Lisa Dudzik On The Integrity of International Arbitration Proceedings

Last year, the Federal Court of Australia dismissed requests of Hong Kong company Sino Dragon to remove two members of an arbitral tribunal in a case against Singapore company Noble Resources. The Australian court’s decision bolstered the integrity of the arbitration process. Contracts and claims manager Lisa Dudzik shares her thoughts on the case.

The dispute between Sino Dragon Trading Ltd and Noble Resources International Pte Ltd should serve as a strong reminder to companies that international arbitration proceedings are not to be messed with. In this case, seeking court intervention to derail the process, even when the court has no clear mandate over the proceedings, will not only be met unfavorably, but will also be looked down on as it can significantly undermine Australia’s status as a pro-arbitration seat.

Background

Last year, a contractual dispute arose between Hong Kong company Sino Dragon and Singapore Company Noble Resources over the sale and purchase of iron ore to China. Contained in the contract was an arbitration clause which required disputes to be resolved by Australian arbitration following UNCITRAL Arbitration Rules, as the iron ore in question is under the jurisdiction of Western Australia.

Noble Resources alleged that Sino Dragon breached the contract when the latter failed to open a letter of credit as the purchaser of the iron ore and failed to perform the contract in general. Noble Resources served Sino Dragon a notice of arbitration worth AUS$1.9 million. Now the dispute revolves around whether or not Noble Resources had suffered damages from Sino Dragon’s breach of contract to purchase the iron ore. Noble Resources had sold the iron ore to a third party.

Arbitration

When Noble Resources served the notice for arbitration, Sino Dragon did not respond within the 30-day period. This could be seen as not only an act of negligence but also a deliberately uncooperative stance by the Hong Kong party, as they failed to respond within the prescribed period on various points of the proceedings—failing to respond when the notice of arbitration was served, failing to appoint an arbitrator, failing to challenge an appointed arbitrator by the other party, and failing to pursue its challenge.

Sino Dragon eventually requested to be pulled out of the Tribunal. They claimed that the appointed authority raised doubts with respect to their impartiality and independence over the case. As a result of this view, they filed their challenge over the appointments in Australian court, which were eventually dismissed.

Lessons, Insights

Judging by this case, it is clear that Australia is committed to remaining a viable seat for arbitration proceedings. The Australian court’s refusal to intervene demonstrates its understanding of its scope and power, as it acknowledges that any intervention made can derail the arbitration process. As the contract between the two companies had an arbitration agreement—with no clause authorizing court intervention—there seems to be little to nothing that Sino Dragon can do to overturn the appointments in its favor.

For updates on this case or for more news about international commercial arbitration brought to you by Lisa Dudzik, please stay tuned to this page.

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