Arbitration law reform and the Arbitration List G of the Supreme Court of Victoria

34 Pages·2010·0.17 MB·English

Arbitration law reform

and the

Arbitration List G of the
Supreme Court of Victoria*

The Hon Justice Clyde Croft
Supreme Court of Victoria

* A paper presented at a discussion night hosted by the Building Dispute Practitioners’ Society Inc and
the Business Law Section of the Law Council of Australia (Construction and Infrastructure Law
Committee) on 5 May 2010.
1. Arbitration law reform 4
Introduction 4
The arbitration framework in Australia and the need for reform 4
The Model Law 5
The International Arbitration Amendment Bill 2009 6
The IAA Bill and the Model Law 6
(a) Writing requirement 6
(b) Interim Measures 7
(c) Model Law covers the field 8
(d) Court or authority for applying the Model Law 9
Enforcement of foreign awards 10
Public Policy 10
Matters to which the court must have regard 11
Optional Provisions 12
(a) Optional Provisions Generally 12
(b) Confidentiality 13
Reasonable opportunity of presenting a case 15
Immunity of arbitrators 15
Commercial Arbitration Amendment Bill 2009 16
Consistency between the CAA and the IAA 16
Paramount object of the Act 17
Scope of application 18
Power to stay court proceedings 18
Equal treatment of parties 18
Statements of claim and defence 19
2
Default of a party 19
Settlement of disputes otherwise than by arbitration 19
Confidentiality 20
Security for costs 20
Determination of preliminary point of law by the Court 20
Recourse against award 20
2. The Arbitration List G of the Commercial Court 22
Conclusion 25
Appendix I 27

3
1. Arbitration law reform1
Introduction
The building and construction industry is well placed to take advantage of the
proposed reforms to the International Arbitration Act 1974 (Cth) (“ the IAA”) and the
Uniform Commercial Arbitration legislation2. The industry has been one of few that
has consistently used arbitration as part of the dispute resolution process. With
significant arbitration expertise already developed by builders, experts, consultants
and lawyers all parties should benefit from improvements to arbitration law.
Before discussing some specific provisions of the International Arbitration
Amendment Bill 2009 (Cth) including the government’s proposed amendments (“IAA
Bill”)3 and the draft Commercial Arbitration Bill 2009 (“CAA Bill”) I would like to
take this opportunity to discuss the arbitration framework in Australia and the need
for reform.
The arbitration framework in Australia and the need for reform
In Australia, international arbitration is governed by the IAA, which adopts (with
amendments) the 1985 version of the UNCITRAL Model Law on International
Commercial Arbitration (“the Model Law”)4 and the United Nations Convention on
the Recognition and Enforcement of Foreign Arbitral Awards.5 Domestic commercial
arbitration is governed by the Uniform Commercial Arbitration legislation and is not
based on the Model Law.

1 I would like to thank David Markham B.Com LLB (Hons) (Monash), my Associate, for his
invaluable assistance in the preparation of this paper.
2 Commercial Arbitration Act 1986 (ACT); Commercial Arbitration Act 1985 (NT); Commercial
Arbitration Act 1984 (NSW); Commercial Arbitration Act 1984 (Vic); Commercial Arbitration Act
1985 (WA); Commercial Arbitration Act 1990 (QLD); Commercial Arbitration Act 1986 (Tas);
Commercial Arbitration and Industrial Referral Act 1986 (SA).
3 The International Arbitration Amendment Bill 2009 (Cth) was referred to the Main Committee by the
House of Representatives on 17 March 2010 and the government has made further proposed
amendments, which for the purpose of this paper, are discussed as part of the bill.
4 United Nations Commission on International Trade Law (UNCITRAL), Model Law on International
Commercial Arbitration 1985 (as adopted by UNCITRAL on 21 June 1985). Adopted by the UN
General Assembly 11 December 1985 (General Assembly Resolution 40/72), with revisions (as
amended by UNCITRAL and adopted on 7 July 2006) adopted by the UN General Assembly on 4
December 2006 (General Assembly Resolution 61/33
5 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, opened
for signature 10 June 1958, 330 UNTS 38 (entered into force 7 June 1959) (“New York Convention”).
4
The IAA has not been significantly reformed since the Model Law was adopted in
1989. Not only is the legislation out of date compared to arbitration law around the
world, but also some judicial decisions interpreting the IAA have diminished
Australia’s arbitration reputation and effectiveness. The need for reform was
recognised by the release of a Discussion Paper by the Commonwealth Attorney-
General.6 This reform process led to the introduction of the IAA Bill into the
Commonwealth Parliament.
The need for updated Uniform Commercial Arbitration legislation is also well
recognised. For example, in February 2009, the Honourable J.J. Spigelman AC, Chief
Justice of the Supreme Court of New South Wales said:7
The focus on commercial arbitration as a form of commercial dispute
resolution has always offered, but rarely delivered, a more cost
effective mode of resolution of disputes. Our uniform legislative
scheme for domestic arbitration is now hopelessly out of date and
requires a complete rewrite. The national scheme implemented in 1984
has not been adjusted in accordance with changes in international best
practice.
The legislation has changed little in 25 years in a time when other jurisdictions have
made significant reforms and improvements. The Standing Committee of Attorneys
General released an Issues Paper and Draft Consultation Commercial Arbitration Bill
in November 2009.
The Model Law
The 2006 version of the Model Law forms the basis of both the IAA Bill and the
CAA Bill. The use of the Model Law as the basis of both the IAA Bill and the CAA
Bill is consistent with the goal of creating a best practice framework for arbitration in
Australia. The Model Law is an internationally drafted and accepted arbitration
regime that is supportive of arbitration. It allows parties the freedom to decide how
they want their disputes resolved with minimal court intervention. The Model Law is
now the arbitration law against which all other arbitration laws are judged.
The choice of the Model Law for both the IAA Bill and the CAA Bill will assist with
achieving a great deal of uniformity between the two regimes. This means that

6 Australian Attorney-General, the Hon Robert McClelland MP ‘Review of the International
Arbitration Act 1974’, November 2008.
7 Opening Of Law Term Dinner, 2009, The Law Society Of New South Wales, Address By The
Honourable J.J. Spigelman AC, Chief Justice Of New South Wales, Sydney, 2 February 2009.
5
expertise developed under one regime will be easily applied to the other. In the case
of international arbitrations, overseas practitioners will be comfortable applying
provisions based on the Model Law. While this paper provides greater comment on
the IAA Bill, practitioners who in the past have only participated in arbitrations under
the CAA will now need to be cognisant of the issues arising under the IAA Bill as the
Model Law underpins both regimes.
The International Arbitration Amendment Bill 20098
While the IAA is already based on the Model Law, the proposed reforms in the IAA
Bill will have a significant positive impact on international commercial arbitration in
Australia. I will discuss the amendments that I believe will have the greatest practical
impact on arbitration in the construction industry and generally.
The IAA Bill and the Model Law
The passage of the IAA Bill will make Australia one of few countries to implement
(with amendments) the 2006 revisions to the Model Law.9
(a) Writing requirement
The 1985 Model Law provides that ‘an arbitration agreement shall be in writing’.10
The writing requirements for an arbitration agreement are relaxed in the 2006 Model
Law where two options are provided for the formal requirements of an arbitration
agreement.11 Option I still requires the arbitration agreement to be in writing, but this
can include a contract that is formed orally (or by other means) and only evidenced in
writing. Option II only requires an agreement between the parties and seemingly
requires no formalities. The IAA Bill adopts Option I. Consequently, an arbitration
agreement must be in writing or evidenced in writing.12 This is a more liberal
approach than the current writing requirement in the IAA and is more liberal than
most of the countries that have not adopted the 2006 Model Law.

8 These comments on the International Arbitration Amendment Bill 2009 (Cth) should be read in
conjunction with the more detailed analysis in Justice Clyde Croft and David Fairlie, ‘The New
Framework for International Commercial Arbitration in Australia’, a paper presented at the conference
International Commercial Arbitration: Efficient, Effective, Economical?, 4 December 2009.
9 Only Mauritius, New Zealand, Peru, Rwanda and Slovenia have implemented the 2006 version. For
current adoption status, see UNCITRAL website:
<www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_status.html>.
10 1985 Model Law, Art 7.
11 2006 Model Law, Art 7.
12 See sub-sections 3(1) and 3(4) of the IAA Bill.
6
Article II of the New York Convention is also important when considering formal
requirements. An award that does not comply with these formal requirements may
suffer difficulties in enforcement as the New York Convention will not apply. Article
II of the New York Convention requires an arbitration agreement in writing. This can
be interpreted in a number of ways, but at its most strict could require a signed written
agreement. Even if this interpretation of the New York Convention is adopted, parties
trying to enforce an arbitration award in Australia based on an arbitration agreement
only evidenced in writing may ask for the more liberal approach in the IAA Bill to be
applied under Article VII(I) of the New York Convention. Article VII(I) allows a
party to rely on a provision of law in the country where enforcement is sought if it is
different to the New York Convention. In the present example, a party could possibly
rely on the more liberal writing requirement.
For construction practitioners, arbitration clauses often form a part of long, detailed,
highly negotiated contracts. Consequently, formal requirements are usually satisfied.
However, issues of formality may be more likely to arise when parties agree,
separately to the main contract, that arbitration will be used.
The CAA Bill also adopts Option I for formal validity. It does not suffer from
complications of enforcement discussed above as the New York Convention does not
apply to enforcement of domestic commercial arbitration awards.
(b) Interim Measures
Interim measures, such as injunctions, are often used to maintain the status quo while
a dispute is being resolved. The IAA currently adopts Article 17 of the 1985 Model
Law, which states that the arbitral tribunal may ‘order any party to take such interim
measure of protection as the arbitral tribunal may consider necessary in respect of the
subject-matter of the dispute.’
The fundamental problem with this provision is that there is no procedure within the
Model Law for a party to have the arbitral tribunal’s interim measure enforced by a
court. Enforcement provisions under the 1985 Model Law only apply to ‘awards’,
which, at the very least, must finally determine some of the issues in dispute. This
enforcement problem can be avoided under the IAA if the parties agree in writing to s
23 of the IAA which applies the court enforcement provisions of Chapter VIII of the
Model Law to interim measures ordered under Article 17.
7
In practice, interim measures ordered by an arbitral tribunal are often complied with
as it is not wise to ignore the arbitral tribunal that is to decide the issues of substance,
and also because the same interim measure can be applied for at a court under Article
9 of the Model Law. The latter option may raise res judicata issues as it puts the court
in the position of having to determine something already dealt with by the arbitral
tribunal. Parties may be better off avoiding this complication and applying directly to
the court, rather than applying to the arbitral tribunal.13 Unfortunately, this means that
parties will not be able to have the entire matter dealt with by an arbitral tribunal.
The 2006 Model Law avoids these complications by the creation of an enforceable
interim measure regime. The IAA Bill adopts all the amendments in relation to
interim measures apart from Article 17B, which gives arbitral tribunals the power to
give ex parte interim measures. Article 17H(1) allows interim measures to be
enforced by a court subject to the limited grounds for refusing enforcement set out in
Article 17I. Written agreement under s 23 (repealed under the IAA Bill) will no
longer be required in order to have enforceable interim measures available.
Section 18B of the IAA Bill prevents arbitral tribunals from making ex parte interim
measure orders, known as preliminary orders, under Article 17B of the Model Law.
The major criticism of ex parte orders in arbitration is that they go against the
consensual nature of arbitration. This criticism may be misguided as Art 17B of the
Model Law is an opt-out provision, which can be excluded by party agreement. If
parties do not wish to have ex parte preliminary orders then, consistently with the
principle of party autonomy, they can exclude them.
The CAA Bill also adopts the 2006 Model Law provisions relating to interim
measures of protection except for ex parte preliminary orders.14
(c) Model Law covers the field
The current s 21 of the IAA allows parties to agree to have their dispute settled in
accordance with a law other than the Model Law. This allows parties to opt out of the
Model Law. The IAA Bill repeals this section with the objective of making it clear

13 Clyde Croft and Bronwyn Lincoln, ‘The role of the courts; enforcement of arbitration awards and
anti-arbitration injunctions’ in K E Lindgren (ed) International Commercial Litigation and Dispute
Resolution (2010) 76.
14 CAA Bill, 17A-17G.
8
that when parties choose arbitral rules they are not automatically opting out of the
operation of the Model Law. In other words arbitral rules and the Model Law can
coexist. This clarification was made necessary by the decision in Eisenwerk v
Australian Granites Ltd [2001] 1 Qd R 461.
However, by repealing s 21 of the IAA the IAA Bill may undesirably compromise
party autonomy by not allowing parties to opt out of the Model Law in favour of
another law. Parties wishing to conduct an international commercial arbitration in
Australia may want to apply another law or rely on a set of arbitration rules which
exclude the Model Law. There seems little reason to inhibit them from doing this. In
some situations such a choice will create an extra level of complexity, but arbitrators
in international arbitrations are often required to apply laws from more than one
country and from a variety of sources.
Section 21 of the IAA Bill makes it clear that when the IAA applies to an arbitration
the State and Territory acts have no residual operation.
(d) Court or authority for applying the Model Law
Courts are given certain functions under the Model Law. The functions includes the
appointment of arbitrators (Arts 11(3) to (4)), the removal of arbitrators (Arts 13(3)
and 14), decisions on arbitral jurisdiction (after the tribunal has already decided) (Art
16(3)) and the setting aside of arbitral awards (Art 34(2)). Under s 18 of the IAA Bill
these functions can be performed by the relevant state or territory Supreme Court or
by the Federal Court of Australia. This gives parties a choice of forum and will place
pressure on the courts to provide efficient court procedures. As discussed below,15
List G of the Commercial Court in the Victorian Supreme Court is designed to
provide an efficient and expeditious service in support of commercial arbitration;
domestic and international. It has been argued that giving jurisdiction to multiple
courts will create inconsistency in interpretation of national legislation. This should be
able to be avoided by courts having regard to the interpretation provisions of the IAA
in the context of the international character of the Model Law, and by the
establishment of specialist arbitration lists.

15 See below, pages 22 to 25.
9
There is provision in s 18 IAA Bill for an authority to be prescribed for the purpose of
appointing arbitrators. No authority has been prescribed, but it is a step towards the
systems in place in the popular arbitration centres of Hong Kong16 and Singapore.17
The drafting in Section 18 of the IAA Bill means that, without further clarification,
the courts and the appointed authority will have concurrent jurisdiction to appoint
arbitrators. It is uncertain how this would work in practice. If a body like Australian
Centre for International Commercial Arbitration (“ACICA”) is to be appointed there
will need to be a transparent system of arbitrator selection so that parties can have
confidence in the process. In my opinion, courts are not necessarily best placed for
deciding which arbitrator will be best suited to a particular dispute. It is a decision
best left to the parties themselves or, in the absence of agreement, a professional body
like ACICA, which has a greater knowledge of arbitrators and their expertise.
Enforcement of foreign awards
The IAA Bill states that an award can only be enforced in a court of a State or
Territory (s 8(2)), or in the Federal Court (s 8(3)) ‘with leave of the Court’. Section
8(3A) of the IAA Bill states that leave can only be refused if subsections (5) or (7)
apply. These subsections are based on Article 34(2) of the Model Law and Article V
of the New York Convention. I am pleased to note that there are proposed
amendments to the IAA Bill that remove the words ‘with the leave of that court’ in ss
8(2) and 8(3), and also ‘leave’ in s 8(3A). The only basis upon which a court can
refuse enforcement of a foreign award is on a ground or grounds set out in subsections
8(5) and 8(7). Removing the requirement for leave will remove the possibility of there
being a general or extra discretion to refuse enforcement absent the application of the
grounds set out in sub-ss 8(5) and 8(7). It is hoped that these amendments are
accepted in the final version of the IAA Bill.
Public Policy
Under subparagraphs 34(2)(b)(ii) and 36(1)(b)(ii) of the Model Law an award may be
set aside or refused enforcement, respectively, if an award is in conflict with public
policy. Section 19 of the current IAA states that:

16 The Hong Kong International Arbitration Centre is appointed under section 34C(3) Arbitration
Ordinance (Hong Kong).
17 The Chairman of the Singapore International Arbitration Centre is appointed under Article 8(2)
International Arbitration Act (Singapore).
10