|FEDERAL COURT OF AUSTRALIA EBJ21 v EBO21  FCA 1406|
|Case Name:||EBJ21 v EBO21  FCA 1406|
|File Number:||NSD 403 of 2021|
|Court:||Federal Court of Australia|
|National Practice Area:||Commercial and Corporations|
|Sub-Area:||International Commercial Arbitration|
|Hearing Date:||28 July 2021|
|Judgment Date:||12 November 2021|
|Medium Neutral Citation:|| FCA 1406|
|Keywords:||ARBITRATION – international arbitration – recognition of an award under the UNCITRAL Model Law – where the pecuniary obligations in the award have been paid – where there is no dispute about the validity or efficacy of the award – whether Art 35 of the Model Law requires orders recognising the award when no Art 36 ground is established – whether declaration recognising the award is justified or required – whether money judgment on the award would be enforcement of the award – whether money judgment on an award that has been paid is available ARBITRATION – international arbitration – obligations of confidentiality with respect to arbitration proceedings – where confidentiality protected by contractual provisions and the International Arbitration Act 1974 (Cth) – whether disclosure of confidential information by bringing proceeding for recognition of an award is within contractual and statutory exceptions to confidentiality PRACTICE AND PROCEDURE – application for suppression orders of all confidential information in relation to arbitral proceedings – whether suppression orders are necessary to prevent prejudice to the proper administration of justice if there is no legitimate purpose for recognition orders|
|Legislation:||Civil Law and Justice (Omnibus Amendments) Act 2015 (Cth) Federal Court of Australia Act 1976 (Cth) ss 23, 37AE, 37AF, 37AG 37AI, 37AJ International Arbitration Act 1974 (Cth) ss 3, 8, 15, 16, 18, 22, 23B, 23C, 23D, 23E, 23F, 23G, 35, Sch 1, 2 Federal Court Rules 2011 (Cth) r 2.32 ACICA Arbitration Rules 2016 rr 22.2, 38.2, 40(e) Convention on the Settlement of Investment Disputes between States and Nationals of Other States, opened for signature 18 March 1965, 575 UNTS 159 (entered into force 14 October 1966) (ICSID Convention) Convention on the Recognition and Enforcement of Foreign Arbitral Awards opened for signature 10 June 1958, 330 UNTS 3 (entered into force 7 June 1959) (New York Convention) Arts 54, 56 UNCITRAL Model Law on International Commercial Arbitration (as adopted by the United Nations Commission on International Trade Law on 21 June 1985, and as amended on 7 July 2006) Arts 1, 20, 30, 31, 35, 36|
|Cases:||Ainsworth v Criminal Justice Commission  HCA 10; 175 CLR 564 Clarence City Council v Commonwealth of Australia  FCAFC 134; 280 FCR 265 Esso Australia Resources Ltd v Plowman  HCA 19; 183 CLR 10 Hogan v Australian Crime Commission  HCA 21; 240 CLR 651 Hub Street Equipment Pty Ltd v Energy City Qatar Holding Company  FCAFC 110; 153 ACSR 84 InfraRed Environmental Infrastructure GP Ltd v Spain, No ARB/14/12, Decision on the Continuation of the Stay of Enforcement of the Award (ICSID 2019) Kingdom of Spain v Infrastructure Services Luxembourg Sàrl  FCAFC 3; 387 ALR 22 Kingdom of Spain v Infrastructure Services Luxembourg Sàrl (No 3)  FCAFC 112; 392 ALR 443 Mobil Cerro Negro Ltd v Venezuela 863 F 3d 96 (2nd Cir, 2017) TCL Air Conditioner (Zhongshan) Company Ltd v Castel Electronics Pty Ltd  FCAFC 83; 232 FCR 361 TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia  HCA 5; 251 CLR 533 The Country Care Group Pty Ltd v CDPP (No 2)  FCAFC 44; 275 FCR 377 Traxys Europe SA v Balaji Coke Industry Pvt Ltd and Another (No 2)  FCA 276; 201 FCR 535 Tridon Australia Pty Ltd v ACD Tridon Inc (Incorporated in Ontario)  NSWCA 146 Rinehart v Rinehart  FCA 1241; 320 ALR 195 Rinehart v Welker  NSWCA 403; 93 NSWLR 311 Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd (No 2)  FCA 206; 277 ALR 441 Victoria International Container Terminal Ltd v Lunt  HCA 11; 388 ALR 376 Weinar v Lex 176 A 3d 907 (Pennsylvania Superior Court, 2017) Williams v Spautz  HCA 34; 174 CLR 509|
|Orders:||THE COURT ORDERS THAT: 1. The originating process filed on 5 May 2021 be dismissed. 2. For a period of five years, or until further order: (a) the parties be assigned the following pseudonyms: (i) the first and second applicants, EBJ21 and EBN21 respectively; (ii) the first and second respondents, EBO21 and EBP21 respectively, and (b) all documents on the court file for this proceeding be confidential in the sense contemplated by r 2.32 of the Federal Court Rules 2011 (Cth). 3. Costs be reserved. 4. Within seven days of these orders, the respondents file and serve submissions of no more than five pages (of at least 12 point font and 1.5 line spacing) on costs and on the period of time for which Order 2 above should operate. 5. Within seven days of service on them of the submissions referred to in Order 4, the applicants file and serve short submissions in response and subject to the same limitations. 6. Within three days of service on them of the submissions referred to in Order 5, the respondents file and serve any short submissions in reply of no more than two pages and otherwise subject to the same limitations. 7. Unless any party requests an oral hearing and the Court so orders, the issues raised by the submissions referred to in Orders 4 to 6 above be decided on the papers.|
|Parties:||EBJ21 First Applicant EBN21 Second Applicant AND EBO21 First Respondent EBP21 Second Respondent|
|Representation:||Counsel for the Applicants: G Nell SC and J Kennedy Solicitor for the Applicants: Addisons & Counsel for the Respondents: A Dinelli Solicitor for the Respondents: Russell Kennedy|
- This case concerns whether arbitral award creditors are entitled to recognition or enforcement of an award that sounds in money, whether by way of declaration or judgment or both, in circumstances where the award has been paid, and was paid prior to the time for payment specified in the award.
- The award debtors, being the respondents, say that there is no entitlement to the recognition or enforcement of the award by orders of the Court in those circumstances; it is pointless – the award has been satisfied and the obligations in the award have been discharged. They also say that the applicants’ persistence in seeking recognition or enforcement is an abuse of process and indicative of the applicants having an improper predominant purpose, namely to circumvent the confidentiality obligations that otherwise attach to the dispute by bringing it into the public arena of a court proceeding. They say that to recognise or enforce the award would be contrary to public policy.
- The award creditors, the applicants, say that Art 35(1) of the UNICTRAL Model Law on International Commercial Arbitration, by providing that an arbitral award “shall be recognised” and “shall be enforced”, gives them a right to recognition or enforcement that can only be defeated on one of the limited grounds set out in Art 36 of which prior payment of the award is not one. They say that that right means that their proceeding seeking recognition cannot be an abuse of process or contrary to public policy.
- The applicants are associated network marketing companies, one of which is incorporated in a foreign country and the other in Australia. The applicants develop, manufacture and distribute certain products which they promote to customers through a network of “Associates”.
- The respondents were enrolled with the applicants as “Independent Associates” in 2013 pursuant to an agreement between them. The agreement included an “Arbitration and Governing Law” provision which, relevantly, has the following features:
- Any controversy or claim arising out of or relating to the agreement “shall be settled by confidential arbitration administered by the Australian Centre for International Commercial Arbitration (AU) [ACICA] … administered under its commercial arbitration rules, and any judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction”;
- The “arbitration proceedings shall be held in the city of Sydney, Australia”;
- “Neither the parties nor the arbitrator(s) shall disclose the existence, content, or results of any arbitration without the prior written consent of both parties”;
- “Judgment on any award rendered by the arbitrator(s) may be entered in any court having jurisdiction”.
- On 24 January 2020, the respondents terminated the agreement with the applicants. On the same day, solicitors for the applicants wrote to the respondents noting that various confidentiality and non-solicitation and restraint obligations remained between them. The respondents had apparently shifted allegiance and were working with a competing multi-level marketing company (the competitor). The letter went on to allege, among other things, that the respondents had made false statements about the applicants’ products to multiple “Independent Associates”, were in breach of their contractual obligations and were liable for the tort of contractual interference.
- On 12 February 2020, solicitors for the competitor replied to the applicants’ letter requesting further details and particulars. However, the applicants did not reply, and instead commenced a proceeding against the respondents and the competitor in a superior court in a foreign country. The originating process in that proceeding was not served on the respondents, and never has been, but it was published and maintained on the applicants’ website and in that way the applicants published the dispute to the world at large. The originating process is detailed and emotive in its allegations against the respondents. The respondents say that the foreign proceeding “lapsed” after 12 months for failure to prosecute the claim.
- Further correspondence was exchanged between the parties’ solicitors regarding the allegations and the foreign process. In a letter dated 21 February 2020, the respondents noted that the agreement contained a clause stating that any dispute between them must be by way of arbitration. Presumably for this reason, the applicants commenced two arbitration proceedings by serving notices of arbitration on each respondent on 14 May 2020. Those arbitration proceedings were consolidated shortly thereafter.
- A number of documents were filed in the arbitration and procedural orders were made by the arbitrator. On 21 April 2021, almost a year after the commencement of the arbitration, the parties undertook a mediation with the assistance of a former judge of this Court which led to the dispute being settled as recorded in a confidential deed of settlement between the parties of the same date.
- The confidential deed of settlement records that it was concluded to avoid the further cost and inconvenience of litigation and without any admission of liability. The terms of the settlement deed include the following:
- the parties agreed to particular orders being made by the arbitrator, including that within 30 days of the date of the award the respondents pay a specified amount in Australian dollars to the applicants;
- the parties mutually released each other from all claims, actions, costs and demands whatsoever in respect of or in any way connected to the facts or circumstances the subject of the arbitration proceeding;
- the parties agreed that the terms of the agreement are “strictly confidential and are not to be disclosed or permitted to be disclosed in any form, or any manner, either directly or indirectly, except … for the purpose of enforcing this agreement”; and
- the agreement may be pleaded in any court as a bar to any action, suit, claim, cause of action or proceeding commenced or to be commenced by any party which is inconsistent with or contrary to the agreement.
- By letter from the respondents’ solicitors the following day, the applicants were advised of the importance of the confidentiality of the agreement to the respondents, including by providing a copy of r 22.2 of the 2016 ACICA Arbitration Rules. That rule sets out the limited exceptions to the confidentiality of all matters relating to the arbitration, including its existence and the award. The exceptions relevantly include:
- for the purpose of making an application to any competent court; and
- for the purpose of making an application to the courts of any State to enforce the award.
- As noted, on 5 May 2021, the arbitrator then made the award as contemplated by the confidential deed of settlement. It is in the following terms:
- This is a final award on agreed terms made in accordance with arts 30 and 31 of the UNCITRAL Model Law on International Commercial Arbitration (Model Law) (as applied by s 16 of the International Arbitration Act 1974(Cth)) and art 40.l of the ACICA Arbitration Rules 2016 (Rules).
- In accordance with art 38.2 of the Rules, this award is final and binding on the parties.
- The respondents are to pay $[amount] to the claimants.
- The payment referred to in Order 3 above is to be made within 30 days of the date of this award.
- The respondents are jointly and severally liable for the payment referred to in Order 3 above.
- The costs of arbitration (excluding those described in art 44(e) of the Rules) are to be split evenly between the disputing parties.
- Any deposit of costs held by ACICA, if returned to the parties, is to be distributed back to the disputing parties in equal shares.
- Each party otherwise bears its own legal costs (including those described in art 44(e) of the Rules).
- The proceedings are terminated.
- This award is made on 5 May 2021 at Sydney, New South Wales, Australia, which is the place of arbitration in accordance with art 20(1) of the Model Law.
- The respondents paid the award on 22 May 2021, two weeks earlier than required, but in the meanwhile the applicants had already commenced the present proceeding.
- There is no suggestion of any dispute about any aspect of the award or that any of it has not been carried into effect. The references to the costs described in r 44(e) of the ACICA rules is to the parties’ own costs.
The present proceeding
- On the very day the award was made, 5 May 2021, the originating application was filed. It sought the following relief:
- An order, pursuant to s 23 of the Federal Court of Australia Act 1976(Cth), read with ss 16 and 18 of the International Arbitration Act 1974 (Cth) and Art 35 of the UNCITRAL Model Law on International Commercial Arbitration, that the Final Award dated 5 May 2021 made by [the arbitrator] between the applicants and respondents be enforced by this Court.
- There be judgment against the first and second respondents in the sum of AU$[amount of the award] plus interest from 6 June 2021.
- If this application is opposed, costs.
- Five days later, on 10 May 2021, the applicants’ solicitors wrote to the respondents’ solicitors, enclosing the originating application and supporting affidavit by way of service. They explained why the applicants had commenced the proceeding notwithstanding that the date for payment was more than three weeks hence:
As your clients are aware, our clients required the security of a Final Award as a condition of resolving the consolidated arbitration between the parties. Such security is provided by, among other things, the ability to enforce the Final Award under Article 35 of the UNCITRAL Model Law so as to benefit from having the Award converted into orders of a relevant court.
- It should be observed that the respondents had given no indication that they would not pay the award, whether at all or on time, and the applicants had given no prior warning that once the award was made they would make an application to a court to enforce the award even before payment was due and payable.
- On 21 May 2021, the respondents filed an interlocutory application seeking suppression and non-publication orders so as to protect their identities and other information about the dispute which is governed by the confidentiality agreements between the parties. The basis for the relief is that the applicants’ proceeding is an abuse of process aimed at circumventing the confidentiality agreements and having no other apparent purpose.
- As previously mentioned, on 22 May 2021, the respondents paid the award.
- On 27 May 2021, I made orders pursuant to s 37AI(1) of the Federal Court of Australia Act 1976(Cth) (FCA Act) that the parties’ names be supressed along with the electronic court file, until further order. That provision allows for suppression and non-publication orders pending the resolution of a dispute about whether such orders should be made. It was determined that the final relief sought by the applicants and the suppression orders sought by the respondents would be decided in the same final hearing. I will deal with the respondents’ application in a separate section of these reasons below.
- In written submissions filed before the final hearing, the applicants explained that in view of payment of the award having been made they no longer sought an order in terms of prayer 1 in the originating application, i.e., that the award be enforced, but instead sought only judgment for the sum specified in the award, and costs. However, after the hearing the applicants submitted revised proposed orders as follows:
THE COURT ORDERS THAT:
- The Court hereby and in these orders recognises as binding on the Respondents the Final Award of [the arbitrator] dated 5 May 2021 in [description of the award] (Award).
- Pursuant to s 23 of the Federal Court of Australia Act 1976(Cth), read with ss 16 and 18 of the International Arbitration Act 1974 (Cth) and Article 35 of the UNCITRAL Model Law on International Commercial Arbitration, judgment be entered in favour of the Applicants against the Respondents for the pecuniary obligations under the Award in the sum of AU$[amount].
- The Respondents pay the Applicants’ costs of the Proceedings, including the Respondents’ Interlocutory Application filed 21 May 2021.
AND THE COURT NOTES THAT:
- The Respondents have fulfilled the pecuniary obligations under the Award the subject of Order 2 above.
- The applicants’ relief accordingly shifted from, initially, enforcement and judgment to only judgment, and then to recognition and judgment. That changing relief reflects some uncertainty as to the different meanings and effect of recognition and enforcement as referred to in the Model Law.
- There is no dispute that the relevant governing legislation is the International Arbitration Act 1974(Cth) (IAA).
- Part II of the IAA provides for the enforcement of foreign arbitration agreements and “foreign awards” under the Convention on the Recognition and Enforcement of Foreign Arbitral Awardsopened for signature 10 June 1958, 330 UNTS 3 (entered into force 7 June 1959) which is reproduced as Sch 1 to the IAA. It is known as the New York Convention. A “foreign award” is defined in s 3(1) to mean, relevantly, an arbitral award made in a country other than Australia. As the award at issue in this case was made in Australia, its recognition and enforcement do not fall to be dealt with under Pt II of the IAA and the New York Convention. However, as will be seen, the scheme for the recognition and enforcement of awards under the UNCITRAL Model Law on International Commercial Arbitration (as adopted by the United Nations Commission on International Trade Law on 21 June 1985, and as amended on 7 July 2006) which is reproduced as Sch 2 to the IAA, is modelled on the New York Convention scheme with the result that authorities on the one scheme are relevant to the other scheme. See Hub Street Equipment Pty Ltd v Energy City Qatar Holding Company  FCAFC 110; 153 ACSR 84 at  and the authorities cited there.
- Part III of the IAA deals with international commercial arbitration, and in particular deals with mechanisms giving the Model Law the force of law in Australia. It is common ground that recognition and enforcement of the arbitral award in this case fall to be dealt with under Pt III of the IAA and the Model Law. That is because the arbitration in this case was “international” as “the parties to [the] arbitration agreement, at the time of the conclusion of that agreement, had their place of business in different States” (Art 1(3)(a)) but, as explained, the award is not a “foreign award”.
- Section 16(1) of the IAA, in Pt III, states:
Subject to this Part, the Model Law has the force of law in Australia.
- Article 35 of the Model Law, which is headed “Recognition and enforcement”, relevantly states:
(1) An arbitral award, irrespective of the country in which it was made, shall be recognized as binding and, upon application in writing to the competent court, shall be enforced subject to the provisions of this article and of article 36.
(2) The party relying on an award or applying for its enforcement shall supply the original award or a copy thereof. …
- Article 36 of the Model Law, which is headed “Grounds for refusing recognition or enforcement”, identifies the limited grounds on which recognition or enforcement of an award under Art 35 may be refused. Relevantly, they include if “the recognition or enforcement of the award would be contrary to the public policy of this State” (Art 36(1)(b)(ii))).
- The grounds for not recognising or enforcing an arbitral award set out in Art 36 of the Model Law mirror the grounds in s 8(5) of the IAA and Art V of the New York Convention: Hub Streetat .
The distinction between recognition and enforcement
- It is explained in TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia HCA 5; 251 CLR 533 (TCL HCA), at  per French CJ and Gageler J, that Art 35 of the Model Law was drafted to bring out a useful distinction between recognition and enforcement. It takes into account that recognition not only constitutes a necessary condition for enforcement but also may stand alone, for example where an award is relied on in other proceedings. Also, by operation of Art 35(1), an award is recognised as binding between the parties from the date of the award, whereas enforcement occurs by a competent court only “upon application in writing to [it]”. (See TCL HCA also at .)
- It is further explained in TCL HCA(at ) that s 8(1) of the IAA demonstrates that the requirement of Art 35 of the Model Law that an arbitral award “shall be recognised as binding” is appropriately and succinctly translated as part of the law of Australia to mean that an arbitral award is binding by force of the Model Law on the parties to the arbitration agreement for all purposes, on and from the date the arbitral award is made. The purposes for which an arbitral award is recognised as binding include reliance on the award in legal proceedings in ways that do not involve enforcement, such as founding a plea of former recovery or as giving rise to a res judicata or issue estoppel.
Forms of orders
- It follows that it is not necessary for a court to make any order for an award to be recognised – it has recognition by force of law and a court can recognise it by, for example, upholding a defence of res judicata with reference to the award. In an appropriate case where the status or validity of an award is in dispute, a court might make a declaration recognising an award. But there is nothing in the Model Law or otherwise in the IAA that suggests that a court must make some order to fulfil its obligation under Art 35 of the Model Law to recognise an award. On the contrary, an order is required to enforce an award, but an order is not required to recognise it.
- An appropriate order, although not necessarily the only appropriate order, for the enforcement of an arbitral award, which would be made under s 23 of the FCA Act, would be an order that the arbitral award be enforced as if the arbitral award were a judgment or order of the Court: TCL HCAat . However, in respect of an arbitral award sounding in money (i.e., a money award) an appropriate, and the usual, order to enforce the award would be simply to enter judgment for the sum concerned: Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd (No 2) FCA 206; 277 ALR 441 at  per Foster J; Traxys Europe SA v Balaji Coke Industry Pvt Ltd and Another (No 2)  FCA 276; 201 FCR 535 at  per Foster J; Kingdom of Spain v Infrastructure Services Luxembourg Sàrl  FCAFC 3; 387 ALR 22 (Spain No 1) at - per Perram J, Allsop CJ and Moshinsky J agreeing; Kingdom of Spain v Infrastructure Services Luxembourg Sàrl (No 3)  FCAFC 112; 392 ALR 443 (Spain No 3) at  per Allsop CJ, Perram and Moshinsky JJ agreeing.
- The applicants submit that the consequence of the Spain No 1 andSpain No 3judgments referred to in the preceding paragraph is that a proper form of recognition, but not enforcement, of the award in this case is judgment in the monetary sum of the award. It must, however, be recognised that recognition, enforcement and execution were considered in those judgments in the context of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, opened for signature 18 March 1965, 575 UNTS 159 (entered into force 14 October 1966) (the ICSID Convention) under Pt IV of the IAA, the terms of which are materially different from the New York Convention, the Model Law and Pts II and III of the IAA. Notably, s 35 of the IAA is headed “Recognition of awards” but provides for awards to be “enforced” and Section 6 of Chapter IV of the ICSID Convention uses the terminology of recognition and enforcement. The point that was made by the Court in characterising the proceeding as a “recognition proceeding” was that it did not involve execution from which the Kingdom of Spain, the award debtor, enjoyed immunity as a foreign State.
- In Spain No 1(at ), the Chief Justice emphasised that it was the language as used in the ICSID Convention that was at issue, which use should not be regarded as fixed for all purposes. His Honour explained (at -) that a proceeding seeking a form of order that will permit or facilitate enforcement of, or execution procedures for, pecuniary obligations imposed by an award as if the award were a final judgment of the court is a species of recognition and that it cannot be execution. Such an order “is one which gives the required recognised status to the award in the domestic firmament: It is to be seen as (recognised as) equivalent to a domestic judgment and is to be enforceable as such.”
- That analysis, even in the peculiar context of the ICSID Convention, does not say that judgment on an award is something other than enforcement of the award. Indeed, his Honour made it clear (at ) that an order that judgment be entered in the amount of the award can be characterised as enforcement but not as execution:
That (as a matter of language) an exequatur order, or an order that the award be enforceable as if it were a judgment of the court, or an order that judgment be entered in an amount of the award, could meaningfully be described in a particular context as an order being part of the process of enforcement (at its commencement, or as its point of commencement) does not mean that it is to be characterised as execution, or as a step or a procedure to which Arts 54(3) and 55 [of the ICSID Convention] speak.
- In Spain No 3(at ), the Chief Justice explained that the entry of judgment in the terms of the pecuniary obligations in the award is the equivalent of the leave of the court to enforce the award as if it were a judgment or order of the court as provided for in s 35(4) of the IAA. His Honour reiterated (at ) that to enter judgment for the award debtor’s pecuniary obligations under the award and thereby create a judgment debt is to enforce the award. His Honour explained (at ) that recognition in that case was for the practical purpose of giving the award an enforceable status, i.e., to enforce the award.
- It may be helpful to summarise what I am saying about the Spain First, they deal with different statutory provisions and a different Convention, each with different use of language to that used in Pt III of the IAA and the Model Law which govern the present case. Therefore, what they say about enforcement and recognition cannot simply be imported into the context of Pt III and the Model Law. Secondly, and in any event, even in the context of the ICSID Convention those cases do not say that entering judgment on the award is not to enforce the pecuniary obligations of the award.
- For those reasons, I do not accept the applicant’s submission that in the context of the Model Law to enter judgment in the terms of the pecuniary obligations of an award would not be enforcement of the award. As the analysis in TCL HCAshows, it clearly is enforcement, although it is also recognition because to enforce an award is to recognise it. I will therefore treat the applicants’ prayer for judgment in the monetary sum of the award as an application to enforce the award.
Enforcement of the award
- It may be accepted, as submitted on behalf of the applicants, that Art 35 of the Model Law requires a court to recognise an arbitral award as binding and, upon application to it in writing, to enforce an arbitral award unless one of the grounds for refusing recognition and enforcement set out in Art 36 is established. Indeed, it may be that even if one of those grounds is established that the court will nevertheless exercise a discretion to enforce the award. Such is the pro-enforcement bias of the Model Law, and the New York Convention on which its enforcement provisions are based. However, there is no discretion to refuse to enforce an award. See TCL HCAat  per Hayne, Crennan, Kiefel and Bell JJ; TCL Air Conditioner (Zhongshan) Company Ltd v Castel Electronics Pty Ltd  FCAFC 83; 232 FCR 361 at  per Allsop CJ, Middleton and Foster JJ (TCL FCAFC); Hub Street at -; Traxys at .
- Although the respondents contend that the public policy ground to refuse recognition and enforcement in Art 36(1)(b)(ii) of the Model Law is established because the proceeding is an abuse of process, the respondents’ other contentions against the relief sought by the applicants apply at an earlier stage. Those contentions are, in essence, that (1) no order by the Court is required, or justified, for the purpose of recognising the award in circumstances where there is no contest as to its validity, and (2) no order by the Court enforcing the award is justified because there are no longer any rights or obligations expressed in the award that could be enforced.
- The authority of an arbitrator is based on the agreement of the parties to submit their dispute, whether as to fact or law or both, to the arbitrator for resolution. An award made by the arbitrator pursuant to such authority is final and conclusive. The making of the award in the exercise of that authority both extinguishes the original cause of action and imposes new obligations on the parties in substitution for the rights and liabilities which were the subject of the dispute referred to arbitration; the exercise of the arbitral power creates a new charter by reference to which the parties’ legal rights and obligations are in the future to be decided. The former rights of the parties are discharged by an accord and satisfaction. The accord is the agreement to submit disputes to arbitration; the satisfaction is the making of an award in fulfilment of the agreement to arbitrate. See TCL HCAat  and .
- When an arbitral award is enforced in court, the obligations sought to be enforced are those which are created by the award in substitution for the rights and liabilities which were the subject of the dispute referred to arbitration. A party may sue on an award as a cause of action or it can seek enforcement of the award pursuant to the IAA, but in either event it is the rights and obligations arising from the award that are sought to be enforced. See TCL HCAat ,  and .
- An application for the enforcement of an award under Art 35 necessarily involves a determination of questions of legal right or legal obligation. An order of a court determining the application on the merits then operates of its own force as a court order to create yet a new charter by reference to which those questions are in future to be decided as between the parties to the application. See TCL HCAat -.
- The recognition that an arbitral award gives rise to a new set of rights and obligations which rights and obligations are the subject of enforcement provides a complete answer to the applicants’ claim for enforcement of the award in this case. That is that the rights and obligations constituted by the award were fulfilled, or discharged, upon payment of the award. There were no rights or obligations left to be enforced from that moment on; there was and is nothing to enforce.
- Specifically in relation to the relief that the applicants seek in the form of the entry of a judgment in their favour, such relief can only be granted to enforce the pecuniary obligations of an award. In this case it is common ground that there are no such pecuniary obligations.
- In an application to enforce an arbitral award under Art 35 of the Model Law, the Court has power under s 23 of the FCA Act to make such orders as are “appropriate” in relation to the matter: TCL HCAat . In circumstances where the applicants’ right to payment and the respondents’ obligations to pay have been discharged by fulfilment, there is no “appropriate” order that can be made in order to “enforce” the award. The reason why the entering of judgment in a monetary sum to enforce a money award is an appropriate order is because that sum of money has been determined by the arbitrator to be and is therefore due and payable – there is a pecuniary obligation in the award.
- There can, however, be no justification for entering judgment against a party for a particular sum of money when that sum of money has already been paid. The applicants were not able to identify any instance of a court entering judgment in such a circumstance, but they maintained that they are entitled to such a judgment because they have an award and Art 35 provides that it “shall be recognised”. I reject that submission. As explained above, to enter judgment on the award is to enforce it and it cannot have been contemplated that an award that has been paid must nevertheless be enforced.
- In short, the arbitral award in this case gave rise to a cause of action independent from the rights and obligations of the parties in the dispute that was submitted jointly by them to the arbitrator for determination. That cause of action is expressed in the money award, namely that the respondents pay a money amount by a certain time. The respondents’ defence to that cause of action is that the money has been paid; the cause of action has been extinguished. That is a complete defence to the cause of action and hence to the enforcement of the award.
Recognition of the award
- The position in respect of recognition is different. A money award that has been paid, and in respect of which there are no longer any extant rights and obligations, can still have legal effect. That is because, as explained, it can give rise to, for example, a res judicata. If, say, the applicants again asserted a claim against the respondents arising out of the facts and circumstances that were the subject of the arbitral proceeding, the respondents’ defence would be one of res judicata in reliance on the award. The award would have recognition by operation of Art 35(1) of the Model Law, and the court or tribunal in which the applicants’ claim was asserted would be bound to so recognise it subject to the establishment of one of the grounds for not doing so as set out in Art 36. If there was a dispute as to whether the new claim arose out of the same facts and circumstances that had been the subject of the arbitral proceeding, there would also have to be recourse to the settlement deed and the pleadings in the arbitration in order to decide whether the defence of res judicata was established. That illustrates that recognition of the award would not on its own necessarily determine the defence. The same considerations apply in respect of, for example, a defence of issue estoppel.
- Aside from recognition by giving effect to an award, such as by enforcing it or upholding a defence in reliance on it, the obvious manner of recognition of an award that might be given by a court is by way of declaration. Although the applicants assert that they have a right to the recognition of the award, they accept that the Model Law is not prescriptive of how that is to be done. They say that in this case recognition is best achieved by the declaration they seek, namely that “the Court hereby and in these orders recognises as binding on the respondents the Final Award…”. In that regard, s 21 of the FCA Act provides that the Court may, in civil proceedings in relation to a matter in which it has original jurisdiction, make binding declarations of right, whether or not any consequential relief is or could be claimed.
- The power to grant declaratory relief is a discretionary power which must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions; the person seeking relief must have “a real interest” and relief will not be granted if the question “is purely hypothetical”, if relief is “claimed in relation to circumstances that [have] not occurred and might never happen” or if “the Court’s declaration will produce no foreseeable consequences for the parties”: Ainsworth v Criminal Justice Commission HCA 10; 175 CLR 564 at 581-582 per Mason CJ, Dawson, Toohey and Gaudron JJ. That analysis is expressed in relation to a court’s inherent jurisdiction to grant declaratory relief, but it applies equally to this Court’s statutory jurisdiction under s 21 of the FCA Act: Clarence City Council v Commonwealth of Australia FCAFC 134; 280 FCR 265 at - per Jagot, Kerr and Anderson JJ.
- In the present case, there is no dispute about the authenticity of the award or its validity or legal efficacy. All parties, and the Court, recognise the award. Also, no party has indicated any intention to rely on the award in any circumstances that are presently anticipated as likely to arise. The applicants say only that if such circumstances do arise then they will be better off with an order that recognises the award than they would be without it. The only dispute about the recognition of the award is whether any relief should be granted to the applicants in the form of a court order that recognises the award. The respondents oppose that relief, not because they do not in some way recognise the award, but in order to preserve their rights of confidentiality in relation to the arbitration. Even their public policy ground for resisting recognition is in substance not a challenge to whether the award should be recognised, but to the proposition that any relief recognising the award should be granted.
- Those circumstances are not such as to give rise to or justify a declaration recognising the award. There is no relevant controversy between the parties. The relief is claimed in anticipation of circumstances that have not occurred and are not likely ever to occur. The Court’s declaration will produce no foreseeable or meaningful consequences for the parties. That is the same as in Tridon Australia Pty Ltd v ACD Tridon Inc (Incorporated in Ontario) NSWCA 146 at - where the Court refused to enforce by order declarations in an award because the declarations were in any event binding and there was no utility in a court order. The declaration should therefore be refused.
- The applicants submit that for the Court to refuse to make orders recognising the award would cast substantial doubt on the finality or validity of the award and the ability of any party to seek the award’s recognition in the future. I reject that submission for the simple reason that with the dismissal of the application the award remains recognised; what is being refused is not recognition but a declaration, and that refusal is not because the award is not recognised but because the declaration is not justified.
- The applicants have not identified any case where orders have been made having the effect of recognising or enforcing an award the authenticity, validity or efficacy of which is not in dispute between the parties and where the obligations expressed in the award have been met. Statements in various cases to the effect that a court must or shall recognise an award followed by relief giving effect to that being granted have all been in the context of there being some dispute about the award. There is no such dispute in this case.
- For those reasons, the applicants’ application must be dismissed.
- Given that conclusion, and because by relying on the public policy ground to resist any relief recognising the award the respondents do not challenge the validity of the award, or that it is capable of recognition, it is not necessary to consider that ground.
- As mentioned, the respondents by interlocutory application seek the protection of their rights of confidentiality in the arbitration by way of suppression orders. The orders they seek are to the effect that the parties be assigned pseudonyms under the power given to the Court under s 37AF of the FCA Act and that all the documents filed in this case be ordered to be confidential with the effect that under r 2.32 of the Federal Court Rules 2011(Cth) no non-party would be able to inspect them other than with the leave of the Court.
Confidentiality at common law
- Even outside the context of the IAA, the common law recognises obligations of privacy and confidentiality in relation to arbitral proceedings, although those obligations are by no means absolute. Subject to any manifestation of a contrary intention arising from the provisions or the nature of an agreement to submit a dispute to arbitration, the arbitration held pursuant to the agreement is private in the sense that it is not open to the public. That is something that inheres in the subject matter of the agreement to submit disputes to arbitration rather than arising from an implied term. See EssoAustralia Resources Ltd v Plowman  HCA 19; 183 CLR 10 at 26 per Mason CJ, Dawson and McHugh JJ agreeing.
- It is also recognised that the efficacy of a private arbitration as an expeditious and commercially attractive form of dispute resolution depends, at least in part, upon its private nature. Hence the efficacy of a private arbitration will be damaged, even defeated, if proceedings in the arbitration are made public by the disclosure of documents relating to the arbitration. A party would be entitled to an injunction to restrain the other party from the publication of pleadings or statements of case, expert reports and evidence given at a hearing. See Essoat 27.
- Nevertheless, for various reasons, complete confidentiality of the proceedings in an arbitration cannot be achieved. For example, no obligation of confidence attaches to witnesses who are therefore at liberty to disclose to third parties what they know of the proceedings. Also, and relevantly for present purposes, court proceedings in relation to the arbitration, such as to seek the recognition or enforcement of an award, would be public and would inevitably entail the disclosure of some information in relation to the arbitral proceeding. See Essoat 28-29.
- An additional obligation not to disclose confidential information in relation to arbitral proceedings may arise from an express contractual provision between the parties to that effect: Essoat 29.
Confidentiality in the IAA
- Turning now to the IAA, there are provisions in Pt III that recognise the importance of the confidentiality of information about arbitral proceedings. In that regard, s 15(1) defines “confidential information” in relation to arbitral proceedings broadly as including all formal documents in the nature of pleadings and submissions, all evidence, any notes made by the tribunal of oral evidence or submissions, transcripts, any rulings by the arbitral tribunal and any award of the arbitral tribunal.
- There is then a series of provisions which protect confidential information in relation to arbitral proceedings to which the Model Law applies, although under s 22(2) the parties can agree in writing that they will not apply. There is no such agreement in this case.
- Section 23C provides that neither the parties to arbitral proceedings nor an arbitral tribunal may disclose confidential information in relation to the proceedings except in the limited circumstances provided for in ss 23D-23G. One of those, s 23D, sets out a list of circumstances in which confidential information in relation to arbitral proceedings may be disclosed, only two of which may be relevant for present purposes. They are:
(1) s 23D(6), i.e., if disclosure of the information “is necessary for the purpose of enforcing an arbitral award and the disclosure is no more than reasonable for that purpose”; and
(2) s 23D(7), i.e., if disclosure of the information “is necessary for the purposes of this Act, or the Model Law as in force under subsection 16(1) of this Act, and the disclosure is no more than reasonable for that purpose”.
- The confidentiality provisions referred to above were introduced into the IAA as an opt-out confidentiality regime by the Civil Law and Justice (Omnibus Amendments) Act 2015(Cth), Sch 1 items 60-63. The Explanatory Memorandumexplained (at ) that the purpose of the amendments was to ensure that, in line with community expectations and international best practice, arbitral proceedings are confidential unless the parties agreed to conduct their arbitration in another manner.
- The rationale for protecting the confidentiality of arbitral proceedings is varied. It generally includes respect for party autonomy and the encouragement of parties to resolve their disputes by arbitration. Confidential arbitration can be attractive to parties wishing not to have their dirty laundry aired in public, or wishing to maintain an ongoing commercial relationship with each other by excluding interference or pressure that might come from their dispute being aired publicly. Of course, it may not only be unsavoury conduct that they have an interest in keeping out of the public eye, but also commercially confidential or sensitive information including trade secrets and practices, customer information, and so on. In short, there are legitimate interests to be protected by the confidentiality of arbitral proceedings.
Confidentiality in the contracts
- The parties to the arbitral proceeding that is the subject of this case, as mentioned, agreed a range of confidentiality provisions reinforcing the protections offered by the IAA. To reiterate:
(1) The arbitration agreement requires that neither the arbitrator nor the parties disclose information about the arbitration other than with the prior written consent of both parties.
(2) The ACICA rules governing the arbitration require that neither the arbitrator nor the parties disclose information relating to the arbitration to third parties other than for particular purposes including “for the purpose of making an application to the courts of any State to enforce the award”.
(3) The settlement agreement provides that its terms are strictly confidential and are not to be disclosed in any way other than in limited circumstances including “for the purpose of enforcing” the agreement.
Summary conclusion on confidentiality
- All of the above shows that there is a strong public and, in this case, private interest in maintaining the confidentiality of the arbitral proceeding, but there is a narrow exception that allows the disclosure of so much as may be necessary in a proceeding to enforce the award or is necessary for the purposes of the IAA or the Model Law. The contractual exceptions are even narrower, being limited to enforcement of the award and enforcement of the settlement deed.
Suppression orders under the FCA Act
- Against the strong public and private interest in maintaining the confidentiality of the arbitral proceeding is a strong public interest in open justice in relation to court proceedings, it being a primary objective of the administration of justice to safeguard the public interest in open justice: FCA Act, s 37AE. Although the Court has the power under s 37AF of the FCA Act to make the suppression orders that the respondents seek, under s 37AG(1)(a) that power can in this case only be exercised if “the order is necessary to prevent prejudice to the proper administration of justice” (emphasis added).
- The principles in relation to the making of suppression or non-publication orders under s 37AF of the FCA Act are well settled. They were recently expressed as follows in The Country Care Group Pty Ltd v CDPP (No 2) FCAFC 44; 275 FCR 377 per Allsop CJ, Wigney and Abraham JJ:
8 Suppression or non-publication orders should only be made in exceptional circumstances: Rinehart v Welker (2011) 93 NSWLR 311;  NSWCA 403 at ; Rinehart v Rinehart (2014) 320 ALR 195;  FCA 1241 at . That is both because the operative word in s 37AG(1)(a) is “necessary” and because the court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice: Rinehart v Welker at ; Rinehart v Rinehart at . The paramount consideration is the need to do justice; publication can only be avoided where necessity compels departure from the open justice principle: Rinehart v Welker at ; Rinehart v Rinehart at .
9 The critical question is whether the making of a suppression or non-publication order is “necessary to prevent prejudice to the proper administration of justice”. The word “necessary” in that context is a “strong word”: Hogan v Australian Crime Commission (2010) 240 CLR 651;  HCA 21 at . It is nevertheless not to be given an unduly narrow construction: Fairfax Digital Australia and New Zealand Pty Ltd v Ibrahim (2012) 83 NSWLR 52;  NSWCCA 125 at , citing Hodgson JA in R v Kwok (2005) 64 NSWLR 335;  NSWCCA 245 at . The question whether an order is necessary will depend on the particular circumstances of the case. Once the court is satisfied that an order is necessary, it would be an error not to make it: Hogan at . There is no exercise of discretion or balancing exercise involved: Australian Competition and Consumer Commission v Air New Zealand Limited (No 3)  FCA 1430 at .
- To that exposition can be added the observation in Rinehart v Welkerat  and  per Bathurst CJ and McColl JA that respect to party autonomy, which is fundamental in modern arbitration law, does not mean that everything associated with a private arbitration wears a mantle of confidentiality; once a court’s supervisory jurisdiction is invoked, the fact the arbitration was held in private is only a factor relevant to the question whether the proceedings should be heard in open court. Also (at ), the parties’ agreement that proceedings, or particular aspects of them, should be heard in camera or be subject to a non-publication order is not determinative.
- I am satisfied that it is necessary to prevent prejudice to the proper administration of justice that the suppression orders that the respondents seek be granted. My reasoning is as follows.
- In this case, the contractual exceptions to confidentiality are for the purpose of enforcing the award (the ACICA rule) and enforcing the settlement agreement (the relevant clause in the deed of settlement). There is no suggestion the applicants sought by their proceeding to enforce the settlement agreement, and insofar as enforcing the award as enlivening the exception is concerned they stumble at two points. First, when they commenced the proceeding the pecuniary obligations in the award were not yet due and payable so there was nothing yet to enforce. Secondly, once the award had been paid, the pecuniary obligations were discharged, so there was still nothing to enforce.
- As with enforcement, the applicants run into considerable difficulty with recognition. That is that, for the reasons I have given for refusing declaratory relief, there was no need or substantial legitimate purpose to seeking recognition; there was, and is, no present or contemplated dispute between the parties with regard to the authenticity, validity and efficacy of the award. Indeed, the award was made by consent pursuant to a settlement agreement which included confidentiality provisions and the proceeding to recognise it was lodged for filing the very day that the award was made. It cannot be said that on that day there was already some dispute, or even anticipated dispute, about the consent award; the respondents had only days before signed a deed of settlement consenting to the award. That strongly suggests that the proceeding was brought not for any substantial legitimate purpose, of which the applicants have failed to identify any, but rather for some other purpose. Indeed, to act as the applicants acted in commencing the proceeding when they did, without warning, thereby negating the efficacy of the confidentiality to which they had agreed only days before and rendering essentially pointless their agreement to the respondents having a month to pay the award, was to act in bad faith. It cannot reasonably be justified or explained other than as a strategy to lift the veil of confidentiality from the arbitral proceeding.
- The applicants submit that even if their motive in bringing and maintaining the proceeding was to reveal otherwise confidential information to the public, it does not matter because their purpose was to obtain orders recognising or enforcing the award and they thus desired to obtain a result “within the scope of the remedy”. See Williams v Spautz HCA 34; 174 CLR 509 at 526-527 per Mason CJ, Dawson, Toohey and McHugh JJ and at 535 and 537 per Brennan J. The applicants refer in particular to Victoria International Container Terminal Ltd v Lunt HCA 11; 388 ALR 376 at - on the distinction between motive and purpose. However, Lunt is distinguishable from the present case. There, the applicant for relief had a genuine desire and purpose in obtaining the relief he said he was entitled to, albeit that his motive in doing so was to benefit someone else rather than himself. In the present case, the applicants have no substantial legitimate purpose in obtaining the relief they say there are entitled to, whatever their motives; it can do them, or anyone else, no appreciable good.
- The explanation by the applicants in their correspondence serving the originating process in this proceeding, namely that they required the award as they wanted the security of being able to get a judgment, does not justify bringing the proceeding. By bringing the proceeding they sought, in effect, to have recourse to their “security” before there had been any default, or any suggestion of any default. And then even after the award was paid and they plainly no longer required any security, they pressed on with the proceeding including seeking a money judgment.
- The applicants submit that a party need not wait for a default to occur before commencing the process of recognition and enforcement which, if successful, will ultimately enable them to utilise the execution processes of the court. They say that a party may legitimately seek the recognition of an award immediately after it is made so that they have the ability to then enforce and execute on any judgment enforcing the award if and when that becomes necessary. They say that applying to recognise an award immediately after it is made is not uncommon in the United States, for example, which applies analogous provisions to those in the Model Law and that, as an international instrument, the Model Law should be construed consistently with international arbitral practice. That directs attention to the three cases relied on by the applicants as evidencing international arbitral practice.
- In Mobil Cerro Negro Ltd v Venezuela863 F 3d 96 (2nd Cir, 2017), one day after an ICSID arbitral panel announced an award directing Venezuela to pay Mobil approximately US$1.6 billion, Mobil filed an ex parte petition seeking judgment on the award. Although judgment was granted by the US District Court for the Southern District of New York, it was subsequently set aside by the Second Circuit of the US Court of Appeals because the ex parte procedure was contrary to the notice procedure required by legislation governing foreign state immunity. However, the distinguishing point for present purposes is that, unlike in the present case, there was no suggestion that the arbitral award was not due and payable immediately on it being made.
- In Weinar v Lex176 A 3d 907 (Pennsylvania Superior Court, 2017), it is recorded that the panel of arbitrators issued a pecuniary award in favour of Weinar which then, on the same day, filed a petition to enforce the award in a New York State court. Once again, there is no suggestion that the award was not due and payable immediately on it being made.
- In InfraRed Environmental Infrastructure GP Ltd v Spain, No ARB/14/12, Decision on the Continuation of the Stay of Enforcement of the Award (ICSID 2019), an ad hoc committee in an annulment proceeding (at ) agreed with the submission of one of the parties that enforcement immediately after the award is issued is “a natural consequence of the enforcement regime created by the ICSID Convention”. As with the other cases relied on by the applicants, there is no suggestion that the award in that case was not due and payable immediately on it being made.
- It is notable that in none of those cases was a recognition or enforcement proceeding brought prior to the pecuniary obligation in the award being due and payable, and in none is there a discussion of whether such a practice would be countenanced. They are also all US cases, so they are in any event of limited value in establishing international practice.
- In the result, I do not accept that it is established international arbitral practice that proceedings to enforce arbitral awards are regularly or appropriately brought before the pecuniary obligations under the award are due and payable. It is not necessary for the determination of this case to decide whether an award debtor should be given a reasonable opportunity to pay the award before disclosure of confidential information in relation to the arbitral proceeding is justified by the bringing of recognition or enforcement proceedings. But where the award is by its own terms not yet due and payable and there is no suggestion that it will not be observed or recognised by the award debtor as authentic, valid and effective, there is no substantial legitimate purpose in applying to a court for recognition or enforcement before default on the terms of the award.
- On the applicants’ approach, the confidentiality regime provided by the IAA and the parties’ agreement to confidentiality would be substantially eroded because in every case as soon as an award was made a party could file public court proceedings revealing significant and otherwise confidential details about the arbitration including, at least, the fact that it took place, the identity of the parties and the terms of the award. Parties could have no confidence in the confidentiality of their dispute being maintained when they go to arbitration. As this case illustrates, even settling the dispute, without admission of liability, on terms including strict confidentiality and a period of time to pay, would be insufficient to maintain the confidentiality of the arbitral proceeding. Endorsing such an approach would be in conflict with the purpose of the confidentiality regime under the IAA. It would also be contrary to the evident purpose of the parties’ agreement.
- The proper administration of justice places a high value on its processes not being used other than for substantial legitimate purposes. It also places a high value on parties observing their agreements and their statutory obligations. The proper administration of justice is prejudiced by a party asserting a legal right ostensibly available to it but with no substantial legitimate purpose to that assertion if the result is to make public that which the parties’ agreement and the law otherwise protects as confidential. Should that occur, it is necessary to prevent prejudice to the proper administration of justice by making such orders as may be required to maintain the protection of that confidentiality.
- This is such a case. For the Court not to intervene by making suppression orders, it would be allowing its processes to be used for no substantial legitimate purpose and which would have the effect of eroding or undermining the parties’ agreement to, and the law’s protection of, confidential information in relation to their arbitral proceeding. That would be prejudicial to the proper administration of justice. Making the suppression orders is therefore necessary to prevent that prejudice.
- Section 37AJ of the FCA Act provides that a suppression order operates for the period decided by the Court and specified in the order, which period should be no longer than is reasonably necessary to achieve the purpose for which the order is made. Also, the period for which an order operates may be specified by reference to a fixed or ascertainable period or by reference to the occurrence of a specified future event.
- I have not heard the parties on what an appropriate period should be. I will accordingly provide that the suppression orders operate for a period of five years or until further order, and I will invite the parties to make submissions on what the appropriate period should be.
- For the above reasons, the applicants’ originating application filed on 5 May 2021 must be dismissed. Also, there should be orders suppressing the identity of the parties and maintaining the confidentiality of all documents on the court file for a period of five years, or until further order, subject to the rules of the Court which provide for the ability of anyone to make application for access to a document on a confidential court file. For reasons to do with the Court’s internal administrative processes for consistent use of pseudonyms, the pseudonyms previously assigned have to be changed.
- As mentioned, I will invite the parties to make brief submissions on the operative period of the suppression orders. I will also invite them to make submissions on costs which, in the meanwhile, will be reserved.
|I certify that the preceding ninety-one (91) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.|
Dated: 12 November 2021