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CIArb Features

Arbitration Reforms in Australia

1 June 2017 Features
By Sabina Adascalitei MCIArb, Research and Academic Affairs Coordinator

On 22 March 2017, the Civil Law and Justice Amendment Legislation Bill (“Bill”) was introduced into the upper house of the Federal Parliament.

This omnibus bill purports to amend the International Arbitration Act 1974 as well as other Australian legislation. The International Arbitration Act incorporates the provisions of the UNCITRAL Model Law with the common additions of supplemental provisions.

The proposed amendments aim to clarify aspects which have received inconsistent interpretations and had been applied differently by various courts.

The following changes seem to be most relevant to the international arbitration arena:

  1. “Competent Court”

    This amendment corrects a drafting error dating from 1989, when Part III of the International Arbitration Act gave effect to the Model Law. S 18 does not mention that in addition to the State and Territory Courts, the Federal Court has competence with respect to the Model Law enforcement regime and with regard to the taking of evidence.

    Furthermore, there is no specification about the Federal Court having competence to recognise and enforce interim measures. As noted in the Explanatory Memorandum, this omission “has led to costly and confusing litigation as to which courts have jurisdiction”.

    The Bill seeks to clarify this issue, proposing that both the Federal Court and Australian State and Territory Supreme Courts should be expressly listed as competent courts. In this way, parties will no longer need to rely on the common law to establish jurisdiction.

  2. “Parties to the Award”

    This second amendment seeks to align the provisions of the International Arbitration Act with the New York Convention 1958 by changing the wording of S 8(1) to reflect that foreign awards are binding between the parties to the award, rather than the parties to the arbitration agreement. The Explanatory Memorandum makes reference to two cases to illustrate the inconsistencies.

    In Altain Khuder LLC v IMC Mining Inc & Anor (2011)[1] the Victorian Court of Appeal held that when the award debtor is not expressly named as party to the arbitration agreement, the award creditor may be required to establish that the award debtor is party to the agreement.

    This decision has been criticised mainly because it adds an extra evidential requirement on the award creditor, which is not in line with the New York Convention. This can be seen in the case of Dampskibsselskabet Norden AIS v Beach Building & Civil Group Pty[2], where the Federal Court of Australia was reluctant to follow Altain Khunder and instead noted that the evidential burden was limited to the production of the arbitration agreement and the award.

    The amendment brought by the Bill invalidates the approach in Altain Khunder and essentially removes any additional evidential requirements that may have been required in the past.

  3. Arbitral Tribunal’s Powers to Make a Costs Award

    The Explanatory Memorandum further notes that the current wording of the International Arbitration Act “refers to an arbitral tribunal’s power to make an award as to costs and to tax or settle the amount of costs to be paid and to award costs as between party and party or solicitor and client.

    The references to taxing costs on a party and party or solicitor and client basis are outmoded and inflexible in contrast with current practice in international arbitration.

    This amendment would align Australian practice with international standards and provide Australian arbitral tribunals with more flexibility in making costs awards. It would be a matter for the tribunal to settle an appropriate approach to awarding costs.”

    Therefore, the Bill offers arbitral tribunals more flexibility in making costs awards. The current provision regarding the power to tax or settle the amount being paid will be replaced to reflect the arbitrators’ powers to determine the amount to be paid as well as direct the manner of payment and how the costs shall be borne.

  4. Confidentiality

S 22 of the International Arbitration Act will be amended to exclude the opt-out confidentiality provisions concerning arbitrations seated in Australia. In this sense, the Bill aims to clarify the application of different provisions of the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration.

Australia is not yet party to the Convention, but if the parties choose Australia as their seat of arbitration, S 22 will resolve any conflict between the International Arbitration Act and the Rules on Transparency.

The proposed amendments to the International Arbitration Act seem to resolve certain inconsistencies and uncertainties in the Australian arbitration system and will be most welcome by parties seeking to arbitrate in the jurisdiction.

After being introduced, the Senate referred the Bill to its Legal and Constitutional Affairs Legislation Committee for a report, which will need the approval of the Senate and House of Representatives before it becomes law.

[1] Altain Khuder LLC v IMC Mining Inc & Anor (2011) 282 ALR 717.

[2] Dampskibsselskabet Norden AIS v Beach Building & Civil Group Pty Ltd (2012) 292 ALR 161.