Australia

Case updates

This year the Australian courts continued to re affirm their pro enforcement approach to international arbitration awards. In two significant separate judgments, the Federal Court of Australia rejected attempted challenges to enforcement proceedings relating to an award made by an International Centre for Settlement of Investment Disputes (ICSID) Tribunal, and an award made by the China International Economic and Trade Arbitration Commission (CIETAC).

Eiser Infrastructure Ltd v Kingdom of Spain [2020] FCA 157

The Federal Court of Australia confirmed that sovereign immunities from the jurisdiction of the Australian courts will not apply where a State has agreed to submit to international instruments under which it was obliged to recognise and enforce awards.

Eiser Infrastructure (Eiser) sought enforcement of an award against Spain of a 2017 ICSID Award for 128m euros in Eiser’s favour that found that Spain was in breach of the Energy Charter Treaty (ECT).

The subject of the dispute was subsidies and incentives introduced by Spain in 2007 to attract renewable energy production, which were subsequently repealed by Spain after Eiser invested over 100m euros in solar power projects in Spain. Eiser claimed that these legislative changes constituted a breach of the obligation to provide fair and equitable treatment under Article 10(1) of the ECT, to which Spain is party.

Spain challenged the enforcement proceedings in the FCA on the basis that section 9 of the Foreign State Immunities Act 1985 (Cth) (Immunities Act) provides that a foreign State is immune from the jurisdiction of the courts of Australia in any proceedings.

The court referred to the relevant exceptions in section 10 of the Immunities Act, being section 10(1) which provides that a “state is not immune from jurisdiction in a proceeding in which it has submitted to the jurisdiction of the court”, and section 10(5) which provides that a foreign State may enter an agreement to waive its immunity.

The Court held that Spain had, by signing and ratifying the ECT and ICSID Convention, agreed to the dispute resolution mechanism of arbitration stipulated within these agreements. By doing so, Spain had ultimately submitted to the jurisdiction of the Australian Court (as a party to the ECT and Investment Convention). Further, a foreign State cannot be immune from the recognition and enforcement of an ICSID award, as the ICSID Convention inherently envisages arbitration awards being made against foreign states and provides that such awards “shall ” be recognised and enforced by contracting parties, which includes Australia.

As a result, Spain’s immunity argument was rejected and it was deemed to have fallen under the relevant exceptions in section 10 of the Immunities Act. Spain failed on its application and the award was enforced.

The Federal Court made the important distinction between enforcing an award and executing it. While the award is enforceable against Spain and could not be challenged on grounds of immunity, the Immunities Act continues to restrict execution of an award and seizure of assets of a sovereign State. Seizure of assets is only available subject to certain limited exceptions such as where the assets to be seized are “commercial property”.

The case sets the tone for how the Australian courts will view enforcement of ICSID awards, and how they will treat any challenges to enforcement made under the Immunities Act.

Tianjin Jishengtai Investment Consulting Partnership Entreprise v Huang [2020] FCA 767

The Federal Court of Australia confirmed the Australian courts’ regard for the overriding objectives of arbitration in enforcing a CIETAC award in the form of an order for specific performance.

Tianjin Jishengtai Investment Consulting Partnership Enterprise (Tianjin) sought orders pursuant to section 8(3) of the International Arbitration Act (IAA) for the enforcement of an award made by a Tribunal in the People’s Republic of China (PRC) under the auspices of the China International and Economic Trade Arbitration Commission. The award found Huazhao Huang (Huang) liable to pay Tianjin RNB 78,753,425 to acquire 32.43836% of Tianjin.

Huang challenged the enforcement of the award on two grounds. Firstly, Huang asserted that Tianjin had not provided the court with a duly certified copy of the award or duly certified copies of the arbitration agreements under which the award was made, as sections 9(1)(a) and (b) of the IAA require. Secondly, Huang challenged the form of the orders sought by Tianjin, arguing that the orders did not reflect the form of the award.

With regard to the first ground, Jagot J rejected Huang’s contention based on three findings. Her Honour’s principal conclusion was that the award and agreements provided to the Court were accompanied by a notary’s certification and, therefore, duly certified. It was accepted that the documents contained sufficient evidence in themselves to satisfy section 9(1) of the IAA. Notwithstanding that conclusion, her Honour also had regard to section 9(5) of the IAA which provides that a document, upon mere production to the Court, is prima facie evidence of the matters to which it relates. Finally, her Honour took the witness statement of Wen Jiaxin, dated 7 May 2020, as further evidence that the award and agreements had been duly certified in accordance with section 9(1) of the IAA. Notably, Jagot J exercised her discretion to admit the witness statement into evidence despite not being sworn or affirmed as required by the rules of the court. Her Honour accepted that the substance of the evidence was not in dispute and that enforcing the hearsay provisions, and requiring cross examination in Australia, would involve unnecessary expense or delay due to the effect of COVID-19 on international travel.

In disposing of Huang’s first ground, Jagot J had regard to the objects of the IAA in section 2D, as required by section 39 of the IAA, as well as the fact that arbitration is designed to be an efficient, impartial, enforceable and timely method for resolving commercial disputes. Furthermore, her Honour remarked that awards ought to provide certainty and finality. On the basis of these considerations, her Honour saw no reason not to make orders for the enforcement of the award. Having disposed of this issue, the Court’s attention turned to the form that the orders would take.

The second ground for challenging enforcement asserted that the form of the award was different to the form of the orders sought by Tianjin. Jagot J agreed with Huang’s general submission that part of the award requiring Huang to purchase a stake in Tianjn, is akin to an order for specific performance. However, her Honour did not agree that this means that no orders should be made.

The Federal Court’s conclusion was that Huang pay the relevant sum to Tianjin, converted to AUD17,414,377.59, and that this should be followed by a consequential order requiring the transfer of the relevant shares from Tianjin to Huang. The Court also stated that the form of the award should be a declaration as to the enforceability of the award and judgment. That direction is reflected in the order of the Court which required the parties to confer and provide the Court with agreed or competing orders within seven days.

Other key developments

Australia ratifies The Mauritus Convention to increase transparency ISDS

Australia has strengthened its position as an arbitration friendly jurisdiction by taking legislative steps to adopt greater transparency in investor State dispute settlement (ISDS).

In September 2020, Australia ratified the United Nations Convention on Transparency in Treaty based Investor State Arbitration (Mauritius Convention). The Mauritius Convention extends the application of the UNCITRAL Rules on Transparency in Treaty based investor State Arbitration (Transparency Rules), which applied to investment treaties concluded after 1 April 2014 and aim to promote greater transparency and public accessibility in ISDS proceedings.

ISDS proceedings are confidential in nature by default. The overriding objective of the Transparency Rules is to increase transparency in the ISDS process. The key provisions are:

• mandatory disclosure of arbitration documents, including the notice of arbitration, the response to the notice of arbitration, and all pleadings (witness statements and expert reports are available upon request by any person);
• following consultation with the parties, the arbitral tribunal may allow for a third party to make written submissions on matters relevant to the dispute; and
• hearings will be open to public, with limited exceptions where there is a need to protect confidential information or the integrity of the arbitral process.

Necessarily, the Transparency Rules contain exceptions to protect confidential information. The arbitral tribunal is given the power to prevent confidential or protected information from being made public, and to determine what shall constitute such confidential or protected information.