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21 November 2008

Seeley International Pty Ltd v Electra Air Conditioning BV (2008) 246 ALR 589

In the February 2008 edition of the Mallesons International Arbitration Update we considered the decision of Mansfield J in the Federal Court in Seeley International Pty Ltd v Electra Air Conditioning BV (2008) 246 ALR 589. This decision has now been upheld by the Full Federal Court on appeal.

The Court agreed with the first instance judge that a proper construction of the arbitration agreement showed that the parties had agreed to have certain disputes - most particularly, disputes where one party was seeking a declaration - dealt with in Court.

As noted in our initial piece on the case, this construction, whilst arguably correct, produces a strange result where the parties agreed to have similar disputes heard in the different ways (arbitration or litigation depending on whether declaratory relief was involved) and in the context of language that is usually reserved for well-known exceptions to the arbitral regime - namely, where the parties need urgent interim relief, often prior to the commencement of the arbitration.

Whilst the Full Federal Court’s decision upholds an arguably correct interpretation as a matter of law, it is doubtful whether the result is what the parties actually intended. This case reinforces the need for great care when drafting arbitration agreements.