2026 Australian Arbitration Week Recap: It's Not Me, It's You. Repudiatory Breach of the Arbitration Agreement, English and Australian Law
October 17, 2026
Contractual parties sometimes attempt to manipulate a counterparty into a repudiatory breach of the arbitration agreement, often as a means of exiting an unfavourable contract. These tactics were the focus of discussion at It's Not Me, It's You. Repudiatory Breach of the Arbitration Agreement, English and Australian Law, a panel discussion hosted by Johnson Winter Slattery and 39 Essex Chambers during Australian Arbitration Week on 14 October 2026. The discussion included:
Moderator: Swee Im Tan (39 Essex Chambers)
Welcome: Robert Johnston (Partner, Johnson Winter Slattery)
Speakers:
- Lee Carroll (Partner, Johnson Winter Slattery)
- Ben Olbourne (Barrister, 39 Essex Chambers)
The session was conversational and interactive, with Mr Olbourne and Ms Carroll trading cases from English and Australian law perspectives and fielding questions from the floor throughout. At one point, the discussion turned to whether the peanut butter at the heart of Kraft v Bega was smooth or crunchy. Beneath the humour lay a serious tension: an arbitration agreement is, as Mr Olbourne remarked, “ultimately just a contract in itself."
Breach Does Not Always Amount to Repudiation
A repudiatory breach is a breach of contract that goes to the centre of the contract and gives the innocent party the right to treat the contract as being disregarded, entitling the innocent party to refuse to be bound by its terms.
Commencing court proceedings despite an operative arbitration agreement can amount to repudiatory breach if the party no longer intends to be bound by that agreement. That intention, as the panel agreed, will be found only in clear and unequivocal conduct. It follows that a party with a credible or genuine reason for going to court is unlikely to have repudiated.
Mr Olbourne considered whether other types of conduct could amount to repudiation, including ignoring a notice of arbitration, refusing to pay one's share of the institutional deposit, walking away after losing on jurisdiction, and defying a disclosure order. He concluded that none of these would likely amount to repudiation.
English Perspective
Mr Olbourne began with a case study from an unpublished ICC arbitration involving a Chinese constructor and a Pakistani owner.
The claim arose from a settlement agreement containing a widely drafted arbitration clause. For several years, the Chinese constructor sought payment from the Pakistani owner under the settlement agreement, but the Pakistani party never responded: it did not reject, dispute, or otherwise engage with the demands. Advised by local Pakistani counsel that this silence meant there was no “dispute” under the settlement agreement, the Chinese constructor brought the claim as a debt in the Pakistani courts, expressly acknowledging the arbitration agreement but asserting it did not apply because there was no dispute, only non-payment. The Pakistani party appeared and sought a stay or dismissal based on the arbitration agreement, and the Pakistani court stayed the proceedings in favour of London arbitration. The Chinese constructor appealed the stay but, on the advice of newly instructed English counsel, instead commenced ICC arbitral proceedings. In response, the Pakistani party challenged the Tribunal’s jurisdiction, arguing that the Chinese constructor had repudiated the arbitration agreement by suing in Pakistan.
The Tribunal held that commencing the Pakistani proceedings was a breach of the arbitration agreement, which was not disputed, but not a repudiatory breach, because the Chinese constructor had referred to the arbitration agreement, accepted that it was valid and operative, and advanced a genuine, if barely arguable, justification for why it did not apply.
Australian Perspective
Ms Carroll discussed the recent Supreme Court of New South Wales (“Supreme Court”) case of Elecnor Australia Pty Ltd v Clough Projects Australia Pty Ltd [2025] NSWSC 610 which considered whether the commencement of court proceedings was repudiatory of the arbitration agreement. The decision was appealed and the judge on appeal upheld the primary judge’s conclusion on repudiation (Clough Projects Australia Pty Ltd v Elecnor Australia Pty Ltd [2026] NSWCA 111 at [106]-[109]).
The case concerned a joint venture deed between Elecnor and Clough for a high-voltage transmission project between New South Wales and South Australia, with a tiered dispute resolution clause culminating in ICC arbitration seated in Singapore.
After Clough failed to satisfy an obligation to provide security and entered voluntary administration, Elecnor sought to acquire its interest for $1 under the deed's compulsory acquisition machinery. Clough rejected the offer, and Elecnor brought proceedings in the Supreme Court. Clough cross-claimed, and Elecnor sought to stay that cross-claim in favour of arbitration. As Ms Carroll emphasised, the compulsory acquisition dispute was not purely private: it could not be resolved without deciding how the deed of company arrangement and Part 5.3A of the Corporations Act 2001 (Cth) operated. Elecnor had not, therefore, repudiated, waived, or abandoned the arbitration agreement by going to court. The cross-claim was stayed, but no part of Elecnor's main proceedings were.
Applicable Law
The discussion pivoted to the doctrine of separability. Separability means that repudiation of the main contract does not necessarily repudiate the arbitration agreement, and whether the latter has been repudiated is governed by its own proper law.
Ms Carroll began the discussion by noting that whether the arbitration agreement has been repudiated is a question that is answered by application of the law of the arbitration agreement, which may be different from the law of the main contract. She added that when drafting and reviewing arbitration agreements, she ensures there is a “separate express choice of the proper law of the arbitration agreement, in addition to the proper law of the main contract.”
But what happens when there is an absence of express choice? Is it the law of the seat, or is it the law of the main contract?
In the absence of an express choice, the outcome may depend on which institutional rules the parties happened to select.
In Australia, Article 27.4 of the ACICA Arbitration Rules 2021 (“ACICA Rules”) provides that “[t]he law of the seat shall be the governing law of the arbitration agreement, unless the parties have expressly agreed otherwise and that agreement is not prohibited by an applicable law.”
In England, Section 6A of the Arbitration Act 1996, inserted by the Arbitration Act 2025, establishes a new default statutory rule for determining the law applicable to an arbitration agreement. Where the parties do not expressly choose a law for the arbitration agreement, it is governed by the law of the seat of the arbitration. This is a departure from the common law position established in Enka Insaat Ve Sanayi A.S. v OOO Insurance Company Chubb [2020] UKSC 38.
Whilst the ACICA Rules provide guidance on the position in Australia, the discussion turned to the audience, noting that Australia does not yet have a statutory default rule equivalent to Section 6A. Some advocated for Australia to adopt a similar approach to England, while others favoured Australia taking its own path in terms of legislative approach.
Anti-Arbitration Injunctions
Ms Carroll progressed the discussion to anti-arbitration injunctions, specifically the case of Kraft Foods Group Brands LLC v Bega Cheese Limited [2018] FCA 549 (“Kraft Foods”).
Bega and Kraft were parties to a Master Licence and Ownership Agreement (“Agreement”) governed by New York law. The dispute resolution clause provided for mediation followed by New York-seated arbitration. Three separate sets of proceedings were brought:
- In September 2017, Kraft invoked the dispute resolution clause and issued a notice of dispute under the Agreement regarding ownership of the peanut butter trade dress (i.e., the product's overall look and packaging that identifies its source to consumers), then brought proceedings in New York to com- pel Bega to mediate and, if necessary, arbitrate.
- In November 2017, Kraft sued Bega in the Federal Court of Australia (“Court”), alleging that Bega's advertisements claiming Kraft peanut butter "is now Bega peanut butter" were misleading or deceptive under Section 18 of the Australian Consumer Law.
- In February 2018, Kraft commenced an ICDR arbitration seeking declarations and damages for breach of the Agreement. By then, it had already taken the Australian case through pleadings, discovery, and a defence to Bega's cross-claim.
Bega applied to the Court to restrain the arbitration, and the Court granted an anti-arbitration injunction, finding a substantial degree of overlap between the New York arbitration and the Court proceedings.
The case illustrates an Australian court restraining a foreign-seated international arbitration under its implied power to protect the integrity of its own processes, as defined in the case CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345, which Bega relied on. Two points were decisive: the party seeking to arbitrate had chosen to litigate the overlapping issues in court itself, and parallel proceedings risked inconsistent findings.
Damages
Lastly, the panel turned to costs and damages.
Mr Olbourne noted that under English law, damages for breach of an arbitration agreement are now well established and usually comprise the costs of the foreign proceedings. Those costs may be recovered either in the foreign court or as damages in the arbitration, but not both, as this would amount to double recovery.
Ms Carroll provided input on the Australian perspective noting that the position is less settled. Where a party sues in breach of an arbitration agreement and the proceedings are stayed, the other party should normally get its costs on an indemnity basis, because those costs are its loss from the breach (Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10 (S) and Sino Dragon Trading Ltd v Noble Resources International Pte Ltd (No 2) [2015] FCA 1046).
Key Takeaways
The following lessons emerge:
- Ordinary contract law applies: an arbitration agreement is ultimately a contract, and normal contract law principles, including repudiation, apply notwithstanding the specialised nature of arbitration practice.
- Notify parties: a party taking action that disregards the arbitration clause should notify the other party.
- Intention not to be bound: commencing court proceedings despite an operative arbitration agreement is repudiatory only where it is established that the party no longer intends to be bound by the arbitration agreement.
- Clear and unequivocal conduct: such an intention will only be found or inferred from conduct that is clear and unequivocal.
- Drafting: careful consideration should be given at the drafting and review stages to whether two governing law clauses are preferable.
In most cases, the counterparty's "it's not me, it's you" will not end the relationship.
More coverage from the Australian Arbitration Week is available here.
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