11.1 Arbitration is increasingly being used for the resolution of commercial disputes. It is particularly relevant to international disputes because it can be a neutral alternative to each party’s court system. This chapter is a brief overview of international arbitration from the perspective of Australian law.
11.2 The purpose of this chapter is twofold: first, to provide an overview of the international arbitral organisations available and to outline the nature of the work carried out by them as well as the rules by which they operate. Secondly, to outline some of the major legal issues relating to international arbitrations. The chapter focuses on enforcement and choice of law issues.
International arbitration associations
11.3 Various organisations and regimes, both government and private, have been established to provide a framework and a place for international commercial arbitration. A number of institutions have evolved (and continue to evolve) which facilitate international arbitration.
11.4 The best known international arbitration organisations are the Paris-based International Chamber of Commerce (ICC), the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID) and the London Court of International Arbitration (LCIA). There are also many other arbitral bodies which supervise international arbitrations, including those which are styled as national bodies but which administer a considerable volume of international arbitrations on a regular basis.[dccxx]
International Chamber of Commerce
11.5 The Paris-based International Chamber of Commerce (ICC) runs an arbitration service supervised by the ICC’s International Court of Arbitration. Based on its caseload ICC arbitration is probably the most frequently used international arbitration service.[dccxxi] In 1994 384 new requests for arbitration were submitted to the ICC and by the end of 1994 the ICC was administering a case- load of 801 pending arbitrations.[dccxxii]
11.6 The service provided by the ICC is that of a formal administrative body.[dccxxiii] The ICC does not conduct arbitrations itself but ‘administers’ arbitrations all over the world. An arbitration submitted to the ICC is run and heard by an arbitrator, subject to the ICC Rules. Where parties cannot agree on matters such as the place of arbitration or the arbitrators, these are determined by the ICC. After the arbitral award is determined it must be submitted for the approval of the ICC’s International Court of Arbitration which has the power to make modifications or draw the arbitrator’s attention to points of substance. Costs of the arbitration (which are paid in advance) are divided equally between the parties.
11.7 Some users of ICC arbitration have commented that its procedural rules are too complex. However, the ICC operates on the premise that a high level of supervision and administration is necessary to ensure that cases, especially complex ones, proceed quickly and effectively.
11.8 The ICC requires parties to draw up terms of reference which define the issues at the outset of the arbitration. Some users of the system have queried the benefit of this, commenting that it is impractical to bind parties to the initial claims in the terms of reference because facts uncovered after the beginning of the arbitration often alter the nature of the claims.[dccxxiv]
11.9 In the Asia-Pacific region there has been an increase in the number of requests for ICC arbitrations in the period 1981 to 1990. In 1981 there were 21 parties from the region involved in ICC arbitration and in 1990 the number was 70. It should, however, be noted that confrontational approaches to dispute resolution (such as arbitration and litigation) are not culturally popular with Asian-Pacific parties.
… ICC experience does lend support to the conventional wisdom that arbitration has traditionally been less utilized in the Pacific Basin than elsewhere and is not the preferred method of dispute settlement in certain Asian countries, China and Japan being those most often named, which have a preference for dispute settlement by negotiation, mediation and conciliation.[dccxxv]
International Centre for the Settlement of Investment Disputes (ICSID)
11.10 ICSID was created under the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 (ICSID Convention). It is available only in cases where one of the parties to the dispute is a nation or a national agency.[dccxxvi] More than 80 national states have ratified the ICSID Convention, including Australia.[dccxxvii] All of these states have agreed that there shall be no possibility of challenging an ICSID award before the courts of the place of arbitration. All signatories have bound themselves to recognise and enforce ICSID awards to the same extent as if they were final national court judgments.[dccxxviii] Failure of a nation to carry out the awards of its arbitrations has negative consequences with ICSID and the World Bank, under the aegis of which ICSID operates.
11.11 ICSID supervises and provides facilities for arbitration but does not itself conduct the arbitrations. It has the power to provide facilities for disputes which do not fall within the ‘investment’ criteria of the ICSID Convention as long as one party is a nation or a national agency. The parties may agree on the arbitrator and the place of arbitration, otherwise the treaty makes provision for these procedural matters.[dccxxix]
11.12 ICSID has had a relatively small number of arbitrations – 30 in as many years, of which fewer than 10 have resulted in final awards. However, this statistic must be considered in the light of the relative youth of the organisation as well as the fact that the nature of the institution is unlikely to lead to a large caseload. The transactions to which states (or their agencies) are party tend to be significant and disputes are not embarked upon lightly.
London Court of International Arbitration
11.13 The London Court of International Arbitration (LCIA) is an institution comprised of the Chamber of Commerce, the Corporation of the City of London and the Institute of Arbitrators. Generally, it handles the same type of general commercial dispute as the ICC although the LCIA caseload is much smaller than the ICC. However, like the ICC, the LCIA bears responsibility simply for the organisation of the procedure and for the appointment of the arbitrators.
11.14 In an LCIA arbitration the arbitrator ‘can order the preservation, storage, sale or other disposal of any property or thing under the control of any party’.[dccxxx] Further, the parties appear to be free to apply to the ‘competent court for preaward conservatory measures’.[dccxxxi] The LCIA can ‘… order any party to provide security for all or part of any amount in dispute in the arbitration’.[dccxxxii]
11.15 The rules of the LCIA discourage the appointment of arbitrators who are not independent or impartial. The LCIA retains a discretion, in certain circumstances, to refuse a party the making of a new nomination and to make an appointment of an arbitrator itself.
11.16 LCIA arbitrators may express their award in any currency and may award simple or compound interest at any rate which they consider to be appropriate. They are not bound by interest rates prescribed by law.
Asia-Pacific arbitral bodies
11.17 Several arbitration centres and institutions operate in the Asia-Pacific region, including the
Singapore International Arbitration Centre (SIAC) and the Singapore Institute of Arbitrators
Hong Kong International Arbitration Centre (HKIAC)
China International Economic and Trade Arbitration Commission (CIETAC)
Korean Commercial Arbitration Board
Japan Commercial Arbitration Association
Thai Arbitration Centre (TAC)
Kuala Lumpur Regional Centre for Arbitration
Indonesian National Arbitration Association (BANI).
11.18 As well, there are two Australian arbitration institutes which are available for international arbitration
The Australian Centre for International Commercial Arbitration (ACICA). ACICA is Melbourne-based, operated by an independent board and closely associated with the Australian Institute of Arbitrators
The Australian Commercial Disputes Centre (ACDC). ACDC is Sydney-based, it acts as the Asia-Pacific Registry for the London Court of International Arbitration and it has various affiliations with arbitral bodies in other countries. ACDC also has a focus on mediation and other forms of alternative dispute resolution.
11.19 It is difficult to obtain comparable statistics on the caseloads of these arbitral bodies. They appear to vary widely, ranging from the relatively small caseload of the Japan Commercial Arbitration Association[dccxxxiv] to the more substantial volume of work handled by the Chinese CIETAC.[dccxxxv] At all events (with the possible exception of China) the caseload of these organisations is significantly smaller than that of the ICC.[dccxxxvi]
National and international arbitration
11.20 Many countries have a national arbitral body which extends the scope of its operations and offers services for international arbitrations. Some examples include the American Arbitration Association which handles a significant number of international cases due to the large number and strength of the American market players in the international scene, the Arbitration Institute of the Stockholm Chamber of Commerce which has historically been popular in contracts involving the People’s Republic of China and the former Union of Soviet Socialist Republics and the Vienna Arbitral Centre of the Austrian Federal Economic Chamber which is often selected in matters involving the former COMECON countries – Hungary, the Czech Republic and Slovakia – especially where the arbitration is likely to be in German.
Specialist arbitral tribunals
11.21 In addition there are many specialised, industry-specific arbitral institutions and bodies which deal only with a particular type of dispute. For example, the Hamburg Commodity Exchange, the Federation of Oils, Seeds and Fats Associations (FOSFA) of London and the Odd Lots Committee of the New York Stock Exchange.[dccxxxvii] There are also industry-specific arbitration rules, such as the recently settled World Intellectual Property Organisation (WIPO) arbitration rules which are used in intellectual property disputes.[dccxxxviii]
11.22 The industry-specific institutions provide assistance in organising arbitrations as well as a set of procedural rules, with varying schemes for matters such as the choice of the arbitrator or arbitral tribunal.
11.23 It is possible to agree to arbitration without referral to a particular arbitration institution. This is known as ad hoc arbitration. It can give rise to particular jurisdictional and procedural issues. Most frequently, in the experience of international arbitrators,[dccxxxix] problems arise through lack of attention to the procedural pitfalls involved in international arbitrations – the parties need to agree on matters such as the choice of law, the language, place and procedure of the arbitration, the means by which facts will be proved and many other matters. However, ad hoc arbitration can work well if there is a spirit of co-operation and an ongoing relationship which the parties wish to preserve.[dccxl]
Model rules for arbitration
UNCITRAL Model Law
11.24 The UNCITRAL Model Law was developed to provide a standardised and universal set of arbitral rules, suitable for use in any tribunal seeking to resolve a dispute irrespective of the national origin or status of the participants.
11.25 The International Arbitration Act 1974 (Cth) (International Arbitration Act), an Act of the federal Parliament, provides for the UNCITRAL Model Law (except Chapter VIII) to have the force of law in Australia in international commercial arbitrations. The term ‘international commercial arbitration’ is the subject of specific definition in the Model Law). The parties may by agreement opt out of using the Model Law. Should the parties opt out, thereby excluding the Model Law and agreeing for example that another set of rules such as the ICC Rules should apply, those other rules will not have the force of law which the International Arbitration Act would otherwise render. The provisions of the State commercial arbitration legislation will, to the extent of any inconsistency, apply and override the rules upon which the parties have agreed. Thus
… despite the wider prohibition on recourse to courts contained in the ICC Rules, the full supervisory jurisdiction provided by the Commercial Arbitration Acts would apply, rather than the narrower scope for court action imposed by the Model Law.[dccxli]
11.26 The UNCITRAL Model Law is a comprehensive work governing the arbitration agreement, the composition and jurisdiction of the arbitral tribunal, the conduct of the arbitral proceedings and the making of and recourse against the award. Its provisos give the parties considerable discretion but provide safety nets for decision-making where the parties cannot agree on matters such as the place of arbitration, the number of and the appointment of arbitrators. Rules exist on apportioning the costs of the arbitration which are usually borne by the unsuccessful party. Recourse against the award is through other judicial authorities.
11.27 The International Arbitration Act stipulates that Chapters II-VII of the ICSID Convention (to which Australia is a party) have the force of law in Australia where the parties to the dispute are the Government of the Commonwealth and a national of an ICSID Contracting State and the parties have agreed in writing to submit to ICSID. If the ICSID Convention applies, other laws do not.
11.28 Arbitrations which are not ‘international commercial arbitrations’ under the UNCITRAL Model Law are subject to State and Territory commercial arbitration legislation. This legislation leaves much to the parties themselves about which to reach consensus in the arbitration agreement including questions as to the conduct of the arbitration.
Legal issues in international arbitration
11.29 Arbitration requires a legal infrastructure in which to function. The arbitral process is intended to lead to a binding determination of a dispute. If it is to be binding, the law must support (among other things) the agreement to arbitrate, the arbitral procedures, the determination of substantive liabilities and crucially, the enforcement of the arbitral award.
Unilateral arbitration clauses
11.30 Arbitration is usually based on an arbitration agreement. However, some nations have granted a right to arbitration, usually in relation to actions of public authorities and through ICSID, irrespective of whether any specific agreement has been concluded with the claimant. Most of these rights are in bilateral investment protection treaties. However, they have recently been included in the North American Free Trade Agreement (NAFTA) and the Energy Charter Treaty.
11.31 Enforcement is one of the most important concerns in international arbitration. There are two critical issues. First, there is the problem of enforcing an arbitration agreement. Second, there is the problem of enforcing the final award made as a result of the arbitration.
Enforcing the arbitration agreement
11.32 It is important that an agreement to arbitrate is binding upon the parties to the agreement and enforceable at law. In Australia actions to enforce an arbitration agreement are generally in the form of an action seeking to stay judicial proceedings brought about by the breach of the agreement.[dccxlii] Applications for a stay on the basis of an arbitration agreement may be made under State or Territory Commercial Arbitration Acts, the International Arbitration Act or through the inherent jurisdiction of the court.
11.33 The court’s jurisdiction to grant the stay will depend on which arbitration law regime applies to the arbitration agreement. It has been argued that there are uncertainties in determining which regime applies, particularly the international regimes for arbitration.[dccxliii]
Commercial Arbitration Acts
11.34 State and Territory Commercial Arbitration Acts allow a party to an arbitration agreement to seek a stay of court proceedings instituted in breach of an arbitration agreement.[dccxliv] A stay is only available where the applicant has not delivered pleadings or taken any step in the court proceedings other than the entry of appearance. Where an application for a stay is made after the applicant has delivered pleadings in the court action, the applicant for the stay must first seek the court’s leave in order to make the application.[dccxlv] The power of the court to grant a stay is discretionary but courts have indicated a tendency to grant a stay, particularly where a contract with an international element is involved.[dccxlvi]
International Arbitration Act 1974
11.35 As mentioned above, the International Arbitration Act adopts the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 and the UNCITRAL Model Law on International Commercial Arbitration as part of Australian domestic law. Both have provisions that allow for a stay of court proceedings due to arbitration clauses in international contracts.[dccxlvii]
11.36 Although the International Arbitration Act is silent as to the extent of the recognition of foreign arbitral awards, it seems that the tendency is to allow the award to be relied on as a defence provided that the award is one made on the merits of the case (and not, for example, entered as a default judgment).[dccxlviii] It is now established that an issue estoppel can be based on a foreign judgment.[dccxlix] However, it is not yet clear whether an issue estoppel can be based on a foreign arbitral award.[dccl]
11.37 Some recent cases indicate that the court has an inherent power to stay proceedings on the basis of an arbitration agreement although courts are reluctant to exercise this jurisdiction.[dccli] However, such a power could be important if an arbitration agreement does not fall within statutory provisions. This may occur, for example, if the agreement is not in writing.
Enforcement of arbitral awards
11.38 Arbitral awards are generally binding on the parties to the arbitration. Under the International Arbitration Act there are provisions for the recognition and enforcement of foreign awards in Australia. These reflect both the New York Convention and the UNCITRAL Model Law. These provisions are available where the New York Convention or the UNCITRAL Model Law applies to the arbitration agreement. However, s 8(4) of the International Arbitration Act restricts enforcement to awards made in countries which are also signatories to the Convention or those made in other countries provided that the applicant is domiciled or ordinarily resident in Australia or in a signatory country.
New York Convention
11.39 TheNew York Convention adopted by the United Nations Conference of International Commercial Arbitration is intended to facilitate enforcement of foreign arbitral awards. It has achieved widespread international acceptance. It proceeds on the assumption that an award has been made and is concerned with the recognition and enforcement of foreign arbitral awards. It is not concerned with the conduct of the arbitration itself. Once an award has been made, if it complies with the requirements of the convention, it will be enforceable in accordance with the terms of the convention.
11.40 Australia is a party to the New York Convention. As at January 1995 there were 102 other nations which had ratified, acceded to and approved the convention.[dcclii] The parties include most countries with which Australia has significant economic dealings, and in particular includes the USA, Japan, China, UK, Canada, New Zealand and all the ASEAN and European Union countries. Taiwan is not a signatory.
11.41 Ratification or accession by a country of an international convention (such as the New York Convention) does not necessarily, of itself, produce the consequence that that country does not need to do more in order to give effect to the convention. Having ratified the convention, that country is bound as a matter of international law to give effect to the convention. The constitutional law of a particular country often requires further steps to be taken before the treaty forms part of the local law of the country. A joint UNCITRAL and International Bar Association project is investigating the extent to which signatory countries have put in place domestic arrangements to enable enforcement in their country of an award under the New York Convention.[dccliii]
11.42 The Indonesian legal system provides an example of the need for domestic arrangements. Although Indonesia ratified the New York Convention in 1981, the Supreme Court of Indonesia decided in 1984 that it was still necessary for implementing regulations to be adopted in order to enable the enforcement of awards under the Convention. The Court held that until this was done the foreign arbitral award could not be enforced by the courts of Indonesia. The implementing regulations were issued in 1990 specifying in detail how foreign arbitral awards can be enforced. The process includes obtaining from the Supreme Court of Indonesia a declaration called an ‘exequatur’ which will not be issued by the Supreme Court if the foreign arbitral award is contrary to the fundamental principles of the Indonesian legal system, society or public policy. Once the exequatur is granted the award will be enforced.[dccliv]
Reservations under the New York Convention
11.43 Some states have adopted the New York Convention with one or both of the permitted reservations
the ‘reciprocity reservation’ – the declaration that a state will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State
the ‘commercial reservation’ – a state may declare that it will apply the Convention only to differences arising out of legal relationships, whether or not contractual, which are considered as commercial under the national law of the state making the declaration.
Over 50 states have made the reciprocity reservation and a significant number have made the commercial declaration.[dcclv]
11.44 The New York Convention and the UNCITRAL Model Law provide similar bases on which the enforcement of a foreign award may be refused
incapacity of a party to the arbitration agreement
invalidity of the arbitration agreement
lack of notice or inability to present a case
award outside submission
improper composition of arbitral authority or improper arbitral procedure
award has been set aside or is not yet binding
subject matter not arbitrable under the lex fori
enforcement contrary to public policy, eg affected by fraud or in breach of natural justice.
11.45 There is also some scope to enforce foreign arbitral awards in Australia at common law where the International Arbitration Act does not apply.[dcclvi]
11.46 Some difficulties have arisen in determining the scope of the New York Convention and the UNCITRAL Model Law under the International Arbitration Act. There are few judicial decisions on international arbitration in Australia.[dcclvii] These difficulties are outlined in chapter 4.
11.47 Arbitral awards made in Australia would be enforceable overseas in countries which are parties to the New York Convention or have adopted the UNCITRAL Model Law. However, problems of scope and interpretation may exist.
Choice of law
11.48 It is usually necessary to determine at various stages of an arbitration which law should apply to particular aspects of the arbitration. This can be difficult. The law to which an individual reference to arbitrate is subject may be different to the law which governs the general agreement to arbitrate.[dcclviii] The applicable laws may vary according to the stage of the arbitration or the issue to be determined. For example, the law applying to a determination of the validity or interpretation of the arbitration agreement often differs from that applying to the arbitration itself.[dcclix]
Laws for the framework of the arbitration
11.49 Parties can select which law is to form the substantive rules of the arbitration to cover, for example, the fairness of the proceedings and the rights of the parties. In Australia if no law is specified and the arbitration agreement satisfies the definition of ‘international commercial agreement’ in the International Arbitration Act, the UNCITRAL Model Law provides a framework of rules for the conduct of the arbitration.[dcclx] However, parties may decide to arbitrate under other rules.[dcclxi] For example, the ICC, the LCIA and the American Arbitration Association all have their own rules of arbitration.
11.50 It may also be open to the parties to empower an arbitrator to resolve a matter in accordance with international law, transnational law or by reference to general principles of justice and fairness. The latter option frees the arbitration itself from any formal system of law. Article 19(1) of the UNCITRAL Model Law supports this proposal
the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings.
11.51 However, courts in the United Kingdom have indicated that an arbitration procedure must be governed by the municipal law of a country.[dcclxii] Australian courts have not yet commented on this proposition.
Opting out of UNCITRAL
11.52 Some difficulties are caused by opting out of the UNCITRAL Model Law. It has been argued that if parties opt out of the UNCITRAL Model Law, the definition of international commercial arbitration in Article 1(3) of the UNCITRAL Model Law does not apply.[dcclxiii] This effectively allows parties who have opted out to include their own definition of international commercial arbitration in their arbitration rules. Others argue that in such a situation the domestic Commercial Arbitration Acts apply.[dcclxiv]
11.53 It has also been argued that by opting out of the UNCITRAL Model Law parties lose statutory protection for recognition and enforcement of Australian arbitration awards.[dcclxv] An Australian arbitral award made in Australia by non-Australian parties may not be considered to be a ‘foreign arbitral award’ under the New York Convention.
Recent Australian cases
Esso Australia Resources Ltd & Others v Plowman & Others[dcclxvi] – confidentiality in arbitration
11.54 The question whether documents produced or information disclosed to an opposing party in an arbitration which is to be heard in private are confidential simply because the arbitration is to be heard in private was determined by the High Court of Australia in Esso Australia Resources Ltd & Others v Plowman & Others (Esso v Plowman) in April 1995. The four to one majority decision of the court is that such documents and such information are not confidential merely because of the private nature of the hearing.
11.55 The case arose out of agreements for the sale of Bass Strait gas by Esso/BHP to two Victorian public utilities, the Gas & Fuel Corporation and the State Electricity Corporation. Esso/BHP sought an increase in the price of the gas supplied pursuant to the agreements. The utilities refused to pay. The agreements contained arbitration clauses and the dispute was referred to arbitration pursuant to those clauses. The utilities sought disclosure of information relating to the calculations justifying the proposed price increases which, in the absence of confidentiality agreements, Esso/BHP was not willing to provide. The utilities refused to enter into confidentiality agreements. Esso/BHP insisted, pointing to the commercially sensitive nature of the information of which disclosure was being sought.
The major questions
11.56 The major questions posed for the court’s determination were whether, either because of an implied term in the arbitration agreements or because of the inherent nature of arbitration as a method of resolving disputes
arbitration hearings are to be conducted in private
the parties to an arbitration have a general obligation of confidence in relation to all documents and information prepared for and used in the arbitration, and
the parties to an arbitration have an obligation of confidence in relation to documents and information compulsorily disclosed during the course of an arbitration.
11.57 In response to those questions the majority of the High Court held that
while the arbitrator has the power, in determining the procedure to be followed at an arbitration, to decide who shall be present at an arbitration hearing, that power is to be exercised subject to the provisions of the contractual submission to arbitration
the parties to an arbitration have a narrow duty (similar to that carried by a party in relation to discovered documents) of confidentiality in relation to all documents and information prepared for and used in the arbitration, and
subject to the legitimate interest of the public in obtaining information about the affairs of public authorities, documents produced under compulsion (pursuant to an arbitrator’s direction) attract the same confidentiality which would attach to them if the parties were litigating their dispute.
11.58 The court took the opportunity to consider the broader question of whether in Australia ‘confidentiality is an essential attribute of a private arbitration imposing an obligation on each party not to disclose the proceedings or documents and information provided in and for the purposes of the arbitration’.[dcclxvii] The Court held that it was not.
11.59 The majority observed that in an arbitration the goal of complete confidentiality cannot be achieved. This is because, among other reasons
witnesses in the arbitration could not be bound by any such obligation
a court may be called upon to review an arbitration award, and
a party may need to disclose various details about the arbitration to a third party (such as an insurance company).
11.60 The court held that in Australia, subject to any contrary intention in the arbitration agreement, arbitrations are to be held in private, that is, they are not open to the public. Chief Justice Mason commented
… I prefer to describe the private character of the hearing as something that inheres in the subject matter of the agreement to submit disputes to arbitration, rather than attribute that character to an implied term.
All five judges who heard the case agreed that privacy is an inherent quality of commercial arbitrations.
11.61 There has been some criticism of the decision on the ground that it will undermine the confidence of parties in the privacy of arbitration hearings in Australia and thereby make Australia a less attractive location for arbitrations.[dcclxviii] Other commentators have suggested that these concerns are overstated.[dcclxix]
11.62 Few jurisdictions deal with the issue of confidentiality in legislation governing arbitrations.[dcclxx] The Singapore legislation provides that on the application of any party, arbitration proceedings shall be heard ‘otherwise than in open court’.[dcclxxi] A wider duty of confidentiality than that stated in Esso v Plowman, does not appear to be provided in more than a handful of jurisdictions.[dcclxxii]
11.63 Where confidentiality is a concern the parties can provide for a duty of confidentiality in their arbitration agreemnt. Esso/BHP could, for example, have required the arbitration clauses in the gas sale agreements to include a duty of confidentiality. However, parties should be aware that witnesses in the arbitration will not be bound by the arbitration agreement and hence will not be bound by any contractual obligation of confidentiality.
11.64 If legislative provision were to be made for the duty of confidentiality, the scope and extent of the duty would need to be addressed. Attention would also have to be given to the question of whether to enact this duty for international arbitrations only or for both international and domestic arbitrations.
Resort Condominiums v Bolwell & Another[dcclxxiii]– enforcement of foreign interlocutory order
11.65 The question of whether an interlocutory order of a foreign arbitrator made in a foreign jurisdiction is enforceable in Queensland as a ‘final award’ pursuant to the New York Convention, was considered by Lee J in the Supreme Court of Queensland in Resort Cndominiums International Inc v Bolwell & Another in October 1993 (Resort Condominiums). The judge held that such an award was not enforceable as an ‘arbitral award’ pursuant to the Convention. It is understood that the decision is subject to appeal.
11.66 Resort Condominiums (RCI USA), a US corporation, conducted a world-wide time sharing business. It ran the ‘RCI Exchange Program’. Briefly, the program allowed exchange (usually during vacations) between persons in separate countries who wished to spend vacation time in one another’s country. RCI USA entered into a license agreement with RCI Australia pursuant to which RCI Australia was permitted to operate the RCI Exchange Program in a certain part of the Asia-Pacific region in exchange for a royalty fee. Disputes broke out between the parties based upon RCI USA alleging against RCI Australia, among other matters, non-payment of royalty fees and breach of other conditions of the license agreement. The license agreement contained an arbitration clause.
11.67 RCI USA obtained a temporary restraining order in the Indiana State Court against RCI Australia which required the provision of information, financial statements and other information including discovery. RCI USA terminated the license agreement. Complex procedural battles took place between the parties, both in the US courts and before an arbitrator in Indianapolis. RCI Australia participated by teleconference in the arbitration proceedings but only to object, asserting that as the license agreement terminated so the right of either party to refer the matter to arbitration had ceased. Having made that point, the representative for RCI Australia withdrew. Nonetheless, the arbitrator heard RCI USA’s application for interim relief and made detailed orders. Until the making of a final award, the arbitrator restrained RCI Australia from refusing to comply with the trust account provisions of the license agreement, acting otherwise than in accordance with the arbitration clause, refusing to allow RCI USA access to its financial material and related conduct. In the Supreme Court of Queensland RCI USA sought to enforce the arbitrator’s award. RCI Australia opposed the application.
The major questions
11.68 The main questions which Lee J had to decide were whether
an ‘arbitral award’, as referred to in the New York Convention, included an interlocutory order made by an arbitrator or whether it only referred to an award which finally determined the rights of the parties
if an award determines some of the matters in dispute between the parties (an ‘interim award’) that is sufficient to render it an award which the Australian court would enforce
a general discretion exists whether to enforce a foreign award
the orders made by the arbitrator in this case were contrary to public policy.
11.69 Lee J held that
a reference to an ‘arbitral award’ in the New York Convention does not include an interlocutory order made by an arbitrator but only an award which finally determines the rights of the parties
the expression ‘arbitral award’ may include a valid interim award, however, the particular ruling made by the arbitrator in this case was not an ‘arbitral award’ as it did not determine all or at least some of the matters in dispute between the parties
there exists a general discretion whether to enforce a foreign award
some of the orders made by the arbitrator were contrary to public policy and so ought not be enforced, being far-reaching as to both subject matter and time and made without regard for the scope of the license agreement.
The issues raised by the decision
11.70 The decision in Resort Condominiums has attracted considerable comment and some criticism. The principal objection to the decision is directed to the decision that there is a general discretion whether to enforce a foreign award, beyond the matters set out in Article V of the New York Convention. Some commentators strongly disagree with this conclusion. They argue that it has seriously undermined the purpose of the convention which is to require enforcement of foreign awards in all cases, subject only to the grounds stated in Article V.[dcclxxiv] Other critics of the decision have said that it is not supported by the authorities cited to support it.[dcclxxv]
11.71 In addition, there has been criticism of the broad construction the decision appears to give to the public policy exception to the enforcement of foreign awards. This criticism is on the basis that the breadth of this construction could compromise the cardinal objective of the convention, namely the speedy and liberal enforcement of foreign awards.[dcclxxvi]