On 29 August 2012, the Western Australian parliament passed the Commercial Arbitration Act 2012 (WA) (Act) heralding the first significant changes to the state’s domestic arbitration regime since the Act’s inception in 1985.1
The Act follows the adoption by five other states in Australia (New South Wales, Victoria, South Australia, Tasmania and the Northern Territory) of their own amended Commercial Arbitration Acts and achieves uniformity across these states.2 It is expected that the remaining states (Queensland and Australian Capital Territory) will pass their own amended Commercial Arbitration Acts soon.3
In essence, the Act now closely aligns with Australia’s international arbitration laws as set out in the International Arbitration Act 1974 (Cth). It achieves this by completely changing the structure of the previous Commercial Arbitration Act 1985 (WA) (1985 Act). Each section of the Act refers specifically to its equivalent article in the Model Law4. Where there is any difference between sections in the Act and their corresponding articles in the Model Law, these differences are noted and explained under the text of the relevant section in the Act.
A new overriding objectives section in the Act makes it clear that the ‘paramount object of the Act is to facilitate the fair and final resolution of commercial disputes by impartial tribunals without unnecessary delay or expense’5. The Act aims to achieve this by ‘enabling parties to agree about how their commercial disputes are to be resolved…and to provide arbitration procedures that enable commercial disputes to be resolved in a cost effective manner, informally and quickly’.6
While it remains to be seen whether the Act facilitates a cheaper alternative to court based litigation, it is clear that the amendments to the Act allow much less scope for court intervention and provide more powers to arbitrators, for example, to order ‘interim measures’7. This helps build certainty and trust among parties in Western Australia who have valid arbitration agreements that they can have any disputes that arise under their contracts dealt with efficiently by a chosen arbitral tribunal.
Some of the key changes in the Act are outlined below.
Full force to the arbitration agreement
Unlike the 1985 Act which allowed the courts a discretion to decide whether to stay court proceedings which had been commenced when a valid arbitration exists, the Act makes it clear that the court must refer the matter to arbitration where a valid arbitration agreement is in place, unless it finds that the arbitration agreement is ‘null and void, inoperable or incapable of being performed’.8
Court intervention only in specified circumstances
The Act provides that a court must not intervene in relation to any matter governed by the Act except in relation to certain circumstances which are set out in the Act.9 These circumstances include such things as granting interim measures10 (which the arbitral tribunal can also do), and ruling on the validity of interim measures granted by the arbitral tribunal11 or setting aside final awards handed down by the arbitral tribunal12.
Reduced scope for challenge and removal or arbitrators
No longer will a party be able to simply apply to the Court to challenge and remove an arbitrator. Under the 1985 Act, a party could apply to the court for the removal of an arbitrator upon the grounds of ‘misconduct’, ‘undue influence’ or ‘incompetence’ of the arbitrator.
The courts have had great difficulty in interpreting these words. In Gebauer Nominees v Cole [No. 2]14, the WA Court of Appeal noted that it would be impossible to provide a comprehensive definition of misconduct warranting the removal of an arbitrator ‘[g]iven the infinite variety of circumstances that could arise’.
Under the Act, an arbitrator may only be challenged ‘if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence, or if the arbitrator does not possess qualifications agreed to by the parties’15. The Act specifies that there are justifiable doubts as to the impartiality or independence of a person approached in connection with a possible appointment as arbitrator only if there is a ‘real danger of bias on the part of the person in conducting the arbitration’16.
Even when an arbitrator is challenged by a party, the parties (subject to any other agreement between them) have to first allow the arbitral tribunal to hear and rule on the challenge before resorting to the court.17 When the court’s jurisdiction is enlivened to hear a challenge (this will occur if the challenging party is dissatisfied with the decision of the arbitral tribunal), the arbitral tribunal may still continue with the arbitral proceedings and make an award.18 The Court’s decision as to the challenge on the arbitrator will be final.19
Arbitral tribunal’s power to grant interim measures
Whereas in the 1985 Act, the arbitral tribunal had certain powers to grant interim awards or specific performance of a contract, the Act contains broader powers for the arbitral tribunal to make interim measures, some of which include:
- security for costs;
- discovery of documents and interrogatories;
- giving of evidence by affidavit;
- the inspection of any property which is or forms part of the subject matter of the dispute; and
- dividing, recording and strictly enforcing the time allocated for a hearing between the parties (a stop-clock arbitration).20
Although parties may still apply to the courts for the same interlocutory orders as the above ‘interim measures’, the widening scope of the arbitral tribunal’s powers to grant interim measures should enhance the efficiency of arbitrations by reducing reliance on the courts. In particular, ‘stop-clock’ arbitrations have enormous potential to quicken the arbitration process and make it more efficient, thereby helping to achieve the paramount object of the Act.
Limited ability to appeal arbitral tribunal’s decision
Unlike the 1985 Act, where the parties were able to appeal against a decision of the arbitral tribunal on a question of law, the Act makes any appeal on a question of law practically impossible. For a party to an arbitration agreement governed by the Act to appeal a question of law arising from the arbitral tribunal’s decision, that party will have to agree with the opposing party (within a prescribed time limit) that an appeal may be made.21 It is difficult to envisage such a situation where both parties would agree to allow an appeal to be made. Even if this were to happen, the leave of the court is still required and the threshold for leave to be granted is very high.22
Act applies exclusively to domestic arbitrations
Another important change to the Act is that it applies exclusively to domestic arbitrations and not to international arbitrations.23 Under the International Arbitration Act 1974 (Cth) (before it was amended in 2010), parties could opt out of the Model Law and this would then entitle the parties to have the dispute decided under the relevant state Commercial Arbitration Act. The Act now excludes arbitrations to which the Model Law applies (international arbitrations).24
The 1985 Act did not contain any confidentiality provisions. Parties had to rely on the case law which deemed that arbitrations were private but not necessarily confidential.25
The Act contains a detailed confidentiality regime. Parties must not disclose confidential information except in limited circumstances.26 This is an ‘opt-out’ provision which means that unless the parties agree not to be bound by the confidentiality regime (to opt-out), then they will be bound by that regime.27
The changes in the Act are significant and timely for parties conducting business within Western Australia. Greater powers for arbitrators to make interim measures such as the ‘stop-clock arbitration’, the reduced scope for court intervention and a detailed ‘opt-out’ confidentiality regime are just some of the key changes that should help build greater trust among parties in the arbitral process for resolving disputes in Western Australia.