New South Wales CA imports arbitration clause from one entity to another, stays proceedings

In Warner Bros Feature Productions Pty Ltd v Kennedy Miller Mitchell Films Pty Ltd [2018] NSWCA 81, the New South Wales Court of Appeal overturned the decision of the New South Wales Supreme Court by referring a dispute to arbitration in California pursuant to the parties’ agreement and by ordering a stay on court proceedings pursuant to section 7(2) of Australia’s International Arbitration Act 1974 (Cth). The Court of Appeal applied a pragmatic approach to determine whether an arbitration clause found in standard term contracts used by other members of a company’s corporate group should be incorporated into the parties’ agreement.

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New Zealand signs side letters with five CPTPP members to exclude compulsory investor state dispute settlement

New Zealand has recently signed “side letters” to exclude compulsory Investor State Dispute Settlement (“ISDS“) with five members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP“) – Brunei Darussalam, Malaysia, Peru, Viet Nam and Australia. This demonstrates the evolving approach to ISDS in the Asia Pacific region and is of particular interest both in the context of the worldwide debate about the future of ISDS, and also due to the importance of CPTPP members within the global economy.

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The English Court of Appeal substitutes one anti-suit injunction for another (more limited one)

The English Court of Appeal is the latest court to weigh in on this long-running dispute spanning multiple jurisdictions between Messrs Emmott and Wilson, relating to an agreement to establish a “quasi-partnership”. Following an appeal brought by Mr Emmott against the High Court’s decision (which we reported here), the question for the Court of Appeal was whether to uphold the anti-suit injunction granted by the High Court preventing Michael Wilson & Partners, Limited (“MWP”) from pursuing proceedings in the Australian courts in light of the London-seated arbitration agreement between them.

The Court of Appeal allowed the appeal in part, issuing a substitute injunction against MWP advancing only the claims which the court deemed to be vexatious and oppressive in undermining the arbitration agreement and process.  This judgment helpfully clarifies the circumstances in which the English Court will issue an anti-suit injunction in order to safeguard the integrity of an English-seated arbitral process, and confirms that the court will not permit arbitral proceedings or awards to be undermined by parties against whom adverse findings have been made. However, it also demonstrates that the question of whether proceedings fall within the scope of an arbitration agreement can be a complex and controversial one.

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The Federal Court of Australia recognises and enforces ICSID award

 

The Australian judiciary has again proven that Australia is a pro-arbitration destination, by recognising and enforcing an award and decision rendered under the rules of the International Centre for Settlement of Investment Disputes (ICSID). In Lahoud v The Democratic Republic of Congo [2017] FCA 982 (Lahoud), the Federal Court of Australia highlights that applicants can be confident that a foreign arbitral award will be recognised and enforced in Australia – even if it is against a foreign state.

Application for recognition

On 25 July 2017, Justice Gleeson of the Federal Court of Australia granted leave to the applicants in Lahoud to have the decisions of two ICSID tribunals recognised and enforced in Australia. The power to do so is enshrined in section 35(4) of the International Arbitration Act 1974 (Cth) (the Act). The two decisions in question were the original award and a decision on the request for annulment of the award (see ICSID Case No. ARB/10/4).

Background

The arbitration concerned an organisation operated by the applicants in the Democratic Republic of Congo (DRC), known as “IMPOREX”. The applicants leased their premises from a DRC government body, and sought damages for the alleged expropriation of their business premises and destruction of their property.

Having previously confirmed their jurisdiction to hear the dispute (on 16 February 2012), the arbitral tribunal consisting of three arbitrators delivered their award on 7 February 2014. The tribunal found that the respondent, the DRC, had violated various obligations under the New Investment Code of the DRC. In particular, the tribunal found that the DRC had breached the fair and equitable treatment and expropriation provisions of the New Investment Code. The respondent was ordered to pay the claimants USD$1.7 million in damages plus interest. The tribunal also determined that costs would largely be covered by the respondent.

Subsequently, the DRC unsuccessfully sought an annulment of the award, arguing that that the tribunal failed to provide reasons in parts of the award, and exceeded its power. On 29 March 2016, the annulment tribunal rejected the respondent’s entire application for annulment. Costs were again largely awarded against the respondent.

The Federal Court’s decision

In the decision of the Federal Court of Australia, Justice Gleeson provided a methodical illustration of the international arbitration framework in force in Australia, and the application of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the 1965 Convention on the Settlement of Investment Disputes, now ratified by 153 contracting states) (the Convention). Justice Gleeson explained that the Act aims to encourage the use of arbitration to resolve disputes involving international trade and commerce, to recognise and enforce foreign arbitral awards, and to give effect to the Convention, signed by Australia on 24 March 1975.

Justice Gleeson briefly explored the inclusive nature of the definition of an “award”, contained in section 31(1) of the Act. Her Honour highlighted that an award covers the interpretation, revision and annulment of an award. Owing to its inclusive nature, the ordinary and natural meaning of “award” therefore captured a decision refusing to annul an award. The decision rejecting the request for annulment in this matter was therefore included within the definition of “award”, and could be recognised and enforced.

Justice Gleeson found that all requirements under the Act and the Convention to recognise and enforce an award had been met. Having regard to the objectives of the Act, the benefits and finality of arbitration, Justice Gleeson recognised the two awards and made the orders sought by the applicants. The applicants were granted leave to have the ICSID award and decision recognised and enforced as if they were judgments of the Federal Court of Australia.

Comment

The recognition of this ICSID decision and award is a promising decision of the Federal Court of Australia. The decision affirms that Australia is an international arbitration friendly jurisdiction, and that organisations can be certain that arbitral awards properly made, will be effectively recognised and enforced in Australia.

Brenda Horrigan
Brenda Horrigan
Partner
+61 2 9225 5536
Anne Hoffmann
Anne Hoffmann
Senior Associate
+61 2 9225 5561
Sam Hall
Sam Hall
Solicitor
+61 3 9288 1374

Australian Court sets aside an international arbitration award and removes an arbitrator

The respondents in an international commercial arbitration were successful in the Federal Court in Australia in setting aside parts of two partial awards and removing the sole arbitrator pursuant to Articles 12, 18 and 34 of the UNCITRAL Model Law. These articles are incorporated into Australian law by the International Arbitration Act 1974 (Cth).

The Court found that the arbitrator had conducted himself in such a manner that the applicants could no longer have confidence in him. This was mainly because the arbitrator had decided various substantive questions in a final manner without giving some of the parties an opportunity to be heard on those questions.

The Court observed that procedural difficulties were encountered due to the hiving off and determination of incomplete separate questions where issues between the parties had not been properly crystallised.

Hui v Esposito Holdings Pty Ltd [2017] FCA 648 and Hui v Esposito Holdings Pty Ltd (No 2) [2017] FCA 728 demonstrate the circumstances in which the Court may review the actions of an arbitrator and may be prepared to terminate an arbitrator’s mandate and set aside awards.

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Australia is the first state in the Asia-Pacific region to sign the Mauritius Convention

On 18 July 2017, Australia became the first state in the Asia-Pacific region to sign the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration, also known as the Mauritius Convention. Globally, Australia was the 21st signatory to the Mauritius Convention, joining a number of other major signatories such as the UK, the US, France, Germany and Canada. The Convention will come into force on 18 October 2017, six months after its ratification by the first three states.

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Inside Arbitration: Issue #4 of the publication from Herbert Smith Freehills’ Global Arbitration Practice

We are delighted to share with you the latest issue of the publication from Herbert Smith Freehills’ Global Arbitration Practice, Inside Arbitration.

In addition to sharing knowledge and insights about the markets and industries in which our clients operate, the publication offers personal perspectives of our international arbitration partners from across the globe.

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Anticipated arbitration reforms in Australia

The Australian International Arbitration Act 1974 (Cth) (Act) applies to all international arbitration proceedings in Australia. The Civil Law and Justice Legislation Amendment Bill 2017 (Bill) is an omnibus bill which proposes to make certain amendments to the Act (as well as other various Australian legislation).

The International Arbitration Act incorporates the United Nations Commission on International Trade Law’s Model Law on International Commercial Arbitration (Model Law) and, much like other Model Law jurisdictions, contains additional provisions supplementing the Model Law. The proposed amendments to the Act are another effort by Australia to improve and clarify the provisions of the Model Law by addressing issues which have arisen in jurisprudence.

The key proposed change will make it easier for foreign awards to be enforced in Australia. A number of other less significant amendments are also proposed.

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All Australian States and Territories are now Model Law jurisdictions

By introducing the new Commercial Arbitration Act 2017 (ACT), the Australian Capital Territory is the last Australian State to adopt the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration (the Model Law). At the Federal and State level, the Model Law now applies to both international and domestic arbitrations seated in Australia.

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Australian Court provides guidance on Art 33(3) of the Model Law, the doctrine of functus officio and when a ‘Final Award’ is not ‘final’

In Blanalko Pty Ltd v Lysaght Building Solutions Pty Ltd [2017] VSC 97, Croft J of the Victorian Supreme Court confirmed that a party is not required to rely on, or comply with the time constraint in, Art 33(3) of the Model Law to obtain a further Award in circumstances where the arbitrator has made ‘a conscious decision not to deal with an issue’.  The decision also provides useful commentary on the functus officio doctrine and the circumstances in which an Award labelled ‘Final Award’ is not, relevantly, a ‘final Award.’

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