The recent decision the New South Wales Court of Appeal in Gordian Runoff Limited v Westport Insurance Corporation [2010] NSWCA 571 confirmed that there are only limited grounds for an appeal from an arbitral award and has held that an arbitrator, unlike a judge, is not required to provide detailed reasons of the award.

This case is significant because it represents a departure from the trend that Courts in Australia had adopted by giving an expansive interpretation to the limited grounds for appeal of an arbitral award. Significantly, one of the grounds relied on by the reinsurer was that the arbitral award should be set aside on the basis that the arbitrator did not give detailed reasons for the decision. The reinsurer relied on the 2007 Victorian Supreme Court decision in Oil Basins Ltd v BHP Billiton Ltd [2007] VSCA 255.

Article 31(2) of the UNCITRAL Model Law on International Commercial Arbitration, and section 29(1) of the Commercial Arbitration Act (both in New South Wales and Victoria), provide that an award by an arbitral tribunal shall state the reasons upon which it is based. In Oil Basins, the Court held that "the scope of an arbitrator's obligation to give reasons is logically the same as that of a judge"2, but that the requirement to give reasons would depend on the circumstances of the case. Therefore, if the dispute turns on a short factual issue and the arbitrator is chosen for his knowledge of the relevant trade then the reasons given in some instances need be no more than rudimentary. However, in a complex arbitration the reasons have to be to the standard expected of a judge. It is the nature of the dispute which sets the standard for the reasons.

In Gordian Runoff, the Chief Justice after an extensive review of the cases and international commentary concluded that the decision in Oil Basins in requiring detailed reasons was wrong and that there is no requirement for an arbitrator to produce "a standard of reasons equivalent to those required of a judge at common law"3. He said that to the extent that the Victorian Supreme Court was equating the obligations of arbitrators to give reasons with the obligations of judges that view is "plainly or clearly wrong and should not be followed"4.

The issue has arisen in several cases since the Gordian Runoff case including the decision in Thoroughvision Pty Ltd v Sky Channel Pty Ltd [2010] VSC 1395. The single Victorian judge in that case focussed on the need for the question of reasons to be assessed by reference to the importance of proportionately having regard to the complexity of the issues, their importance and the money involved. He concluded that the case before him was different from the facts in Oil Basins as the dispute was more straightforward and as a result, did not require complex reasons.

In light of, Gordian Runoff it appears that Australian Courts, are increasingly prepared to recognise that there is a distinction between arbitrations and Court litigation and that depending on the complexity of the issues, the reasons given by an arbitrator do not necessarily have to be as detailed as those given by a judge.