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1
The International Arbitration
Review
Law Business Research
Third Edition
Editor
James H Carter
2
The International Arbitration Review
Reproduced with permission from Law Business Research Ltd.
This article was first published in The International Arbitration Review, 3rd edition (published in June 2012 – editor James H Carter).
For further information please email [email protected]
The International
Arbitration Review
Third Edition
Editor
James H Carter
Law Business Research Ltd
The Law Reviews
THE MERgERs And ACquIsITIons REvIEw
THE REsTRuCTuRIng REvIEw
THE PRIvATE CoMPETITIon EnfoRCEMEnT REvIEw
THE dIsPuTE REsoLuTIon REvIEw
THE EMPLoyMEnT LAw REvIEw
THE PuBLIC CoMPETITIon EnfoRCEMEnT REvIEw
THE BAnkIng REguLATIon REvIEw
THE InTERnATIonAL ARBITRATIon REvIEw
THE MERgER ConTRoL REvIEw
THE TECHnoLogy, MEdIA And TELECoMMunICATIons REvIEw
THE InwARd InvEsTMEnT And InTERnATIonAL TAxATIon REvIEw
THE CoRPoRATE govERnAnCE REvIEw
THE CoRPoRATE IMMIgRATIon REvIEw
THE InTERnATIonAL InvEsTIgATIons REvIEw
THE PRoJECTs And ConsTRuCTIon REvIEw
THE InTERnATIonAL CAPITAL MARkETs REvIEw
THE REAL EsTATE LAw REvIEw
THE PRIvATE EquITy REvIEw
THE EnERgy REguLATIon And MARkETs REvIEw
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PuBLIsHER Gideon Roberton
BusInEss dEvELoPmEnT mAnAGER Adam sargent
mARKETInG mAnAGERs nick Barette, Katherine Jablonowska
mARKETInG AssIsTAnT Robin Andrews
EdIToRIAL AssIsTAnT Lydia Gerges
PRoduCTIon mAnAGER Adam myers
PRoduCTIon EdIToR Anne Borthwick
suBEdIToR Caroline Rawson
EdIToR-In-CHIEf Callum Campbell
mAnAGInG dIRECToR Richard davey
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vii
ACKnoWLEdGEmEnTs
The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:
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Acknowledgements
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Editor’s Preface ......................................................................................................xv James H Carter
Chapter 1 ARBITRATIon In THE AsEAn REGIon ............................ 1 Colin Ong
Chapter 2 ARGEnTInA ............................................................................. 19 Alberto DQ Molinario and María Laura Velazco
Chapter 3 AusTRALIA .............................................................................. 35 James Whittaker, Colin Lockhart and Jin Ooi
Chapter 4 AusTRIA .................................................................................... 47 Christian W Konrad and Philipp Peters
Chapter 5 BRAZIL ....................................................................................... 59 Luiz Olavo Baptista and Mariana Cattel Gomes Alves
Chapter 6 BuLGARIA ................................................................................. 81 Assen Alexiev and Boryana Boteva
Chapter 7 CAnAdA .................................................................................... 92 David R Haigh QC, Louise Novinger Grant, Sonya Morgan and Romeo Rojas
ConTEnTs
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Chapter 8 CHILE ...................................................................................... 109 Davor Harasić and Karina Cherro
Chapter 9 CHInA ..................................................................................... 120 Brenda Horrigan and Tracy Wu
Chapter 10 CoLomBIA ............................................................................. 136 Alberto Zuleta-Londoño and Daniela Vergel-Riascos
Chapter 11 CYPRus.................................................................................... 145 Alecos Markides
Chapter 12 dEnmARK .............................................................................. 155 René Offersen
Chapter 13 EnGLAnd And WALEs ...................................................... 165 Deborah Ruff, with Matthew Page and Daniel Meagher
Chapter 14 fInLAnd ................................................................................ 180 Jan Waselius and Tanja Jussila
Chapter 15 fRAnCE ................................................................................... 190 Jean-Christophe Honlet, Barton Legum and Anne-Sophie Dufêtre
Chapter 16 GERmAnY .............................................................................. 203 Hilmar Raeschke-Kessler
Chapter 17 HonG KonG ........................................................................ 217 Joseph Kwan and Kwok Kit Cheung
Contents
xi
Chapter 18 HunGARY .............................................................................. 227 András Szecskay and György Wellmann
Chapter 19 IndIA ....................................................................................... 237 Shardul Thacker
Chapter 20 IRELAnd ................................................................................ 250 Klaus Reichert SC
Chapter 21 IsRAEL ..................................................................................... 257 Shraga Schreck
Chapter 22 ITALY ........................................................................................ 284 Michelangelo Cicogna and Andrew Paton
Chapter 23 JAPAn ....................................................................................... 296 Hiroyuki Tezuka and Yutaro Kawabata
Chapter 24 KAZAKHsTAn ....................................................................... 307 Aigoul Kenjebayeva and Bakhyt Tukulov
Chapter 25 KoREA ..................................................................................... 313 Benjamin Hughes and Beomsu Kim
Chapter 26 LITHuAnIA ............................................................................ 321 Ramūnas Audzevičius, Tomas Samulevičius and Mantas Juozaitis
Chapter 27 LuxEmBouRG ..................................................................... 330 Véronique Hoffeld and Antoine Laniez
Contents
xii
Chapter 28 mALAYsIA ............................................................................... 340 Chong Yee Leong
Chapter 29 mExICo .................................................................................. 352 José María Abascal
Chapter 30 nETHERLAnds .................................................................... 365 Jan Willem Bitter and Charlotte de Vink
Chapter 31 nIGERIA .................................................................................. 385 Babajide Ogundipe and Lateef Omoyemi Akangbe
Chapter 32 PAKIsTAn ................................................................................ 388 Mansoor Hassan Khan
Chapter 33 PoLAnd .................................................................................. 394 Wojciech Kozłowski, Michał Jochemczak and Katarzyna Kempa
Chapter 34 PoRTuGAL ............................................................................. 404 José Carlos Soares Machado and Mariana França Gouveia
Chapter 35 RomAnIA ............................................................................... 411 Tiberiu Csaki
Chapter 36 RussIA ..................................................................................... 421 Mikhail Ivanov and Inna Manassyan
Chapter 37 sCoTLAnd ............................................................................ 434 Lord Dervaird
Contents
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Chapter 38 sInGAPoRE ............................................................................ 441 Chong Yee Leong
Chapter 39 souTH AfRICA ..................................................................... 455 Gerhard Rudolph and Darryl Bernstein
Chapter 40 sPAIn ....................................................................................... 469 Carlos de los Santos and Margarita Soto Moya
Chapter 41 sWITZERLAnd ..................................................................... 480 Martin Wiebecke
Chapter 42 uKRAInE................................................................................. 495 Vladimir Zakhvataev and Ulyana Bardyn
Chapter 43 unITEd ARAB EmIRATEs .................................................. 508 Kaashif Basit
Chapter 44 unITEd sTATEs .................................................................... 520 James H Carter and Suman Chakraborty
Appendix 1 ABouT THE AuTHoRs ...................................................... 540
Appendix 2 ConTRIBuTInG LAW fIRms’ ConTACT dETAILs ... 570
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Editor’s PrEfacE
International arbitration is a fast-moving express train, with new awards and court decisions of significance somewhere in the world rushing past every week. Legislatures, too, constantly tinker with or entirely revamp arbitration statutes in one jurisdiction or another. The international arbitration community has created a number of electronic and other publications that follow these developments regularly, requiring many more lawyer hours of reading than was the case a few years ago.
Scholarly arbitration literature follows behind, at a more leisurely pace. However, there is a niche to be filled for analytical review of what has occurred in each of the important arbitration jurisdictions during the past year, capturing recent developments but putting them in the context of the jurisdiction’s legal arbitration structure and selecting the most important matters for comment. This volume, to which leading arbitration practitioners around the world have made valuable contributions, seeks to fill that space.
The arbitration world is consumed with debate over whether relevant distinctions should be drawn between general international commercial arbitration and international investment arbitration, the procedures and subjects of which are similar but not identical. This volume seeks to provide current information on both of these precincts of international arbitration, treating important investor–state dispute developments in each jurisdiction as a separate but closely related topic.
I thank all of the contributors for their fine work in compiling this volume.
James H CarterWilmer Cutler Pickering Hale and Dorr LLPNew YorkJune 2012
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Chapter 3
AustrAliAJames Whittaker, Colin Lockhart and Jin Ooi1
I INTRODUCTION
It comes as no surprise that Australia has not been traditionally perceived as the go-to destination for international commercial arbitration, even in the Asia-Pacific region. No doubt this is due to the competitive disadvantages that Australia faces, not least due to its geographical distance from everywhere else.2 Indeed, a survey conducted in 2008 revealed that only seven international arbitral awards were rendered under the rules of Australia’s peak body for international commercial arbitration, the Australian Centre for Commercial Arbitration (‘ACICA’) between 2003 and 2007 compared to under the rules of other prominent arbitration institutions, including in our own region, Hong Kong (1,690) and Singapore (263).3
In light of these statistics and given that Singapore has now emerged as the preferred arbitration seat of choice in Asia, surpassing even Hong Kong,4 one can be encouraged that change remains possible, even for Australia. The recent emergence of Asia as the world’s economic powerhouse, coupled with the rapid changes to the Australian legal services market, reinforce this view.
1 James Whittaker is a partner, Colin Lockhart is a counsel and Jin Ooi is a lawyer in the litigation practice group of Corrs Chambers Westgarth.
2 Justice Michael Kirby, ‘Do Australians Have a Future in International Commercial Arbitration?’ (1999) 18 The Arbitrator 103.
3 School of International Arbitration of Queen Mary, University of London and PricewaterhouseCoopers, International Arbitration: Corporate Attitudes and Practices (2008) www.pwc.co.uk/en_UK/uk/assets/pdf/pwc-international-arbitration-2008.pdf at 9 May 2012.
4 School of International Arbitration of Queen Mary, University of London, 2010 International Arbitration Survey: Choices in International Arbitration (2010) www.arbitrationonline.org/docs/2010_InternationalArbitrationSurveyReport.pdf at 9 May 2012.
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Commentators are now more hopeful than ever that Australia will present itself as a prime seat for international arbitration in the Asia-Pacific region, as a result of recent legislative amendments.5 To make sense of the law reforms, it is necessary to point out that Australia has a federal system of government, with the result that separate arbitral laws are in place in the Commonwealth as the federal entity and in each of the six States and two federal Territories.
The reforms were first put into motion at the end of 2008 when the then Commonwealth Attorney-General announced the federal government’s intention to review the International Arbitration Act 1974 (Cth) (‘the IAA’)6 and released a discussion paper to stimulate debate about the future of the IAA.7 Following an 18-month period of consultation and consideration, the International Arbitration Amendment Act 2010 (Cth) (‘the Amending Act’) came into force on 6 July 2010, bringing with it a number of significant changes to the way in which international arbitration is regulated in Australia.
The IAA gives the force of law to the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (‘the Model Law’)8 and as a result of the Amending Act, also adopts the 2006 amendments to the Model Law.9 Most significantly, the new Section 21 of the IAA makes clear that the ‘Model Law covers the field’ with regard to international arbitrations seated in Australia, to the exclusion of State and Territory arbitral laws. Prior to the amendments, parties to an arbitration agreement could choose to have their dispute ‘settled otherwise than in accordance with the Model Law’, for example, by adopting instead the arbitral law of an Australian State or Territory, none of which applied the Model Law.
The former Section 21 had long been a source of confusion and concern. For one, the provision allowed the parties to opt-out of the Model Law, but not the IAA. This gave rise to a range of practical uncertainties, including what happened when another law was nominated but which provisions conflicted with the IAA or what law applied when an alternative law was not nominated.10 A further problem concerned the judicial
5 See, for example, Peter Megens and Adam Peters, ‘International Arbitration Amendment Act 2010 (Cth) – Towards a New Brand of Australian International Arbitration’ (2011) 30 The Arbitrator and Mediator 43; Richard Garnett and Luke Nottage, ‘The 2010 Amendments to the International Arbitration Act: A New Dawn for Australia?’ (2011) 7 Asian International Arbitration Journal 29; Albert Monichino, ‘International Arbitration in Australia – 2010/2011 in Review’ (2011) 22 Australasian Dispute Resolution Journal 215; Chris Merritt, ‘Arbitrators Eye Regional Market’, The Australian (Sydney), 4 May 2012, 29.
6 Robert McClelland, ‘Australian Government Moves to Modernise International Arbitration’ (Press Release, 21 November 2008).
7 Attorney-General’s Department, Review of the International Arbitration Act 1974, Discussion Paper (2008).
8 International Arbitration Act 1974 (Cth) s 16.9 International Arbitration Act 1974 (Cth) s 15, sch 2.10 See further Revised Explanatory Memorandum, International Arbitration Amendment Bill
2009 (Cth), [112].
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interpretation of the former Section 21. In Australian Granites Ltd v. Eisenwerk Hensel Bayreuth Dipl-Ing Burkhardt GmbH,11 the Queensland Court of Appeal held that the parties had opted out of the Model Law by expressly adopting a well-known form of arbitration (in this case the International Chamber of Commerce (‘ICC’) Rules).12 This result has received widespread criticism and is in direct conflict with Article 19 of the Model Law which allows the parties to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. Also of relevance is Article 28 of the Model Law which contemplates party choice as to the substantive law that is to be applied to the particular facts of a dispute.
It is perhaps unsurprising then that the Eisenwerk decision was recently questioned by the Supreme Court of New South Wales and not followed. 13 Nine days after the New South Wales Supreme Court’s decision, the Queensland Court of Appeal delivered its judgment in a separate case and, although afforded the opportunity, expressly declined to consider the correctness of the Eisenwerk decision.14 Hence the opportune enactment of the new Section 21, which denies the parties of the choice to oust the Model Law as the applicable arbitral law yet continues to bestow parties freedom to elect both their procedural rules and applicable substantive law,15 and thus overall providing much needed certainty and consistency to international arbitration in Australia.
A number of other amendments are significant. Very briefly, they include new interpretation provisions, new provisions that confine the circumstances in which the courts can set aside an award made under the Model Law or refuse to enforce foreign awards, a range of optional provisions that parties to an arbitration agreement may adopt on an ‘opt-in’ basis to help resolve their disputes in a fair and efficient manner, and a range of other measures directed at improving the general operation of the IAA.16 Together, the amendments seek to ensure that the IAA remains at the forefront of international arbitration best practice.17
On a State and Territory level, a review of Australia’s domestic arbitration law had commenced in 2002 but was stalled in 2007. The reform process was reignited not long after the Commonwealth Attorney-General’s announcement to review the IAA, when the then Chief Justice of New South Wales highlighted the ‘hopelessly out of
11 (2001) 1 Qd R 461 (Eisenwerk).12 See also Lightsource Technologies Australia Pty Ltd v. Pointsec Mobile Technologies AB (2011) 250
FLR 63.13 Cargill International SA v. Peabody Australia Mining Ltd (2010) 78 NSWLR 533.14 Wagners Nouvelle Caledonie Sarl v. Vale Inco Nouvelle Caledonie SAS [2010] QCA 219.15 See Revised Explanatory Memorandum, International Arbitration Amendment Bill 2009
(Cth), [113]-[114].16 For a thorough discussion, see, for example, Megens and Peters, above n 4 or Garnett and
Nottage, above n 4.17 Commonwealth, Second Reading – International Arbitration Amendment Bill 2009, House
of Representatives, 12790 Commonwealth, Second Reading – International Arbitration Amendment Bill 2009, House of Representatives, 12790 (Robert McClelland, Attorney-General).
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date’ and ‘embarrassing’ state of Australia’s legislative scheme for domestic arbitration.18 The result was a complete overhaul of the domestic arbitral laws, the most noteworthy feature of which is their application of the Model Law. As of 9 May 2012, of the new statutes in the six States and two Territories, three are currently in operation;19 two are awaiting commencement,20 two are still passing through Parliament,21 and only in the Australian Capital Territory has the Bill yet to be introduced into Parliament. Once the domestic statutes come into force, Australia will have a relatively consistent domestic and international arbitration scheme of legislation based on the Model Law.
II THE YEAR IN REVIEW
i Developments affecting international arbitration
In March 2011, the International Arbitration Regulations 2011 (Cth) came into force, appointing ACICA as the sole competent authority to perform arbitrator appointment functions under the IAA22 (a function previously performed exclusively by the Australian courts). The Regulations enable the peak body for international commercial arbitrations in Australia to appoint arbitrators to international arbitrations seated in Australia in circumstances where the parties have not agreed on an appointment process between themselves or where such a procedure had been agreed on but has broken down. On the same day that the Regulations came into effect, ACICA also adopted the ACICA Appointment of Arbitrators Rules 2011, which establish a streamlined process through which a party can now apply to ACICA to have an arbitrator appointed to an international arbitration seated in Australia.
In August 2011, ACICA released the ACICA Expedited Arbitration Rules and a revised version of the ACICA Arbitration Rules. The ACICA Expedited Arbitration Rules have an overriding objective to provide arbitration that is quick, cost effective and fair, considering especially the amounts in dispute and complexity of issues or facts involved.23 This objective of expedition is reflected in the rules, which provide for, among other things, the appointment of only one arbitrator within 14 days from the commencement of arbitration.24
A standout feature of the revised ACICA Arbitration Rules is the incorporation of brand new emergency arbitrator provisions, which allow a party to make an application to ACICA for emergency interim measures of protection prior to the constitution of an
18 Justice James Spigelman, Speech delivered at Opening of Law Term Dinner 2009, the Law Society of New South Wales, Sydney, 2 February 2009.
19 Commercial Arbitration Act 2010 (NSW); Commercial Arbitration Act 2011 (Vic); Commercial Arbitration Act 2011 (SA).
20 Commercial Arbitration (National Uniform Legislation) Act 2011 (NT); Commercial Arbitration Act 2011 (Tas).
21 Commercial Arbitration Bill 2011 (Qld); Commercial Arbitration Bill 2011 (WA).22 International Arbitration Regulations 2011 (Cth), reg 4.23 ACICA Expedited Arbitration Rules, r 3.1.24 ACICA Expedited Arbitration Rules, rr 8.1, 8.2.
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arbitral tribunal.25 An emergency arbitrator is to be appointed within one business day from the receipt of the application and any decision on emergency interim measures of protection is to be made within five business days from when the application was referred to the emergency arbitrator.26
ii Arbitration developments in local courts
The past year has been an important period for international arbitration in Australia as cases concerning the recent amendments to the IAA filter through the judicial system and local courts grapple with the new provisions. While the practical operation of the amendments will continually be tested in court, the judicial reception thus far has been positive. The first part of this section considers the enforcement of ‘non-foreign’ international arbitral awards and the temporal operation of Section 21 of the IAA. The second part examines two recent cases which illustrate the narrow scope that parties have in resisting enforcement of foreign awards.
Enforcement of ‘non-foreign’ international arbitral awards and the temporal operation of Section 21 of the IAATwo recent decisions are of relevance.
In Castel Electronics Pty Ltd v. TCL Air Conditioner (Zhongshan) Co Ltd,27 the Federal Court of Australia considered and confirmed its jurisdiction to enforce a ‘non-foreign’ international arbitral award. The dispute in these proceedings arose out of a distribution agreement between Castel Electronics (based in Australia) and TCL Air Conditioner (based in China), in which the arbitral tribunal sitting in Australia delivered an award in favour of Castel Electronics. As the award was made in Australia, it did not fall within the IAA’s definition of a ‘foreign award’, the criteria of which has to be an arbitral award made in a country other than Australia and in relation to which the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (‘the New York Convention’) applies.28 The IAA specifically vests jurisdiction in the Federal Court and the State and Territory courts to enforce a ‘foreign award’29 but, together with articles 35 and 36 of the Model Law, is silent as to which court is competent to enforce a ‘non-foreign award’, 30 such as in the present case. While the court declined to consider whether State and Territory courts also had jurisdiction to enforce ‘non-foreign awards’, it quipped that at least ‘some court must be ‘competent’’ to do so.31
25 ACICA Arbitration Rules 2011, sch 2.26 New provisions concerning the appointment of emergency arbitrators are also found in the
revised version of the ICC Rules of Arbitration, which are in force as from 1 January 2012.27 [2012] FCA 21 (‘Castel Electronics’).28 International Arbitration Act 1974 (Cth) ss 3(1), 39(3).29 International Arbitration Act 1974 (Cth) ss 8(2), (3).30 A ‘non-foreign award’ is to be distinguished from a ‘domestic award’, the latter being a non-
international arbitral award made in Australia, the enforcement of which is governed by the commercial arbitration statutes of the various States and Territories.
31 Castel Electronics [2012] FCA 21, [35].
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The Federal Court ultimately found comfort in a provision of the Commonwealth Judiciary Act 1903 which confers the Federal Court with jurisdiction in any matter arising under a federal law and as such, jurisdiction to enforce awards in accordance with articles 35 and 36 of the Model Law.32 Applying this same reasoning, it would also appear that international awards to which the New York Convention does not apply will also be enforceable in the Federal Court.
Besides the jurisdiction point, the Court in Castel Electronics had the opportunity to consider whether the new Section 21 of the IAA (discussed in Part I above) operates in relation to arbitration agreements entered prior to the 2010 amendments. In doing so, the Court referred to the common law presumption against retrospectivity as set out by the High Court of Australia in Maxwell v. Murphy:33
a A statute divesting vested rights is to be construed as prospective. b A statute, merely procedural, is to be construed as retrospective.c A statute which, while procedural in its character, affects vested rights adversely is
to be construed as prospective.
It was common ground that the parties did not opt out of the Model Law, which accordingly applied to their arbitration. The Court noted that because the Model Law sets out rules for the conduct of international commercial arbitrations, as opposed to the substantive law to be applied, Section 21 which relates to the capacity to opt-in or out of the Model Law can only be best described as a procedural rather than a substantive provision, with the effect that the new Section 21 should be construed as retrospective.34
While it is well-understood that parties cannot opt out of the Model Law pursuant to the new Section 21 of the IAA, the apparent effect of the Castel Electronics decision is to extend the limitation to arbitration agreements that had been entered into prior to when the new Section 21 came into force. However, the question arises as to what effect this reasoning will have on arbitration agreements that have expressly opted out of the Model Law before the 2010 amendments.
This very issue was considered by the Western Australia Court of Appeal in Rizhao Steel Holding Group Co Ltd v. Koolan Iron Ore Pty Ltd,35 which was also concerned with the enforcement of a ‘non-foreign’ international arbitral award. This case dealt with two related appeals by Rizhao (based in China) against Koolan Iron Ore and Mount Gibson Mining (both based in Australia). When the parties entered into the contracts, they had elected to opt-out of the Model Law pursuant to the former Section 21 of the IAA and instead apply the Western Australian Commercial Arbitration Act 1985 (‘the CAA’).36 A dispute arose between the parties and arbitration commenced, but just as the hearings were approaching their conclusion, the former Section 21 was repealed and
32 Ibid [39]-[57].33 (1957) 96 CLR 261, 270.34 Castel Electronics [2012] FCA 21, [67].35 [2012] WASCA 50 (Rizhao).36 Commercial Arbitration Act 1985 (WA).
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the new Section 21 came into operation as a result of the Amending Act. Nonetheless, the arbitrator delivered awards against Rizhao. The Supreme Court of Western Australia subsequently granted leave to the other parties who sought to enforce the awards pursuant to the CAA and also in a separate hearing, dismissed Rizhao’s applications for leave to appeal from the awards. Rizhao appealed against the latter decisions, its main proposition being that the judge at first instance erred by dealing with the other parties’ application for enforcement of the ‘non-foreign awards’ under the CAA when, as Rizhao contended, the only source of jurisdiction for the enforcement of such awards was the IAA as a result of the amendment to Section 21.
In dismissing the appeals, the Court held that Rizhao gained a significant forensic advantage by not taking the point which it then sought to raise on appeal in the course of the proceedings before the primary judge, and of which it was then aware.37 Accordingly, it would be antithetical to the interests of justice for the Court of Appeal to consider Rizhao’s jurisdictional point in which it chose not to raise at first instance.38
Having decided the case on procedural grounds, the court nonetheless took the opportunity to consider the substantive issues raised, holding that even if Rizhao were permitted to take on appeal the point in which it failed to take before the judge at first instance, it should nonetheless be concluded that the primary judge did not err as to the source of his jurisdiction.39 Rizhao’s first contention was that the authority conferred by the former Section 21 of the IAA extended only to opting out of the Model Law up to the point of settlement of their dispute which, it contended, occurred when an arbitral award was delivered. The court disagreed, holding that ‘settlement’ in the context of the former Section 21 extended to and included all matters up to the final resolution and disposition of claims including, for instance, judicial review and enforcement of the award.40
Rizhao’s second contention related to the temporal operation of the new Section 21. It asserted, much like the Federal Court’s decision in Castel Electronics, that by virtue of the new provision, the Model Law applies to all arbitration agreements, or in the alternative, to all proceedings for enforcement of international arbitral awards, even if the parties had agreed to opt out of the Model Law prior to the commencement date of the new Section 21. Although the new provision can be characterised as a procedural law (and thus have retrospective application in accordance with presumption (b) as stated in Maxwell v. Murphy), the court held that it was necessary to assess its impact upon vested rights and, in particular, the vested rights of the parties to these proceedings. In this case, the parties had a contractual right to have any dispute between them resolved in accordance with the provisions of the CAA and each was contractually obliged to submit to the resolution of the dispute pursuant to those provisions. This right of the parties, the court held, was a vested and substantive right. If the Model Law was applied in this case, it would significantly alter the legislative framework in which the parties would be
37 Rizhao [2012] WASCA 50, [55]-[71].38 Ibid [72]-[87].39 Ibid [90]-[92].40 Ibid [109]-[114].
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entitled to obtain or resist enforcement of the awards, especially considering that the parties’ contractual rights to have their dispute arbitrated had already been exercised prior to the 2010 amendments. As a result, although procedural in character, the new Section 21, if applied, would adversely affect the parties’ rights, 41 such that the provision must be held to have prospective application pursuant to presumption (c) as stated in Maxwell v. Murphy.
The Court in Rizhao sought to distinguish this result with the earlier decision of the Federal Court by pointing out that the parties in Castel Electronics had not exercised the right to exclude the Model Law which accordingly applied as the procedural law, both before and after commencement of the Amending Act.42 In Castel Electronics, it was difficult for the federal judge to see how any of the vested rights of the parties could be adversely affected by the retrospective operation of the new Section 21.
While Rizhao has provided some clarity as to the temporal operation of Section 21 of the IAA, it should be borne in mind that it was unnecessary for both courts in Castel Electronics and in Rizhao to consider this point, seeing that they had already decided their respective cases on other grounds. Moreover, in Rizhao, the parties’ contractual rights to have their dispute arbitrated had already been exercised under the former Section 21 and it is uncertain whether the Western Australia Court of Appeal’s reasoning will be extended to situations where the parties’ rights only crystallise at a time after the commencement of the Amending Act.43 With the Courts’ views on this issue being obiter dicta and non-binding,44 it remains to be seen whether future decisions will be able to shed more light.
Narrow scope for resisting enforcement of foreign awardsWith the Amending Act having disposed of the requirement for a party to seek leave to enforce a foreign award,45 the Federal Court in Uganda Telecom Ltd v. Hi-Tech Telecom Pty Ltd 46 recently considered whether a foreign arbitral award should be registered as a final judgment in Australia. The application was brought about by Uganda Telecom (based in Uganda) against Hi-Tech (based in Australia), with which it had entered into
41 Ibid [131]-[139], [198].42 Ibid [140], [202].43 See, for example, the following comments in Rizhao: ‘That argument [that the right to arbitrate
under the chosen regime was a substantive right] becomes a little stronger if a dispute or difference between the parties had crystallised prior to the commencement of the amending Act’ [133] and ‘[The principles enunciated in Maxwell v. Murphy] compel the conclusion that because there is no express provision applying the unamended law to agreements entered into prior to its commencement, it is to be presumed that the amended law does not apply so as to alter the contractual rights and obligations of the parties to agreements entered into before its commencement, at least where those rights have crystallised by the commencement of arbitral proceedings, in which the parties have vested rights and interests’ [139] (emphasis added).
44 Rizhao [2012] WASCA 50, [140], [202]..45 International Arbitration Act 1974 (Cth), s 8(3).46 (2011) 277 ALR 415 (‘Uganda Telecom’).
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a contract to supply telecommunications services and facilities. A dispute had arisen between the parties and Uganda Telecom commenced arbitration in Uganda, which Hi-Tech claimed it had no notice of and did not participate in. The arbitrator delivered an award in favour of Uganda Telecom and the company then proceeded to enforce the award against Hi-Tech in the Federal Court pursuant to Section 8 of the IAA.
Hi-Tech resisted the application on a number of grounds, all of which were wholly rejected by the Court. First, Hi-Tech submitted that the relevant arbitration clause in the arbitration agreement was void for uncertainty as it did not specify, among other things, the seat of arbitration, the identity and number of arbitrators, the rules that were to apply to the arbitration, and the lex arbitri. The Court disagreed, holding that the matters omitted from the arbitration clause were all covered in detail and adequately under the Ugandan Arbitration and Conciliation Act (‘the Ugandan Act’).47 Hi-Tech had also objected to Uganda Telecom’s unilateral invocation of the arbitration but again the court held that this was permissible under the Ugandan Act.48 Contrary to Hi-Tech’s submissions, the court further found the award to be an arbitral award under both the IAA and the Ugandan Act, and a foreign award under the IAA, it having been made in Uganda, which is a party to the New York Convention.49
The most important part of the Uganda Telecom decision concerns Hi-Tech’s argument that the amount of general damages awarded by the arbitrator in the award was arrived at by an erroneous reasoning process involving mistakes of fact and law. Subsections 8(5) and 8(7) of the IAA set out the grounds on which a court may refuse to enforce a foreign arbitral award. Prior to the 2010 amendments, the view emerged that courts retained a general discretion to refuse enforcement of a foreign award even if none of the grounds in subsections 8(5) and 8(7) were made out.50 The Federal Court in Uganda Telecom confirmed that whether or not such a residual discretion existed, Section 8(3A) of the IAA inserted by the Amending Act, now makes clear that no such discretion remains, with subsections 8(5) and 8(7) constituting exhaustive grounds for refusal.51
Further, the court found that the public policy ground for refusal to enforce a foreign award in Section 8(7)(b) of the IAA is to be read narrowly in conjunction with the pro-enforcement purpose of the New York Convention and the objects of the IAA.52 As such, the public policy ground cannot be relied upon to deal with Hi-Tech’s complaint of the excessive assessment of general damages in the award. The court held
47 Ibid 430-431.48 Ibid 431.49 Ibid 432.50 See, for example, Resort Condominiums International Inc v. Bolwell [1995] 1 Qd R 406, 428-
432; Corvetina Technology Ltd v. Clough Engineering Ltd (2004) 183 FLR 317, 319-322.51 Uganda Telecom (2011) 277 ALR 415, 439.52 Ibid, applying the United States Court of Appeals’ decisions in Parsons & Whittemore Overseas
Co Inc v. Société Générale De L’Industrie Du Papier 508 F 2d 969, 974 (2nd Cir, 1974) and Karoha Bodas Co, LLC v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara 364 F 3d 274, 306 (5th Cir, 2004).
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that erroneous legal reasoning or misapplication of law is generally not a violation of public policy and the time for Hi-Tech to have addressed this matter was during the arbitration proceedings, in which it had chosen not to.
Although the court was not required to and did not consider the effect of other relevant 2010 amendments, it is still worth pointing out that its decision is entirely consistent with the new provisions. To illustrate, the Amending Act inserted a new Section 39 into the IAA which addresses matters to which courts must have regard when considering, among other things, the exercise of its power to enforce or to refuse to enforce a foreign award under Section 8 of the IAA. In particular, the court must have regard to the recently inserted objects of the IAA in Section 2D,53 which emphasises the importance of arbitration in facilitating international trade and commerce and the fact that the IAA gives effect to three international instruments. Further, the court must have regard to the fact that ‘arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes’ and that ‘awards are intended to provide certainty and finality’.54
A new provision has also been inserted into the IAA to avoid misinterpretation of the public policy ground in Section 8(7)(b) by clarifying that the circumstances in which enforcement of a foreign award would be contrary to public policy includes (but is not limited to) where ‘the making of the award was induced or affected by fraud or corruption’ or where ‘a breach of the rules of natural justice occurred in connection with the making of the award’.55
Further light has been shed on the expression ‘public policy’ in Section 8(7)(b) of the IAA when the Federal Court in Traxys Europe SA v. Balaji Coke Industry Pvt Ltd (No 2) recently explained that the expression ‘means those elements of the public policy of Australia which are so fundamental to our notions of justice that the courts of this country feel obliged to give effect to them in respect of claims which are based fundamentally on foreign elements such as foreign awards under the IAA’.56 Consistent with the pro-enforcement bias informing the New York Convention and the IAA, the court confirmed that 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.57 It can be clearly seen from the Uganda Telecom and Traxys decisions, coupled with the 2010 amendments, that Australia is committed to increase certainty in the enforcement process of foreign awards and to strengthen the grounds on which parties may resist enforcement.
53 International Arbitration Act 1974 (Cth), s 39(2)(a).54 International Arbitration Act 1974 (Cth), s 39(2)(b).55 International Arbitration Act 1974 (Cth), s 8(7A).56 Traxys Europe SA v. Balaji Coke Industry Pvt Ltd (No 2) [2012] FCA 276, [96].57 Ibid [105].
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iii Investor–state disputes
Australia is a party to 21 bilateral investment treaties since 198858 and four out of six free trade agreements with investment protection rules since 2003, which provide for investor-state arbitration.59 In April 2011, the Australian federal government released a trade policy statement announcing a discontinuance of its practice to seek the inclusion of investor–state dispute resolution procedures in trade agreements with developing countries.60 It indicated that such provisions confer greater legal rights on foreign businesses than those available to domestic businesses and constrain the ability of the Australian government to make laws on social, environmental and economic matters in circumstances where those laws do not discriminate between domestic and foreign businesses. No doubt one of the government’s main concerns was provisions which could limit its capacity to put health warnings or plain packaging requirements on tobacco products.
It turns out that the concerns were not irrational. Only a few months after the government’s announcement of its policy statement, Philip Morris Asia Limited (based in Hong Kong), owner of Australian affiliate Philip Morris Limited, served a notice of claim on the Australian government stating its intention to pursue legal action over Australia’s proposed plain cigarette packaging legislation61 in alleged breach of Australia’s bilateral investment treaty with Hong Kong.62 As far as the authors are aware, this is the first ever investment treaty claim against Australia. Philip Morris alleged that the legislation will amount to expropriation of its trademarks and is a violation of fair and equitable treatment obligations. At the time of submission of this chapter, it is unclear what the status of the arbitral process is. The authors also note that Honduras and Ukraine have launched a challenge against Australia’s plain packaging legislation in the World Trade Organization and that Philip Morris’ Australian affiliate has brought proceedings in the High Court of Australia challenging the constitutional validity of the same legislation.
58 Australia has entered into bilateral investment treaties with Argentina, China, the Czech Republic, Egypt, Hong Kong, Hungary, India, Indonesia, Laos, Lithuania, Mexico, Pakistan, Papua New Guinea, Peru, the Philippines, Poland, Romania, Sri Lanka, Turkey, Uruguay and Vietnam.
59 These are free trade agreements with ASEAN–New Zealand (ASEAN comprises of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam), Chile, Singapore and Thailand. The free trade agreement with the USA (signed in 2005) omits investor-state arbitration provisions, as does the investment protocol (signed in February 2011) of the Australia–New Zealand Closer Economic Relations Trade Agreement.
60 Commonwealth, Gillard Government Trade Policy Statement: Trading Our Ways to More Jobs and Prosperity (2011) 14.
61 Tobacco Plain Packaging Act 2011 (Cth). The manufacturing prohibition is due to commence on 1 October 2012 and the sales prohibition on 1 December 2012.
62 Agreement with Hong Kong concerning the Promotion and Protection of Investments, signed 15 September 1993, Australia–Hong Kong, 1748 UNTS 385 (entered into force 15 October 1993).
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The High Court challenge was heard in April 2012 and, at the time of submission of this chapter, the results remain pending.
In another recent investor–state dispute, Australian mining company White Industries Australia Limited was successful in obtaining an arbitral award against the Republic of India for approximately A$10 million. As far as the authors are aware, this is the first known investment arbitration award in favour of an Australian investor. White initiated the arbitration under Australia’s bilateral investment treaty with India63 because of the delay that White experienced in the Indian courts on matters concerning the enforcement of an earlier ICC award delivered in 2002 against Coal India (a state-owned company). In February 2012, White launched proceedings in the Supreme Court of New South Wales to enforce its most recent foreign arbitral award but, as far as the authors are aware, has chose to discontinue the proceedings as of April 2012 for reasons unknown to the authors.
III OUTLOOK AND CONCLUSIONS
The international arbitration landscape in Australia has seen a raft of activities in the past few years, all of which were purposefully aimed at bolstering Australia’s reputation as a first-rate arbitration-friendly jurisdiction and as a desirable seat for international arbitration, particularly in the Asia-Pacific region. It is too early to tell if the amendments to the IAA truly meet the objectives that it has set out to achieve but the international arbitration community in Australia remains fairly positive that change is on the horizon. The next year promises to be an interesting one for international commercial arbitration in Australia.
63 Agreement with the Republic of India on the Promotion and Protection of Investments, signed 26 February 1999, Australia–India, [2000] ATS 14 (entered into force 4 May 2000).
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Appendix 1
about the authors
JAMES WHITTAKER
Corrs Chambers WestgarthJames Whittaker is a partner in the litigation practice group of Corrs Chambers Westgarth and heads the firm’s litigation and workplace relations division. he has over 20 years’ experience in representing large national and international corporations, governments and associations in commercial arbitrations, and recently ran the proceedings in australia’s high Court concerning plain packaging of tobacco, now the subject of two Wto proceedings.
COLIN LOCKHART
Corrs Chambers WestgarthColin Lockhart is a counsel in the litigation practice group of Corrs Chambers Westgarth. he has extensive experience in international arbitration proceedings, including ICC arbitrations in France and australia and has taught international arbitration law at the university of Western australia Law school. he is also recognised nationally as a leading authority on the law of misleading or deceptive conduct, being the author of The Law of Misleading or Deceptive Conduct (LexisNexis), now in its third edition.
JIN OOI
Corrs Chambers WestgarthJin ooi is a lawyer in the litigation practice group of Corrs Chambers Westgarth. he graduated with First Class honours from the university of sydney (australia) and is a member of the Law society of the state of New south Wales.
About the Authors
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CORRS CHAMbERS WESTgARTH
Level 32Governor Phillip tower1 Farrer Placesydney NsW 2000australiatel: +61 2 9210 6500Fax: +61 2 9210 [email protected]@[email protected]