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Victorian Supreme Court overturns decision to enforce Mongolian arbitral award
Practical Law UK Legal Update Case Report 2-508-9449 (Approx. 4 pages)
Victorian Supreme Court overturns decision to enforce Mongolian arbitral award
by Practical Law
| Published on 06 Oct 2011 • Australia |
Andrew Robertson (Partner) and Ryan Kuss (Law Clerk), Piper Alderman
In a decision dated 22 August 2011, the Court of Appeal division of the Victorian Supreme Court allowed an appeal from a decision to enforce a Mongolian arbitral award and set aside indemnity costs orders against the appellant.
Facts
This was an appeal from the decision of the Victorian Supreme Court to enforce a Mongolian arbitral award. For full details of the facts, see Legal update, Victorian Supreme Court enforces Mongolian award and clarifies the court's role in determining parties. In brief, the court rejected the award debtor's arguments against enforcement, which included that it was not a party to the arbitration agreement. It effectively held that the award debtor should have raised the issue of whether it was a party to the arbitration agreement before the supervisory courts at the seat of arbitration (Mongolia). The appellant, IMC Solutions (IMCS), raised several grounds of appeal, including whether the plaintiff, Altain (A) had the onus of proving that the arbitral award was binding on IMCS as a party to the arbitration agreement pursuant to which the award was made.
Decision
The Court of Appeal division of the Victorian Supreme Court allowed the appeal. However, the majority of the court and the minority gave different reasons for their decisions.
Majority
The judgment of the majority (Hansen JA and Kyrou AJA) referred to sections 8 and 9 of the International Arbitration Act 1974 (IAA). Section 8 essentially restates the grounds for refusing enforcement of an award as reflected in the New York Convention. Section 9 details which documents are to be produced to the court on an application for the enforcement of a foreign award, namely:
- The duly authenticated original award or a duly certified copy.
- The original arbitration agreement under which the award purports to have been made or a duly certified copy.
The majority considered that mere compliance with section 9(1) will not always provide sufficient prima facie evidence of these matters to satisfy the court that leave should be granted for the enforcement of a foreign arbitral award. This is especially so where, on the face of the arbitration agreement and the award, the person against whom the award was made was not party to the agreement. In such cases, the court should not proceed ex parte. Rather, the award creditor should be required to give notice of the proceeding to the award debtor and the proceeding should continue on an inter partes basis. At that hearing, the evidential onus will remain on the award creditor to meet the prima facie evidential requirements that are set out in section 9.
The majority held that to secure an order enforcing the foreign arbitral award under sections 8(1) and (2), the award creditor must satisfy the court on a prima facie basis, that:
- An award has been made by a foreign arbitral tribunal granting relief to the award creditor against the award debtor.
- The award was made pursuant to an arbitration agreement.
- The award creditor and the award debtor are parties to the arbitration agreement.
In support of this, they cited the UK Supreme Court's decision in Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Parkistan [2010] UKSC 46, in which Lord Mance stated that the scheme of the New York Convention gives "limited prima facie credit to apparently valid arbitration awards based on apparently valid and applicable arbitration agreements" (see Legal update, Dallah Supreme Court decision: full update).
The majority rejected the view that any assumption should be made as to the regularity of an award. The majority felt that the award creditor faced the same onus as a party in any other civil proceedings to demonstrate the elements of the IAA had been met, and that the award creditor faced the same onus to demonstrate any defence to enforcement. However, it was uncontroversial that the cogency of evidence required to discharge the civil standard of proof will depend upon the issue sought to be proved.
They also rejected the respondent's submissions, to the effect that the court's function at this stage is to act mechanistically or robotically. Rather, the court must act judicially and "carefully review the award and the arbitration agreement that are filed pursuant to section 9(1) of the Act and determine whether those documents, whether considered alone or in combination with other evidence, satisfy the [aforementioned] prima facie evidence requirements".
The majority held that, in the present case, the trial judge had erred in making the ex parte order against IMCS. This was because A had not met the onus of establishing on a prima facie basis that IMCS was a party to the agreement. Given those circumstances, the judge should have ordered that IMCS be given notice of the application and that the application be heard inter partes.
Further, the court overturned Justice Croft's costs orders, in which he had ordered indemnity costs for the unsuccessful (at first instance) resistance of the enforcement of the arbitral award.
Minority
Warren CJ came to a similar conclusion as the majority, but for different reasons. His view was that section 8(1) requires the award creditor to show that:
- There is a purported or apparent arbitration agreement.
- The award creditor and award debtor are parties to that agreement.
- There is an award made against the award debtor in pursuance of that agreement.
Merely producing the documents referred to in section 9(1) will, by virtue of section 9(5), conclusively establish these requirements in the absence of contrary evidence. However, Warren CJ argued that the award creditor must satisfy the court that the documents produced meet the description of the documents described in sections 9(1)(a) and (b). Where the arbitration agreement does not expressly name the award debtor as a party, the agreement will not, on its face, be an agreement of the kind referred to in section 9(1)(b). The award creditor will then need to provide extrinsic evidence to demonstrate that the award debtor is a party to the agreement.
In placing the onus on the award creditor to establish that the award debtor was a party to the arbitration agreement, Warren CJ drew a distinction between prima facie and non-prima facie regularity.
The legislation creates a "legislative presumption of regularity founded upon documentary proof" in an attempt to encourage the use of arbitration and facilitate the recognition of foreign awards. This only requires the award creditor to establish the prima facie regularity of the award based on the documents in section 9(1) for the regularity of the award to be presumed and for the award to be enforced. However, as noted above, the documents will not establish this prima facie regularity unless it is clear from the face of the arbitration agreement that the award debtor was a party to it. If the award debtor is not named in the agreement, extrinsic evidence will be needed to prove that it was a party and thereby establish prima facie regularity.
The more substantial burden, on the other hand, of dealing with questions of irregularity that are not readily apparent on the face of the documents (the defences in section 8(5)) rests upon the party seeking to resist the enforcement of an order.
Warren CJ ultimately held that, in the present case, IMCS was not named as a party on the face of the agreement and that A therefore had the legal burden of proving that IMCS was a party to the arbitration agreement pursuant to which the award was made. This meant that the trial judge had therefore erred in imposing the onus of proof on IMCS.
Comment
The case is important to demonstrate that the Australian courts are not merely rubber-stamping foreign awards, but understand their role as ensuring that the arbitral agreement and award meet the criteria established by the New York Convention. The difference between the majority and the dissenting opinion of the court relates to the standards and onus required by parties to the enforcement proceedings. The dissenting judgment effectively indicates that apparently regular documents will be enforced unless the resisting party provides factual evidence to resist enforcement.