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AUSTRALIA 52
Federal Court of Australia, 11 May 2021, File No. VID 637 of 2020
(Beijing Jishi Venture Capital Fund (Limited Partnership) v. James Z Liu et al.)
AUSTRALIA 52
The Federal Court denied enforcement of a CIETAC award, rendered in a dispute under a shareholders agreement, in respect of the second respondent, finding that she had not been properly informed of the arbitration, and that the lack of a proper notice (Sect. 8(5)(c) of the 1974 International Arbitration Act (IAA) and Art. V(1)(b) of the 1958 New York Convention) constituted a breach of natural justice, so that enforcement would constitute a violation of public policy (Sect. 8(7)(b) of the IAA and Art. V(2)(b) of the Convention). The Court granted enforcement against the other respondents. (1) The Court observed preliminarily that: (i) there was a strong presumption of regularity in respect of awards and the means by which they were arrived at; (ii) the evidentiary standard of proof to establish grounds for refusal under the IAA was the balance of probabilities and specifically, in respect of proper notice, the party had to have been given a reasonable opportunity to present its case; (iii) proper notice had to be determined under Australian law, but it was important that any approach to determine what was proper notice under Sect. 8(5)(c) was consistent with the approaches of other jurisdictions that enacted domestic law to implement the New York Convention; (iv) a finding of violation of public policy as a ground for refusal under Sect. 8(7)(b) of the IAA was a matter of Australian public policy and Australian principles of natural justice; and (v) the Federal Court was not bound by the findings of the arbitral tribunal. (2) On the facts of the case, the Court held that the second respondent had not been given notice of the arbitration at the (email) addresses provided for in the shareholders agreement; the notice had been sent instead to an address that was not the contractually agreed address for her, but rather the address given for her husband, the first respondent, in a different agreement to which she was not a party. The Court also found that the second respondent could not be deemed to have had actual knowledge of the arbitration through her husband, both because the Court found that he had not been her agent, and because the second respondent had had very limited involvement in her husband’s business. Notice had also not been in accordance with the alternatives given in the CIETAC rules. (3) Failure to give proper notice breached the rules of natural justice and enforcement of the award would constitute a violation of public policy. (4) Under the circumstances, the Court held that it ought not to exercise its residual discretion in favor of enforcement even in the absence of proper notice, because proper notice was a fundamental requirement to the integrity of the arbitration.
Due process: The court discusses what constitutes “proper notice” of the appointment of the arbitrators or of the arbitration proceedings.
Public policy: The court discusses alleged violations of a fundamental rule of due process in the arbitration on the recognition and enforcement of an arbitral award, including the failure to communicate the names of the arbitrators, the failure to send copies of reports or letters filed in the arbitration, etc.