Australian court emphasises limits on refusing enforcement of foreign arbitral awards

In this way, the International Arbitration Act 1974 (Cth) limits the courts’ capacity for intervention in the arbitral proceedings - insofar as these extend to the enforcement of an award in a domestic court - in circumstances where the respondent does not elect to appear.

The court’s decision in the case between Reeves and ALT Advisory (Jersey) Limited and ALT Financial Group Limited highlights the favourability of Australian domestic law to the enforcement of awards obtained through international arbitration and the amenability of Australian courts to implementing and facilitating the pro-arbitration aims of the federal parliament. This, in turn, bodes well for Australia’s future as a respected seat of international commercial arbitration.

Arbitral proceedings in the case

The enforcement proceedings were the culmination of a dispute between Professor Reeves, for whom Pinsent Masons acted, and his former employer, Jersey-based financial advisory firm ALT Advisory, following the firm’s failure to remunerate Reeves in accordance with the terms of his employment agreement.

Reeves terminated his employment with ALT Advisory, and not long after referred the dispute to arbitration. ALT Advisory’s Australian-based subsidiary, ALT Financial, which had underwritten ALT Advisory’s financial obligations under the employment agreement, was joined as a defendant in the proceedings.

ALT Financial tried, unsuccessfully, to challenge the tribunal’s jurisdiction on the basis that the employment agreement had not been executed in accordance with the Corporations Act 2001 (Cth), which it claimed also invalidated the arbitration agreement clause contained in the employment agreement.

In response to ALT Financial’s jurisdictional challenge, the arbitral tribunal provided timely reminders of two fundamental tenets of arbitration: the principle of severability and the ‘competence-competence’ principle. The tribunal ruled that, in accordance with the competence-competence principle, it had jurisdiction to rule on its own jurisdiction, and that the doctrine of severability meant that, even if the employment agreement was not valid – which the tribunal rejected – the agreement to arbitrate would remain enforceable.

Enforcing the award

Section 8(5) of the International Arbitration Act sets out six grounds on which a party may resist enforcement of a foreign award which may only be considered by the court at the request of the party resisting enforcement:

• the party was under an incapacity at the time the arbitration agreement was made;
• the arbitration agreement was invalid;
• the party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present its case in the arbitration proceedings;
• the award deals with issues falling outside the scope of the submission to arbitration;
• the arbitral authority was constituted otherwise than in accordance with the agreement; and
• the award had been set aside in the country where it was made or had not yet become binding on the parties.

If the respondent chooses to appear, the court may consider the grounds listed in section 8(5), provided that they are raised by the appearing respondent. Importantly, the listed grounds are heavily fact-dependent and are therefore difficult to plead successfully.

Where the respondent fails to make any such request, the grounds that the court may consider are limited to those listed in article 8(7) of the International Arbitration Act — namely, that the subject matter of the dispute between the parties to the award is not capable of settlement; or that it would be contrary to public policy to enforce the award. ‘Contrary to public policy’ generally covers circumstances where the making of the award was induced or influenced by fraud or corruption, or if the rules of natural justice were violated in making the award.

Neither ALT Advisory nor ALT Financial complied with the arbitral award that the tribunal granted in Professor Reeves’ favour, leading the initiation of enforcement proceedings before the court, in which neither company filed an appearance.

In the absence of any involvement from either ALT Advisory or ALT Financial, the court held that there was "no basis … to consider any of the matters set out in section 8(5) of the International Arbitration Act having regard to which the Court may refuse to enforce an award", which must be raised "at the request of the party against whom the award is … to be enforced". 

The court also held that there was "nothing in the material before [it] to suggest that it should refuse to enforce the Final Award on the basis of any finding under s 8(7) … that the subject matter of the award is not capable of settlement under applicable law, or that would be contrary to public policy to enforce the Final Award".

Co-written by Rory Dempsey of Pinsent Masons.