Enforcing arbitral awards in Australia27. Juni 2017
Ella Wisniewski supported WAGNER Arbitration from March to May 2017. She is admitted to the Supreme Court of Western Australia as a lawyer and currently an LL.M. candidate in International Dispute Resolution at the Humboldt-University of Berlin. As part of her time with the firm, she was kind enough to put together the answers to the questionnaire on behalf of her home jurisdiction – Australia.
It is generally accepted that Australian courts have adopted a supportive, “hands off” approach to arbitration, both international and domestic. This stance is demonstrated by adoption of the UNCITRAL Model Law on International Commercial Arbitration 1985 (“Model Law”), minimal intervention in arbitral proceedings, and strictly limited grounds for refusing enforcement of arbitral awards.
Recent decisions of Australian Federal and State courts have demonstrated a regard for the objectives of the governing legislation, namely that arbitration should be upheld as an efficient and enforceable method of dispute resolution, and that arbitral awards are intended to provide certainty and finality. The judiciary has addressed the necessity of striking a balance between ensuring the integrity of the arbitral process and respect for the autonomy of commercial parties. In the case of Colin Joss & Co Pty Ltd v Cube Furniture Pty Ltd, the Court stressed that arbitral proceedings and awards should be viewed “in a common-sense way and without undue legality”, and not scrutinised with an „overcritical or pedantic eye”.
- What is the applicable law for recognition and enforcement of an arbitral award in your jurisdiction and which is the relevant Section?
Within the Australian legislative framework governing arbitration, a ‘domestic award’ is one that is rendered by a tribunal within Australia where both parties are Australian. An ‘international award’ is rendered within Australia but at least one non-Australian party is involved and a ‘foreign award’ is an award rendered outside of Australia.
Domestic commercial arbitration is governed by the uniform Commercial Arbitration Act (“CAA”) in each Australian State and Territory. The CAA relies heavily on the Model Law as the template for the conduct of domestic arbitral proceedings. The Model Law “covers the field”, meaning that where it applies to an arbitration in Australia, it will do so to the exclusion of any conflicting State laws.
International awards and foreign awards are governed by the Commonwealth International Arbitration Act 1974 (“IAA”). The enforcement of international awards (rendered within Australia) is governed by the Model Law, as incorporated into the IAA. The enforcement of foreign awards is dealt with in Part II of the IAA, which is identical in substance to the relevant provisions of the New York Convention. The IAA also clarifies that where any conflict between the provisions of the Model Law and the New York Convention arises, the latter will prevail.
- Is your jurisdiction party to the 1958 New York Convention? If yes, what is the date of entry into force of the Convention? Was there any reservation made under Article I (3) (reciprocity reservation) of the Convention?
Yes, Australia has been party to the New York Convention since 24 June 1975, and has made no reservations. In 2010, amendments to the IAA clarified that even arbitral awards made in ‘non-Convention’ states could be enforced in Australia.
JURISDICTION, PROCEDURE BEFORE COURT
- Which is the competent court for an application for recognition and enforcement of an arbitral award?
An application for enforcement of an international or foreign award may be made to the Federal Court of Australia or to the Supreme Court of any Australia State or Territory, as if the award were a judgment of that court (Sections 8(2) and 8(3) of the IAA). An application for enforcement of a domestic award may be made to the Supreme Court of the State in which the award was rendered, or the State in which the debtor has assets.
Note: In the IAA, the terms „recognition“ and „enforcement“ are used synonymously. There is a presumption that if an award meets the requirements of the New York Convention or the Model Law, it is automatically recognized as binding for any purpose. That is, the Court’s role is ostensibly limited to the enforcement of that award. However, section 3(2) of the IAA clarifies that “enforcement” also includes “recognition of the award”. This is relevant in a situation where a plaintiff attempts to bring a cause of action in an Australian court which has already been dealt with by arbitration. In such a case, the defendant could rely on the IAA to seek “recognition” of the arbitral award by the Court, to oust the plaintiff’s claim.
- How does one initiate court proceedings for the enforcement of an award in your home jurisdiction?
The party seeking enforcement must commence proceedings by filing an application (in the Federal Court) or summons (in State courts).
- Are the proceedings in your jurisdiction adversarial or ex parte?
Proceedings are generally adversarial.
- What documentation is required to obtain recognition of an arbitral award? For instance, must the award be submitted in original or a certified copy? Must the original arbitration agreement be submitted?
A party seeking enforcement of an arbitral award must produce:
- an original or certified copy of the award;
- an original or certified copy of the arbitration agreement; and
- a translation of the above documents, if either is not in English.
- If the necessary documentation is drafted in another language than the official language of your jurisdiction, is it necessary to submit a translation together with an application to obtain recognition of an arbitral award?
Yes, and the English translation must be certified as correct by a diplomatic or consular agent in Australia of the country in which the award was made, or otherwise to the satisfaction of the court.
- Do you need to be represented by a lawyer from the particular jurisdiction?
While individual applicants may be self-represented, corporations must be represented by a lawyer competent to appear in the State or Federal court.
- Are there any differences in the procedure of the enforcement of domestic and foreign arbitral awards?
Parties seeking to enforce a foreign or international arbitral award have the option of applying to the Federal Court of Australia. For domestic enforcement proceedings, applicants may choose to apply to the Supreme Court of the State in which the award was rendered, or of the State in which the defendant has assets.
- What are the costs of recognition and enforcement proceedings and how are they allocated? Are there any statutory limitations to legal fees?
The party seeking to have the award enforced will be required to pay the relevant court application fee, and each party is liable to bear their own legal fees (known as “costs”). However, if the enforcement proceedings are contested, the court will have the discretion to make an adverse costs order against the losing party. Recent case law has shown a willingness to make indemnity cost orders, given the high threshold required to establish grounds for refusing enforcement.
Depending on whether the applicant is an individual or a corporation, the court fees are usually between AU$1,000 and AU$4,000. As an example, for an application to the Western Australian Supreme Court, there is a set fee of AU$2,348 for corporations and AU$1,205 for individuals or small businesses. For an application to the Federal Court, there is a set fee of AU$3,745 for corporations and AU$1,290 for others.
If costs are awarded to the successful party by way of an indemnity costs order, then the actual amount payable is determined by the court. This may be decided at the time the costs order is made, or at a separate “costs assessment” hearing. Unless the parties reach an agreement as to the amount of costs, it will be determined in accordance with the applicable ‘scale of costs’, which essentially caps the legal costs which may be awarded
- How long do recognition and enforcement proceedings usually take?
For domestic enforcement proceedings, the time frame usually depends on whether or not there is any opposition to the application for enforcement. If there is no opposition, it has been estimated that the proceedings will take approximately three months.
The time frame for enforcement proceedings involving foreign awards is difficult to predict, because it will largely depend on the time it takes to serve the documents. The IAA does not prescribe any particular requirements for service on a defendant In Australia or abroad. Accordingly, the local procedural rules of service will apply: for parties domiciled in Australia, the applicant will need to ensure that documents are served personally (by hand) on individual defendants, or for a corporation, at its registered office in Australia. For service on a defendant abroad, the applicant will first need to obtain the leave of the court, and service may then be effected through diplomatic channels.
SUBSTANTIAL REQUIREMENTS FOR THE ENFORCEMENT OF FOREIGN AWARDS
- What are the grounds on the basis of which a foreign award may be refused enforcement?
The grounds for refusing enforcement of a foreign arbitral award are set out in the IAA, and are identical to those of Art. 5 New York Convention.
While not limited to these examples, section 9(7A) of the IAA further provides that an award will be contrary to Australian public policy if (1) the making of the award was induced or affected by fraud or corruption, or (2) a breach of the rules of ‘natural justice’ occurred when making the award.
The enforcing court is not required to examine the grounds for refusal ex officio, hence the party seeking to oppose enforcement of the award bears the burden of proof.
- How does your home jurisdiction interpret and construe the public policy violation defense for foreign arbitral awards?
A string of recent decisions has confirmed the overarching position that the Australian public policy is to enforce arbitral awards wherever possible, and that judicial intervention should be limited to that which will ensure the integrity of the arbitral process. This position is best illustrated in the ‘Cube Furniture’ cases, wherein the Court noted that the public policy exception “corresponds to the public policy in favour of making arbitral awards, both domestic and international, binding”, and observed that the “high threshold that the public policy exception demands brings with it the enhanced risk of an indemnity costs award because a failed challenge will be more easily identified as one which should not have been brought because it was throughout destined to fail.”
With one exception, the case of Aircraft Support Industries Pty Ltd v William Hare UAE (“Aircraft Support Industries”), all other public policy challenges have been unsuccessful. Furthermore, the ‘exception’ decision in Aircraft Support Industries was substantially overturned on appeal, with the Full Federal Court finding that no breach of natural justice had occurred in the making of the award. In its decision, the Court endorsed the now uniformly accepted principle that for a court to decline enforcement under section 8(7)(b) of the IAA it is necessary to show that a breach of natural justice caused “real practical unfairness and real practical injustice to the party resisting enforcement”.
A second important consequence of Aircraft Support Industries was the confirmation that Australian courts can sever and partially enforce a foreign award. The decision on appeal provided that if the void portion of an arbitral award is clearly separate and divisible, and provided no practical injustice would flow from the partial enforcement, the non-void portion of the award will remain enforceable.
- Do courts recognize and enforce partial or interim awards or only final awards?
Australian Courts have distinguished interim measures – such as preliminary or interlocutory ‘orders’ – from truly interim or partial awards, such as a preliminary award on liability pending a further award on quantum.
The New York Convention governs the enforceability of foreign awards in Australia, which raises the question of whether interim measures rendered by tribunals outside of Australia may be considered enforceable ‘awards’. The differentiation is relevant because, while neither the IAA nor the New York Convention defines ‘award’, one of the grounds on which enforcement may be refused is that the award has not yet become final and binding on the parties. In the case of Resort Condominiums v. Bolwell, the Queensland Supreme Court held that an interlocutory order made by the tribunal did not finally resolve or dispose of at least one of the matters in dispute between the parties, and therefore such an order was not considered an enforceable award. This position is based on the understanding that preliminary orders are only provisional; they can subsequently be varied in some way by the same tribunal.
The question of whether a partial award – such as a ‘final’ award on liability pending calculation of quantum – is binding, and therefore enforceable in its own right, has not been definitively settled in Australian Courts. However, following the reasoning in Resort Condominiums v. Bolwell, one can deduce that it is possible. This would be in line with recent legislative amendments and case law in other jurisdictions, such as in Singapore, where it has been clarified that partial and interim awards are also ‘final and binding’, and therefore enforceable.
As mentioned in Q#13 above, an Australian Court recently upheld an application to sever and enforce part of an award, where the unenforceable part of the award had been refused recognition on public policy grounds in the first instance.
SUBSTANTIAL REQUIREMENTS FOR THE ENFORCEMENT OF DOMESTIC AWARDS
- What are the grounds on the basis of which a domestic award may be refused enforcement?
The CAA provides exclusive grounds for refusing enforcement of a domestic arbitration, which reflect those of the Model Law. As is the case for enforcement of foreign awards, the enforcing court is not required to examine the grounds for refusal ex officio, hence the party seeking to oppose enforcement of the award bears the burden of proof.
- How does your home jurisdiction interpret and construe the public policy violation defense in respect of domestic awards?
The jurisprudence with regard to interpretation of the public policy defense does not differentiate between domestic and foreign awards; see Q#13 above. The firm pro-arbitration stance adopted by the Full Federal Court of Australia in recent foreign award cases was similarly expressed in the domestic case of Emerald Grain Pty Ltd v Agrocorp International Pty Ltd  FCA 414.
- Do courts recognize and enforce partial or interim awards or only final awards?
It is again necessary to distinguish between interim measures issued by an arbitral tribunal, sometimes referred to as preliminary or interlocutory ‘orders’, and interim awards.
The Model Law as amended in 2006 applies to domestic arbitral awards and international awards rendered within Australia. Article 17H of the Model Law provides that: “An interim measure issued by an arbitral tribunal shall be recognized as binding and, unless otherwise provided by the arbitral tribunal, enforced upon application to the competent court”. It follows that interim measures rendered by tribunals within Australia, such as for the giving of evidence, disclosure of documents, inspection of property, and security for costs, will be enforceable by Australian Courts.
The question of the enforceability of partial or interim domestic awards has not been tested. However, such awards are likely to be considered ‘final’, and therefore enforceable, in that they resolve or dispose of at least one question in dispute, and cannot be reversed by the same tribunal.
EFFECTS, REMEDIES & PROCEDURAL REQUESTS
- What is the effect of a decision recognizing the award in your jurisdiction? Is it immediately enforceable?
Arbitral awards are automatically recognized, and presumed to be enforceable upon application to the appropriate court, unless one of the prescribed exceptions to enforcement applies. Once the court grants a ‘declaration of enforceability’, the award becomes a judgment of the enforcing court, at which point the usual enforcement measures available for the enforcement of a judgment can be applied. These include the seizure and sale of property and freezing of assets, earnings or debt appropriation orders, and the commencement of winding up or bankruptcy proceedings against the judgment debtor.
- Are any remedies available against a decision recognizing an arbitral award in your jurisdiction and, if yes, what are they?
In the case of a domestic arbitral award, the affected party may apply to the court to have the award set aside, under the limited grounds set out in section 34A of the CAA. These are identical to the grounds available to parties seeking to oppose enforcement of an award. However, once the court has granted a declaration of enforcement of a domestic arbitral award, the only recourse available to the affected party is to appeal the ‘judgment’ itself, pursuant to the ordinary rules for appeal of State Supreme Court judgments. Essentially, there would need to be an appealable error of law in the judgment.
There is no such remedy for parties seeking to have foreign awards set aside, only challenges at the enforcement stage. That is, Australian Courts do not have the power to review foreign awards generally, only in accordance with the limited grounds for refusal if the enforcement is challenged.
- What remedies, if any, are available against a decision refusing to recognize an arbitral award in your jurisdiction?
Once a decision has been made to refuse to enforce a domestic or foreign award, the only recourse for an affected party would be to establish an appealable error of law. Depending on whether the refusal to enforce was made in the Federal Court of Australia or a State Supreme Court, the appeal would go to either the Full Federal Court of Australia or the Court of Appeal of a State Supreme Court.
- Are any additional defenses such as a set-off claim possible in enforcement proceedings?
- Is it possible to obtain the recognition and enforcement of an award that has been fully or partly set aside at the seat of the arbitration?
One of the grounds for refusal to enforce an award is that it has been set aside or suspended by a court of the State in which, or under the law of which, it was made. Given that there is no separate process for the recognition of foreign awards, this would be raised as grounds for objection during enforcement proceedings. If there are any pending challenges to the award in the foreign State where the award was rendered, the Australian court will stay enforcement proceedings until the challenge proceedings are decided.
- In case the award is set aside after the decision on enforcement of the award has been issued, what remedies, if any, are available against this decision?
Enforcement of foreign awards can only be challenged at the stage of the enforcement proceedings, according to the limited grounds set out in Q#12 above. Once the court has ordered enforcement of a foreign arbitral award or an international arbitral award made in Australia, it has the effect of any other judgment of that court. Therefore, it can only be appealed under the ordinary rules of appeal against the court’s judgment, which essentially require the affected party to establish that an appealable error of law has been made.
- Are interim measures to cease assets available in your jurisdiction? And if yes, what kind of measures are they?
Yes, parties may ask the court to make interim orders, such as an order for security of the award debt, and the court will exercise its discretion accordingly. The likelihood of the court making such orders is increased where there is compelling evidence that the defendant has assets in Australia and that those assets may ‘disappear’ if an interim order is not made.
THE ENFORCEMENT ITSELF
- How do you enforce an award that has been declared enforceable by the court? Is there a specific procedure?
Once a declaration of enforceability has been granted, the award becomes a judgment of the court and the usual enforcement measures are available to the ‘judgment creditor’. These include, but are not limited to:
- Freezing of assets;
- Appropriation of earnings or debt;
- Seizure and sale of property;
- Delivery of goods;
- Imposition of a charging order (over shares or money in a financial institution); and
- Commencement of winding up or bankruptcy proceedings.
Enforcement of the judgment can be sought by filing a general application or “notice of motion” in the State court in which the judgment was made, which is ordinarily an ex parte procedure. There is a limitation period of 12 years in which to do so.
If the declaration of enforceability (judgment) was granted in the Federal Court, which is a possibility for international or foreign awards, the judgment creditor may file a Request for Enforcement form and supporting documentation. Once the enforcement process has been issued by the Federal Court, the party seeking to enforce the judgment many then access the enforcement measures of the relevant State court.
- Are there any costs involved and what are the costs?
There is no filing fee for a Request for Enforcement in the Federal Court.
The cost of making the initial application for enforcement in a State court varies depending on the State, however it will be approximately AU$400 for an individual applicant and between AU$700 – AU$900 for a corporation. There are various additional fees, payable to the Sheriff ‘s Office, for carrying out each of the enforcement measures as necessary. The fees associated with enforcement may be added to the total sum of the judgment debt.
- Are there statistics available regarding the number of enforcement proceedings in your home jurisdiction?
- Are there statistics available regarding the success ratio?
No. However the general perception is that very few awards, domestic or foreign, are refused enforcement.
- Is information available whether the court officers/bailiffs effectively pursue the enforcement against the debtor?
- Are there any other particularities or special features which should be considered?
To provide a more streamlined process for arbitration-related applications, a number of Australian Courts, including the Federal Court and the Supreme Courts of Victoria and New South Wales, have recently established dedicated arbitration lists. The Federal Court allocates arbitration-related matters to a group of Judges with expertise in international commercial arbitration.
A final, practical note: Applicants should note that in most Australian State jurisdictions, the limitation period for commencing proceedings to enforce an arbitral award is six years. For domestic awards only, setting aside proceedings need to be commenced no later than three months after the party making the application has received the award.
Über den Autor
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