AUSTRALIA. Hilary Birks. Allens Linklaters

Transcription

1 AUSTRALIA Hilary Birks Allens Linklaters

2 1 Country Report: Australia Public Policy and the Recognition and Enforcement of Arbitration Awards (Hilary Birks) Contents 1 How the concept of public policy is defined in Australian courts 2 2 Examples of Australian case law where public policy was raised in support of resisting enforcement of an arbitral award Sauber Motorsport AG v Giedo van der Garde BV & Ors [2015] VSCA Armada (Singapore) Pte Ltd (Under Judicial Management) [2014] FCA TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 311 ALR 387; [2014] FCAFC William Hare UAE LLC v Aircraft Support Industries Pty Ltd (2014) 290 FLR International Relief and Development Inc v Ladu [2014] FCA Gujarat NRE Coke Limited v Coeclerici Asia (Pte) Ltd (2013) 304 ALR Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) (2012) 201 FCR Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd (2011) 277 ALR IMC Aviation Solutions Pty Ltd v Altain Khuder LLC (2011) 282 ALR Yang v S&L Consulting and Anor [2009] NSWSC International Movie Group Inc & Anor v Palace Entertainment Corporation Pty Ltd (1995) 128 FLR Resort Condominiums International Inc v Bolwell & Anor (1993) 118 ALR Examples of Australian case law where public policy was raised in support of an application for an arbitral award to be set aside Hebei Jikai Industrial Group Co Ltd v Martin [2015] FCA Emerald Grain Australia Pty Ltd v Agrocorp International Pte Ltd (2014) 314 ALR 299; [2014] FCA Cargill International SA v Peabody Australia Mining Ltd (2010) 78 NSWLR Other Australian case law relevant to the public policy question 19 Appendix 21

3 Country Report: Australia Public Policy and the Recognition and Enforcement of Arbitration Awards (Hilary Birks) 1 How the concept of public policy is defined in Australian courts Public policy is a concept that may be relevant to the question of whether an arbitral award should be set aside by an Australian court or whether an Australian court should refuse to enforce an arbitral award. By way of background, international arbitration in Australia is subject to the legislative framework of the International Arbitration Act 1974 (Cth) (the Act). Section 2D of the Act provides that the objectives of the legislation are: (c) (d) (e) to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes; and to facilitate the use of arbitration agreements made in relation to international trade and commerce; and to facilitate the recognition and enforcement of arbitral awards made in relation to international trade and commerce; and to give effect to Australia's obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty-fourth meeting [the New York Convention]; and to give effect to the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985 and amended by the United Nations Commission on International Trade Law on 7 July 2006 [the Model Law]; and In giving effect to the New York Convention and the Model Law, the Act provides for the limited circumstances in which an award in respect of an international arbitration may be set aside by a competent court and in which the enforcement of an award may be refused (see sections 8 and 16 of the Act). 1 These circumstances include those in which the court finds that an award would be contrary to public policy (see section 8(7) and section 16 2 of the Act). In interpreting the meaning of 'public policy' under the Act, sections 8(7A) and 19 provide that the enforcement of an award (or, in relation to section 19, an interim measure) would be in conflict with or contrary to public policy if: the making of the award was induced or affected by fraud or corruption; or a breach of the rules of natural justice occurred in connection with the making of the award. 1 The regime applicable to domestic arbitration (rather than international arbitration) is subject to State and Territory legislation. See, for example, Commercial Arbitration Act 2010 (NSW), Commercial Arbitration Act 2011 (SA) and Commercial Arbitration Act 2011 (Vic). 2 Section 16 of the Act provides that the Model Law has the force of law in Australia. The relevant articles of the Model Law are Article 17I (in relation to refusing recognition or enforcement of an interim award), Article 34 (in relation to the setting aside of an award) and Article 36 (in relation to the enforcement of an award).

4 3 Section 39 of the Act provides that where a court is considering the matters referred to in section 39(1) of the Act, which include exercising the power to refuse enforcement of an interim or final award or to set aside an interim or final award, the court must have regard to: the objects of the Act [in section 2D]; and the fact that: (i) (ii) arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes; and awards are intended to provide certainty and finality. The legislative framework therefore sets the scene in relation to the way in which an Australian court is required to determine whether an interim or final award should be set aside or whether enforcement of an interim or final award should be ordered. The approach to the interpretation of 'public policy' and its application in Australia is generally similar in respect of applications to set aside an award as well as arguments for the refusal of enforcement of an award. There is a presumption that the same words used in legislation should be given the same meaning, unless indicated otherwise. 3 There is no indication in the Act that the meaning of 'public policy' has a different meaning depending on whether the question relates to the setting aside of an award or the enforcement of an award under the Act. The Convention makes it clear that it is the public policy of the State (in this case, Australia) in which the enforcement or recourse is sought, that is relevant to the determination of whether an award or the enforcement of an award is contrary to public policy. Further, section 19 of the Act expressly provides that, in relation to the Model Law, when considering questions of public policy, it is the public policy of Australia that is relevant. Australian case law has considered issues of public policy generally as well as alleged breaches of the rules of natural justice as a basis for finding that an award is contrary to public policy. However, there have not been a large number of cases regarding this question and the decisions reflect a mixed approach. For an early example, the Court in Resort Condominiums International Inc v Bolwell & Anor 4 found the relevant award to violate public policy on the basis that, amongst other things, the award included orders that the court would not make. As identified by Professor Richard Garnett and Professor Michael Pryles, 5 this approach was 'inconsistent with the narrow scope of the public policy exception and the pro-enforcement policy underlying the [New York Convention] itself'. More recently, Australian courts have adopted a more 'pro-enforcement' approach in determining whether an award should be set aside or whether enforcement should be refused due to a breach of public policy. In a 2014 decision, considering a submission that an award should be set aside on the basis that there was a breach of the rules of natural justice and, therefore, that the award was contrary to public policy, the Court of Appeal of the Federal Court of Australia held that (emphasis added): 6 [110] The real question is whether an international commercial party has been treated unfairly or has suffered real practical injustice in the dispute and litigation context in which it finds itself. Formalism in the application of the so-called rules is not the essence of the matter: fairness and equality are. How unfairness is revealed or demonstrated in any particular case will depend on the circumstances. The 3 Registrar of Titles (WA) v Franzon (1975) 132 CLR 611; Castel Electronics Pty Ltd v TCL Air Conditioner (Zhongshan) Co Ltd (No 2) [2012] FCA (1993) 118 ALR 655 (Resort Condominiums). 5 In Chapter 3 (Enforcement of Foreign Awards in Australia and New Zealand) of International Arbitration in Australia (2010), edited by Luke Nottage and Richard Garnett, pages TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 311 ALR 387 at paragraphs 110 and 111 (TCL v Castel).

5 4 requirement of a fair hearing in an international commercial arbitration has been discussed in many cases. [111] The above leads one to the conclusion that Arts 34 and 36 [of the Model Law] should be seen as requiring the demonstration of real practical injustice or real unfairness in the conduct of the reference or in the making of the award. The rules of natural justice are part of Australian public policy. The assessment as to whether those rules have been breached by reference to established principle is not a matter of formal application of rules disembodied from context, or taken from another statutory or human context. The relevant context is international commercial arbitration. No international arbitration award should be set aside for being contrary to Australian public policy unless fundamental norms of justice and fairness are breached. Each of Art 34 and 36 [of the Model Law] contains a form of discretion or evaluative decision: may be set aside (Art 34), may be refused only (Art 36). It is not profitable to seek to differentiate between the engagement of public policy under the Articles and a supposedly separate and a later question whether to exercise the discretion; nor is it profitable, but only likely productive of difficulty or error, to read into Arts 34 and 36 any precise notions of required prejudice or other preconditions to the exercise of any discretion In Sauber Motorsport AV v Giedo van der Garde BV & Others, 7 the Court of Appeal of the Supreme Court of Victoria adopted the analysis of the Court in TCL v Castel, finding that: 8 In order to establish that the enforcement of an award would be contrary to public policy by reason of a breach of natural justice what must be shown is real unfairness and real practical injustice. Accordingly, more recent cases indicate that in considering whether there has been a beach of natural justice, and, therefore, there is a ground to refuse enforcement or to set aside an award as being contrary to public policy, Australian courts are likely to take a restrictive approach in interpreting what conduct amounts to a breach of natural justice. More generally, in relation to questions requiring consideration of what conduct is contrary to public policy, there is a trend in recent cases suggesting that courts will take a pro-enforcement approach. This is reflected in cases including Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) 9 in which His Honour Justice Foster held: [105] the scope of the public policy ground of refusal is that the public policy to be applied is that of the jurisdiction in which enforcement is sought, but it is only those aspects of public policy that go to the fundamental, core questions of morality and justice in that jurisdiction which enliven this particular statutory exception to enforcement. The public policy ground does not reserve to the enforcement court a broad discretion and should not be seen as a catch-all defence of last resort. It should not be used to give effect to parochial and idiosyncratic tendencies of the courts of the enforcement state. This view is consistent with the language of s 8(7), the terms of s 8(7A), the text of Art V(2) of the [New York] Convention, the fundamental objects of the [New York] Convention and the objects of the [Act]. This approach also ensures that due respect is given to Convention-based awards as an aspect of international comity in our interconnected and globalised world which, after all, are the product of freely negotiated arbitration agreements entered into between relatively sophisticated parties. The following sections of this report include summarises of cases relating to: the enforcement of arbitral awards where enforcement is resisted on the ground that enforcement would be contrary to public policy; applications for an arbitral award to be set aside on the basis that the award is contrary to public policy; and other case law relevant to the interpretation of the public policy issue. 7 [2015] VSCA Id at [7] and [8]. 9 [2012] FCA 276.

6 5 2 Examples of Australian case law where public policy was raised in support of resisting enforcement of an arbitral award The following cases are listed in order of most recent to oldest: 2.1 Sauber Motorsport AG v Giedo van der Garde BV & Ors [2015] VSCA 37 This was an appeal from a decision of the Supreme Court of Victoria (see Giedo van der Garde BV & Giedo Gijsbertus Gerrit van der Garde v Sauber Motorsport AV [2015] VSC 80). Relevant Facts Mr van der Garde claimed that he had been guaranteed a position as a nominated driver for Sauber Motorsport AG (Sauber) for the 2015 Formula One season. He was subsequently informed that he would not be so nominated. Mr van der Garde commenced arbitration against Sauber and obtained a partial award which ordered Sauber to ' refrain from taking any action the effect of which would be to deprive Mr van der Garde of his entitlement to participate in the 2015 Formula One Season as one of Sauber's two nominated race drivers'. Mr van der Garde and his management company applied to the Supreme Court of Victoria to enforce the award in Australia. The Court granted leave to the two named drivers for Sauber to be represented and heard in the enforcement proceeding, even though they were not party to the arbitration proceedings. First Instance Decision Sauber and the other drivers resisted enforcement on several grounds, including that enforcement would be contrary to public policy. They argued that there had been a breach of the rules of natural justice because the arbitrator had made findings not contended for by either party and because the other drivers had not been heard in the arbitral proceedings. His Honour Justice Croft rejected these arguments. Sauber appealed the decision. (c) The Appeal On appeal, Sauber's arguments on public policy grounds and the Court of Appeal's findings were as follows: Uncertainty: Sauber submitted that the award was too uncertain and, as such, enforcement would be contrary to public policy. The Court referred to the award and the trial judge's conclusions that all parties were well aware of the nature of the dispute and its resolution. The Court found that the trial judge's conclusions were well-founded and that the award was not uncertain. Futility: Sauber submitted that the command of the award was futile and contrary to public policy. The Court of Appeal found that there was no error in the trial judge's approach to this issue (which was that there was not a demonstrated lack of utility as to render the award against public policy). Legality and safety: Sauber submitted that enforcement of the award, permitting Mr van der Garde to race in circumstances which would pose an unacceptable risk and danger would be contrary to public policy. The Court of Appeal rejected this argument, agreeing with the trial judge that these concerns did not raise any public policy issue. 2.2 Armada (Singapore) Pte Ltd (Under Judicial Management) [2014] FCA 636 Gujarat NRE Coke Limited (Gujarat) and Armada (Singapore) Pte Ltd (Under Judicial Management) (Armada) were parties to a contract of affreightment pursuant to which Gujarat

7 6 agreed to ship and Armada agreed to provide tonnage for the transportation of six cargoes of coking coal annually for each year from 2008 to 2012 (inclusive). Armada commenced arbitration against Gujarat for breach of the contract of affreightment in respect of the six shipments in 2009 and the first three shipments in Armada also reserved its right to allege further breaches in respect of future shipments. The arbitral tribunal made three partial awards in favour of Armada, awarding damages for past and future losses incurred. Armada sought to enforce these awards in Australia. Gujarat challenged the enforcement proceedings on several grounds, including that, to the extent that the second partial award (referred to in the judgment as the 'Second Award'), related to a declaration as to future loss, it was contrary to the public policy of Australia under section 8(7) of the Act. The Decision In considering the public policy argument, His Honour Justice Foster of the Federal Court of Australia determined that it was not appropriate to give effect to a declaration in respect of future shipments. However, Justice Foster recognised that the tribunal may have made additional awards relating to actual losses suffered by Armada since judgment was reserved in the enforcement proceedings. On that basis, Justice Foster granted Armada leave to amend its application to include any such additional awards. Justice Foster further explained that his decision in relation to the Second Award was not based on section 8(7) of the Act, stating that (at 21): The mere fact that enforcing such a declaration might not be consistent with principles developed in Australia for the exercise of an Australian Court's discretion to make declarations would not, of itself, be sufficient to constitute a reason for refusing to enforce the award on the grounds that to do so would be contrary to public policy. 2.3 TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 311 ALR 387; [2014] FCAFC 83 This case relates to a very lengthy dispute that involved several challenges to an arbitral award as well as a challenge to the High Court of Australia in relation to the Federal Court of Australia's jurisdiction to hear the matter on the basis that amendments to the Act were constitutionally invalid. In TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia [2013] HCA 5, the High Court unanimously rejected the challenge. TCL Air Conditioner (Zhongshan) Co Ltd (TCL) and Castel Electronics Pty Ltd (Castel) were parties to a distribution agreement, pursuant to which Castel had exclusive rights to distribute TCL-manufactured air conditioners in Australia. TCL began selling non-tcl branded air conditioner products in Australia which gave rise to a dispute between the parties. The dispute was referred to arbitration. Following an initial challenge relating to the scope of the arbitration clause under the distribution agreement, the tribunal rendered a final award in favour of Castel. First Instance Decision TCL sought to resist Castel's enforcement of the award. TCL also sought to have the award set aside. TCL's grounds for resisting enforcement and seeking to have the award set aside were based on an argument that the arbitral award was contrary to the rules of natural justice and, accordingly, in breach of the public policy of Australia under the Act. At first instance, His Honour Justice Murphy dismissed TCL's application to set aside the award. TCL appealed.

8 7 (c) The Appeal On appeal, TCL argued that: there was no evidence, or no probative evidence, for the three critical findings made by the tribunal (the 'no evidence rule'); and the arbitrators could not reasonably make findings as to loss other than in accordance with TCL's expert evidence, when the arbitrators accepted that Castel's expert witness lacked expertise (the 'no hearing rule'). The Full Court unanimously rejected TCL's appeal, finding that 'The application was a disguised attack on the factual findings of the arbitrators dressed up as a complaint about natural justice' (at [54]). The Full Court referred to relevant international case law and made the following observations about the rules of natural justice (see [2014] FCAFC 83 at 35-39): The rules are part of Australian public policy and the essence of natural justice is fairness. There can be no breach of any rule of natural justice unless there is real unfairness and true practical injustice in how the dispute resolution was conducted. The content of the rules of natural justice vary according to the circumstances and, in particular, the content of the dispute resolution process in question. In this case, the relevant context is international commercial arbitration, where parties consent to a private arrangement under which errors of law or fact are not legitimate bases for court intervention. Articles 34 and 36 of the Model Law and sections 16 and 19 of the Act deal with fundamental conceptions of fairness and justice, they are not technical rules that can be invoked by minor, technical breaches. In maintaining the balance between swift enforcement of arbitral awards and legitimate testing of those fundamental norms, the Model Law and the Act require the demonstration of real unfairness, prejudice or practical injustice. In most, if not all cases, a party that claims to have suffered such unfairness or injustice should be able to show it with tolerable clarity and expedition, without a detailed re-examination of the facts or factual evaluation. There may be real unfairness or injustice if a party can demonstrate that it has been denied an opportunity to be heard on an important and material issue that could reasonably have made a real difference to the outcome of the arbitration. The Full Court found that no rule of natural justice was breached. 2.4 William Hare UAE LLC v Aircraft Support Industries Pty Ltd (2014) 290 FLR 233 William Hare UAE LLC (the plaintiff) and Aircraft Support Industries Pty Ltd (the defendant) were parties to an agreement which provided for the plaintiff to perform construction works at Abu Dhabi International Airport. A dispute arose between the parties about the final amount due to be paid to the plaintiff, as well as in relation to the payment of retention monies pursuant to the terms of the agreement. On 10 May 2011, the defendant executed a corrected version of an earlier letter that had been executed by both parties. The 10 May letter outlined the agreement reached between the parties in relation to the outstanding payments, including the payment of two instalments relating to retention monies. The defendant failed to pay the second instalment of the retention monies. The plaintiff served a request for arbitration which included a preliminary statement of relief sought, including an

9 8 order for payment of the second instalment of the retention monies, as well as the sum of US$50,000 representing the discount that the plaintiff applied for the purposes of settling the final account as outlined in the 10 May 2011 letter. The tribunal found that the plaintiff was entitled to an award for payment of the second instalment of the retention monies as well as the US$50,000 representing the discount to the final account, plus interest on the amounts awarded. The Decision The plaintiff sought enforcement of the arbitral award in the Supreme Court of New South Wales pursuant to section 8(2) of the Act. The defendant resisted enforcement, arguing that a breach of the rules of natural justice occurred in making the award and that it was contrary to public policy pursuant to section 8(7) of the Act. The defendant relied on the following grounds in supporting its claim that there was a breach of the rules of natural justice (at 236): Ground 1: The tribunal found that the plaintiff was entitled to US$50,000 even though a claim for payment of that sum was not made in the plaintiff's Statement of Claim and was not responded to by the defendant in its Defence, or otherwise and the tribunal failed to give reasons why the plaintiff was entitled to the US$50,000. Ground 2: The tribunal failed to consider the defendant's contention that the alleged agreement embodied in the 10 May 2011 letter had to be a permitted variation to the agreement in order to be enforceable and the tribunal further failed to give reasons why the alleged agreement was a variation, or if it was not, whether the agreement operated in accordance with its terms. Ground 3: The tribunal refused to allow the defendant to rely upon certain supplementary grounds of defence and proceeded with the hearing de bene esse prior to its determination of whether the supplementary defences could be relied upon. Ground 4: The tribunal failed to give reasons for the rejection of each of the defences relied upon by the defendant as originally propounded. Ground 5: The tribunal failed to give reasons why the sums claimed by the plaintiff were due under the agreement. Ground 6: The tribunal failed to give reasons why the sums due under the agreement were otherwise than as contended by the defendant. His Honour Justice Darke reviewed the way in which the arbitral proceeding progressed in some detail. His Honour then referred to recent case law including TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 311 ALR 387 and Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) (2012) 201 FCR 535 in relation to the concept of natural justice in international commercial arbitration.

10 9 Justice Darke dealt with each of the defendant's grounds of objection as follows: Ground 1: His Honour found that although the reasons were 'very brief', the award adequately disclosed the tribunal's essential reasons on the payment of the US$50,000 and it was not for the Court to determine whether the tribunal was correct or incorrect in that decision. His Honour added that in the content of an international arbitration, the reasons given by the tribunal appeared adequate. However, Justice Darke then considered there was a breach of natural justice in the tribunal's award of US$50,000 in circumstances in which the claim was not included in the plaintiff's Statement of Claim. In this respect, His Honour found that, in the circumstances in which the arbitration was conducted, there had been a breach of the rules of natural justice. His Honour held (at 249): fairness required the tribunal to give notice of its view to the parties (especially to the defendant) and invite them to address the claim, including by the making of submissions In my view, by reference to accepted principles of natural justice, real unfairness and real practical injustice has been shown to have been suffered by the defendant to that extent. Ground 2: Justice Darke found that there was no breach of the rules of natural justice in relation to Ground 2. His Honour found that there was no discernible unfairness or practical injustice to the defendant in the manner in which the tribunal dealt with this aspect of the case. Further, there was no deficiency in the reasons provided for the tribunal reaching its conclusion that the parties had reached a binding agreement. Ground 3: Justice Darke found that there was no discernible unfairness or practical injustice to the defendant in relation to the manner in which the application for leave to rely on supplementary defences was dealt with by the tribunal. Grounds 4, 5 and 6: Justice Darke addressed the defendant's submissions in relation to the tribunal's alleged failure to give reasons together. His Honour concluded that the defendant had failed to show that any particular defence was not considered by the arbitral tribunal or that the defendant suffered real unfairness or prejudice was suffered as a result. His Honour then went on to consider whether the award could be enforced in part. After reviewing case law from various jurisdictions and the legislative history of the Act, His Honour concluded that (at 265): In my opinion, s 8 of the Act should be construed so as to allow enforcement (pursuant to s 8(2) or s 8(3)) of a part of an award, and allow refusal of enforcement (pursuant to s 8(7)) of part of an award, where severance of the award is possible. That is to say, "the award" as it appears in those sub-sections should be construed as including part of the relevant award. It seems to me that this construction is not only available as a matter of language, it is consistent with the objects of the Act, and promotes rather than hinders the efficient and fair enforcement of international arbitral awards. Further, it accords with the approach taken internationally in relation to similar legislation. Accordingly, His Honour ordered that the award relating to the payment of the US$50,000 should be severed and that the award should otherwise be enforced pursuant to section 8(2) of the Act.

11 International Relief and Development Inc v Ladu [2014] FCA 887 The International Relief and Development Inc (the applicant) and Mr Ladu (the respondent) were parties to an employment agreement, pursuant to which, Mr Ladu was employed as a Program Manager in South Sudan. Following concerns being raised by an employee of the applicant, a review was conducted and Mr Ladu's employment was subsequently terminated. As a result of further information that became available to the applicant following termination of Mr Ladu's employment, the applicant learned that Mr Ladu had breached his employment agreement and the applicant's Employee Code of Conduct by being the Managing Director, Chairman and shareholder of a company called Ladu & Brothers Company Ltd. Mr Ladu commenced proceedings in South Sudan, alleging unlawful termination of his employment. The applicant commenced arbitration in Virginia, United States, in accordance with the dispute resolution provision in the employment agreement. The arbitration proceeded and Mr Ladu failed to take any part in it. The arbitrator found in favour of the applicant. The applicant sought to enforce the award in the United States. Mr Ladu unsuccessfully challenged the enforcement proceedings. The Decision The applicant sought to enforce the award in Australia. In challenging the Australian enforcement proceedings, Mr Ladu raised four issues: a question as to whether Mr Ladu was given notice of the appointment of the arbitrator; a question as to whether Mr Ladu was given notice of the hearing of the arbitration; whether Mr Ladu was otherwise unable to present his case in the arbitration proceedings; and whether enforcing the award would be contrary to public policy, in that a breach of the rules of natural justice has occurred in connection with the making of the arbitral award. Counsel for Mr Ladu conceded that if he failed to make out any of the first three grounds, he would fail to establish that enforcement would be in breach of public policy. In considering the issues raised by Mr Ladu, Her Honour Justice Kenny of the Federal Court of Australia held that Mr Ladu failed to establish that there was a breach of natural justice. Her Honour referred to the objects of the Act, as specified in section 2D, noting that (at [168]): in determining [the applicant's] present application and in interpreting the [Act], the Court is obliged to have regard to the objects of the [Act] including, in this particular case, that effect be given to Australia's obligations under the New York Convention Justice Kenny ordered that the award be enforced pursuant to section 8(3) of the Act. 2.6 Gujarat NRE Coke Limited v Coeclerici Asia (Pte) Ltd (2013) 304 ALR 468 Coeclerici Asia (Pte) Ltd (Coeclerici) and Gujarat NRE Coke Limited (Gujarat) were parties to a contract of sale. The contract was governed by English law and provided for disputes to be resolved by arbitration in England. A dispute arose between the parties and an arbitration was commenced. Prior to the hearing, the parties reached a settlement which provided that Coeclerici would be entitled to a 'consent

12 11 award' if Gujarat failed to make any of the payments under the settlement agreement. Gujarat defaulted. The arbitral tribunal contacted Gujarat to request reasons why the tribunal should not make an award in Coeclerici's favour the following day. Gujarat submitted that it did not have a reasonable opportunity to present its position. The tribunal disagreed and made an award in favour of Coeclerici. Gujarat appealed to the English High Court of Justice, seeking to have the award set aside. The application was dismissed. First Instance Decision Coeclerici applied to the Federal Court of Australia for the award to be enforced under section 8(3) of the Act: see Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd [2013] FCA 882. Gujarat resisted enforcement of the award on the basis that: Gujarat was not provided with a reasonable opportunity to present its case; and there was a breach of the rules of natural justice and enforcement would therefore be contrary to public policy. In considering the application, His Honour Justice Foster found that Gujarat had 'ample opportunity and more than a reasonable opportunity in which to put their case before the arbitrators'. His Honour also noted that similarity of the submissions and evidence in the English High Court proceedings and held that there was an issue estoppel regarding the 'reasonable opportunity' question because it had already been determined by the English High Court. His Honour also held that the matter may also be res judicata. Further, even if there were no issue estoppel or res judicata, it would generally be inappropriate for an enforcement court of a New York Convention country to reach a different conclusion on the same question as a court at the seat of the arbitration. (c) The Appeal Gujarat unsuccessfully appealed to the Full Court of the Federal Court of Australia. In a unanimous judgment, the Court agreed with His Honour Justice Foster's conclusion that Gujarat had been given a reasonable opportunity to be heard and that it would generally be inappropriate for an enforcement court of a New York Convention country to reach a different conclusion on the same question as that reached by a court at the seat of the arbitration. 2.7 Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) (2012) 201 FCR 535 Traxys Europe SA (Traxys) and Balaji Coke Industry Pvt Ltd (Balaji) were parties to a contract for the sale of metallurgical coke. Traxys was, in fact, a party interposed between a sale contract between Balaji and Al Nasr Company to provide Balaji with a greater time frame within which to pay for the coke delivery from Al Nasr Company. In the event, Balaji failed to pay for the coke delivery. Traxys paid for the delivery, took control of the coke shipment and resold the product to a third party. In the consequential arbitral proceeding, Traxys claimed damages against Balaji for breach of contract, seeking the difference between the sale price of the coke shipment under the contract and the amount realised under the subsequent sale between Traxys and the third party. The arbitral tribunal found in favour of Traxys and ordered Balaji to pay compensation of 427,576. Both parties commenced proceedings as follows: Balaji commenced proceedings in India to set aside the award and restrain Traxys from enforcing the award; and

13 12 Traxys commenced proceedings in England to recognise and enforce the award and restrain Balaji from challenging the award in Indian courts. Traxys succeeded in its applications in England. The Decision Traxys then applied to have the award enforced in Australia under section 8(3) of the Act. Balaji resisted enforcement on the basis that (amongst other things): it is a pre-requisite to enforcement and consistent with public policy under the Act that Traxys first prove that there are assets within the enforcement jurisdiction, which Traxys did not do; and to enforce the award in Australia notwithstanding the existence in India of the proceedings to set it aside and an interim court order restraining Traxys from enforcing the award would be contrary to public policy under the Act. His Honour Justice Foster rejected Balaji's arguments and ordered the enforcement of the award under section 8(3) of the Act. In doing so, His Honour held (at [105]): [105] the scope of the public policy ground of refusal is that the public policy to be applied is that of the jurisdiction in which enforcement is sought, but it is only those aspects of public policy that go to the fundamental, core questions of morality and justice in that jurisdiction which enliven this particular statutory exception to enforcement. The public policy ground does not reserve to the enforcement court a broad discretion and should not be seen as a catch-all defence of last resort. It should not be used to give effect to parochial and idiosyncratic tendencies of the courts of the enforcement state. This view is consistent with the language of s 8(7), the terms of s 8(7A), the text of Art V(2) of the [New York] Convention, the fundamental objects of the [New York] Convention and the objects of the [Act]. This approach also ensures that due respect is given to Convention-based awards as an aspect of international comity in our interconnected and globalised world which, after all, are the product of freely negotiated arbitration agreements entered into between relatively sophisticated parties. 2.8 Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd (2011) 277 ALR 415 Uganda Telecom Ltd (UTL) and Hi-Tech Telecom Pty Ltd (Hi-Tech) were parties to a Telecommunication Service Contract for the supply by UTL of telecommunications switching services and facilities to Hi-Tech in order to facilitate conduct of its international telecommunications traffic to UTL and to other destinations in Uganda. A dispute arose relating to alleged breaches of the agreement by Hi-Tech and UTL commenced arbitration proceedings. Hi-Tech did not take any part in the arbitration. The arbitrator subsequently issued an award in UTL's favour for general damages, special damages, interest and costs. The Decision UTL applied to the Federal Court of Australian for the enforcement of the award pursuant to section 8(3) of the Act. Hi-Tech resisted UTL's application on a variety of grounds including that the award was contrary to public policy because the amount of general damages awarded by the arbitrator was arrived at by an erroneous reasoning process involving mistakes of fact and law. His Honour Justice Foster rejected Hi-Tech's submissions, holding that (at 29-30): Section 8(5) of the Act does not permit a party to a foreign award to resist enforcement of that award on such a ground. Nor is it against public policy for a foreign award to be enforced by this Court without examining the correctness of the reasoning or the result reflected in the award. The whole rationale of the Act, and thus the public policy of Australia, is to enforce such awards

14 13 wherever possible in order to uphold contractual arrangements entered into in the course of international trade, in order to support certainty and finality in international dispute resolution and in order to meet the other objects specified in s 2D of the Act. Further, His Honour noted that (at 33): Section 8(7) preserves the public policy ground. However, it would be curious if that exception where the source of some general discretion to refuse to enforce a foreign award. Whilst the exception in s 8(7) has to be given some room to operate, in my view, it should be narrowly interpreted consistently with the United States cases. The principles articulated in those cases sit more comfortably with the purposes of the [New York] Convention and the objects of the Act. 2.9 IMC Aviation Solutions Pty Ltd v Altain Khuder LLC (2011) 282 ALR 717 IMC Mining Inc (IMC Mining) and Altain Khuder LLC (Altain Khuder) were parties to a mining services agreement. A dispute arose in relation to IMC Mining's alleged non-performance of its obligations. Altain Khuder commenced arbitration and obtained an award in its favour. The award ordered that IMC Mining to pay a sum of money to Altain Khuder. The award also ordered that a related party, IMC Aviation Solutions Pty Ltd (IMC Solutions), pay the sum on behalf of IMC Mining. The Decision Altain Khuder applied to the Supreme Court of Victoria for the award to be enforced against IMC Mining and IMC Solutions on an ex parte basis. His Honour Justice Croft made orders for the enforcement of the award but reserved the rights of the IMC Mining and IMC Solutions to apply for the orders relating to enforcement to be set aside. IMC Solutions applied for the orders relating to enforcement to be set aside on the following grounds: that the award was not a 'foreign award', binding on the parties (as required by sections 8(1) and (2) of the Act); in the alternative, the award was not, vis a vis, IMC Solutions, valid under the law of Queensland; in the alternative, IMC Solutions was not given proper notice of the appointment of the arbitrators or of the arbitration proceedings and/or was unable to present its case in the arbitration proceedings (section 8(5)(c) of the Act); in the alternative, the award deals with a difference not contemplated by, or falling within the terms of, the submission to arbitration and/or contains a decision on a matter beyond the scope of the submission to arbitration (section 8(5)(d) of the Act); in the alternative, the composition of the arbitral tribunal and/or the arbitral authority was not in accordance with the agreement of IMC Solutions and was not, vis a vis IMC Solutions, in accordance with the law of Mongolia (section 8(5)(e) of the Act); in the alternative, to enforce the award would be contrary to public policy (section 8(7) of the Act). IMC Solutions' submission regarding public policy was based on its assertion that, for the reasons advanced in relation to the grounds for resisting enforcement under section 8(5) of the Act, IMC Solutions was denied natural justice in the arbitration proceedings. As a result, IMC Solutions did not have an opportunity to respond to the materials relied upon by Altain Khuder in the arbitration.

15 14 His Honour Justice Croft considered some authorities relating to public policy including Sir Anthony Mason's findings in Hebei Import & Export Corporation v Polytek Engineering Co Ltd [1999] 1 HKLRD 665, that there had not been a breach of any notions of justice and morality in Hong Kong (at 70-72). Justice Croft held, amongst other things, that: IMC Solutions was not entitled to 'relitigate and revisit the issues the subject of the arbitration' (at [69]); and IMC Solutions had failed to establish that enforcement of the award would be contrary to public policy (at [116]). In addition, IMC Solutions was ordered to pay Altain Khuder's costs on an indemnity basis. IMC Solutions appealed to the Court of Appeal of the Victorian Supreme Court. (c) The Appeal The grounds of appeal did not include a challenge to the decision in relation to whether the award was contrary to public policy. The main issue for the Court of Appeal was to determine how the Act applies in circumstances in which the alleged award debtor (in this case, IMC Solutions) is not expressly named as a party to the relevant arbitration agreement. The Court of Appeal held that Altain Khuder had the legal burden of establishing before Justice Croft, on the balance of probabilities, that IMC Solutions was a party to the relevant arbitration agreement. The Court of Appeal held that the issue of whether IMC Solutions was a party to the arbitration agreement as well as the issue of whether IMC Solutions was estopped from resisting enforcement in Australia had to be re-decided according law. Her Honour Chief Justice Warren considered that it was inappropriate in the circumstances of the appeal to decide the two issues. However, the majority of the Court proceeded to do so and allowed IMC Solutions' appeal, setting aside all of the orders of Justice Croft in so far as they related to IMC Solutions Yang v S&L Consulting and Anor [2009] NSWSC 223 Mr Yang engaged a migration agent, Stephen Lee to assist with obtaining and Australian residency visa application for Mr Yang and his family. After obtaining the visa, Mr Yang entered into a contract with S&L Consulting, pursuant to which Mr Yang agreed to pay $500,000 for shares in an Australian company that he would hold for three years. S&L Consulting made certain guarantees under the contract, including that Mr Yang and his family's permanent residency would not be revoked by the government unless they failed to reside in Australia for a sufficient period during the three year period and to purchase all of Mr Yang's shares if a third party purchaser was not found at the expiry of the three year period. As part of his permanent residency application, Mr Yang had made undertakings to the Australian Government that, if he was granted a business skills visa, he would make genuine efforts to actively participate as an owner or part-owner in the day to day management, at a senior level, of a new or existing business in Australia. Following the three year period, a purchaser for Mr Yang's shares had not been found and S&L Consulting did not pay Mr Yang the $500,000. Mr Yang obtained an arbitral award against S&L Consulting and Mr Lee (who was guarantor of S&L Consulting's obligations) for the $500,000, plus penalties and costs. The Decision Mr Yang applied to the Supreme Court of New South Wales to have the award enforced. S&L Consulting opposed the application on public policy grounds, submitting that the guarantee

16 15 relating to Mr Yang's (and his family's) permanent residency was contrary to the policy of the law of Australia by providing an incentive to Mr Yang not to comply with the undertakings he had made to the Australian Government. His Honour Justice White held that public policy considerations did not prevent the enforcement of the award. His Honour commented that: The guarantee granted to Mr Yang under the contract was not unlawful or for an unlawful purpose. His Honour noted that if Mr Yang failed to be involved at a senior level of a new or existing business, the Minister retained a discretionary power to cancel his visa (at paragraph [18]). Even if the guarantee was for an unlawful purpose, it would not be contrary to public policy to enforce an award in respect of it unless the guarantee was otherwise unenforceable on the basis of relevant contract law principles (at paragraph [19]). In any event, if the guarantee was found to be unlawful, it could be severed and given the award did not rely on the guarantee, severance would not impact on the award, or its enforcement (at paragraph [24]) International Movie Group Inc & Anor v Palace Entertainment Corporation Pty Ltd (1995) 128 FLR 458 International Movie Group Inc (IMG) and The Movie Group Inc (TMG) were related entities, one of which was party to thirteen separate contracts with either Palace Films Pty Ltd or Palace Entertainment Corporation relating to the licensing of motion picture distribution rights in Australia and New Zealand. Palace Entertainment Corporation Pty Ltd, the defendant in the proceeding, was not named as a party to any of the thirteen contracts. A number of disputes arose in relation to the thirteen contracts and they were referred to arbitration. The arbitrator rendered an award in favour of IMG, including a nominated sum of damages, as well as an order providing that if IMG sold or licensed a particular film in Australia or New Zealand in the future, 'any net sums received by [IMG] from such sales shall reduce the amount due'. The Decision IMG sought to have the award enforced in the Supreme Court of Victoria and Palace argued that enforcement of the award would be contrary to public policy based on: Inevitable practical difficulties of interpretation or enforcement. In this respect, Palace relied on an assumption that the contracts were made with different entities. The Court found that, on the facts, there was nothing to suggest that any other legal entity other than the defendant was a party to any of the contracts. Further, the Court found that there was no force in an argument that findings in the favour of the plaintiffs collectively, would affect the operation or validity of the award (at 23) and dismissed the other aspects of the defendant's submissions on the issue (at 24). The submission that the award was not final as it did not finally determine the rights of the parties. The Court held that the award was uncertain on its face on the basis that the damages may have required an adjustment by reference to future events (at 24). 10 To the extent that the award was unenforceable, it was severable. 10 As Pryles, M and Garnett, R in 'Recognition and Enforcement of Foreign Awards under the New York Convention in Australia and New Zealand' Journal of International Arbitration(2008) 25(6): , at , have commented, the parties and the Court appeared to accept that uncertainty was a legitimate ground for refusing enforcement of the award.

17 Resort Condominiums International Inc v Bolwell & Anor (1993) 118 ALR 655 Resort Condominiums International Inc (RCI) entered into a licence agreement with the second respondent, RCI Australia, pursuant to which RCI granted RCI Australia rights to the RCI Exchange Program. RCI Australia and Mr Bolwell (the Managing Director and Principal of RCI Australia) agreed to pay RCI a royalty. RCI alleged that RCI Australia breached the agreement by failing to pay the annual royalty fee and breaching other conditions of the licence agreement. A Judge of the United States District Court granted a preliminary injunction against RCI Australia and made certain procedural orders, including a direction that all further orders be stayed pending arbitration in accordance with the licence agreement. Two days later, an arbitrator made an interim arbitration order and award in essentially similar terms to the order of the District Court Judge. The orders were interlocutory and procedural and did not resolve the dispute between the parties. The Decision RCI sought enforcement of the award in Australia and RCI Australia opposed enforcement on the grounds including that enforcement should be refused in the court's general discretion or on public policy grounds. His Honour Justice Lee accepted RCI Australia's arguments and refused enforcement. In relation to the public policy argument, His Honour found that (at 20): Many of the orders of the present kind are contrary to the public policy of Queensland not only in the sense that many of them as drafted would not be made in Queensland, particularly without undertakings as to damages and appropriate security and in certain other respects, but also because of possible double vexation and practical difficulties in interpretation and enforcement In my view, even if it be correct that the [interim arbitral award was] in fact an "arbitral award" within the meaning of the Convention and a "foreign award" within the meaning of the Act I would refuse the application on the grounds referred to in s 8(7) of the Act (art V(2) of the Convention), or alternatively in the exercise of my discretion. 3 Examples of Australian case law where public policy was raised in support of an application for an arbitral award to be set aside The following cases are listed in order of most recent to oldest: 3.1 Hebei Jikai Industrial Group Co Ltd v Martin [2015] FCA 228 This case relates to an application for an arbitral award to be set aside pursuant to Article 34 of the Model Law. In 2012, Hebei Kikai Industrial Group Co Ltd (Hebei) and Mr Martin were parties to commercial proceedings in the Supreme Courts of New South Wales and Queensland. The proceedings also involved RUS Holdings (Australia) Pty Ltd (RUS Holdings), of which Mr Martin was a director and both Hebei and Mr Martin were shareholders. The parties agreed to settle their disputes and discontinue all relevant proceedings. The settlement was recorded in a Deed of Settlement which provided a mechanism to finally resolve an issue in relation to whether Mr Martin had breached his duties as a director of RUS Holdings, or its subsidiary, RUS Mining Services Pty Ltd (RUS Mining). The procedure involved appointing an auditor to prepare a report disclosing the basis for a breach of duty by Mr Martin. Mr Martin could dispute the finding by referring the matter to arbitration. The