International Arbitration 2019 Comparisons

Last Updated August 19, 2019

Law and Practice

Authors



Clifford Chance (Perth) is a leading global law firm, headquartered in London. Clifford Chance has the largest international arbitration practice in Australia. The firm's award-winning Australian arbitration team comprises 15 full-time international arbitration lawyers across Perth and Sydney, who work daily with specialists from the firm's offices in Beijing, Hong Kong, Shanghai, Seoul, Singapore, Tokyo, Paris and London to deliver the highest quality advice and representation to clients. In addition to the work they do acting for parties in major commercial disputes spanning a range of sectors (including energy, mining, finance and shipping), the team is unique in Australia for the volume of work it does representing investors in arbitrations against foreign governments in Asia and Africa under bilateral investment treaties and free trade agreements. Examples of the Australian arbitration team's recent work include representing Churchill Mining Plc, Kingsgate Consolidated Limited, Tantalum International Ltd and Cortec Mining Kenya.

Arbitration remains the method of choice for the resolution of commercial disputes in the infrastructure, energy and natural resources sectors in Australia, where there is a high rate of foreign participation and cross-border contracting. The key motivating factors for parties opting for international arbitration in Australia continue to be confidentiality and the New York Convention enforcement mechanism. Speed and efficiency are less critical factors than in other jurisdictions (because the courts in Australia are efficient and reliable), although there is evidence that these factors do inform the choice of arbitration in rapid and repeat-transaction contexts, such as commodities trading. Expertise is also a factor in certain types of contracts, such as gas sales agreements and construction contracts, where the ability to appoint arbitrators with specific technical skills and qualifications is seen as a significant advantage by many businesses.

Clarification of Standard of Review in Stay Applications

Stays continue to be the most common arbitration-related application that Australian courts are called upon to decide. In recent years, conflicting lines of case law emerged concerning the standard of review of arbitration agreements in the context of stay applications: in some cases, the court has taken a 'full review' approach, whereby the existence and scope of the arbitration agreement are determined by the court on the balance of probabilities (similar to the approach in England); in other cases, the court has taken a 'prima facie review' approach, whereby so long as the issue in dispute arguably falls within the scope of a prima facie valid arbitration agreement, the court proceedings will be stayed and it will be for the arbitrator(s) to decide the issue of scope in the exercise of Kompetenz-Kompetenz (similar to the approach in Singapore and Hong Kong). This important issue has now been clarified by the High Court: in Rinehart v Hancock Prospecting [2019] HCA 13. In this case, the High Court endorsed the prima facie review approach to arbitration agreements in the context of stay applications. The High Court also confirmed the liberal approach to interpretation, holding that arbitration clauses are to be construed by reference to the language used by the parties, in light of the surrounding circumstances and the purposes and objects of the legal instrument in which the clause is contained.

Internationalisation of Arbitration Practice

Until recently, it was common for arbitral proceedings in Australia to be conducted in a manner similar to domestic litigation, with court-style pleadings and evidence presented in an adversarial fashion, often by barristers (rather than solicitors). But in recent years, there has been a marked shift away from court-style practice and towards the adoption of a more international approach: the use of the 'memorial' system of case presentation is growing; evidence is being taken earlier and presented in a more collaborative fashion (especially expert evidence); more firms are doing the advocacy 'in-house' (rather than briefing external counsel); and arbitrators are taking a more inquisitorial approach (particularly in large, complex cases). These positive changes in the way arbitration is practised result from a number of forces converging, including the adoption of the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration (UNCITRAL Model Law) at the State level (such that it applies to both domestic and international arbitration), the increased involvement of foreign parties and foreign law firms in Australia-seated arbitral proceedings, the efforts of institutions such as the Australian Centre for International Commercial Arbitration (ACICA) and the International Chamber of Commerce (ICC) to promote international practices and procedures, and the general increase in exposure to international disputes that Australian firms have enjoyed in recent years as a result of the growth of the market for international arbitration services in the Asia-Pacific.     

Investor-State Dispute Settlement

Australian businesses — particularly mining companies — continue to make use of the investor-State dispute settlement (ISDS) provisions in Australia's free trade agreements (FTAs) and bilateral investment treaties (BITs). Examples of current or recently concluded ISDS cases brought under Australian treaties include Tethyan Copper Company Pty Limited v Islamic Republic of Pakistan (under the Australia-Pakistan BIT), Planet Mining Pty Ltd v Republic of Indonesia (under the Australia-Indonesia BIT), Kingsgate Consolidated Ltd v Kingdom of Thailand (under the Australia-Thailand FTA) and Tantalum International Ltd v Arab Republic of Egypt (under the Australia-Egypt BIT). Although many in the political class remain somewhat wary of ISDS as a result of the tobacco plain packaging claim by Philip Morris (which Australia defeated in 2015), and there is still distrust of ISDS in some segments of the public, the Australian government is generally supportive of ISDS. This is illustrated by the fact that Australia agreed to ISDS in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which entered into force on 30 December 2018. The Australian government has, however, taken commendable steps to increase public confidence in ISDS. These steps include Australia's signing (in July 2017) of the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (Mauritius Convention), which provides for a regime that incorporates the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (Transparency Rules) in certain investor-State arbitrations.

The infrastructure, mining, and oil and gas industries continue to dwarf all other industries in terms of the volume of international arbitration cases they generate in Australia. As a result, the vast majority of international arbitration activity occurs in Western Australia and Queensland – the states with the largest natural resources industries. This is illustrated by the result of a study conducted in 2019 by Francis Burt Chambers (one of the leading barristers' chambers in Western Australia), in conjunction with the ICC and FTI Consulting. This study found that, in the 2017-18 financial year alone, there were 105 unique arbitration proceedings in or connected to Western Australia (52 of these matters were international arbitration cases, the balance were domestic), with an aggregate value in dispute of approximately AUD22.5 billion. The dominance of the natural resource-exporting states as arbitration markets is likely to continue in the medium term, although there is a steady and increasing volume of international arbitration case-flow in Victoria and New South Wales, covering a broader range of business sectors (including finance, hospitality and technology).   

Within Australia, ACICA is the principal institution for international arbitration. The Australian Disputes Centre (ADC) (headquartered in Sydney) provides world-class dispute resolution facilities in the centre of Sydney's CBD. Combined with ACICA's role as an arbitral institution, both ACICA and ADC offer users of international arbitration a 'one-stop shop' for their disputes. The ICC Rules and the UNCITRAL Rules are popular choices for international arbitrations seated in Australia. Sometimes these arbitrations are linked to ACICA but they are also frequently conducted on an ad hoc basis or with a degree of administrative support from an overseas institution such as the ICC Court.

International arbitrations concerning Australian substantive law or projects in Australia are also referred to the Singapore International Arbitration Centre (SIAC), the Hong Kong International Arbitration Centre (HKIAC) and other regional centres. Overall, SIAC and the ICC are probably the most widely chosen arbitral institutions in contracts between Australian businesses and Asian businesses; in contracts concerning major projects located in Australia, the UNCITRAL Rules are selected reasonably often, as they are seen as affording the parties maximum freedom to shape the arbitral procedure to meet the needs of their dispute.

International arbitration in Australia is governed by the International Arbitration Act 1974 (Cth) (IAA). The IAA incorporates almost all of the UNCITRAL Model Law provisions — the Model Law is incorporated into the IAA as Schedule 2 of that Act — save for a number of deviations that are set out in Section 22. Broadly, these provisions deal with party defaults, confidentiality, evidence and security for costs.

While not strictly a deviation, in Australia, the test for bias under the IAA is slightly different to the test that applies under the Model Law. Article 12 of the Model Law allows parties to challenge the appointment of an arbitrator when there are "justifiable doubts" as to the independence and impartiality of that arbitrator. Under Section 18A of the IAA, "justifiable doubts" is taken to be established only when there is a "real danger" of bias on the part of the arbitrator. The threshold for establishing a challenge in Australia is, accordingly, set higher than in other jurisdictions, meaning that bias challenges are (or should be) more difficult to make out in an Australian-seated arbitration than in most other jurisdictions. The leading authority on Section 18A of the IAA is Hui v Esposito Holdings Pty Ltd [2017] FCA 648, discussed below.

Further, each Australian state and territory has enacted its own Commercial Arbitration Act, which govern domestic arbitrations conducted in those states and territories. However, the legislation governing domestic arbitrations is not covered in this chapter.

Since 2015, there have been no major changes to the IAA, although the legislation continues to be updated as and when the need arises. The most recent round of amendments was made in Civil Law and Justice Legislation Amendment Act 2018 (Cth) (2018 Amendment Act). The 2018 Amendment Act amended the IAA to "specify the meaning of 'competent court' for the purpose of the Model Law; clarify procedural requirements for enforcement of an arbitral award; modernise provisions governing certain arbitrators’ powers; and clarify the application of certain confidentiality provisions."

In specifying the meaning of "competent court" for the purpose of the Model Law, the 2018 Amendment Act clarifies that "competent courts" are the Supreme Courts of a given state or territory, or, in any case, the Federal Court of Australia, for those articles of the Model Law that do not specify what are "competent courts" (Articles 17H, 27, 35 and 36). This resolves any potential questions of jurisdiction when parties attempt to engage the courts' jurisdiction under those articles.

In clarifying the procedural requirements for enforcement of an arbitral award, the 2018 Amendment Act introduces a welcome development that clarifies the scope of the recognition of arbitral awards. Previously, Section 8(1) of the IAA stated that "a foreign award is binding by virtue of this Act for all purposes on the parties to the arbitration agreement in pursuance of which it was made." An issue in enforcement arose when parties who were non-signatories to an arbitration agreement ultimately ended up being parties to an arbitration award, either through consolidation of proceedings, formal joinders of parties or other grounds. The 2018 Amendment Act addressed this by amending Section 8(1) – and Section 8(5)(f) (on one of the grounds for refusing enforcement of an award) – to read "a foreign award is binding by virtue of this Act for all purposes on the parties to the award." This amendment deals with the issue that led the Victorian Court of Appeal to refuse enforcement of the award in IMC Aviation Solutions Pty Ltd v Altain Khuder LLC, discussed below.

The 2018 Amendment Act is also notable in that it increases the discretion given to a tribunal in awarding costs in an arbitration. Previously, Section 27 of the IAA contained references to the taxation of costs on a party/party or solicitor/client basis, which, as stated in the Explanatory Memorandum to the 2018 Amendment Act, were "outmoded and inflexible in contrast to current practice in international arbitration." The 2018 Amendment Act made various technical amendments to remove references to taxation and to give tribunals greater discretion in the amounts that they award in costs, including the manner and basis of payment.

Finally, the 2018 Amendment Act also updates the confidentiality provisions in the IAA to reflect Australia's signing of the Mauritius Convention, which provides for the application of the UNCITRAL Transparency Rules for certain investor-State arbitrations. The 2018 Amendment Act amends Section 22 of the IAA to clarify that the current 'opt-out' regime for the confidentiality of arbitrations conducted in Australia does not apply when the parties to an investor-State arbitration have agreed to the application of the Transparency Rules (which contain a modified confidentiality regime).

As under the New York Convention, Section 3 of the IAA requires arbitration agreements to be in writing to be enforceable, and Sections 7(2) and 8(7) provide, in effect, that the dispute must be capable of settlement by arbitration. Australia has adopted Option 1 of Article 7 of the Model Law. Article 7 of the Model Law provides an expansive definition of the writing requirement for arbitration agreements – in effect, any written medium can satisfy the writing requirement for arbitration agreements. This would include arbitration agreements concluded by emails and even text messages.

An arbitration agreement can be challenged on the basis of the usual categories of invalidity under contract law (such as illegality, fraud, mistake, etc). However, those defects must specifically relate to the arbitration agreement itself, and not to the principal agreement. The doctrine of separability applies under Australian law, which quarantines the arbitration agreement from the principal agreement, and ensures the arbitration agreement can survive in circumstances where the principal agreement may be invalid. Arbitration agreements can also be void for lack of certainty or unenforceable on the basis they are pathological. However, Australian courts will generally strive to give effect to arbitration agreements where possible. This was confirmed recently by the High Court in Rinehart v Hancock Prospecting [2019] HCA 13, discussed below.   

Generally speaking, parties enjoy a wide ambit of the types of disputes they may agree to submit to arbitration subject to certain limitations. For example, pre-dispute (ie, before a claim has been made and rejected) arbitration agreements concerning insurance contracts that fall under the scope of the Insurance Contracts Act 1984 (Cth) are 'void' pursuant to Section 43 of that Act. Under Section 11 of the Carriage of Goods by Sea Act 1991 (Cth), arbitration agreements concerning certain carriage of goods agreements have no effect if the arbitration agreement provides for arbitration outside Australia.

Although there was historically some question about whether the misleading or deceptive conduct provisions in the Australian Consumer Law were arbitrable, it is now well settled that they are. 

The Australian Consumer Law may potentially have the effect of rendering arbitration agreements – limited to certain consumer contracts – to be 'unfair' pursuant to the terms of that legislation and, accordingly, be rendered 'void'. Although the vast majority of business contracts will not fall within the scope of the unfair terms regime of the Australian Consumer Law, there is a risk that businesses that include arbitration clauses in standard form contracts with consumers could fall within this scope. Under Section 24 of the Australian Consumer Law, terms of contracts are unfair when they cause significant imbalance between the parties; the term is not reasonably necessary to protect the legitimate interests of the party being advantaged by the term; and the term causes a detriment to a party in its application. Section 25(k) lists as an example of an unfair term: "a term that limits, or has the effect of limiting, one party’s right to sue another party." If recourse to arbitration (to the exclusion of litigation) is incorporated by way of an arbitration agreement in a consumer contract, there is a risk that the term would be determined to be 'unfair' and, accordingly, 'void' pursuant to Section 23 of the Australian Consumer Law.

Australian courts have traditionally been pro-arbitration and this continues to be the case today. Australian courts will ordinarily enforce arbitration agreements (through the grant of a stay of litigation) unless there are very compelling reasons not to do so. When an arbitration agreement is challenged before an Australian court (such as in opposition to an application for a stay of court proceedings), the court will conduct only a prima facie review of the arbitration agreement, rather than a full review (as is the practice in England).

These issues have recently been the subject of authoritative judgment by the High Court of Australia in the case of Rinehart v Hancock Prospecting [2019] HCA 13. This case arose out of certain settlement deeds between members of an Australian mining dynasty. The arbitration clauses of the settlement deeds provided that any dispute "under this deed" and "any dispute hereunder" could be referred to arbitration. The applicants argued the deeds were invalid and that a dispute as to invalidity was not within the scope of the arbitration clauses of the deeds. The High Court disagreed, ruling that dispute as to the validity of the deeds did fall within the scope of the arbitration clauses. The High Court held that the arbitration clauses of the deeds were to be construed by reference to the language used by the parties, in light of the surrounding circumstances and the purposes and objects of the deeds. The High Court indicated that arbitration clauses should ordinarily be construed broadly, unless there are clear words that signal an intention to limit the effect of the clause.

There are, however, examples of Australian courts taking a more restrictive approach. For example, in April 2018, the Federal Court of Australia ruled that arbitration proceedings in New York would be stayed in favour of court proceedings in Victoria, Australia: Kraft Foods Group Brands LLC v Bega Cheese Limited [2018] FCA 549. But this decision turned on very specific facts: in this case, Kraft had commenced both the arbitration and litigation at issue; Bega applied for an anti-arbitration injunction, arguing that the subject matter of both disputes was essentially the same, and was successful.

On the whole, Australia remains a very pro-arbitration jurisdiction, and parties can take comfort in the knowledge that their arbitration agreements will be properly enforced. Australian courts continue to have a good track record of staying court proceedings commenced in violation of the agreement to arbitrate. 

Australian law recognises the doctrine of separability, under which an arbitration agreement (or an arbitral clause contained in a wider contract) will be considered valid even if the rest of the contract is deemed invalid (for reasons of, say, illegality). The doctrine of separability forms part of Australian arbitration law by virtue of Article 16(1) of the Model Law.

With the exception of arbitral proceedings under the Convention on the Settlement of Investment Disputes (ICSID Convention) (in which nationality provisions apply), there are no limits on the parties' autonomy to select arbitrators, save for the requirement that arbitrators are impartial and independent. Any person may act as an arbitrator and arbitration law in Australia imposes no particular qualification requirements. A person is not to be precluded from acting as an arbitrator solely on the basis of their nationality, unless otherwise agreed by the parties (Article 11(1) of the Model Law).

Equally, parties are free to impose qualification requirements as they see fit. This could be particularly helpful in the context of particular types of contracts such as construction contracts or reinsurance contracts, where particular expertise of arbitrators may be desirable. However, as usual, care needs to be taken in the drafting of any qualification requirements in an agreement to arbitrate. The March 2018 decision of the English Court of Appeal in Allianz Insurance Plc and Sirius International Insurance Corporation v Tonicstar Limited [2018] EWCA Civ 434 provides a useful example of the problems that can arise where qualification requirements are included in the arbitration clause. In Tonicstar, the parties were in dispute over the selection of an arbitrator on the basis of a qualification requirement in their arbitration agreement that provided that "[…] the arbitration tribunal shall consist of persons with not less than ten years' experience of insurance or reinsurance." The reinsurers, Allianz and Sirius, selected a senior London-based barrister with 30 years' experience in insurance and reinsurance matters. Tonicstar objected, saying that the arbitrator had to be engaged in the business of insurance and reinsurance. Ultimately, the Court found in favour of the reinsurers, holding that the appointment of the barrister was in accordance with the terms of the arbitration agreement, and, in making the decision, the Court upheld the agreement of the parties in setting their qualification requirements for selecting arbitrators. If an Australian court is faced with a similar dispute, it is likely that this decision would provide persuasive precedent.

When the parties' chosen method for selecting arbitrators fails, the Model Law provides for a default procedure. Article 11 of the Model Law sets out this procedure.

For an arbitration with three arbitrators, the default procedure is that each party appoints one arbitrator, and the two party-appointed arbitrators appoint the third arbitrator. If either party fails to appoint within 30 days of a request from the other party, or if the party-appointed arbitrators cannot agree on the identity of the third arbitrator within 30 days of their appointment, the appointment is to be made upon request of a party by either the court or prescribed "other authority."

For an arbitration with a sole arbitrator, failing agreement between the parties, the court or prescribed "other authority" will appoint the arbitrator at the request of either party.

Under regulation 4 of the International Arbitration Regulations 2011 (Cth), ACICA is the prescribed "other authority" for this purpose.

Australian courts have the power to intervene in the selection of arbitrators in specified circumstances. As set out above, a default in the parties' procedure for the selection of arbitrators entitles a party to apply to the court to appoint an arbitrator. Further, if an arbitrator's mandate expires or is withdrawn voluntarily or by agreement of the parties, or the arbitrator cannot perform his or her duties by reason of law or fact, or otherwise fails to act without undue delay, any party may make a request to the court to decide on the removal of the arbitrator. Substitute arbitrators are appointed according to the same procedure applicable for the arbitrator being replaced.

Article 13 of the Model Law defers to the parties' agreement for the procedure for challenging or removing arbitrators. However, failing any such agreement, Article 13 provides that a party may submit written reasons for their challenge to the tribunal within 15 days of becoming aware of the constitution of the tribunal and unless the arbitrator withdraws, or the other party agrees to the challenge, the tribunal will decide on the challenge. Within 30 days of a decision rejecting the challenge, the challenging party may apply to the court to make a final decision on the challenge.

Under Article 12(1) of the Model Law, an arbitrator has a duty of impartiality and independence and a duty to disclose without delay any circumstances that are likely to raise justifiable doubts about their impartiality, independence or whether they have the qualifications agreed to by the parties. However, the IAA augments the Model Law by prescribing that the test for removal of an arbitrator is whether there is a "real danger" of bias.  The "real danger" test in the IAA is derived from the English decision in R v Gough [1993] AC 646.   

As yet, there have been few applications for removal of arbitrators under the IAA (which suggests that the higher threshold for removal under Section 18A of the IAA is having the effect of deterring frivolous challenges, as Parliament intended). Thus, the case law in this area remains sparse. At present, the leading authority is Hui v Esposito Holdings Pty Ltd [2017] FCA 648, where Beach J of the Federal Court removed an arbitrator for bias (and set aside parts of the arbitrator's partial awards) on the basis that the arbitrator's conduct of the proceedings displayed prejudgment of certain issues in dispute. Beach J held that that a "real possibility" of prejudgment is sufficient to constitute a "real danger" of bias for the purposes of Section 18A of the IAA. This decision appears to align the Australian test for arbitrator bias with the test that prevails in England (and other common law countries, such as Hong Kong), which is whether a "fair-minded and informed observer would conclude that there was a real possibility that the tribunal was biased" – a reformulation of the R v Gough test laid down by the House of Lords in Porter v Magill [2002] 1 All ER 465.

As discussed in 3.2 Arbitrability, there are some restrictions on the types of disputes that parties may agree to submit to arbitration. Those are arbitrations arising out of certain contracts of insurance, carriage of goods by sea agreements and consumer agreements. In addition, matters that relate to criminal offences, divorce, custody of children, property settlement, wills, employment grievances, some IP disputes, competition law disputes, and bankruptcy and insolvency matters cannot be the subject of private arbitration in Australia. The case of WDR Delaware Corporation v Hydrox Holdings Pty Ltd [2016] FCA 1164 considered the arbitrability of matters arising under the Corporations Act 2001 (Cth), in which WDR Delaware had sought to argue that a winding-up order under the Corporations Act also falls in the category of non-arbitrable matters since it affects third parties (shareholders) and there is a public interest element in ensuring all steps relating to the winding-up should be considered by a court. The Court stated that “[b]lanket propositions in support of the proposition that all claims in a Corp[orations] Act proceeding are not arbitrable will not usually find favour with the Court” and found that a winding-up order under the Corporations Act was arbitrable since the only shareholders affected were the two parties to the dispute. In the circumstances, there was no substantial public interest element or an effect on third parties that could place the matter outside the scope of arbitrability.

The Kompetenz-Kompetenz (competence-competence) principle has the force of law by virtue of Australia's adoption of the Model Law. Under Article 16 of the Model Law, an arbitral tribunal is empowered to rule on its own jurisdiction and on any objections to the existence or validity of the arbitration agreement.

In recent years, two competing approaches have developed concerning the standard of review of arbitral jurisdiction (and arbitration agreements) in Australia. The first is the "prima facie review approach" (referred to as such by the Singapore Court of Appeal in Tomolugen Holdings Ltd v Silica Investors Ltd [2015] SGCA 57). Under this approach, if a court is satisfied that it is arguable that the arbitration agreement covers the dispute in question then a stay of the litigation will be granted and the issue will be for the arbitrator(s) to decide in the exercise of Kompetenz-Kompetenz. This approach is preferred in Singapore and Hong Kong, key arbitration jurisdictions in the Asia-Pacific region (which, like Australia, have adopted the UNCITRAL Model Law). The second approach is the "full review approach" (again, referred to as such by the Court in Tomolugen). Under this approach, a court will undertake a full merits review as to the existence and scope of the arbitration agreement before determining, on the balance of probabilities, whether to order a stay. This is the approach undertaken by the English courts: Joint Stock Company “Aeroflot Russian Airlines” v Berezovsky [2013] 2 Lloyd’s Rep 242. In 2016, in the decision of Samsung C&T Corporation v Duro Felguera Australia Pty Ltd [2016] WASC 193, Le Miere J adopted the full review approach in determining whether to grant a stay of litigation proceedings commenced by Samsung in the Supreme Court of Western Australia (a stay in favour of arbitration in Singapore was ultimately granted). That decision came under some criticism after it was delivered, on the basis that the full review approach adopted by the Supreme Court was not a faithful adherence to the Kompetenz-Kompetenz principle. Subsequently, in Hancock Prospecting Pty Ltd v Rinehart (2017) 350 ALR 658, a case concerning the Australian domestic arbitration legislation, the Full Court of the Federal Court of Australia ruled in favour of the prima facie review approach: "We think that any rigid taxonomy of approach is unhelpful, as are the labels 'prima facie' and 'merits' approach. How a judge deals with an application under s 8 of the CA Act will depend significantly upon the issues and the context. Broadly speaking, however, and with some qualification, aspects of the prima facie approach have much to commend them as an approach that gives support to the jurisdiction of the arbitrator and his or her competence, as recognised by the common law and by s 16 of the CA Act, whilst preserving the role of the Court as the ultimate arbiter on questions of jurisdiction conferred by ss 16(9) and (10), 34(2)(a)(iii) and 36(1)(a)(iii) of the CA Act. Broadly, the approach is consonant with the structure of the CA Act and the Model Law. However, it is difficult to see how the Court can exercise its power under s 8 without forming a view as to the meaning of the arbitration agreement. Further, it may be that if there is a question of law otherwise affecting the answer to the question of jurisdiction, especially one that is confined, which might be dispositive, it might be less than useful for the Court not to deal with it."

Notably, although this shows the Full Court did approve the prima facie approach, it did so subject to the caveat that the court may look at the arbitration agreement in more detail when the circumstances necessitate such an inquiry. On appeal, the Full Court decision was upheld by the High Court, confirming the force of the prima facie review approach in Australia (see Rinehart v Hancock Prospecting [2019] HCA 13). Following Hancock Prospecting – which should be a persuasive authority even in international arbitration contexts – Australian courts will likely be more reluctant to intervene on issues of arbitral jurisdiction.

Under Article 16(2) of the Model Law, a plea challenging a tribunal's jurisdiction can be raised within the tribunal proceedings no later than the submission of the statement of defence, and a plea that the tribunal has exceeded its jurisdiction is to be brought as soon as the matter alleged to be beyond the tribunal's discretion is raised in the proceedings. Under Article 16(3), a tribunal may rule on such a plea as a preliminary question or in an award on the merits.

Within 30 days of a tribunal ruling on a preliminary question of jurisdiction, any party may request to the court specified in Article 6 to decide the matter. However, in Australia, an application to the court is limited to instances when a tribunal rules that it has jurisdiction (ie, but not when it rules that it lacks jurisdiction). This is in contrast to other jurisdictions, such as Singapore, England and Wales, and France, where the ability to seek court assistance is open in circumstances where the tribunal rules either that it does or does not have jurisdiction.

Section 18 of the IAA directs that the court specified for Article 6 is the Supreme Court of the state or territory of the place (seat) of arbitration or the Federal Court of Australia.

While there is an international trend towards limiting reconsideration of the both factual and legal findings of arbitral tribunals, in Australia, the court has discretion regarding the extent of its review of the tribunal's decision on jurisdiction.

In Dallah Real Estate and Tourism Holding Company (Appellant) v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46 (All), the English Supreme Court held that the reviewing court is entitled "and indeed bound" to revisit the question of the tribunal's jurisdiction (at [104]). Further, in considering a question of jurisdiction, the "starting point cannot be a review of the decision of the arbitrators" that a valid arbitration agreement existed between the parties; but rather, must be "an independent investigation by the court of" the question of the jurisdiction of the tribunal (at [160]).

The 2018 case of Lin Tiger Plastering Pty Ltd v Platinum Construction (Vic) Pty Ltd [2018] VSC 221 confirmed that the appropriate standard of review by a court of an arbitral tribunal’s preliminary ruling on jurisdiction is a de novo review. The issue was considered by the Supreme Court of Victoria in relation to Section 16 of the Commercial Arbitration Act 2011 (Vic). Croft J noted there had been a lack of authoritative guidance in Australia on the preferred approach, and the Model Law neither prescribed nor expressly resolved the issue. His Honour considered the approaches undertaken in other foreign jurisdictions, including Singapore, Hong Kong, England and New Zealand. Ultimately, Croft J concluded that: "[o]n the basis of these authorities and commentaries, the position is, in my view, that a hearing de novo is the correct standard of review to be applied under s 16(9) of the CAA. Deference should duly be given to the cogent reasoning of the arbitral tribunal but the Court is the final 'arbiter' on the question of jurisdiction. As has been observed, this is an aspect of court assistance and support of arbitral processes and is not at odds with the policy of minimal court intervention or 'interference'."

Applications for stays of litigation (and enforcement of arbitration agreements) remain the most common form of arbitration-related application heard by Australian courts. Australian courts are very experienced in this area and the case law shows that Australian courts will generally stay court proceedings commenced in breach of arbitration agreement.

In respect to an international arbitration agreement to which Australia or an Australian state or resident is a party, and proceedings that are capable of determination by arbitration are pending in an Australian court, the other party to the arbitration agreement may apply to the same court for a stay of legal proceedings under Section 7(2) of the IAA (see Tanning Research Laboratories Inc v O'Brien (the Leage) (1990) 169 CLR 332 at 351).

If proceedings capable of determination by arbitration are pending in a court, the other party to the arbitration agreement may apply to the same court for a stay of proceedings or as much of the proceedings as necessary to have the matter in question referred to arbitration.

In some states, such as Western Australia, Australian courts have ordered indemnity costs against the party that commenced court proceedings in breach of the arbitration agreement; however, not all Australian states agree with this approach.

The New York Convention forms Schedule 1 of the IAA. Article II of the Convention requires that each state recognise an agreement in writing by which the parties submit to the jurisdiction of an arbitration.

Extending the jurisdiction of an arbitral tribunal to a third party or non-signatory to the arbitration agreement would be inconsistent with the national law unless there are grounds for establishing that a non-signatory is the alter ego or agent of a signatory. This principle was accepted in the case of IMC Aviation Solutions Pty Ltd v Altain Khuder LLC, although, in that case, the Court declined to find that the relevant non-signatory was (or had been considered by the tribunal to be) a party to the arbitration agreement by virtue of the agency/alter ego principle. In the same case, the Court also acknowledged that a non-signatory to an arbitration agreement who nevertheless participated in arbitration proceedings may be estopped from contesting jurisdiction later on (although in that case the Court found no basis for an estoppel).

The principles of Australian law that govern arbitral jurisdiction over non-signatories do not draw any distinction based on nationality (ie, it is irrelevant whether the third party/non-signatory is a foreign or local person).

An arbitral tribunal in Australia may order interim relief under Article 17 of the Model Law, which is incorporated in Australian national law by Schedule 2 of the IAA (see Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd (2013) 298 ALR 666 [127]–[129]).

Pursuant to Article 17 of the Model Law, a tribunal has wide powers to make an order that a party maintain or restore the status quo pending determination of the dispute, that a party take action to prevent or refrain from action that would cause current or imminent harm or prejudice to the arbitral process, that a party preserve assets out of which a subsequent award may be satisfied, or to preserve evidence. Article 17A sets out the conditions for the grant of interim measures, which is similar to the test for injunctions under Australian law generally, being that: (i) harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted; and (ii) there is a reasonable possibility that the requesting party will succeed on the merits of the claim.

Since the Model Law does not contain a procedure for the appointment of an emergency arbitrator to decide on an interim measure where a party requires instant relief, prior to the constitution of the tribunal, this has been included in the revised ACICA Rules (effective from 1 January 2016). The revised ACICA Rules now provide for emergency interim measures of protection in Schedule 1 to the ACICA Rules. An application for an emergency interim measure is to contain details of the nature of the relief sought, the reasons why such relief is required on an emergency basis and the reasons why the party is entitled to such relief (ACICA Rules, Schedule 1, Clause 1.3). The emergency arbitrator has "power to order or award any interim measure of protection on an emergency basis that he or she deems necessary and on such terms as he or she deems appropriate." The emergency arbitrator may also "modify or vacate the emergency interim measure for good cause shown at any time prior to the constitution of the Arbitral Tribunal" (ACICA Rules, Schedule 7, Clauses 3.2 and 3.3).

It is acknowledged under Australian law that, despite the existence of an arbitration agreement or clause, there may be circumstances where urgent relief is required from a court. The Model Law (which forms part of the IAA) expressly acknowledges the concurrent jurisdiction of the courts and arbitral tribunals in relation to interim measures.

Australian courts have the power to issue a wide array of preliminary and interim relief in aid of arbitration, with the scope of available orders being substantively the same as in other common law countries. The available forms of relief include orders directing a party to refrain from action that would cause current or imminent harm or prejudice to the arbitral process, orders to preserve assets out of which a subsequent award may be satisfied (so-called freezing orders) and orders to preserve evidence.

Article 17J of the Model Law provides that "[a] court shall have the same power of issuing an interim measure in relation to arbitration proceedings, irrespective of whether their place is in the territory of this State, as it has in relation to proceedings in courts." Thus, an Australian court does have the power to issue interim relief in aid of a foreign-seated arbitration. Such relief is granted from time to time. For example, on 3 April 2018, the New South Wales Supreme Court granted a freezing order to Donaco International Limited, in aid of the company's Singapore-seated arbitration against certain Thai parties.

Although judicial assistance is available in this area, Australian law gives arbitral tribunals broad powers to grant interim relief. Non-urgent applications for relief will not "from any policy perspective" require intervention from the court and should be addressed during the course of arbitration (see Amcor Packaging (Aust) Pty Ltd v Baulderstone Pty Ltd [2013] FCA 253 at [41]; Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd (2013) 298 ALR 666 at [127]–[129]).

The IAA does not include any emergency arbitrator mechanism. If parties wish to have access to an emergency arbitrator in Australia, they will need to select arbitration rules that provide for this option, such as the ACICA Rules or the ICC Rules. The ACICA Rules relating to emergency interim measures make it clear that they are intended to have an alternative operation to recourse to the courts for interim relief. ACICA Rules, Schedule 1, Clause 7.1 states that: "[t]he power of the Emergency Arbitrator under this Schedule 1 shall not prejudice a party’s right to apply to any competent court or other judicial authority for emergency interim measures. If any such application or any order for such measures is made after the referral of an application for emergency interim measures of protection to an Emergency Arbitrator, the applicant shall promptly notify the Emergency Arbitrator, all other parties and ACICA in writing."   

However, there may be circumstances where it is preferable to apply to a court instead of an emergency arbitrator (or the arbitral tribunal), such as if an order affecting third parties is required. 

As to enforcement, Article 17H of the Model Law expressly provides that "[a]n interim measure issued by an arbitral tribunal shall be recognized as binding and […] enforced upon application to the competent court, irrespective of the country in which it was issued."

An arbitral tribunal in Australia may order security for costs under Article 17E of the Model Law. There is also specific provision in the Model Law (Article 17H), which allows state courts to order security if the arbitral tribunal has not already made a determination with respect to security or it is deemed necessary to protect the rights of third parties.

Aside from the Model Law and the IAA, ACICA publishes Arbitration Rules and Expedited Arbitration Rules that can be referred to in any contract. The current version of the ACICA Rules came into effect on 1 January 2016 following a review and consultation process. These Rules supersede the 2011 and 2005 editions of the ACICA Rules. If the parties have specifically agreed to the application of an earlier edition of the ACICA Rules, ACICA will administer the arbitration under those rules. Parties may also agree to the application of the UNCITRAL Arbitration Rules and designate ACICA as the administering body.

Article 2.1 of the ACICA Rules provides that: "[w]here parties agree in writing that disputes shall be referred to arbitration under the rules of or by ACICA, then such disputes shall be resolved in accordance with these Rules, subject to such modification as the parties may agree in writing."   

In such circumstances, the ACICA Rules will govern the arbitration, except that where any of the ACICA Rules are in conflict with a provision of the law applicable to the arbitration from which the parties cannot derogate, that provision shall prevail.   

The ACICA Rules make it clear that they apply in addition to the Model Law, as clarified in Article 2.3, which states that "[b]y selecting these Rules the parties do not intend to exclude the operation of the UNCITRAL Model Law on International Commercial Arbitration."

The overriding objective of the ACICA Rules is "to provide arbitration that is quick, cost effective and fair, considering especially the amounts in dispute and complexity of issues or facts involved."

The IAA provides that if the Model Law applies to an arbitration, it "covers the field," in that the laws of an Australian state or territory relating to arbitration do not apply to that arbitration. There are no additional procedural steps specified in the IAA that are not specified in the Model Law. Division 3 of the IAA contains additional provisions to the Model Law, but these do not relate to procedural steps. The provisions provide for parties to obtain subpoenas from a court, and to apply to court for orders where a party has failed to assist the tribunal in various ways (eg, failure to appear as a witness). Division 3 also contains provisions on disclosure of confidential information (Sections 23C-23E) and on consolidation of arbitral proceedings (Section 24).

In relation to the appointment of arbitrators, under Article 18 of the IAA, ACICA is appointed as the body to determine the appointment of arbitrators where the parties or the arbitrators fail to appoint an arbitrator (as prescribed by regulation 4 of the International Arbitration Regulations 2011 (Cth).

If a party to an arbitration agreement dies, the IAA provides that the agreement is not discharged, the authority of an arbitral tribunal is not revoked and the arbitration agreement is enforceable by or against the personal representative of the deceased (Article 23H).

The parties to an arbitration agreement that falls under the IAA are free to agree on the powers and duties of an arbitral tribunal subject to the duties prescribed in the IAA and the general law.

The IAA vests an arbitrator with a duty of impartiality and independence, and a duty to disclose without delay any circumstances that are likely to raise doubts about their impartiality, independence or whether they have the qualifications agreed to by the parties (Model Law, Article 12(1)). The arbitral tribunal and each individual arbitrator have a duty to state the reasons upon which their award is based unless otherwise agreed by the parties.

In BHP Billiton Ltd v Oil Basins Ltd [2006] VSC 402 [22]–[23], Hargrave J held that an arbitrator has a duty to provide reasons commensurate with the "functions, talents and attributes of the tribunal member" and the circumstances of the case (affirmed by the Supreme Court of Victoria Court of Appeal in Oil Basins Ltd v BHP Billiton Ltd [2007] VSCA 255 [27]).

In addition to the Model Law, Section 24 of the IAA grants an arbitral tribunal with the power to consolidate proceedings where a common question of law or fact arises, the rights to relief claimed arise with respect to the same transaction (or series of transactions), or for some other reason specified in the application, where it is desirable that a consolidation order be made.

Tribunals are granted broad powers to award interest, both on the period prior to the issue of an award (Article 25) and on the non-payment of an amount due under an award. Article 25 of the IAA allows a tribunal to include interest "at such reasonable rate as the tribunal determines on the whole or any part of the money" from the period between the date on which the cause of action arose and the date on which the award is made. The IAA provides the tribunal with power to order that interest is payable, including compound interest, if an amount ordered to be paid under an award is not paid on or before the due date. The IAA also provides tribunals with discretionary power to award costs, including the fees and expenses of the arbitrator(s).   

As discussed under 6 Preliminary and Interim Relief, a tribunal is granted power to make preliminary orders and interim measures in accordance with Article 17 of the Model Law.

Beyond the requirement that a legal practitioner representing a party before an arbitral tribunal must be a duly qualified legal practitioner from any legal jurisdiction of that party's choice (Section 29(2) IAA), there are no other qualification requirements. Legal practitioners in Australia must abide by the applicable professional conduct rules and obligations, including with respect to dealing with conflicts of interest, maintaining client confidentiality and their fundamental duties to the court and the administration of justice.

In Australia, the general approach to collection and submission of evidence has tended to follow that of an adjudicated litigation process, with a distinct pleadings stage followed by a discovery, submission of witness evidence, expert witness evidence and finally a hearing (with cross-examination). However, as noted above, there has recently been a marked shift away from litigation-style practice and towards the adoption of a more international approach: the use of the 'memorial' system of case presentation is growing, evidence is being taken earlier and presented in a more collaborative fashion (especially expert evidence), and arbitrators are taking a more inquisitorial approach (particularly in large, complex cases).

Ultimately, as is the case in all Model Law jurisdictions, Australian law gives the parties considerable freedom (and the arbitral tribunal considerable discretion) to shape the procedure by which evidence is taken, exchanged and presented.

Under Article 19 of the Model Law, the arbitral tribunal has the power to determine the admissibility, relevance, materiality and weight of any evidence. Thus, the rules of evidence are for the tribunal to determine and apply, subject to the mandatory rules of procedural fairness and any specific rules agreed by the parties (ad hoc or through the adoption of arbitration rules that contain specific provisions on evidence).   

For proceedings administered by ACICA, the ACICA Rules contain provisions relating to evidence that apply in addition to the Model Law. In particular, clause 31.1 provides that an arbitral tribunal "shall have regard to, but is not bound to apply, the International Bar Association Rules on the Taking of Evidence in International Arbitration in the version current at the commencement of the arbitration." More broadly, in the authors' experience, the IBA Rules on the Taking of Evidence in International Arbitration are commonly applied as a guide for parties and the arbitral tribunal in relation to international arbitration proceedings seated in Australia.

Judicial assistance may be sought with respect to evidence. Pursuant to Article 27 of the Model Law, an arbitral tribunal or a party with the tribunal's approval may request assistance in the taking of evidence from a competent court, which may execute the request according to its rules on taking evidence. In addition to the Model Law, Section 23J of the IAA grants a tribunal the power to make an order allowing the tribunal or a specified person to inspect, photograph, observe or conduct experiments on evidence that is in the possession of a party to the proceedings. An order allowing a sample of such evidence to be taken by the tribunal or specified person may also be made.

Arbitral tribunals themselves have limited powers of compulsion under the IAA and Model Law to require parties to produce documentary or other evidence.

In accordance with the Model Law, the arbitral tribunal or a party, with the tribunal's permission, may request assistance in taking evidence from the appropriate court and that court may execute the request according to its rules (Article 27 of the Model Law). Sections 23 and 23A of the IAA provide parties with the ability to apply to a court to obtain subpoenas or other orders, but only with the permission of the arbitral tribunal.

The recent decision in UDP Holdings Pty Ltd v Esposito Holdings Pty Ltd & Ors shows the Australian courts' willingness to issue subpoenas in aid of international arbitration seated in Australia. However, the Australian courts have also refused to issue such relief in aid of foreign-seated arbitrations, as seen in Samsung C&T Corporation, Re Samsung C&T Corporation.

Importantly, in addition to the powers under the Model Law and IAA relating to court assistance, Section 23B of the IAA provides that if a person defaults in failing to attend for examination or to produce a document ordered by a court, refuses to comply with other orders of the court, or fails to comply with a requirement of the arbitral tribunal, the arbitral tribunal may continue with the proceeding, and make an award on the evidence before it.

The position regarding the confidentiality of arbitral proceedings has been the subject of debate in Australia in recent years. However, much of this debate was resolved through the introduction of amendments in 2015 to the IAA. These amendments, notably the addition of Sections 23C–23G, have brought Australian arbitration legislation more into line with the case law in other major common law jurisdictions such as England and Wales, and Singapore. Most notably, the 2015 amendments essentially prescribe that, with limited exceptions, the default setting for international arbitrations seated in Australia is that they are confidential (for those arbitrations commenced after the amendments came into force). Nevertheless, there are differences in approach depending as to what part of the arbitral process is being considered and there are exceptions. These are described below.

The basic protection for confidential information in relation to international arbitrations seated in Australia arises under Section 23C of the IAA, which provides that "the parties to arbitral proceedings commenced in reliance on an arbitration agreement must not disclose confidential information in relation to the arbitral proceedings," unless one of the exceptions listed in the Act applies.

Confidential information is defined broadly and includes:

  • the statement of claim, statement of defence and all other pleadings, submissions, statements, or other information supplied to the arbitral tribunal by the parties;
  • any evidence, whether documentary or otherwise, supplied to the arbitral tribunal and any notes made by the arbitral tribunal of oral evidence or submissions given before the arbitral tribunal;
  • transcripts of oral evidence or submissions given before the arbitral tribunal; and
  • any rulings and awards made by the arbitral tribunal. 

The exceptional circumstances allowing for the disclosure of confidential information are:

  • all parties consent to the disclosure;
  • the disclosure is made to a party's professional or other adviser; 
  • the disclosure is necessary to ensure that a party to the arbitral proceedings has a full opportunity to present the party’s case (and the disclosure is no more than reasonable for that purpose); 
  • the disclosure is necessary for the establishment or protection of a party's legal rights in relation to a third party (and the disclosure is no more than reasonable for that purpose); 
  • the disclosure is necessary for the purpose of enforcing an arbitral award (and the disclosure is no more than reasonable for that purpose); 
  • the disclosure is required by the IAA or the Model Law; 
  • the disclosure is in accordance with an order made or a subpoena issued by a court; and
  • the disclosure is required by a competent regulatory body, and the person making the disclosure gives written details of the disclosure, including an explanation of reasons for the disclosure, to the parties and the tribunal. 

The IAA also allows, in certain circumstances, for the tribunal to order disclosure of confidential information and for a court to allow or prohibit disclosure. 

Arbitration hearings are not expressly covered by the 'confidential information' provisions of the IAA; however, the High Court of Australia in Esso v Plowman (1995) 183 CLR 10 observed that historically the "agreement to arbitrate gave rise to an arbitration which was private in the sense that strangers were not entitled to attend the hearing." Additionally, Article 22.1 of the ACICA Rules provides that all arbitration hearings shall take place in private.

Finally, as noted above, the 2018 Amendment Act introduced a special rule for ISDS cases: the 2018 Amendment Act amended Section 22 of the IAA to clarify that the current 'opt-out' regime for the confidentiality of arbitrations conducted in Australia does not apply when the parties to an investor-State arbitration have agreed to the application of the Transparency Rules (which contain a modified confidentiality regime).

The form of an arbitral award is prescribed by Article 31 of the Model Law, which requires that an award be made in writing and signed by the arbitrator, or arbitrators. Signature by majority of members is insufficient.

There must be reasons stated for an award unless the parties have otherwise agreed that no reasons are necessary to be given or the award is to record an agreed settlement. Further, the Model Law does not contain any time limit that must be abided by for an award, the applicable rules may also be silent on this point. If parties wish to include a timeline for an award, they must do this either in their arbitration agreement or otherwise agree a time within which the tribunal is required to deliver an award. It will then be up to the tribunal as to whether it can adhere to the stated time and to raise this with the parties if it considers more time is required. In this regard, different arbitral rules and institutions have different provisions. For example, the ACICA Rules do not make any provision for the timing of the award; however, under Rule 11(1) of the PCERA Arbitration Rules, the arbitral tribunal is to deliver its final award within a period of three months.

There are no specified limits on the types of remedies that an arbitral tribunal may award. However, punitive damages for breach of contract are not generally available under Australian law; it is unclear whether an arbitral tribunal or court would enforce an arbitral award providing for such punitive damages and there are apparently no reported cases where this issue has been tried. If such an award is permitted under the governing law of the contract, it would militate in favour of enforcing the award. However, given public policy considerations that the award would not otherwise be generally enforced, the court would be likely to weigh the arguments carefully.

In relation to specific performance, declarations and other equitable remedies, there is no obvious reason why an Australian court would not enforce an award granting such remedies (to the extent they are within the scope of Australian law). In this context it should be noted that the power of the court to enforce an award of specific performance is expressly granted in Australia's local (state or territory) arbitration acts.

In general, in Australia, costs will be awarded to the prevailing party. Where an arbitral award orders payment of money, the general practice regarding interest and legal costs is that it will award interest on that sum from the date on which the cause of action arises. The unsuccessful party is generally ordered to pay the legal costs of the successful party. These matters are the subject of Sections 25, 26, and 27 of the IAA.

There are very limited grounds available for setting aside an award in Australia, which are set out in Article 34 of the Model Law (incorporated into Australian law via Section 16 of the IAA). Broadly, these grounds allow for an award to be set aside in the following circumstances:

  • incapacity of party when entering into the arbitration agreement;
  • legal invalidity of the arbitration agreement;
  • the party making the application was not given proper notice of the appointment of the arbitrator or the arbitral proceedings;
  • a party was unable to present its case;
  • the award deals with matters beyond the scope of the reference to arbitration;
  • the arbitral tribunal was not constituted in accordance with the arbitration agreement or the law of the seat of the arbitration;
  • the arbitration procedure was not in accordance with the arbitration agreement or the law of the seat of the arbitration;
  • the subject matter of the dispute is not legally capable of settlement by arbitration; or
  • the award is in conflict with public policy.

The last of the grounds above – the public policy ground – is also addressed by Section 19 of the IAA, which provides that, for the avoidance of doubt, an award (or interim measure) will be contrary to the public policy of Australia if it was induced or affected by fraud or corruption, or a breach of the rules of natural justice occurred in connection with the award (or interim measure).

Australian courts have generally taken a pro-arbitration stance in refusing to set aside arbitral awards unless there are compelling reasons. For example, in the leading case of TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361, the Court held (at [55]) that: "[a]n international commercial arbitration award will not be set aside or denied recognition or enforcement under Arts 34 and 36 of the Model Law (or under Art V of the New York Convention) unless there is demonstrated real unfairness or real practical injustice in how the international litigation or dispute resolution was conducted or resolved, by reference to established principles of natural justice or procedural fairness. The demonstration of real unfairness or real practical injustice will generally be able to be expressed, and demonstrated, with tolerable clarity and expedition. It does not involve the contested evaluation of a fact-finding process or 'fact interpretation process' or the factual analysis of asserted 'reasoning failure', as was argued here."

Another important principle recognised in Australian annulment jurisprudence is that, where a procedural error or imbalance arises from a party's own conduct, that party will not be able to use that procedural defect to later set aside the award (Sino Dragon Trading Ltd v Noble Resources International Pte Ltd [2016] FCA 1131).

Australian courts recognise party autonomy in international arbitration and support the ability of parties to agree such dispute resolution mechanisms as they wish. On the other hand, the principle of finality in relation to an arbitral award is equally fundamental. Indeed, when exercising their powers in relation to the conduct or enforcement of arbitration proceedings, Section 39(2)(ii) of the IAA requires Australian courts to have regard to the fact "[arbitral] awards are intended to provide certainty and finality." There is a possible tension between these two principles. On the one hand, courts ought to recognise and give effect to the agreement of the parties to apply a review mechanism for arbitral awards. On the other hand, the existing regime for arbitral awards treats such awards as final and binding (and only reviewable in limited, prescribed circumstances). In the absence of any test case on this issue, if asked to consider this issue, it is most likely that the Australian courts would scrutinise the wording of the arbitration agreement carefully. If it is unequivocally clear that the parties intended an award to be reviewable, and the process and scope of such review is sufficiently clear and certain, then it is likely the Australian courts would give effect to the parties' agreement. However, if there is a lack of clarity, it may be hard for the party seeking to set aside (or resist enforcement of) the arbitral award to persuade the court that the parties intended the relevant award not to be final or that the interests of justice are best served by reviewing such award. In this context it is noted that Section 39(2)(i) of the IAA also requires Australian courts to have regard to the fact that "arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial dispute."

In relation to the review of a final (merits) award, as set out above, in principle, unless it is obvious that what has occurred is contrary to public policy or the award was made in breach of natural justice, Australian courts will normally take the position that the arbitral tribunal's findings of fact and law should be upheld. The standard approach to review is, therefore, deferential.

In relation to breach of natural justice, the prevailing judicial view is that the award should not be set aside unless there exists real unfairness or real practical injustice in the conduct of the arbitration or issuance of the award.  In the leading case of TCL Air Conditioner, the Court held that courts undertaking a merits review may undermine the international arbitration system: "If the rules of natural justice encompass requirements such as the requirement of probative evidence for the finding of facts or the need for logical reasoning to factual conclusions, there is a grave danger that the international commercial arbitral system will be undermined by judicial review in which the factual findings of a tribunal are re-agitated and gone over in the name of natural justice, in circumstances where the hearing or reference has been conducted regularly and fairly."

Australia acceded to the New York Convention in March 1975 (without making any reservations). In the same year, Australia also signed the ICSID Convention (without making any reservations), although it did not enter force in Australia until 1991. Australia is not party to the Hague Convention on Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters 1971.

Australian courts have considerable experience hearing and determining applications for the enforcement of foreign arbitral awards, particularly awards made in Asian jurisdictions such as Singapore and Hong Kong.

Foreign arbitral awards are enforceable in Australia through Section 8(3) of the IAA, which provides that they are to be treated as if they were a Federal Court judgment. In order to enforce an award, Section 9 of the IAA also provides that the enforcing party must produce (i) "the duly authenticated original award or a duly certified copy" and (ii) "the original arbitration agreement under which the award purports to have been made or a duly certified copy."

Parties seeking to enforce an arbitral award in Australia should file the Federal Court Request for Enforcement form in accordance with the Federal Court of Australia Act 1976 (Cth) and the Federal Court Rules 2011 (Cth).

Under Section 8(8) of the IAA, the court may adjourn an enforcement proceeding if the award is the subject of a set-aside proceeding at the seat. In doing so, the court may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security. This provision was invoked by the award debtor in Hyundai Engineering & Steel Industries Co Ltd v Alfasi Steel Constructions (NSW) Pty Ltd [2018] FCA 1054. In that case, O'Callaghan J of the Federal Court granted the adjournment, subject to the award debtor providing security for the entire award plus post-award interest (the award debtor subsequently failed to put up the security ordered and the award was enforced, while the set-aside proceedings in Singapore were pending).

Consistent with Article V(1)(e) of the New York Convention (which forms part of the IAA), an Australian court has discretion to enforce an award that has been set aside at the seat of arbitration. In Ye v Zeng [2015] FCA 1192, Allsop CJ of the Federal Court noted (in obiter) that "it does not follow from the fact that an award is set aside in the seat country that the award will not be enforced elsewhere" and cited (amongst other authorities) the decision of the House of Lords in Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46.

Where enforcement of an arbitral award is sought in an Australian court against a foreign state, sovereign immunity may be raised by the debtor state at the execution stage. The applicable statute is the Foreign States Immunities Act 1985 (Cth) (FSIA), Section 30 of which provides that "the property of a foreign State is not subject to any process of order (whether interim or final) of the courts of Australia for the satisfaction or enforcement of a judgment, order or arbitration award […]". Australia subscribes to the restrictive doctrine of sovereign immunity – this is reflected in Section 32 of the FSIA, which provides that commercial property will generally not be covered by sovereign immunity. Further, Australian law recognises that sovereign immunity may be waived and when it has been, the waiver may not be withdrawn except in accordance with the agreement under which the waiver was given (FSIA, Section 31(3)).

The grounds for resisting enforcement of an arbitral award are set out in Sections 8(5) and 8(7) of the IAA and include:

  • incapacity of party when entering into the arbitration agreement;
  • legal invalidity of the arbitration agreement;
  • the party making the application was not given proper notice of the appointment of the arbitrator or the arbitral proceedings;
  • a party was unable to present its case;
  • the award deals with matters beyond the scope of the reference to arbitration;
  • the arbitral tribunal was not constituted in accordance with the arbitration agreement or the law of the seat of the arbitration;
  • the arbitration procedure was not in accordance with the arbitration agreement or the law of the seat of the arbitration;
  • the award has not yet become binding on the parties or has been suspended by a competent court of the country under which law the award was made;
  • the subject matter of the dispute subject to the award is not capable of settlement by arbitration under the laws in force in the state or territory in which the court is sitting; or
  • to enforce the award would be contrary to public policy.

The general approach of the Australian courts to enforcement was articulated in the case of IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] VSC 248 as being that, to the extent the words used in IAA allow, a narrow interpretation may be applied to the grounds for resisting enforcement. However, in this case, the Court held that an award creditor must first establish:

  • there is a foreign award;
  • the foreign award was made pursuant to an arbitration agreement; and
  • the foreign award was made against a person who was a party to that arbitration agreement.

Once the award creditor establishes these facts, the onus then shifts to the award debtor to establish its grounds for non-enforcement. To establish one of the grounds listed in Section 8(5) of the IAA, the party resisting enforcement must prove any facts constituting the defence (including, where applicable, the content of foreign law) on the balance of probabilities. The Court further held that "[w]hile the standard of proof that applies to the defences under s 8(5)(a) – (e) is the normal civil standard (balance of probabilities), the onus placed on the award debtor in respect of those defences can be properly described as a heavy onus." On the facts of this particular case, the Court refused to enforce the part of the award that ordered a payment from a non-party to the arbitration agreement. However, the Court did acknowledge that if the non-party had been an agent for the relevant party, the award may have been enforceable against it. The Court also allowed for the possibility that had the non-party participated in the arbitration process, it could have been estopped from resisting enforcement of the award.

The public policy ground has also been the subject of Australian judicial discourse on enforcement. In the case of Sauber Motorsport AG v Giedo Van Der Garde BV [2015] VSCA 37, enforcement of the award would result in one driver, who was not a party to the arbitration, not being able to participate in the 2015 Formula One season. It was argued, amongst other things, that this would be a breach of the rule of natural justice (and therefore the award could be refused enforcement as being contrary to public policy). However, dismissing an appeal from a decision ordering that the award be enforced, the Court of Appeal held that the fact that non-parties rights would be affected by enforcement did not mean that enforcement was against public policy. 

The public policy ground was also framed in terms of a breach of the rules of natural justice by the applicant in the case of Gujarat NRE Coke Limited v Coeclerici Asia (Pte) Ltd [2013] FACFC 109. In that case, the applicant claimed that it had not been given a reasonable opportunity to present its case (despite having consented to an award to be issued against it in the event it defaulted on its payment obligations under a settlement agreement – it then defaulted). The Court held that the award was enforceable on the basis that the arbitrators and the courts of the seat considered a reasonable opportunity had been given. The fact that a foreign court had already given a decision supporting the award was given significant weight.

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Law and Practice in Australia

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Clifford Chance (Perth) is a leading global law firm, headquartered in London. Clifford Chance has the largest international arbitration practice in Australia. The firm's award-winning Australian arbitration team comprises 15 full-time international arbitration lawyers across Perth and Sydney, who work daily with specialists from the firm's offices in Beijing, Hong Kong, Shanghai, Seoul, Singapore, Tokyo, Paris and London to deliver the highest quality advice and representation to clients. In addition to the work they do acting for parties in major commercial disputes spanning a range of sectors (including energy, mining, finance and shipping), the team is unique in Australia for the volume of work it does representing investors in arbitrations against foreign governments in Asia and Africa under bilateral investment treaties and free trade agreements. Examples of the Australian arbitration team's recent work include representing Churchill Mining Plc, Kingsgate Consolidated Limited, Tantalum International Ltd and Cortec Mining Kenya.