March 2013

International Arbitration in Australia ? Alive and well?

This morning, the High Court of Australia unanimously dismissed the application by TCL Air Conditioner (Zhongshan) Co Ltd (TCL) for constitutional writs directed to the judges of the Federal Court of Australia, essentially seeking to restrain the Federal Court from enforcing an arbitral award.  In doing so, the High Court has confirmed the validity of Australia’s international arbitration regime.

The matter arose from the arbitration of a dispute under a distribution agreement between TCL and Castel Electronics Pty Ltd (Castel), pursuant to which TCL was required to pay Castel a sum of money.  Castel applied to the Federal Court of Australia for enforcement of the awards in accordance with article 35 of the UNCITRAL Model Law on International Commercial Arbitration (Model Law), which is given the force of law pursuant to section 16(1) of the International Arbitration Act 1974 (Cth).

TCL had applied to the High Court for an order restraining the judges of the Federal Court from enforcing the awards, and for an order quashing the decisions of the Court in relation to the awards on the basis that the Federal Court’s power to enforce an arbitral award against it was contrary to the powers vested in the Federal Court by Chapter III of the Constitution.

Arbitration is an increasingly popular method of resolving disputes between companies both within Australia and around the world.  It allows commercial parties to employ an ordered, efficient and private dispute resolution mechanism resulting in an enforceable award or judgment.  Australian Courts have previously recognised the importance of international commercial arbitration to the smooth working of international commerce and the importance of enforcement of the bilateral bargain between commercial parties by submission of their disputes to arbitration, as reflected in the New York Convention and the Model Law.

TCL’s application jeopardised the validity of the Australian international arbitration regime and if it had been successful, would have put Australia at odds with other major legal systems around the world.  The High Court’s decision is therefore a welcome one to parties that look to international arbitration as a means to resolve their disputes.

But is the High Court’s judgment enough?

The Australian Government has been relatively slow to embrace arbitration and as a consequence Singapore and Hong Kong have become preferred seats for arbitrations within the Asia Pacific region.  The High Court’s decision dismissing TCL’s application is critical to Australia’s future as seat for international arbitrations and its reputation as a dispute resolution destination, and will hopefully assist in dispelling lingering uncertainties that resulted from the 2010 amendments to the International Arbitration Act 1974 (Cth).

A more detailed review of the impact of the High Court’s decision will follow shortly.

Author: Gavin Stuart