Australia: Reviling or Reviving Arbitration ?

These questions are currently receiving a deal of attention from politicians and distinguished practitioners¹ as a result of the recent tabling of the International Arbitration Amendment Bill 2009 which proposes amendments to the International Arbitration Act 1974 (Cth) (IAA) as well as a proposed new model Bill to reform the uniform commercial arbitration legislation adopted by each State and Territory to regulate domestic commercial arbitration.

The UK Experience

In the Arbitration Act 1996 the UK has an Act governing both international and domestic arbitration which is widely considered one of the most advanced in the world. One of its governing principles is that of party autonomy – the ability of parties to fashion their own procedure. However, this advanced legislation has done nothing to stem the decline of arbitration at the hands of adjudication. This is not withstanding the perceived deficiencies of adjudication such as the souring of client relationships².

The Australian proposals

Presently in Australia, international arbitration is based on the UNCITRAL Model Law. However domestic arbitration is governed in each State and Territory by commercial arbitration legislation. In itself this is not a bad thing but the history of interpretation of that legislation and the advantages of consistency as in the UK, suggest the importance of a uniform framework for arbitration, domestic and international.

Submissions on international arbitration to the Federal Attorney-General led to the International Arbitration Amendment Bill 2009.

Further, in a step we see as moving towards a more uniform framework, the Standing Committee of Attorneys General (SCAG) has also decided that the UNCITRAL Model Law should be adopted by State and Territory legislation for domestic arbitration.

There are, however, important points to note about this.

The most important of these is the removal of the right to party autonomy where the parties seek to agree on a process inconsistent with the overriding principles of SCAG's proposals.

The overriding principles on which the SCAG proposals hang are:

• The principal purpose of commercial arbitration is to provide a quicker, cheaper and less formal method of finally resolving disputes and litigation. Accordingly, the legislation reforming domestic arbitration should reflect this principle and aim.
• The proposed State and Territory legislation should, noting the Commonwealth's current review of the IAA, be drafted consistently with the IAA to the greatest extent possible to ensure genuinely harmonised systems for international and domestic arbitration.

In Australia to date, parties have been free to devise their procedure subject, however, to the supervisory jurisdiction of the courts. There have been conflicting judicial pronouncements about the breadth of this supervision leaving arbitrators uncertain as to what extent they are required to mimic court procedures to ensure that their decisions are upheld³.

The result of all this has been that in some Australian jurisdictions commercial litigation has become cheaper, safer and often quicker although commercial litigation itself has run a slow second to adjudication.

The proposed reform of domestic arbitration will strike at party autonomy and supervisory jurisdiction.

Promptly and effectively implemented, this judicial reform may yet raise domestic arbitration, like Lazarus, to new life. Creating a more uniform framework for commercial arbitration, the proposed reforms to the IAA will establish Australia as a key centre for international arbitration.

1. See JJ Spigelman 'Address at the Opening of the Law Term Dinner 2009 Law Society of New South Wales' 2 February 2009 http://www.lawlink.nsw.gov.au/lawlink/Supreme_Court/ ll_sc.nsf/vwFiles/Spigelman020209.pdf/$file/Spigelman020209.pdf; DS Jones 'International Dispute Resolution in the Global Financial Crisis' IAMA Conference, Melbourne 29-31 May 2009, www.dougjones.info/publications; Commonwealth Attorney-General's Department media release on progress of Uniform Commercial Arbitration Regulation, 6 November 2009, http://www.attorneygeneral.gov.au/www/ministers/mcclelland.nsf/Page/MediaReleases_2009_FourthQuarter_6November2009-ProgressonUniformCommercialArbitrationRe gulation; and ACICA conference to be held on 4 December 2009 in Melbourne, 'International Commercial Arbitration: Efficient, Effective, Economical?', http://www.iama.org.au/pdf/ ACICA.pdf.

2. On the proposals for the reform of adjudication see the UK's 'Local Democracy, Economic Development and Construction Bill', February 2008, http://www.publications.parliament. uk/pa/ld200809/ldbills/002/09002.i-v.html. The principal changes contemplated by the Bill are that all construction contracts whether wholly oral or only partly evidenced in writing will be caught by the Housing, Grants, Construction and Regeneration Act, that any attempt to agree the costs of an adjudication (including the fees and expenses of the adjudicator) will be ineffective unless the agreement is made in writing after service of the adjudication notice and that contracts must include a written provision permitting the adjudicator to correct clerical or typographical errors in the adjudicator's decision: see 'Changes to the Construction Act: D Cordery 2009 Constr. L.J. Vol. 25(8) 684'. Is domestic arbitration dying? Will it suffer death at the hands of adjudication? Can legislative reform revive it?

See South Australian Superannuation Fund Investment Trust v Leighton Contractors Pty Ltd (1996) 66 SASR 509 compared with Promenade Investments Pty Ltd v New South Wales (1991) 26 NSWLR 184 and Leighton Contractors Pty Ltd v Kilpatrick Green Pty Ltd [1992] 2 VR 505.

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