Foreign arbitral award enforceable against an Australian corporation in liquidation

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On 19 April 2013, the Federal Court of Australia handed down judgment in Eopply New Energy Technology Co Ltd v EP Solar Pty Ltd [2013] FCA 356 granting Eopply leave to enforce a foreign arbitral award made in China against an Australian corporation in liquidation.

Eopply, the award creditor, sought to enforce an arbitral award made by China International Economic and Trade Arbitration Commission (CIETAC) Shanghai Sub-Commission on 15 February 2012 against the respondent.  The day before the first return of the proceeding before the Court, Eopply received a letter informing that liquidators had been appointed to the respondent for the purpose of winding it up.  The letter also confirmed that the liquidators did not oppose leave to proceed being granted to Eopply pursuant to s 500(2) of the Corporations Act 2001 (Cth) nor did they oppose Eopply’s claim.

consideration for granting leave to proceed under section 500(2) of the corporations act

Section 500(2) of the Corporations Act provides that, after the passing of a resolution for voluntary winding up of a corporation, no action or other civil proceeding is to proceed against that corporation except by leave of the Court and subject to such terms as the Court imposes.  In deciding whether to grant leave, Justice Foster extracted the following considerations from the judgment in Executive Director of the Department of Conservation and Land Management v Ringfab Environmental Structures Pty Ltd [1997] FCA 1484:

  1. The purpose of having a requirement for leave is to prevent a corporation in liquidation being subjected to expensive, and perhaps, unnecessary, actions.
  2. In determining whether leave should be granted, the Court considers whether the balance of convenience lies in allowing the applicant to proceed by way of action to judgment, or whether the applicant should be left to pursue its claim by lodging a proof of debt with the liquidator.
  3. For leave to be granted, it must be shown that there is a serious or substantial question to be tried and a real dispute between the parties.

With regard to the above, Justice Foster considered that:

  1. If leave is granted, virtually no additional expense or inconvenience will be visited upon the respondent and judgment will be entered immediately.
  2. When appropriate regard is had to section 2D of the International Arbitration Act 1974 (Cth) (IAA) which specifies the objects of the IAA and to the matters set out in section 39 of the IAA (namely that arbitration is intended to be an efficient, enforceable and timely method of resolving commercial disputes and that awards are intended to provide certainty and finality), there is good reason to make the path to recovery by the award creditor easier by granting leave and allowing judgment to be entered rather than leave the award creditor to the vagaries of the proof of debt process.
  3. There is no opposition to leave being granted.

Although Justice Foster was concerned that there was no evidence before the Court as to the financial position of the respondent and thus no basis upon which the Court could make an assessment as to whether Eopply was likely to recover any part of the amount awarded to it, his Honour was satisfied that the above considerations weighed heavily in favour of the grant of leave. In his Honour’s judgment, there was no consideration of any moment which would weigh in the balance against the grant of leave.

NO REQUIREMENT TO SEEK LEAVE TO ENFORCE A FOREIGN AWARD UNDER THE IAA

Eopply also sought an order that it be granted leave to enforce the award pursuant to section 8(3) of IAA, but Justice Foster pointed out that there is no longer any need for an award creditor/applicant to seek leave to enforce a foreign award.

Having satisfied itself that Eopply had produced to the Court, pursuant to section 9 of the IAA, a duly certified copy of the relevant arbitration agreement and the award (including a certified English translation) and that neither the respondent nor its liquidators had requested the Court not to enforce the award on one or more of the exhaustive grounds specified in sections 8(5) and (7) of the IAA, the Court proceeded to order that the award be duly enforced.

This decision reaffirms the Federal Court’s commitment to enforce foreign arbitral awards, consistent with the pro-enforcement bias of the New York Convention.  Unless the resisting party is able to prove to the court’s satisfaction one of the grounds specified in sections 8(5) and 8(7) of the IAA, the award creditor will be entitled to have the award(s) enforced in Australia.


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