TCL Air Conditioner (Zhongshan) Company Ltd v The Judges of the Federal Court of Australia

• Jurisdiction: Australia Federal only
• Judge: Gageler J.,French CJ,Hayne,Crennan,Kiefel
• Judgment Date: 13 March 2013
• Neutral Citation: 2013-0313 HCA A,[2013] HCA 5
• Court: High Court
• Docket Number: S178/2012
• Date: 13 March 2013

Tcl Air Conditioner (Zhongshan) Co Ltd

Plaintiff

and

The Judges of The Federal Court of Australia & Anor

Defendants

[2013] HCA 5

French CJ, Hayne, Crenna, Kiefel, Bell and Gageler JJ

S178/2012

HIGH COURT OF AUSTRALIA

TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia

Constitutional law — Judicial power of Commonwealth — Constitution, Ch III — Section 16(1) of International Arbitration Act 1974 (Cth) provided that UNCITRAL Model Law on International Commercial Arbitration (‘Model Law’) has ‘force of law in Australia’ — Article 35 of Model Law provided that arbitral award shall be enforced upon application to ‘competent court’ — Where Federal Court of Australia had no power to refuse to enforce arbitral award for error of law on face of award — Whether institutional integrity of Federal Court impermissibly impaired — Whether judicial power of Commonwealth vested in arbitral tribunals.

Words and phrases — ‘arbitral award’, ‘institutional integrity’, ‘judicial power’.

Constitution, Ch III.

International Arbitration Act 1974 (Cth), Pt III, ss 16(1), 19, Sched 2 Arts 5, 8, 28, 34, 35, 36.

Representation

B W Walker SC with N L Sharp for the plaintiff (instructed by Norton Rose Australia)

Submitting appearance for the first defendant

A J Myers QC with D L Bailey for the second defendant (instructed by Browne & Co Solicitors and Consultants)

ORDER

Appeal dismissed with costs.

French CJ And Gageler J.

Introduction

1 The International Arbitration Act 1974 (Cth) (‘the IAA’) gives the force of law in Australia to the UNCITRAL Model Law on International Commercial Arbitration adopted in 1985 and amended in 2006 (‘the UNCITRAL Model Law’) by the United Nations Commission on International Trade Law (‘UNCITRAL’) 1. In these reasons, ‘the Model Law’ refers to the UNCITRAL Model Law as given the force of law in Australia.

2 An application to enforce an arbitral award under Art 35 of the Model Law is a ‘matter … arising under [a law] made by the [Commonwealth] Parliament’ within s 76(ii) of the Constitution. That is because rights in issue in the application depend on Art 35 of the Model Law for their recognition and enforcement and because the Model Law is a law made by the Commonwealth Parliament 2. The Federal Court of Australia has original jurisdiction in a matter arising under a law made by the Commonwealth Parliament, defined under s 77(i) of the Constitution by s 39B(1A)(c) of the Judiciary Act 1903 (Cth) (‘the Judiciary Act’). The Federal Court is therefore a ‘competent court’ to which an application can be made under Art 35 of the Model Law. In an application to enforce an arbitral award under Art 35 of the Model Law, the Federal Court has power under s 23 of the Federal Court of Australia Act 1976 (Cth) (‘the Federal Court Act’) to make such orders as are ‘appropriate’ in relation to the matter in which it has jurisdiction under s 39B(1A)(c) of the Judiciary Act. These reasons will explain that appropriate orders may include an order that the arbitral award be enforced as if the arbitral award were a judgment or order of the Federal Court.

3 The plaintiff, in this application in the original jurisdiction of the High Court under s 75(v) of the Constitution for writs of prohibition and certiorari directed to the judges of the Federal Court, argues that the jurisdiction conferred on the Federal Court in an application under Art 35 of the Model Law is incompatible with Ch III of the Constitution. The facts and procedural history are set out in the reasons for judgment of Hayne, Crennan, Kiefel and Bell JJ.

4 The plaintiff's argument, as refined in oral submissions, reduces to the proposition that the inability of the Federal Court under Arts 35 and 36 of the Model Law to refuse to enforce an arbitral award on the ground of error of law

appearing on the face of the award either: undermines the institutional integrity of the Federal Court as a court exercising the judicial power of the Commonwealth, by requiring the Federal Court knowingly to perpetrate legal error; or impermissibly confers the judicial power of the Commonwealth on the arbitral tribunal that made the award, by giving the arbitral tribunal the last word on the law applied in deciding the dispute submitted to arbitration. The undermining of the institutional integrity of the Federal Court is compounded, the plaintiff argues, because the arbitral award that is to be enforced by the Federal Court, in spite of any legal error that may appear on its face, is one that Art 28 of the Model Law, or an implied term of the arbitration agreement, requires to be correct in law.

5 The argument should be rejected. Chapter III of the Constitution does not operate to limit the implementation of the UNCITRAL Model Law in Australia in the manner propounded by the plaintiff. Article 35 of the Model Law neither undermines the institutional integrity of the Federal Court nor confers judicial power on an arbitral tribunal. Neither Art 28 of the Model Law nor an implied term of an arbitration agreement requires an arbitral award to be correct in law.

Model Law

6 The IAA requires that regard be had to its objects in the interpretation of the Model Law 3. The relevant object is to give effect to the UNCITRAL Model Law 4. The IAA also specifically facilitates reference in the interpretation of the Model Law to documents of UNCITRAL and of the UNCITRAL working group for the preparation of the UNCITRAL Model Law 5.

7 The Model Law itself requires in its interpretation that regard be had ‘to its international origin and to the need to promote uniformity in its application and the observance of good faith’ 6. The origin of some of its key provisions, including Arts 35 and 36, may be traced to provisions of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted by the United Nations Conference on International Commercial Arbitration in 1958 (‘the New York Convention’). The New York Convention is adhered to by over 140 Contracting States. The New York Convention is implemented in Australia by Pt II of the IAA, which applies to the exclusion of Arts 35 and 36 of the Model

Law where both would otherwise apply in relation to an award 7. The Model Law applies without regard to the system of law that governs an arbitration agreement. Articles 35 and 36 apply without regard to the place of arbitration or to the place of making an arbitral award.

8 Those considerations of international origin and international application make imperative that the Model Law be construed without any assumptions that it embodies common law concepts or that it will apply only to arbitral awards or arbitration agreements that are governed by common law principles. The first of those considerations makes equally imperative that so much of the text of the Model Law as has its origin in the New York Convention be construed in the context, and in the light of the object and purpose, of the New York Convention 8.

9 In common with the New York Convention, the Model Law nevertheless proceeds on a conception of the nature of an arbitral award, and a conception of the relationship of an arbitral award to an arbitration agreement, identical in substance to the conception that has for centuries underpinned the understanding of an arbitral award at common law as ‘a satisfaction pursuant to [the parties'] prior accord of the causes of action awarded upon’ and as thereby ‘precluding recourse to the original rights the determination of which had been referred to arbitration’ 9. That conception, in short, is that ‘the foundation of arbitration is the determination of the parties' rights by the agreed arbitrators pursuant to the authority given to them by the parties’ 10. The English law of arbitration, which has combined statute law with common law since the seventeenth century, has at ‘every stage’ of its development ‘approached the relationships between the parties and the arbitrator, and between the parties and each other, unequivocally in terms of private law’ 11. The same approach has been evident in the historical development of the statute law and the common law governing arbitration in

Australia 12. That is so notwithstanding the truth of the observation that performance of the arbitral function is not ‘purely a private matter of contract, in which the parties have given up their rights to engage judicial power’ and is not ‘wholly divorced from the exercise of public authority’ 13.

10 The conception is captured, and its international commercial significance is explained, in the following observation 14:

‘The New York Convention and the [UNCITRAL] Model Law deal with one of the most important aspects of international commerce — the resolution of disputes between commercial parties in an international or multinational context, where those parties, in the formation of their contract or legal relationship, have, by their own bargain, chosen arbitration as their agreed method of dispute resolution. The chosen arbitral method or forum may or may not be the optimally preferred method or forum for each party; but it is the contractually bargained method or forum, often between parties who come from very different legal systems. An ordered efficient dispute resolution mechanism leading to an enforceable award or judgment by the adjudicator, is an essential underpinning of commerce …

The recognition of the importance of international commercial arbitration to the smooth working of international commerce and of the importance of enforcement of the bilateral bargain of commercial parties in their agreement to submit their disputes to arbitration was reflected in both the New York Convention and the [UNCITRAL] Model Law.’

11 The analytical commentary published by the UNCITRAL Secretariat to accompany the 1985 draft of the...