The recent decision of the Supreme Court of Victoria in Jacobs Group (Australia) Pty Ltd v Commonwealth of Australia  VSC 127 considered whether the court had jurisdiction to grant leave to appeal an arbitral award on a question of law pursuant to the Commercial Arbitration Act 2011 (Vic).
In April 2011, the Commonwealth Department of Defence (the Defence Department) and Jacobs Group entered into a Design Services Contract (the Contract) under which Jacobs Group agreed to provide services relating to the Townsville Royal Australian Air Force Base.
The Contract provided that disputes referred to arbitration would be conducted in accordance with the Rules of Arbitration of the International Chamber of Commerce (the ICC Rules). At the time, Article 28(6) of the ICC Rules provided that all Awards are binding and that parties submitting disputes to arbitration under the ICC rules waived their right to any form of recourse.
However, clause 12.13(c) of the Contract provided that “nothing in this clause is intended to modify or vary the rights of the parties under the Commercial Arbitration Act 1984 (Vic)“ (the 1984 Act) and expressly excluded the operation of the part of Article 28(6) of the ICC Rules that waived the parties’ right to appeal an arbitral award. Section 38(2) and (4) of the 1984 Act provided that parties may appeal an award to the Supreme Court of Victoria on any question of law arising out of an award, with the consent of the other parties to the arbitration agreement.
On 17 November 2011, the Commercial Arbitration Act 2011 (Vic) (the 2011 Act) came into operation with retrospective effect. Relevantly, Section 34A(1) of the 2011 Act provides that an appeal lies to the Court on a question of law arising out of an award if the parties agree and the Court grants leave.
In August 2017, the Defence Department requested an arbitration of disputes in an unresolved notice issued the previous year. In August 2019, the Arbitrator issued a Partial Award in the sum of $3,424,970.35 against Jacobs Group.
Jacobs Group sought leave of the Supreme Court of Victoria to appeal the Partial Award on a question of law pursuant to s 34A(1) of the 2011 Act. The Defence Department applied for the proceedings to be dismissed on the ground that s 34A(1) of the 2011 Act did not apply as the parties had not agreed an appeal may be made.
Riordan J considered the legislative purpose of the 2011 Act, which plainly expressed the intention to regulate arbitration agreements which came into existence before the commencement of the 2011 Act. The fact that the parties’ arbitration agreement referred to the 1984 Act and not section 34A of the 2011 Act was accordingly not fatal to Jacobs Group's application.
The question of whether the Court had jurisdiction therefore turned on whether the terms of clause 12.13 of the Contract constituted an agreement between the parties that an appeal could be made from an award; a condition precedent to the right of appeal under section 34A(1) of the 2011 Act.
In dismissing Jacobs Group’s application and finding that the Court lacked jurisdiction to hear the appeal, Riordan J held that clause 12.13 did not constitute an express or implied agreement that the parties would have a right to appeal arbitral awards on a question of law. Although clause 12.13 was not silent on the question, the provision merely stated that the parties “did not intend to modify or vary the rights of appeal” under the 1984 Act. This effected a preservation of rights but did not objectively indicate that the parties consented to judicial review of any arbitral award, regardless of the fact the clause excluded the waiver contained in Article 28(6) of the ICC Rules.
This case highlights the importance of clearly stating the parties’ intentions when drafting an arbitration clause. If the parties agree to the right to appeal an arbitral award on a question of law, this should be stated expressly, as the court will take an objective approach to interpretation to determine the ordinary meaning of the arbitration clause.
The full decision can be found here.