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Federal Court of Australia has jurisdiction to enforce both "non-foreign" and foreign arbitral awards
Practical Law UK Legal Update 6-518-2563 (Approx. 4 pages)
Federal Court of Australia has jurisdiction to enforce both "non-foreign" and foreign arbitral awards
by Practical Law
| Published on 29 Feb 2012 • Australia |
Andrew Robertson (Partner) and Ryan Kuss (Law Clerk), Piper Alderman
The Federal Court of Australia has ruled it has jurisdiction to enforce both "non-foreign" and foreign arbitral awards made under the International Arbitration Act 1974 and the UNCITRAL Model Law.
Background
Section 16 of the International Arbitration Act 1974 (Cth) (1974 Act) gives the UNCITRAL Model Law (Model Law) the force of law in Australia.
Articles 35 and 36 of the Model Law provide:
"Article 35. Recognition and enforcement
(1) An arbitral award, irrespective of the country in which it was made, shall be recognized as binding and, upon application in writing to the competent court, shall be enforced subject to the provisions of this article and of article 36.
(2) The party relying on an award or applying for its enforcement shall supply the original award or a copy thereof. If the award is not made in an official language of this State, the court may request the party to supply a translation thereof into such language."
"Article 36. Grounds for refusing recognition or enforcement
(1) Recognition or enforcement of an arbitral award, irrespective of the country in which it was made, may be refused only:
(a) at the request of the party against whom it is invoked, if that party furnishes to the competent court where recognition or enforcement is sought proof that:
(i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(ii) the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(v) the award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, that award was made; or
(b) if the court finds that:
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or
(ii) the recognition or enforcement of the award would be contrary to the public policy of this State.
(2) If an application for setting aside or suspension of an award has been made to a court referred to in paragraph (1)(a)(v) of this article, the court where recognition or enforcement is sought may, if it considers it proper, adjourn its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the other party to provide appropriate security."
Section 39(1)(a)(i) and (iii) of the 1974 Act provides:
"(1) This section applies where:
(a) a court is considering:
(i) exercising a power under section 8 to enforce a foreign award; or
(iii) exercising a power under Article 35 of the Model Law, as in force under subsection 16(1) of this Act, to recognise or enforce an arbitral award."
Section 39B(1A)(c) of the Judiciary Act 1903 confers the Federal Court of Australia with jurisdiction:
"in any matter … arising under any laws made by the Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter".
Facts
The parties were a Chinese manufacturer (TCL) and an Australian distributor (Castel) under a distribution agreement. A dispute arose in relation to this contract and was referred to arbitration in Australia in accordance with the dispute resolution clause in the contract.
The arbitrator ruled in favour of Castel. Castel applied to the Federal Court of Australia (Court) for enforcement of the arbitral awards. TCL applied to set aside the awards as contrary to public policy.
On this occasion, Murphy J dealt only with the preliminary issue of whether the Court had jurisdiction to enforce the awards.
Decision
Murphy J concluded that the Court had jurisdiction to enforce the arbitral awards made under the 1974 Act and Model Law.
He noted that the arbitration that was the subject of these proceedings was between parties with their places of business in different countries. It was, therefore, an "international arbitration" under the Model Law. However, as Murphy J explained, awards made in "international arbitration" can be either foreign or "non-foreign". The 1974 Act defines a "foreign award" as one made in a country other than Australia. A "non-foreign award", although not defined by the 1974 Act, is one made in Australia between international parties. While the 1974 Act specifically vests jurisdiction in the Federal Court to enforce "foreign awards", there is no equivalent in respect of "non-foreign awards".
Murphy J found that, in the present case, the awards in question were non-foreign awards. Different provisions of the 1974 Act and the Model Law apply according to whether an award is foreign or non-foreign. In respect of foreign awards, section 20 of the 1974 Act provides that when Part II of the 1974 Act (which applies to the enforcement of foreign awards) applies to an award, Articles 35 and 36 of the Model Law do not. However, there is no similar provision in respect of non-foreign awards.
To determine the provisions applicable to non-foreign awards, Murphy J considered section 39(1)(a)(i) and (iii) of the 1974 Act. He held that section 39(1)(a)(iii) must be a reference to a court exercising a power to enforce a non-foreign award. Indeed, given that Article 35 of the Model Law does not apply to foreign awards because of section 20 of the 1974 Act, section 39(1)(a)(iii) can only make sense if it is referring to the enforcement of non-foreign awards.
Therefore, Articles 35 and 36 of the Model Law apply to the enforcement of non-foreign awards.
Murphy J then turned his attention to the question of whether the Federal Court is a "competent court" for the purposes of Articles 35 and 36. Murphy J found that the present applications constituted a relevant matter for the purposes of section 39B(1A)(c) of the Judiciary Act 1903 as there was a single underlying controversy between the parties which required determination by the Court.
However, to attract jurisdiction under section 39(1A)(c), the matter must be one arising under a federal law. Murphy J stated that the Model Law Articles relied on by the parties had force as federal law by virtue of section 16 of the 1974 Act. Therefore, the matter arose under a federal law.
Murphy J also disposed of a number of other arguments which he considered to have no bearing on his conclusion.
Comment
This decision sheds more light on the practical operation of the commercial arbitral regime in Australia. However, while any clarity the courts can provide on the topic is welcome, it should be noted that Murphy J's judgment is limited in that he declined to express a conclusive view on whether State and Territory courts have jurisdiction to enforce non-foreign arbitral awards under Articles 35 and 36 of the Model Law.