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Focus: New arbitration law for Western Australia

16 September 2013

In brief: New legislation implementing a major overhaul of arbitration law in Western Australia has come into effect. Partner Stephen McComish , Lawyer Kristian Maley, and Law Graduate Emma Cundale report on the Act that brings Western Australia into line with the uniform domestic arbitration law developed by the Standing Committee of Attorneys-General.

How does it affect you?

  • The Commercial Arbitration Act 2012 (WA) – which came into effect on Wednesday, 7 August this year – means parties in Western Australia have greater freedom to tailor their dispute resolution process to suit their particular project or transaction.
  • The risk of delay to, or abuse of, the arbitration process might now be reduced in Western Australia.
  • The arbitration process will have greater finality. There will be less scope for courts to set aside an arbitral tribunal's award, and no right to review on the basis of a 'manifest error of law'.
  • Arbitration practices and principles developed by state and federal courts under the International Arbitration Act 1974 (Cth) (the IAA), and in the markets and courts of other countries, may be more influential in domestic arbitrations in Western Australia. 

Objectives of the Act

The new legislation aims to make commercial arbitration more attractive for the resolution of domestic commercial disputes in Western Australia, by:

  • giving parties more control over the arbitration procedure;
  • reducing unnecessary delay and expense; and
  • enhancing the finality of the arbitration process.

This is reflected in section 1C(1) of the Act, which says that its 'paramount object' is 'to facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense.'

Key changes

The key changes under the new Act relate to the following areas.

Easier enforcement of awards

Enforcement of an award is more straightforward under the new Act. The court does not have a discretion to refuse enforcement of an award: the award 'is to be enforced' by the court if sought by a party (s35(1)). Further, there are now very limited grounds on which the court could refuse the enforcement of an award (s36(1)).

This contrasts with the position under the previous Act where to enforce an award as a judgment it was necessary to obtain the leave of the court (see s33).

Easier enforcement of arbitration agreements

Similarly, if a party ignores an arbitration agreement and goes to court, the court must, upon application of a party, refer the parties to arbitration, unless the court finds that the arbitration agreement is null and void, inoperative, or incapable of being performed (s8(1)).

The burden of proof has shifted: under the previous Act, the party seeking to enforce the arbitration agreement had to prove that 'there is no sufficient reason why the matter should not be referred to arbitration', and that it was 'ready and willing to do all things necessary' for the arbitration (s53(1)).

Again, this adds a degree of additional certainty to parties that their disputes will be resolved in accordance with their arbitration agreement.

Less scope for appeals

The new legislation allows the arbitration process to be final, in that no appeal is possible unless the parties have agreed (which may be stipulated in the arbitration agreement) (s34A). Notably, for parties that do wish to preserve the possibility of appeal, the Act permits them to do so by expressly agreeing that this will be the case. The new Act does away with the rather convoluted appeal mechanism under the previous Act, which provided for appeal on the basis of a legally significant manifest error of law on the face of the record (s38(5)(b)(i)).

Earlier this year, the High Court affirmed the principle of limited court interference in arbitral proceedings (in the context of international arbitration).1 Consequently, there should now be no doubt that the courts will give effect to this principle as reflected in the new Act in accordance with its terms.

Interim measures

Arbitral tribunals now expressly have the power to order interim measures, eg, for security for costs, for discovery or for other procedural matters (s17). An interim measure may be enforced by the court in the same way as an award of the tribunal (s17H). This is a substantial improvement over the previous Act, under which arbitral tribunals had no express power to make such orders.

Confidentiality

The Act provides for arbitration to be confidential unless the parties agree otherwise (s27E). Under the previous Act, an arbitration was not confidential unless the parties agreed.2  

Harder to challenge arbitrators

There is now a much higher threshold to be overcome in challenging the appointment of, or seeking the removal of, an arbitrator. A party seeking to do so must show that there are justifiable doubts as to the impartiality or independence of the arbitrator, ie, there must be a real danger of bias (s12(6)). Under the previous Act, a reasonable perception of bias was sufficient to disqualify an arbitrator on the basis of 'misconduct' (in the technical sense in which that term was used in the Act) (s44).

Background to the reforms

The Act brings Western Australia into line with the uniform domestic arbitration law developed by the Standing Committee of Attorneys-General (SCAG). The SCAG released a consultation draft of the law in May 2009. The uniform law has is now in effect in all states and territories other than the Australian Capital Territory.3  

These reforms bring domestic and international arbitration in Australia substantially in line with one another. The uniform laws are based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration 1985, as revised in 2006 (the Model Law), which is also the basis of the IAA.

The Model Law is a template law developed by UNCITRAL. It is not, however, a convention or a treaty. It now forms the basis of arbitration laws in around 80 countries, including nearly all of the common law states in the Asia-Pacific region (eg, Singapore, Hong Kong, Malaysia and New Zealand).

The Act is based on the 2006 version of the Model Law. However, the complete text of the 2006 revision of the Model Law is not taken up in the Act, and includes certain 'Australian made' additions to the text of the Model Law (known as 'Model Law Plus' provisions).

Influence of international case law

Principles of arbitration law developed by state and federal courts applying the IAA and other states' new Commercial Arbitration Acts, and principles developed in other Model Law countries, are persuasive authority in Western Australia in the interpretation of the new legislation.

Because neither the Commercial Arbitration Act 1986 (WA) nor the Arbitration Act 1996 (UK) are based on the Model Law, the persuasive value of previous Western Australian decisions and English and Welsh court decisions on matters relating to arbitration will be diminished.

The Act's effect

In recent years, domestic arbitration in Australia has been in something of a decline (in marked contrast to international arbitration). Arbitration has been hamstrung by aging legislation, while its judicial competitors have developed increasingly innovative and efficient procedures. The new legislation will change this dynamic and may reinvigorate domestic arbitration in Western Australia.

In summary, for domestic arbitrations in Western Australia, the new legislation will provide:

  • greater certainty and finality;
  • greater party autonomy through choice of arbitral procedure;
  • less court involvement in the dispute process; and
  • hopefully, faster resolution of disputes.

Those doing business in Western Australia can look forward to arbitration once again being a competitive alternative to the court system.

Footnotes
  1. TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia [2013] HCA 5.
  2. Esso Australia Resources Limited v Plowman (1995) 183 CLR 10.
  3. Commercial Arbitration Act 2010 (NSW); Commercial Arbitration (National Uniform Legislation) Act 2011 (NT); Commercial Arbitration Act 2011 (SA); Commercial Arbitration Act 2011 (Vic); Commercial Arbitration Act 2011 (Tas); Commercial Arbitration Act 2013 (Qld).

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