Apr 2023

Australia

Law Over Borders Comparative Guide:

Arbitration

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1 . Key considerations in deciding whether to arbitrate in this jurisdiction

Australia is an arbitration-friendly jurisdiction. Its governing arbitration legislation incorporates both the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and the UNCITRAL Model Law on International Commercial Arbitration (Model Law). 

 

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1.1. Advantages

Benefits of arbitrating in Australia include:

  • the generally pro-arbitration stance taken by Australian courts, which strive to give effect to the parties’ agreement to arbitrate, are reluctant to unduly interfere with a tribunal’s jurisdiction or findings, and facilitate the enforcement of arbitral awards in accordance with the New York Convention;
  • the stability of Australia’s government and independence of its court systems;
  • Australia’s modern legislative framework incorporating the Model Law which is construed having regard to international jurisprudence;
  • the existence of supportive arbitral institutions, such as the Australian Centre for International Commercial Arbitration (ACICA).
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1.2. Disadvantages and common pitfalls

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1.3. Other distinctive features

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2 . Principal laws and institutions relating to international arbitration in this jurisdiction

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2.1. Legal framework

Australia has separate legislative regimes governing domestic and international arbitration. 

International arbitration is governed by the International Arbitration Act 1974 (Cth) (IAA). The IAA implements Australia’s obligations under the New York Convention and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). Domestic arbitration is governed by the uniform Commercial Arbitration Acts (CAA) of each State and Territory. 

Both legislative regimes adopt the Model Law, with minor amendments. As is the case with the Model Law, the IAA and the CAA contain mandatory and non-mandatory provisions, as well as ‘opt-in’ provisions.

There is no special court or chamber which deals with arbitration matters. State and Territory Supreme Courts and the Federal Court of Australia have jurisdiction to decide arbitration matters.

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2.2. What qualifies as international arbitration?

An arbitration is ‘international’ for the purposes of the IAA if it meets the criteria in Article 1(3) of the Model Law, i.e.:

  • the parties’ place of business is in different countries; 
  • the seat of the arbitration is a foreign country; 
  • a substantial part of the commercial relationship is to be performed in, or the place with which the subject-matter of the dispute is most closely connected to is, a foreign country; or
  • the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country.
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2.3. Main local international arbitration institutions

The main international arbitration institution is the ACICA. Headquartered in Sydney, ACICA publishes arbitration and expedited arbitration rules, maintains a panel of arbitrators, and administers arbitrations governed by the ACICA Rules. The ACICA Rules are updated periodically (most recently in 2021) and reflect international best practice.

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3 . Arbitration agreements

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3.1. Requirements as to content and form

The IAA and CAA adopt the definition of ‘arbitration agreement’ set out in Article II(1) of the New York Convention.

As for the requirement of the arbitration agreement being ‘in writing’, the IAA and CAA adopt the extended definition of ‘writing’ in Option 1 of the Model Law as amended in 2006. An arbitration agreement will be in writing if its content ‘is recorded in any form’, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means. 

A reference in a contract to any document containing an arbitration clause is an arbitration agreement, provided that the reference makes the clause part of the contract. Australian courts have accepted that incorporation by reference does not in principle require an express reference to an arbitration clause in the primary agreement (Carob Industries Pty Ltd v. Simto Pty Ltd (1997) 18 WAR 1), although the analysis ultimately turns on the parties’ objective intentions. 

There is no requirement for the arbitration clause to be signed by the parties to be valid. 

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3.2. Validity of arbitration agreements

An arbitration agreement is invalid where it is inoperative, incapable of being performed, or null and void (e.g. if it conflicts with a statutory prohibition on agreements to refer certain types of disputes to arbitration, such as it exists in respect of domestic building contracts in New South Wales and Victoria). 

The Full Federal Court held that “null and void” refers to circumstances where an arbitration agreement has been affected by invalidity from the beginning or where a party lacked the capacity to agree to arbitrate (Comandate Marine Corp v. Pan Australia Shipping Pty Ltd (2006) 157 FCR 45, 99). This would cover matters involving a lack of consent due to duress, fraud, undue influence or misrepresentation. 

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3.3. Special formalities

There are no special formalities for the formation of arbitration agreements.

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3.4. Governing law

Parties are free to choose the law governing the arbitration agreement. In the absence of an express choice, the governing law will be found by considering whether a choice of law can be implied (based on the parties’ objective intentions). If no implied choice can be ascertained, the governing law will be the law with which the arbitration agreement ‘has its closest and most real connection’ (Dialogue Consulting Pty Ltd v. Instagram Inc [2020] FCA 1846). The choice of seat may be a relevant factor to consider, but will not be determinative.

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4 . Arbitrability

There are limited restrictions on areas of law which are non-arbitrable. As a general rule, if there is legitimate public interest, or where it might impact the rights of third parties, it is not arbitrable (Comandate Marine Corp v. Pan Australia Shipping Pty Ltd (2006) 157 FCR 45).

Recent Australian case law has seen an expansion of matters capable of settlement by arbitration (e.g. disputes concerning the winding up of a company were held to be arbitrable in WDR Delaware Corporation v. Hydrox Holdings Pty Ltd [2016] FCA 1164, as were disputes regarding the existence of a trust relationship in Fitzpatrick v. Emerald Grain Pty Ltd [2017] WASC 206 [99]). 

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4.1. Applicable restrictions

A number of subject matters are typically considered non-arbitrable, including criminal offences, some intellectual property disputes, bankruptcy and pure insolvency issues. 

Arbitration of certain disputes is restricted by some statutes, such as some claims pursuant to a statutory right to a payment, and disputes in connection with contracts of insurance (unless agreed after a dispute has arisen).

Consistent with Australia’s pro-arbitration stance, it is only in ‘extremely limited circumstances’that a dispute will be non-arbitrable where there is a valid arbitration agreement (Rinehart v. Welker [2012] NSWCA 95).

Recent case law suggests that a dispute may be capable of settlement by arbitration even where one of several subject matters is non-arbitrable, provided ‘the real controversy between the parties’ is inter partes and not sufficiently in the public interest (WDR Delaware Corporation v. Hydrox Holdings Pty Ltd [2016] FCA 1164). 

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5 . Enforcing arbitration agreements

Australian courts will enforce valid arbitration agreements by staying court proceedings or issuing anti-suit injunctions to restrain a party from commencing or continuing legal proceedings in breach of an arbitration agreement. The competence-competence principle applies and questions regarding arbitral jurisdiction (and the scope, operability and enforceability of an arbitration agreement) will be left to the arbitrator unless circumstances exist that make it ‘preferable’ for the court to determine such questions.

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5.1. Stay of proceedings

Australian courts will stay proceedings before them where a valid arbitration agreement governs the parties’ dispute. See above, Section 3.2.

Australian courts are becoming progressively more liberal in enforcing the competence-competence principle. The Full Federal Court recommended the application of the ‘prima facie approach’ and referral of matters of jurisdiction to arbitration ‘unless the context in which these questions arise make it preferable for the Court to determine such matters’ (Hancock Prospecting Pty Ltd v. Rinehart [2017] FCAFC 170). 

The circumstances in which courts consider it ‘preferable’ to determine matters of arbitral jurisdiction are becoming narrower – as seen, for example, in Transurban WGT Co Pty Ltd v. CPB Contractors Pty Ltd [2020] VSC 476, where the Court refused to restrain the defendant, a design & construct subcontractor on a major infrastructure project, from arbitrating claims against Transurban as head contractor. Transurban argued that a linked claims provision in the design & construct subcontract operated to preclude the subcontractor from arbitrating claims against Transurban until the corresponding claims passed by Transurban through to the principal were resolved under the head contract. The Court held that whether the linked claims provision had the effect alleged was a matter for the arbitrators and granted a stay of proceedings referring the parties to arbitration. 

Agreement covers the dispute

Where there is a valid arbitration agreement, it is safe to assume that all disputes related to the transaction are to be resolved by arbitration unless the agreement includes an express carve out for a particular dispute or class of disputes.

Australian courts have indicated a tendency to construe arbitration agreements liberally but within the prevailing tradition of objective contractual interpretation (Rinehart v. Hancock Prospecting Pty Ltd [2019] HCA 13).

An order of stay can be subject to conditions, such as that a party not raise as a defence in any arbitration that the tribunal lacks jurisdiction where preconditions to arbitration have not been satisfied.

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5.2. Anti-suit injunctions

Australian courts will order anti-suit injunctions to stop parties pursuing a remedy in the courts of another country in breach of a valid arbitration agreement. 

As with a stay of proceedings, the court must be satisfied that: 

  • a valid foreign arbitration agreement governs the parties’ disputes; and 
  • the dispute that is the subject of the foreign proceedings is within the scope of that arbitration agreement. 

In accordance with their inherent or auxiliary equitable jurisdiction, Australian courts may grant anti-arbitration injunctions – although the power of courts to do so is subject to seemingly conflicting authority. In Kraft Foods Group Brands Ltd v. Bega Cheese Ltd [2018] FCA 549, the Federal Court of Australia exercising its implied jurisdiction to control its own process granted an anti-arbitration injunction preventing Kraft from proceeding with a New York seated arbitration until proceedings on foot in the Federal Court were determined. Conversely, in the context of a domestic arbitration, the Supreme Court of Victoria (the court of the seat in that case) refused to grant an anti-arbitration injunction in Transurban WGT Co Pty Ltd v. CPB Contractors Pty Limited [2020] VSC 476. In the latter case, Justice Lyons observed that Article 5 of the Model Law, which provides that ‘no court must intervene except where so provided by this Act’, would appear to remove the Court’s inherent or auxiliary equitable jurisdictions, including the power to issue anti-arbitration injunctions. An exception was said to exist where an anti-arbitration injunction was sought to restrain one arbitration in favour of a separate arbitration on foot between the parties pursuant to Article 17J of the Model Law, but this would be to facilitate (not obstruct) the dispute resolution process the parties themselves agreed to, and to ensure the fair and final resolution of a dispute by arbitration without unnecessary expense. 

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6 . Arbitral Tribunal

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6.1. Restrictions on the parties’ freedom to choose arbitrators

Parties are free to choose a method of appointment of, and to select, arbitrators, save for two restrictions (Model Law, Article 11): 

  • arbitrator(s) appointed must be independent and impartial; and 
  • each party must receive proper notice of the appointment of an arbitrator.
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6.2. Requirement of arbitrator independence and impartiality

Arbitrators must disclose any circumstances likely to give rise to a justifiable doubt as to their impartiality or independence prior to and at any time throughout the proceedings (Model Law, Article 12(1)). 

Justifiable doubts as to the impartiality or independence of an appointed or potential arbitrator will only arise where there is ‘a real danger of bias’ on the part of that person in conducting the arbitration (IAA, section 18A). 

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6.3. Mandatory rules applicable to the appointment process

Parties are free to agree on the procedure for appointing the arbitrator(s) save for the requirements in Article 11 of the Model Law described above in Section 6.1.

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6.4. Appointment mechanism in the absence of party agreement or applicable institutional rules

Where parties do not agree a procedure for appointment, the default procedure under Article 11(3) of the Model Law will apply.

Where an arbitrator cannot be appointed following the procedure agreed by the parties or the default regime, the appointment will be made by ACICA, as the default appointing authority under the IAA, or a superior court. 

The uniform CAA allows for court intervention to appoint arbitrators where arbitrations have two, four or more arbitrators or with three arbitrators and more than two parties (a situation not covered by the Model Law). 

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6.5. Mandatory rules applicable to the replacement process

Where an arbitrator’s mandate terminates for whatever reason, a substitute arbitrator is to be appointed according to the same rules applicable to the appointment of the arbitrator being replaced (Model Law, Article 15).

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6.6. Mandatory disclosure obligations

Prospective and appointed arbitrators must ‘disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence’ throughout the proceedings (Model Law, Article 12). This obligation is affirmative, in that it requires arbitrators to proactively investigate possible conflicts. 

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6.7. Grounds for challenge

A party may challenge the appointment of an arbitrator if there are circumstances that give rise to justifiable doubt as to the arbitrator’s impartiality, independence or requisite qualifications agreed by the parties (Model Law, Article 12(2)).

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6.8. Mandatory rules governing the challenge of arbitrators

Parties are free to agree on a procedure for challenging the arbitrators. 

Failing such an agreement, the challenge procedure in Article 13(2) of the Model Law applies. If the challenge is unsuccessful, a party can apply to a court or competent authority (ACICA for international arbitrations) to decide on the challenge. 

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6.9. Removal

If an arbitrator becomes de jure or de facto unable to perform their functions, or for another reason fails to act without undue delay, and the arbitrator does not withdraw, any party may request a court or competent authority to decide on the termination of the mandate (Model Law, Article 14(1)).

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6.10. Liability and immunity of arbitrators

Under both the IAA (section 28) and the uniform CAA (section 19), arbitrators are not liable for anything done or omitted in good faith in their capacity as an arbitrator. 

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7 . Assistance by the State courts

Courts have broad powers to grant interim measures in relation to arbitral proceedings, and to issue subpoenas and other related powers in aid of arbitration. 

Curial jurisdiction to grant interim measures exists regardless of whether the arbitration is seated in Australia or elsewhere. There is a divergence of views as to whether the same is true for other judicial powers in aid of arbitration which may be exercisable only in Australia-seated arbitrations (Samsung C&T Corporation, Re Samsung C&T Corporation [2017] FCA 1169). 

However, with Australia being party to the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, parties to international arbitrations can seek assistance from an Australian court via a letter of request by a Court of another Contracting State (and vice versa).

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7.1. Interim measures

Overview of interim measures

Courts and arbitral tribunals have concurrent powers to issue interim measures in relation to arbitral proceedings (Model Law, Articles 17 and 17J). In exercising this power, courts can issue a range of orders (including on an ex parte basis), including discovery, interim preservation orders, freezing orders and security for costs. Courts will generally only exercise these powers where urgent relief is sought and there are compelling reasons to do so. 

The Model Law requires tribunal-granted interim measures to be recognised and enforced unless specific grounds are met for refusing enforcement (Articles 17H, 17I).

The IAA does not indicate a preference when both courts and tribunals have jurisdiction to issue interim relief. It has been suggested that courts should defer to the arbitral tribunal when the parties have agreed to arbitrate and the tribunal has the capacity to grant the relief sought (see, e.g., Hancock v. Rinehart [2014] NSWSC 156).

Relevance of availability of emergency arbitrator mechanism

The ACICA Rules 2021 provide for emergency arbitration procedures.

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7.2. Taking of evidence

The arbitral tribunal or parties (with approval) can request assistance in the taking of evidence from a competent court, which may execute it according with its rules on the taking of evidence (Model Law, Article 27). 

The IAA sets out processes by which a court may assist in the production of documentary evidence in arbitral proceedings (ss 23 to 23J). Equivalent processes are set out in the uniform CAA.

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7.3. Appointment or challenge of arbitrators

Courts may:

  • appoint arbitrators (Model Law, Article 11(3));
  • decide on challenges to appointments of arbitrators (Model Law, Article 13(3)); and 
  • decide on the termination of an arbitrator’s mandate (Model Law, Article 14(2)). 
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7.4. Other available assistance

As discussed above in Section 5.1, Australian courts can stay proceedings and refer parties to arbitration where a valid arbitration agreement covers the dispute.

Further, consistent with Article 16(3) of the Model Law, where a tribunal rules as a preliminary question that it has jurisdiction, the decision can be challenged before a court. The court may conduct a re-hearing on questions of jurisdiction and its decision is not subject to appeal.

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8 . General procedural (minimum) requirements

Parties are to be treated with equality and each party is to be given a full opportunity to present its case (Model Law, Article 18). 

Under section 18C of the IAA (which is mandatory), a party to arbitral proceedings is taken to have been given a ‘full opportunity to present their case’ if they have been given a reasonable opportunity to do so. However, a failure to take advantage of an opportunity to present one’s case ‘does not result in any breach of the Model Law or of the rules of natural justice, more generally’ (UDP Holdings Pty Ltd v. Esposito Holdings Pty Ltd (No 2) [2018] VSC 741, [24]). 

Australian courts will apply a high threshold when asked to intervene in an award on the basis that there was an alleged violation of natural justice or lack of procedural fairness (see, e.g., TLC Air Condition (Zhongshan) Company Ltd v. Castel Electronics Pty Ltd (2014) 311 ALR 387, [55]).

Aside from the above, there are minimal general procedural requirements for the conduct of arbitration. For example, there are no requirements for hearings to take place at the seat or in-person.

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9 . Confidentiality

Parties to international arbitral proceedings seated in Australia and the arbitral tribunal are to keep information obtained or produced in an arbitration confidential, subject to certain exceptions (IAA, sections 23C–23D). Parties may, by agreement, opt-out of the confidentiality obligations under the IAA. 

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10 . Awards

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10.1. Requirements as to content and form

The award must comply with the content and form requirements in Article 31 of the Model Law.

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10.2. Time limit

There is no time limit specified in Australian legislation. 

The ACICA Rules provide that unless parties agree otherwise, the final award should be rendered within nine months from the date the file was transmitted to the tribunal or no later than three months from the date the tribunal declares the arbitration proceedings are closed, whichever is earlier.

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10.3. Remedies

In the absence of limits imposed by the parties, a tribunal can award any remedy that would be available to a court of law, including damages, injunctions, specific performance and declarations. 

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11 . Post-award proceedings

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11.1. Interpretation and correction of awards

Tribunals can correct and interpret awards in accordance with Article 33 of the Model Law. 

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11.2. Challenge of an award

Process for setting aside an award

A party may apply to a State or Territory Supreme Court or to the Federal Court of Australia to set aside an international arbitral award (IAA sections 3(1), 18; Model Law, Articles 6, 34). 

A party has three months to bring an application for setting aside in accordance with the Model Law. 

Grounds for setting aside an award

The grounds for setting aside an award are narrow and limited to those enumerated in Article 34 of the Model Law and section 19 of the IAA with respect to the public policy ground. Arbitral awards are not reviewable on the merits. 

Australian interpretation of these grounds is as follows:

  • The incapacity ground has been of limited relevance in practice in Australia. 
  • The ground of invalidity is invoked more often, where courts have held that an award debtor resisting enforcement must affirmatively prove that an agreement governed by foreign law is invalid under the governing law (see, e.g., Liaoning Zhongwang Group Co Ltd v. Alfield Group Pty Ltd (2017] FCA 1223).
  • Australian courts have typically applied high standards for the burden of proving that notice was not properly given (see, e.g., Uganda Telecom Ltd v. Hi-Tech Telecom Pty Ltd (2011) 277 ALR 415). 
  • For an award debtor to show that it was unable to present its case, a breach of the rules of natural justice in the form of a real unfairness or practical injustice will generally be required. 
  • Consistent with international jurisprudence, Australia’s courts will not engage in a merits review when considering if matters decided were outside the scope of the arbitration agreement (see, e.g., Giedo van der Garde BV v. Sauber Motorsport AG (2015) 317 ALR 792).
  • It is rare for an award to be set aside on the basis that the composition of the tribunal or arbitral procedure was not in accordance with the arbitration agreement – although this ground was recently relied upon by the applicant to deny enforcement before the Federal Court (see Hub Street Equipment Pty Ltd v. Energy City Qatar Holding Company [2021] FCAFC 110).
  • The public policy ground will be violated where the award was induced or affected by fraud or corruption or a breach of the rules of natural justice occurred in connection with the award (IAA, section 19). This section is only enlivened for ‘those aspects of public policy that go to the fundamental, core questions of morality and justice’ (Traxys Europe SA v. Balaji Coke Industry Pvt Ltd (No 2) [2012] FCA 276). Where public policy objections relate to only part of the award, it is possible for the award to be severed and only valid parts enforced. 

Courts may also suspend the setting aside proceedings to give an arbitral tribunal an opportunity to resume proceedings or to take such further action as the arbitral tribunal considers necessary to address the grounds raised by the applicant. 

Consequences of setting aside an award

Where an award has been set aside, it no longer has the effect of a final and binding decision. The dispute is able to be arbitrated again, as the setting aside has no impact on the effectiveness of the underlying arbitration agreement.

However, the decision of the court setting aside the award could affect the scope of adjudication before a new arbitral tribunal, as a party may be prevented or ‘estopped’ from reopening certain matters in any subsequent arbitration. 

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11.3. Recognition and enforcement proceedings

Process for recognition and enforcement

The party seeking recognition and enforcement of an award rendered in an international commercial arbitration seated in Australia must comply with the requirements in Article 35 of the Model Law. Recognition, and enforcement under the Model Law may be sought in either a State or Territory Supreme Court or the Federal Court of Australia (IAA, section 18(4)–(5)).

In Australia, limitation periods apply to arbitral awards in all states, except South Australia. The limitation period is usually six years.

Grounds for refusing recognition and enforcement

The grounds for setting aside an award are identical to the grounds for refusing recognition and enforcement, with one additional ground, being that the award has not yet become binding on the parties or has been set aside in the country where the award was made.

Courts have the discretion to adjourn enforcement proceedings or order security against the award debtor when the award is being challenged at the seat of arbitration (IAA, section 8(5)–(6)). The award debtor resisting enforcement will typically need to establish that an application to set the award aside has been made appropriately and/or that, at least prima facie, it has prospects of success. 

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11.4. Cost of enforcement

Unless an award debtor resists enforcement, applicants can expect to pay court fees in the range of AUD 3,000 to AUD 14,000 to enforce a foreign arbitral award in Australia (assuming that the applicant is a corporate entity and that only a one-day hearing is required with no case management). This is in addition to solicitor and counsel fees. 

The cost consequence following a failed attempt to resist recognition and enforcement remain unsettled (see e.g., Ye v. Zeng (No 5) [2016] FCA 850, [21]–[23]). 

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11.5. Enforcement of orders of emergency arbitrators

The enforceability of an emergency arbitrator’s award remains a developing area of law. Having regard to the obligation to recognise as binding and enforce interim measures under the Model Law, we anticipate that such interim measures will be recognised and enforced by Australian courts unless one of the enumerated grounds for refusing recognition is met. 

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12 . Enforcement of foreign awards

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12.1. Process for enforcing New York Convention awards

A foreign arbitral award may be enforced in a superior court ‘as if the award were a judgment or order of that court’ (IAA, section 8(2)–(3)).

To have a foreign award enforced in Australia, applicants are required to comply with the evidentiary and translation requirements of the IAA (s 9). The award creditor does not have any further onus of proof. The party opposing recognition and enforcement has the burden of raising and proving the grounds for non-enforcement. 

The limitation periods outlined above in Section 11.3 apply. 

There is no requirement of reciprocity in Australia.

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12.2. Grounds for resisting enforcement of New York Convention awards

The grounds for resting enforcement of awards in Australia under the New York Convention are the same as those set out above in Section 11.3.

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12.3. Enforcing Non-Convention awards

The process for recognition and enforcement and the grounds for resisting enforcement of non-convention award is set out above in Sections 12.1 and 12.2. 

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13 . Professional and ethical rules

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13.1. Applicable to counsel

In Australia, there are currently no ethical codes that specifically apply to counsel in arbitration. Each State and Territory has established professional and ethical rules that are applicable to Australian legal practitioners in both court and arbitral proceedings. 

Australian-registered foreign lawyers acting in the manner of a solicitor are required to adhere to the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules, which operate in all jurisdictions except the Northern Territory. 

Party autonomy also provides parties with the opportunity to set out in the arbitration clause the specific obligations of conduct for counsel in the arbitration proceedings.

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13.2. Applicable to arbitrators

There are currently no ethical codes that specifically apply to arbitrators in all arbitrations. 

The ACICA Rules require arbitrators to have regard to the IBA Rules on the Taking of Evidence in International Arbitration and allow arbitrators and parties to have regard to the IBA Guidelines on Conflicts of Interest in International Arbitration.

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14 . Third-party funding

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14.1. Applicable regulatory requirements

Prohibitions based on the English doctrines of maintenance and champerty have been abolished, and courts have upheld third-party funding agreements. There is no regulation that limits the funders’ fees, but courts retain the discretion to set aside agreements that are contrary to public policy. 

There are no centralised rules governing the provision of third-party funding in arbitration. Funders are subject to financial services regulation, are required to hold an Australian Financial Services Licence and comply with the managed investment scheme regime (Corporations Amendment (Litigation Funding) Regulations 2020 (Cth)).

The ACICA Rules contain provisions requiring the disclosure of the existence of third-party funding and identification of the funder at the time the Notice of Arbitration or Answer are filed, or as soon as practicable after funding is agreed. 

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14.2. Overview of the third-party funding market in this jurisdiction

The Australian third-party funding market has seen a marked increase in activity (reportedly a growth of 8.7% per annum between 2017 and 2022). The initial focus on investor-state arbitration in the market has recently expanded to international commercial arbitration.

In 2021-2022, the market size of the Australian litigation funding industry was estimated at AUD 173.5 million in terms of revenue and it is anticipated to continue to experience an annual growth of 4.1% for the next five years (IBISWorld, Litigation Funding in Australia Industry Report No OD5446, June 2022). 

There are a range of different funding structures of varying degrees of sophistication that are currently available (including, recently, portfolio funding). 

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15 . Trends and recent developments

At the time of writing, outcome is awaited in two cases that have put into focus Australia’s arbitration-friendly label.

The first concerns an application in the Federal Court for the recognition and enforcement of an ICSID award against Spain by Dutch and Luxembourg claimant investors. Spain resisted the application claiming it was immune from the jurisdiction of the Australian courts under the Foreign States Immunities Act (Cth). The Federal Court and the Full Federal Court found that Spain was not immune by virtue of becoming a party to the ICSID Convention, but this was only to the extent that the application was for ‘recognition’ of the award, not for its ‘enforcement’ (Kingdom of Spain v. Infrastructure Services Luxembourg S.à.r.l. (2021) 387 ALR 22). An appeal of this decision was heard by the High Court of Australia in November 2022, and its judgment may develop the law in relation to recognition and enforcement as well as jurisdictional immunities of sovereign debtors.

The second concerns a dispute between an Australian mining company (Mineralogy) and Western Australia (WA) about a stalled development of a mine in the Pilbara region. The dispute was referred to arbitration and produced two awards on the merits in Mineralogy’s favour. However, in 2020, WA passed emergency legislation that effectively extinguished any State liability in relation to the disputed matters, as well as Mineralogy’s right to pursue claims in the future. Mineralogy’s Singaporean parent has recently notified an investment treaty claim against the Commonwealth Government which seeks to hold Australia responsible for WA’s alleged unlawful expropriation of Mineralogy’s investment, including by invalidating its arbitration agreement and arbitral awards. The matter highlights potential sovereign risk consequences of a failure to respect arbitration agreements and enforce arbitral awards.

Further distinctive points to note about arbitrations in Australia are:

  • Courts have recently expanded the circumstances in which third parties can claim ‘through or under’ a party to an arbitration agreement in the context of a stay application (Rinehart v. Hancock Prospecting Pty Ltd [2019] HCA 13; Bulkbuild Pty Ltd v. Fortuna Well Pty Ltd [2019] QSC 173). While the lasting impacts of these decisions is unclear, the principle significantly expands the ability of non-parties to the arbitration agreement to enforce provisions within the agreement.
  • The rules for consolidation in domestic and international arbitrations differ. In international arbitration, tribunals will only have the option to order consolidation where parties have ‘opted in’ to their application (IAA, s 24). In domestic arbitration, tribunals have the power to order consolidation unless parties have agreed to opt out (CAA, section 27C).

EXPERT ANALYSIS

Chapters

Brazil

Anna-Katharina Scheffer da Silveira
Paulo Macedo
Rafael Alves

Colombia

Juan Felipe Merizalde
Juan Pablo Gómez-Moreno

Ecuador

Adriana Rodas
David Toscano
Gabriela Ortega

England and Wales

Gregory Fullelove
Katie Bewlock

France

Carl Szymura
Julie Spinelli

Hong Kong

Kim M. Rooney

India

Sanskriti Sidana
Shaneen Parikh
Tushar Karkaria

Italy

Gregorio Baldoli
Massimo Benedettelli

Nigeria

Igonikon Adekunle
Konyinsola Osipitan
Sesan Sulaiman

Saudi Arabia

Fahad N. AlArfaj

Singapore

Joel Quek
Koh Swee Yen SC
Wendy Lin

South Africa

Clement Mkiva
Jackie Lafleur
Jonathan Barnes
Tori Herholdt

South Korea

Brandon Bang
Hangil Lee
In Hyuk Hwang
Tony DongWook Kang

Switzerland

Noradèle Radjai

United States

Benjamin Guthrie
Carlos Hafemann
Daniela Páez
Emma McGrath
Lucila Marchini
Louis Thivierge

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