30 Jun 2011

Resistance is futile - Uganda Telecom and the grounds for resisting enforcement of foreign awards

by Mark Gillard

Parties have only very limited scope to resist enforcement of foreign awards in the wake of the 2010 amendments to the International Arbitration Act

Following the 2010 amendments to the International Arbitration Act 1974 (Cth), courts have been reticent to impugn the substance of an award, or the procedure adopted by the arbitral tribunal, in the course of an application to enforce an award.

A recent case demonstrates once again that there are very limited grounds upon which parties may be able to resist enforcement of an award. In Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd [2011] FCA 131, the Federal Court held that:

  • there is no general discretion to refuse enforcement; and
  • the public policy ground for refusing enforcement under the Act should be interpreted narrowly and should not give rise to any sort of residual discretion.

The 2010 amendments to the Act

The International Arbitration Amendment Act 2010 introduced some important changes to promote the objectives of international arbitration as an efficient, impartial, enforceable and timely method by which to resolve international commercial disputes.

In respect of the enforcement of foreign arbitral awards, section 8 of the new Act has under gone some important changes. First, the requirement for the court to grant leave for enforcement under section 8(3) of the Act was removed. Further, a new section 8(3A) was added which expressly limits the grounds for refusing enforcement to the narrow grounds set out in sections 8(5)-(7) of the Act, which mirror the grounds for the refusal of enforcing an award under section 5 of the New York Convention:

(a) a party to the arbitration agreement in pursuance of which the award was made, was under some incapacity at the time when the agreement was made;

(b) the arbitration agreement is not valid under the law applicable to it;

(c) a party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his or her case in the arbitration proceedings;

(d) the award deals with a difference not contemplated by, or not falling within the terms of, the submission to arbitration, or contains a decision on a matter beyond the scope of the submission to arbitration;

(e) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or, where applicable, the law of the country where the arbitration took place;

(f) the award has not yet become binding on the parties to the arbitration agreement or has been set aside or suspended by a competent authority;

(g) the subject matter of the difference between the parties to the award is not capable of settlement by arbitration under the laws in force in the State or Territory in which the court is sitting; or

(h) to enforce the award would be contrary to public policy.

In addition to these amendments, the new Act introduced other changes aimed to support the efficient enforcement of foreign awards. For example, a new section 39 set out matters which a court must take into consideration when enforcing a foreign award under section 8 of the Act. In particular, section 39(2) states that a court or authority must have regard to the objects of the Act. The objects of the Act are set out in a new section 2D and include:

(a) to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes;

(b) to facilitate the use of arbitration agreements made in relation to international trade and commerce; and

(c) to facilitate the recognition and enforcement of arbitral awards made in relation to international trade and commerce.

Under section 39(2), a court must also have regard to the fact that:

(a) arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes; and

(b) awards are intended to provide certainty and finality.

These types of considerations are clearly intended to weigh in favour of the ability of successful parties to enforce awards. They also have the effect of allowing arbitrators more latitude in dealing with parties in hearings (for example, limiting time for submissions or declining to hear submissions on certain points). This is because claims of procedural deficiencies in an arbitral hearing (such as breach of natural justice) are much less likely to risk providing the aggrieved party with a ground for resisting enforcement of the award ultimately made by the arbitral tribunal. Prior to the insertion of these new provisions, parties had more scope to argue that they had been unable to present their case as a result of some procedural decision or direction by the arbitral tribunal.

The grounds for resisting enforcement in Uganda Telecom

In the Uganda Telecom case, the applicant, Uganda TelecomLtd, sought to enforce in Australia an award dated 29 April 2009. The award was made in 2009 by the arbitrator, Mr R Kafuko Ntuyo, who was appointed by the Centre for Arbitration and Dispute Resolution in Kampala, Uganda to arbitrate certain disputes which had arisen between Uganda Telecom Ltd and the respondent, Hi-Tech Telecom Pty Ltd. The arbitration took place in Uganda and the award was made in Uganda.

High-Tech sought to resist the enforcement of the award in the Federal Court and alleged that it did not appear before the arbitrator or participate in any way in the arbitration. It claimed that it never became aware that the arbitrator was purporting to embark upon an arbitration of the dispute. Hi-Tech also contended that that arbitration was never validly constituted. The court noted that the onus of establishing these grounds fell upon Hi-Tech, as the party resisting enforcement. Following consideration of the facts, the court rejected all of Hi-Tech's grounds for refusing enforcement.

No general discretion to refuse to enforce an award

In Uganda Telecom, Justice Foster considered whether, following the new Act, the Court had any general discretion to refuse to enforce the award. He concluded that:

"Whether or not, in 2004, there was a general discretion in the court to refuse to enforce a foreign award which was brought to the court for enforcement, the amendments effected by the 2010 Act make clear that no such discretion remains."

Prior to the 2010 amendments, Australian courts faced with a party seeking enforcement of an award had indicated that there was a general discretion available to a court to refuse to enforce an award (see, for example, Corvetina Technology Ltd v Clough Engineering Ltd (2004) 183 FLR 317 and Resort Condominiums International Inc v Bolwell [1995] 1 Qd R406).

The Court also indicated that parties should not attempt to identify a discretion to refuse enforcement in the oft-cited ground that enforcement would be contrary to public policy. Justice Foster observed that:

"Section 8(7)(b) preserves the public policy ground. However, it would be curious if that exception were the source of some general discretion to refuse to enforce a foreign award. Whilst the exception in s8(7)(b) has to be given some room to operate, in my view, it should be narrowly interpreted."

This narrow approach to interpreting the public policy exception to the enforcement of foreign awards is also consistent with international jurisprudence on this issue. A good example is United States jurisprudence relating to the public policy ground, such as Parsons & Whittemore Overseas Co, Inc v Société Générale De L’Industrie Du Papier 508 F 2d 969 (2d Cir 1974). It has also been observed in the United States that there is a "pro-enforcement bias" informing the New York Convention (see, for example, Karaha Bodas Co, LLC v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara 364 F 3d 274 at 306 (2004)).

Other recent decisions on enforcement under section 8

The Uganda Telecom case is consistent with the findings in other cases under section 8 of the Act which are consistent with the pro-enforcement policy introduced by the New York Convention and reflected in the Amendment, both of which demonstrate a concern with protecting the finality of awards.

For example, in Altain Khuder LLC v IMC Mining Inc (2011) 246 FLR 47, Justice Croft in the Victorian Supreme Court observed that it would be:

"intolerable if the law was that an award creditor could be required to relitigate matters which were the subject of the arbitration; possibly many times and in a multiplicity of courts, and with the possibility of inconsistent findings … Consequently, a party seeking to resist the enforcement of an award is entitled to rely on the grounds provided for in the Convention, and in the legislation applying its provisions, but is not entitled to venture further towards reconsideration of the findings, substantive or procedural, of the arbitral tribunal".

Both of these decisions demonstrate that there is only very limited scope for parties to resist enforcement of foreign awards in the wake of the 2010 amendments to the Act.


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