Overview

In this publication we provide a brief update on recent developments in international arbitration in Australia, revealing how the 2010 amendments to the international arbitration regime in Australia are already leading to lower costs and less court intervention for international arbitration. For more information and in-depth analysis of each issue covered, see here.

  1. The Australian Centre for International Commercial Arbitration (ACICA) has become the authority able to appoint arbitrators where other agreed mechanisms fail.
  2. The enforcement of a Mongolian arbitration award by the Victorian Supreme Court evidences a move in Australia for minimal intervention and review by a court in enforcement proceedings.
  3. Indemnity costs may now be awarded as a matter of course where a party seeks to oppose the enforcement of an arbitral award.
  4. The enforcement of a Ugandan award in the Federal Court of Australia has highlighted that even poorly drafted arbitration agreements can still lead to enforceable awards in Australia.

ACICA becomes the appointing authority

On 2 March 2011, the International Arbitration Regulations 2011 (Cth) (Regulations) came into force, prescribing ACICA as the sole competent authority to perform the functions set out in arts 11(3) and 11(4) of the UNCITRAL Model Law on International Commercial Arbitration (Model Law).

The effect of the Regulations is that where:

a.a party fails to appoint an arbitrator

b.the parties cannot agree on the appointment of an arbitrator

c.the party-appointed arbitrators cannot agree on the appointment of a third arbitrator, or

d.an arbitral institution fails to appoint an arbitrator as required

a party to an arbitration in Australia can apply to ACICA (instead of a court) to appoint the arbitrator. This avoids the costs and delays associated with court applications.

More details on ACICA, the Model Law and the ability to appeal from a decision of ACICA can be found here.

Enforcement of a Mongolian award

On 28 January 2011, the Supreme Court of Victoria (Croft J) enforced a Mongolian award under the new regime provided in s 8 of the International Arbitration Act 1974 (Cth) (IAA). In doing so, the Court (Altain Khuder LLC v IMC Mining Inc [2011] VSC 1) covered a number of topical, complex and controversial issues on the application of the New York Convention.

In summary, Croft J held:

  1. A party seeking to enforce an award does not need to prove that the award or arbitration agreement is binding or valid; all they need to do is comply with the procedural requirements in the IAA and the relevant court rules.
  2. A party who seeks to resist the enforcement of an arbitral award bears a “very heavy burden” in doing so and must present “clear, cogent and strict proof” that one of the grounds for refusing enforcement of an award found in the New York Convention (as enacted in Australia by s 8 of the IAA) applies.
  3. The proper law of the contract is not necessarily the proper law of the arbitration agreement. It is therefore important to identify the law of the arbitration agreement, as this law governs the validity of the arbitration agreement, including the jurisdiction of the arbitral tribunal.
  4. The decision of the United Kingdom Supreme Court in Dallah Real Estate & Tourism Holding Co v Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46 should not be read as allowing a court in an enforcement proceeding to re-open and re-litigate most issues already raised before and dealt with by the tribunal.
  5. Where the courts of the seat of arbitration have verified an award and a party has had sufficient opportunity to argue the tribunal lacked jurisdiction both before the tribunal and the courts of the seat of arbitration, an estoppel will ordinarily arise preventing that party from arguing the tribunal lacked jurisdiction before a court seeking to enforce the award.

The decision has been appealed to the Victorian Court of Appeal.

An analysis of Croft J’s reasoning on each point summarised above, together with the practical implications of his Honour’s decision, can be found here.

Indemnity costs awarded against party resisting enforcement of foreign arbitral award

Following the decision on the enforcement of the Mongolian award, Croft J awarded costs on an indemnity basis against the party resisting enforcement (Altain Khuder LLC v IMC Mining Inc (No 2) [2011] VSC 12).

Should other courts within Australia follow his Honour’s decision, a party seeking enforcement of an award in Australia has the potential to recover all its costs in doing so, not just party/party costs.

Conversely, parties seeking to resist enforcement of an arbitral award in Australia should only do so in circumstances where they have a good case for refusing enforcement. Otherwise, they may be subject to a significant costs order awarded against them on top of any award enforced by the court.

Further details on this decision and its implications can be found here.

Federal Court enforces Ugandan award

Having been conferred with the relevant jurisdiction under the recent amendments to the IAA, the Federal Court (Foster J) has recently enforced a Ugandan award (Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd [2011] FCA 131). The important points to come from this case are:

  1. The enforcement of an award will only be contrary to public policy where it “would violate the forum state’s most basic notions of morality and justice”.
  2. Arbitration agreements that contain no details other than certain disputes must be submitted to arbitration will not be void for uncertainty if the law of the seat of arbitration “fills the gaps” on details required for an effective arbitration (eg, procedure for appointment of arbitrators, place of arbitration, rules of arbitration etc).

The effect of the decision of Foster J is to highlight the importance of choosing an appropriate seat of arbitration. Although no substitute for a properly drafted arbitration agreement, it is important to ensure that the arbitration laws of the chosen seat of arbitration adequately deal with and protect the procedures and mechanisms of arbitration that are necessary for an efficient, timely and cost-effective resolution of the dispute.

A more detailed overview of the reasons of Foster J can be found here.