Important developments for Australia and Australian companies
The Australian position in relation to international arbitration has always been complicated by virtue of its federal system of laws which allows parties to choose to resolve their dispute under arbitral laws other than in accordance with the internationally accepted Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law (UNCITRAL). This creates confusion and not insignificant legal difficulties concerning the interaction of different laws. Additionally, the finality sought by parties to an international arbitration is not always certain by virtue of the appeal/review powers contained in the State and Territory Commercial Arbitration Acts. As well, there has been in recent years a general concern about the trends surrounding the nature of international arbitration with the widespread view that arbitration has become too litigious with proceedings increasingly resembling those of a court. Such complications and trends had led many to believe that Australia was unlikely to establish itself as a major player in the field of international arbitrations. In light of a new Bill currently before Parliament, all of this could now change.
In an effort to counter such trends, overcome the difficulties with Australia's federal system and in a bid to promote Australia as a centre for international arbitration and dispute resolution, the International Arbitration Amendment Bill 2009 was introduced into Parliament on 25 November 2009, following the Commonwealth Government's year long review of international commercial arbitration in Australia.
The most significant amendment is the repeal of section 21 of the International Arbitration Act 1974 (Cth). Under section 21, the parties to an arbitration agreement could agree that the dispute between them is to be settled otherwise than in accordance with the Model Law. As such, the parties could elect to resolve their dispute under applicable State or Territory legislation, which does not always achieve the certainty and finality provided for under the Model Law. In the case of “international commercial arbitrations”, the amendment Bill removes the capacity of the parties to nominate an alternative arbitral tribunal, with the Model Law set to “cover the field” for international commercial arbitration in Australia. The State and Territory legislation will therefore be limited to domestic arbitrations.
This is a major development for Australia and will largely do away with many of the inherent difficulties of the current federal system. A number of other proposed amendments also seek to make the process of conducting international arbitration in Australia more efficient by streamlining many of the procedural aspects (such as legislating for confidentiality), so as to be of even greater assistance to parties wishing to resolve their disputes other than by way of the traditional court processes.
The amending legislation (which is currently at the second reading stage and scheduled to be debated in the latter part of 2010) will, if passed, fundamentally change the way in which international arbitration is regulated in Australia.