Australian court enforces USD 27 million foreign arbitration award against Australian registered corporation

By Dean Ehrlich, 10 January 2023

The Federal Court of Australia has ordered the enforcement of a USD 27 million foreign arbitration award made in favour of a Chinese construction company against a Chinese national residing in Sydney and an Australian registered corporation.

In doing so, Stewart J rejected the claim that enforcement of the Beijing Arbitration Commission award would lead to “manifest unfairness” and would be contrary to public policy. This despite the respondents’ claims that:

  • the award entailed “a declaration of rescission without consequential orders restoring the parties to their pre-contractual positions”; and
  • the copies of the arbitration agreement and award tendered by the applicant were “not adequately certified or authenticated” and the award was “not adequately translated” as required by s 9 of the International Arbitration Act, 1974.

In a judgement, delivered on 22 December 2022, Stewart J affirmed that “the conception of public policy in the IAA” is limited in scope. “A degree of international harmony and concordance of approach” is required and there is no scope for “any idiosyncratic national approach” in this context, explained the justice.

Recognising this international dimension, Stewart J held that under the New York Convention there must be “compelling reasons” to refuse an award’s enforcement. Enforcement “must be 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 [offence].”

According to Stewart J, however, no such compelling reasons were present in the matter before him.

“In my assessment, [the respondents’] complaints about the award do not rise to the level of the award being contrary to fundamental norms of justice and fairness in Australia within the context of international commercial arbitration such as to enliven the public policy ground for resisting enforcement.”

In reaching this conclusion, the Justice affirmed that it is generally inappropriate for an enforcement court to second guess the findings (on the same arguments) of the courts at the seat unless “there has been an obvious and serious disregard for basic principles of justice by the arbitrators.” In this regard, Stewart J observed that the respondent had been repeatedly rebuffed by the courts at the seat after applying “exhaustively” to domestic courts and authorities in the PRC for the award’s cancellation.

According to Stewart J, the respondent “was able to and did contend before the PRC courts that the award should be set aside as being contrary to public policy (or public interest) because of the imbalance of rights and obligations that it creates, but on each occasion her argument was rejected.”

In the justice’s assessment, the arbitral tribunal simply “dealt with what was before it”. While the respondent had consented to the rescission of the parties’ agreement, the respondent did not ask the tribunal for any orders restoring the parties to their pre-contractual positions.

“There is no fundamental unfairness,” the Justice explained, in the tribunal giving effect to a rescission without also making consequential orders restoring the parties to their pre-contractual positions – even though the effect in Chinese law of rescission (or “jie chu”) may be different to that in English and Australian law.

In this regard, Stewart J accepted the evidence of an academic expert in Chinese corporate law that there remained processes available to the respondent to pursue such relief under Chinese law. “Article 97 of the Contract Law of the People’s Republic of China (1999), which although now repealed was applicable at the relevant time, provided that “after a contract is rescinded, … where the obligations have already been performed, the parties may, taking into account the performance status and the nature of the contract, demand restoration to the original status, or that other remedial measures be taken, and have the right to demand compensation for losses”. Thus, there is no automatic return to the status quo prior to executing the contract, but rather the parties have the right to “demand” restoration to the original status.”

As for the sufficiency of the documents produced by the award creditor, the Justice held that “enforcement is the exercise of a judicial power; it is not an administrative function.” He explained that where the party resisting enforcement “does not dispute that the copies of documents that are tendered by the award creditor are proper copies, the court can be satisfied that the documents are what they purport to be.”

As there was no contest as to the terms of the award bearing the stamp of the Beijing Arbitration Commission or the arbitration agreement, or translations of those documents before him, Stewart J accepted that they were duly authenticated, certified and within the meaning of s 9(2) of the International Arbitration Act, 1974.

All objections to the enforcement of the award having failed, Stewart J ordered that the award must be enforced.

In the proceedings:

  • Minter Ellison Lawyers represented the applicant.
  • Chen Shan Lawyers represented the respondents.