Australia: important arbitration developments in 2009

Practical Law Legal Update 4-501-0582 (Approx. 4 pages)

Australia: important arbitration developments in 2009

Summary of Australian legislation governing arbitration

Australian statute law has until now drawn significant differences between international and domestic arbitration. International arbitration is governed by Commonwealth legislation, the Commonwealth International Arbitration Act (the Commonwealth Act), which is framed around the New York Convention and the UNCITRAL Model Law. Australia's domestic arbitration is governed by separate State and Territory Acts. The State and Territory Acts are quite different to the Commonwealth Act.

As a result of a review of Australia's international arbitration law a Bill has been introduced which will significantly modernise the Commonwealth Act and demonstrates significant support for international arbitration from the Australian Federal Government.

Draft legislation is now also being discussed to bring Australia's domestic arbitration legislation in line with the UNCITRAL Model Law. If passed the legislation will modernise Australian arbitration law and ensure a more streamlined structure.

These developments are occurring while Australia's arbitral bodies are being supported by retired members of the judiciary. This support has also seen the arbitral bodies demonstrate support to endeavour to move closer together.

The Bill to amend the International Arbitration Act

In November 2008, the Federal Attorney General announced a review of Australia's international arbitration law. At the same time the Attorney General introduced into Parliament a Bill to extend jurisdiction over international arbitrations to the Federal Courts. That Bill has now been passed by the Senate but must be returned to the House of Representatives because of changes made in the upper house.

In addition, the government carried out a review of the Commonwealth Act with a view to modernising international arbitration law, and enacting the amendments to the UNCITRAL Model Law. As a result of that review process, the International Arbitration Amendment Bill 2009 was introduced into Federal Parliament on 25 November 2009,to make significant further amendments to the Commonwealth Act. Changes to Australian arbitral law reflected in the Bill include:

A statement of objects including that the purpose of the legislation is to facilitate trade and commerce by encouraging the use of arbitration as a method of resolving disputes. These objects are to be taken into account in performing operations pursuant to the Act. The Bill goes further to provide that in interpreting the legislation, regard is to be had to the fact that arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes; and that awards are intended to provide certainty and finality.
Confirmation for the "avoidance of doubt" that an agreement in writing includes:
- Agreements recorded in any form even if concluded orally.
- Electronic records.
- An exchange of statements of claim and defence.
- Incorporation by reference.
That leave to enforce an award is only to be refused in circumstances reflecting Article V of the New York Convention.
That grounds of public policy, without limiting them, include fraud, corruption and breach of natural justice.
Pursuant to Article 12 (1) of the UNCITRAL Model Law, there are only justifiable doubts of impartiality or independence if there is a real danger of bias in conducting the arbitration.
The Commonwealth Act applies exclusively, meaning that the State and Territory Act will not apply to international arbitrations.
Courts may issue subpoenas to support arbitration.
A party may apply to a Court to assist the arbitral tribunal.
Confirmation that an arbitral tribunal may proceed, in default of appearance, to an award based on the evidence before it.
Statutory provisions clarifying that the arbitration process - including pleadings, evidence and awards - are confidential. Disclosure of such material is presently prohibited in certain circumstances. In effect the new provisions would override the High Court's decision in Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10.
The arbitrator is given power to direct interest on an award, where payment is to be made by a certain date, including setting the rate of interest.
Updating Schedule 2 to the UNCITRAL Model Law as amended on 7 July 2009.

The review considered giving the Federal Courts exclusive jurisdiction over international arbitration. However, the Bill does not do this and State and Federal Courts will continue to both have jurisdiction. Other issues raised in the review have also not been adopted in the Bill.

This is a significant modernisation of Australia's arbitral law and a strong indication of support for arbitration by the Federal Attorney-General.

Changes under discussion for domestic arbitration

Under Australia's Federal Constitutional arrangements there are two tiers of arbitration legislation. Domestic arbitrations, and sometimes international arbitrations, are governed by State and Territory Acts (usually called the Commercial Arbitration Act), which by agreement between the States and Territories are in substantially common form.

The State Acts, first adopted almost 25 years ago, were quite different in form from the Commonwealth Act. However, the Standing Committee of Attorneys General (SCAG), which includes all State and Territory Attorneys General and the Commonwealth Attorney General, have now agreed to develop a Bill that is likely to bring the State Acts largely in line with the Commonwealth Act. To this end, a consultation Bill (which includes similar provisions to the Commonwealth Act (including the amendments under consideration in the review)) has been produced. Some additions and changes will be needed to supplement the UNCITRAL Model Law in the domestic environment to aid the conduct of arbitrations.

Further, the consultation Bill indicates State legislation will make it clear it only applies to domestic arbitrations leaving the Commonwealth Act to apply exclusively to international arbitrations. The Bill seeking to amend the International Arbitration Act has like provisions. Previously international arbitration in Australia could be governed by both the Commonwealth Act and, except to the extent of any inconsistency, the State legislation.

If the consultation Bill becomes law, specific arbitrations will only have one piece of legislation governing them. Further, given their increased commonality, authorities on domestic or international arbitration will more readily be of general assistance in their respective spheres. This will significantly simplify the law of arbitration in Australia and add in developing arbitration jurisprudence in Australia.

The cumulative effect of these amendments

While these are separate amendments to separate pieces of legislation the cumulative effect of these amendments will be to bring about effectively a single arbitration law in Australia based on the current UNCITRAL Model Law. This will assist in making the practice of arbitration in Australia consistent with modern arbitration practice. Australian jurisdictions will become even more attractive as viable seats.

Australian arbitral bodies receive judicial support and move closer together

In 2009, Australia's arbitral bodies have seen strong support from retired justices of Australia's High Court.

The High Court of Australia is the ultimate appellate Court in Australia, hearing appeals from both Federal and State Courts. Its 7 Justices are the highest judicial officers in Australia. Shortly after his retirement from the High Court in February 2009, the Honourable Michael Kirby joined the Council of the Institute of Arbitrators and Mediators Australia (IAMA) and was elected the President of IAMA in May 2009 at IAMA's Annual Conference. The Honourable Michael Kirby also joined the Board of Directors of the Australian Centre for International Commercial Arbitration (ACICA) later in the year.

Retired Chief Justice Murray Gleeson agreed to be the patron of the Australian branch of the Chartered Institute of Arbitrators (CIArb).

The three leading Australian arbitral bodies IAMA, represented by the Honourable Michael Kirby, ACICA and the Australian branch of the CIArb signed a Memorandum of Co-operation in early December 2009 at ACICA's annual conference.

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