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Australian High Court Clears the Way for Enforcement of Arbitral Awards

One of the questions that is most often asked by clients is whether or not an award issued in international arbitration - which is a private vehicle for dispute resolution - is enforceable and whether collection can be guaranteed to the fullest extent of the law. In other words, whether an arbitral award can be enforced in the same way that a judgment from a court is enforced.

The answer is almost invariably yes. Many countries have laws that state that arbitral awards can be enforced in the same way a judgment is enforced. In the United States, this principle is codified in the Federal Arbitration Act.

Other countries have similar provisions, and are in fact signatories to the Convention on the Recognition and Enforcement of Foreign Awards, which is commonly known as the New York Convention. UNCITRAL, the United Nations Commission on International Trade Law, has also drafted a Model Law whose purpose is to make the New York Convention binding according to a nation's own laws. If the Model Law is adopted by a country's legislature, the New York Convention will apply, allowing for the enforcement of arbitral awards.

Many countries have adopted the Model Law, including Australia. Recently, the Australian High Court, in TLC Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court, issued a decision upholding the constitutionality of the Model Law. A petitioner alleged that the arbitral award that had been issued by an arbitral tribunal could not be enforced by an Australian court if the arbitral decision suffered from errors of law and fact. The High Court disagreed with the petitioner and, in a unanimous ruling, upheld the constitutionality of the Model Law, allowing for the enforcement of arbitral awards even if the award itself is premised on errors of law or fact.

This decision cements the legitimacy of the Model Law and, with it, the bedrock principle of international arbitration that an arbitration award should be enforced in the same way that a court judgment is enforced. In short, Australia has recognized what dozens of other countries already recognized - that an arbitral award must be just as effective as a judgment obtained in court.

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