INTERNATIONAL ARBITRATION AND THE AUSTRALIAN COURTS

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1 INTERNATIONAL ARBITRATION AND THE AUSTRALIAN COURTS Justice Clyde Croft 1 Supreme Court of Victoria Introduction Australia has now moved to an environment where there is unparalleled support for arbitration. On the legislative front, there has been a substantial revision and update of the International Arbitration Act 1974 (Cth) (the IAA ), 2 and significant steps taken to introduce a uniform Model Commercial Arbitration Act (the CAAs ) (based on the Model Law and international arbitral best practice) across the States and Territories. 3 Nevertheless, the reinvogoration of international arbitration in Australia will also require the cooperation of various commercial arbitration stakeholders commercial parties, lawyers (whether they be corporate, in house lawyers, barristers or solicitors), arbitrators, arbitral institutions (particularly as educators and the custodians of ethical standards), 4 the Commonwealth, State and Territory governments, and the courts. I will concentrate on the latter, but it should be observed that the role or roles of each of these stakeholders are, naturally, interconnected; thus, collective, coordinated, action is essential if there is to be a successful future for Australia in international arbitration. 1 BEc LLM (Monash), PhD (Cantab), LFACICA, LFIAMA, JFAMINZ, FCIArb. I would like to thank my Associate, Drossos Stamboulakis, fo r his invaluable assistance in the preparation of this paper. 2 The International Arbitration Amendment Act 2010 (Cth) was introduced into Parliament in November 2009, received Royal Assent on 6 July 2010, and came into force on 7 July New South Wales was the first state to adopt the reformed commercial arbitration legislation in the Commercial Arbitration Act 2010 (NSW). The NSW legislation commenced on 1 October It is anticipated that Victoria will enact this legislation in Including the Australian Centre for International Commercial Arbitration (ACICA), the Chartered Institute of Arbitrators (Australian Branch) and the Institute of Arbitrators and Mediators Australia (IAMA). 1

2 Consequently, optimal arbitral policy necessarily involves an intricate balancing act. To attract custom, there must be enough court involvement to support and encourage arbitration but not so much as to stifle it, nor too little to allow parties to bypass the overarching rule of law. The most successful arbitral venues particularly in the Asia Pacific region are those that manage this tightrope act best, and combine a robust rule of law with government support, judicial encouragement and cooperation, and strong arbitral institutions. 5 In this light, and having regard to the role of other stakeholders, I turn to the position of the courts. I focus in particular on the view and treatment of international arbitration in Australia, as well as attempting to predict (with the requisite degree of trepidation) the future international arbitral landscape in Australia. Commercial arbitration in Australia Australia has not developed a high volume of commercial arbitration business, contrary to the experience in many other Western countries. There are many reasons for this and all stakeholders bear some responsibility. In the past, the perception has sometimes been that courts were interventionist rather than supportive of arbitration in some parts of the country. International experience indicates, however, that countries which have been successful in establishing busy international arbitration centres and attracting significant international arbitration work are perceived as supportive of arbitration. Additionally these are countries which also have active and significant domestic arbitration sectors. Despite the fact that this Conference focuses primarily on international arbitration in Australia, in my view, domestic and international arbitration are inexorably linked, and feed off each other. The vibrant domestic arbitration sector provides significant experience for domestic arbitrators and, particularly for present purposes, also for its courts. This is all the more so where the domestic arbitration law is based on an international regime, such as 5 As was reflected in the responses to the Queen Mary 2010 International Arbitration Survey: Choices in International Arbitration, the most important factor influencing the choice of the seat in commercial arbitrations was the formal legal infrastructure at the seat (see page 17). 2

3 the UNCITRAL Model Arbitration Law (the Model Law). 6 Also of concern has been the actual performance of arbitration itself. Of relevance for today s purposes, however, is the perception and actual treatment of arbitration matters by Australian courts. The perceived efficacy of Australian courts in arbitration Australian Courts both Federal and State and Territory 7 are empowered to carry out certain functions with respect to international arbitration, under the International Arbitration Act 1974 (Cth) ( IAA ), which enacts the UNCITRAL Model Law and adopts the New York Convention 8. These regimes cover the field of judicial involvement and support in and for arbitration and the arbitral process, and include the appointment of arbitrators (Arts 11(3) and (4) of the Model Law), the removal of arbitrators (Arts 13(3) and 14), decisions on arbitral jurisdiction (Art 16(3)) and the setting aside of arbitral awards (Art 34(2)). Also important is the ability of courts to stay proceedings in favour of arbitration, whether permanently or otherwise, as well as the ability to grant interim measures (such as discovery, subpoenas and freezing orders) in support of arbitration. Pursuant to the New York Convention, the function of courts in recognising and enforcing awards is also critical. At times, there has been a perception that Australian courts have hindered effective commercial arbitration in one or more of these stages, both by intervening too much in the arbitral process and by interpreting the arbitral law in an interventionist rather than a supportive way. This perception, as well as many other factors, was one of the reasons that our commercial arbitration legislation required attention; though the domestic legislation had also become 6 United Nations Commission on International Trade Law (UNCITRAL), Model Law on International Commercial Arbitration 1985 (as adopted by UNCITRAL on 21 June 1985). Adopted by the UN General Assembly 11 December 1985 (General Assembly Resolution 40/72), with revisions (as amended by UNCITRAL and adopted on 7 July 2006) adopted by the UN General Assembly on 4 December 2006 (General Assembly Resolution 61/33). 7 See s 18 of the IAA, which provides for the concurrent jurisdiction of both Federal, and State and Territory courts. 8 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, opened for signature 10 June 1958, 330 UNTS 38 (entered into force 7 June 1959) ( New York Convention ). 3

4 very dated as a result of developments in legislation elsewhere. 9 Nonetheless, it must be acknowledged that there were some problems with over intervention in the arbitration process by way of judicial review of awards, and as a result, an increasing tendency for parties to challenge awards on the basis of, what is generally (but not strictly correctly) described as, technical misconduct. This should not, however, overshadow the very effective and useful work of the courts in expediting and supporting arbitration through very arbitration friendly decisions on the operation of the arbitration legislation, and more generally. This is unsurprising and consistent with the approach of the common law over a long period of time. In this respect it is, in my view, worth noting that the common law courts were, as far back as the eighteenth century, extraordinarily supportive of commercial arbitration (as Professor James Oldham s account of the work of Lord Mansfield in the latter part of that century illustrates). 10 More recently, the English, Singapore and Hong Kong courts, for example, have been very supportive, as many of our courts have been, and continue to be. Increasingly we are seeing a much greater degree of international citation and convergence between decisions on arbitration, particularly those involving legislation of an international character (such as the Model Law). It is now possible, and not uncommon, for judges across common law jurisdictions to refer to judgments directly on point and on substantially similar legislation (largely based on the Model Law) not only from England and Australia, but increasingly 9 The domestic commercial arbitration legislation, prior to the enactment of the Commercial Arbitration Act 2010 in New South Wales was uniform (or substantially uniform) legislation which flowed from the work of SCAG in the late 1970s and early 1980s which was based on the then new and innovative legislative developments in England which resulted in the enactment of new legislation in the form of the Arbitration Act 1975 (Eng) and, principally, the Arbitration Act 1979 (Eng). Victoria was the first State to enact the legislation SCAG had developed, in the form of the Commercial Arbitration Act New South Wales followed shortly afterwards as, in due course, did the other States and the Territories. Apart from in New South Wales, as a result of its enactment of the Commercial Arbitration Act 2010, this is the domestic commercial arbitration legislation still in force in Australia. 10 J Oldham, English Common Law in the Age of Mansfield (2004, University of North Carolina Press),

5 from the Asia Pacific region, particularly from Singapore and Hong Kong. This will be discussed further below. The view of Australian courts Courts aim to achieve the efficient and just settlement of commercial disputes. One way that courts achieve this is by supporting appropriate (also styled alternative ) dispute resolution (ADR). Arbitration is an important aspect of ADR, broadly defined. Under the IAA the courts have been given supportive, facilitative and supervisory roles with respect to international commercial arbitration. 11 Effective implementation of these roles requires the courts to interpret both the IAA (and its domestic counterpart in the revised CAAs) consistently within Australia and, more broadly given the international provenance of both the IAA and the new CAAs, consistently with the current international jurisprudence applied to the Model Law and its derivatives. 12 Beyond the interpretation of these legislative provisions, Australian courts, broadly, recognise the necessity for arbitration, particularly in the context of the desirability of increased prospects for global enforcement under the New York Convention. Indeed, courts have adopted innovative measures from arbitration; we now see the application of techniques such as chess clock time management being used by the courts. The court s positive view of arbitration as a dispute resolution mechanism is also reflected in the highly successful special reference procedures available and applied extensively by the Supreme Court of New South Wales which provide, in effect, an expedited, supervised, commercial arbitration process with minimal appeal potential and no enforcement problems. With that in mind, I turn now to consider a number of recent Australian court decisions across the field of international commercial arbitration. Recent decisions of Australian courts 11 As is illustrated by Victorian Supreme Court Practice Note 2 of 2010 (Arbitration Business); which in dicates, specifically, the nature of these roles and procedural arrangements for the Arbitration List ( Commercial Court List G). 12 Which include the Arbitration Act 1996 (Eng), the Arbitration Act 1996 (NZ), Arbitration Act (Cap 10) and International Arbitration Act (Cap 143A) (Singapore), and the Arbitration Ordinance 1996 (Hong Kong). 5

6 It bears noting that there is a dearth of High Court authority on the IAA, and the text or principles underlying both the Model Law and the New York Convention. Due to principles of comity, however, decisions of intermediate courts in the Australian hierarchy are of importance in providing guidance on the way in which Australian courts perceive, and may be likely to treat, arbitration. 13 The most recent decisions under the amended IAA are those of Altain Khuder and Uganda Telecom, outlined immediately below. Altain Khuder Two judgments in Altain Khuder LLC v IMC Mining Inc & Anor ( Khuder ) 14 are significant in the present context, for a number of reasons. I have provided a broad overview of the importance of these judgments in the international arbitration context elsewhere. 15 In summary, however, Khuder involved the enforcement of a foreign arbitral award against a party who was not a signatory to the original arbitration agreement, and raised novel questions of interpretation of the legislative provisions (s 8 and 9) of the IAA (which reflect Articles V and IV, respectively, of the New York Convention). This legislation, as amended in 2010, had not been interpreted in this respect previously. 16 In this judgment, I also considered international principles such as kompetenz kompetenz and the applicable or proper law to be applied in relation to various issues in the context of the application. I think there are, however, two critical aspects of the Khuder judgment, as it relates to the view and treatment of international arbitration by Australian courts. First, it highlighted the need for, and desirability of, uniform and consistent interpretation of both the substantive and procedural provisions of 13 y Dee Pty Ltd (2007) 230 CLR 89 (discussed See, eg, Farah Constructions Pty Ltd v Sa further below). 14 [2011] VSC 1 and [2011] VSC 12 (Croft J). 15 For a summary of the significance of these decisions in the international arbitral landscape see the upcoming issue of the Journal of International Arbitration, in an article I wrote entitled Recent Developments in Arbitration in Australia (not yet published). 16 The enforcement provisions of the IAA have also been interpreted in a similar fashion by Foster J of Federal Court of Australia in Uganda Telecom Limited v Hi Tech Telecom Pty Ltd [2011] FCA 131 (22 February 2011) and Uganda Telecom Limited v Hi Tech Telecom Pty Ltd (No 2) [2011] FCA 206 (11 March 2011). 6

7 the IAA (which I discuss further below). Secondly, and particularly with reference to the costs judgment, 17 it highlighted the necessarily international character of judicial decisions on matters involving international arbitration (and the Model Law and the New York Convention, in particular). I considered and applied various Hong Kong High Court decisions to the effect that a party successfully seeking enforcement of a foreign arbitral award is entitled to full indemnity costs. 18 As this was the first time that the issue had been determined in this way in Australia, this decision gave rise to a new category of special costs circumstances in international arbitrations. In line with the policy objectives of the IAA, and the views expressed in the Hong Kong case of A v R, this will encourage parties resisting an award debt award to do so only where necessary and justified, rather than to simply have a go. What this highlights is that Australian courts, more than ever, are informed by international arbitral jurisprudence of a very high quality, which often happens to break the ground for future decision makers. The unsuccessful party in the Khuder cases, the award debtor, appealed the decisions to the Victorian Court of Appeal. At the time of writing the appeal has been heard but the decision reserved. Uganda Telecom The other decisions which consider the IAA in its amended form, post 7 July are the decisions of Foster J in Uganda Telecom. 20 In this dispute, an arbitration was conducted in Uganda without Hi Tech, who failed to respond to Uganda Telecom s request for arbitration. Uganda Telecom argued that payment and guarantees, that it had contracted for, were not provided by Hi Tech. An award was made in Uganda Telecom s favour, by a tribunal sitting in Uganda. Uganda Telecom then sought to enforce this award in the Federal Court. 17 [2011] VSC See cases such as A v R [2009] 3 HKLRD It is important to note that two recent insertions, in the most recent amendment to the IAA, were not, at that time, applicable s 8(3A) and 8(7A) which are aimed at providing clear interpretative guidance and direction. 20 Uganda Telecom v Hi Tech Telecom Pty Ltd (2011) FCA 131 and Uganda Telecom Limited v Hi Tech Telecom Pty Ltd (No 2) [2011] FCA

8 Justice Foster held that the grounds for refusing enforcement, pursuant to the IAA, were limited in nature and did not confer a general discretion on the Court to refuse enforcement. Furthermore, Foster J held that the public policy exception does not provide the court with a general discretion to refuse to enforce a foreign award. 21 This is consistent with my findings in Altain Khuder, and in line with the clear policy objective expressed by the Federal Parliament in the IAA. Lightsource Technologies Lightsource Technologies Australia Pty Ltd v Pointsec Mobile Technologies [2011] ACTSC 59 ( Lightsource ) involved a licensing dispute between the two parties. Court proceedings were initiated, and, relevantly for present purposes, Pointsec submitted that the proceedings should be permanently stayed in favour of arbitration (in reliance on s 7 of the IAA). Refshauge J found that s 7(2) of the IAA was applicable, and that the Court was prima facie required to stay the court proceedings. However, Lightsource Technologies argued that s 7(5) of the IAA, which disallows referral to arbitration where the arbitration agreement is null and void, inoperative, or incapable of being performed, applied. His Honour found that a part of the arbitration clause, which provided that no claim may be brought or made more than six months after [Pointsec Australia] first knew or should have known of the basis for the action or claim, acted as a time bar for commencing arbitral proceedings, meaning that arbitral proceedings could no longer be brought after the six month period had elapsed. It must be remembered that this decision applied the IAA prior to the commencement of specific provisions in the IAA (some of which I will discuss further below), which now provide clear legislative guidance to the courts to have particular regard to the international character of arbitration. Thoroughvision and Gordian Runoff 21 Ibid [132]. 8

9 Although Thoroughvision Pty Ltd v Sky Channel Pty Limited & Anor 22 ( Thoroughvision ) involved review of a domestic arbitral award under the CAA, 23 it is relevant in the international context as it may provide some indication as to the nature of judicial views on the quality of reasons required of an arbitrator, and may inform interpretation of Article 31 of the Model Law (extracted below). The relevant provision of the CAA, which requires reasons to be delivered, is s 29: (1) Unless otherwise agreed in writing by the parties to the arbitration agreemen t, the arbitrator or umpire shall (a) make the award in writing; (b) sign the award; and (c) include in the award a statement of the reasons for making the award. (2) Where an arbitrator or umpire makes an award otherwise than in writing, the arbitrator or umpire shall, upon request by a party within seven days after the making of the award, give to the party a statement in writing signed by the arbitrator or umpire of the date, the terms of the award and the reasons for making the award. The equivalent provision under the Model Law is Article 31 Form and contents of award: (1) The award shall be made in writing and shall be signed by the arbitrator or arbitrators. In arbitral proceedings with more than one arbitrator, the signatures of the majority of all members of the arbitral tribunal shall suffice, provided that the reason for any omitted signature is stated. (2) The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given or the award is an award on agreed terms under article 30. (3) The award shall state its date and the place of arbitration as determined in accordance with article 20(1). The award shall be deemed to have been made at that place. (4) After the award is made, a copy signed by the arbitrators in accordance with paragraph (1) of this article shall be delivered to each party. 22 [2010] VSC 139 ( Thoroughvision ). 23 Under sub section 29(1)(c) of the Commercial Arbitration Act 1984 (Vic). 9

10 Thoroughvision was decided in the context of a decision of the Victorian Court of Appeal 24 and a decision of the New South Wales Court of Appeal 25 in that area. The Victorian Court of Appeal in Oil Basins Ltd v BHP Billiton Ltd found that the reasons contained in the arbitral award were not of an acceptable standard, on the basis that the reasons of an arbitrator had to be of a judicial standard (which varies, depending on the particular circumstances of the case). 26 The New South Wales Court of Appeal considered this decision in Gordian Runoff Ltd v Westport Insurance Corporation: With great respect, it is far from clear that the UNCITRAL Model Law required more stringent reasons than required under the 1979 Act and, if so, to what extent. The words of s 29(1)(c), which reflect the expression in the Model Law, Art 31(2), which was based on the UNCITRAL Arbitration Rules, Art 32(3) and which is now reflected in the Arbitration Act 1996 (Eng) (the 1996 Act ), s 52(4), should be viewed against the context of the compromise embodied in the Model Law and against the background of international commercial arbitration. 208 The compromise in the Model Law was not between those who thought arbitrators reasons should reach the standard of detail of a judge in the common law system and those who thought some lesser standard was called for. Rather, it was a compromise between national laws requiring reasons and those not requiring any reasons: see HM Holtzmann and J E Neuhaus A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary (1989, Kluwer) at ; First Working Group Report on the Model Law A/CN.9/216 at para 80; Seventh Secretariat Note A/CN.9/264, Art 31 para 3; P Binder International Commercial Arbitration and Conciliation in UNCITRAL Model Law Jurisdictions (3rd Ed, 2010, Sweet & Maxwell) at There is no record in the discussions leading to the framing of the Model Law of a desire of any nation to raise the standard required of arbitrators to those of judges in the common law systems giving reasons, in particular, in circumstances where issues of fact and law were appellable by way of rehearing. 213 A perusal of the contemporary writings on commercial arbitration, in particular international commercial arbitration does not identify any express support for the standard of reasons in Art 31(2) to be that of a judge in a common law system. (See generally: Binder op cit at [6 074]; A Redfern & M Hunter Law and Practice of International Commercial Arbitration (4 th Ed, 2004, Sweet & Maxwell) at ; A Walton & M Vitoria Russell on the Law of Arbitration (20 th Ed, 1982, St evens & Sons Ltd) at ; Mustill & Boyd op cit 24 Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWCA See, particularly, [5 0] [57] of the Court of Appeal decision in Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346 (Buchanan, Nettle and Dodds Streeton JJA) 27 [2010] NSWCA

11 at ; Holtzmann & Neuhaus op cit at ; E Gaillard & J Savage (Eds) Fouchard Gaillard Goldman on International Commercial Arbitration (1999, Kluwer Law International) at 590 and 763; M Rubino Summartano International Arbitration Law (1990, Kluwer Law and Taxation Publishers) at 437; J Lew et al Comparative International Commercial Arbitration (2003, Kluwer Law International) at ; Jacobs op cit at [28.20]; Poudret & Besson op cit at ; J Parris Arbitration Principles and Practice (1983, Granada) at 141; P Rowland Arbitration Law and Practice (1988, Institute of Chartered Accountants in England and Wales in association with Sweet & Maxwell) at 75 76; A Tweedale & K Tweedale Arbitration of Commercial Disputes: International and English Law and Practice (2005, Oxford University Press) at and ; J Tackaberry & A Marriott Bernstein s Handbook of Arbitration and Dispute Resolution Practice Vol 1 (4 th Ed, 2003, Sweet & Maxwell) at ; R Merkin Arbitration Law (2004, LLP) at ; Lord Bingham Reasons and Reasons for Reasons: Differences Between a Court Judgment and an Arbitration Award (1988) 4 Arbitration International 2, 141 at and (1997) 16 The Arbitrator 19; Sir Harry Gibbs Reasons for Arbitral Awards: the John Keays memorial lecture, Sydney 7 th September 1988 (1988) 7 The Arbitrator 3, ; P Gilles & N Selvadurai Reasoned awards: How extensive must the reasoning be? (2008) 74 Arbitration ). 216 The underlying difference between arbitration and court litigation should be borne in mind at all times: see in particular the article by Lord Bingham Reasons and Reasons for Reasons: Differences Between a Court Judgment and an Arbitration Award op cit. Though courts and arbitration panels both resolve disputes, they represent fundamentally different mechanisms of doing so. The court is an arm of the state; its judgment is an act of state authority, subject generally in a common law context to the right of appeal available to parties. The arbitration award is the result of a private consensual mechanism intended to be shorn of the costs, complexities and technicalities often cited (rightly or wrongly, it matters not) as the indicia and disadvantages of curial decision making. 217 That some difficult and complex arbitrations tend to mimic the procedures and complexities of court litigation may be a feature of some modern arbitration, but that can be seen perhaps more as a failing of procedure and approach rather than as reflecting any essential character of the arbitral process that would assist in a conclusion (erroneous in principle) that arbitrations should be equated with court process and so arbitrators should be held to the standard of reasons of judges. 219 The Model Law, Art 31(2) and the CA Act, s 29(1)(c) do not say that the arbitrator must deal with every substantial argument put forward by the contending parties. Nor do they state that the arbitrator should state the evidence from which he or she draws his or her findings of fact and give reasons for preferring some evidence over other evidence. 11

12 222 The above is sufficient to explain why I disagree with the view of the Court in Oil Basins if that conclusion can be taken from the reasons that the legal obligation of an arbitrator to give reasons is to be equated with a judge in the common law system. It is unnecessary to discuss the particular requirements of individual circumstances other than those obtaining in this case, or the many cases on the adequacy of arbitrators reasons in the context of particular facts, such as Transcatalana de Commercio SA v Incobrasa Industrial Commercial Brazileira SA (The Vera ) [1995] 1 Lloyd s Rep 215; Universal Petroleum Co Ltd v Handels und Transport GmbH [1987] 1 Lloyd s Rep 517; Ascot Commodities NV v Olam International Ltd [2002] CLC 277; Checkpoint Ltd v Strathclyde Pension Fund [2003] EWCA Civ 84; World Trade Corp Ltd v C Czarnikow Sugar Ltd [2004] EWHC 2332 (Comm); Protech Projects Construction (Pty) Ltd v Al Kharafi & Sons [2005] 2 Lloyd s Rep 779; Petroships Pte Ltd v Petec Trading & Investment Corp of Vietnam (The Petro Ranger ) [2001] 2 Lloyd s Rep 348; Hawk Shipping Ltd v Cron Navigation Ltd [2003] EWHC 1828 (Comm); and Torch Offshore LLC v Cable Shipping Inc [2004] 2 Lloyd s Rep 446. My decision in Thoroughvision required consideration of and reference to both these Victorian and New South Wales Court of Appeal decisions. Thoroughvision was referred to (though not named) in an article in the legal section of the Australian Financial Review 28 on 30 April 2010 which said that I suggested the New South Wales Court of Appeal approach in relation to the quality of reasons that an arbitrator must give was preferable. This is something of an oversimplification because clearly the Victorian decision is binding in Victoria within the ambit of the issues decided. Consequently, it may be helpful to set out what I did say in Thoroughvision: In my opinion, it is clear from the authorities that a principle of proportionality applies with respect to the nature and extent of reasons which an arbitrator is obliged to provide in an arbitration award. An example of a case in which very extensive and comprehensive reasons were required is Oil Basins Ltd v BHP Billiton Ltd. 30 This was, however, an arbitration that involved 15 hearing days, an arbitral tribunal of three, conflicting and substantive expert evidence and substantial submissions. The present arbitration is, on the other hand, an arbitration confined with respect to the proper construction of the MOU. Further, as indicated, the Deed of Arbitration requires that the arbitration be conducted in accordance with the overriding objective referred to in that Deed, adopting procedures suitable to the determination of the type of issues involved and at the same time avoiding unnecessary delay and expense so as to provide a fair, expeditious and cost effective process for the determination of these issues. 55 It is well established that the reasons need show only that the arbitrator grasped the main contentions advanced by the parties, and communicated to the 28 James Eyers, Battle for arbitration continues Australian Financial Review (30 April 2010) Thoroughvision Pty Ltd v Sky Channel Pty Limited & Anor [2010] VSC 139 at [58] [58]. 30 (2007) 18 VR 346 at 367, [57] (Buchanan, Nettle and Dodds Streeton JJA). 12

13 parties, in broad terms, the reasons for the conclusions reached. 31 The reasoning process must be exposed so that the reader of the award can understand how and why the conclusion was reached; 32 It is clear that reasons need not be elaborate or lengthy, provided that these requirements are met. 33 The decision of the Court of Appeal in Oil Basins Ltd v BHP Billiton Ltd 34 confirms that an arbitrator must address each issue raised for decision within the scope of the arbitration agreement. 35 However it does not follow that the position outlined on the basis of the authorities to which reference has been made is rendered any different, or that the nature and extent of reasons is not to be fashioned by reference to the nature of the matters in dispute and, proportionately, having regard to the complexity of the issues, the importance, monetary or otherwise, of the arbitration proceedings and the nature of the arbitral proceedings, expeditious or otherwise, as agreed between the parties. 58 The present arbitration is, as indicated, to be distinguished from the very substantial, complex and lengthy arbitration proceeding the subject of the Oil Basins appeal. Additionally, this is not a case where, as in Oil Basins, the Arbitrator has omitted to deal with an entire and substantial issue, possibly, of critical significance to the arbitration. In this context I do not take the view that there is any relevant inconsistency for present purposes in the decisions of the Victorian and New South Wales Courts of Appeal in Oil Basins and Gordian Runoff, respectively. 36 In any event, the standard required for arbitral reasons remains to be determined leave to appeal was granted in the Gordian Runoff case, and the appeal was heard in the High Court of Australia. To date, the judgment remains reserved. The future of arbitration in Australia Attracting arbitral custom and generating and maintaining a successful and thriving arbitral sector depends largely on user perception. In a practical sense, the jurisdictions that will benefit the most from the increased use of arbitration are those which are in practice, and perceived to be, supportive of arbitration. 31 See UCATT v Brain [1981] IRLR 224 at 228 (Donaldson LJ); and see Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346 at [50] to [59] (Buchanan, Nettle and Dodds Streeton JJA); and Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWCA Davidson v Fish [2008] VSC 32 at [12] (Pagone J); and see Rashid v Minister for Immigration and Citizenship [2007] FCAFC 25 at [18] (Heerey, Stone and Edwards JJ). 33 See Stefan v General Medical Council [1999] 1 WLR 1293 at (2007) 18 VR See (2007) 18 VR 346 at 364 (Buchanan, Nettle and Dodds Streeton JJA). 36 I am strengthened in this view by the conditional language adopted by Allsop P with respect to the extent of inconsistency between these decisions (see [2010] NSWCA 57 at [222] and [224]). 13

14 Nonetheless, the way in which courts can assist and promote international arbitration does not require an overzealous deference to arbitration at all costs; a position clearly affirmed and contemplated, for example, in the limited defences to enforcement provided for in Article V of the New York Convention and Article 36 of the Model Law. In the long run, jurisdictions that offer support for arbitration, within the framework of a certain, consistent and predictable enforcement environment, with close adherence to the rule of law, will prosper. Consequently, the future of arbitration in Australia depends on a number of factors and stakeholders. In the context of courts involvement with arbitration, there are a number of ways in which court processes can respond in a streamlined, efficient and supportive fashion. I think that the following broad categories encapsulate or are likely to in the near future the courts impact on international arbitration in Australia: 1) Interpretation of the IAA, the Model Law and the New York Convention 2) Court Procedure 3) Liaison between courts and with arbitration users Interpretation of the IAA and the Model Law The way in which the spirit and intent of the IAA should be approached and applied has been discussed by me in the Khuder judgments, as well by Foster J of the Federal Court in the Uganda Telecom judgments. These decisions are, I think, now indicative of the supportive approach Australian courts are taking with respect to international arbitration, guided by the new provisions of the IAA. Meeting the need for consistent, uniform, and internationally informed judicial decision making is a clear thread running through these decisions. Consistent interpretation of the IAAs (and the CAAs) with international jurisprudence Consistency of interpretation is important, but only if the interpretation is both consistent and in accordance with accepted international jurisprudence with respect to the Model Law. It is critically important that the IAA and CAA are not treated as stand alone pieces of legislation devoid of the underlying international 14

15 jurisprudence. 37 If Australian courts do not interpret the Model Law, as applied by the IAA and the CAAs, consistently and in accordance with the legislative purpose and the international provenance of the provisions, the present legislative reforms will not be successful in promoting and developing international and domestic commercial arbitration in Australia. The interpretation provisions of the Acts should, however, help in this respect, and it is to these that I now turn. A court or authority in exercising the functions and powers listed in s 39(1) must: 38 have regard to: (a) the objects of the Act; and (b) the fact that: (i) arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes; and (ii) awards are intended to provide certainty and finality. The extensive list in s 39(1) seems to cover most, if not all, situations where a court or authority 39 will be applying or interpreting the IAA, the Model Law, the New York Convention or arbitration agreements and awards. A court or authority is directed to have regard to the objects of the IAA rather than obliged to apply the objects of the Act or the other considerations. Nevertheless, this probably makes little practical difference. The objects of the IAA are set out in s 2D, as follows: The objects of this Act are: (a) to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes; and 37 And see s 2A of the CAA, which requires this approach from the CAA perspective. 38 IAA, s 39(2). 39 See IAA s 18: (1) A court or authority prescribed for the purposes of this subsection is taken to have been specified in Article 6 of the Model Law as a court or authority competent to perform the functions referred to in Article 11(3) of the Model Law. (2) A court or authority prescribed for the purposes of this subsection is taken to have been specified in Article 6 of the Model Law as a court or authority competent to perform the functions referred to in Article 11(4) of the Model Law. The functions referred to in Articles 11(3) and 11(4) of the Model Law are the appointment of arbitrators. At this stage, no authority has been prescribed, but a arbitral institution such as ACICA would be appropriate. 15

16 (b) to facilitate the use of arbitration agreements made in relation to internationa l trade and comme rce; and (c) to facilitate the recognition and enforcement of arbitral awards made in relation to international trade and commerce; and (d) to give effect to Australia s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty fourth meeting; and (e) to give effect to the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985 and amended by the United Nations Commission on International Trade Law on 7 July 2006; and (f) to give effect to the Convention on the Settlement of Investment Disputes between State s and Nationals of Other States signed b y Australia on 24 March The Parliamentary intention and objective is made quite clear by the combination of both ss 39 and 2D the efficient settlement of disputes by encouraging the use of arbitration in the context of international trade and commerce. Regard should also be had to Article 2A of the Model Law, which is given effect to by the IAA, and provides: (1) In the interpretation of this Law, regard is to be had to its international origin and to the need to promote uniformity in its application and the observance of good faith (2) Questions concerning matters governed by the Law which are not expressly settled in it are to be settled in conformity with the general principles on which this Law is based. It is likely that such consistent interpretation will be given effect, aided by these provisions, 40 but also by the principle of comity, reaffirmed by the High Court of Australia in Farah Constructions Pty Ltd v Say Dee Pty Ltd 41 in the following terms: 42 Intermediate appellate courts and trial judges in Australia should not depart from decisions in intermediate appellate courts in another jurisdiction on the interpretation of Commonwealth legislation or uniform national legislation unless they are convinced that the interpretation is plainly wrong Section 2A of the CAA also requires that regard is to be had to the need to promote so far as practicable uniformity between the provisions of the Model Law (as given effect by the IAA), and refers explicitly to UNCITRAL documents, and documents of its working groups, as documents that may be used in interpreting the CAA. 41 (2007) 230 CLR Ibid 150 (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ ). 43 Australian Securities Commission v 22Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 492 per Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ. 16

17 This principle would appear to apply to both the CAA as uniform national legislation and the IAA as Commonwealth legislation. Thus, application of this principle is likely to be important in the international commercial arbitration context because of the dearth of High Court authority under the IAA and in relation to the Model Law provisions. It is also important in the domestic arbitration context, and will assist further in the development of international arbitration jurisprudence, as decisions on the CAA provisions feed interpretation of the IAA and the Model Law provisions generally, and consequently affect perception of Australia as an international venue. In a practical sense, this means that Australian courts should have regard to decisions of overseas courts applying and interpreting the Model Law. In my view, the IAA encourages this approach as the interpretative provisions specifically direct judges to have regard to the international origins of the provisions applied by the IAA, and to the desirability of the uniform application of these provisions internationally. 44 The same result is contemplated with respect to the Model Law provisions adopted in the CAA provisions. 45 Consequently, a consistent interpretation and application of the IAA and the CAAs, which is consistent with international thinking having regard to the Model Law base of both pieces of legislation, should lead to the minimum amount of court intervention necessary, as well as providing for effective support for the arbitration process when required. Court procedure In my view, another important area relating to the courts treatment of arbitration is the need to coordinate the procedure to be applied with respect to the making of and dealing with applications under the IAA (and the CAAs). In this context, procedure must also include listing procedures and expedition. 46 The procedural approach to applications under the IAA and the CAAs will have a 44 See IAA, s 2D. 45 See CAA, s 2A. 46 Noting in this respect that the Victorian Supreme Court Arbitration List (List G) is available 24 hours per day, seven days per week and hearings can and do take place outside court hours as required. 17

18 major impact on the way that Australian arbitration law is viewed. For example, staying court proceedings in favour of an arbitration is a pro arbitration step, but if it takes an excessive time for the stay application to be heard and determined, the arbitration process has probably been thwarted anyway. Procedural consistency and expediency is far more likely to be achieved when there are specialist arbitration lists and judges; as the experience in leading commercial arbitration centres such as London, Singapore and Hong Kong shows. Specific arbitration practice notes and rules are essential to this process. As more State and Territory Supreme Courts and the Federal Court create specialist arbitration lists, or nominate particular judges to hear arbitration matters, further expertise will be developed in the courts. The Federal Court has an Arbitration Coordinating Judge in each State and Territory. The Supreme Court of New South Wales has a Commercial Arbitration List, and I am the judge in charge of the Supreme Court of Victoria s Arbitration List, 47 which is a specialist list (List G) in our Commercial Court. 48 An additional advantage of having a specialist arbitration list is that procedural enquiries relating to arbitration applications can be directed to the one place. 49 Liaison between courts and with arbitration users The process of consultation, review, and encouragement of international best practice which prompted the review of the IAA (and its subsequent legislative 47 The Arbitration List was announced by The Hon. Marilyn Warren AC, Chief Justice of Victoria, 'The Victorian Supreme Court's Perspective on Arbitration' (Speech delivered at the ACICA International Commercial Arbitration Conference on 4 December 2009) available at /library/supreme+ +speech+ +remarks+at+the+icac+ +warren+cj%28pdf%29; see also the Hon. Marilyn Warren AC, Chief Justice of Victoria, Victoria s Commitment to Arbitration Including International Arbitration and Recent Developments, ce%20may%2013.pdf (13 May 2010). 48 See Practice Note No 2 of 2010 (Arbitration Business); and Justice Clyde Croft, Arbitration Reform in Australia and the Arbitration List (List G)in the Commercial Court Supreme Court of Victoria, presented at a seminar of the Commercial Bar Association of the Victorian Bar on 24 May 2010, 222e6833/Arbitration+Reform+in+Australia+ +Combar+Commentary+ +24+May+2010.pdf?MOD=AJPERES. 49 In Victoria, Practice Note No 2 of 2010 (Arbitration Business) lists the contact details of my Associates. 18

19 provisions) should not end on the commencement of the Acts. If the goals of the IAA (and the CAAs, which, in my view, it necessarily depends upon) are to be fully realised, the courts will need to communicate with and receive feedback from commercial arbitration stakeholders. I am in the process of creating an Arbitration Users Group for the Supreme Court of Victoria. I expect that this Users Group will be especially useful in discussing and developing the procedures for commencing and disposing of applications under the IAA and the CAAs. This consultation may lead to further improvements to the Arbitration Business Practice Note. 50 I would expect that other courts are establishing similar consultative mechanisms. The courts should also liaise with each other to develop and share their arbitration expertise. The existence of specialist arbitration lists will help in this regard by directing arbitration business to particular judges within a court who can then share their knowledge and experience with the arbitration judges from other courts. A Judicial Liaison Committee has been established under the auspices of the Australian Centre for International Commercial Arbitration ( ACICA ), which aims to share and consolidate arbitration expertise in courts, and provide a means for discussion and review of matters and decisions concerning international arbitration. This consultation involves judges of the Federal Court and the judges of the State and Territory Supreme Courts, and will be essential if, as I expect, the majority of Model Law decisions are initially made under the domestic CAA. Conclusion: The future Australian courts and arbitration Australia has world class courts, both in terms of expertise and independence. The quality of its leading arbitrators, international and domestic, and its leading lawyers practising in arbitration matters, is beyond question. I have no doubt that Australian courts can more than meet the unique challenge presented by international arbitration and more than that play a leadership role in facilitating the development of commercial arbitration in Australia, both 50 Practice Note No. 2 of 2010 Arbitration Business. 19

20 internationally and domestically. Nevertheless, the Courts are only one piece of the puzzle. Success in the arbitral world depends on a complex interrelated support mechanism, such that a particular arbitral seat offers consistent, predictable, cost effective and timely support for arbitration. This success can only be achieved by a combined effort of all stakeholders. While the future landscape of international arbitration is hard to predict, the future that must be avoided is clear. If Australia, and its courts (a key component of the supervisory and enforcement environment in Australia), do not take real steps to encourage and promote arbitration, Australia will be marginalised in an international arbitral system. This will be particularly acute as arbitration in the Asia Pacific region continues to grow exponentially. This will have significantly adverse consequences in terms of the development of our international legal expertise and the involvement of Australia s legal and other professionals in international trade and commerce. * * * * * * * 20