Enforcing Chinese Arbitration Awards in Australia

With so much trade between China and Australia the question arises of how to resolve disputes when agreements are breached.


Many commercial agreements now include arbitration provisions for resolving disputes.


Disputes between Chinese companies and their Australian counterparts may be subject to the United Nations Commission on International Trade Law (UNCITRL) and its arbitration rules.


Where contracting parties have an arbitration clause in their agreement and a dispute arises the parties submit to arbitration and an award is made.


Once an award is made for money in favour of the Chinese company, the question is how does that company enforce its award against a company based in Australia.


An award made in China can be recognised and enforced in Australia under the International Arbitration Act 1974 in an Australian court that has jurisdiction over the amount of the award.


The Chinese company needs to ascertain the state in Australia in which the Australian company has its registered office and may then take proceedings in that state in the appropriate court to have the award recognised.


The Australian company can object to the recognition of the award on grounds set out in section 8 of the Act.


The main grounds for objection are that the award is not final, in the sense that it can or is subject to appeal or that the making of the award was induced or affected by fraud or corruption.


If the Australian court decides that an objection is not valid the award becomes an order of that court. Depending on the amount, the award/order can be enforced by a warrant to seize the Australian company’s goods or commencing winding up proceedings under the Corporations Act 2001.


If you require assistance in recognising and enforcing an award in Australia please contact Greg Doran in our litigation department.

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Do we need a Shareholders Agreement?

This is a question we are often asked by shareholders of newly established and existing proprietary limited companies.  The simple answer is, a properly drafted Shareholders Agreement can help shareholders avoid potential disputes over the way in which a company is operated, by proving an agreement between the shareholders on predominately commercial issues not covered by a company’s Constitution.

Upon incorporation a company is regulated by the Corporations Act 2001 (Cth) (Corporations Act), its regulations and to the extent a company has one, its Constitution.  However, the Corporations Act and the Constitution primarily focus on the legal, regulatory and corporate activities of the company and do not do deal with business objectives including the commercial expectations of the shareholders.



In this regard, shareholders should ask themselves:

• What are the business activities and purposes of our company?
• How long will the company operate and build up the business before selling the business and providing a return on each shareholders’ investment?
• Which shareholders are entitled to be appointed directors and thereby have a say in the day to day management of the business?
• What decisions may only be made by shareholders as a group, rather than the directors?
• How do shareholders with minority shareholdings have an impact in the decision making process, rather than having their wishes ignored by majority shareholders?
• Should shareholders as a group restrict the sale or transfer of shares outside the current group of shareholders?
• How are the funding requirements of the business to be met? Debt, equity or both?
• What happens when a shareholder who is active in the business dies or suffers a permanent disability?  How can the other shareholders acquire the shares of the affected shareholder?
• Should shareholders be restrained from being involved in other businesses which complete the business of the company?

In answering these and other related questions, the shareholders should be able to formulate the commercial issues to be agreed to in their Shareholders Agreement.

Although Shareholders Agreements are not vital to the success of a company’s business, especially where there is a small number of like-minded shareholders, they are generally recognised as greatly assisting the objectives of the shareholders as owners and operators of the business.

The content of the Shareholders Agreement will follow a generally accepted structure developed over the last 30 or so years of commercial legal practice, with additional specific clauses to deal with the company’s own circumstances.

It should be noted that despite what shareholders may agree, the Corporations Act will in most cases take precedence over the terms of a Shareholders Agreement.

The Constitution, on the other hand, may be overridden by a Shareholders Agreement to the extent of any inconsistency. However, ideally the Constitution should be amended to incorporate the terms of the Shareholder Agreement.

Nevett Ford Melbourne’s Commercial lawyers have a wealth of experience in the preparation of Shareholder Agreements and advising companies and shareholders alike.

Please contact Andrew Bini if you would like further information.

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