Australian High Court considers constitutional challenge to Australia's international arbitration regime

Peter Ward, Partner, Perth

Speedread

In November 2012 the High Court of Australia considered a challenge to the constitutional validity of Australia's international arbitration regime.(1) Australian practitioners await a decision which could have significant consequences for Australia's reputation as a venue for international arbitration.

Full article

Constitutional challenge

The key provisions of the International Arbitration Act 1914 (the "IAA") under challenge concern the enforcement of arbitral awards, other than foreign awards sought to be enforced under the New York Convention. In other words, awards which have been made in an international arbitration in Australia or awards which are made in countries which are not signatories to the New York Convention.

The case concerned the enforcement of an Australian arbitration award, granted in favour of an Australian company against a Chinese company. The respondent resisted enforcement on the grounds that the Federal Court of Australia did not have jurisdiction to enforce it. This argument was dismissed and in early 2012 the courts held that the Federal Court did have jurisdiction to enforce a non-foreign award. However, at a later hearing, judgment was reserved on whether the award should be enforced. The respondent has since applied to challenge the constitutional validity of the relevant provisions of the IAA and the Model Law on the basis that those provisions impair the institutional integrity of the Federal Court and, in effect, confer Commonwealth judicial power on arbitral tribunals.

Implications

A High Court ruling invalidating key provisions of the IAA would create significant uncertainty and is likely to damage Australia's reputation as a venue for international arbitration. Although further legislation could rectify this, it would take time and would in itself be contrary to the general principle of finality in arbitral awards. We will keep you updated of the eagerly awaited decision.

Please click on the links below for the other articles in the February 2013 Arbflash:

• Asymmetric dispute resolution clauses: proceed with caution
• Anatomy of an arbitration Part I: Why arbitrate?
• Queen Mary 2012 survey on international arbitration practice: snapshot of key findings
• Arbitration in China: CIETAC developments
• International round-up
• Investment treaty update
• Frequently asked questions: is my tiered dispute resolution clause binding?

_Notes:

_{⁽¹⁾ TCL Air Conditioner (Zhongshan) Co Ltd -v- The Judges of the Federal Court of Australia & Anor (Case No. S178/2012).}