Enforcement of Arbitral Awards and the Constitutional position of international commercial arbitration in Australia

Sometimes it is argued that litigation in the context of international arbitration is of no more use than domestic arbitration because of a lack of enforceability. Happily, in Australia, arbitral awards are enforceable through the International Arbitration Act 1974 (Cth) as if they were the judgement of a state or territory court. They may also be enforced through the Federal Court of Australia.

At the time of TCL Air Conditioner v The Judges of the Federal Court of Australia [2013] HCA 5, the High Court made it clear that the International Arbitration Act 1974 (Cth) is a firmly accepted legislative framework for the enforcement of arbitral awards in Australia. The decision gives greater certainty to the efficacy of Australia and Sydney in particular as a base for international commercial arbitration.

Essentially the case was about a dispute that arose in relation to a distribution agreement between TCL Airconditioners of China and Castel Electronics in Australia. TCL attempted to show that the International Arbitration Act 1974 was unconstitutional but eventually failed to show any basis of unconstitutionality. Essentially TCL argued that the act expanded the powers of an enforcing court beyond what they should be under Chapter III of the constitution. The judged highlighted in their decision the consensual basis of an arbitrator’s power as being what distinguishes its character from judicial power. The fundamental characteristic of judicial power is a sovereign or governmental power, exercisable in the absence of consent of the subjects whose rights are affected.