ReSolution Issue 17, May 2018 | Page 25






The issue has recently come before the Australian courts in Jasmin4. At first instance, Edelman J (before his elevation to the High Court of Australia) opined that on an application for a stay under s 7, if the plaintiff resisting the stay contends that it is a stranger to a contract containing an arbitration agreement, the question of whether the plaintiff is bound by the arbitration agreement (ie the question of partyhood) is to be determined by the choice of law rules of the forum (which in Australia, at common law, results in application of the lex fori) and not the law of the putative arbitration agreement (as mandated by Article V of the New York Convention). This (obiter) view was affirmed on appeal by two judges of the Federal Court (Beach J, with whom Dowsett J generally concurred). Beach J (like Edelman J)5 considered it counter-intuitive to suggest that the law to assess whether a contract had been formed should be the law set out in the contract that the plaintiff denied being a party to: [130].6 On the other hand, Greenwood J dissented on this point, taking the view that “the structured integrated coherence” of the New York Convention and the UNCITRAL Model Law on International Commercial Arbitration (‘Model Law’) required the same choice of law rule mandated by s 8(5)(b) of the IAA (to the enforcement of an award) to be applied under section 7(2) (to the enforcement of an arbitration agreement), notwithstanding that section 7(2) did not expressly select a choice of law rule: [82].
The issue is reminiscent of the impenetrable brain teaser: “which came first, the chicken or the egg?”.7 With respect, Greenwood J’s views are to be preferred to the views of the majority of the Full Court of the Federal Court of Australia and of the trial judge.
Facts
Trina, a US company, entered into a Supply Agreement with JRC, another US company. It provided for arbitration in New York according to New York Law. Under the Supply Agreement, Trina was to supply solar panels to Jasmin, an Australian company. To avoid GST, JRC (a related party to Jasmin) was named as the purchaser under the Supply Agreement. Instead, Jasmin was named as the guarantor. The arbitration clause in the Supply Agreement did not bind the guarantor. The solar panels were delivered late, were of the wrong model, and did not comply with Australian conditions. JRC and Jasmin refused to pay the invoices rendered by Trina. Trina commenced an arbitration against Jasmin and JRC in New York seeking recovery of unpaid invoices of about USD 1.3 million. Jasmin objected to the jurisdiction of the Arbitrator, contending that it was not a party to any arbitration agreement with Trina. In a preliminary ruling on jurisdiction, the Arbitrator found, applying New York law, that Jasmin was bound by the arbitration agreement. Jasmin took no further part in the arbitration.
Shortly afterwards, Jasmin commenced legal proceedings in Australia against Trina seeking damages, for misleading or deceptive conduct in contravention of the Australian Consumer Law, in the order of $A30 million. Jasmin sought leave to serve the proceedings out of the jurisdiction upon Trina in the US.
First Instance Decision
Edelman J, sitting as a judge of the Federal Court, granted leave to serve the proceedings out of the jurisdiction upon Trina.8 At the time, he was aware that there was an arbitration on foot in New York and that the Arbitrator had found that she had jurisdiction over Jasmin. Applying the lex fori (ie Australian law) to determine the question of the existence of the putative arbitration agreement, Edelman J found that Jasmin was not a party, and