Emerald Grain Australia v Agrocorp International [2014] FCA 414

This case considers the requirements of procedural fairness in an arbitration. 

The applicant (“Emerald Grain”) sought to set aside an Arbitral Award (“the Award”) made in favour of the respondent (“Agrocorp”).  Emerald Grain brought the application under:

  1. Article 34(2)(b)(ii) of the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”),[1] providing that an arbitral award may be set aside by a court if the court finds that the award “is in conflict with the public policy” of Australia; and
  2. Section 19(b) of the International Arbitration Act 1974 (Cth) (the “Act”) providing that, for the avoidance of any doubt, an award is in conflict with, or is contrary to, the public policy of Australia within the meaning of Article 34(2)(b)(ii) if a breach of the rules of natural justice occurred in connection with the making of the award.

Emerald Grain contended the Tribunal, in making an award under an agreement for the purchase of grain, breached procedural fairness in two ways:

  1. There was no evidence of probative value before the Tribunal permitting certain of its findings (the “No Evidence Claim”).[2]
  2. The Tribunal made those findings based on its own opinion and ideas without adequate notice to Emerald Grain (the “No Hearing Claim”).

Each is considered in turn.

No Evidence Claim

In dealing with this contention, Pagone J emphasised the fine distinction between, on the one hand, permissibly asserting a breach of the “no evidence” rule and, on the other hand, impermissibly seeking to impugn a decision maker’s finding of fact.[3] Further, considering an arbitral award is not to be read like a judgment of a court, Pagone J observed:

Accordingly, there is no expectation in arbitral awards for every argument to be analysed and for every fact to be identified by reference to supporting evidence. The task falling upon a party seeking to challenge an arbitral award is, therefore, necessarily exacting. The role of the Court in ensuring compliance with the rules of natural justice is, in essence, supervisory … and the Court’s jurisdiction in this case is exercised in the context of private rights where the parties have, as part of their private rights, agreed to resolve their dispute by private arbitration. The party seeking to challenge an award on the no (probative) evidence ground must, therefore, focus precisely upon the absence of (probative) evidence as distinct from error in the findings that were made upon the evidence. The court must be satisfied that the facts challenged lacked evidence upon which they could be made rather than that the facts were wrongly decided.[4] (Citations omitted)

Pagone J dismissed the No Evidence Claim. His analysis of the evidence before the Tribunal illustrates the difficulty of making out such a contention.

No Hearing Claim

In dealing with this contention, Pagone J endorsed the ten principles set out in the New Zealand authority Trustees of Rotoaira Forest Trust v Attorney-General[5] regarding procedural fairness in arbitrations.[6] In particular, Pagone J emphasised “an obligation upon an applicant to demonstrate that it, as a reasonable litigant, would not have foreseen the possibility of the Tribunal’s reasoning. It must also show that ‘it might have been possible to persuade’ the Tribunal otherwise if the Tribunal had given adequate notice.”[7] Again, Emerald Grain fell short and Pagone J dismissed the No Hearing Claim.

Procedural Fairness and Arbitration

Pagone J’s general observations on procedural fairness do illustrate the difficulty of establishing a breach of those rules in this context. So much is unsurprising, given the procedural flexibility that arbitration provides as well as the legislative regime’s general objective of upholding awards.

There is, however, one interesting aspect to this case. Emerald Grain, faced with the regime’s limited bases on which an award may be impugned, sought to bring “no evidence jurisdictional error” within the rubric of procedural fairness.

On one view, Emerald Grain’s No Evidence Claim could have been dismissed because a requirement for substantiated fact-finding is not, in fact, an aspect of procedural fairness (and therefore section 19(b) of the Act).