TCL Airconditioner (Zhongshan) Co Ltd V the Judges of the Federal Court of Australia [2013] HCA 5: A Case Note

By Douglas, Susan | The Journal of New Business Ideas & Trends, January 1, 2013 | Go to article overview

TCL Airconditioner (Zhongshan) Co Ltd V the Judges of the Federal Court of Australia [2013] HCA 5: A Case Note


Douglas, Susan, The Journal of New Business Ideas & Trends


Abstract

Purpose - The purpose of this paper is to present the details of a judgement of the High Court in relation to the constitutional validity of recent amendments to federal arbitration legislation in Australia.

Design/methodology/approach - The paper employs the approach commonly referred to in the legal literature as a case note.

Decision - The High Court concluded that, although the Federal Court is not empowered under the International Arbitration Act 1974 (Cth) to review an arbitral award for error of law, its task in determining the enforceability of arbitral awards is not incompatible with the institutional integrity of the Court, and there is no impermissible delegation of federal judicial power in contravention of the Australian Constitution.

Implications - This case establishes that the Federal Courts has jurisdiction to enforce awards resulting from commercial arbitration where the arbitral award is governed by a choice of law agreed between parties to an international arbitration agreement and the award may disclose an error of law.

Keywords: Australian Constitution, arbitration, commercial contracts.

JEL Classifications: K12; K33; K41

PsycINFO Classifications: 3660

FoR Codes: 1801; 1503

Introduction

This case note examines the recent decision of the High Court of Australia as to the constitutional validity of amendments to federal arbitration legislation that were made to strengthen Australia's international arbitration regime by better providing for the finality of arbitral awards. At the centre of the argument are the principles embodied in the UNCITRAL Model Law on International Commercial Arbitration (as amended in 2006) (the Model Law), was which was given the force of law in Australia by the International Arbitration Act 1974 (Cth) (the LA Act) and concurrently into the Commercial Arbitration Acts in the states and territories. The principle in question limits the grounds on which the enforcement of an arbitral award can be resisted. In particular the principle in the Model Law which does not permit a court to refuse enforcement of an arbitral award by reason of an error of law.

The extent to which this case was a significant test of the law was highlighted by the intervention of the Attorneys-General of the Commonwealth and each state and the amici curiae appearances of the Australian Centre for International Commercial Arbitration, the Institute of Arbitrators and Mediators Australia, and the Chartered Institute of Arbitrators.

Factual Background

TCL, a company registered and having its principal place of business in China, and Castel a company registered and having its principal place of business in Australia, entered into a written distribution agreement. According to the agreement TCL granted Castel the exclusive right to sell air conditioners in Australia that were manufactured by TCL. The agreement provided for submission of disputes to arbitration in Australia.

In July 2008 Castel submitted a dispute to arbitration in Australia arising from contractual claims against TCL, seeking damages. On 23 December 2010 the arbitral tribunal made an award upholding Castel's claims and requiring TCL to pay Castel $3, 369,351. On 27 January 2011 a further award was made requiring TCL to pay Castel $732,500 in costs for the arbitration.

TCL failed to pay the amounts awarded and Castel sought enforcement in the Federal Court.1 TCL opposed enforcement of the awards on the ground that the Federal Court lacked jurisdiction and in the alternative that, if the Federal Court did appearing on the face of the award have jurisdiction, the awards should not be enforced due to an alleged breach of natural justice. On January 2012 Murphy J ruled that the Federal Court had jurisdiction under the LA Act which under si6(i) gives the force of law in Australia to the the Model Law.

TCL appealed to the High Court arguing that si6(i) of the LA Act is beyond power by requiring an exercise of judicial power inconsistent with the Ch III of Constitution. …

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