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Effect of amendments to Australian International Arbitration Act on pre-amendment arbitration agreement
Practical Law UK Legal Update 1-518-7916 (Approx. 5 pages)
Effect of amendments to Australian International Arbitration Act on pre-amendment arbitration agreement
by Practical Law
| Published on 03 Apr 2012 • Australia |
Andrew Robertson (Partner) and Ryan Kuss (Law Clerk), Piper Alderman
On 9 March 2012, the Western Australia Supreme Court of Appeal considered the effect of amendments to the International Arbitration Act (IAA) on pre-amendment arbitration agreements. This case clarifies the application of section 21 of the IAA and also elucidates several issues of procedure under Australian arbitral legislation.
Background
Section 21 of the International Arbitration Act 1974 (Cth) (IAA) (repealed and replaced on 6 July 2010) provided:
"If the parties to an arbitration agreement have (whether in the agreement or in any other document in writing) agreed that any dispute that has arisen or may arise between them is to be settled otherwise than in accordance with the Model Law, the Model Law does not apply in relation to the settlement of that dispute."
Section 20 of the International Arbitration Amendment Act 2010 (Cth) (Amending Act) (effective 6 July 2010) replaces section 21 with the following provision:
"Model Law covers the field
If the Model Law applies to an arbitration, the law of a State or Territory relating to arbitration does not apply to that arbitration."
Facts
The appellant, Rizhao Steel Holding Group Co Ltd (Rizhao), and the respondents, Koolan Iron Ore Pty Ltd and Mount Gibson Mining Ltd (collectively: Mount Gibson), entered into contracts for the sale and purchase of iron ore. Rizhao's place of business was within China and Mount Gibson's place of business was within Australia.
Disputes arose in relation to this contract which contained an arbitration clause which provided for disputes to "be referred to arbitration in accordance with the Commercial Arbitration Act 1985 (WA) (1985 CAA)". It was common ground between the parties that each arbitration was subject to the 1985 CAA and that the arbitration was an international arbitration as defined under the UNCITRAL Model Law (which is given the force of law in Australia by section 16 of the IAA).
As the arbitration hearings were approaching their conclusion, the Amending Act came into operation. Subsequent to this, the arbitrator delivered an award in favour of Mount Gibson, and Mount Gibson applied to the Supreme Court of Western Australia for leave to serve out of the jurisdiction notices of two originating summonses for leave to enforce the awards of the arbitrator as judgments of the Supreme Court, pursuant to section 33 of the CAA. Leave was granted and Mount Gibson commenced proceedings seeking leave to enforce the awards.
The applications for leave to enforce the awards were heard and Rizhao appeared at the hearing. Rizhao made no submissions to the effect that the applications for leave to enforce the awards as judgments were not properly brought pursuant to the CAA, or that the court lacked jurisdiction to grant the orders sought, or to the effect that the IAA was the only source of jurisdiction to enforce the awards as judgments. Rather, Rizhao applied for leave to appeal from the awards pursuant to section 38 of the CAA.
The primary judge assumed that it was common ground between the parties that the CAA gave the court jurisdiction to enforce the awards as judgments of the court and, pursuant to section 33 of the CAA, he gave leave to enforce the awards. Rizhao's applications for leave to appeal from the awards were later heard and dismissed. At that hearing, counsel for Rizhao then raised questions regarding the applicability of the IAA in this case but noted that the judge was not required to deal with this point at this stage.
Rizhao appealed the decision to grant leave to enforce the awards and this appeal was heard in the present case. The basic proposition underpinning Rizhao's appeals was its assertion that the Supreme Court's only source of jurisdiction to enforce the awards is the IAA and that, as the primary judge purported to exercise jurisdiction conferred upon the court under the CAA, his orders should be set aside as outside the jurisdiction invoked.
Decision
Martin CJ dismissed the appeal. Buss JA agreed and Murphy JA substantially agreed.
Raising new issues on appeal
Martin CJ noted that parties will generally be precluded from raising issues on appeal which were not raised at trial. Parties will only be permitted to raise a new point of appeal in exceptional cases where the interests of justice require determination of the new point and where there is no prejudice to the party against whom the new point is taken.
Martin CJ pointed out that there are certain differences between the CAA and the IAA which Rizhao endeavoured to use to its forensic advantage by relying on the CAA at the hearing of the application for leave to enforce the awards and by now attempting to rely on the IAA at the hearing of the appeal from that decision. He concluded that, in the circumstances, it would be "antithetical to the interests of justice" to allow Rizhao to now rely on the IAA and raise the new issue sought. He also concluded that there would be prejudice to Mount Gibson if the new point were taken.
Jurisdiction
Rizhao had asserted that the primary judge did not have jurisdiction to enforce the award. Martin CJ noted that, even if the primary judge was in error in relying on the CAA for jurisdiction to enforce the awards, that error did not of itself invalidate the exercise of jurisdiction if there was another available source of jurisdiction (namely the IAA). However, he considered that the primary judge did have jurisdiction under the CAA.
Construction of section 21 of the IAA
As the arbitration was an international arbitration under the Model Law, the CAA could only apply if the parties had validly agreed to exclude the operation of the Model Law. Whether they had done so depended on how section 21 of the IAA, pre and post amendment, is interpreted.
Pre-amendment: Rizhao argued that the expression "the settlement of that dispute" in section 21 of the pre-amendment IAA should be interpreted as enabling parties to an arbitration agreement to opt out of the Model Law provisions, but only up to the point of settlement of their dispute (which occurs when an arbitral award is delivered). On this view, the parties could not exclude the operation of the IAA at the point of enforcement of the arbitral awards and the orders of the primary judge, purportedly made under the CAA, were made without jurisdiction.
Martin CJ rejected this reasoning and interpreted the expression according to its natural and ordinary meaning. He considered that "settlement" in this context extends to and includes all matters up to the final resolution and disposition of claims, including the recognition and enforcement provisions.
Post-amendment: Martin CJ found that the amended section 21 is clear: it is not possible for parties to an agreement to which the IAA applies to contract out of the operation of the Model Law.
Rizhao had submitted that the amended section applied to the agreement between the parties retrospectively, or, in the alternative, to the enforcement proceedings brought by Mount Gibson (because they had been brought after the Amending Act commenced).
This question largely depended on whether the amendment affected substantive or procedural rights and obligations, and what effect the change in law had upon vested rights. It was less likely that Parliament intended the amendment to operative retrospectively if it would have an adverse effect on vested or substantive rights.
Martin CJ thought it arguable that the
"right of each party to have any dispute or difference arising under their contract resolved under the legal regime which they had chosen is a vested and substantive right, with the result that the amendment to s 21 of the IAA … should not be construed as adversely affecting those rights".
However, he did not express a concluded view on this because, on the facts, the disputes between the parties had crystallised and the contractual rights recognised by section 21, prior to its amendment, had been invoked (that is, the arbitration was already underway). The rights of the parties under such an arbitration could therefore be characterised as vested rights which would be adversely affected if the amending law were to be construed as applying to the arbitral proceedings then underway. Martin CJ therefore concluded that the amending Act should not be construed as applying to agreements providing for international arbitration which entirely exclude the operation of the Model Law, at least where arbitral proceedings had been commenced by the time of the amendments. Such agreements therefore continue to exclude the operation of the Model Law, including where (as in the present case) enforcement proceedings are commenced after the date of amendment.
Accordingly, the amendment of section 21 of the IAA in 2010 did not have the effect of applying the Model Law to the arbitrations or prevent the continuing operation of the parties' agreement that all aspects of their arbitral proceedings are to be governed by the CAA.