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Ignoring Foreign Arbitral Proceedings will not prevent a Foreign Arbitral Judgement from being enforced: Federal Court of Australia
Introduction
The Federal Court confirmed in a judgment issued on August 5, 2020, that ignoring foreign arbitral proceedings hoping that they will go away will not prohibit the subsequent arbitral award from being enforced against you, even if the arbitral proceedings were not performed following the contractual procedure.
Facts
In the case of Energy City Qatar Holding Co v Hub Street Equipment Pty Ltd (No 2)[1], Energy City Qatar (ECQ) sought to enforce a Qatari arbitral decision made according to an arbitration provision in a contract for the delivery and installation of street lighting and street furniture in Energy City between ECQ and Hub Street Equipment (Hub). The issue arose from an advance payment paid by ECQ to Hub under the contract, which ECQ later attempted to recoup after opting out of the arrangement. Hub notified ECQ that it would determine its stance after getting legal counsel after several email contacts and meetings in which ECQ demanded restitution of the money. Hub, on the other hand, never contacted ECQ again and kept the upfront money.
To collect the advance payment, ECQ filed arbitration procedures under the contract. While the arbitration provision required ECQ to submit Hub a notification is giving Hub 45 days to nominate one member of the arbitral panel, ECQ instead filed a statement of claim in the Qatari Plenary Court of First Instance, asking the Court to appoint a three-person arbitral tribunal, including one nominated by the ECQ. In cases when “a disagreement develops between the parties prior to an agreement between them as to the arbitrators...,” the Qatari Civil and Commercial Code of Procedure (CCCP) permitted for arbitrators to be appointed in this manner.
Hub received a notification of the Court proceedings from ECQ, and the Tribunal, once formed, issued Hub six notices in English detailing the arbitration's progress. Despite the notifications, Hub did not attend the arbitration, and the Tribunal had to delay the proceedings three times because of his absence. Because Hub failed to present, the Tribunal proceeded to resolve the issue and make the award. Notably, the judge found several factual findings, including that Hub had received the Tribunal's notifications but chose to ignore the arbitral proceedings.
Later on, under the International Arbitration Act 1974 (Cth) (IAA), Hub contested the award's enforcement on a variety of grounds, including:
- It did not obtain appropriate notice of the arbitrator's appointment, which would have given it 45 days to choose an arbitrator: s. (8)(5)(c) of the IAA;
- It did not get enough notice of the arbitration proceedings since it did not receive any notice at all: s. 8(5)(c) of the IAA;
- It was unable to submit its argument in the arbitration procedures because it had never been notified of them: s. 8(5)(c) of the IAA;
- Because the contractual process had not been followed, the arbitral authority's composition did not match the parties' agreement: s. 8(5)(e) of the IAA;
- The arbitral procedure did not follow the parties' agreement since the contract called for the arbitration to be held in English, but it was held in Arabic, and the award was given in Arabic: s. 8(5)(e) of the IAA; and
- Because the arbitral judgment violated natural justice principles, it should not be implemented because it would be against public policy to do so: IAA sections 8(7) and 8(7A) (b).
Issue: Should the award be set aside since the Tribunal was not established in line with the contract?
Decision
The contract and the conduct and legality of the arbitration were all regulated by Qatari law. The Qatari Plenary Court of First Instance used the Qatari CCCP to determine to select the arbitral tribunal was satisfied that a disagreement had developed between ECQ and Hub before an agreement between the arbitrators. On this basis, the judge was not convinced that the Tribunal's composition was inconsistent with the parties' agreement. As a result, ECQ's request to enforce the award was granted.
In conclusion, even if there are claimed procedural flaws with the arbitral processes or decision, the ruling indicates that Australian courts would take a pro-arbitration attitude when determining to enforce international arbitral judgments. In this case, the procedural errors needed not to have prejudiced Hub since the company had been given enough chance to submit its case but had declined.
Links Referred:
https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/full/2021/2021fcafc0119
[1] [2020] FCA 1116
(This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, or Religion, Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre Foundation shall not be responsible for any errors caused due to human error or otherwise.)
- Facts
- Decision
- Conclusion
