18 April 2016

Ye v Zheng - The Australian Court’s approach to the relationship between the Seat and Enforcement Courts

Ye v Zeng [2015] FCA 1192 and Ye v Zeng (No 2) [2015] FCA 1243 are two recent judgments involving an application before the Australian Federal Court for the recognition and enforcement of a foreign award in an international commercial arbitration.

Issue

The decision involved an application for recognition and enforcement of a foreign arbitral award made in China by the Xiamen Arbitration Commission. The respondent sought to stay enforcement of the award by arguing, inter alia, a lack of procedural fairness and that the matter was subject to an appeal at the seat (the PRC).  

Held

The presiding judge noted the court’s discretion to order security and that the matter should be approached by assessing the legitimacy of the appeal. In the earlier judgment, the court had given the respondents an opportunity to substantiate the nature of the procedural fairness complaint, noting that a complaint of  procedural fairness and natural justice would be picked up by Article V(2)(b) of the New York Convention, to which China is a party. No evidence was filed and, accordingly, the judge found no clear basis for such a challenge. As a result, the judge ordered the full principle sum, together with some interest, to be secured in Australia to secure the award pending the outcome of the appeal, commenting that:

In an era of electronic commerce and fast moving funds, it is unsatisfactory to expect the courts to stand by and simply wait weeks or months for another country’s courts to go about their work and protect a party that has, until set aside, a binding award entered into and awarded pursuant to the contractual undertakings of the parties.

Not only does this judgment illustrate the way in which Australian courts will enforce Chinese arbitration awards pursuant to the New York Convention, the judge’s further comments also indicate that the mere fact of an appeal at the seat of arbitration is insufficient grounds to stay enforcement or to set aside the award. The fact that an award is set aside in the seat country does not mean that the award will not be enforced elsewhere.[1]


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[1] Citing, Dallah Real Estate v The Ministry of Religious Affiars, Government of Pakistan [2010] UKSC 46

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