Wherever business is conducted, commercial disputes are inevitable. With many businesses operating globally, arbitration can occur in offshore jurisdictions – and this can be enforced in Australia.

Last month’s blog examined the benefits of arbitration as an alternative dispute resolution tool, and the advantages it offers over more traditional mechanisms such as conciliation and mediation; this month’s focus is on enforcement of arbitral awards – particularly those made overseas.

What is an Arbitral Award?

The term “arbitral award” refers, generally, to any decision of an arbitral body in relation to a dispute that has been referred to it. Such decisions are legally binding, similar to court judgements. The outcomes mandated by such awards can be monetary, such as ordering one party to pay a certain amount to another, or non-monetary, such as restraining a party to the matter from taking a specific action.

Arbitral awards are typically final, and like court judgements, can be enforced by courts if required.

This month’s article focuses on a hypothetical business which has succeeded in international arbitration, obtaining a favourable award from an offshore jurisdiction – also known as a “seat” – such as an arbitration tribunal based in London or Singapore. The award was obtained overseas but the losing party’s assets are in Australia, so how can the business convert obtaining the award into the recovery of monies or assets the award entitles it to?

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards

As a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention” of 1958, or “the Convention”), Australia is obliged to recognise arbitral awards from other member countries.

An arbitral award obtained from seats such as London or Singapore can be enforced as easily as a local court judgement under the International Arbitration Act 1974 (Cth)(“IAA”). A straightforward three-step process is typical:

  • Apply to court: the business seeking local enforcement of an international arbitral award must file an application with the appropriate court (usually the Federal Court of Australia). The original award, the arbitration agreement, certified translations (if needed) and any other pertinent documents must be included in the application.
  • Obtain judgement: the court will review the documents for compliance with the Convention – not the case’s merits. If satisfied, the court will issue its own judgement mirroring the arbitral award obtained by the business abroad.
  • Enforcement: the business, now holding both the international arbitral award and a local judgement, can use standard debt recovery tools to seize assets, garnish bank accounts, or initiate winding-up proceedings against the debtor as appropriate.

Limited Grounds for Refusal

The grounds on which a court may refuse to recognise an international arbitral award are extremely limited, and these are set out in the IAA. These include

  • Incapacity or invalid arbitration agreement;
  • Lack of proper notice of the appointment of arbitrator or proceedings;
  • The respondent being unable to present its case (also known as the “due process objection”);
  • Award beyond scope;
  • Irregular composition of tribunal;
  • Award not binding/set aside;
  • Subject matter not arbitrable;
  • Contrary to public policy.

Accordingly, the scope for challenges is also restricted, and limited to narrow grounds such as procedural unfairness or the award being set aside at its seat. Enforcement proceedings in Australian courts are not forums for losing parties to disputes to relitigate their cases.

Conclusion

An international arbitral award does not, of itself, represent the end of a commercial dispute, but rather provides a “key” for unlocking the value of a successful arbitration. Enforcement by courts – underpinned by Australia’s obligations under the New York Convention – is the final step to complete an international arbitration, and as an extension of the issues canvassed last month further underlines the ways in which arbitration can thrive in Australia as a dispute resolution mechanism.

Ming Yip
Lawyer