The New Zealand Arbitration Act 1996 was amended on 8 May 2019 with the aim of increasing New Zealand’s attractiveness as an arbitral hub by rectifying loopholes which surfaced in cases before various courts. With this view, the key amendments clarify the procedure for challenging jurisdictional decisions and set aside procedures with regard to tribunal composition and procedural issues. In addition, the default ‘quick draw’ appointment mechanism, which operated in circumstances where an arbitrator has not been appointed, has been removed.
Challenges to jurisdictional decisions
The NZ Arbitration Act previously allowed a party to challenge an arbitral tribunal’s decision on jurisdiction by requesting the New Zealand High Court to decide the matter within 30 days of receiving notice of the tribunal’s jurisdictional decision. A tribunal’s jurisdictional decision can be made either in a preliminary phase or together with the merits, however, a party must raise a plea that the tribunal lacks jurisdiction ‘not later than the submission of the statement of defence’.
The amendments insert a new provision, providing that parties’ failure to make a request to the High Court challenging the tribunal’s jurisdictional decision ‘in a timely manner operates as a waiver of any right to later object’ to the tribunal’s decision.
This new provision makes clear parliament’s intention that arbitration be a final and binding form of dispute resolution, which was reflected in the third reading speech: ‘[s]imply, arbitration is a very cost-effective and timely method of resolving commercial and other disputes … [which] reduces the caseload on courts’.
Though the words ‘in a timely manner’ are not defined and left open to interpretation, the policy basis makes clear that jurisdictional challenges should be made early, or otherwise not at all. The Arbitrators’ and Mediators’ Institute of New Zealand Incorporated has suggested that a waiver will occur if:
- a plea as to jurisdiction is not made before the defence is submitted; and
- a request to the High Court is not lodged on time and actively pursued.
This provision will apply to any arbitrations that have New Zealand as the place of arbitration.
Arbitral awards may only be set aside by an application to the High Court in certain circumstances. Prior to the amendments, a set aside application could be made if:
‘the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this schedule from which the parties cannot derogate, or, failing such agreement, was not in accordance with this schedule’
The narrow references to ‘this schedule’, referring to Schedule 1 of the Arbitration Act, allowed for non-compliance with the broader Arbitration Act without the possibility of set aside. For example, if a procedure adopted by the tribunal conflicted with a mandatory provision of the Arbitration Act located elsewhere than Schedule 1, it would not have given rise to circumstances allowing a set aside application to the High Court.
The amendments correct this loophole by replacing reference to ‘this schedule’ with ‘this Act’.
Similarly, this provision applies to any arbitrations that have New Zealand as the place of arbitration.
Default ‘quick draw’ appointment mechanism
The final amendment relates to a unique – now removed – appointment procedure which was enlivened where a party or third party (eg an appointing authority) failed to make an appointment, or there was failure to agree on an appointment. In those circumstances, a party could specify in writing the failure and propose an appointment if the failure was not remedied within a period specified by that party. That party’s proposed appointment would then take effect upon expiry of the specified period, unless the failure was rectified. This procedure is commonly known as the ‘quick draw’ procedure and was part of additional rules which apply to all international arbitrations and to other arbitrations by party agreement.
This mechanism effectively allowed unilateral appointments and it was noted in the Bill’s third reading speech that such process is ‘unfair’. The amendment repeal entirely the quick draw procedure.
Where there has been a failure to appoint, a party may now request the Arbitrators’ and Mediators’ Institute of New Zealand Incorporated to take the necessary measures to secure the appointment.
The amendments are a welcome development that simplify and provide additional certainty in relation to arbitration proceedings which take place in New Zealand.