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No two ways about it: enforcement of foreign arbitration awards in Australia

Hyundai Engineering & Steel Industries Co Ltd v Two Ways Constructions Pty Ltd (No 2) [2018] FCA 1551

This recent Federal Court decision provides guidance - and caution - concerning the enforcement of foreign arbitration awards in Australia, in circumstances where there is still an ongoing appeal at the seat of the arbitration.

The dispute
After a contractual construction dispute arose between the parties, an arbitral award was made under the arbitration agreement in favour of Hyundai Engineering. This occurred in Singapore, which was the agreed seat of arbitration. Hyundai Engineering then sought to enforce the judgment in Australia.

Two Ways Constructions appealed to the High Court of Singapore seeking to partially set aside the award and, separately, applied to the Federal Court for an adjournment of Hyundai Engineering's application to enforce the award in Australia. The Federal Court granted the adjournment on the condition that Two Ways Constructions provided security for the award.

Shortly afterwards, voluntary administrators were appointed to Two Ways Constructions. The company had not provided security as required. This led Hyundai Engineering to proceed with the enforcement of the award in Australia, notwithstanding the voluntary administration.

Hyundai Engineering and the administrators agreed that the award should be enforced in Australia, however there was contention about further orders that the administrators were seeking.

What was the Federal Court asked to decide?
The Judge was asked to decide whether:

  • there be reserved to the parties liberty to apply to have orders amended to match the outcome of the appeal decision of the High Court in Singapore; and
  • to order that Hyundai Engineering was not to take any step to enforce any judgment or order of the Court without leave.

The Court's reasoning
In relation to the second issue, which the Court found to be straightforward, the Court found that it was unnecessary to make an order to stop Hyundai Engineering from enforcing any judgment without leave because section 440D of the Corporations Act 2001 (Cth) has the effect of disallowing any proceedings to be commenced against a company during administration, without the administrator's or Court's approval.

In relation to the the first issue, the Court refused to make the order sought. The Judge found that, once the Court made an order for the enforcement of the award in Australia, it then had no jurisdiction to vary that order in the event that the Singapore High Court later set aside part of the award.

In coming to this decision, the Court contemplated whether the proposed order would constitute the making of a 'supplemental' order, which would be permissible, or whether the judgment would be 'varied', which is not within the Court's powers. The Court concluded that amending the order could not be 'supplemental' as any change to the award amount would require a substantial variation to a key term of the order.

Thus, the Court could not grant liberty for the parties to later apply to have the orders amended, as that would involve an application to vary or alter the initial order. Due to the requirement for finality of litigation, this was beyond the power of the Court.

Implications
In this case, the Court agreed to enforce the award because the administrators had agreed to make the orders final to secure Hyundai Engineering's position as a debtor. If the administrators hadn’t so agreed, it is likely that the Court would be reluctant to make final orders given that it has no power to subsequently amend or vary orders that are concurrently the subject of an appeal in the seat of the arbitration.

Regardless of the unique facts of this case, it is apparent that a party seeking to appeal orders at the seat of the arbitration should be cautious about having an award enforced in the Federal Court of Australia, because once the Court enforces the award, it has no jurisdiction to amend the order.

Thanks

We thank the authors of this legal update Karen Ingram and Krissy Thomas from Clayton Utz Litigation and Dispute Resolution team, for their contribution to Pulse.

Tags: Arbitration, Legal practice, Building and construction, Dispute handling administration