08 Apr 2011

High Court to consider international arbitration and bias issues

by Sid Wang, James Robinson

The Michael Wilson & Partners Limited case will test the operation of a foreign arbitral award made after an Australian judgment.

The High Court of Australia has a prime opportunity to provide much-needed clarification of general principles of international arbitration law. The opportunity comes at a time when there is a significant movement in Australia to promote international arbitration.

The High Court has granted a foreign law firm, Michael Wilson & Partners Limited (MWP), special leave to appeal from a decision of the NSW Court of Appeal on questions regarding the status of foreign arbitral awards in Australia.

The trial, which was heard in 2009, related to the alleged diversion of profits and business opportunities by three Australians employed by MWP to work on energy and resources projects in Kazakhstan. The trial judge awarded more than $8 million against two of the Australians, partly on the basis that they were accessories to breaches of fiduciary duties by the third man who the judge found to be the "backbone" of the conspiracy. MWP pursued the third Australian separately in an arbitration in London, where he was later found liable, but on a more limited basis than the two Australians in NSW.

The focal point of the High Court appeal is whether it is an abuse of process for MWP to hold a better result in NSW against the accessories than it obtained against the principal in the London arbitration and will test the operation of a foreign arbitral award made after an Australian judgment.

If the High Court follows leading English authorities such as Sun Life v Lincoln National, the legal result would be clear: an arbitral award is not in its nature available to third parties for any purpose, so the two Australians found by the NSW Court to have accessorial liability could not rely on a private and confidential arbitral award to which they are not party to later defeat their judgment liability.

In addition, the High Court will consider whether there was an apprehension that the senior NSW judge who heard a trial was biased and whether the defendants waived their opportunity to complain about apprehended bias.

The High Court is expected to hear the matter in June this year. Clayton Utz partner Sid Wang acts for MWP.

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