Full Court of the Federal Court of Australia gives guidance on award enforcement

In an appellate judgment, the Full Court of the Federal Court of Australia has ruled that a foreign arbitral award is not enforceable because the arbitral tribunal was not constituted strictly in accordance with the parties’ arbitration agreement. Notably, the decision also considers the courts’ discretion to enforce an award even where a party establishes a ground for non-enforcement, an issue on which there was previously “no authoritative statement in Australia”.

The Full Court allowed an appeal from its first instance decision that enforced a foreign award pursuant to the International Arbitration Act 1974 (Cth).

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INDIA AMENDS ARBITRATION LAW RELATING TO ENFORCEMENT OF AWARDS TAINTED BY FRAUD AND ARBITRATOR QUALIFICATIONS

In a little heralded development, the Government of India passed the Arbitration and Conciliation (Amendment) Ordinance 2020 (the “Ordinance”) on 4 November 2020 to amend the Indian Arbitration and Conciliation Act 1996 (the “Act”) with immediate effect. The Ordinance introduces provisions to stay the enforcement of arbitral awards tainted by fraud, and deletes certain provisions from the Act relating to qualification and accreditation of arbitrators.

Stay on enforcement

An important change introduced by the Ordinance concerns the power of the Indian court to stay enforcement of an award where an application has been made to set it aside. A court must now grant an unconditional stay on the enforcement of an award if a prima facie case is made out that the arbitration agreement or contract which is the basis of the award, or the making of the award itself was “induced or effected” by fraud or corruption. The stay shall continue until the application to set aside the award is decided.

By way of background, under Section 34 of the Act, a party to an arbitral award made in India may apply to the Indian court to have it set aside on the grounds, amongst other things, that the award conflicts with the public policy of India, which includes circumstances where the making of the award was induced or affected by fraud or corruption.

Prior to 2015, Section 36 of the Act was applied such that enforcement of an award would be stayed where an application was made under Section 34 until that application had been decided. This incentivised losing parties to challenge awards on any grounds to prevent their enforcement. An amendment to the Act passed in 2015 (discussed in our prior blog post here) modified Section 36 such that the filing of an application to set aside an award would not by itself render the award unenforceable, unless the court in its discretion granted a stay based on a separate application.

The Ordinance now restricts this discretion in that a court must stay an award unconditionally if it is satisfied that a prima facie case of fraud is made out. The amendment is deemed to have been inserted from 23 October 2015, and applies to all court cases arising out of arbitral proceedings, irrespective of whether the arbitration or court proceedings were commenced before or after this date.

The Ordinance notes that the change was made to address concerns raised by stakeholders. While the court already had the discretion to stay enforcement where the award was being challenged, the mandatory nature of the stay where a prima facie case of fraud is made out will inevitably incentivise challenges on that basis. It will be interesting to see how judges deal with such challenges.

While this amendment addresses challenges to awards made in India, it should not apply to the enforcement of foreign awards under a separate part of the Act, although the Indian court has the discretion (under Section 48) to refuse enforcement of a foreign award where it finds that the award was induced or affected by fraud.

Norms for accreditation of arbitrators

The Ordinance has also deleted the Eighth Schedule to the Act dealing with the qualifications and experience of an arbitrator, which provided that a person would not be qualified to be an arbitrator in an arbitration seated in India unless he or she is an advocate, accountant or company secretary under Indian law, or an officer of the Indian Legal Service, or holding a particular degree and/ or having public sector experience. This provision was understood effectively to exclude foreign nationals from acting as an arbitrator on arbitrations seated in India.

Section 43J of the Act now states that: “The qualifications, experience and norms for accreditation of arbitrators shall be such as may be specified by the regulations.” It is possible that these regulations would be framed by the Arbitration Council of India, which is to be formed pursuant to the Arbitration and Conciliation (Amendment) Act 2019 (discussed in our blog post here).

For more information, please contact Nick Peacock, Partner, Nihal Joseph, Associate, or your usual Herbert Smith Freehills contact.

Nicholas Peacock
Nicholas Peacock
Partner
+44 20 7466 2803
Nihal Joseph
Nihal Joseph
Associate
+44 20 7466 2212

INDIA INTRODUCES KEY AMENDMENTS TO ARBITRATION AND CONCILIATION ACT 1996

After the Arbitration and Conciliation Bill, 2019 (the “Bill“) was passed by both houses of the Indian Parliament, the President of India on 9 August 2019 gave his assent.  The new Arbitration and Conciliation (Amendment) Act, 2019 (the “2019 Act“) will amend the Indian Arbitration and Conciliation Act, 1996 (the “1996 Act“), implementing the recommendations of the High Level Committee Report issued in 2017 under the chairmanship of Justice BN Srikrishna. The changes proposed in the Bill were previously discussed here.

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LCIA Facts and Figures for 2016: another strong caseload

The LCIA has recently released its Facts and Figures for 2016. This report (Facts and Figures – 2016 A Robust Caseload.pdf), which is produced annually, provides an overview of and insights into the LCIA's caseload. It includes detailed statistics concerning aspects of the caseload ranging from the industry sectors concerned, to arbitrator appointments, and the frequency of use of different procedures under the LCIA's Arbitration Rules (the "Rules").The statistics demonstrate that the LCIA caseload continues to grow, attracting disputes from across a number of industry sectors and involving parties from across the world.

Some of the main points from this year's report are set out below.

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‘Bare’ arbitration clauses and the extent to which the Singapore court may assist

In K.V.C Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd and another Suit [2017] SGHC 32 ("KVC Action") the Singapore High Court discussed the extent to which the Singapore courts and the Singapore International Arbitration Centre, in its capacity as default appointing authority under the Singapore International Arbitration Act ("IAA"), are able to support and facilitate an arbitration commenced pursuant to a bare arbitration clause which specifies neither the place of arbitration nor the manner in which arbitrators are to be appointed.

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