In the recent decision of Gujarat NRE Coke Limited v Coeclerici Asia (Pte) Ltd  FCAFC 109, the Full Court of the Federal Court of Australia refused an appeal to resist enforcement of an arbitral award under the International Arbitration Act 1974 (Cth) pursuant to grounds of procedural unfairness. This decision demonstrates the following three important points:
Coeclerici Asia (Pte) Ltd (Coeclerici) commenced arbitration proceedings to recover the balance of the purchase price it had paid to Gujarat NRE Coke Limited (Gujarat) as prepayment in return for 40,000 metric tonnes of metallurgical coke, which Gujarat failed to deliver. The purchase agreement entered into between the parties provided that disputes were to be resolved by way of arbitration in London under London Maritime Arbitration Association (LMAA) terms.
Around a week prior to the commencement of the arbitral hearing, the parties entered into a Payment Agreement, under which the arbitration was suspended to afford Gujarat an opportunity to repay the outstanding money of USD 8m. Of importance are the following terms of the Payment Agreement:
When Gujarat failed to deliver the first payment by the stipulated date, Coeclerici requested the arbitral tribunal to make a consent award in its favour pursuant to the terms of the Payment Agreement. The arbitrators afforded an opportunity to Gujarat to explain, by close of business the following day, any reason why the tribunal should not proceed as requested by Coeclerici. The following day, Gujarat’s solicitors explained that they had been unable to obtain instructions but would retry the next day. The following day, Coeclerici again urged the tribunal to make an award in its favour and, on the same day, the arbitrators advised the parties that it would so proceed.
Gujarat’s solicitors wrote to the arbitrators the next day submitting that the tribunal did not have the power to proceed to an award at that stage. They put forward some reasons, in outline, as to why Gujarat was not in breach of the Payment Agreement, including that it was an implied term of the Payment Agreement that payment of the outstanding sums was conditional upon the Reserve Bank of India granting exchange control by the due dates or, in the alternative, that Gujarat lacked capacity to enter into the Payment Agreement, such capacity being a matter of Indian law. In the circumstances, Gujarat requested a reasonable time to properly develop their arguments and a reasonable opportunity to make detailed submissions in defence, such period to take into account the need to take Indian advice.
In this regard, the Full Federal Court was critical of the fact that Gujarat had had a whole week to explain why its failure to pay the outstanding sums was not a breach of contract, which, on its face, it appeared to be. The Court also considered that it must have been apparent to Gujarat that if payment could not have been made by the due date, its position would have to be justified, and promptly.
Notwithstanding Gujarat’s further protestations (but which submissions it outlined above were not further developed), the arbitrators ultimately proceeded to make an award in favour of Coeclerici, having satisfied themselves that if Gujarat were allowed additional time to substantiate the reasons it had given as to why the arbitrators should not proceed to an award, the Payment Agreement itself and the circumstances in which it was concluded would still have led the arbitrators to conclude that Coeclerici was entitled to the award that it sought.
Gujarat sought to set aside the award in the High Court of Justice in London on the grounds of “serious irregularity affecting the tribunal, the proceedings or the award”, under s 68(1) of the Arbitration Act 1996 (UK), but was wholly unsuccessful. The High Court of Justice ruled (as did the Full Federal Court) that a reasonable opportunity had been given to Gujarat to argue its case. The English Court also distinguished between, on the one hand, a party having no opportunity to address a point, or his opponent’s case, and, on the other hand, a party failing to recognise or take the opportunity which exists, the latter of which involves no breach of the UK Arbitration Act.
The primary judge concluded that Gujarat had an ample opportunity to put its case to the arbitrators. The Full Federal Court agreed.
The Full Federal Court distinguished between, on the one hand, a situation in which Gujarat sought to put forward its defences to a claim in a separate or different arbitration, and, on the other hand, the present situation where the Payment Agreement referred the dispute to the arbitral tribunal that was already constituted (cf referring the dispute to a new arbitration under LMAA terms). If it were the former situation, the procedure adopted by the tribunal would of course have been irregular and unfair (not having satisfied the mechanical requirement of the LMAA terms concerning the exchange of submissions etc). Here, because of the Payment Agreement entered into between the parties, it became a question for the tribunal as to whether an event had occurred to lift the suspension of the arbitration. In the circumstances, the Court held that the arbitrators were entitled to resolve this issue in the arbitration by such procedure as they chose as long as it gave a fair and reasonable opportunity to Gujarat to put its case. This, it was held, the arbitrators did.
The Full Federal Court was also quick to note that there is a clear relationship between the quality of the point being raised and the length of time to be given and the procedure to be employed to resolve the point. It was apparent to the Court that the arbitrators thought that both the implied term point and the capacity point were so lacking in merit that nothing could be gained by any further explication. The worth and substantiality of the implied term point was rigorously argued by Gujarat on appeal but the Court labelled the argument as “hopeless”. In the circumstances, the Court held:
“... the appellants had over a week to articulate these matters (and they knew previously that they would have to do so). They had no right to some leisurely expanse of time to think up and develop points. ... The arbitrators were not only entitled, but obliged, to act with proper despatch. That entitlement and obligation inhered in their authority taken from the consent of the parties. ... [The arbitrators] had the courage of their convictions as to the hopelessness of the points raised. They thought they had given the appellants a reasonable opportunity to explain their apparent default. The supervising court of the seat agreed with them. [The primary judge in the Federal Court] agreed with them. We agree with them.”
The primary judge concluded that since the issue before him as to the adequacy of the opportunity for Gujarat to put its case to the arbitrators had been determined by the English High Court of Justice, this was subject to an issue estoppel. While acknowledging that this question of whether issue estoppel operates in circumstances where an Australian court is considering whether to refuse a foreign award has not been resolved in a clear way by any binding authority, the Full Federal Court nonetheless declined to attempt a resolution of the issue, having already disposed of the appeal by deciding that Gujarat had had a reasonable opportunity to put its case.
Nonetheless, the Full Federal Court agreed with the primary judge that it would generally be inappropriate for the court of enforcement of a New York Convention country to reach a different conclusion on the same question of asserted procedural defects as that reached by the court of the seat of arbitration (here, the English High Court of Justice).
The Court endorsed the decision of Colman J in Minmetals Germany GmbH v Ferco Steel Ltd  1 All ER (Comm) 315 as to the weight to be given to the views of the supervising court of the seat of the arbitration, except in exceptional cases, which this case was not.
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