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Australia has a long-standing tradition of embracing arbitration as a means of alternative dispute resolution. While on a domestic level this is reflected by court-annexed and compulsory arbitration prescribed for certain disputes, arbitration has become equally common in international disputes. Traditionally, arbitration was largely confined to areas such as building and construction. However, the strong and steady growth of the Australian economy over the past decade and the opening of the Asian markets in the mid-1990s have further advanced the use of arbitration in other areas, particularly the energy and trade sectors.
Arbitration in Australia has experienced significant growth in recent years. This can be attributed to the growing familiarity, on behalf of legal practitioners and their clients, with the importance and advantages of international arbitration. While the increasing use of arbitration, in conjunction with other forms of ADR, has not had a dramatic effect in terms of reducing litigation, industry attitudes suggest that arbitration is increasingly being relied on as the preferred dispute resolution mechanism.
Since 2010, changes to the Australian arbitration landscape both internationally and domestically have helped to develop Australia as an attractive hub for international arbitration, and have put Australia at the forefront of international arbitration practice. Amendments to the International Arbitration Act 1974 (Cth) (IAA) and the introduction of the new Commercial Arbitration Acts (collectively referred to as the CAAs) represent a new dawn for arbitration in Australia. Coupled with the pro-arbitration approach taken by Australian courts, Australia is well positioned to keep pace with international standards and user expectations, and is ready to grasp the growing opportunities that arbitration has to offer.
Arbitration law reforms in Australia
In July 2010 the International Arbitration Amendment Act 2010 (Cth) (Amendment Act) introduced some major amendments to Australia’s international arbitration legislation. The intention behind the amendment was to ensure that the IAA remains at the forefront of international arbitration practice, and to develop Australia’s status as a major centre for international arbitration.
The Amendment Act introduced many significant changes to the IAA. Principally, the 2006 version of the UNCITRAL Model Law on International Commercial Arbitration (Model Law) has now replaced the 1985 version as the applicable law under the IAA. As such, the provisions on the enforcement of interim measures to which parties could previously opt-in under the IAA became obsolete and were therefore repealed. The enforcement of interim measures is now covered by article 17H of the Model Law.
There were a number of other noteworthy amendments to the IAA. For example, the repeal of the former section 21 of the IAA, which allowed the parties to agree to resolve their dispute ‘other than in accordance with the Model Law’. Under the revised IAA, such contracting-out of the Model Law is no longer possible. The primary reason for this was to create certainty and consistency in the application of Australian arbitration law and to avoid any further confusion arising from the infamous decision of the Queensland Court of Appeal in Eisenwerk Hensel Bayreuth Dipl-Ing Burkhardt GmbH v Australian Granites Ltd  1 Qd R 461 (Eisenwerk). Eisenwerk is the authority for the proposition – under the old IAA – that where the parties selected the ICC Rules of Arbitration, they had contracted out of the Model Law. As a result, the domestic arbitration legislation of the states and territories, the largely uniform Commercial Arbitration Acts, would have applied. More recently, in Cargill International SA v Peabody Australia Mining Ltd  NSWSC 887, the New South Wales Supreme Court held that the decision in Eisenwerk was ‘plainly wrong’.
Reforms have also taken place on a domestic arbitration level. In early 2010, the standing committee of attorneys-general agreed to introduce uniform arbitration legislation in all states and territories based on the 2006 Model Law. This was a significant step forward in modernising Australia’s domestic arbitration legislation and bringing domestic arbitration legislation into alignment with the federal system (that is, the IAA). The transition to arbitration under the Model Law has also meant that practitioners of domestic arbitration in Australia have been able to transfer their procedural skills to the 60-plus foreign jurisdictions where the Model Law is in force. For the parties involved in arbitration, these amendments have increased the efficiency of the arbitral process, which has translated into greater cost and time savings. The current progress of the CAAs through the Australian states and territories is as follows:
|Passed and in operation
|Passed but not yet in operation
|Victoria: Commercial Arbitration Act 2011 (VIC)
|Western Australia: Commercial Arbitration Act 2012 (WA)
|Australian Capital Territory: yet to introduce a bill into parliament
|Victoria: Commercial Arbitration Act (Vic) 2011
|South Australia: Commercial Arbitration Act (SA) 2011
|Northern Territory: Commercial Arbitration (National Uniform Legislation) Act 2011 (NT)
|Tasmania: Commercial Arbitration (Consequential Amendments) Act 2011 (TAS)
|Queensland: Commercial Arbitration Act 2013 (QLD)
Unlike the IAA, the CAAs include confidentiality provisions, which apply unless the parties specifically opt out, and allow for an appeal from the arbitration award if certain preconditions are met. Another significant change under the CAAs was that the exercising of the courts’ power to stay court proceedings in the presence of an arbitration agreement was made compulsory, removing the courts’ discretion to stay proceedings that was previously available.
Following these amendments to the IAA, the Commonwealth Parliament further entrenched the use of ADR processes through the enactment of the Civil Dispute Resolution Act 2011 (Cth). The purpose of the Act is to ‘ensure that, as far as possible, parties take “genuine steps” to resolve a civil dispute before proceedings are commenced in the Federal Court or the Federal Magistrates Court’. The Act provides a non-exhaustive list of examples of ‘genuine steps’, which includes participation in arbitration, mediation or direct negotiations. The Act is an explicit recognition by Parliament that litigation should be a last resort in resolving disputes, rather than the first port of call.
Institutional arbitration in Australia: ACICA
The Australian Centre for International Commercial Arbitration (ACICA) is Australia’s premier international arbitration institution. Following the successful launch of the ACICA Arbitration Rules (ACICA Rules) in 2005, ACICA has more recently revised its Expedited Arbitration Rules (ACICA Expedited Rules), which were first published in late 2008. The ACICA Expedited Rules aim to ‘provide arbitration that is quick, cost-effective and fair, considering especially the amounts in dispute and complexity of issues or facts involved’ (article 3.1 of the ACICA Expedited Rules). Furthermore, ACICA has adopted an opt-in approach for these rules, requiring parties to explicitly select them (rather than the ACICA Rules) in their arbitration agreement.
ACICA has also updated its Arbitration Rules to include a set of ‘Emergency Arbitrator’ provisions which are found in schedule 2 of the ACICA Rules. These new provisions enable the appointment of an ‘emergency arbitrator’ in arbitrations that have commenced under the ACICA Rules but have not yet had a tribunal appointed. Therefore, by accepting ACICA arbitration, parties not only accept arbitration according to the ACICA Rules, but also agree to be bound by the emergency rules and any decision of an emergency arbitrator. The power of the emergency arbitrator applies to all arbitrations conducted under the ACICA Rules unless the parties expressly opt out of it in writing.
Also included in recent amendments to the ACICA Rules are new provisions for ‘Application for Emergency Interim Measures of Protection’. These provisions, also found in Schedule 2, provide that the emergency arbitrator may grant any interim measures of protection on an emergency basis that he or she deems necessary and on such terms as he or she deems appropriate. Such emergency interim measures may take the form of an award or of an order which must be made in writing and which must contain the date when it was made and reasons for the decision. These emergency procedures generally follow the same approach as the ACICA Rules on interim measures and will not prejudice a party’s right to apply to any competent court for interim measures.
Both these provisions came into force on 1 August 2011 and have provided businesses with a prompt and efficient option for obtaining urgent interlocutory relief in their cross-border disputes before an arbitral tribunal is constituted.
On 2 March 2011, the International Arbitration Regulations 2011 (Cth) came into force, prescribing ACICA as the sole default appointing authority competent to perform the functions under article 11(3) and 11(4) of the Model Law which deal with the appointment of arbitrators. This means that ACICA will, from time to time, be asked to appoint arbitrators to international arbitrations seated in Australia, where the parties have not agreed upon an appointment procedure or where their appointment procedure fails. This landmark development removed the requirement for parties to commence proceedings in one of the state or territory supreme courts, or in the federal court to have an arbitrator appointed under the IAA.
In giving effect to its appointment as sole appointing authority, ACICA adopted the ACICA Appointment of Arbitrators Rules 2011 in March 2011 which establish a streamlined process through which a party can apply to have an arbitrator appointed to a dispute seated in Australia. A board comprising representatives of the attorney-general, the chief justices of the High Court and the Federal Court of Australia, the president of the Australian Bar Association, the president of the Law Council of Australia and other industry representatives will oversee the appointment process. ACICA has ensured that the process will take place efficiently and that a nomination will be made without delay.
More recently, ACICA entered into a cooperation agreement with the Australian International Disputes Centre (AIDC), from which it operates at a new venue in Sydney. The AIDC was established in 2010 with the assistance of the Australian government and the government of the State of New South Wales. The centre houses leading ADR providers, which, in addition to ACICA, include the Chartered Institute of Arbitrators (CIArb) Australia, Australian Maritime and Transport Arbitration Commission (AMTAC) and the Australian Commercial Disputes Centre (ACDC). The AIDC is a one-stop shop offering full ADR services working to ensure ADR processes deliver benefits of efficiency, certainty, expediency, enforceability and commercial privacy. The AIDC is available for ACICA, PCA, ICC, ICDR, LCIA, CIETAC, HKIAC, SIAC, AAA or any other arbitrations, mediations or other processes. In addition to state-of-the-art hearing facilities, the AIDC also provides all the necessary business support services, including case management and trust account administration provided by skilled and professional staff.
In April 2007, AMTAC was officially launched by ACICA. With approximately 12 per cent of world trade by volume either coming into or going out of Australia by sea, the country is in a position to take a leading role in domestic and international maritime law arbitration. AMTAC is committed to using the ACICA Expedited Arbitration Rules for maritime proceedings conducted under its auspices. The facilitative role of AMTAC complements and is complemented by the role of the Australian courts in providing sure, reliable and impartial means to resolve disputes that arise in international trade.
Primary sources of arbitration law
Legislative powers in Australia are divided between the Commonwealth of Australia, as the federal entity, and the six states. Furthermore, there are two federal territories with their own legislatures.
Matters of international arbitration are governed by the IAA which, as mentioned above, underwent a revision in 2010 to incorporate the 2006 Model Law. The Model Law provides for a flexible and arbitration-friendly legislative environment, granting parties ample freedom to tailor the procedure to their individual needs. The adoption of the Model Law has also provided users with a high degree of familiarity and certainty as to the operation of those provisions, making it an attractive choice.
The IAA supplements the Model Law in several respects. Division 3, for example, contains provisions on the parties’ right to obtain subpoenas, requiring a person to produce certain documents or to attend examination before the arbitral tribunal. While these provisions apply unless the parties expressly opt out, there are other provisions – such as those dealing with confidentiality or consolidation of proceedings – which only apply if the parties expressly opt in. Another helpful provision is section 19, which clarifies the meaning of the term ‘public policy’ for the purpose of articles 34 and 36 of the Model Law.
Part II of the IAA implements Australia’s obligations as a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention). Australia acceded to the New York Convention without reservation and it extends to all external territories. Australia is also a signatory to the ICSID Convention, the implementation of which is contained in part IV of the IAA.
Domestic arbitration has traditionally been a matter of state law and is governed by the relevant commercial arbitration acts of each state or territory where the arbitration takes place. Following amendments made in 1984 and 1993, the commercial arbitration acts of the states and territories are largely uniform and are thus commonly referred to as the ‘Uniform Acts’. As mentioned above, the commercial arbitration acts are currently undergoing significant reforms. With the vast majority of states and territories having passed or in the course of passing the new legislation, the CAAs will ensure that Australia has a largely consistent domestic and international arbitration regime based on the Model Law.
In the following paragraphs, any reference to the ‘Uniform Acts’ is therefore a reference to the domestic arbitration regime currently still in operation in Western Australia (which has passed but is yet to enforce the new legislation) and the Australian Capital Territory (which is yet to introduce a bill into parliament). Reference to the newly enacted commercial arbitration acts in all other states and territories will be referred to as the ‘CAAs’.
For international arbitrations in Australia, both the Model Law and the New York Convention require the arbitration agreement to be in writing. While article II(2) of the New York Convention states that an ‘agreement in writing’ shall include an arbitral clause in a contract or an arbitration agreement signed by both parties or contained in an exchange of letters or telegrams, the Model Law is more expansive in its definition. Article 7 of the Model Law provides that an ‘arbitration agreement is in writing if its content is recorded in any form that provides a record of the agreement, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means’. Under the IAA, the term ‘agreement in writing’ has the same meaning as under the New York Convention.
Similarly, domestic arbitrations under both the Uniform Acts and the CAAs require an arbitration agreement to be in writing. However, in contrast to the Uniform Acts, the CAAs adopt the more expansive definition contained in article 7 of the Model Law. Additionally, the CAAs provide that an arbitration agreement can be evidenced through electronic communication or in an exchange of statements of claim and defence, or incorporated by reference in a contract to any other document containing an arbitration clause.
In the landmark decision of Comandate Marine Corp v Pan Australia Shipping  FCAFC 192, the Federal Court confirmed its position that an arbitration clause contained in an exchange of signed letters is sufficient to fulfil the written requirement. However, as the Federal Court of Australia pointed out in its decision in Seeley International Pty Ltd v Electra Air Conditioning BV  FCA 29, ambiguous drafting may still lead to unwanted results. In that case, the arbitration clause included a paragraph providing that nothing in the arbitration clause would prevent a party from ‘seeking injunctive or declaratory relief in the case of a material breach or threatened breach’ of the agreement. The Federal Court interpreted that paragraph to mean that the parties intended to preserve their right to seek injunctive or declaratory relief before a court. The court was assisted in its interpretation by the fact that the agreement also included a jurisdiction clause.
Under Australian law, arbitration agreements are not required to be mutual. They may confer a right to commence arbitration to one party only (see PMT Partners v Australian National Parks & Wildlife Service  HCA 36). Some standard form contracts, particularly in the construction industry and the banking and finance sector, still make use of this.
The issue of which disputes are arbitrable has not yet been fully resolved. Particularly in relation to competition, bankruptcy and insolvency matters, courts have occasionally refused to stay proceedings, without expressly holding that these matters are inherently not arbitrable. Instead, most court decisions have considered whether the scope of the arbitration agreement is broad enough to cover such a dispute (see, for example, ACD Tridon Inc v Tridon Australia  NSWSC 896) in respect of claims arising under the Corporations Act 2001 (Cth).
Considerations such as these commonly arise in relation to the Competition and Consumer Act 2010 (Cth), (formally known as the Trade Practices Act 1974 (Cth) (TPA)), Australia’s competition and consumer protection legislation. In IBM Australia v National Distribution Services (1991) 22 NSWLR 466, the New South Wales Court of Appeal held that certain consumer protection matters under the TPA are capable of settlement by arbitration. Further, the New South Wales Supreme Court in Francis Travel Marketing v Virgin Atlantic Airways (1996) 39 NSWLR 160, and the Federal Court in Hi-Fert v Kiukiang Maritime Carriers (1998) 159 ALR 142, confirmed that disputes based on misleading and deceptive conduct under section 52 of the TPA are arbitrable.
However, in Petersville v Peters (WA) (1997) ATPR 41-566 and Alstom Power v Eraring Energy (2004) ATPR 42-009, the Federal Court took a slightly different position. It held that disputes under part IV of the TPA for anti-competitive behaviour are more appropriately dealt with by the court, irrespective of the scope of the arbitration agreement. These decisions show that courts may be reluctant to allow the arbitrability of competition matters and may seek to preserve the courts’ jurisdiction to hear matters that have a public dimension.
An increasingly common issue faced by the courts is that which arises when multiple claims are brought by one party, only some of which are capable of settlement. So far, the courts have approached this issue by staying court proceedings only for those claims it considers capable of settlement by arbitration (see Hi-Fert v Kiukiang Maritime Carriers (1998) 159 ALR 142).
There are very limited circumstances in which a third party who is not privy to the arbitration agreement may be a party in the arbitral proceedings. One situation in which this can occur is in relation to a parent company where a subsidiary is bound by an arbitration agreement, though this exception is yet to be finally settled by Australian courts. There is, however, authority suggesting that a third party can be bound by an arbitration agreement in the case of fraud or where a company structure is used to mask the real purpose of a parent company (see Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449).
However, under the revised IAA, courts now have the power to issue subpoenas for the purpose of arbitral proceedings, requiring a third party to produce to the arbitral tribunal particular documents or to attend for examination before the arbitral tribunal (section 23(3) of the IAA).
Similarly, under the CAAs, a party may obtain a court order compelling a person to produce documents under section 27A. The Uniform Acts also allowed parties to approach the court to obtain subpoenas, to require a person to attend for examination before the arbitrator, or to produce documents to the arbitrator. These powers remain, but a party now requires approval of the arbitral tribunal before approaching the court.
The arbitral tribunal
Appointment and qualification of arbitrators
Australian laws impose no special requirements with regard to the arbitrator’s professional qualifications, nationality or residence. However, arbitrators must be impartial and independent. Article 12 of the Model Law requires arbitrators to disclose any circumstances likely to give rise to justifiable doubts as to their impartiality or independence. This duty continues throughout the arbitration. The revised IAA, under section 18A, supplements the justifiable doubt test required by articles 12(1) and (2) of the Model Law by stating that a justifiable doubt as to the arbitrator’s impartiality or independence exists only where there is ‘a real danger of bias on the part of [the arbitrator] in conducting the arbitration’.
Where the parties fail to agree on the number of arbitrators to be appointed, section 10 of the CAAs provides for a single arbitrator to be appointed while section 6 of the Uniform Acts and article 10 of the Model Law provide for the appointment of a three-member tribunal. The appointment process for arbitrators will generally be provided in the institutional arbitration rules, or within the arbitration agreement itself. For all other circumstances, article 11 of the Model Law and sections 11 and 8 of the CAAs and Uniform Acts, respectively, prescribe a procedure for the appointment of arbitrators.
Where the parties have not agreed upon an appointment procedure, or where their appointment procedure fails, parties are able to seek the appointment of arbitrators for international arbitrations from ACICA in its capacity as sole appointing authority. This provides parties with a timely and cost-effective means of appointing arbitrators as they do not need to resort to the courts. Pursuant to article 11(5) of the Model Law, any appointment made by ACICA is unreviewable by a court, further reducing the potential for delays or increased costs. ACICA also has more experience and knowledge of arbitrators than the courts such that it is best placed to appoint an appropriate person.
Furthermore, the emergency arbitrator provisions found in schedule 2 of the ACICA Rules enable the appointment of an emergency arbitrator in arbitrations commenced under the ACICA Rules, but only before the case is referred to an arbitral tribunal. The emergency procedure calls for ACICA to use its best endeavours to appoint the emergency arbitrator within one business day of its receipt of an application for emergency relief. The arbitrator will be selected to the extent possible from ACICA’s panel of arbitrators, based on his or her expertise and immediate availability. While the Rules make no provision for the parties themselves to choose the emergency arbitrator, they do not preclude ACICA from appointing a person selected by the parties.
It should be noted that the arbitration law in Australia does not prescribe a special procedure for the appointment of arbitrators in multiparty disputes. If multiparty disputes are likely to arise under a contract, it is advisable to agree on a set of arbitration rules containing particular provisions for the appointment of arbitrators under those circumstances, such as those found under article 11 of the ACICA Rules.
Challenge of arbitrators
For arbitrations under the IAA and the CAAs, a party can challenge an arbitrator if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality and independence. The parties are free to agree on a procedure for challenging arbitrators. Failing such agreement, article 13(2) of the Model Law and section 13 of the CAAs prescribe the procedures for international arbitrations and domestic arbitrations respectively. These are substantially the same: initially the party must submit a challenge to the tribunal, but may then apply to a competent court if the challenge has been rejected.
Mirroring the provisions in the IAA, under section 12 of the CAAs, it will be harder to remove arbitrators because of a perceived lack of independence and impartiality, as any challenge to an arbitrator will need to demonstrate that there is a ‘real danger’ that the arbitrator is biased. This replaces the previous test, which required only a ‘reasonable apprehension of bias’ to be established.
For domestic arbitrations under the Uniform Acts, courts have exclusive jurisdiction to remove arbitrators. Pursuant to section 44 of the Uniform Acts, any party can make an application to the court to remove an arbitrator or umpire where it is satisfied that there has been misconduct by the arbitrator; undue influence has been exercised in relation to the arbitrator; or an arbitrator is unsuitable or incompetent to deal with the particular dispute. Also, its involvement in the appointment of an arbitrator does not bar a party from later alleging the arbitrator’s lack of impartiality, incompetence or unsuitability for the position (section 45 of the Uniform Acts).
Power of arbitrator to act as mediator, conciliator or other non-arbitral intermediary
Like the Uniform Acts, the CAAs contain provisions under section 27D to facilitate med-arb, a process whereby an arbitrator may act as a mediator or conciliator or other ‘non-arbitral intermediary’ in order to try and resolve the dispute. Med-arb may occur if the arbitration agreement provides for it or the parties have consented to it. Under the CAAs, an arbitrator who has acted as a mediator in mediation proceedings that have been terminated may not conduct subsequent arbitration proceedings in relation to the dispute, unless all parties to the arbitration consent in writing.
Liability of arbitrators
The CAAs, at section 39; the Uniform Acts, at section 51; and the IAA, at section 28 all provide that arbitrators are not liable for negligence in respect of anything done or omitted to be done in their capacity as arbitrators. But they remain liable for fraud. This is also reflected in article 44 of the ACICA Rules. There are no known cases where an arbitrator has been sued in Australia. In addition, an entity that appoints, or fails or refuses to appoint, a person as an arbitrator is also not liable in relation to the appointment if it acted in good faith (section 28(2) of the IAA).
The arbitral procedure
The principle of party autonomy is generally held in high regard by Australian tribunals. As a result of this, arbitral procedure tends to vary significantly according to the particulars of the dispute and the needs of the parties involved.
Under Australian law, parties are generally free to tailor the arbitration procedure to their particular needs, provided they comply with fundamental principles of due process and natural justice. Party autonomy is a fundamental principle of the Model Law and, subject to certain mandatory requirements, parties are free to determine the procedure to govern the arbitration (article 19 of the Model Law). The most significant limitation on party autonomy is the requirement of article 18 of the Model Law that parties be treated with equality and afforded a reasonable opportunity of presenting its case. This cannot be derogated from by the parties’ agreement and applies to domestic arbitrations as well as to international arbitrations.
The relevant law governing procedure for international arbitrations is the IAA. The procedural provisions of the IAA are not extensive, and largely accommodate party autonomy by operating on an opt-out basis. For domestic arbitration, the relevant legislation is the CAAs, with the exception of the Uniform Acts for Western Australia and the Australian Capital Territory.
Australian courts have a strong history of supporting the autonomy of arbitral proceedings. Courts will generally interfere only if specifically requested to do so by a party or the tribunal, and only where the applicable law allows them to do so.
The courts’ powers under the Model Law and therefore under the IAA, are very restricted. However, courts may:
- grant interim measures of protection (article 17J of the Model Law);
- appoint arbitrators where the parties or the two party-appointed arbitrators fail to agree on an arbitrator (articles 11(3) and 11(4) of the Model Law);
- decide on a challenge of an arbitrator if so requested by the challenging party (article 13(3) of the Model Law);
- decide, upon request by a party, on the termination of a mandate of an arbitrator (article 14 of the Model Law);
- decide on the jurisdiction of the tribunal, where the tribunal has ruled on a plea as a preliminary question and a party has requested the court to make a final determination on its jurisdiction (article 16(3) of the Model Law);
- assist in the taking of evidence (article 27 of the Model Law); and
- set aside an arbitral award (article 34(2) of the Model Law).
In addition to those functions prescribed in the Model Law, courts have additional powers specified under provisions of the IAA. These include, for example, the power to issues subpoenas pursuant to section 23 of the IAA, as discussed above.
With regard to domestic arbitration under the Uniform Acts, courts have some additional powers, including discretion to stay proceedings (section 53 of the Uniform Acts) and power to review an award for errors of law (section 38 of the Uniform Acts).
Section 5 of the CAAs makes it clear that there is no scope for the court to intervene except in circumstances provided for under the Act, which include:
- applications by a party to set aside or appeal against an award (sections 34 and 34A of the CAAs);
- where there is a failure to agree on the appointment of an arbitrator, the court may appoint an arbitrator at the request of a party (section 11 of the CAAs);
- deciding on a challenge to an arbitrator (section 13 of the CAAs);
- terminating the mandate of an arbitrator who is unable to perform the arbitrator’s functions (section 14 of the CAAs);
- reviewing an arbitral tribunal’s decision that it has jurisdiction (section 16 of the CAAs); and
- making orders in relation to the costs of an abortive arbitration (section 33D of the CAAs).
With regard to arbitrations under the Model Law, the arbitral tribunal is generally free to make any interim orders or grant interim relief as it deems necessary in respect of the subject matter of the dispute. Article 9 states that it is not incompatible with the arbitration agreement for a party to request, before or during arbitral proceedings, interim measures from a court and for a court to grant such measures. Since the 2006 Model Law has been incorporated into the IAA, the position with respect to the courts’ power to grant interim measures in support of foreign arbitration has been clarified. Article 17J of the Model Law now states that a court has the power to order interim measures ‘irrespective of whether [the seat] is in the territory of this State’. Likewise, courts now also have the power to enforce interim measures issued by a foreign arbitral tribunal (article 17H of the Model Law).
Under section 14 of the Uniform Acts, the arbitrator has the freedom to conduct the arbitration as he or she sees fit. In particular, section 23 allows the arbitrator to make interim awards unless the parties’ intention to the contrary is expressed in the arbitration agreement. Furthermore, section 47 confers on the court the same powers to make interlocutory orders for arbitral proceedings as it has with regard to court proceedings.
The CAAs contain detailed provisions dealing with interim measures in Part 4A. Similar to the provisions under the Uniform Acts, section 19 of the CAAs allows the arbitral tribunal the freedom to conduct the arbitration in such manner as it considers appropriate and section 17 allows the tribunal to make interim awards unless the parties express an intention to the contrary. The added advantage of the CAAs is that there will be a mechanism for the recognition and enforcement of interim measures by the courts. The courts will be obliged to enforce an interim measure granted in any state or territory, except in limited circumstances. Furthermore, the parties may ask the court to order interim measures in relation to arbitration proceedings. The CAAs make clear that it is not incompatible with an arbitration agreement for a party to request an interim measure of protection from a court.
Stay of proceedings
Provided the arbitration agreement is drafted widely enough, Australian courts will stay proceedings in the face of a valid arbitration agreement. For domestic arbitrations which operate under the Uniform Acts, section 53(2) provides that a stay application must be made before the party has delivered pleadings or taken any other steps in the proceedings, other than the filing of an appearance, unless it is with the leave of the court. In contrast, section 8 of the CAAs gives greater primacy to the arbitration agreement. So long as there is an arbitration agreement which is not null or void, inoperative or incapable of being performed, the court must refer the parties to arbitration. There is no scope for the court to exercise discretion not to enforce an arbitration agreement.
For international arbitrations, Australian courts support the autonomy of international arbitration and will stay court proceedings in the presence of a valid arbitration agreement broad enough to cover the dispute, if the subject matter of the dispute is arbitrable (section 7(2) of the IAA). Applications for stay are limited to those types of arbitration agreements listed in section 7(1) of the IAA. The primary purpose of this section is to ensure that a stay of proceedings is not granted under the New York Convention for purely domestic arbitrations. Pursuant to section 7(5) of the IAA, courts will refuse a stay only if they find the arbitration agreement is null, void, inoperative, or incapable of being performed. The courts may impose such conditions as they think fit in respect of the order to stay court proceedings.
Similarly, article 8 of the Model Law mandates a stay of proceedings where there is a valid arbitration agreement. A party must request the stay before making its first substantive submissions. Although the issue of the relationship between article 8 of the Model Law and section 7 of the IAA has not been definitively settled by the courts, the prevailing opinion among arbitration practitioners is that a party can make a stay application under either of the two provisions (this also seems to be the position of the Federal Court in Shanghai Foreign Trade Corporation v Sigma Metallurgical Company (1996) 133 FLR 417).
The IAA is expressly subject to section 11 of the Carriage of Goods By Sea Act 1991 (Cth), which renders void an arbitration agreement contained in a bill of lading or similar document relating to the international carriage of goods to and from Australia, unless the designated seat of the arbitration is in Australia. Furthermore, there are statutory provisions in Australia’s insurance legislation (section 43 of the Insurance Contracts Act 1984 (Cth) and section 19 of the Insurance Act 1902 (NSW)) that render void an arbitration agreement unless it has been concluded after the dispute has arisen. A decision by the New South Wales Supreme Court clarified that this limitation applies to both insurance and reinsurance contracts (HIH Casualty & General Insurance Limited (in liquidation) v Wallace (2006) NSWSC 1150). A similar provision is also contained in section 7C of the Home Building Act 1989 (NSW).
There is much greater flexibility with regard to legal representation in international arbitrations than there is in domestic arbitrations. Under section 29(2) of the IAA, a party may either represent itself or choose to be represented by a duly qualified legal practitioner from any legal jurisdiction or, in fact, by any other person it chooses.
For domestic arbitrations governed by the Uniform Acts, however, the requirements are more restrictive. Section 20(1) of the Uniform Acts sets out a comprehensive list of circumstances and requirements under which a party may be represented in arbitral proceedings. While the provision is broad enough to also allow representation by a foreign legal practitioner in certain circumstances, representation by a non-legal practitioner is very limited.
Mirroring the IAA, section 24A of the CAAs provides no restrictions on representation allowing parties to be represented by another person of their choice. There is no equivalent provision in the Model Law.
Confidentiality of proceedings
In the past, Australian courts have taken a somewhat controversial approach to confidentiality of arbitral proceedings. In the well-known decision in Esso Australia Resources v Plowman (1995) 183 CLR 10, the High Court of Australia held that while arbitral proceedings and hearings are private in the sense that they are not open to the general public, that does not mean that all documents voluntarily produced by a party during the proceedings are confidential. In other words, confidentiality is not inherent in the fact that the parties have agreed to arbitrate. However, the court noted that it is open to the parties to agree that documents are to be kept confidential. The IAA now includes provisions dealing in detail with the confidentiality of different aspects of the arbitration proceedings (sections 23C-G of the IAA). In particular, the provisions deal with circumstances in which confidential information may be disclosed and the process for such disclosure, as well as the power of the courts and the tribunal to allow or prohibit disclosure under certain circumstances. Since these provisions operate on an opt-in basis, it is advisable to agree to their application in the arbitration agreement if confidentiality is to be preserved.
As the Uniform Acts do not contain any confidentiality provisions, the common law position will apply to domestic arbitrations seated in Western Australia and the Australian Capital Territory. In contrast, the CAAs contain provisions in sections 27E to 27F that prohibit the disclosure of confidential information about arbitral proceedings, except in limited circumstances (identical to those circumstances provided for under the IAA) and where the parties have agreed otherwise. Domestic courts are also empowered to review orders of the arbitral tribunal prohibiting or allowing the disclosure of confidential information.
Evidentiary procedure in Australian arbitrations is largely influenced by the common law system. Arbitrators in international and domestic arbitration proceedings are not bound by the rules of evidence, and may determine the admissibility, relevance, materiality and weight of the evidence with considerable freedom (article 19(2) of the Model Law and section 19(3) of both the CAAs and the Uniform Acts).
Although arbitrators enjoy great freedom in the taking of evidence, in practice arbitrators in international proceedings will often refer to the IBA Rules on the Taking of Evidence (IBA Rules). The ACICA Rules also suggest the adoption of the IBA Rules in the absence of any express agreement between the parties and the arbitrator.
The situation is slightly different with regard to domestic arbitrations. Despite the liberties conferred by section 19(3) of both the CAAs and the Uniform Acts, many arbitrators still conduct arbitrations in a manner not dissimilar to court proceedings: namely, witnesses are sworn in, examined and cross-examined. Nevertheless, there has been some development lately, and more arbitrators are adopting procedures that suit the particular circumstances of the case and allow for more efficient proceedings.
For arbitrations governed by the IAA, article 27 of the Model Law allows an arbitrator to seek the court’s assistance in the taking of evidence. In such case, a court will usually apply its own rules for the taking of evidence.
Form of the award
The proceedings are formally ended with the issuing of a final award. While neither the Model Law, the CAAs nor the Uniform Acts prescribe time limits for delivery of the award, there are certain form requirements that awards must meet. According to article 31 of the Model Law, an award must be in writing and signed by at least a majority of the arbitrators. It must contain reasons; state the date and place of the arbitration; and be delivered to all parties to the proceedings. This date will be relevant for determining the period in which a party may seek recourse against the award.
The form requirements for domestic awards are similar. The award needs to be in writing; be signed by the arbitrators; and contain reasons (section 31 of the CAAs and section 29 of the Uniform Acts). Unlike the Uniform Acts, wherein there is no express requirement for the award to state the date and place of the arbitration, the CAAs do make such a requirement (section 31 of the CAAs). Under the Uniform Acts, the parties may also choose for the award to be delivered orally, with a subsequent written statement of reasons and terms by the arbitrator (section 29 of the Uniform Acts). With regard to the content of the award, there are currently no restrictions as to the remedies available to an arbitrator. Whether the award of exemplary or punitive damages is admissible, however, is yet to be tested in Australia.
As mentioned above, there are no statutory time limits in either domestic or international proceedings for the making of an award. Under the Uniform Acts, where an arbitration agreement itself contains a time limit to this effect, a court would have the power to extend the time limit (section 48(1) of the Uniform Acts). The effect of such a time limit in proceedings under the IAA is not settled. According to article 32 of the Model Law, delays in rendering an award do not result in the termination of the arbitral proceedings. Instead, one option is for a party to apply to a court to decide on the termination of the arbitrator’s mandate (article 14(1) of the Model Law), on the basis that he or she is ‘unable to perform his function or for any other reason fails to act without undue delay’.
Under article 29 of the Model Law, any decision of the arbitral tribunal shall be made by a majority of its members. In contrast, the Uniform Acts provide that the decision of a presiding arbitrator shall prevail if no majority can be reached (section 15 of the Uniform Acts). Both the Model Law and the CAAs allow a similar power of the presiding arbitrator, though only with regard to procedural matters (article 29 of the Model Law and section 29 of the CAAs).
Recourse against award
Most important to a party that is unhappy with the outcome of the arbitration is whether it is possible to appeal or set aside the award. The only available avenue for recourse against international awards is to set aside the award (article 34(2) of the Model Law). The grounds for setting aside an award mirror those for refusal of enforcement under the New York Convention, and essentially require a violation of due process or a breach of public policy. The term ‘public policy’ in article 34 of the Model Law is qualified in section 19 of the IAA and requires some kind of fraud, corruption or breach of natural justice in the making of the award. The Model Law does not contemplate any right to appeal for errors of law.
The Uniform Acts allows for broader means to challenge an award. An appeal to the Supreme Court is possible on any question of law (section 38(2) of the Uniform Acts) with either the consent of all parties or where the court grants special leave (section 38(4) of the Uniform Acts). However, the Supreme Court will not grant leave unless it considers the determination of the question of law concerned to substantially affect the rights of one or more parties to the arbitration agreement. Furthermore, the court must be satisfied that there is a manifest error of law on the face of the award or strong evidence exists that the arbitrator made an error of law and that the determination of that question may add substantially to the certainty of commercial law (section 38(5) of the Uniform Acts). Guidance as to how a court might interpret these provisions can be taken from Giles v GRS Constructions (2002) 81 SASR 575 and Pioneer Shipping v BTP Tioxide  AC 724, though in some regards the latter case has been criticised in more recent decisions.
In the recent decision in Westport Insurance Corp v Gordian Runoff Ltd  HCA 37 (Westport), the High Court of Australia reinterpreted the test of ‘manifest error of law on the face of the award’ as required under the Uniform Acts, and held that all that is required is that the error appear on the face of the award and the error be apparent to the understanding of the reader. The majority judgment held that ‘an error of law either exists or does not exist; there is no twilight zone between the two possibilities’ and disagreed that ‘answers given by arbitrators upon difficult questions of law, which had been open to competing arguments, did not qualify as errors of law’. This represents a radical departure from the previous formulation under the Uniform Acts.
The judgment in Westport also considered the standard of reasons required from arbitral tribunals, confirming that an arbitrator’s failure to provide adequate reasons may itself constitute an error of law and give rise to an award being appealed. This decision represents a significant departure from previous authorities which required arbitrators to be held to the standard of reasons of judges (Oil Basins Ltd v BHP Billiton Ltd  VSCA 255). From a practical perspective, this decision limits the grounds for challenging an award and recognises the importance of finality and efficiency in arbitration.
Under section 40 of the Uniform Acts, all the aforementioned rights to appeal may be excluded by the parties by way of an exclusion agreement, subject to the limitations set out in section 41 of the Uniform Acts. Further recourse is available under section 42 of the Uniform Acts in the form of setting aside the award on the grounds that the arbitrator misconducted the proceedings or the award has been improperly procured.
With regard to the position under the CAAs, an award is to be set aside on identical grounds as article 34 of the Model Law. Additionally, and in contrast to the IAA, section 34A of the CAAs allows an appeal of the award under limited circumstances. An appeal on a question of law is only possible with the leave of the court or if the parties agree to the appeal before the end of the appeal period. Further, the court must be satisfied that all of the following requirements are satisfied:
- the determination of the question will substantially affect the rights of one or more of the parties;
- the question is one which the arbitral tribunal was asked to determine;
- the decision of the tribunal on the question is obviously wrong (or is one of general public importance); and
- despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.
Often, the most crucial moment for a party that has obtained an award is the enforcement stage. Australia has acceded to the New York Convention without reservation. It should be noted, however, that the IAA creates a quasi-reservation in that it requires a party seeking enforcement of an award made in a non-Convention country to be domiciled in, or to be an ordinary resident of, a Convention country. So far no cases have been reported where this requirement was tested against the somewhat broader obligations under the New York Convention, and, given the ever-increasing number of Convention countries, the likelihood that this requirement will become of practical relevance is decreasing.
Section 8 of the IAA implements Australia’s obligations under article V of the New York Convention and provides for foreign awards to be enforced in the courts of a state or territory as if the award had been made in that state or territory and in accordance with the laws of that state or territory. However, section 8 of the IAA only applies to awards made outside Australia. For awards made within Australia, either article 35 of the Model Law for international arbitration awards, or section 35 of the CAAs or section 33 of the Uniform Acts for domestic awards, applies.
Under the 2010 amendments to the IAA, Parliament neglected to confer any court with such an express power to enforce international arbitral awards made in Australia, referring only to a ‘competent court’ being required. This requirement was recently clarified in TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd  FCA 21, where the Federal Court of Australia held that it has jurisdiction to enforce international arbitral awards made in Australia. This the position was reinforced in the corresponding appeal case of TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia & Anor  HCA 5, where the High Court of Australia confirmed the Federal Court’s jurisdiction.
Recently, the Federal Court’s decision in Uganda Telecom Pty Ltd v Hi Tech Telecom Pty Ltd  FCA 131 reinforced the finality of arbitral awards and Australia’s pro-enforcement policy by holding that there is no general discretion to refuse enforcement; and the public policy ground for refusing enforcement under the Act should be interpreted narrowly and should not give rise to any sort of residual discretion.
From an Australian perspective, the opening of foreign markets, especially in Asia, is also increasing the significance of the protection of foreign direct investment under the International Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 (ICSID Convention). While the number of investment arbitrations with Australian participation is expected to increase significantly over the next decade, the level of awareness about the different options of investment protection available under investment treaties still needs to be raised.
Australia is currently a party to 23 bilateral investment treaties (BITs) and six free trade agreements (FTAs), with a further nine being negotiated. Australia has entered into FTAs with New Zealand, Chile, the United States, Malaysia, Singapore and Thailand, and is a party to the ASEAN–Australia–New Zealand FTA that came into effect in 2010. Further FTAs are currently under negotiation with China, India, Japan, Korea, Indonesia and the Gulf Cooperation Council, in addition to the Pacific Agreement on Closer Economic Relations (PACER) Plus, the Regional Comprehensive Economic Partnership and the Trans-Pacific Partnership Agreement.
Some of Australia’s FTAs contain investment protection provisions similar to those commonly found in BITs. For example, section B of chapter 10 of the Australia–Chile FTA contains detailed provisions on investor-state dispute settlement. Where a dispute between a party and an investor is not resolved by negotiations and consultations, the investor may refer the investment dispute to arbitration under the ICSID Convention, the ICSID Additional Facility Rules, the UNCITRAL Arbitration Rules or under any other arbitration rules. The procedures and remedies available under the Australia–Chile FTA are significantly broader than those included in the existing BIT between Australia and Chile and represents the most comprehensive outcome in trade negotiations since the Closer Economic Relations Trade Agreement with New Zealand in 1983.
While most of Australia’s existing BITs designate investor-state dispute settlement for the resolution of disputes arising under these treaties, in a trade policy statement released in April 2011, the Australian government stated that it would no longer include provisions providing for investor-state dispute settlement in future BITs and FTAs. While the lack of substantive safeguards may deter foreign investors from investing in Australia, the government has signalled that it will continue to support the principle of national treatment. This will ensure that foreign and domestic businesses are treated equally under the law and are not precluded from obtaining protections for investments in Australia.