International arbitration is an approach to cross-border transactions requiring the use of alternative dispute resolution in the interests of avoiding litigation in court. An arbitration is a legally effective adjudication of a dispute otherwise than by the ordinary procedure of the courts. The determination or decision of the arbitrator, equivalent to a judgment in a court of law, is called an arbitration award, or arbitral award, and is usually binding on the parties.
Adopted by the United Nations in 1958 and currently with 161 signatory countries, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the New York Convention, is the foundational instrument used in international trade and commerce providing an effective worldwide arbitration system where parties opt for a private dispute resolution process instead of going to court. The purpose of the New York Convention is to facilitate the enforcement of foreign arbitral awards by providing a simple process of enforcement subject to certain minimal grounds on which enforcement can be resisted.
When conducting business with a foreign entity, it is prudent for commercial contracts to contain an arbitration clause by which the parties agree, in the event of a dispute between them, that the dispute will be referred to arbitration. The arbitration clause should be sufficiently widely and carefully drafted to cover disputes associated with a contract and its negotiation (not just under the contract) so that contracting parties can successfully agree to refer disputes to an arbitrator.
In common law arbitration jurisdictions, a party seeking to undertake international arbitration must initiate a legal action in court in order to enforce an arbitration award. It is prudent for proof to be established at the outset that a commercial entity is indeed party to an arbitration agreement in the context of a cross-border transaction. Under Article IV of the New York Convention, a party seeking enforcement needs to present the ruling court (i.e. the supervisory jurisdiction) with a valid agreement to arbitrate and a valid arbitral award as the basis of enforcement. If the said agreement and award is not made in an official language of the country in which the award is relied upon, the party applying for recognition and enforcement of the award must produce a valid translation of these documents into such language.
Pursuant to the terms of the New York Convention, the enforcement of foreign awards occurs when arbitral awards are made in the territory of another contracting state. An arbitral award made in a country which is not a signatory to the Convention cannot take advantage of the Convention to enforce that award, unless there is some bilateral recognition. Enforcement may be resisted on certain other grounds.
The New York Convention seeks to provide common legislative standards for the recognition of arbitration agreements and court recognition and enforcement of foreign and non-domestic arbitral awards. The term “non-domestic” embraces awards which, although made in the state of enforcement, are treated as “foreign” under its law. Foreign and non-domestic arbitral awards will not be discriminated against under the Convention. The Convention obliges parties to ensure that such awards are recognised and generally capable of enforcement in their jurisdiction in the same way as domestic awards.
To date, in most cases, Australia has taken a pro-arbitration stance. National arbitration law in Australia utilises the following Acts to conduct international commercial arbitrations:-
- International Arbitration Act 1974 (Commonwealth);
- Commercial Arbitration Act 1986 (ACT);
- Industrial Referral Agreements Act 1986 (SA);
- Commercial Arbitration Act 2010 No 61;
- Commercial Arbitration Act 2011 (VIC);
- Commercial Arbitration Act 2011 (TAS);
- Commercial Arbitration (National Uniform Legislation) Act 2011 (NT);
- Commercial Arbitration Act 2012 (WA);
- Commercial Arbitration Act 2013 (QLD).
Navigating the complexities of international commercial arbitration is not only risky, but costly, without the appropriate legal advice. At Burke Lawyers, we, together with our partners, are qualified to assist in Australian, US and international commercial dispute resolution. For more information, please contact Meghan Warren, Principal, Rosy Roberts or Amelia Nagel, Associates, at Burke Lawyers on firstname.lastname@example.org, email@example.com and firstname.lastname@example.org respectively, or by calling +61 3 9822 8588.