This article was first published in Volume 33, Part 4, October 2016 ( ICLR 413) of the International Construction Law Review.
The International Construction Law Review, published by Informa Law, is the leading authority on construction law, with each issue examining important developments worldwide. For more, visit https://www.i-law.com/ilaw/construction.htm
Recent amendments to arbitration legislation in Australia have increased the demand for arbitration. Those amendments were directed to various matters, but importantly they were designed to increase certainty in the finality of arbitral awards by restricting the right to appeal, and to strengthen the confidentiality obligations associated with arbitrations.
These amendments have been greeted with significant enthusiasm by the commercial community, in particular those involved in the construction of major projects. In the past five years, in excess of AUD200 billion has been spent on a range of energy and resources projects. As those projects reach completion, disputes are becoming apparent. Many will be resolved by arbitration. The scale and complexity of these disputes are unprecedented in Australian legal history. Many claims exceed AUD1 billion. However, court processes are ill-equipped to deal with them.
There are many reasons parties choose to arbitrate. The most often cited are the ability to select an arbitrator with the requisite expertise, confidentiality, the adoption of a process that is more efficient than court processes and finality.
An unintended side-effect of the increase in arbitration is the corresponding reduction in litigation, and as a consequence, new case law. There is a growing concern that this decrease in new jurisprudence is stunting the development of the common law. This problem is particularly pronounced in relation to construction law where final and binding arbitration is the default dispute resolution mechanism.
This article proposes a way to mitigate the impact of arbitration on the development of the law in Australia. Publishing awards with the parties’ identifying information removed, but containing the arbitrator’s name, the relevant facts (appropriately sanitised to maintain the parties’ confidentiality) and the legal reasoning, would have the potential to contribute to the development of construction law and lead to a more informed marketplace for consumers of arbitration services. As is discussed below, the arbitration award would never have precedential value, however a well-reasoned arbitral award from a respected practitioner is likely to be just as persuasive as other non-precedential material regularly used by courts when considering novel or difficult issues.
2. History of Australian Arbitration Legislation
A dual legislative regime governs commercial arbitration in Australia. The International Arbitration Act 1974 (Cth) (IAA) governs international arbitration and State and Territory-level legislation governs domestic arbitration.
The IAA gives the 2006 Model Law on International Commercial Arbitration (Model Law) the force of law in Australia. The 1986 version of the Model Law was incorporated into Australian law on 15 May 1989, and amendments to the IAA in 2010 replaced it with the 2006 version of the Model Law. The update therefore modernised the law but did not introduce radical change. The IAA also gives effect to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) and the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention).
The statutes which regulate domestic arbitration are State based. Prior to 1984 there was no uniformity between the relevant Acts. Agreements to arbitrate took the form of Scott v Avery clauses, meaning that the first instance jurisdiction of the court only arose once an award had been made. The court’s role was limited to enforcing the award. However, in all States awards could be reviewed if there had been a manifest error of fact or law on the face of the award. In addition, a case could be stated to a court for an opinion on a point of law. Therefore the common law developed by use of both mechanisms, notwithstanding that most disputes arising in the construction industry were first referred to arbitration.
From 1984 uniform legislation was progressively introduced, borrowing from the reform evident in the 1979 amendments to English legislation. The right to have an award challenged on the basis of an error of fact or law on the face of the award was abolished (as the 1979 Act had done in England and Wales). That right was replaced with a right of appeal. However that right was limited, ultimately by a statutory version of the rules developed by the House of Lords in The Nema. The intention of the reform was to limit the number of arbitral awards which were the subject of review by the courts. While courts initially were perhaps more generous in granting leave than was intended by the legislature, over time that generous approach was severely restricted, with the consequence that fewer and fewer cases became the subject of an appeal.
Prior to the first uniform domestic arbitration acts the High Court of Australia decided the case Codelfa Construction Pty Ltd v State Rail Authority of New South Wales. It is a seminal case in Australia, cited every day in an Australian court. The case related to the construction of tunnel and rail system in Sydney and was the subject of a long arbitration process followed by a series of appeals. The facts and law which arose from this case, as is common in construction cases, were complex. Many legal issues were raised in the case and its resolution improved the certainty of Australian common law. The case is often cited in respect of three issues that commonly arise in cases involving a contract and another one that is important, although significantly rarer. They are:
When can terms be implied into a contract as a matter of fact;
In what circumstances is it permissible to admit evidence which is extrinsic to the contract in aid of contractual interpretation;
What is the extrinsic evidence that can be admitted; and
In what circumstances is a contract frustrated?
The arbitrator’s original decision in favor of the contractor rested on an implied term. The judge at first instance agreed with the arbitrator’s award, as did the New South Wales Court of Appeal. The alternative argument that the relevant contract had been frustrated was rejected at all these levels, as it was said to be inconsistent with authority. Ultimately the High Court of Australia ruled that the contractor’s case based on implied terms failed, but that its case based on frustration, which had not found favour below, succeeded.
Had the award been made after the introduction the Uniform Commercial Arbitration Acts, with their statutory version of The Nema like rules governing when leave should be granted, the case may well never have reached the High Court and an important development and clarification of the common law would have never occurred.
All of this highlights the problem. The restriction on the right of appeal means that cases of this type will not see the light of day. Construction cases, because of their complexity, often throw up important legal issues that may not be litigated with the same energy in other cases. The absence of a right of appeal is not, however, the only reason why arbitration restricts the Court’s access to cases which consider the complex factual and legal issues which regularly arise. To understand how recent amendments to the domestic arbitration law limit the likelihood of construction matters being considered by courts, it is necessary to also consider the law relating to stay of proceedings.
The first Uniform Commercial Arbitration Acts of the 1980s changed the effect of Scott v Avery clauses. Pursuant to the 1980s legislation, the arbitration clause would not operate as a condition precedent to the right to litigate, irrespective of the way in which the clause was worded. Instead the court was given a discretion as to whether to stay proceedings brought in violation of the arbitration clause. This meant that a party to an arbitration agreement could litigate a dispute. It was then incumbent on the counterparty to the arbitration clause to seek a stay of the court proceedings under s 53 of the 1980s version of the Uniform Commercial Arbitration Act. Section 53 empowered the court to stay court proceedings if there was “no sufficient reason” why the dispute should not be referred to arbitration. While courts generally granted stays on the basis that parties should be held to their bargain, there were notable exceptions. Early in the life of the 1980s legislation, courts refused to grand stays for a number of reasons, such as if the dispute was predominantly legal or involved numerous parties and it was therefore more efficient for the dispute to be resolved in court, where all parties could be subjected to a single process.
Accordingly, while most disputes the subject of an arbitration clause were referred to arbitration, occasional complex matters continued to be litigated contrary to the agreement of the parties. This was particularly the case if the dispute involved multiple parties. Because the Court’s mandate to stay was discretionary, some significant cases slipped through the arbitration net. The cases which were not stayed provided an opportunity for precedent to develop, albeit at a much slower rate.
As noted above, the Federal IAA, which incorporates the New York Convention, the Model Law and the ICSID Convention, governs international arbitration. Through the IAA, the New York Convention was incorporated into Australian law in 1974, the ICSID Convention in 1990 and the Model Law in 1989, updated in 2010. As a consequence, courts have not, since the mid-1970s had any discretion as to whether it should stay its process in favour of international arbitration like the discretion found in respect of domestic arbitration. Subject to the usual exceptions in the New York Convention and now the Model Law, the Court must grant a stay application. Likewise, there is no merits review of an award on enforcement pursuant to the New York Convention and Model Law.
The fact that the regime for international arbitration is different to the law relating to domestic arbitration has had little effect on the development of Australian common law, as there are far fewer international cases and a number of them (particularly those the subject of enforcement in Australia) are likely to be in respect of awards where the proper law considered is not Australian Law.
By the end of the last decade the domestic regime had come under criticism for being outdated and out of step with international best practice for commercial arbitration. In February 2009, the Honourable James Spigelman, then Chief Justice of the Supreme Court of New South Wales, passionately argued that the delay in reform meant that the uniform legislation of the 1980s was “now hopelessly out of date” and had become “embarrassing”. He called for the legislation governing domestic arbitration Acts to be completely rewritten, and the adoption of the Model Law as the domestic arbitration law. 
Later in 2009, the Standing Committee of Attorney’s General heeded Spigelman CJ’s call with a law reform proposal, which suggested an overhaul of the domestic arbitration legislation in order to harmonise the State and Territory Acts with each other and with the IAA, and thus, with the Model Law.
Since 2010, all States and Territories (with the exception of the Australian Capital Territory) have repealed their old legislation and enacted fresh commercial arbitration acts, based on the Model Law (the Commercial Arbitration Acts).
It is these reforms that have revitalised interest in arbitration in Australia.
Three of the more significant amendments to the domestic commercial arbitration regime relate to circumstances in which stays are granted, the right to appeal and confidentiality. These will be discussed in more detail below.
3. Recent Amendments to Australian Law of Arbitration
The new uniform Commercial Arbitration Acts, which have been passed progressively around Australia to regulate domestic arbitration, promote arbitration by requiring that courts stay their process on application of a party to an arbitration agreement (the discretion no longer exists), increased certainty in the finality of arbitral awards and strengthening confidentiality in arbitration. This section explores the importance of these three issues and how they have revitalised the interest in arbitration in Australia, but at the same time increase the risk that the development of construction law will be retarded.
A) Stay of proceedings
The Commercial Arbitration Acts are substantially based on the Model Law. Pursuant to s 8, a court must stay any proceeding that is brought “unless it finds that the agreement is null and void, inoperative or incapable of being performed”. Accordingly, it will require the most unusual circumstances before a court will refuse to grant a stay, reducing to virtually zero the number of cases likely to escape the arbitration net.
B) Finality of arbitral award
For good policy reasons it is difficult to argue for significant change in the status quo in respect of international arbitration in Australia. These arbitrations will remain confidential with no merits review of any award by the courts. The prohibition on a merits review of the award relates to both enforcement of a foreign award and an international award seated in Australia.
The policy settings for domestic arbitration are slightly different, although the difference between the policy for domestic and international arbitration has narrowed considerably since the new Uniform Commercial Arbitration Acts were enacted. Now the parties must agree to a right to appeal. Logically this is most likely to occur before the result of an arbitration is known. Even where the parties have so agreed they do not enjoy an unfettered right to appeal.
Section 34A of the new Commercial Arbitration Acts provides that judicial review of an award is only available if the parties agree that an appeal may be made and the court grants leave. Section 34A(3) further provides (emphasis added):
(3) The Court must not grant leave unless it is satisfied—
(a) that the determination of the question will substantially affect the rights of one or more parties; and
(b) that the question is one which the arbitral tribunal was asked to determine; and
(c) that, on the basis of the findings of fact in the award—
(i) the decision of the tribunal on the question is obviously wrong; or
(ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt; and
(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the Court to determine the question.
The requirements of s 34A(3) have not yet received much judicial interpretation. In refusing to grant leave to appeal in Cameron Australasia Pty Ltd v AED Oil Ltd, the Victoria Supreme Court observed that s 34A allows for “an appeal on a question of law arising out of an arbitral award, but only in limited circumstances, and only on an ‘opt-in’ basis.” However, the Court did not expand further on what it meant by “a question of law” because it refused to review the award on the basis that the parties had not chosen to opt-in.
As of yet, there is no judicial consideration of the meaning of “obviously wrong” or “just and proper” in the context of s 34A. What is already clear, however, is that the opt-in provision will reduce the amount of appeals of arbitral awards to the courts.
For many parties to construction disputes, this higher certainty of arbitration providing a final resolution to a dispute is likely to further encourage them to choose arbitration as their preferred forum for dispute resolution. The impact this will have on the development of construction law in Australia is obvious: it will hamper its development.
One need only look at the effect of the codification of The Nema rules in 1996 in the UK. Lord Thomas of Cwmgiedd, Lord Chief Justice of England and Wales, observed that following this legislative step, the number of cases able to satisfy the test for grant of leave to appeal are very few. Only 19 cases were granted leave to appeal in 2015 as compared to the years before 1979, when the court considered 300 cases on appeal. His honour commented that this sharp decrease in the number of appeals obviously reduces the court’s ability to develop and progress the law and compounds the adverse impact caused to the common law by the diversion of more disputes away from the courts and to arbitration.
C) Presumption of confidentiality
In other common law countries confidentiality has been a hallmark of arbitration, rooted in principles of self-determination and the parties’ ability to choose to keep both their dispute and its resolution private and confidential. The confidentiality associated with a private arbitration in those countries has meant that commercially sensitive information or awards will not be in the public domain. The risk of reputational damage associated with publically airing a dispute in open court is also avoided if the dispute is kept confidential.
Prior to the enactment of the new Commercial Arbitration Acts in Australia, there was no presumption of confidentiality in Australia. In the 1995 case Esso Australia Resources Ltd v Plowman (Minister for Energy and Minerals) (Esso), the High Court of Australia held that there was no implied obligation of confidentiality in arbitration agreements. Confidentiality was an obligation only if expressly specified in the arbitration agreement.
In Esso, Plowman sought to disclose information Esso had provided during the course of the arbitration. Esso argued that the arbitration agreement contained an implied term of confidentiality, which meant that documents obtained during the course of the arbitration could not be disclosed to third parties. The High Court held by majority that while arbitration proceedings are private, they attract no greater confidentiality than a court proceeding, and that that confidentiality is not a necessary attribute of such privacy.
In practice, parties could circumvent Esso by expressly agreeing that the arbitration was confidential as well as private.
The Australian position following Esso was out of step with international commercial arbitration. Accordingly some argued that this was an important reason why foreign disputants chose not to arbitrate in Australia.
The Commercial Arbitration Acts brought Australian domestic arbitration law back in line with international best practice by imposing a statutory duty of confidence. Section 27E of the Commercial Arbitration Acts prohibits the parties and the tribunal from disclosing confidential information, subject to certain exceptions. Pursuant to s 27E(1) the parties may agree to opt-out of the statutory duty.
The IAA, which deals with international arbitration, provided for confidentiality on an opt-in basis. However, in October 2015 the IAA was amended to mirror the duty of confidence required in respect of domestic arbitration.
As with the increased certainty in the finality of arbitral awards, the statutory presumption of confidentiality now enshrined in both the IAA and the Commercial Arbitration Acts means that any learning that might have been available as a consequence of an award is restricted to the parties to the arbitration and is therefore not available to others.
4. Can Parties be Persuaded to Litigate Rather than Arbitrate?
As is discussed below, a number of judges have expressed deep concern that the increase in arbitration is adversely affecting the development of the common law. There is much force in their arguments. Their solution is that parties should return to litigation to ensure the continued development of the law. It seems that such a call is unlikely to be totally successful, even if court processes become more efficient. To understand why this call to litigate is unlikely to resolve the problem, it is necessary to understand why, in Australia, arbitration is becoming more popular.
In addition to the usual motivational drivers, such as privacy, confidentiality, flexibility and finality of decision, other factors specific to the construction industry, weigh the balance further in favour of arbitration.
An often touted benefit of arbitration is that it is less costly, both in time and money, than litigation. Arguably, this is not true. Justice Byrne has suggested that “lawyers have hijacked the arbitration process”. Because lawyers are trained to operate in a more formal environment, they have transformed the traditionally less formal arbitration procedure to mirror litigation. While this may have been the case in the past, good arbitrators and at least one party seeking an efficient process can radically affect the pace and formality associated with arbitration with a significant reduction in cost. This is now happening regularly in Australia. The recent amendments to the legislation have helped but so has a change in the legal culture, both of arbitrators and practitioners. There is an increasing realisation that deviations from court processes can improve the quality of the product.
Insofar as Justice Byrne’s point remains good for some arbitrations, many commercial parties continue to cite the desire to reduce the costs and time associated with resolving a dispute as one of the strongest drivers behind the preference for arbitration. Indeed the challenge for the courts is how to deal with complex, factually dense and expert rich cases that arise in construction matters, in the context of a process which has been specifically designed for disputes of a much smaller factual and expert compass. Such processes work perfectly well for the vast majority of commercial cases many of which are of high value, but do not lend themselves well to construction matters.
In particular the standard processes used by Australian courts relating to pleadings, discovery and hearing are in many cases likely to produce unacceptable outcomes for parties to a construction dispute. While Australian courts continue to refine these aspects of their process, their target market remains other commercial disputes. As a consequence, few judges have the deep construction experience necessary to design a process which can improve efficiency and thereby accelerate the outcome and lower cost. Examples of innovation from arbitration which are rarely applied in Australian courts include setting down the matter for hearing at the first preliminary hearing for directions, determining the times by which any interlocutory process is to be completed by reference to that hearing date, holding parties to the timetable established at the first preliminary conference, the use of agreed/disagreed as-built programmes in delay cases in relation to the history of construction (which are more effective than pleadings at narrowing disputes) and stop clock hearings. These innovations, coupled with the possibility of appointing an arbitrator who has a lifetime of experience in disputes arising in the construction industry, are significant advantages which make litigation uncompetitive. Indeed many consider that the most important benefit of arbitration is that it allows the parties to select the decision-maker.
While the process of appointments to the judiciary is designed to ensure that high quality people are chosen, this does not guarantee that the judge chosen to hear a construction matter has the necessary or even the best experience of the available judges of the court.
Like the factual matrix of construction disputes, construction law is itself complex. The legal and regulatory framework governing the construction industry is becoming increasingly intricate, with an array of laws, regulations and codes relating to things like licensing, safety and security of payment.
Evidence in construction disputes is often detailed and highly technical. Almost invariably expert evidence is required in relation to one or more aspects of the case. Judges are not always well equipped to decipher this evidence as they tend to lack technical expertise or engineering training.
On the other hand, there are an increasing number of arbitrators with extensive experience in construction disputes, or that are qualified as lawyers or as engineers – in some cases, all three - making them ideally suited to resolve these disputes.
It is unsurprising therefore that the construction industry should favour arbitration, which offers a higher likelihood that the decision-maker involved is able to grasp the technical issues and evidence and to make a decision based on all the facts.
Some jurisdictions recognise that construction disputes need to be resolved by those with the requisite training and expertise, leading to the emergence of specialist courts, such as the Technology and Construction Court for England and Wales. That court services all of England and Wales, which is a significant market. As a consequence there is a depth of experience in both the judiciary and the profession which is difficult to replicate in the Australian context. In Australia there are eight State and Territory Courts, all of which are, in some sense or other, in competition with one another. Each deal with the construction cases referred to them. It is common place that the judge appointed will not have had any relevant experience. Accordingly, it is often necessary to explain in detail common concepts; for example what is a critical or non-critical activity, float, contingency etc. It is unlikely that they will be familiar with the debate about prospective versus retrospective delay analysis or the strengths and weaknesses of the various methodologies of analysis used by expert witnesses. More complex issues associated with, for example, a finite element analysis, can be overwhelming for anyone who has not spent years studying them.
Accordingly the expertise required is unlikely to be developed in a concentrated way, as it has in England and Wales.
5. The Effect on the Development of the Law
As discussed above, whilst the construction industry has good reason to favour arbitration, the swing away from litigation has led to a decrease in new construction law jurisprudence. This is problematic for several reasons. Through case law, courts make authoritative statements of law, and clarify individuals’ legal rights and obligations. This is essential to the operation of the rule of law, which is necessary for a functioning market economy. Further, precedents develop the common law and keep it in step with developments in the market and society. Common law needs new jurisprudence to deal with new issues which emerge in the ever developing construction industry in order to “progress and develop the rules needed to guide both the parties and their lawyers”.
The Right Honourable Beverly McLachlin, Chief Justice of Canada, described the development of the common law as akin to a living tree:
All areas of law – construction law included – are living, constantly evolving trees. Some branches sprout and grow; others crack and need trimming. Thus, the law develops and remains responsive to changes in society.
Courts are the institutions tasked with maintaining the common law. In most areas they are forced to do this because new cases are constantly being brought which require the examination and determination of new issues that arise as society develops. Old issue are also regularly re-examined as a consequence of the natural case load which courts attract.
However, since courts are reactive institutions, they can only discharge this task if matters are brought to them.
Therefore new case law is required for the common law to be able to adapt and respond to developments in markets, trade and commerce, including those associated with globalisation and new technologies. The reduction of cases in certain industries where disputes are increasingly diverted from the courts to arbitration has the effect of stunting the development of the common law in these areas and its ability to keep step with these developments.
Technology has transformed the market. Everyone has heard it said that technology is disrupting business. It is logical that such disruption needs to be managed and regulated by the law to avoid injustice while ensuring the positive aspects of it are retained for society. Lord Thomas observed that the internet has brought about a “digital revolution”:
The internet has not simply provided a means for buying almost anything, but it has facilitated rapid and fundamental change in the way business is done. The digital revolution has created new, digital, markets and digital products. It has altered the way in which businesses are structured, how they interact and trade with each other, and, of course, how financial markets operate.
He further commented that a sound legal framework and the rule of law is vital for strong and effective markets as well as for economic development. Substantive law must be clear, readily accessible and understandable. Procedural law must enable parties to settle disputes where possible, and when it is not, provide easy access to a binding dispute resolution process to resolve the dispute in a just and timely manner. Courts, he says, are vital to the functioning of the necessary legal framework in common law jurisdictions, as, in addition to resolving disputes between commercial parties, they develop the common law through precedent and respond to social changes and changes in the market. This development occurs incrementally, which ensures that the law remains predictable. However, given the pace of change due to technology, it is important that while law evolves in a predictable way, the rate of change increases so that it keeps pace with changes in society. Therefore, publically articulated laws and the development of the law through precedents are needed in order to allow citizens and market actors to understand the current state of the law and to structure their affairs and business arrangements accordingly.
Writing a decade before Lord Thomas’ comments, the Honourable Samuel L Bufford, then a US Bankruptcy Judge in the Central District of California, made similar observations regarding the necessity of the rule of law and sound legal structures for a well-functioning market economy. Judge Bufford wrote that “the Rule of Law is part of the ‘software’ of governmental regulation that is needed to operate the 'hardware' of the free markets.”
The concept of the rule of law requires predictability. The business law system, he noted, must be known and accepted by market participants as the foundation for economic activity for it to be predictable. It has been argued that in fields where arbitration is prevalent, there is a corresponding lack of guidance as to the current state of the law, which has led to unnecessary further disputes. It is logical to assume that some of these additional disputes could have been avoided had the parties to the dispute been able to take advantage of the persuasive arguments that had been tested in previous arbitrations.
As already noted, stunting the development of the common law is of particular concern for construction law. Expanding on her common law tree analogy, Chief Justice McLachlin noted:
The Construction Law tree looks different than it used to. It may not be dead, but new branches are not appearing as often as they once did. And old branches that need pruning are often neglected.
This she says, is the result of the increasing trend within the construction industry to opt for arbitration rather than litigation.
The reduction in court cases impedes public understanding and scrutiny of the law. If a certain issue is repeatedly arbitrated but never litigated, the public or the parliament may not become aware of it. If that issue had instead been litigated, it would have enabled public scrutiny of the issue, thereby increasing the prospects of the law being changed as a consequence of parliamentary intervention.
It has been suggested that parties to construction disputes should be encouraged to use courts to resolve disputes involving significant legal issues. The problem with this argument, which is often recognised but ignored by its proponents, is that the parties themselves do not want to litigate for the reasons previously discussed. They have little interest in the potential precedential value of their cases or providing guidance to other players in the market place, as these disputes are rarely about the establishment of a principle of general application. The parties’ primary motivation is resolution of the dispute, preferably by agreement and failing that by a binding dispute resolution process. If that process produces a principle of general application it is an accident, of no great interest to them.
6. Mitigation Measure – Publish Awards
How then do we ensure that construction law can develop and remain relevant and responsive to the industry’s needs in a climate where arbitration is on the increase?
The suggestion that parties should litigate rather than arbitrate their construction disputes to promote a public good is unrealistic. This is particularly true in the Australian context. The nature of construction disputes often means that a court is a less attractive forum than arbitration. As a consequence members of the construction industry vote with their feet by stipulating arbitration. This trend is unlikely to change. To the contrary, it is likely to continue to increase.
Is there a way to capture the learning from these private and confidential arbitrations so that be utilised in developing the law?
Any realistic solution requires that the principal advantages of arbitration be retained; confidentiality, finality and the ability to choose an arbitrator with an education and experience suitable to each dispute.
However, publishing awards containing both the arbitrator’s name and the legal reasoning and decision would place in the public domain a new source of material from which lessons could be learnt. Obviously, such material would not have precedential value in the way in which a court decision has. However, it is not uncommon for persuasive arguments to be developed using cases from other jurisdictions, such as the United States. Such cases are not binding but that does not preclude them being persuasive. Likewise, academic articles often influence the outcome of difficult cases. Why then not arbitration awards?
Such awards, particularly from well recognised practitioners, dealing with complex and difficult issues are likely to contain insights which are not generally available and may even highlight areas where law reform by parliament is necessary.
There has been an increase in publication of arbitral awards internationally. For example, the International Chamber of Commerce International Court of Arbitration (ICC) publishes redacted decisions, with names and other identifying information removed. Likewise, the International Centre for the Settlement of Investment Disputes (ICSID) publicises details of all its arbitrations, including the name of the arbitrators, and is required to publish excerpts of the tribunal’s reasoning in each arbitration. Most ICSID awards are now also published, with the parties’ consent, and are available online.
The ICC approach of publishing awards in a redacted form provides an example of how more of the learning generated in arbitration can be made available more generally. However, the arbitrator’s names should not be redacted for three reasons. First, the identity of the arbitrator is important to establish the persuasive value of an award. The more experienced and better educated the arbitrator, the more likely it is that the profession and, in particular, the judiciary will regard the award as casting light on a difficult issue. Secondly, the publication of the names of the arbitrators responsible for an award will allow the profession to make its own assessment of the arbitrators in the market when choosing the identity of arbitrators in future cases, rather than relying on the self-serving marketing material provided by some arbitrators. Finally, the publication of awards should improve the quality of awards. At least some arbitrators will be more motivated to ensure a higher quality product to protect their reputation rather than have it damaged as a consequence of the publication of a poor award.
Arguably, there is a tension between the potential benefits that may be derived from more widespread publication of awards and the highly prized confidentiality associated with arbitration. There is often an expectation on behalf of parties to a private commercial arbitration, which itself is confidential, that the award will remain private and not be released to the public.
Lord Thomas has expressed the view that arbitral confidentiality is “overrated”. In reality, he argues, the market is aware of who is involved in arbitration and what the arbitration relates to. Even in cases where confidentiality is preserved during the arbitration, information and even arbitral awards are often subsequently leaked. Further, if a party seeks to enforce an award, it inevitably enters the public sphere. The fact that an arbitration is confidential does not mean that in all cases the result will not be publicly available. There are a number of important exceptions to the confidentiality regime which means that notwithstanding confidentiality, the result must be disclosed pursuant to other overriding legal requirements. For example, if a publicly listed entity is the beneficiary of a significant award which would, if known, have a material effect on its share price, then in most legal systems it would be under a positive obligation to disclose that award. That obligation usually trumps the obligations in relation to confidentiality.
Even in those cases where the award will remain confidential that confidentiality is not necessarily lost because the award is published, provided that the parties identifying information is redacted, as is the ICC’s practice.