IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] VSCA 248

IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] VSCA 248 - VSCA 2011 case summary — Zoe

[49]

8 Recognition of foreign awards

(1) Subject to this Part, a foreign award is binding by virtue of this Act for all purposes on the parties to the arbitration agreement in pursuance of which it was made.

(2) Subject to this Part, a foreign award may be enforced in a court of a State or Territory as if the award were a judgment or order of that court.

...

(3A) The court may only refuse to enforce the foreign award in the circumstances mentioned in subsections (5) and (7).

...

(5) Subject to subsection (6), in any proceedings in which the enforcement of a foreign award by virtue of this Part is sought, the court may, at the request of the party against whom it is invoked, refuse to enforce the award if that party proves to the satisfaction of the court that:

(a) that party, being a party to the arbitration agreement in pursuance of which the award was made, was, under the law applicable to him or her, under some incapacity at the time when the agreement was made;

(b) the arbitration agreement is not valid under the law expressed in the agreement to be applicable to it or, where no law is so expressed to be applicable, under the law of the country where the award was made;

(c) that party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his or her case in the arbitration proceedings;

(d) the award deals with a difference not contemplated by, or not falling within the terms of, the submission to arbitration, or contains a decision on a matter beyond the scope of the submission to arbitration;

(e) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

(f) the award has not yet become binding on the parties to the arbitration agreement or has been set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made.

...

(7) 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:

(a) the subject matter of the difference between the parties to the award is not capable of settlement by arbitration under the laws in force in the State or Territory in which the court is sitting; or

(b) to enforce the award would be contrary to public policy.

(7A) To avoid doubt and without limiting paragraph (7)(b), the enforcement of a foreign award would be contrary to public policy if:

(a) the making of the award was induced or affected by fraud or corruption; or

(b) a breach of the rules of natural justice occurred in connection with the making of the award.

...

9 Evidence of awards and arbitration agreements

(1) In any proceedings in which a person seeks the enforcement of a foreign award by virtue of this Part, he or she shall produce to the court:

(a) the duly authenticated original award or a duly certified copy; and

(b) the original arbitration agreement under which the award purports to have been made or a duly certified copy.

...

(5) A document produced to a court in accordance with this section is, upon mere production, receivable by the court as prima facie evidence of the matters to which it relates.

[67]

The words 'arbitration agreement' in s 8(1) mean 'purported or apparent arbitration agreement'.
Section 8(1) requires the award creditor to show, on the balance of probabilities, that:
1. there is a purported or apparent arbitration agreement;
2. the award creditor and award debtor are parties to that agreement; and
3. there is an award made against the award debtor in pursuance of that agreement.
The words 'arbitration agreement' in s 9(1)(b) means an agreement of the kind referred to in s 8(1), i.e. a purported or apparent arbitration agreement to which the award debtor and the award creditor are parties.
Section 9(5) assists the award creditor to establish the elements of s 8(1).
The expression 'prima facie evidence' in s 9(5) means evidence that, in the absence of contrary evidence, is conclusive proof of the relevant fact.
The effect of s 9(5) is that, in the absence of contrary evidence, the mere production of the two documents referred to in s 9(1) is always sufficient to establish the elements of s 8(1) on the balance of probabilities.
The award creditor must satisfy the enforcing court that the two documents it has produced in purported compliance with s 9(1) meet the description of ss 9(1)(a) and 9(1)(b). Normally, the documents will speak for themselves and the award creditor will not need to do anything other than simply produce the documents.
In the unusual case where the arbitration agreement does not expressly name the award debtor as a party, the agreement will not, on its face, be an agreement of the kind referred to in s 9(1)(b). In that case the award creditor will need to lead extrinsic evidence to show, on the balance of probabilities, that the award debtor is a party to the arbitration agreement pursuant to which the award was made.
Leaving aside the grounds under ss 8(5) and 8(7), enforcement of a foreign arbitral award will usually follow a brief, summary procedure. This does not mean that the enforcing court is failing to act judicially. Rather, it means that the Act assists the award creditor through an evidentiary deeming provision in s 9(5). The effect of the deeming provision is that the mere production of the original arbitration agreement and the original award (or duly certified copies of these documents) will normally be sufficient to discharge the burden the Act places on the award creditor.
Once s 8(1) is satisfied, the award debtor may only resist enforcement of the award by relying on one of the grounds in ss 8(5) and 8(7).
To establish a defence under s 8(5) the award debtor must prove any facts constituting the defence (including, where applicable, the content of foreign law) on the balance of probabilities.
The difficulty of proving a defence pursuant to s 8(5) will depend on the particular defence relied upon. While the standard of proof that applies to the defences under s 8(5)(a)-(e) is the normal civil standard, the onus placed on the award debtor in respect of those defences can be properly described as a heavy onus. In accordance with ss 2D and 39, the court's general starting position is that most arbitral tribunals properly discharge their duties and correctly determine their jurisdiction and that most arbitral awards, subject to formal requirements, should be enforced. The defences in s 8(5)(a)-(e) constitute allegations that are serious. An enforcing court will not be persuaded lightly that it is more likely than not that such an allegation is correct.

[138]

2D Objects of this Act

The objects of this Act are:

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

(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; and

(d) to give effect to Australia's obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty fourth meeting; ...

Part II - Enforcement of foreign awards

3 Interpretation

(1) In this Part, unless the contrary intention appears:

agreement in writing has the same meaning as in the Convention.

arbitral award has the same meaning as in the Convention.

arbitration agreement means an agreement in writing of the kind referred to in sub article 1 of Article II of the Convention.

...

Convention means the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty fourth meeting, a copy of the English text of which is set out in Schedule 1.

...

foreign award means an arbitral award made, in pursuance of an arbitration agreement, in a country other than Australia, being an arbitral award in relation to which the Convention applies.

...

(4) For the avoidance of doubt and without limiting subsection (1), an agreement is in writing if:

(a) its content is recorded in any form whether or not the agreement or the contract to which it relates has been concluded orally, by conduct, or by other means; or

(b) it is contained in an electronic communication and the information in that communication is accessible so as to be usable for subsequent reference; or

(c) it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.

(5) For the avoidance of doubt and without limiting subsection (1), a reference in a contract to any document containing an arbitration clause is an arbitration agreement, provided that the reference is such as to make the clause part of the contract.

...

8 Recognition of foreign awards

(1) Subject to this Part, a foreign award is binding by virtue of this Act for all purposes on the parties to the arbitration agreement in pursuance of which it was made.

(2) Subject to this Part, a foreign award may be enforced in a court of a State or Territory as if the award were a judgment or order of that court.

(3) Subject to this Part, a foreign award may be enforced in the Federal Court of Australia as if the award were a judgment or order of that court.

(3A) The court may only refuse to enforce the foreign award in the circumstances mentioned in subsections (5) and (7).

...

(5) Subject to subsection (6), in any proceedings in which the enforcement of a foreign award by virtue of this Part is sought, the court may, at the request of the party against whom it is invoked, refuse to enforce the award if that party proves to the satisfaction of the court that:

(a) that party, being a party to the arbitration agreement in pursuance of which the award was made, was, under the law applicable to him or her, under some incapacity at the time when the agreement was made;

(b) the arbitration agreement is not valid under the law expressed in the agreement to be applicable to it or, where no law is so expressed to be applicable, under the law of the country where the award was made;

(c) that party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his or her case in the arbitration proceedings;

(d) the award deals with a difference not contemplated by, or not falling within the terms of, the submission to arbitration, or contains a decision on a matter beyond the scope of the submission to arbitration;

(e) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

(f) the award has not yet become binding on the parties to the arbitration agreement or has been set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made.

(6) Where an award to which paragraph (5)(d) applies contains decisions on matters submitted to arbitration and those decisions can be separated from decisions on matters not so submitted, that part of the award which contains decisions on matters so submitted may be enforced.

(7) 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:

(a) the subject matter of the difference between the parties to the award is not capable of settlement by arbitration under the laws in force in the State or Territory in which the court is sitting; or

(b) to enforce the award would be contrary to public policy.

(7A) To avoid doubt and without limiting paragraph (7)(b), the enforcement of a foreign award would be contrary to public policy if:

(a) the making of the award was induced or affected by fraud or corruption; or

(b) a breach of the rules of natural justice occurred in connection with the making of the award.

...

9 Evidence of awards and arbitration agreements

(1) In any proceedings in which a person seeks the enforcement of a foreign award by virtue of this Part, he or she shall produce to the court:

(a) the duly authenticated original award or a duly certified copy; and

(b) the original arbitration agreement under which the award purports to have been made or a duly certified copy.

...

(5) A document produced to a court in accordance with this section is, upon mere production, receivable by the court as prima facie evidence of the matters to which it relates.

...

Part V - General matters

39 Matters to which court must have regard

(1) This section applies where:

(a) a court is considering:

(i) exercising a power under section 8 to enforce a foreign award; or

(ii) exercising the power under section 8 to refuse to enforce a foreign award, including a refusal because the enforcement of the award would be contrary to public policy; or

...

(b) a court is interpreting this Act ...; or

(c) a court is interpreting an agreement or award to which this Act applies; or

...

(2) The court ... must, in doing so, have regard to:

(a) the objects of the Act; and

(b) the fact that:

(i) arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes; and

(ii) awards are intended to provide certainty and finality.

[375]

At all relevant times on the project, both the First Defendant and/or IMC Mongolia LLC acted as agent, or the representative, for the Second Defendant on the project and provided services to the Plaintiff on the project at the direction of, on behalf of, or at the request of, the Second Defendant. Further, I verily believe that the First Defendant and IMC Mongolia LLC conducted their business as a common enterprise with the Second Defendant. For all intents and purposes, it was the Second Defendant which was the proper party to the contract in question and also a proper party to the arbitration and through its representatives it participated in the arbitration, although it then tried to distance itself from the project and the proceedings.
Further, and/or alternatively, at all relevant times the First Defendant and/or IMC Mongolia LLC was the alter ego of the Second Defendant on the project. The Second Defendant was involved in the day to day running of the First Defendant and/or IMC Mongolia LLC's participation in the project.
The named IMC entity on the first page of the Operations Management Agreement is 'IMC Mining Inc', purportedly being the First Defendant but its identity is not clear. The Agreement is signed by Mr Stewart Lewis simply on behalf of 'IMC Mining' in accordance with Section 127 of the Corporations Act 2001. In any event, it was both Defendants who entered into the Agreement. To the extent that IMC Mining Inc purportedly executed the Agreement, it did so as representative for IMC Mining Solutions Pty Ltd.[105]
It was always contemplated that the IMC companies based at 123 Eagle Street, Brisbane, Australia would be involved in the administration of the Agreement and would have certain rights and obligations under the Agreement. This is confirmed in clause 15.4 of the Agreement, which sets out the contact details for sending notices under the Agreement to IMC, being Level 40, Riverside Centre, 123 Eagle Street, Brisbane, Queensland 4000. This is the same address as that given for the registered office details for IMC Mining Solutions Pty Ltd ...
A further example of IMC Mining Solutions Pty Ltd being contemplated in the Agreement is found in clause 13.2 ...[106]
The introduction of IMC Mining Inc through the Operations Management Agreement did not suggest to us that IMC Mining Solutions Pty Ltd was not bound to perform the Agreement. We treated the two IMC companies as one and the same, as they acted on the project (as I shall describe below), and used the same 'IMC' employees on a regular basis. Under Mongolian Law, that is the same as the role of representatives, which is recognized under Article 65 of the Mongolian Civil Code, or as a third party contract relationship recognized under Article 203 of the Mongolian Civil Code. That is how the Arbitral Tribunal saw it on the evidence presented.
Further, as far as the Plaintiff was concerned, IMC Mining Solutions Pty Ltd and IMC Mining Inc amounted to the same economic reality and the commercial interests of IMC Mining Solutions Pty Ltd was the primary driver behind the activities carried out by IMC Mining Inc and IMC Mongolia LLC on the project. The Plaintiff formed this view throughout the course of the project (including the period leading up to the execution of the Operations Management Agreement) based on:

[377]

The Plaintiff was at various times provided with various business cards of IMC employees who would be involved on the project on behalf of the IMC Group.[107]
That IMC Mining Solutions Pty Ltd was the principal IMC entity on the project and continued to carry out its obligations under the Operations Management Agreement, either directly, or through its representatives, is confirmed by the following examples.[108]
Further evidence that IMC Mining Inc conducted its business as a common enterprise with IMC Mining Solutions Pty Ltd and in fact was the representative for IMC Mining Solutions Pty Ltd on the project is contained in a memorandum from Mr Pat Kelly to Mr Bazar dated 2 February 2009. The memorandum is titled 'Statement of Accounts - Tayan Nuur' and purportedly sets out the payments received by IMC Mining Inc on the project as at 2 February 2009 and where those funds have been spent/allocated.
The notable thing about this document is that it was signed by Mr Pat Kelly, in his capacity as 'Director - Mining Operations, IMC Mining Solutions Pty Ltd.' I verily believe that this document further evinces that IMC Mining Solutions Pty Ltd was in control of the financial matters on the project for the IMC Group and oversaw the receipt and allocation of funds on the project, and in fact was the contracting party.
Further evidence of the Second Defendant's involvement and control over the performance carried out by the First Defendant on the Project is evidenced by the Power of Attorney dated 16 June 2009 which was executed by Mr Stewart Lewis.[109]
Further, at the hearing the Plaintiff gave further oral evidence of the involvement of both Defendants and their employees in the project. This convinced the Arbitral Tribunal that the Second Defendant was the proper party to the contract and the proper party to the arbitration.[110]
In the premises, it is submitted that there is an abundance of evidence which confirms that the Second Defendant, IMC Mining Solutions Pty Ltd, was the 'controlling mind' behind the IMC Group's involvement in the project. Further, it is submitted that there is an abundance of evidence which confirms that IMC Mining Inc and IMC Mongolia LLC acted as agent or representative for IMC Mining Solutions Pty Ltd on the project and provided services to the Plaintiff on the project at the direction of, on behalf of, or at the request of, IMC Mining Solutions Pty Ltd. Further, I verily believe that the evidence shows that IMC Mining Inc and IMC Mongolia LLC conducted their business as a common enterprise with IMC Mining Solutions Pty Ltd.
Ultimately, it was evidence of this nature and the evidence given at the hearing that persuaded the Arbitral Tribunal in the arbitration proceeding to make a finding that the Second Defendant, IMC Mining Solutions Pty Ltd, is liable to pay, for and on behalf of IMC Mining Inc, the amount of US$5,903,098.20 plus the arbitration fee amount of US$50,257,70 to the Plaintiff. Given their conduct on the project and their involvement in the arbitration, both Defendants were on clear notice that this was the Plaintiff's case in the arbitration.
[D]isputes arose between the Plaintiff and the Defendants concerning the performance (or non-performance as the case may be) of the Defendants' obligations on the project. The Plaintiff brought a number of complaints against the IMC Group in the arbitration ...[111]
The first Defendant, on behalf of the Defendants, nominated Mr Ganbold Dogsom as their nominated arbitrator ...[112]
Mr Bevan Jones attended the preliminary hearing [on 7 July 2009] on behalf of the Defendants. Mr B Baatar was the Defendants' legal counsel at the preliminary hearing and made submissions on behalf of the Defendants at the hearing.
Mr Bevan Jones attended the preliminary hearing [on 24 July 2009] on behalf of the Defendants. Ms B Bayartsetseg was the Defendants' legal counsel at the preliminary hearing and made submissions on behalf of the Defendants at the hearing.[113]
The original written decision [ie the Preliminary Hearing Document] was signed by the Arbitrators and representatives for each of the parties, including representatives of the Defendants. The written decision was signed by Ms Bayartsetseg on behalf of the First Defendant, in its capacity as agent or representative of the Second Defendant.[114]
Notably, the parties agreed and provided their mutual consent at the 24 July 2009 preliminary hearing that the arbitral dispute would be determined according to Mongolian law.
Further, the Second Defendant through its representative, the First Defendant, recognised the jurisdiction of the Arbitral Tribunal over the disputes concerning the Agreement by, among other things:

[379]

[T]he Defendants were represented through the First Defendant and were given the opportunity to, and did, attend and make submissions at the preliminary hearing on 7 July 2009 and at the further preliminary hearing on 24 July 2009.
Exhibits 'GB-39' and 'GB-40' confirm that Ms B Bayartsetseg signed the written decision to acknowledge the matters contained in the written decision on behalf of the Defendants. Ms Bayartsetseg was their legal practitioner representative.[120]
On or about 13 August 2009, the Defendants' legal representative, Mr B Baatar, sent a letter to ... the MNAC confirming that both he and Ms B Bayartsetseg would be representing the Defendants at the arbitration hearing.[121]
On or about 14 August 2009, the Defendants sent a letter to the MNAC, requesting that the hearing be set down for 19 August 2009 be postponed.[122]
The letter confirms that [IMCM] was preparing documents and evidence that it intended to file in the arbitration proceeding and that the volume of these documents comprised approximately 3,000 pages.
On or about 18 August 2009, a further letter was sent to the MNAC on behalf of the Defendants.[123]
Shortly before the hearing, the Defendants' legal representatives ceased to act for the Defendants. To accord the Defendants with procedural fairness and to satisfy the Defendants' right to attend the arbitral hearing, the Arbitral Tribunal postponed the hearing to 15 September 2009.
On 8 September 2009, Mr J Liotta of Lehman, Lee & Xu Mongolia sent an email to Mr Stewart Lewis at imcal.com.au, which was copied in to Mr Bevan Jones, which stated the following ...[124]
Mr Liotta's email confirms that the Defendants were put on notice that the hearing would commence on 15 September 2009 with or without them.[125]
[T]he Defendants did not attend the hearing despite being given a clear opportunity to do so.
Further, the documents filed by the Defendants in the arbitration proceeding confirm the commonality on the project of IMC Mining Solutions Pty Ltd and IMC Mining Inc. For example, the response document dated 16 June 2009, filed on behalf of IMC Mining Inc (refer to Exhibit 'GB-32') contains the following statements.[126]
The response document dated 16 June 2009 confirms that IMC Mining Inc is to be read as including IMC Mining Solutions Pty Ltd for the purpose of the arbitration hearing. The statements made by IMC Mining Inc in its response document could only have been truthful if they can be attributed to IMC Mining Solutions Pty Ltd. For the purpose of the arbitration hearing, as with the project itself, the interests of IMC Mining Inc and IMC Mining Solutions Pty Ltd were one and the same.
The purported control which IMC Mining Solutions Pty Ltd exerted over IMC Mining Inc for the purpose of the arbitration proceeding is borne out in HopgoodGanim's letter to the ... MNAC ... dated 7 September 2009. In that letter, they stated ...[127]
This was a belated attempt by IMC's Australian lawyers to draw a distinction between the two Defendants, which was made when they no doubt realised the fact that the First Defendant was inserted as the representative of the Second Defendant, in an ad hoc and confused manner so as to try and create the impression of difference when in fact there was no difference.
This letter was seen for what it is - an attempt by IMC Mining Solutions Pty Ltd to stymie the arbitration proceeding by writing to the ... MNAC, putting [it] on notice that IMC Mining Inc was all but insolvent and financially dependent on IMC Mining Solutions Pty Ltd and trying to draw a distinction between the two Defendants which had not been there on the project.
Ultimately, the Arbitral Tribunal was persuaded by the nature of the relationship between the First and Second Defendants on the project and, in particular, the intimate, and continuing, involvement of the Second Defendant on the project from the outset, that the First and Second Defendants were both in fact bound by the contract and subject to the arbitration agreement and both were parties to the arbitration. The Arbitral Tribunal held on page 13-15 of the Final Award: ...[128]
The fact that the Arbitral Tribunal clearly came to the view that the Second Defendant had obligations under the Operations Management Agreement is confirmed on page 12-15 of the Final Award where the Tribunal held ...[129]
Further, the Second Defendant was given an opportunity through the First Defendant to have its case heard at the arbitration hearing. In fact, the Second Defendant communicated directly with the MNAC and acknowledged that it was aware of the First Defendant's involvement in the arbitration proceeding and left the conduct of the matter to the First Defendant (refer to exhibit GB-45).[130] However, the Arbitral Tribunal saw the correspondence and facts for what they were - an attempt by the Second Defendant to distance itself from the First Defendant in the proceeding and to try to create the impression of a difference when there was no difference.
The Arbitral Tribunal was convinced by the abundance of documentation and other evidence which demonstrates both the First and the Second Defendants' intimate involvement throughout the course of the Defendants' engagement on the project, that the First and the Second Defendants were both involved in the contract, the project and the dispute and, notably, the First Defendant was the representative for the Second Defendant.

[472]

The plaintiff further submitted that both defendants attended and were legally represented at this hearing, by virtue of the representative for IMC Mining acting for or on behalf of IMC Solutions. As discussed further below, this depends in part on an initial characterisation of the representative signing [the Preliminary Hearing Document] for IMC Mining acting for or on behalf of IMC Solutions, such that any signature or acceptance of the outcome of this hearing by IMC Mining was also given on behalf of IMC Solutions. The [Preliminary Hearing Document], however, does not of itself shed light on the involvement or nature of any relationship of agency, alter ego, or any other form of relationship which the plaintiff argues IMC Mining agreed, assumed or entered into for and on behalf of IMC Solutions. Mr Stewart Charles Lewis, the present CEO of IMC Solutions, and the managing director of IMC Mining from 27 June 2007 to 4 September 2009, deposed that the document contained the signature of the first defendant's representative, Mr Bevan Jones, of IMC Mining, and that of its legal representative, [Ms] Bayartseteg of the Mongolian law firm Lehman, Lee & Xu ('Lehman'). Mr Lewis stated that these signatures were solely on behalf of IMC Mining, and not 'on behalf of the Defendants' (as Mr Batdorj deposed to in the first Batdorj affidavit). Mr Jones was appointed by Mr Lewis to manage the arbitration on IMC Mining's behalf. Mr Jones deposed that he attended this meeting on behalf of IMC Mining, and stated that he was not notified or made aware that any claim was made directly against IMC Solutions. Mr Jones exhibited a power of attorney, appointing Lehman, to act for and in relation to this preliminary hearing, and the arbitral proceedings generally, on behalf of IMC Mining. The power of attorney contains very broad provisions with respect to Lehman's powers, together with more specific (but inclusive, rather than exclusive provisions) for 'mediating communication with, raising questions from, exchanging information with and submitting explanations to the Client and others, when and where necessary' (emphasis added). No direct affidavit or other supporting evidence was provided by Lehman; which was surprising in all the circumstances, particularly having regard to the ambit of that firm's instructions and role, as apparently indicated by the power of attorney provisions. Having regard to the onus of proof the second defendant must meet, particularly in the face of contrary evidence, and with reference to my findings below, insofar as the evidence is inconsistent, I prefer the evidence of Mr Batdorj. In coming to this finding as to the preliminary hearing, I rely particularly on the first-hand nature of Mr Batdorj's evidence about the hearing, and the lack of similar directly responsive evidence adduced by the second defendant. It is apparent that Mr Batdorj attended the preliminary hearing in his capacity as the plaintiff's representative. By contrast, Mr Lewis, who assiduously denied the assertions that IMC Mining acted for or on behalf of IMC Solutions at this meeting, was not present at the meeting, and deposed that although he was 'from time to time consulted about the progress', as he was not resident in Mongolia, he left the management of the arbitration 'principally' to Mr Jones. Furthermore, no direct evidence supporting Mr Lewis' denials, or evidence contrary to that of Mr Batdorj in this respect, was forthcoming from any of the then employees or contractors of either of the defendants who were present at the hearing. As the plaintiff submitted, nowhere does Mr Jones rebut the evidence of Mr Batdorj that he was acting for both defendants and support the evidence of Mr Lewis that he did not have authority, nor purport to act on behalf of, the second defendant, IMC Solutions. Furthermore, no evidence was led from the Mongolian law firm (Lehman) which represented IMC Mining at this hearing, which would have assisted in clarifying the scope of its representation, if any, of the second defendant. Consequently I find that at the preliminary hearing on 24 July 2009 it was agreed, amongst other things, that between IMC Mining, IMC Solutions, and the plaintiff:

(a) The Arbitral Tribunal had jurisdiction to hear and determine the dispute;

(b) The dispute shall be resolved according to Mongolian law;

(c) The arbitration hearing shall be held in Ulaanbaatar City, Mongolia; and

(d) The language of the arbitration shall be Mongolian.[146]

[518]

Agent Representation. Principal shall solely bear the responsibility for consequences from a contract contained an arbitration agreement made by Proxy/representative/agent within the mandate delegated by him/her (Article 63.2 of Civil Code) and there is no doubt with respect of the party to arbitration agreement from the principal. If a principal acknowledges/recognizes later a person that is acted without authorization as an agent, the principal shall be a party to the arbitration in accordance with Article 68 of Civil Code. If a principal gives a comprehension to the Proxy (Article 65 of Civil Code) that he has a proper proxy or mandate and that is ascertained, the principal shall be binding by the contract concluded by the Proxy. However, the comprehension issue is controversial and determined as case by case.
Participation of several persons in one obligation/Co-obligers. This issue is regulated in Articles 241 and 242 of Civil Code of Mongolia. To transfer rights and obligations is a main ground of participation of several persons in one obligation. Furthermore, there are other grounds of participation of several persons in one obligation: participation of a third party in the obligation, main contractor and sub-contractor (Article 210 and 347 of Civil Code) are stated in Article 210 of Civil Code. Pursuant to Article 9.5 of the Company law of Mongolia, shareholders of a company shall jointly liable for the company's responsibility. However, it is still controversial under Mongolian laws whether any co-obligor or co-obligee whose interest is being affected by the conclusion of arbitration agreement by other co-obligers or co-obligees is to become a party to that arbitration agreement and that should be determined by case by case.
Assignment/transfer of rights and obligation. Assignment of rights and obligation shall be executed under the law or contract. Transferring under the contract is regulated in Articles 123, 124 of Civil Code. However, some contracts have special legal regulations with respect of transferring rights and obligation, for instance, transfer of rights and obligation to third party under a contract which is in favour of a third party (Article 210.4 of Civil Code), transfer of assignment to another person (Article 404 of Civil Code), pledge (article 157.7 of Civil Code), guarantee (Article 465 of Civil Code), lawful inheritance under the law (Articles 521.1 and 522.1 of Civil Code), acquisition or merger of companies (Articles 19 and 20 of Company law), bankruptcy (Law on Bankruptcy) etc. If rights and obligations of contract are legally and fully transferred to an assignee, the assignee shall be a party to the arbitration as same as the assignor. If the transfer is a partial transfer, then it is a controversial and there is no practice yet, which will depend on whether an arbitration agreement is attributed to right or to obligation and whether the arbitration agreement has been transferred specifically.
Contract in favour of third party. The general regulations for this kind of contract are envisaged in Article 203 of Civil Code. Some special conditions and the rights and duties of Consignee in the Consignment contract (Article 390 of Civil Code) and insurance policy/contract in favour of third party (Article 441 of Civil Code). It is again controversial that if claiming right/lien was legally transferred to a third party, the party will be a direct party to the arbitration agreement and that will depend on whether an arbitration agreement is attributed to right or to obligation and whether the arbitration agreement has been transferred fully.[161]

[570]

The evidence was that the courts of Mongolia, a civil law jurisdiction, having been asked to verify the award would, in approaching that task, act not merely as a 'rubber stamp' for the evidence presented by one party, but satisfy themselves by proper inquiry that the requirements of the Mongolian civil code which are applicable have been made out. The Mongolian courts verified the award.

...

It was also submitted by the plaintiff that not only is the Award not able to be challenged in the Mongolian courts, but the Mongolian courts have in fact verified the Award and the findings of the Arbitral Tribunal. The first Batdorj affidavit exhibits an order from Judge L. Oyun, a judge of the Khan-Uul District Court (being a competent court of record in Mongolia) dated 23 November 2009 in which Judge L. Oyun verified the Award, concluding that it was a legitimate award under Mongolian law and is capable of being enforced in accordance with the New York Convention. It was also noted that Judge L. Oyun's Order is expressed to be final.

Articles 40, 42 and 43 of the Mongolian Law on Arbitration provide for a verification process for arbitral awards. Under these provisions, the successful party who has an award made in its or their favour (the award creditor, in this case Altain Khuder, the plaintiff) may apply to the Mongolian courts to have the award verified if the other party or parties (the award debtor or debtors, in this case the defendants) do not pay the award sum. Under Articles 42.7 and 43 of the Mongolian Law on Arbitration, the court can choose to make the verification order or not. It will verify the order if there are 'good reasons' to do so. One of the matters which the court will consider is whether any of the matters set out in Article 40 would justify the court not making the verification order. It is significant in the present circumstances that the Article 40 provisions identified by Article 43 are those listed in Article 40.2, provisions which reflect in large part the provisions of paragraph 1 of Article V of the New York Convention; provisions which are, in turn, reflected in the provisions of sub-s 8(5) of the [Act].[178]

[593]

Parties should comply with arbitration awards. A person who obtains an award in his favour pursuant to an arbitration agreement should be entitled to expect that the court will enforce the award as a matter of course.

Applications by a party to appeal against or set aside an award or for an order refusing enforcement should be exceptional events. Where a party unsuccessfully makes such application, he should in principle expect to have to pay costs on a higher basis. This is because a party seeking to enforce an award should not have had to contend with such type of challenge.

Further, given the recent introduction of Civil Justice Reform (CJR), the court ought not normally to be troubled by such type of application. A party unmeritoriously seeking to challenge an award would not be complying with its obligation to the court under O.1A r.3 to further the underlying objectives of CJR, in particular the duty to assist the court in the just, cost-effective and efficient resolution of a dispute.

If the losing party is only made to pay costs on a conventional party-and-party basis, the winning party would in effect be subsidising the losing party's abortive attempt to frustrate enforcement of a valid award. The winning party would only be able to recover about two-thirds of its costs of the challenge and would be out of pocket as to one-third. This is despite the winning party already having successfully gone through an arbitration and obtained an award in its favour. The losing party, in contrast, would not be bearing the full consequences of its abortive application.

Such a state of affairs would only encourage the bringing of unmeritorious challenges to an award. It would turn what should be an exceptional and high-risk strategy into something which was potentially 'worth a go'. That cannot be conducive to CJR and its underlying objectives.

Accordingly, in the absence of special circumstances, when an award is unsuccessfully challenged, the Court will henceforth normally consider awarding costs against a losing party on an indemnity basis.[193]

At a glance

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Judgment (798 paragraphs)

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Legislation Cited (7)

Cases Cited (14)