1 Summary
In March 2020, Justice Riordan of the Victorian Supreme Court handed down his decision in Jacobs Group (Australia) v Commonwealth of Australia [2020] VSC 127, deciding against Jacobs Group on the enforcement of an arbitral award stemming from a dispute over design services for a project at the Townsville Royal Australian Air Force Base. Justice Riordan’s decision, while not binding on the Victorian Supreme Court, is unlikely to be overruled by it in future decisions. It is also persuasive for courts in other Australian states applying similar legislation that exists across every Australian state.
Jacobs Group sought to appeal the award on a question of law, relying on an arbitration clause drafted in early 2011 that preserved appeal rights under the Commercial Arbitration Act 1984 (Vic) (1984 Act) and excluded the operation of an ICC Rule which would have curtailed such appeal rights. The question, however, was whether this clause entitled Jacobs Group to an appeal under amendments to the Commercial Arbitration Act 1984 (Vic), introduced in November 2011 (2011 Act).
2 Legislative changes in 2011
Under the 1984 Act, the Australian regime for appealing arbitral awards was “opt-out”: that is, it allowed appeals either with all parties’ consent, or with leave of the state Supreme Court, unless the arbitration agreement excluded a right of appeal.
The 2011 Act introduced a new “opt-in” regime. This means that under section 34A of the 2011 Act, the Victorian Supreme Court can now only consider an appeal on a question of law where parties have specifically agreed “under this section” that an award could be appealed.
Additionally, the Court can only give leave to appeal if satisfied that:
- determining the question of law will substantially affect a party’s rights;
- the arbitral tribunal had been asked to determine that question of law;
- the tribunal’s decision was obviously wrong or (if the question has general public importance) is open to serious doubt; and
- allowing the appeal would be just and proper.
Similar legislative changes occurred across other Australian states and territories in 2011.
3 Issues in dispute
Jacobs Group’s appeal raised two issues:
- Is an agreement not to opt-out of appeal rights under the 1984 Act the same as an agreement to opt-in under the 2011 Act?
- For a party to appeal an award, does the arbitration agreement need to:
(a) state that it relates specifically to the relevant section in the 2011 Act? (And would this exclude any agreement to allow appeals of awards drafted before the 2011 Act amendments?)
(b) make reference to the requirement or restraints on the grant of leave to appeal?
4 Judgment
Justice Riordan dismissed the proceedings, finding that the parties’ agreement not to opt-out of appeal rights did not amount to an agreement to opt-in to these rights under the 2011 Act.
- He applied the reasoning of South Australian Chief Justice Kourakis in ASC AWD Shipbuilder Pty Ltd v Ottoway Engineering Pty Ltd (2017) 129 SASR 122 at [21]:
It is one thing to recognise that the obvious effect of [a contract expressly not excluding] the question of appeals against awards was that either party was at liberty to seek permission to appeal if the statute so allowed and quite another to leap from that to a presumption that the parties intended to preserve that power for each other by contractually binding themselves to assist the other to appeal against an award made in their favour.
- The arbitration agreement might have left open rights under the 1984 Act, but was not a commitment by each party to consent to the other having a right to appeal on a question of law under an amending Act.
- In fact, the agreement did not indicate what parties’ intentions were if appeal rights under the 1984 Act were amended.
Accordingly, the arbitration agreement did not entitle Jacobs Group to appeal the award.
However, Riordan J also concluded that an agreement to appeal an award did not have to expressly or implicitly refer to the section in the 2011 Act, and parties to an agreement do not even have to know the 2011 Act section exists.
Balancing the strength of the literal meaning argued for by the Commonwealth (that an agreement to appeal “under this section” was only valid if it expressly or implicitly referred to the relevant section in the 2011 Act) against the promotion of the legislative purpose, Riordan J concluded that the Victorian Parliament had not meant to invalidate all agreements to appeal drafted before 2011.
Finally, Riordan J found that there was no need for the agreement to appeal to refer to requiring leave of the Court to appeal, or to the factors the Court has to consider in granting leave.
5 Implications
Given that all Australian jurisdictions have now switched from an “opt-out” to an “opt-in” regime for appealing arbitral awards, it is likely that Justice Riordan’s decision will be followed by other Australian courts.
What does this mean for you?
- If you are entering a new agreement with an Australian arbitration clause, bear in mind that anything less than an agreement that the parties consent to allow awards to be appealed on a question of law will not be enforceable.
- If you are a party to an arbitration clause drafted before the regime changed from “opt-out” to “opt-in” and want the option of appealing an award, you should consider whether you want to renegotiate this clause.