Australian court grants leave to enforce Chinese award against company in liquidation

On 19 April 2013, Justice Foster of the Federal Court of Australia handed down judgment in the case of Eopply New Energy Technology Co Ltd v EP Solar Pty Ltd [2013] FCA 356.  The question before his Honour was whether a foreign arbitral award made in China ought to be enforced in Australia against an Australian company in liquidation. The judge allowed Eopply to proceed with its originating motion seeking leave under Australia's Corporations Act 2001 (Cth) (Corporations Act), and ordered enforcement of the award under the International Arbitration Act 1974 (Cth) (IAA).

The arbitral award was made in China on 15 February 2012 by the China International Economic and Trade Arbitration Commission (CIETAC) at Shanghai against EP Solar Pty Ltd (EP Solar).  Eopply New Energy Technology Co Ltd (Eopply) sought to enforce the award.

In April 2013 liquidators had been appointed to EP Solar following a resolution by its sole shareholder.  The Court accepted that it was implicit in the resolution that the corporation was to be wound up voluntarily.  This finding was important for the purposes of s 500 (2) of the Corporations Act, which provides that:

“After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes”.

EP Solar did not make an appearance in the Federal Court. 

Eopply sought leave pursuant to s 500(2) of the Corporations Act to proceed with its originating motion.  In its originating motion Eopply also sought leave pursuant to s 8(3) of the IAA to enforce the award against EP Solar as if it were a judgment of the Court.  As Foster J noted, leave under the IAA is no longer required for the enforcement of a foreign arbitral award.

The liquidators of EP Solar had informed the Court that they did not oppose the application.  Foster J found therefore that subject to the Court being satisfied that leave to proceed was required and ought be granted and that matters specified in s 8, s 9 and s 10 of the IAA were satisfied, the Court should enforce the foreign arbitral award.  The matters in these sections include demonstrating that the award is a foreign arbitral award, that the award was made pursuant to a valid arbitration agreement and pursuant to proper procedure, and the provision to the Court of appropriately authenticated documents.

On the question of leave to proceed, Foster J relied on considerations identified by Lee J in Executive Director of the Department of Conservation and Land Management v Ringfab Environment Structures Pty Ltd [1997] FCA 1484, including:

(a)   The purpose for the requirement for leave, being to prevent a corporation in liquidation being subjected to expensive actions, perhaps unnecessarily;

(b)   Whether the balance of convenience lies in allowing a creditor to proceed to judgment or whether the creditor should pursue its claim by way of proof of debt;

(c)   Whether there is a serious or substantial issue to be tried and a real dispute between the parties.

In this case, Foster J found that if leave were granted to Eopply, virtually no additional expense or inconvenience would be visited upon EP Solar; if leave were granted, judgment would be entered immediately.

His Honour found further that where Eopply’s claim was based on a foreign award, regard should be had to the objects of the IAA and to s 39 of the IAA.

The objects of the IAA are set out in s 2D and include:

(a)   to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes;

(b)   to facilitate the use of arbitration agreements made in relation to international trade and commerce; and

(c)   to facilitate the recognition and enforcement of arbitral awards made in relation to international trade and commerce.

Section 39 of the IAA provides that the Court must have regard when, amongst other things, exercising a power to enforce a foreign award, to those objects and to the fact that arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes and awards are intended to provide certainty and finality.

His Honour stated that in the context of the objects and s 39, there is good reason to make the path to recovery by the award creditor easier by granting leave and allowing judgment to be entered rather than leave the award creditor to the vagaries of the proof of debt process.  His Honour also took into account the fact that the liquidators did not oppose the application, concluding (in relation to the question of leave), that:

Although there is no evidence before the Court as to the financial position of the respondent and thus no basis upon which the Court can make an assessment as to whether the award creditor is likely to recover any part of the amount awarded to it, the above considerations weigh heavily in favour of the grant of leave.  In my judgment, there is no consideration of any moment which would weigh in the balance against the grant of leave.

Foster J granted leave to Eopply pursuant to s 500 (2) of the Corporation Act and, being satisfied that Eopply had established that it was entitled to have the award against EP Solar enforced, made orders accordingly (subject only to an adjustment to the arbitrator’s fees included in the judgment so as to accord with the terms of the award).