Silver service - enforcing foreign arbitral awards in NSW

By Mathew Stulic.

Key Points:

What can you do when a party does not co-operate in respecting an international arbitration award made against it?

The traditional answer is that under the New York Convention on the Enforcement of Foreign Arbitral Awards 1958 you can enforce the award wherever the recalcitrant party has assets (and enforce the award more easily than an equivalent foreign judgment).

A recent case in the Supreme Court of NSW gives a very nice illustration of how this process works when enforcing an award in NSW and, in particular, how a requirement to serve documents relating to the enforcement on a unco-operative party is governed by Australian law (and not the law relating to the party's home jurisdiction).

In ML Ubase Holdings Co Limited v Trigem Computer Inc [2005] NSWSC 224, the plaintiff was a Malaysian corporation seeking to enforce an arbitral award rendered in New York against a Korean corporation. The Korean company had failed to pay the award. The Malaysian company sought to enforce the award in Australia on the basis that Korean company had assets in Australia. In granting the plaintiff leave to proceed and entering judgment against the defendant, the Court confirmed that as long as documents are served on foreign defendants in compliance with the procedural laws applicable in NSW, there is no requirement to comply with the laws of the country in which the defendant is being served.

Enforcement of a foreign arbitral award in Australia

A party seeking to enforce a foreign arbitral award in Australia faces two choices:

• enforce the award in accordance with section 8(2) of the International Arbitration Act 1974 (Cth) through the application of the Foreign Judgments Act 1991 (Cth); or
• enforce the award by virtue of the uniform Commercial Arbitration Acts,

and in accordance with the respective State or Territory Supreme Court Rules in which the award is to be enforced. The plaintiff in Trigem opted for the former course.

The NSW enforcement proceedings

The plaintiff filed a summons which sought:

• leave to enforce the arbitral award made in its favour in New York, as a judgment of the NSW Supreme Court; and
• judgment be entered for the plaintiff in the same amount as that contained in the arbitral award.

The plaintiff had personally served the summons that it filed in the Supreme Court of New South Wales on the president of the defendant company in Korea. The defendant did not file an appearance in the NSW Supreme Court by the time required in the summons, nor did it appear in Court on the return date of the summons.

Leave to proceed in the absence of an appearance by a defendant under the NSW Supreme Court Rules is granted if service of the originating process is proved and if the requirements of the Rules are met. Justice Einstein had to consider in Trigem what the requirements are for the effective service of documents on foreign defendants.

No requirement to comply with foreign law

Justice Einstein confirmed that the proper approach to applications for leave to proceed against defendants served outside Australia was set down by the High Court of Australia in Agar v Hyde (2000) 201 CLR 552, which established:

• if a defendant served outside Australia with an originating process filed in the Supreme Court of New South Wales has not entered an appearance, an applicant for leave to proceed must demonstrate that one or more of the cases set out in Part 10 Rule 1A of the Supreme Court Rules applies;
• it is sufficient for the plaintiff to demonstrate that it falls within one of the relevant sub-rules of Part 10 Rule 1A by making reference to the allegations in the summons;
• it is not necessary to demonstrate that those allegations will be made good at trial; and
• once a claim is seen to be of the requisite kind, the proceeding falls within the relevant subparagraph, and service outside Australia is permitted, and prima facie, the plaintiff should have leave to proceed.

Part 10 Rule 1A of the Supreme Court Rules sets out the various actions for which an originating process may be served outside Australia.The summons in Trigem fell squarely within Part 10 Rule 1A(u)(iii) of the Supreme Court Rules, namely where the proceedings are brought to enforce in NSW, an arbitral award wherever made.

He noted that in the earlier NSW case of Williams v Lips - Heerlen BV (unreported, NSW Sup Ct, 1/11/1991), Justice Giles dealt with the contention that non-compliance with the law of the country in which the court documents are being served (in that particular case, the Netherlands) will nullify any service. Justice Giles held that the validity of the service is to be judged by compliance with the Supreme Court Act and Rules and there is no requirement that service in accordance with the Rules also comply with the law of the country of service.

Justice Einstein also referred to the possible avenue open to the plaintiff to effect service of the NSW proceedings under the Treaty on Judicial Assistance in Civil and Commercial Matters between Australia and the Republic of Korea. In this regard, it was held that parties seeking to serve documents on foreign entities have an option to serve documents under the Treaty as an alternative course. However, while a party may choose to take advantage of the mechanisms under the Treaty, those mechanisms do not specify a mandatory method of service and the plaintiff in Trigem was entitled to serve the defendant personally as it had done.

It is interesting to note that the presence of a treaty such as the one in this case provides no procedural advantage in cases where you are seeking to enforce an arbitration award against assets outside the jurisdiction in question (in this case, Korea). However, a judicial assistance treaty is the most effective option for service of proceedings in cases where you anticipate that the final outcome will have to be enforced in the home jurisdiction of the defendant (as it will nullify any argument that service was not properly effected and therefore not recognised by the foreign court in question).

The decision

As personal service had been effected on the defendant and the requirements set down by the High Court in Agar v Hyde had been met, Justice Einstein granted leave for the plaintiff to proceed against the defendant and entered judgment for the amount of the arbitral award rendered in New York.

Comments

Australia has long been recognised as a jurisdiction that has a supportive legislative and judicial regime for the conduct of international commercial arbitration and the enforcement of international arbitral awards. The decision in Trigem is a further example of the supportive machinery that courts in Australia provide in order to facilitate the enforcement of international arbitral awards. Although the decision was not challenged (under the restrictive provisions of the Article V of the New York Convention) it is noteworthy that the enforcement of the award took three months.

The decision is also a timely reminder that a party seeking to serve an originating process filed in the NSW Supreme Court can serve it personally on a foreign corporation. Furthermore, the manner of service need not comply with the requirements of the laws of the country in which the foreign defendant is domiciled to constitute effective service for the purposes of proceedings in the NSW Supreme Court.

For further information, please contact Mathew Stulic.