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Focus: Subpoenas under the IAA: foreign-seated arbitrations need not apply

18 October 2017

In brief: A recent Federal Court decision suggests a narrow approach to judicial support of international arbitrations, limiting access to evidence located in Australia for parties of foreign-seated arbitrations. Partner Nick Rudge (view CV) and Overseas Lawyer Caroline Swartz-Zern report.

 
 

How does it affect you?

  • The decision – in Re Samsung C & T Corporation – suggests that Australian courts will narrowly interpret the scope of their jurisdiction to support foreign arbitration in obtaining evidence on the basis that the International Arbitration Act's (the IAA) scope only extends to international arbitrations seated domestically.
  • This decision limits parties in foreign-seated arbitrations from obtaining evidence available in Australia, even where a nexus exists between the parties to the arbitration and Australia.
  • Australian documents and witnesses cannot be compelled unless an international arbitration is seated in Australia.
  • Parties who expect that crucial evidence for a foreseeable dispute may be located in Australia should designate an Australian seat in the arbitration agreement or agree to an Australian seat at the outset of the arbitration. This is particularly important for parties with disputes that would otherwise be seated in non-contracting states of the Hague Evidence Convention.

The facts

On 5 September 2017, Samsung C & T Corporation filed a request for a subpoena to obtain evidence for use in an arbitration, seated in Singapore and administered by the Singapore International Arbitration Center (SIAC), under the UNCITRAL Rules, currently on foot between Samsung and Duro Felguera Australia Pty Ltd. Both parties have related Australian entities.

In assessing whether the Federal Court could grant Samsung's request, Justice Gilmour first considered s22A of the IAA, the Interpretations section, so as to determine whether the Federal Court of Australia was the proper jurisdiction in which to bring the request. Relevantly, 'court' is defined as:

  1. in relation to arbitral proceedings that are, or are to be, conducted in a State – the Supreme Court of that State; and
  2. in relation to arbitral proceedings that are, or are to be, conducted in a Territory:
    1. the Supreme Court of the Territory; or
    2. if there is no Supreme Court established in that Territory – the Supreme Court of the State or Territory that has jurisdiction in relation to that Territory; and
  3. in any case – the Federal Court of Australia.
 

Samsung argued that the Singapore International Arbitration Act (Cap 143A, 2002 Rev Ed) (the SIAA) can only compel evidence in Singapore and therefore it is only through the IAA that evidence located in Australia can be compelled. Samsung further reasoned that even if there were territorial limits on the Federal Court of Australia, there was sufficient nexus between the dispute and Australia for evidence from Australia to be compelled through the courts of Australia.

Justice Gilmour also considered that the intention of the Federal Government in introducing and amending the IAA was to encourage international arbitrations seated in Australia.

The decision

Justice Gilmour held that he did not have jurisdiction to grant the request for a subpoena in Australia because:

  • 'in any case', the third limb of the definition of 'court', should be interpreted narrowly to be consistent with the intention of the IAA and to not unnecessarily read words into the phrase. Consequentially, the Federal Court only has jurisdiction where a state/territory court would have jurisdiction.
  • The IAA only applies to arbitrations commencing or taking place in Australia for the following reasons:
    • Article 1(2) of the Model Law provides that it applies only to international arbitrations seated in the state in which the Model Law has been adopted. When enacting the Model Law, a legislating state may expand on this provision;
    • Part II of the IAA expressly relates to 'foreign awards', whereas Part III does not make a similar distinction to cover foreign arbitral proceedings;
    • the intention of the IAA was to help develop Australia as a regional hub for international arbitration; and
    • when the Federal Government reviewed the Federal Court's jurisdiction over international arbitration matters in 2008, the Federal Court was given concurrent jurisdiction to state and territory courts, meaning that either a state or territory are the only jurisdictions for the IAA to apply.

Justice Gilmour suggested that parties should instead avail themselves of the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters of 18 March 1970 (the Hague Evidence Convention). To do so, a party must obtain permission from the arbitral tribunal, obtain a letter executed by the judicial authority in which the arbitration is seated, and then bring that letter before the courts of Australia for recognition and execution.

Comment: an impractical interpretation of the IAA

Justice Gilmour's decision reflects the view held by other jurisdictions, particularly those that have adopted the UNCITRAL Model Law. However, when comparing s23 and the other provisions considered 'optional' in Part III of the IAA, and considering the practicalities that arise from his decision, Justice Gilmour's interpretation may be at cross purposes with the objectives of international arbitration.

An alternative interpretation of the consequences of the adoption of the Model Law for Part III of the IAA may mean that it applies equally to foreign-seated awards. As the Federal Government expressly chose not to adopt the exact language of the Model Law in Part III, it is equally acceptable that s23 should apply to foreign-seated arbitrations.

Article 27 of the Model Law, 'court assistance in taking evidence', states:

The arbitral tribunal or a party with the approval of the arbitral tribunal may request from a competent court of this State assistance in taking evidence. The court may execute the request within its competence and according to its rules on taking evidence. [emphasis added].

 

Article 27 constrains a party from seeking evidence from another jurisdiction, by designating that the request be from 'a competent court of this State'. However, the Federal Government chose to adopt more fluid language in s23 of the IAA, which contrary to article 27 of Model Law, provides that a party may seek evidence from 'a' court. The narrow interpretation of 'court' in s22A indicates that 'any' should actually mean 'either'. A broader interpretation of 'court' is consistent with s23(2), which places the primary condition precedent on the section, namely that a party may only obtain a subpoena with the express permission of the arbitral tribunal. With this mechanism in place, s23 ensures that courts act in support of the arbitral tribunal's proceedings.

By interpreting s23 (and, in turn, the purpose of the IAA) narrowly to only cover international arbitrations seated in Australia, Justice Gilmour permits a gap in the arbitral proceedings for foreign-seated arbitrations requiring evidence in another jurisdiction. For the approximately 60 jurisdictions that have adopted the Hague Evidence Convention, as Justice Gilmour suggested, a solution is available, albeit a more costly and time-consuming solution (two characteristics that international arbitration endeavours to avoid). For all other jurisdictions, a party, even one with a strong nexus to Australia, cannot obtain evidence that may be critical to the arbitral proceedings.

A broader interpretation of s23 of the IAA would be consistent with the intent of international arbitration to serve as a transnational tool, supported by domestic courts. This interpretation would follow France and a growing number of jurisdictions in the US, wherein a party may obtain evidence within the jurisdiction if the evidence itself is located within that jurisdiction. For example, the Southern District of New York (In re Ex Parte Application of Kleimar N.V., No. 16-MC-355, 2016 WL 6909712 (S.D.N.Y. Nov. 16, 2016)) recently permitted a party to a foreign arbitration (seated in London) to obtain a subpoena for a non-party to the arbitration on the basis that there was enough of a connection of the third party to New York.

Providing discretion to Australian courts, on the basis that an arbitral tribunal has already considered the evidence to be necessary, would provide greater efficiency for users of international arbitration.

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