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22 Jun 2009

An update on the recognition and enforcement of foreign arbitral awards in Australia

by Doug Jones, Nicholas Lazarou

A party that obtains an award in an overseas arbitration may seek recognition and enforcement of that award by an Australian Court under section 8 of the International Arbitration Act 1974 (Cth). Section 8 also contains grounds under which enforcement of foreign awards "may" be refused by the Court (subsections 8(5), (7) and (8)).

A glance over recent Australian decisions provides some useful insights into the practice of enforcement of foreign awards and highlights particular issues in the event of non-appearance by a defendant to challenge enforcement. These cases are notable illustrations of the robust approach of the courts to the recognition and enforcement of foreign awards.

An enforcement application in the Federal Court

Justice Emmett, in the Federal Court, recently considered an application by a Chinese corporation, China Sichuan Changhong Electric Co Ltd, for leave to enforce a foreign arbitral award against an Australian company, CTA International Pty Ltd (China Sichuan Changhong Electric Co Ltd v CTA International Pty Ltd [2009] FCA 397).

The award was issued by the Mianyang Arbitration Commission in the People's Republic of China, and resulted from an arbitration pursuant to an exclusive Sales Agreement for the distribution of the Chinese company's products in Australia and New Zealand.

The Australian defendant did not appear before the Court at the enforcement application.

The Court concluded, on the evidence submitted by the plaintiff, that the Chinese Award satisfied the requirements for enforcement as a "foreign award" under the Act, and that the Sales Agreement between the parties had contained a relevant arbitration clause. In dealing with the defendant's absence, the Court considered the issue of whether the defendant had been properly notified of the enforcement application, and, finding that it had, granted leave to the plaintiff to enforce the Award.

Recent decisions of the NSW Supreme Court

A comparable scenario featured in a recent decision of the NSW Supreme Court involving an application by a Singapore company, Transpac Capital Pte Limited, to enforce an award obtained against an Australian party in a Singapore arbitration under the rules of the Singapore International Arbitration Centre (Transpac Capital Pte Limited v Buntoro [2008] NSWSC 671). The defendant in the application, once again an Australian company, similarly did not appear at the hearing before Justice Hall.

The Court determined on the evidence before it that the Singapore arbitration had been conducted pursuant to a relevant arbitration agreement between the parties, and that the resulting Award was eligible for enforcement as a "foreign award" under the Act. In the absence of a challenge by the defendant, the Court went on to consider of its own accord the question of whether any grounds applied, under section 8 of the Act, for it to refuse enforcement of the Singapore Award. Concluding that none applied, the Court granted leave to the plaintiff to enforce the Award.

More recent still is the decision of Justice Hammerschlag, in another enforcement application before the NSW Supreme Court in which a Chinese plaintiff sought enforcement of a Chinese arbitral award under the China International Economic and Trade Arbitration Commission (CIETAC) (Xiaodong Yang v S&L Consulting Pty Ltd & Anor [2008] NSWSC 1051). In analogous circumstances, the defendants, one of which was an Australian company, did not make an appearance before the Court.

Having determined that the plaintiff's evidence met the criteria under section 8 of the Act, and that proper notice of the application had been given to the defendants, the Court granted leave to enforce to the plaintiff, concluding that there was "no reason discernible from the material relied upon why this Court should not enforce the award".

Conclusion

These recent decisions demonstrate the ways in which courts may exercise their discretion under the Act in considering whether grounds exist for refusing enforcement of foreign awards. This is a particularly relevant issue where, as in the above cases, a defendant does not appear before the court at the enforcement application.

More generally, the above outcomes are a reflection of the straightforward practice of achieving recognition and enforcement of foreign arbitral awards in Australia.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.