Dnata Airport Services Pty Ltd v Polar Air Cargo Worldwide, Inc [2026] NSWCA 105

Dnata Airport Services sought to move Polar Air's contractual cross-claims out of court and into arbitration under Article 9 of the International Air Transport Association (IATA) Standard Group Handling Agreement (SGHA). Polar Air had brought those cross-claims after a Dnata employee sued it over a cargo-unloading injury. The New South Wales Court of Appeal granted leave but dismissed Dnata's appeal: Article 9 allowed arbitration only if both parties chose arbitration and agreed on the process; Dnata's unilateral election created no arbitration agreement under section 7(2) of the International Arbitration Act 1974 (Commonwealth).

Background

Dnata provided ground cargo handling at Sydney Airport for Polar Air, a United States cargo airline, under the Standard Group Handling Agreement. The Main Agreement came from IATA's standard form and contained Article 9, headed "Arbitration".

The underlying court proceeding began with Mr Iosefa, a Dnata employee, suing Polar Air in negligence after he alleged an injury while unloading a Polar Air Boeing 747 freighter. Polar Air then brought third-party cross-claims against Dnata for breach of the SGHA and contractual indemnity. Dnata answered by seeking a stay of those contractual cross-claims in favour of arbitration.

Article 9 required the parties first to make reasonable efforts to resolve a dispute themselves. It then said the parties "may elect" arbitration. Its third sentence sent any failed-consensus dispute to the nominated law and courts. The parties accepted that the contractual cross-claims fell within Article 9 and that Polar Air's negligence cross-claim did not. The live question was whether Article 9 bound the parties to arbitrate once Dnata elected arbitration.

The Court's Decision

Chief Justice Bell, with Justice of Appeal Kirk and Justice of Appeal McHugh agreeing, held that Article 9 required mutual choice. The words "the parties may elect" meant both parties, because Article 9 used "the parties" in the same sense in its first and third sentences and the wider agreement used "either party" when the drafter meant one party acting alone. Dnata's solicitor's election did not bind Polar Air to arbitrate.

The court also relied on the missing arbitral machinery. Article 9 left all core arbitral machinery unresolved. It named no institution or rules. It also left the seat, language, appointment mechanism, appeal position, and tribunal power over jurisdiction unsettled. That absence made unilateral arbitration hard to reconcile with the clause, especially because Dnata's reading would let the first electing party choose the size of the arbitral panel.

On contractual construction, the court applied Australian Broadcasting Commission v Australasian Performing Rights Association and Westfield Management Ltd v AMP Capital Property Nominees Ltd for the rule that courts read a clause in the whole agreement. It distinguished Canadian National Railway v Lovat Tunnel Equipment Inc because that clause lacked Article 9's third sentence, which directed litigation when no arbitration process attracted mutual agreement.

Dnata also argued that "the dispute" in the third sentence meant only a procedural dispute about the arbitration process. The court rejected that reading. The same phrase referred to the substantive dispute throughout Article 9; the contract and general law supplied no workable criteria for a court to design the arbitral process; and Dnata's construction would force the parties through court over procedure before sending them back to arbitration on the merits.

For the agreement-to-agree line, the court considered King v Brandywine Reinsurance Co (UK) Ltd, Commercial Union Assurance Co Plc v NRG Victory Reinsurance Limited, and Re McNamara Construction of Ontario Ltd v Brock University. Those authorities supported the narrower point that permissive arbitration wording can require further consent before any binding reference to arbitration arises. The court confined broad-construction authorities such as Global Partners Fund Limited v Babcock & Brown Limited to scope disputes; this appeal concerned whether any arbitration agreement existed at all.

Result

The Court of Appeal granted leave because the clause formed part of an international standard agreement used in aviation ground handling. It dismissed the appeal with costs. Article 9's heading and reference to arbitration did useful work, but only as permission for both parties to arbitrate if they later agreed. The clause did not bar litigation when consensus on arbitration was absent.

The line from the case is narrow. A clause can mention arbitration, sit under an arbitration heading, and still leave arbitration dependent on later mutual consent. Parties who want either side to compel arbitration need text that grants that power expressly and enough arbitral machinery to make the choice operative.