On 6 July 2010, the International Arbitration Amendment Act 2010 received Royal Assent and passed into law. This is the Australian Government’s attempt to promote Australia as a hub for international arbitration and to provide parties to foreign arbitral proceedings with greater certainty regarding recognition and enforcement in Australia.

The International Arbitration Act 1974 (Cth) (IAA) has been amended by the International Arbitration Amendment Act 2010 (Cth) in a move which the Attorney-General of Australia, the Hon. Robert McClelland MP, said was intended to "ensure the Act remains at the forefront of international arbitration practice". The amendments to the IAA were seen by the Attorney-General to be essential in order to "emphasise the importance of speed, fairness and cost-effectiveness in international arbitration, while clearly defining and limiting the role of the courts in international arbitration without compromising the important protective function they exercise."

One of the most significant amendments to the IAA is the repeal of the existing section 21, which previously allowed parties to choose to resolve their dispute "other than in accordance with the Model Law". This change means it is no longer possible to contract out of the Model Law in international arbitration where Australian procedural law is selected. Although this approach denies parties an element of freedom of choice, it introduces certainty and consistency in how international arbitration will be supervised by Australian courts and what measures are available to assist parties in resolving their disputes.

The amendments to section 21 mean that the Model Law now “covers the field” so there will be no recourse to the state arbitration acts in relation to, for instance; subpoenas, the disclosure of confidential information, and the death of a party. There are, however, provisions available to the parties on an "opt-out" basis which would give the courts jurisdiction in relation to these issues.

Unless parties agree to “opt-out”, they will have the following rights in arbitrations governed by the IAA:

  • a right to request that subpoenas be issued
  • a right to seek security for costs
  • a right to apply to a Court for relief as a result of non-compliance with a subpoena
  • a right to apply to a Court for relief in the event that the respondent to an arbitration refuses to participate.

Similarly, unless parties agree expressly to adopt the provision, there will be no right for either party to apply to the Court for an order for the disclosure of confidential material. Additionally, the IAA now contains provisions for minimising delay in enforcement proceedings, and long-awaited clarification of the operation of the Model Law with respect to challenges to the appointment of an arbitrator.

The amendments to IAA (s.21) came as two Australian courts were considering the decision in Eisenwerk Hensel Bayreuth Dipl-Ing Burkhardt GmbH v Australian Granites Ltd [2001] 1 Qd R 461 (Eisenwerk); a case widely derided in international law. Eisenwerk is authority for the position, under the unamended IAA, that where the parties select ICC Arbitration Rules, they have contracted out of the Model Law. As a result the State-based Commercial Arbitration Acts would apply. The recent judgments were both given in August 2010:

  • in Cargill International SA v Peabody Australia Mining Ltd [2010] NSWSC 887, the New South Wales Supreme Court decided that the reasoning in Eisenwerk was “plainly wrong” and found that the ICC Rules could co-exist with the Model Law
  • in Wagners Nouvelle Caledonie SARL v. Vale Inco Nouvelle Caledonie SAS [2010] QCA 219 the Queensland Court of Appeal was again faced with this argument but in relation to UNCITRAL rather than ICC Rules. In this case it found that the construction of the arbitration clause did not expressly exclude the Model Law and so there was no need to review Eisenwerk. Notwithstanding the construction point, the court did not endorse the Eisenwerk decision; it distinguished it and commented that “What is said to be ‘the principal contained in paragraph 12’ of Eisenwerk is, in truth, no principal at all” as it all came down to contractual interpretation.

The transition provisions of the International Arbitration Amendment Act appear not to have retrospective effect. For instance, the amendment to IAA (s.21) is applicable from 6 July 2010, however, that would relate to the date of the arbitration agreement rather than the date of accrual of the cause of action. Thus, in relation to contracts made prior to 6 July 2010, the unamended IAA probably applies, at least relating to s.21.

The amendments to the International Arbitration Act will be a welcome development to those participating in international arbitrations with an Australian seat. Given the robust manner in which the Supreme Court of New South Wales has dealt with the widely-derided Eisenwerk decision and the fact that Eisenwerk was not endorsed by the Queensland Court of Appeal, it seems that the courts now accept the need for a supportive, non-interventionist jurisdiction if International Arbitration is to flourish in Australia. These judgments are very important because the recently-legislated amendments are not retrospective in nature. Thus, an arbitration agreement entered into prior to 6 July 2010 could be subject to the same IAA v. state-based legislation arguments as before. It is to be hoped that the amendments to the IAA and these recent judgments will increase Australia's attractiveness as a major centre for international arbitration.