The case concerned dealings between the plaintiff and defendant relating to the development of software and related services for the Department of Defence (Defence).

In October 2003, the parties entered into a partner agreement whereby the defendant granted to the plaintiff a non-exclusive, non-transferable right to market and distribute certain software products and services in the Australian Capital Territory. The partner agreement contained an arbitration clause providing for arbitration in Stockholm, administered by the Arbitration Institute of the Stockholm Chamber of Commerce.

The Defence evaluated the software for a period, apparently with some success. However, by 2006 the plaintiff and a company called Compucat Research Pty Ltd (Compucat) jointly tendered to the Defence and the plaintiff and the defendant (Pointsec Mobile Technologies Pty Ltd (PMT Australia)) entered discussions to reduce the licence fee to support this approach.

Subsequently, an Australian incorporated company established by PMT Australia, approached Compucat direct and the two jointly proceeded in discussions with the Defence to the exclusion of the plaintiff.

Proceedings ultimately ensued and two issues were raised before the court. The first dealt with the services of proceedings in Sweden and the second was an application for a stay of proceedings. This update focuses on the stay application.

The defendant applied for a permanent stay of the proceedings. The application had four alternative bases:

Although the application was heard in May 2008, for reasons unknown, the decision was not handed down until April 2011.

The court refused to grant a stay of the proceedings. The court noted that the International Arbitration Act mandated a stay to enforce the arbitration agreement, unless one of the exceptions (reflecting those in the New York Convention) applied. These exceptions include where the arbitration agreement is inoperative or incapable of being performed.

The court found that:

It was submitted that a time-bar in the contract rendered the arbitration agreement inoperative or incapable of being performed. The relevant clause provided that:

The court stated that clauses of this nature can be "claim-barring clauses" or "remedy-barring clauses", citing Halsbury's Law of England and Smeaton Hanscomb & Co Ltd v Sassoon I Setty Son & Co [1953] 2 All ER 1471. A claim-barring clause is where the claim cannot succeed, but can be brought, whereas a remedy-barring clause is one where remedies cannot be pursued.

The judge stated that he was inclined to the view that the clause was a remedy-barring clause, but that it was not necessary to decide the matter. He concluded that even if the operation of the time-bar clause meant that the arbitrator would have to decide whether the claim was in time, this did not make the arbitration clause operative or capable of performance. The judge held the waiver or abandonment of a claim would have the same effect but would prevent the claim being settled by arbitration. The judge said the effect of the time bar here was equivalent to waiver or abandonment of a claim. The arbitration agreement was therefore inoperative or incapable of performance as a mechanism to resolve the dispute.

The judge's logic is difficult to follow as he expressly did not reach any conclusion as to the nature of the time-bar, a matter the arbitrator could, as the court acknowledged, consider and determine. In the absence of any conclusion on the time-bar clause, it does not follow that the agreement was necessarily inoperative or incapable. That was the very matter that had not been determined.

Nevertheless, the court adopted this reasoning and when applied to all four bases for the stay of proceedings, the same conclusion was reached, that is, the stay was refused.

The decision is difficult to reconcile internally and is not consistent with the recent authority regarding the approach of Australian courts to arbitration agreements and the enforcement of such agreements.

Lightsource Technologies Australia Pty Ltd v Pointsec Mobile Technologies AB [2011] ACTSC 59.