Case note: CBI Constructors Pty Ltd v Chevron Australia Pty Ltd [2024] HCA 28
Geoff Farnsworth FCIArb
Partner, Holding Redlich
President, Ciarb Australia Branch
Meru Sharma
Lawyer, Holding Redlich
1. Introduction
The dispute in CBI Constructors Pty Ltd v Chevron Australia Pty Ltd [2024] HCA 28 (Chevron), concerned the Gorgon Project, a massive offshore oil and gas venture. The appellants (collectively ‘CKJV’) were contracted to provide staff to work at Chevron Australia’s construction sites, and a dispute arose as to the calculation of these staff costs.
As per the contract between the parties, CKJV commenced arbitration in 2017 to resolve the dispute, seeking reimbursement based on contract rates. In defence, Chevron Australia claimed that CKJV was only entitled to actual costs. The arbitral Tribunal determined that the proceedings should be split between liability, and then quantum.
2. The arbitration
In November 2018, the Tribunal issued a First Interim Award dealing with liability, rejecting CKJV’s argument for payment based on contractual rates and holding that CKJV was only entitled to actual costs.
When it came to pleading its ‘quantum’ case, CKJV sought to argue that the staff costs should be calculated using an alternative specific contractual criterion (which became known as the Contract Criteria Case, or CCC). CKJV had not raised the CCC issue previously (i.e. prior to the First Interim Award) so the First Interim Award had not addressed or determined the CCC. There was also no suggestion that CKJV was unable to raise the CCC as part of its liability case prior to the First Interim Award – in fact, it appeared that CKJV raised this issue only after the First Interim Award was made against its primary argument. Chevron Australia objected, arguing that CKJV’s repleaded case was precluded by res judicata, issue estoppel, and that the tribunal was functus officio (meaning that having already decided, the tribunal no longer had authority to decide) so far as all issues on liability were concerned, even those not determined in the First Interim Award.
A majority of the arbitral Tribunal rejected Chevron Australia’s objections in a Second Interim Award, finding that CKJV had not pleaded its alternative cases as part of the liability hearing prior to the First Interim Award and it was “commercially unrealistic to have required parties faced with the hearing on liability to raise every point that might … be made by them’ and that ‘it might reasonably be inferred [that CKJV] had not had time to ascertain … whether the [CCC] (if it had thought about it) would make any real difference financially one way or the other’”.[1] The majority of the Tribunal also found that these new arguments could be characterised as quantum and so would not have been addressed in the First Interim Award.[2]
3. Application to set aside the award
Chevron Australia applied to the Supreme Court of Western Australia to set aside the Second Interim Award, arguing that it dealt with matters beyond the scope of the original submission to arbitration. The Supreme Court agreed, finding that the Tribunal was functus officio as regards liability, and set aside the Second Interim Award. CKJV’s appeal to the Court of Appeal was dismissed, with the court agreeing that the Tribunal had improperly re-opened issues of liability which had been determined ‘in globo’ in the First Interim Award.
CKJV then appealed to the High Court of Australia, challenging the Court of Appeal’s findings. The High Court in a 5:2 majority rejected CKJV’s submissions, upholding the decision to set aside the Second Interim Award. The High Court of Australia (with Jagot & Beech-Jones JJ) also determined that the Court will undertake a de novo review of the arbitrator’s decision when there is an application for setting aside an award under Article 34(2)(a)(iii).
4. Appeal to the High Court of Australia
The majority judgment (comprised of all but Jagot & Beech-Jones JJ) first found that, upon rendering the First Interim Award on liability, the Tribunal was functus officio in relation to that subject matter.[3] So, at the time of making the Second Interim Award, the Tribunal did not have authority to make that award.[4] For the majority, the CCC argument concerned the issue of liability and not quantum. Given the Second Interim Award was a decision not made within jurisdiction,[5] the order could be set aside under Article 34(2)(a)(iii) given that the Tribunal had exceeded its authority.[6] The majority made these findings despite recognising an error within jurisdiction does not trigger Article 34 because it does not exceed the authority of the arbitrator.[7]
In making these findings, the majority had to consider whether the Tribunal was entitled to determine, on its own, whether an award had exceeded its authority under Article 16. The majority found that Article 16 and Article 34 are directed to similar queries about the authority of the Tribunal.[8] However, the current matter of the Tribunal being functus officio was something that the courts had jurisdiction over under Article 34 since it is a ‘jurisdictional’ issue and therefore the Court was not precluded from finding that Article 34 prevented the Tribunal from making the Second Interim Award.[9] The majority remarked as follows at [41] (citations excluded):
“Articles 16 and 34 of the Model Law strike an appropriate balance between ensuring the integrity of the arbitral process and the policy of “minimal curial intervention”, which is commonly accepted in international practice and underlies the Model Law. Courts are circumspect in their approach to determining whether an error alleged under Article 34(2)(a)(iii) falls within the scope of that provision. The question is whether an arbitral tribunal has exceeded its jurisdiction or, put another way, has travelled beyond the parties’ submission to arbitration. That question is narrow. And when an issue of jurisdiction is identified, courts “carefully limit the issue they address to ensure that they do not, advertently or inadvertently, stray into the merits of the question that was decided by the tribunal”. Curial intervention is, however, sometimes necessary. This is one of those cases.”
The dissenting joint judgment by Jagot & Beech-Jones JJ took a different view. For their Honours, uniformity in the application of the Model Law is a key interpretive provision and the ‘limited basis for curial intervention'(i.e. Article 34) is consistent with this notion.[10] For their Honours, Article 34(2)(a)(iii) cannot be used to circumvent the limited grounds for curial intervention, even in circumstances where there are “erroneous answers to questions of law arising in the course of arbitral proceedings”,[11] i.e. an error of law does not justify intervention under Article 34.[12]
Implicit in Jagot & Beech-Jones JJ’s’ judgment is the suggestion that Chevron should not have relied on Article 34 to bring its dispute and instead should have brought it under section 27J(1) of the Arbitration Act, which allows an unsatisfied party to confer jurisdiction on the Court to determine a question of law, with the leave of the Court and consent of either the arbitrator or all the other parties.[13] For their Honours, this provision (and section 34A of the Arbitration Act) “represent a (modest) extension of the power of curial intervention contemplated by the Model Law”.[14]
Jagot & Beech-Jones JJ also found that there had not been a final award and so the Tribunal was not functors officio.[15] Whether the Tribunal was functus officio was a conclusion derived from a claim of issue stopple. The claim of issue estoppel is a matter the Tribunal can determine for itself under Article 16.[16] Issue estoppel (or res judicata or Anshun estoppel) do not ‘justify curial intervention’ under Article 34[17] – even if they deal with the ‘finality’ of an award.[18] Jagot & Beech-Jones JJ found that there was nothing to support curial intervention in the parties’ agreement either, stating “the parties agreed to submit their dispute to arbitration, not to a court, much less to that level of scrutiny by a court”.[19]
5. Significance in relation to the principle of ‘minimal’ curial intervention
The majority and dissent judgments in Chevron show there is no uniform view about at least 2 matters:
- the appropriate test for determining whether an issue falls within the jurisdiction of the arbitrator
- the interrelationship between Article 16 and Article 34.
In relation to the first matter, the majority describe their enquiry under Article 34(2)(a)(iii) as concerning whether an issue or error is ‘within jurisdiction’ or ‘beyond the authority or jurisdiction’.[20] In another place, the majority describe the test as whether the error is within jurisdiction or ‘that the tribunal lacked juris-diction’.[21] The majority note that this test has been described in various ways in Australia and overseas, but the specific language or terminology adopted is largely irrelevant.[22] In saying that, the majority cite various cases that suggest the test is about whether the issue goes to the consent to the arbitrator’s jurisdiction (a consent-focused enquiry) or to the claim before the arbitral tribunal[23] or alternatively whether the issue is of jurisdiction or of admissibility.[24] For Jagot & Beech-Jones JJ , the applicable test is only the distinction between jurisdiction and admissibility (‘jurisdiction/admissibility’ distinction).[25]
In applying this test to find that issue estoppel and functus officio were issues of admissibility, Jagot & Beech-Jones also found that “an arbitral tribunal is to be treated as though it is ‘the exclusive tribunal to determine all the issues relevant to the dispute referred to [it]’”.[26] Jagot & Beech-Jones JJ referred to various authorities in support that the relevant inquiry is “which body (i.e. the court or the arbitral tribunal) determines what has been finally decided by an interim award”.[27] One such authority is Ribeiro PJ’s judgment in C v D [2023] HKCFA 16 which expressed that there must be unequivocally clear language that the parties intended a court to review an issue of the arbitrator’s jurisdiction.[28] The majority’s judgment is silent as to this issue.
In relation to the second issue, the majority found that, based on the language of the provision and structure of the Model Law, Article 16 addresses jurisdiction issues ‘as a preliminary question’ whereas Article 34 addresses jurisdiction issues when a binding interim or final award has issued.[29] It was open to the Tribunal to make a determination about its authority being functus officio as a preliminary question under Article 16.[30] However, the Tribunal cannot make an erroneous decision as to its authority under either provision because that will mean that the Tribunal is creating or expanding its own authority.[31] For Jagot & Beech-Jones JJ, Article 16 allows a Tribunal to rule on its own jurisdiction “either as a preliminary question or in an award on the merits”.[32] That is, for Jagot & Beech-Jones JJ, Article 16 is not limited to preliminary jurisdictional questions only and they do not adopt the majority’s distinction between Article 16 and Article 34. For Jagot & Beech-Jones JJ, Article 16 and Article 34 are overlapping but they did wish to express “any final view on the degree of overlap between ss 16 and 34 of the Arbitration Act”.[33]
Despite the above, both the majority and Jagot & Beech-Jones JJ reached a similar view regarding the second ground of appeal – that de novo is the standard of review to be applied by a court when there is an application for setting aside an award under Article 34(2)(a)(iii). Before the High Court, CKJV argued that absolute or substantial deference should have been afforded to the decision of the Tribunal that it was not functus officio. In finding against CKJV (and finding that the primary judge was correct to adopt a de novo review),[34] the majority found that the Article 34 does not explicitly provide for deference (absolute or substantial) to a Tribunal’s decision,[35] a de novo review was adopted as the standard of review in other jurisdictions,[36] and de novo review is applied for enforcement applications under Article 36 which has ‘materially identical’ language to Article 34.[37]
For Jagot & Beech-Jones JJ, a premise of their finding that Article 34 was not invoked is the fact that ‘such reviews are to be conducted de novo’.[38] For their Honours, there is ‘no justification’ for adopting any deference to the Tribunal’s findings regarding a challenge to its juris-diction.[39] On the one hand, this finding by the Court may appear not to align with the principle of minimal curial intervention – if the parties intended the arbitral tribunal to determine all facts and issues instead of a court, and Article 34 is only a ‘modest expansion’ of curial intervention (as found by Jagot & Beech-Jones), then the standard of review by the Court should be circumscribed by the tribunal’s findings as the true determiner of facts. However, Article 34(2)(a) requires a court to consider the proof furnished by the claimant in support of its review application and Jagot & Beech-Jones JJ held that the Court would have difficulty in identifying the claim through the proof if the Court is forced into ‘a journey through the minutiae of the arbitral tribunal’s’ findings and conduct.[40]
[1] CBI Constructors Pty Ltd v Chevron Australia Pty Ltd [2023] WASCA 1 (Chevron) [31].
[2] Ibid.
[3] Chevron [27] and [28].
[4] Chevron [33].
[5] Chevron [30].
[6] Chevron [40].
[7] Chevron [35].
[8] Chevron [37].
[9] Chevron [38]-[40].
[10] Chevron [61]-[63].
[11] Chevron [66].
[12] Chevron [70]: “…neither s 16 nor s 34 of the Arbitration Act is engaged merely because an arbitral tribunal has given a wrong answer to a question of law.”
[13] Chevron [81].
[14] Chevron [70].
[15] Chevron [74].
[16] Chevron [78].
[17] Chevron [81].
[18] Chevron [83].
[19] Chevron [87].
[20] Chevron [30].
[21] Chevron [34].
[22] See Chevron [30].
[23] The Nuance Group (Australia) Pty Ltd v Shape Australia Pty Ltd (2021) 395 ALR 720 [132]; BBA v Baz [2020] SGCA 53 [74]-[77].
[24] BBA v Baz [2020] SGCA 53 [73]; Republic of Sierra Leone v SL Mining Ltd [2021] Bus LR 704 at 709-712 [11]-[18]; C v D (2023) 26 HKCFAR 216.
[25] Chevron [75] citing C v D (2023) 26 HKCFAR 216.
[26] Chevron [81].
[27] Chevron [83].
[28] Chevron [84]-[86] citing C v D (2023) 26 HKCFAR 216.
[29] Chevron [36]-[37].
[30] Chevron [36].
[31] Chevron [32].
[32] Chevron [64].
[33] Chevron [69].
[34] Chevron [43].
[35] Chevron [44].
[36] Chevron [45].
[37] Chevron [46].
[38] Chevron [92].
[39] Chevron [93].
[40] Chevron [92].