On 19 April 2013, the Federal Court of Australia handed down its judgment in Eopply New Energy Technology Co Ltd v EP Solar Pty Ltd [2013] FCA 356. The Court enforced a foreign award against a company in liquidation, in the latest evidence of Australia’s pro-arbitration environment. 

Background

The applicant creditor sought to enforce an arbitral award made in China by the China International Economic and Trade Arbitration Commission (“CIETAC”). The respondent debtor, an Australian company, had liquidators appointed about one week after proceedings commenced.

The question for Justice Foster of the Federal Court of Australia was whether an arbitral award made in China should be enforced against an Australian company in liquidation.

Statutory framework

The International Arbitration Act 1974 (Cth) (“IAA”) provides for enforcement of a foreign award by the Federal Court, without leave of the Court, in section 8(3):

Subject to [Part II of the IAA], a foreign award may be enforced in the Federal Court of Australia as if the aware were a judgement order of that court. 

The IAA gives the Court very limited discretion to refuse enforcement, with sections 8(5) and 8(7) mirroring the grounds for refusal in article V of the New York Cnvention.

However, the Corporations Act 2001 (Cth) (“Corporations Act”) provides that leave of the Court is required to commence proceedings against a company being voluntary wound up, in section 500(2):

After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.

This provision is understood1 to only apply to a creditors’ voluntary winding up, rather than to a members’ voluntary winding up where the directors have made a declaration of solvency2.

Federal Court decision

Justice Foster granted leave to the applicant to proceed under section 500(2) of the Corporations Act, and thereby granted enforcement of the foreign award under section 8(3) of the IAA.

With respect to section 500(2), Foster J noted that “[i]n determining whether leave should be granted, the Court considers whether the balance of convenience lies in allowing the applicant to proceed by way of action to judgment, or whether the applicant should be left to pursue his or her claim by lodging a proof of debt with the liquidator”.3

In this case, the fact that the applicant’s claim was based on a foreign award was significant in pointing to the grant of leave. In Foster J’s words, “[w]hen appropriate regard is had to s 2D of the IAA which specifies the objects of the IAA and to s 39 of the IAA, there is good reason to make the path to recovery by the award creditor easier by granting leave and allowing judgment to be entered rather than leave the award creditor to the vagaries of the proof of debt process”.4 The objects of the IAA specified in section 2D include facilitating international commerce by encouraging the use of arbitration, facilitating the enforcement of arbitral awards, and giving effect to Australia’s obligations under the New York Convention. The matters to which a court must have regard in enforcement proceedings, as specified in section 39, include the efficiency, enforceability and certainty of arbitration.

With respect to section 8(3), Foster J noted that “[o]nce a claimant establishes the matters required to be established by ss [8(3)], 9 and 10 of the IAA, the Court may only refuse to enforce the foreign award in the circumstances mentioned in s 8(5) and s 8(7)”.5

In this case, the matters required by sections 8(3), 9 and 10 were established because (a) the People’s Republic of China is a “Convention country”, (b) the applicant produced a CIETAC-certified copy and an English translation of the “original arbitration agreement”, and (c) the applicant produced a CIETAC-certified copy and an English translation of the “original award”. The onus of making out grounds for refusal under sections 8(5) and 8(7) “rests upon the party resisting enforcement”6, and here neither the respondent nor its liquidators raised any opposition.7

Eopply New Energy Technology Co Ltd v EP Solar Pty Ltd [2013] FCA 356 is a welcome addition to the growing body of jurisprudence under the amended IAA, providing further evidence of Australian courts’ pro-arbitration approach and their unwillingness to interfere with the timely enforcement of foreign awards.