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Client Update: Legislative amendments to support international arbitration in Australia

16 December 2009

In brief: Amendments to clarify the operation of the International Arbitration Act 1974 and support the practice of international arbitration in Australia have been introduced into Federal Parliament. Partner Stephen McComish (view CV), Special Counsel Nicola Nygh (view CV) and Lawyer Dr Sam Luttrell look at the amending legislation.

The amending Bill

The International Arbitration Amendment Bill 2009 (the Bill) proposes to update the International Arbitration Act 1974 (Cth) (the IAA) by adding provisions from the 2006 revision of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration 1985 (the Model Law). A set of non-Model Law (Model Law Plus) provisions, intended to clarify the operation of the IAA and support the practice of international arbitration in Australia, will also be added.

If it passes in its current form, the Bill will:

  • empower arbitral tribunals to grant interim measures of protection necessary to preserve a party's rights while the arbitration is on foot;
  • simplify the way Australian courts assist arbitral tribunals to take evidence, such as by granting subpoenas to give oral evidence and produce documents;
  • make it easier to progress an arbitration where a respondent refuses to participate; and
  • narrow the grounds on which the enforcement of a foreign arbitral award may be refused for offence to public policy under Article V(2)(b) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention).

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The Model Law

The Model Law is a template national law that was drafted in consultation with UNCITRAL member states. The Model Law aims to give the parties maximum procedural freedom and restrict the circumstances in which national courts can intervene in arbitral proceedings. It has been adopted by nearly 50 countries, including nearly all of the common law states of the Asia Pacific region. The first version of the Model Law was settled in 1985, and the template was revised by UNCITRAL in 2006. The 2006 version of the Model Law includes an expansion of the definition of 'agreement in writing' (Article 7, Option 1) and detailed rules for the granting of interim measures of protection (Chapter IV(A)).

The Model Law is given force of law in Australia by IAA Part III and, currently, the 1985 text forms Schedule II to the IAA. The Bill proposes to implement the 2006 version of the Model Law.

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Model Law Plus provisions

The Bill includes a number of 'Australian made' Model Law Plus provisions. The origins of these unique articles lie in two broad categories: the first category is the jurisprudence of international arbitration; the second is Australian common law. The Model Law Plus provisions of the Bill include:

  • a definition of the limited circumstances in which enforcement of a foreign arbitral award may be refused for offence to public policy (section 7A of the Bill), the text of which is consistent with the enforcement jurisprudence of the courts of New York Convention member states;
  • the adoption of a 'real danger' test for bias challenges to arbitrators, which will replace the 'reasonable apprehension of bias' test applicable at common law and make it harder to launch challenges to arbitrators in international disputes (s18A of the Bill);
  • a clarification that the Model Law applies to international arbitrations in Australia to the exclusion of the Commercial Arbitration Acts in each state (s21 of the Bill), directed at addressing the decision in Eisenwerk1, where it was held that the adoption of arbitral rules constituted opting out of the Model Law;
  • rules for the granting of subpoenas to give oral and documentary evidence (s23 of the Bill);
  • rules that parties can adopt to protect the confidentiality of information created for, or adduced as, evidence in an international arbitration (s23C of the Bill), informed by the decision of the High Court in Esso Australia Resources Ltd v Plowman2; and
  • more detailed rules regarding the awarding of costs (s27 of the Bill).

The Bill adopts many of the proposals made in the discussion paper released by the Attorney-General in November 2008 (see our Focus: Attorney-General announces review of International Arbitration Act, December 2008). However, some proposals have not been adopted, including:

  • giving the Federal Court exclusive jurisdiction for all matters arising under the IAA. Instead, the Federal Court will have concurrent jurisdiction with state and territory Supreme Courts; and
  • authority for functions such as the appointment of, and challenge to, arbitrators has not been shifted from the courts to an arbitral institution.

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Comments

If it is passed in its current form, the Bill will significantly improve the legal framework for international arbitration in Australia, both in the way Australian-seated arbitrations are supervised, and the way foreign arbitral awards are enforced in Australian state and federal courts. While the Model Law Plus provisions are sure to attract a good deal of attention from the international arbitration community, it remains to be seen whether or not these improvements achieve the Government's policy objective of making Australia a hub for international arbitration.

Footnotes
  1. Eisenwerk v Australian Granites Ltd [2001] 1 Qd R 461.
  2. (1995) 128 ALR 391.

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