The Supreme Court of New South Wales has ordered a partial enforcement of an arbitral award made in the United Arab Emirates arising out of a construction dispute. The Court found a breach of natural justice in one respect of the award, and severed the affected parts while enforcing the balance.
The plaintiff, William Hare UAE LLC (William Hare), was incorporated in Abu Dhabi. The defendant, Aircraft Support Industries Pty Ltd (Aircraft Support), was incorporated in Australia.
The parties were in dispute regarding the payment of retention monies under a US$15m construction contract for works at the Abu Dhabi International Airport. The dispute resolution clause of the contract provided for arbitration, to be governed by the rules of the Abu Dhabi Chamber of Commerce and Industry and to take place in Abu Dhabi. The parties agreed that the arbitration was final and binding.
An arbitral tribunal heard the dispute in December 2013, after hearing an application by Aircraft Support to rely on supplementary defences, including a defence that the tribunal was not competent.
The arbitral award was issued in May 2014, ordering Aircraft Support to pay US$797,500 in retention monies, and US$50,000 in respect of a discount offered by William Hare for a final account. William Hare sought to enforce the award in New South Wales.
Aircraft Support challenged the enforcement on the basis that the award was contrary to public policy, in finding that William Hare was entitled to a payment of US$50,000 when a claim for that sum was not formally made, the tribunal had failed to give reasons, and the tribunal failed to consider Aircraft Support’s contentions regarding a contract variation.
Section 8(7) of the International Arbitration Act 1974 (Cth) (IAA) provides that the Court may refuse to enforce a foreign award if it finds that the award would be contrary to public policy, including a breach of natural justice.
The Court found:
- there was a breach of natural justice by the tribunal in ordering the payment of US$50,000, which was not specifically identified in the statement of claim or responded to in the defence, and was thought to have been abandoned (after appearing in other preliminary arbitration documents);
- the tribunal should have given notice to the parties that it did not consider that claim to have been abandoned, and provide an opportunity for the parties to make submissions;
- the affected part of the award regarding the US$50,000 payment was able to be severed, and the remainder was enforced under section 8(7) of the IAA;
- the tribunal’s reasons were not inadequate and did not reveal any failure to consider any part of Aircraft Support’s case.
The full decision appears at: http://www.austlii.edu.au/au/cases/nsw/NSWSC/2014/1403.html