A. LEGISLATION AND RULES
International arbitration in Australia continues to be governed by the International Arbitration Act 1974(Cth) (IAA). There have been no amendments to the IAA in the past year.
Australia has entered into two new free trade agreements, one with 14 other Indo-Pacific countries and one with India. The Regional Comprehensive Economic Partnership Agreement (RCEP) entered into force on 1 January 2022 with 10 original parties: Australia, Brunei Darussalam, Cambodia, China, Japan, Laos, New Zealand, Singapore, Thailand and Vietnam and, subsequently, also with the Republic of Korea on 1 February 2022, Malaysia on 18 March 2022 and Indonesia on 2 January 2023. The Australia-India Economic Cooperation and Trade Agreement (AI-ECTA) entered into force on 29 December 2022. With these two new free trade agreements, Australia and the region can reasonably expect an increase in trade resulting in additional international arbitration activity. Further, the RCEP and AI-ECTA feature binding arbitral-like dispute resolution panels as the mandatory dispute resolution mechanism for complaints against state actors.
A.2 Institutions, rules and infrastructure
There have been no changes to the Arbitration Rules of the Australian Centre for International Commercial Arbitration (ACICA) this year.
B.1 Arbitration agreements and leave to appeal arbitral awards
In Inghams Enterprises Pty Ltd v. Southern Cross Farms Australia Pty Ltd, the Supreme Court of South Australia (SCSA) considered the requirements for parties to agree on a right to appeal from an arbitration award.
In that case, the applicant and respondent were parties to four agreements which provided that Inghams Enterprises Pty Ltd (“Inghams”) would provide one-day-old chicks to Southern Cross Farms Australia Pty Ltd and Southern Cross Farms SA Pty Ltd (together, SCF) to breed to adulthood as free-range chickens, whereupon they would then be sold back to Inghams at a “price per bird” cost. The agreements were subsequently amended.
A dispute arose between the parties over the correct interpretation of “price per bird” in light of the amendment, which was initially resolved at arbitration in favor of SCF across two arbitral awards.
Inghams applied to the SCSA for leave to appeal from those awards on the basis of what Inghams claimed to be two questions of law. SCF opposed Inghams’ application on the basis that the parties had not agreed that an appeal may be made as required by section 34A of the Commercial Arbitration Act 2011 (SA) (CCA SA), that no questions of law arose as required by that section and that Inghams had also failed to establish that the arbitrator’s decision was “obviously wrong,” that being a relevant precondition for the grant of leave under that section in any event.
The relevant parts of the dispute resolution clause (as relied upon by Inghams) provided that a party may not commence court proceedings until it had complied with the remainder of the clause (which included referring disputes to arbitration) and that the written determination of an arbitrator was to be final and binding except for manifest error or fraud. Inghams contended that the parties had thereby sufficiently agreed to allow for the prospect of appeal so as to opt-in to the appeal regime under section 34A, including because the dispute resolution clause expressly contemplated the possibility of court proceedings provided that they did not depart from the mandated dispute resolution process (that is, in circumstances of manifest error or fraud).
The SCSA held that an agreement which merely contemplates the possibility of an appeal in the case of manifest error is not sufficient for the purpose of section 34A of the CCA SA and that it is necessary to identify an agreement (an “affirmative choice”) that an appeal may be made under that section.
In addition to holding that only one of Inghams’ two questions was, in fact, a question of law, the SCSA also held that the relevant test for “obviously wrong” required more than merely arguable error, namely, an error (rather than the mere possibility of an error) that is readily “evident” and “obvious” from a perusal of the arbitrator’s reasons for the award without the need for any prolonged adversarial argument, and that Inghams had failed to satisfy that test.
The Supreme Court of Western Australia (SCWA), in Golden Milling Pty Ltd v. Novus Capital Ltd, refused a party’s application for leave to appeal pursuant to section 34A of the Commercial Arbitration Act 2012(WA) (CCA WA), which is in the same terms as section 34A of the CCA SA.
In that case, Golden Mile, Energy Oz and Novus were parties to an arbitration agreement which was the subject of an arbitration in June 2022. The arbitral tribunal ultimately published a partial award that refused Golden Mile and EnergyOz’s claims and found that they were obliged to pay Novus’ damages, and a final award was published providing for Novus’ costs. Novus then commenced proceedings in SCWA to enforce the arbitral award. As part of the SCWA proceedings, consent orders were filed, which included an order that Golden Mile and Energy Oz were permitted to file an originating summons seeking leave to appeal under section 34 of the CCA WA.
Novus opposed the leave application both upon the basis that there had been no agreement permitting an appeal from the arbitral award and also because the award was not “obviously wrong.”
On the first issue, the SCWA, having first determined that a party can agree that an appeal from an arbitral award may be made to the court by its conduct after the issuance of an arbitral award and before the finalization of the hearing of an application for leave to proceed, then held that, in the “exceptional circumstances,” which had occurred, the consent orders reflected an agreement by the parties that an appeal may be allowed under section 34A of the CCA WA. This was both because:
“much of what … [was] … found in the consent orders would be pointless towards the programming of the application for determination of an application for leave to appeal … in the absence of an agreement by Novus to that door being first opened”
and because Novus had obtained a “tangible fiscal benefit” (valuable consideration) from reaching that agreement, namely, payment of the full claim sums as security pending the outcome of the application for leave to appeal.
On the second issue, however, the SCWA held that Golden Mile and Energy Oz had failed to show that there was any error of law, let alone an approach that could be described as “obviously wrong” in the partial award, with the result that the application for leave to appeal failed.
B.2 Stay of proceedings/injunction
In Carmichael Rail Network Pty Ltd v. BBC Chartering Carriers GmbH & Co. KG (The BBC Nile), the Federal Court of Australia (FCA)became the first Australian court to consider the construction of section 11(2) of theCarriage of Goods by Sea Act 1991 (Cth) (COGSA).
Section 11 of the COGSA relevantly provides that:
“(1) All parties to:
(a) a sea carriage document .. [that is, a bill of lading, similar negotiable document of title, a non-negotiable bill of lading and a non-negotiable document that contains or evidences a contract of carriage of goods by sea] … relating to the carriage of goods from any place outside Australia; or
(b) a non-negotiable document of a kind mentioned in subparagraph 10(1)(b)(iii), relating to such a carriage of goods;
are taken to have intended to contract according to the laws in force at the place of shipment.
(2) An agreement (whether made in Australia or elsewhere) has no effect so far as it purports to:
(a) preclude the effect of subsection (1) in respect of a bill of lading or document mentioned in that subsection; or
(b) preclude or limit the jurisdiction of a court of the Commonwealth or of a State or Territory in respect of a bill of lading or a document mentioned in subsection (1); or
(c) preclude or limit the jurisdiction of a court of the Commonwealth or of a State or Territory in respect of:
(i) a sea carriage document relating to the carriage of goods from any place outside Australia to any place in Australia; or
(ii) a non-negotiable document of a kind mentioned in subparagraph 10(1)(b)(iii) relating to such a carriage of goods.
Carmichael Rail Network Pty Ltd(“Carmichael Rail”) sought an anti-suit injunction against BBC Chartering Carriers GmbH & Co. KG (BBC) on the basis that section 11(2) of the COGSA rendered the arbitration and choice of jurisdiction clauses in an agreement between the parties null and void. These proceedings also considered an application by BBC to stay the Australian proceedings in favor of arbitration in London, relying on section 7(2) of the IAA.
Carmichael Rail argued that an anti-suit injunction was justified because both the choice of English law as governing law and the arbitration clauses in the agreement were void as contrary to section 10(1)(b)(ii) and article 3(8) of Schedule 1 of the COGSA (“Australian Rules”) because the application of English law through arbitration had “real potential” to lessen BBC’s liability compared to the result applying Australian laws governing the carriage of goods at sea contained in the Australian Rules.
The FCA ultimately found that Carmichael Rail failed to establish that resolution of the dispute through arbitration in England would reduce its liability (including because of undertakings proffered by BBC to recognize the Australian Rules), with the result that those provisions were found not to have been rendered void by reason of article 3(8) of the Australian Rules, which is an amended form of the Hague Rules which the FCA held was concerned solely with whether a clause, covenant or agreement relieves or lessens a carrier’s liability arising from negligence, fault, or failure in the duties and obligations provided.
The FCA also found that most likely as a result of “historical oversight or inattention rather than an unarticulated legislative policy,” section 11(2) of the COGSA did not prevent parties to a contract for inter-state carriage of goods by sea from agreeing to arbitrate overseas, thereby ousting the jurisdiction of an Australian court. While the FCA acknowledged that this outcome appeared to be a drafting error in the statute, it held that to remedy that error would require an insertion which was too “too big, or too much at variance with the language used by the legislature.”
The FCA also briefly considered section 7 of the IAA, finding that the IAA required the Court to grant the stay sought by BBC. The Court determined that the relevant clause in the agreement between Carmichael Rail and BBC was an “arbitration” agreement for the purpose of section 3(1) of the IAA, and a foreign arbitration agreement for the purpose of section 7(1), thus enlivening section 7(2), which provides that a court shall stay Australian proceedings if those proceedings were instituted by a party to an arbitration agreement against another party to the agreement, and the proceedings involve the determination of a matter that is capable of settlement by arbitration.
Two conditions were applied to the stay pursuant to section 7(2) of the IAA and by agreement of the parties. First, that BBC provides and continues to honor an undertaking that it would maintain its admissions in the London arbitration that the Australian Rules, as applied under Australian law, applied to the dispute, and also that BBC undertakes not to take any time bar defense not otherwise available at the date that the Australian proceedings were commenced.
In Daewoo Shipbuilding & Marine Engineering Co Ltd v. INPEX Operations Australia Pty Ltd, the Supreme Court of New South Wales (SCNSW) was required to consider whether it should grant an interim injunction to prevent a party from calling on a bank guarantee in circumstances where the parties’ rights were to be finally determined by arbitration.
A dispute arose between the parties in relation to the performance by Daewoo, a Korean entity specializing in constructing, installing and commissioning a plant to extract and process natural gas. The dispute related to the performance of the underlying agreement and time delays with the project. The underlying agreement contained a dispute resolution clause which required the parties to resolve any dispute by arbitration to be held in Singapore.
In accordance with its contractual arrangements with INPEX, Daewoo had provided a bank guarantee to INPEX in the amount of USD 328,510,832.00. As a result of alleged performance issues and delay, INPEX gave notice to Daewoo that it intended to call on that bank guarantee.
In response, Daewoo commenced proceedings in the NSWSC seeking urgent injunctive relief to restrain INPEX from calling on the bank guarantee, taking a course of action which the NSWSC described as “a well-trodden path comprehensively sign-posted by seminal judgments of the High Court and state and federal appellate courts” but which was “less clear” when it came to how these principles are applied where the parties have agreed to arbitration. Interim relief was ordered in the first instance, but an extension of the interim injunction was refused.
While section 7(2) of the IAA requires a court to stay proceedings where there is an arbitration agreement in existence, section 7(3) allows the court to provide interim relief for the purpose of preserving the rights of the parties. The Model Law similarly allows courts to make interim orders.
However, in this case, the NSWSC cited a number of authorities in support of the view that this power should be exercised very sparingly and should not be exercised to usurp the powers of the arbitrator, holding that whether the injunction should be granted was to be determined according to the procedures of the court hearing the dispute. This required Daewoo to demonstrate that it had a strong prima facie case, taking into account all of the factual circumstances.
In accordance with orthodox views, the NSWSC observed that bank guarantees are generally provided for the purpose of either risk allocation or to provide security and that, in this case, the guarantee served both purposes, which operated in favor of refusing the injunction and allowing INPEX to call on its bank guarantee, including where, and even though, the dispute was currently the subject of international arbitration.
B.3 Enforcement of arbitral awards
Australian courts continue to take an arbitration-friendly approach to applications to recognize and enforce foreign awards.
In Viterra BV v. Shandong Ruyi Technology Group Co Ltd, the FCA considered whether to discharge temporary freezing orders against agricultural businesses CS Agriculture Pty Ltd and CSTT Holdings Pty Ltd (“CSTT Australia”) in aid of enforcement of an arbitral award.
In January 2021, an arbitral tribunal published an award in favor of Viterra BV (“Viterra”) against Shandong Ruyi Technology Group Co Ltd (“Ruyi”), a textiles corporation incorporated in the People’s Republic of China which had stated that it had serious capital liquidity problems, could not pay the award sum within time and had made no payments towards the award.
Viterra commenced recognition and enforcement proceedings in China and recognition proceedings in Singapore. In addition, it also brought an application in the FCA for recognition and enforcement of the award and also for interim relief against Ruyi, a Singaporean subsidiary and certain of Ruyi’s Australian-incorporated subsidiaries owned via the Singaporean subsidiary.
On 19 November 2021, after an ex parte hearing, Viterra was granted, amongst other orders, interim “notice” freezing orders (that is, orders which required notice to be given before assets were disposed of, rather than orders freezing assets) against both Ruyi and its Singaporean subsidiary, injunctions against the Australian-incorporation subsidiaries restraining them from giving effect to a change of control other than after 10 clear business days’ notice to Viterra and leave to serve the originating application on Ruyi and its Singaporean subsidiary in China and Singapore respectively.
Subsequently, after service upon it but before service could be effected on Ruyi, its Singaporean subsidiary sought the urgent discharge of the freezing order against it, initially under the misapprehension that the orders made against it prevented it from completing a particular transaction and subsequently upon the basis that it should not be subject to any freezing order in any event, including because there was no process in the FCA under which the Singaporean subsidiary could be obliged to disgorge assets or contribute towards any judgment against Ruyi.
In discharging the freezing order made against the Singaporean subsidiary, the FCA determined the following:
- Viterra had failed to identify any process of the FCA that may be available to it as a result of any prospective judgment of the FCA under which the Singaporean subsidiary might be obliged to disgorge assets
- The processes identified by Viterra by which it would be able to realize the value of Ruyi’s shares in its Singaporean subsidiary (and, therefore, the Australian subsidiaries) were only available to it as a shareholder after the conclusion of enforcement processes
- These were not appropriate circumstances for freezing orders given their drastic nature, together with the fact that they were directed not at Ruyi’s assets but at the assets of what the FCA held to be an “independent third party” over which the Ruyi was held to have no relevant control (on the basis that control over the subsidiary’s shares was not the same as having control over its assets for the purpose of discharging its parent’s debts), such that the FCA would decline to exercise the power to continue the freezing orders against the Singaporean subsidiary in support of the arbitral award on the basis of discretionary considerations in any event
This case highlights the obvious importance of seeking orders which are appropriate to the relevant circumstances.
In Siemens WLL v. BIC Contracting LLC, Siemens WLL (“Siemens”) and Leighton Contracting Qatar WILL (“Leighton”), as a contractor, were parties to a Consortium Agreement with respect to the design, construction, maintenance, and operation of a people-mover system at Education City in Qatar, which required all disputes to be settled by arbitration under LCIA Rules by a panel of three arbitrators with the seat of arbitration as London.
Subsequently, Siemens, Leighton (which by this time had cash flow problems) and a third party (BICC) entered into a Mutual Agreement for a cash diversion to be made by Siemens in favor of Leighton, which was supported by a payment guarantee by BICC in favor of Siemens. The payment guarantee contained an arbitration clause that any dispute under the guarantee would be finally settled under ICC Rules, with the seat of arbitration to be Dubai, UAE.
Siemens subsequently commenced an LCIA arbitration against Leighton and BICC under the Consortium Agreement and the Mutual Agreement and then, later, an ICC arbitration against BICC under the payment guarantee.
The LCIA arbitral tribunal subsequently published a final award at London in Siemens’ favor against both Leighton and BICC under the Consortium Agreement and the Mutual Agreement, and shortly thereafter, the ICC arbitral tribunal published its final award under the payment guarantee in Dubai.
Siemens then applied to the FCA to enforce the arbitral awards in Australia under section 8 of the IAA.
Enforcement of an arbitral award under section 8 of the IAA requires that the award be a “foreign award,” which section 3 of the IAA defines as “an arbitral award made, in pursuance of an arbitral agreement, in a country other than Australia, being an arbitral award in relation to which the … [New York] … Convention applies”.
In the course of its consideration of Siemens’ application, the FCA considered whether section 8 of the IAA requires that the award in respect of which enforcement was sought to be made in a “Convention country” as defined in section 3(1) of the IAA, despite going on to hold that both the United Kingdom and the UAE were, in fact, Contracting States by the relevant times in any event.
Noting that when Australia acceded to the Convention, it did not declare (as it could have done and the United States did) that it would limit its recognition and enforcement only to awards which were made in another Contracting State, the FCA held that “an award made in another State is a “foreign award” for the purposes of the IAA even if the State in which the award was made is not a Contracting State to the Convention or (which is the same thing) a Convention country as defined by the IAA”, holding that the reference in Greenwood J’s concurring judgment in Trina Solar (US) Inc v. Jasmin Solar Pty Ltd to the Convention providing for recognition and enforcement of arbitral awards made in Contracting States should not be understood to say that the Convention provides for recognition and enforcement only of awards made in the Contracting States.
In Guoao Holding Group Co Ltd v. Xue (No 2), the FCA granted enforcement of a USD 27 million foreign arbitration award made by the Beijing Arbitration Commission in favor of a Chinese construction company against a Chinese national who resided in Australia and an Australian-registered corporation.
In doing so, the FCA considered whether enforcement of the award would lead to “manifest unfairness” and be contrary to public policy on the basis that the award declared rescission without orders to also restore both parties to their pre-contractual positions and that the award was not adequately certified, authenticated, or translated.
As a starting point, the FCA recognized that the concept of public policy in the IAA is adopted from, and ought to be interpreted consistently with, the New York Convention, ultimately holding that, under the New York Convention, there must be “compelling reasons” to refuse an award’s enforcement which had the result that enforcement was “so fundamentally offensive to that jurisdiction’s notions of justice that, despite its being a party to the Convention, … [a court] … cannot reasonably be expected to overlook the objection.”
The FCA held that the defendant’s complaints about the award did not meet the standard of being contrary to fundamental norms of justice and fairness in Australia in the context of international arbitration.
Moreover, given that prior to the initiation of the Australian proceedings, the award had been challenged without success in the People’s Republic of China, the FCA also held that, outside an exceptional case, it would generally be inappropriate for the enforcement court of a Convention country to reach a different determination on the asserted defects in an award than the court of the seat of the arbitration.
This decision provides a useful reminder that foreign arbitration awards will generally be enforced by Australian courts, with courts only willing to refuse enforcement in cases of fundamental unfairness.
B.4 Setting aside arbitral awards
Similarly to Guoao Holding Co Group v. Xue (No 2) reported on above, the SCNSW in Lieschke v. Lieschke considered whether to set aside an arbitral award on the basis that the award was in conflict with public policy, ultimately determining to set aside the award on the basis that the arbitrator had failed to give the plaintiff a proper opportunity to present their case.
The dispute concerned the division of property following the collapse of a family farming partnership between the plaintiff, their son and their daughter-in-law. During the arbitral proceedings, the plaintiff argued that he had a trust or equitable interest in the partnership property and that there were issues with the partnership accounts. The arbitrator ultimately found in favor of the defendants and issued an interim award in their favor. Following the interim award, the plaintiff engaged new solicitors and then sought to rely on additional expert evidence from a new expert in the arbitration. The arbitrator refused to take the new report into consideration in making the final award.
The NSWSC considered section 18 of the Commercial Arbitration Act 2010(NSW) (CAA NSW), which aligns with article 18 of the Model Law in requiring that parties to an arbitration must be treated with equality and each party must be given a reasonable opportunity to present their case. Section 34(2) of the CCA NSW also provides that an arbitral award may be set aside by a court if a party proves that they were unable to present their case or the court finds that the award is in conflict with public policy.
As noted, the plaintiff’s claim that they were unable to present their case arose from a refusal by the arbitrator to allow the plaintiff to give further expert evidence in circumstances where they clearly wished to change their case after engaging new solicitors.
While accepting that an arbitrator has a wide discretion to conduct the arbitration in the manner they see fit, the court noted that this is subject to safeguards, including that provided by section 18 of the CCA NSW. The court observed that the arbitrator, in this case, was too rigid in refusing to deviate from the procedure of the arbitration and had failed to turn their mind to the factors which should be considered when the plaintiff sought to widen the issues in relation to the partnership accounts, and introduce an argument which may improve its chance of success in the arbitration. As a result, the award was set aside.
Having set aside the award, the court also decided not to remit the case to the arbitrator on the basis that, during the course of the arbitration, the arbitrator had made comments which were extremely critical of the plaintiff’s position, such that it was considered that no reasonable person would expect the arbitrator to render an impartial and fair decision.
This case demonstrates that while the CCA NSW (and equivalents) are generally interpreted in favor of the enforcement of an arbitral award, Australian courts are nevertheless prepared to intervene to ensure that procedural safeguards are upheld in arbitration.
  SASCA 7.
  WASC 364.
  FCAFC 171.
 that is, a non-negotiable document which is not a bill of lading or similar document of title but is a contract which contains a provision to the effect that the Australian Rules are to govern the contract as if it were a bill of lading.
 (2022) 404 ALR 503.
  FCA 215.
  FCA 1029.
  FCAFC 6; 247 FCR 1 at .
  FCA 1584.
  FCA 1584 at .
  NSWSC 1705.