The New South Wales Supreme Court recently delivered judgment in Yang v S & L Consulting & Anor [2009] NSWSC 223, a case involving an application for the enforcement in Australia of a foreign arbitral award made in China. The application was made under the International Arbitration Act 1974 (Cth) (IAA).
The enforcement was challenged on two grounds. First, that the translation and certification of the award was not sufficiently proven under section 9(4) IAA. Secondly, that enforcement would be contrary to public policy.
Background
The plaintiff, Mr Yang, was a Chinese national who applied for a business owner visa in April 2002. In doing so, he retained the services of Mr Lee, a registered migration agent (and the second defendant in the proceedings). Mr Yang was advised on 27 May 2003 that his application for a permanent entry visa to Australia for himself, his wife and his son had been approved.
In January 2004 Mr Yang entered into a consultancy agreement with S & L Consulting. Mr Lee signed the agreement as guarantor.
The agreement, which was in Mandarin, contained a dispute resolution clause providing for the submission of disputes to arbitration under the China International Economic & Trade Arbitration Commission (CIETAC) according to CIETAC arbitration rules.
The substance of the consultancy agreement was that Mr Yang would make a $500,000 investment in an Australian company which would then join forces with a Chinese company to export Australia goods to China.
It also provided, relevantly, that the consulting company would manage the investment and draw its fees from the dividends, but that these fees would not exceed Mr Yang’s dividends, and that the consulting company would be liable for any loss.
Clause 6 of the consulting agreement provided, relevantly, that S & L Consulting would
produce a tracking report required of [Mr Yang] under the immigration regulations within 3 years without charging a separate fee and that [e]xcept for the reason that [Mr Yang] has not spent sufficient time in Australia in the 3 year period, [S & L Consulting] shall guarantee that [Mr Yang’s] permanent residency will not be revoked by the government.
Clause 7 of the agreement guaranteed that within 14 days of the expiration of three years from the making of full payment by Mr Yang, a third party would purchase Mr Yang’s shares for no less than $500,000 (with any deficit to be made up by the consultancy company) or the company would pay Mr Yang $500,000 compensation for his loss. Clause 8 provided a $30,000 penalty for any breach of the agreement, and Clause 9 made Mr Lee jointly liable for the performance of the agreement by S & L Consulting.
By late January 2007, S & L Consulting had not procured a third party to purchase Mr Yang’s shares, nor had it paid him $500,000.
Mr Yang commenced arbitration proceedings with CIETAC. Notice was given to S & L Consulting and Mr Lee a, but neither appeared nor made submissions to the Commission. The tribunal found that the consultancy agreement was valid and effective, that Mr Yang had fulfilled his obligation to pay $500,000 and that S & L Consulting and Mr Lee had failed to perform their obligations. An award in Mr Yang’s favour made in December 2007 provided for payment by the defendants to Mr Yang of $500,000 (as compensation under clause 7 of the agreement), a further payment of $30,000 as the penalty for breaching the contract (clause 8) and specified costs and expenses. The award was made against both defendants and payment was required within 30 days (with interest at 0.021 per cent per day in the event of non-payment).
Translation
Section 9 of the IAA provides that:
(2) For the purposes of subsection (1), an award shall be deemed to have been duly authenticated, and a copy of an award or agreement shall be deemed to have been duly certified, if:
- it purports to have been authenticated or certified, as the case may be, by the arbitrator or, where the arbitrator is a tribunal, by an officer of that tribunal, and it has not been shown to the court that it was not in fact so authenticated or certified; or
- it has been otherwise authenticated or certified to the satisfaction of the court.
(3) If a document or part of a document produced under subsection (1) is written in a language other than English, there shall be produced with the document a translation, in the English language, of the document or that part, as the case may be, certified to be a correct translation.
(4) For the purposes of subsection (3), a translation shall be certified by a diplomatic or consular agent in Australia of the country in which the award was made or otherwise to the satisfaction of the court. (emphasis added)
The defendants submitted that the English translation of the award had been certified by the First Secretary of the Consular Department of the Ministry of Foreign Affairs in China and not by a diplomatic or consular agent in Australia.
In addressing this issue, the court noted that the award and the arbitration agreement had also been translated by an accredited translator and interpreter in Australia and that, although this translator had identified some mistakes in the certified English translation, none was significant except a misstatement of the daily percentage rate of interest … The court also noted that the translation made by the Australian translator was not dispute and was a translation to the satisfaction of the court within section 9(4) of the IAA.
The court observed that:
If, on the proper construction of s 9(4), the translation must be certified by either the requisite diplomatic or consular agent or otherwise to the satisfaction of the Court, [the Australian translator’s] affidavits verifying her translation of the award and the arbitration agreement is sufficient certification. … It is immaterial that the certification of the translation by a diplomatic or consular agent is from such a person from outside Australia, because I am satisfied of the translation provided by [the Australian translator].
Public policy
Section 8(7) of the IAA provides that:
In any proceedings in which the enforcement of a foreign award by virtue of this Part is sought, the court may refuse to enforce the award if it finds that:
…
(b) to enforce the award would be contrary to public policy.
The defendants admitted that they had not complied with the award, but submitted that the award was neither binding nor enforceable because it purported to enforce an agreement, arrangement or understanding between the parties which is against public policy.
The agreement in question was the consultancy agreement which was described by the defendants as an agreement … to reflect amongst other things that the investment by the plaintiff was, amongst other things, in return for a guarantee by the first defendant that the plaintiff’s permanent residence right would not be cancelled by the government unless the plaintiff spent an insufficient amount of time in Australia.
The defendants relied in this submission on the Migration Regulations 1994 (Cth) which state that the primary criteria which an applicant for a subclass 127 visa (being the relevant visa in this case) must fulfil include that the applicant genuinely has a realistic commitment, after entry to Australia as the holder of a subclass 127 visa:
- to either:
- establish an eligible business in Australia; or
- participate in an existing eligible business in Australia; and
- to maintain a substantial ownership interest in that business; and
- to maintain direct and continuous involvement in management of that business from day to day and in making decisions that affect the overall direction and performance of the business in a manner that benefits the Australian economy.
Yang signed a declaration (known as a Business Skills Declaration) which satisfied the above criteria in April 2002. When Yang was notified that his application for a permanent entry visa was successful, the Australian Consulate General Hong Kong Migration Office also advised Yang that by signing the declaration, he had acknowledged a requirement of the Australian government that he would look to actively participate in business in a day-to-day management role after arriving in Australia.
The defendants submitted that the consultancy agreement should not be enforced for reasons of public policy and that the award which gave effect to that agreement also should not be enforced for the same reasons. The defendants’ argument was that under clause 6 of the consultancy agreement, S & L Consulting guaranteed that Mr Yang’s permanent residency would not be revoked unless Mr Yang had not spent sufficient time in Australia in the three year period and that this provided an incentive to Mr Yang not to comply with the declaration and acknowledgment he had made for the purpose of his visa application. The defendants submitted that this was contrary to the policy of the law found in the Migration Act and Regulations.
The defendants did not otherwise challenge the lawfulness of the consultancy agreement.
The court did not accept the defendants’ submissions.
As to the exercise of the Minister’s discretion and the impact of clause 6 of the consulting agreement thereon, the court said:
I do not accept that the guarantee in clause 6 provided any such incentive. Clearly the defendants could not promise that the Minister would not exercise his power to cancel a visa if the Minister was satisfied of any of the matters in s 134(1)(a)-(c). The Minister’s exercise of that power is unaffected by the guarantee. If the Minister had cancelled the plaintiff’s visa notwithstanding that the plaintiff had “spent sufficient time in Australia in the 3-year period”, the plaintiff may have been able to recover damages to put himself, so far as money could do it, in the same position as he would have been in had the visa not been cancelled. There is nothing unlawful in such a promise.
Moreover there is nothing in the Migration Act or the Regulations which required the plaintiff to seek to participate actively in a business in a day-to-day management role after arriving in Australia. Whilst the plaintiff would have committed an offence if he made a false declaration as to his intentions with the requisite knowledge (Australian Criminal Code, s 136.1), the only consequence of his not taking steps to participate actively as an owner or part-owner in the day-to-day management at a senior level of a new or existing business in Australia would be to enliven the power of the Minister to cancel the visa. In other words, even if clause 6 provided the incentive which the defendants assert, that would not promote any unlawful activity.
The court observed further that the award had not been based on clause 6 of the consultancy agreement and concluded that the enforcement of the agreement is not contrary to public policy.
Observation
Recent authority in Australia on the question of public policy in the context of the enforcement of foreign arbitral awards under the IAA is limited.
The above case demonstrates, however, as has always been the case, that the question of whether an award is or may be contrary to public policy will always depend on the specific circumstances of the case. In the context of an application for enforcement, the court’s focus will include the basis for the award as well as the impact of the award should it be recognised and enforced in an Australian state or territory.
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