Parties seeking to challenge enforcement orders for arbitral awards on appeal need not apply for leave to do so.
An arbitral award is made, and the successful party gets an enforcement order. How easily can the other side challenge the enforcement order? Must it get leave from the court?
The Western Australian Court of Appeal's recent decision in Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd  WASCA 50 has shed some light on these issues.
The arbitration award and enforcement order under the Commercial Arbitration Act
Rizhao was the unsuccessful party in an international arbitration held, in terms of the agreement between the parties, according to the provisions of the Commercial Arbitration Act 1985 (WA) (the CAA). The respondents, Mount Gibson, had sought and obtained an order enforcing the arbitration awards as a judgment in the court below.
Rizhao appealed this decision, and sought to argue (for the first time on appeal) that the initial order had been incorrectly granted because it should properly have been sought under the International Arbitration Act 1974 (Cth) (the IAA).
What was the Court of Appeal asked to decide?
The Court of Appeal had to decide if:
- Mount Gibson's contention that the decisions appealed were interlocutory decisions, in respect of which leave to appeal would have been required, but which leave had not been sought by Rizhao within the required time period; and
- Rizhao should be allowed to raise new arguments upon appeal.
An interlocutory decision?
The WA Court of Appeal held that the judgments below entitled Mount Gibson to require the Registrar to enter the judgments in the records of the court, and that their effect was therefore to finally determine the rights of the parties concerning the enforcement of the arbitrators' awards.
This meant that the judgments were final, not interlocutory – with the effect that no leave to appeal was required, and the appeal was properly brought.
The IAA or the CAA?
The Court decided not to allow Rizhao to make new arguments upon appeal because it was not in the interests of justice, and it would prejudice Mount Gibson. It therefore dismissed the appeal. Nonetheless, it chose to consider the substance of Rizhao's arguments because of their general significance.
The arbitration agreement between the parties was concluded before the July 2010 amendments to the IAA, under section 21 of the IAA which then provided that parties could agree that disputes could be settled other than in accordance with the Model Law.
Rizhao argued that the scope of the exclusion contemplated by the words "settled otherwise than in accordance with the Model Law" applied to the conduct of the arbitration only, and could not encompass the enforcement of an arbitral award by a court. It argued that the matter was settled when the arbitral award was delivered.
Mount Gibson took a broader view; it contended that "settlement" included all matters leading up to satisfaction of the award, including enforcement procedures.
The Court of Appeal held that both the plain language and the statutory context in which the concept of settlement was used favoured Mount Gibson's approach, and no ground of public interest had been identified by Rizhao to justify departing from this apparent meaning.
The July 2010 amendments replaced section 21 with a provision under which the Model Law, where it was of application, displaced any State or Territory law relating to arbitration. The Court recognised that this amendment clearly removed the right of parties to contract out of the Model Law.
However, contrary to Rizhao's submissions, it found that this amendment affected the vested rights of parties who had entered into agreements prior to its commencement, so its effect should be taken to be prospective only.
Firstly, the characterisation of enforcement orders as final rather than interlocutory is significant, as it means that parties seeking to challenge them on appeal need not apply for leave to do so.
Secondly, parties to agreements contracting out of the IAA will be affected by the last part of the judgment. Many pre-July 2010 arbitration agreements remain on foot, and it will come as some relief to parties to know that to the extent that these agreements purport to contract out of the Model Law, they are likely be held to be enforceable.
Some caution needs to be expressed, however, as the judgment in this regard was obiter, as the Court had already held that it did not need to decide the point in order to dispose of the appeal.
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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.