pages:24-68
 
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RECENT DEVELOPMENTS IN THE ENFORCEMENT OF FOREIGN ARBITRAL
AWARDS IN AUSTRALIA
Greg ory Ne ll SC*
1 Introduction
As Allsop J observed in Comandate Marine Corp. v Pan Australia Shipping Pty Ltd,1 disputes arising from
commercial bargains are unavoidable and part of the activity of commerce itself. The existence of such disp utes and
the means by which they are resolved can also amount to a hidden cost of the underlying transa ction. This is
especially so in relation to international trade, where the actual and apprehended risks and uncertainties associated
with the enforcement o f the parties’ obligations in foreign and unfamiliar legal systems represent both a potential
impediment or barrier to trade and a potential source of additional transactional costs.2 For these reasons, it has been
said that ‘an ordered efficient dispute resolution mechanism leading to an enforceable award or judgment by the
adjudicator, is an essential underpinning of commerce’.3
With a view to avoiding, or at the very least minimi sing, the above costs, risks and u ncertainties, commercial parties
often deal with the possibility of the occurrence of disputes between t hem and the means by which such disputes are
resolved in advance in the terms of their agreement. In the context o f international commerce, this is most
commonly done by the parties choosing arbitration as their agreed method of dispute resolution. The man y
advantages of the use of commercial arbitration as a me ans of resolving disputes in lieu of curial litigation, in
particular between the participants of international trade and commerce, are so well known and documented
4
Despite those advantages which are associated with the conduct of the arbitral process itself, an arbitral award, if it
is not honoured, is unlikely to be of a ny value to the party who has obtained it,
as not
to need repeating here.
5 unless it can be enforced, in
particular in the place where the party against whom the a ward has been obtained6
Principal amongst the recognised ad vantages of international commercial arbitration is the ability and greater ease
with which an arbitral award (once obtained) may be enforced, in particular inte rnationally and in co mparison to the
enforcement of a judgment of a court.
is located and/or has its assets.
This is especially so of awards obtained in the context of international trade and commerce, which may ne ed to be
enforced in countries other than where the award creditor is located or the award was obtained.
This is in large measure a consequence of both the provisio ns of the New York Convention7 (Convention) and its
widespread adoption throughout the world.8 The Convention has been described as one of the single most important
pillars on which the edifice of international arbitration rest s.9
In broad terms, the Convention’s operation is two-fold. First, it facilitates the recognition and enforcement of
arbitration agreements, in particular by ensuring that the parties to such a greements are not able to circumvent their
bargain by pursuing their claims before the courts.
10
* Seven Wentworth Chambers, Sydney NSW. This is an updated version of a paper presen ted in December 2011 at the join t 2011 Conference
between the Maritime Law Association of Australia and New Zealand, and the US and Canada Maritime Law Association.
Secondly, a nd relevantly for pr esent purposes, the Convention
facilitates the enforcement of an award that is the product of the parties’ agreement to arbitrate their disputes. T his is
1 Comandate Marine Corp. v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45, [192].
2 Luke Nottage and Richard Garnett, International Arbitration in Australia (2010) v-vi; Ibid [192].
3 Comandate Marine Corp. v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45, [192].
4 See Fiona Trust & Holding Corp v Privalov [2008] 1 Lloyd’s Law Reports 254, [6]; Patrick Keane, ‘Judicial support for arbitration in
Australia’, (2010) 34 Australian Bar Review 1.
5 The award creditor.
6 The award debtor.
7 Convention for the Recognition and Enforcement of Arbitral Awards (New York Convention), 1958, 330 UNTS 38.
8 As at the date of this paper, there are 146 signat ories to the Convention see UNCITRAL, Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (2012) http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html>.
9 J G Wetter, ‘The present status of the International Court of Arbitration of the ICC : an appraisal”’ (1990) 91 Am Rev of Int’l Arb 58.
10 Convention for the Recognition and Enforcement of Arbitral Awards (New York Convention), 1958, 330 UNTS 38, art II. In Australia, this is
given effect to by International Arbitration Act 1974 (Cth) s 7.
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by the operation of arts III, IV and V of the Convention and their implementation as part of the domestic law of
those countries that have adopted the Convention.
It has been said in this secon d respect that the Convention introduced a pro-enforcementbias or policy for the
recognition and enforcement of arbitral awards. 11 In their recent joint judgment in IMC Aviation Solutions Pty Ltd v
Altain Khuder LLC 12
What that means is this. … the Convention, recognising the role and importance of arbitration in international trade and
commerce and the certainty and fin ality of awards, has simplified the procedure for enforcing foreign arbitral awards
while also limiting the grounds upon which the enforcement of such an award may be resisted and placed the onus of
establishing those grounds upon the party resisting enforcement.
Hansen JA and Kyrou AJ A described that bias or policy in the following terms:
13
Provisions for the recognition and enforcement of arbitral awards in similar terms to those of the New York
Convention are also to be found in arts 35 and 36 of the UNCITRAL Model Law
14
In Comandate Marine Corp. v Pan Australia Shipping Pty Ltd Allsop J referred to the significance of the
Convention and Model Law in the following terms:
and thereby in the domestic law of
the more than 70 countr ies that have now adopted the Model Law as their curial or p rocedural law of arbitration. A
similar pro-enforcement bias or policy can also be seen to lie behind these provisions and their inclusion in the
Model Law.
The recognition of the importance of i nternational commercial arbitration to the smooth working of international
commerce and of the importance of enforcemen t of the bilateral bargain of commercial par ties in their agreement to
submit their disputes to arbitration is reflected in the provisions of both the New York Convention and the Model Law.15
Australia is a signatory to both the New York Convention and Model Law and the provisions of both the Convention
and Model Law have been incorporated into Australian domestic law. This is t hrough the provisions of the
International Arbitration Act 1974 (Cth) (IAA). As Hansen JA and Kyrou AJA also noted in their joint judgment in
IMC Aviation Solutions Pty Ltd v Altain Khuder LLC, the pro-enforcement bias or policy of the New York
Convention is also recognised and reflected in Australia in the IAA and its provisions.
16
The enforceability of arbitral awards, and the ease or otherwise with which such awards may be enforced, are
important factors in assessing the utility and success of international commercial arbitration as a d ispute resolution
mechanism, in particular in the context of international commerce and trade.
More specifically, the enforceability of foreign arbitral awards in Australia, and the ease or otherwise with which
such awards may be enforced in Australia, are likely to be of interest not only to those who may have obtained an
award which has not been honour ed and who are loo king to enforce it against the assets of the award debtor held
anywhere in the world, including in Australia, but also to foreign p arties (and their lawyers) who are contemplating
doing business wit h an Australian resid ent and who are, in that context, considering whether or not to agree to the
resolution of disputes by commercial arbitration and the utility and likely success of such an agreement in the event
that a dispute arises.
The past few years have seen a reinvigoration of commercial arbitration in Australia and a strong push for its
promotion as a means of commercial dispute resolution. This is especia lly in the context of i nternational trade and
commerce. This is not only by those with a vested interest in the success of arbitration,17
11 Dallah Real Estate & Tourism Holding Co v the Ministry of Religious Affairs, Government of Pakistan [2011] 1 AC 763, [101] (Lord Co llins);
see also Parsons & Whittemore Overseas Co Inc v Societe Generale de L’Industrie du Papier (RAKTA) (1974) 508 F 2d 969, 973.
but also from govern ment
at both the State and Federal levels, which has resulted in a number of changes to the existing legislative regime
governing commercial arbitration in Australia.
12 IMC Aviation Solutions Pty Ltd v Altain Khuder LLC (2011) 253 FLR 9.
13 Ibid [128]; see also the comments of Warren CJ at [45] fn 16 to similar effect.
14 UNCITRAL Model Law on International Commercial Arbitration, 2006, 330 UNTS 40.
15 Comandate Marine Corp. v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45, [193].
16 IMC Aviation Solutions Pty Ltd v Altain Khuder LLC (2011) 253 FLR 9, [128].
17 Such as the parties to international agreements, their lawyers and would be arbitrators.
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There has also been a shift in the approach of the Australian judiciary to the enforcement of international arbitration
agreements, both (a) in promoting and giving effect to the freely entered into bargain of the par ties, including via the
adoption of a benevolent and encouraging approach to consensual alternative non-curial dispute resolution such as
arbitration18 and (b) in confi ning the interventio n of the Australian co urts as organs of the State to the minimum
necessary to ensure the integrity of the arbitral process.19
Whilst for the most part these developments have been directed at or had the effect of enhancing and promoting
Australia’s position as a centre for dispute resolution, in particular in the Asia-Pacific region, the y ha ve also
included developments which impact upon the enforcement of foreign arbitral awards in Australia, and which have
been reflected in a pro-enforcement bias.
This shift has been in recognition of the public interest i n
international arbitration and its pro motion and has resulted in the adoption of a pro-arbitration attitude by Australian
courts.
This paper addresses two aspects of the latter developments:
a) the first is recent legislative changes which have sought to enhance the enforcement of foreign arbitral
awards in Australia;
b) the second is the judgment of the Court of Appeal of the Supreme Court of Victoria in IMC Aviation
Solutions Pty Ltd v Altain Khuder LLC and its potential implications for the enfo rcement of foreign arbitr al
awards in the future, especially in light of criticism which t he judgment has received.
Howeve r, before a ddressing those issues, there are so me preliminary observations I wish to make bo th by way of
background and also as an introduction to the framework of arbitration law in Australia (especially for the benefit of
those who may not be familiar with it).
2 Backgro und to Arbitration Law in Australia
2.1 The Leg islative Framework Generally
There are two main compone nts to the legislative regime governing commercial arbitration in Australia. This is as a
consequence of Austra lia’s federal system of government.
The first is the International Arbitration Act 1974 (Cth) (IAA). This is an Act of the Commonwealth Parliament
which (as its name implies) is directed at international commercial arbitration.20
In particular, the IAA:
a) implements Australia’s obligation to enforce and recognise foreign arbitration agreements and arbitral
awards under the New York Convention. This is done through pt II of the IAA, the provisions of which in
effect repeat the terms of that Convention and thereby introduce those terms into Australian domestic law.
A copy of the Convention appears as sch 1 to the IAA;
b) has, since 1989, implemented and given force to the Model Law as the primary arbitral law that governs the
conduct of international commercial arbitrations taking pla ce in Australia. This is done thr ough pt III of the
IAA, and in particular s 16 which provides that (subject to the provisions of that Part) the Model Law has
the force of law in Australia. The Model Law appears as sch 2 to the IAA; and
c) implements Australia’s obligations under the ICSID Convention.21 This is through the provisio ns of pt IV
of the IAA. A copy of that Convention also appears as sch 3 to the IAA.22
18 Comandate Marine Corp. v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45, [165] and [192].
19 Keane, above n 4, 2.
20 That is, arbitration where the parties to the arbitration agreemen t reside or have their places of bus iness in different countries (see for exa mple
the definition in UNCITRAL Model Law on International Commercial Arbitration, 2006, 330 UNTS 40, art 1(3)).
21 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID), 1965, 575 UNTS 159.
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