30 June 2021
A recent case of the Federal Court of Australia affirms the Australian courts’ pro-enforcement approach to foreign arbitral awards under the regime of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).
In Neptune Wellness Solutions, Inc v Azpa Pharmaceuticals Pty Ltd [2021] FCA 676, the Federal Court applied the New York Convention regime in an efficient manner that aligns with best practice in UNCITRAL Model Law jurisdictions and demonstrates the support of the Australian courts towards arbitration: Neptune Wellness Solutions, Inc v Azpa Pharmaceuticals Pty Ltd [2021] FCA 676
Background
Neptune Wellness Solutions, Inc (Neptune) and Azpa Pharmaceuticals Pty Ltd and Azpa Pty Ltd (together, the Azpa Parties) were parties to an arbitration agreement contained in a distributorship agreement concluded in December 2011. Under the distributorship agreement, Azpa Pty Ltd was the exclusive distributor of Neptune Krill Oil in Australia and New Zealand. The arbitration agreement provided for “an arbitration in Quebec according to Canadian laws if the distributor is the defendant.”
A dispute arose between the parties and arbitration proceedings under the arbitration agreement were commenced in August 2014, in which the Azpa Parties were the respondents. The parties actively participated in the arbitral process, were represented by counsel, and presented written and oral evidence. In February 2021, the arbitrator made an award in favour of Neptune, together with pre-award interest and an additional sum on account of Neptune’s costs.
The Azpa Parties did not make payment in respect of the award. Neptune commenced proceedings in the Federal Court of Australia, seeking a declaration that it is entitled to enforce the award as if it were a judgment of the Federal Court. Neptune served the Azpa Parties with the originating process at their registered offices in Melbourne, but the Azpa Parties neither responded nor appeared. Neptune sought orders on the application despite the Azpa Parties’ failure to appear.
The process for enforcement of foreign arbitral awards in Australia
As the starting point, Colvin J noted that Australia is a contracting State to the New York Convention, and gives effect to its obligations under the Convention through the International Arbitration Act 1974 (Cth) (International Arbitration Act). Section 8 of the International Arbitration Act establishes that an arbitral award to which the New York Convention applies is binding on the parties, and that the award can be enforced by Australian Courts as if it were an Australian court judgment or order.
Colvin J noted that the award was made in Montreal, Canada, and that Canada is also a contracting State to the New York Convention. Accordingly, the award was a foreign award for the purposes of the International Arbitration Act.
As evidence of the arbitration agreement and the award was duly provided in accordance with section 9 of the International Arbitration Act, Neptune was entitled to have the award recognised and enforced in Australia. Colvin J entered judgment in favour of Neptune, consisting the amount of the award, pre-award interest, and Neptune’s costs associated with the arbitration. Colvin J also ordered that the Azpa Parties pay Neptune’s costs of, and incidental to, the enforcement application.
Comment
At a concise 10 paragraphs that required reference to only one other case, this case confirms that Australian courts enforce arbitral awards in an efficient manner that reduces delay and cost. It is an approach similar to that enshrined in other UNCITRAL Model Law jurisdictions such as Hong Kong – where the Courts have held that enforcement of arbitral awards should be “almost a matter of administrative procedure” and the courts should be “as mechanistic as possible” (Re PetroChina International (Hong Kong) Corp Ltd [2011] 4 HKLRD 604). This was certainly the case here; counsel for Neptune was able to appear remotely and the application was based predominantly on affidavit evidence.
Notably, even though the Azpa Parties did not appear, Colvin J declared that Neptune was entitled to have the award recognised and enforced against them. Parties to arbitration agreements should note that a failure or refusal to appear in enforcement proceedings before Australian courts will not hamper enforcement of an award.
These are important reminders in the context of costs and time being viewed (for example, by respondents to the recent Australian Arbitration Survey) as key weaknesses of the arbitration process. Court processes that efficiently recognise and enforce arbitral awards are important to remedy these perceptions. The Australian judiciary’s pro-enforcement attitude also contributes to the rise of arbitration in Australia.
For further information, please contact:
Chad Catterwell, Partner, Herbert Smith Freehills
