Who governs foreign contracts signed in Australia?
Can disputes from foreign contracts signed in Australia be heard in Australia?
CCIWA’s International Trade and Investment Centre Manager, Michael Carter, says a recent Federal Court ruling highlights the importance of seeking professional advice on foreign contract law.
The Full Bench of the Federal Court upheld a former South Australian Industrial Relations Commission ruling that two Italian nationals who lodged a claim against the local Italian Consulate for underpayment could have their matters heard in an Australian court, even though they had signed Italian law contracts.
The Adelaide Italian Consulate challenged a South Australian Industrial Relations Judge’s ruling that a Magistrate was correct in ordering the consulate to backpay some wages and long service leave entitlements to the two employees, who made the claim in 2015.
They had been employed in 1998 and 1999 through contracts written in Italian but governed by Australian law. However, a few years later they each signed another document – also written in Italian – electing a full-time contract under Italian law.
In mid-2013, both employees sought other employment after being told the consulate was to close. That decision was reversed but the employees felt compelled to honour their other commitments and gave 22 days’ notice.
It was then that they lodged a claim for underpayment, under the Commonwealth Fair Work Act 2009. The Full Bench decision particularly dealt with whether the Court had the jurisdiction to hear the matter.
No room for error
Carter says foreign contract law is a complex area and the case showed it didn’t always matter in which language an agreement was drafted.
“It is important to understand that any international contracts, whether they be of employment, international sales or distributor agreements, need to be carefully written to protect the interests and outline the responsibilities of all parties to the contract,” Carter said.
The strength and robustness of an agreement was truly tested when things went wrong. The best advice was to seek help from the CCI’s International Trade and Investment Centre (ITIC).
“In international engagement it is imperative that companies firstly seek professional advice from legal firms specialising in international contracts and agreements before signing those contracts,” Carter said.
“An investment now, to ensure that you have covered your legal risk in seeking legal advice on international contracts, will more likely protect your interest in the future.”
The consulate argued that a provision in the Foreign States Immunities Act 1985 prohibited the matter from being heard in an Australian court.
The Full Bench ruled that the IRCSA was correct in its ruling, even though it came to a different reason for decision than the original magistrate.
It said that while the Foreign States Immunities Act 1985 did provide some exemptions to foreign land employers operating in Australia, one section provided for circumstances in which a foreign State will, or may not, be immune from jurisdictions of Australian courts.
In his reasons for the decision, Justice White said while there was an element of convenience in having such disputes heard in an Italian court: “I am unable to agree, however, that it indicates, by implication, an agreement by the parties that such disputes should not be determined in Australian courts.”
He said the Act cited that: “A foreign State, as employer, is not immune in a proceeding in so far as the proceeding concerns the employment of a person under a contract of employment that was made in Australia or was to be performed wholly or partly in Australia.”
The Full Bench of the Federal Court dismissed the Italian Consulate’s appeal, unanimously. Read the case here: Federal Court judgement.