Australia

Case updates

Beijing Jishi Venture Capital Fund (Limited Partnership) v Liu [2021] FCA 477

This case concerned an application by Beijing Jishi Venture Capital Fund (Limited Partnership) (Jishi Fund) in the Federal Court of Australia for enforcement of an award under the International Arbitration Act 1974 (Cth) (IAA) with respect to a 2018 China International Economic and Trade Arbitration Commission (CIETAC) award. Enforcement was resisted by one of the award debtors, (Mrs. Liu), on the grounds that Mrs. Liu had not been served with the notice of arbitration in accordance with the arbitration agreement or the chosen institutional rules resulting in a significant breach of natural justice and the requirement for due process.

Service of the Notice of Aribiration became an issue because a confirmation letter relating to the main agreement between the parties stated that Mr. Liu (Mrs. Liu’s husband) had obtained full authorisation from Mrs. Liu and that Mr. Liu had the right to sign the confirmation letter on Mrs. Liu behalf. The confirmation letter provided a new address for service (New Address). However, Mrs. Liu did not sign the confirmation letter and Mr. Liu did not purport to sign it on her behalf.

The arbitral tribunal took the view that effective service had taken place and proceeded to conduct the arbitration proceedings in the absence of the respondents, including Mrs. Liu. The arbitral tribunal ultimately issued an award in favour of Jishi Fund.

However, the enforcing Court took a different view and declined to enforce the award on the grounds that Mrs. Liu did not receive notice of the arbitration or the appointment of arbitrators in accordance with the arbitration agreement that listed her address for service. The Court did not consider the New Address to have been an address “agreed by the parties”. The confirmation letter was not binding on Mrs. Liu nor was it signed by Mrs. Liu or on her behalf. Therefore, the Court held that the New Address was not relevant to Mrs. Liu, which being given to resulted in no proper notice of the arbitration to Mrs Liu. Accordingly, the Court dismissed the application having regard to sections 8(5) and 8(7) of the IAA.

This case shows the importance of ensuring that notice of an arbitration is given to all parties strictly in accordance with the arbitration agreement, failing which any subsequent award may be unenforceable.

Hub Street Equipment Pty Ltd v Energy City Qatar Holding Company [2021] FCAFC 110

In this case, the Full Federal Court of Australia, on appeal, declined to exercise its discretion to enforce a foreign arbitration award pursuant to section 8 of the IAA. The Court found that the failure of the arbitral tribunal to be composed in accordance with the parties’ arbitration agreement constituted a ground for non-enforcement expressed in section 8(5)(e) of the IAA as well as Article V(1)(d) of the New York Convention provide that recognition and enforcement of an award may be refused if the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place.

Background

In 2010, Hub Street Equipment Pty Ltd (Hub Street) and Energy City Qatar Holding Company (ECQ) entered into a contract by which Hub Street agreed to supply and install street lighting and street furniture equipment and accessories, in Doha, Qatar (Agreement). The Agreement was subject to the laws of Qatar.

A dispute arose between the parties for the repayment of monies advanced by ECQ to Hub Street under the Agreement. Rather than giving notice to Hub Street as required by the dispute resolution clause regarding the appointment of a tribunal, ECQ directly approached the Plenary Court of First instance of the State of Qatar (Qatari Court) for the appointment of a three-member arbitral tribunal.

Although Hub Street’s directors received notice of the Qatari Court proceeding for the appointment of the arbitral tribunal, it did not participate in the arbitral proceedings. Ultimately, the arbitral tribunal issued an award in ECQ’s favour, requiring Hub Street to pay the full value of the advance payment along with compensation against damages incurred by ECQ and the full fees of the arbitration, totalling USD1,045,322.16.

Subsequently, ECQ applied to the Federal Court of Australia for enforcement of the award under s. 8(3) of the IAA, which allows a foreign arbitral award to be enforced as if the award were a judgment or order of the court. Hub Street opposed the enforcement proceeding on two primary grounds:

• the arbitral tribunal had not been constituted in accordance with the agreement of the parties; and
• the procedure of the arbitration was not in accordance with the Agreement in that, contrary to its terms, it was not conducted in English and the award was issued in Arabic.

Ultimately, the Full Federal Court of Australia (on appeal) held that Hub Street had established the ground for non-enforcement expressed in s. 8(5)(e) of the IAA as well as Article V(1)(d) of the New York Convention by proving, to the requisite standard, that the composition of the arbitral tribunal was not in accordance with the Agreement. The Agreement required the notice and invitation to appoint an arbitrator procedure to be followed, with recourse to the Qatari Court available in circumstances where the parties had failed to agree. The Qatari Court had acted on a misapprehension that the dispute resolution clause in the Agreement had been followed and that the process had failed to produce the appointment of an arbitral tribunal.

The Court therefore found that the irregularity with respect to the composition of the arbitral tribunal was reason enough for the Court to not exercise its discretion to enforce the award.

Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. [2021] FCAFC 3

Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. (no 3) [2021] FCAFC 112 In February 2021, the Full Court of the Federal Court of Australia issued a judgment upholding a decision at first instance, which held that the Kingdom of Spain cannot rely on a plea of sovereign immunity against a party seeking to recognise an arbitral award in Australia under the Convention on the Settlement of Investment Disputes (ICSID Convention).

In reaching its decision, the Full Court distinguished the concepts of “recognition” and “enforcement” of arbitral awards under Articles 54(1) and (2) of the ICSID Convention. It found that, for the purposes of recognition, Spain had waived its immunity as a Contracting Party to the ICSID Convention. Relevantly, the Full Court emphasised that Spain’s reliance on sovereign immunity in recognition proceedings before a competent court was incompatible with its agreement to Article 54, as the obligation to recognise an award under Article 54(1) is unaffected by questions of immunity from execution.

The Full Court also held that s 35 of the IAA is directed expressly to the implementation of Article 54, and under section 35(4) of the IAA, a party may seek what Australia has promised under Article 54, that is, leave to enforce the award as if it were a judgment or order of the Court. Thus, the Court considered that Australia can meet its obligations as an ICSID Convention Contracting Party to recognise the pecuniary obligations of an ICSID Convention award as if it was the judgment of the Court, without any contravention of sovereign immunity over execution as provided under Article 55.

Other key developments

The ACICA 2021 rules

In 2021, The Australian Centre for International Commercial Arbitration (ACICA) released its revised ACICA Arbitration Rules (“2021 Rules”), which took effect from 1 April 2021.

The 2021 Rules set out ACICA’s vision for the future of arbitration by focusing on efficiency of the international arbitration process notably on issues of costs and case management, as well as anticipating the needs of parties in multi-contract arbitrations. The 2021 Rules reflect evolving arbitration practice and align with recent trends and advancements in dispute resolution, in particular online hearings, effective case management and managing the rise in third party funding agreements. The key updates are summarised below:

• the new rules expressly allow arbitral tribunals to hold conferences and hearings virtually or in hybrid format, reflecting the recent take up of virtual hearings in conducting arbitration proceedings;
• the new rules give express power to the arbitral tribunal, in consultation with the parties, and where appropriate ACICA, to adopt any measure to protect information shared in the arbitration and to ensure that any personal data is processed and/or stored in light of any applicable law;
• the rule on joinder has been expanded and an additional party can now be joined by the tribunal in circumstances where all parties expressly agree, even if the additional party is not bound by the same arbitration agreement (but only in circumstances where the tribunal has been constituted and not prior to that);
• ACICA may now consolidate arbitrations in consultation with the parties and any confirmed or appointed arbitrators, regardless of whether the arbitrations are between the ‘same parties’, if there exist common questions of law or facts, the right to relief under the same transaction and the arbitration agreements are compatible;
• claims arising out of multiple contracts may now be heard in a single arbitration by lodging composite Notices of Arbitration provided the grounds of consolidation are met;
• if a consolidation application is rejected, the claimant must file separate notices of arbitration in respect of all unconsolidated proceedings. However, two or more arbitrations may run concurrently, or one after another, if the parties have been consulted to allow for greater efficacy;
• parties are now required to, as soon as practicable, disclose any third-party funding arrangements;
• the arbitral tribunal now has the express power to make an award granting early dismissal or termination of any claim, defence or counterclaim;
• unless the parties agree otherwise or there is a shorter period specified by law, the final award must be made no later than 9 months from the date the file was transmitted to the tribunal or no later than 3 months from the date the proceedings close (whichever is earlier);
• ACICA must now, before proceeding with any arbitration, be in possession of the requisite funds. If the deposit of costs remains unpaid, the arbitral tribunal may (after consultation with ACICA) suspend or terminate the arbitration, in whole or in part;
• ACICA, on the arbitral tribunal’s request, can make interim payments for tribunal fees and expenses from the parties’ costs deposit; and
• arbitral tribunal must fix the costs of arbitration by way of a final award or a consent award (or in an order for termination) and can, at any time during the arbitration, make decisions on costs (other than costs to be fixed by ACICA) and order payment, including by way of an interim award, an interlocutory award, or a partial award.

Federal Court of Australia update On 21 December 2021, the Federal Court issued a ‘Commercial Arbitration Practice Note (CA-1)’, which outlines arrangements for the management of applications in the Court that concern commercial arbitration, being:

• international commercial arbitration under the International Arbitration Act 1974 (Cth);
• domestic commercial arbitration under the State and Territory Commercial Arbitration Acts where applicable; and
• the exercise by the Court of its powers under ss 53A, 53AA, 53AB and 54 of the Federal Court of Australia Act 1976 (Cth).