Ignore an Arbitration Clause at Your Peril

Martin CJ has published reasons which should serve as a reminder of the potential consequences of ‘ignoring’ or commencing proceedings in breach of an arbitration clause contained in a contract.

In addition to having the offending proceedings stayed pursuant to the International Arbitration Act 1974 (Cth), the Plaintiff(s) in those proceedings also runs a serious risk of facing an indemnity costs order after a successful stay application.

This is exactly what occurred in KNM Process Systems v Mission Newenergy Ltd.

Paragraph 2 of the Chief Justice’s reasons indicate that whilst an indemnity costs order will not always follow a successful stay application, it does appear that save for any special circumstances an indemnity costs order will usually be made.

It always pays to be mindful whether an arbitration clause applies to any proceedings that you might be considering commencing. If you are unsure, you should seek the opinion of counsel.

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