In case you had any doubt, international arbitration awards are enforceable in Australia, and a creative constitutional challenge won’t be enough to set an award debtor free.

In the recent High Court case of TCL v Federal Court of Australia, TCL argued that the Federal Court should be restrained from enforcing an arbitration award, as the International Arbitration Act 1974 (IAA) conflicted with the Australian Constitution by:

  1. requiring the Court to enforce an award even where there was an error of law on the face of the award; and
  2. vesting the Commonwealth’s judicial power in arbitral tribunals.

What did the High Court say?

Courts are still able to exercise judicial power when deciding whether to enforce an award. Just because the Court can’t refuse to enforce an award where there is an error of law on its face, does not mean its ‘institutional integrity’ has been compromised.

Also, there is no delegation of any judicial power to an arbitral tribunal. An arbitral tribunal is given its power only through the parties’ agreement.

What does this mean?

The IAA is pretty clear, with very limited exceptions (none of which applied to TCL) an award is binding and should be recognised by the Court. If TCL had been successful in its constitutional challenge, the implications for international arbitration in Australia, and all the commercial agreements which contain arbitration clauses, would have been huge.

Luckily we can all sleep easily knowing that if you need to resort to arbitration, your award will be enforceable in Australia. We thought this would be the case, still, nice to have the High Court’s sign off.