Dual proceedings will not stick – Kraft Foods Group Brands LLC v Bega Cheese Limited
[2018] FCA 549
The case concerns the restraining of arbitral proceedings in the US District Court of the Southern District of New York in the matter between Kraft Foods Group Brands LLC (‘Kraft’) and Bega Cheese Limited (‘Bega’).
In 2017, Bega acquired certain rights to use the Kraft brand including the right to sell peanut butter in Australia using its jar design. Bega then aired various television and radio commercials, which Kraft alleges contravened s18 of the Competition and Consumer Act 2010 (Cth) by representing the Kraft brand had changed to Bega peanut butter when it was in fact only licensed out. Kraft then commenced proceedings in the Federal Court of Australia on 9 November 2017 as well as arbitration proceedings in New York in 13 February 2018. Bega responded with an anti-arbitration injunction. On 16 February 2018, Justice O’Callaghan held in favour of Bega and granted the injunction. Because the central question relevant in both proceedings is the ownership of the goodwill in the packaging and ‘trade-dress’, a stay of proceedings in the US is appropriate to prevent duplicated litigation or inconsistent findings.1
This case demonstrates the need for companies to be proactive and conscious of their approach to disputes. Rather than considering which option is the best course of action, Kraft pursued both its possible claims simultaneously which was clearly rejected by the Court given the propensity for conflicting judgments.
Ambiguity in Dispute Resolution Clauses – Hurdsman & Ors v Ekactrm Solutions Pty Ltd [2018] SASC 112
On 10 August 2018, the Supreme Court of South Australia refused an application for a stay of proceedings in a case concerning an ambiguous dispute resolution clause.
In this case there was contention regarding whether a clause of the Share Sale Agreement (‘SSA’) constituted a binding arbitration agreement. Additionally, there was a question as to whether the relevant dispute resolution mechanism was a pre-condition to commencing litigation.2 The clause in question stated the parties must submit to a mediator in accordance with Singapore International Arbitration Centre (‘SIAC’) Rules. However, the SIAC does not contain rules for mediation3 suggesting that the intention may have been to arbitrate rather than mediate. In light of this ambiguity, the Court regarded pre-contractual materials to assist with ascertaining the intention of the parties.4 To further obfuscate matters, the Memorandum of Understanding between the referred to arbitration as a dispute resolution mechanism in contrast to the SSA.
Ultimately, Justice Kelly held that the clause was ‘neither this nor that, that is to say it is not quite an arbitration agreement and not quite a mediation agreement.’5 The clause was thus not an agreement to arbitrate. This case highlights the importance of drafting dispute resolution clauses that clearly reflect the parties’ intentions, lest they go through lengthy and unnecessary court and jurisdiction processes. If more than one dispute resolution mechanism is wanted, the procedure for choice and their harmonious operation should be made plain.
Recent Amendments to the International Arbitration Act 1974 (Cth)
The Civil Law and Justice Legislation Amendment Act 2018 (Cth) (‘the Act’) made noticeable changes to the International Arbitration Act 1974 (Cth) (‘the IAA’). The key amendments follow:
1. Enforcement of an Award
Section 8 of the IAA has been modified to recognise that the enforcement of an award is now between parties to the award as opposed to the parties to the agreement.6 It has also been clarified that the party seeking to enforce the award need only produce the foreign award and the arbitration agreement, rather than the alternative onus of having to prove the debtor was a party to the agreement.
2. Competent Courts Redefined
Section 18 of the IAA now aligns the meaning of ‘competent court’ with the UNCITRAL Model Law on International Commercial Arbitration. Competent courts now include the Supreme Courts and Federal Court of Australia, resolving any jurisdictional controversy.7
3. Confidentiality Provisions
Section 22 of the IAA has been modified in anticipation of potential ratification of the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration. Where these Rules apply, confidentiality provisions in ss 23C to 23G IAA will no longer apply.
4. Arbitrators’ Powers
Section 27 of the IAA was amended to confer wider discretion of arbitrators to award costs without the need to refer to taxation.
The amendments strengthen Australia’s position as an international arbitration hub and bring it in line with leading arbitration destinations such as the UK, Singapore and Hong Kong.
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1 Kraft Foods Group Brands LLC v Bega Cheese Limited [2018] FCA 549 [109].
2 Hurdsman & Ors v Ekactrm Solutions Pty Ltd [2018] SASC 112, 8 [30].
3 Ibid 7 [24].
4 Ibid 7 [25].
5 Ibid 8 [30].
6 Civil Law and Justice Legislation Amendment Act 2018 (Cth) sch 7 items 2, 4.
7 Ibid item 7.