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Australian court enforces Ugandan award and clarifies appropriate form of orders
Practical Law UK Legal Update Case Report 6-505-4886 (Approx. 5 pages)
Australian court enforces Ugandan award and clarifies appropriate form of orders
by Practical Law
| Published on 31 Mar 2011 • Australia, International |
Andrew Robertson (Partner), Piper Alderman
In two recent decisions, the Federal Court of Australia has considered the enforcement of an ex parte award that was issued out of Uganda and clarified the appropriate form of the orders for the recognition and enforcement of the arbitral award.
Facts
The applicant, Uganda Telecom Limited (UTL), a company incorporated in Uganda, sought recognition of an award made by an arbitrator appointed by the Centre for Arbitration and Dispute Resolution in Kampala, Uganda. The arbitration took place in Uganda, where the arbitral award was rendered. The award had been registered at the Commercial Division of the High Court of Uganda and was enforceable in Uganda.
Uganda has ratified the New York Convention (NYC).
The respondent, Hi-Tech Telecom Pty Ltd (HT), a company incorporated in Australia, had not participated in the arbitration. HT resisted enforcement on the grounds that:
- The underlying contract between HT and UTL was void for uncertainty and therefore invalid under Ugandan law. By the time the matter was heard by the court, the only clause to which objection was made was that containing the arbitration agreement.
- The composition of the arbitral tribunal was not in accordance with the agreement between the parties.
- The dispute purportedly determined did not fall within the terms or scope of the relevant arbitration clause.
- The award was neither an arbitral award nor a foreign award within the meaning of section 3(1) of the International Arbitration Act 1974 (IAA) (as amended).
- It did not receive proper notice of the arbitration.
- It was unable to present its case in the arbitration because the CEO and sole director of HT was fearful for his own safety if he travelled to Uganda.
- The award contained errors, including that the arbitrator had used gross income in calculating damages without making due allowance for the expenses associated with the earning of the income.
- The award was contrary to public policy.
HT also asserted that it had a set off claim for conversion of its equipment.
Decision
The Federal Court of Australia rejected HT's arguments and ordered the enforcement of the award. A subsequent hearing took place concerning the appropriate form of those orders.
Uncertainty
The essential terms of the contract between HT and UTL were not in dispute. The arbitration agreement was short but the Federal Court reviewed in detail the provisions of Chapter 4 of the Ugandan Arbitration and Conciliation Act 2000 (UAA). The UAA had processes to deal with each of the defects asserted by HT. It established a "comprehensive regime" which was meticulously followed in this case. Therefore, all alleged deficiencies in the arbitration agreement were covered in the UAA and the clause was not void.
Scope
The court held the dispute was within the scope of the arbitration agreement and was covered by the clause.
The award
The court reviewed the award and in two brief paragraphs concluded that it was an award within the meaning of the IAA.
Notice
The court reviewed the detailed evidence of the various communications UTL alleged it had provided. HT denied receiving any of them. One critical letter commenced arbitration and suggested a proposed arbitrator. This was said to have been delivered in late November 2008. The letter had been sent by DHL to the address listed in the records of the Australian Securities and Investment Commission (ASIC) as HT's registered office, and one of the two addresses recorded as its principal place of business.
HT's director testified that approximately a month before the notice was sent, in October 2008, HT had changed offices. However, UTL tendered evidence that as at February 2010 (that is, 16 months later):
- On three tenant boards at the old premises HT's name was still listed.
- On the reception desk inside the old address was a note that HT had moved to the new address.
- The old address was still occupied, but locked and when visited at least one person was in occupation.
- HT's website still showed the old address.
Someone had signed for the delivery and it was not returned. Numerous e-mails were not tagged as "non-delivered". On the basis of this evidence, the court held that notwithstanding the denials (which were held to be unconvincing), the notice had been received. The court also found that the notice had been validly served under the provisions of the UAA.
Unable to present its case
The court rejected this submission. The evidence of HT's director was that he was not aware of the arbitration. He could not therefore argue that he had not attended because he was too afraid to travel to Uganda. In any event, the allegation of fear was "convenient but unsubstantiated".
Public policy
The court referred to older authority but noted that the changes to the IAA in 2010 constrained the court to only the grounds set out in the IAA. There was no general discretion to refuse enforcement and the public policy grounds "should be narrowly interpreted consistently with the United States cases". In any event, the objections raised under this head should have been raised during the arbitration.
Cross-claim
This claim had not yet been litigated and the court felt its determination should not delay enforcement. Two reasons for this conclusion were:
- The cross-claim was "problematic", given that it had not been raised in the arbitration.
- The IAA did not permit a deferral of enforcement pending determination of a cross-claim.
Orders
The court held that the award should be enforced. It directed the parties to draw up orders to effect this decision within seven days of the judgment. However, the parties could not agree on the wording of the orders. In particular, HT opposed a monetary judgment being entered against it because there had been no determination by the court on the merits. HT also argued that interest on the award should be calculated as if the award was made by the court and not in accordance with the rates and basis awarded by the arbitrator.
The court rejected HT's arguments. It held that a monetary judgment could be entered. Furthermore, the award was in accordance with Ugandan law and was not a judgment of the Federal Court until the court gave judgment. Interest would only start running at Federal Court rates once judgment had been entered.
Comment
The decision is a strong endorsement that Australian courts will enforce foreign awards and will only consider objections to enforcement which are founded on the grounds in the NYC and reflected in the IAA. The court in this case gave the party opposing enforcement the opportunity to develop their arguments but ultimately refused to open any matters closed by the NYC and the award.
The efficacy of the 2010 amendments to the IAA is reflected in the discussion of the public policy ground, which is constrained and the clear statement that any Australian authority hinting at a broader discretion on grounds not reflected in the NYC/IAA is not good law.