THE CHARTERED INSTITUTE OF ARBITRATORS (AUSTRALIA) LIMITED ACN AND

Transcription

1 THE CHARTERED INSTITUTE OF ARBITRATORS (AUSTRALIA) LIMITED ACN AND JOINT SUBMISSIONS IN RESPECT OF THE COMMERCIAL ARBITRATION BILL 2009

2 The Institute of Arbitrators & Mediators Australia The Honourable Michael Kirby AC CMG The Chartered Institute of Arbitrators (Australia) Mr Derek Minus FCIArb (Arb), FCIArb (Med) Mediation & Arbitration Chambers 6th Floor 67 Castlereagh Street Level 7, 195 Macquarie Street Sydney NSW 2000 Tel: (02) Sydney NSW 2000 Tel: (02) February 2010 Mr Laurie Glanfield AM Secretary, Standing Committee of Attorneys-General Department of Justice & Attorney-General Level 14, 10 Spring Street Sydney NSW 2000 RE: JOINT SUBMISSIONS ON THE COMMERCIAL ARBITRATION BILL 2009 Dear Mr Glanfield, The Chartered Institute of Arbitrators (Australia) and the Institute of Arbitrators & Mediators Australia, have pleasure in submitting our joint submissions on the consultation draft Commercial Arbitration Bill These submissions have been arrived at by expert working groups from both organisations who met and reviewed their individual recommendations for amendment of the draft Bill. As two of the major arbitration bodies in Australia, we are desirous of assisting the various State and Territory governments enact legislation that will encourage the greater use of arbitration, both by members of the legal profession and the business community, alike. To this end, we have carefully considered the draft legislation and make such recommendations as from our experience, provide the necessary additional provisions and practical and effective measures that are required to ensure that arbitration in Australia can truly deliver a just, as well as a cheaper and quicker alternative to litigation in the courts. We commend these submissions to your Committee. Yours sincerely, MICHAEL KIRBY President DEREK MINUS President

3 Index Preamble.2 Introduction.4 Uniformity between the CAA and IAA. 5 Paramount object of Act...5 Scope of application of the CAA..5 Recourse against an arbitral award 6 Stay of court proceedings.8 Confidentiality. 8 Power of the Arbitral Tribunal..9 Power of the Court. 9 Role arbitral institutions Full or reasonable opportunity Statement of Claim and Defence.. 11 Extension of ambit of arbitration proceeding...11 Default of a Party Mediation & Arbitration (MedArb) Reasons for award Costs...14 Interest.. 14 Immunity...14

4 CIArb & IAMA JOINT SUBMISSIONS on the COMMERCIAL ARBITRATION BILL OF 14 Preamble The Chartered Institute of Arbitrators (Australia) ( CIArb ) and the Australian Institute of Arbitrators & Mediators Australia ( IAMA ) welcome the government review of the International Arbitration Act 1974 and the uniform Commercial Arbitration Acts, as much overdue. However, it is our shared view that it would be preferable if a single Arbitration Act were to be enacted by the Commonwealth government, as opposed to the separate Commonwealth and States/Territories acts. We would prefer to see the Commonwealth and the various State and Territory governments work together to enact a single Arbitration Act that would cover the field in the area of both international and domestic arbitration. There are a number of reasons for this: (a) (b) (c) (d) a single Commonwealth Act will serve to unify the domestic and international arbitration regimes. Thereby, Australia s law relating to arbitration will become self-contained in a single Act readily accessible to arbitration users; a single Arbitration Act (based on the Model Law and reflecting international norms) is more likely to instil confidence in our Asia- Pacific neighbours that Australia is a reputable arbitration centre; a single Commonwealth Act will obviate the difficulty of identifying which legislative arbitration regime applies whether the Commonwealth (international) regime or the State/Territory (domestic) regime, and if the latter, which particular State or Territory Act applies. That is, the Commonwealth Act would apply to any arbitration seated in Australia; 1 future amendments can be more easily effected if there is only one Parliament instead of several separate Parliaments that need to 1 If the additional (opt-in or opt-out) provisions were to apply to all arbitrations seated in Australia, it would not be necessary to determine whether the arbitration was domestic or international in nature, hence overcoming the difficulty of determining which Act applies, as experienced in Paharpur Cooling Towers Ltd v Paramount (WA) Ltd [2008] WASCA 110.

5 CIArb & IAMA JOINT SUBMISSIONS on the COMMERCIAL ARBITRATION BILL OF 14 conduct the review and make the legislative changes. In this regard, it is also undesirable for differences to develop between the so-called uniform Acts as has occurred with the present regime. (e) finally, it is desirable that as Australia moves to a unified legal profession (and possibly even a single Australian judiciary) that the same Court(s) invested with jurisdiction under the International Arbitration Act 1974 (Cth) are invested with jurisdiction under the domestic Commercial Arbitration Act(s) so that a single consistent body of jurisprudence concerning the Model Law can develop. Under the present system, the Model Law will be interpreted for the purposes of international arbitrations under the International Arbitration Act 1974 and separately for domestic arbitrations under the new Commercial Arbitration Acts, thus creating the potential for differences to develop in the interpretation of the Model Law, which is highly undesirable. As we realise that the adoption of a single Arbitration Act may not occur until some time in the future, we support the present efforts of the various governments, to achieve a harmonisation of the international act and the separate domestic acts, based on the Model Law. The focus of our shared submissions is on the various amendments and additional provisions that we believe need to be made to the Bill. We believe these amendments are necessary for two reasons. Firstly, they give practical effect to an Australian arbitration regime that can stimulate the use of arbitration as a process. Secondly, they instil greater confidence in the business community to use arbitration as an effective process for the resolution of commercial disputes.

6 CIArb & IAMA JOINT SUBMISSIONS on the COMMERCIAL ARBITRATION BILL OF 14 REVIEW OF THE COMMERCIAL ARBITRATION BILL 2009 JOINT SUBMISSIONS BY THE CIArb and IAMA 2 A. Introduction 1. The secretary of SCAG has released a draft CAA Bill 2009 ( CAA Bill ) and Issues Paper. The CAA Bill is intended to be a uniform piece of legislation, which will be enacted by the Parliaments of the various States and Territories to replace the current uniform Commercial Arbitration Acts. 3 The CAA Bill proposes substantial and important changes to Australia s outdated uniform domestic arbitration Acts. In particular, it adopts the Model Law as the backbone of a new domestic arbitral legislative regime. In that regard, the CAA Bill is a welcome initiative. 2. Reform of the domestic arbitral legislative regime is desirable for two primary reasons: (a) (b) firstly, to promote arbitration as a credible alternative to litigation before Australian courts in respect of the resolution of non-- international disputes; secondly, to promote Australia's aspirations of becoming a regional hub for international commercial arbitration in the Asia-Pacific region. 4 2 In this submission, CIArb means the Chartered Institute of Arbitrators (Australia) Ltd and IAMA means the Institute of Arbitrated & Mediators Australia. The two organizations have chosen to combine our submissions to provide a single voice to government and better represent the views of our members for significant and practical reform of the present legislative regime, to enable greater use of arbitration processes in the resolution of commercial disputes in Australia. 3 Comprising the Commercial Arbitration Act 1984 (NSW), Commercial Arbitration Act 1984 (Vic), Commercial Arbitration Act 1990 (Qld), Commercial Arbitration Act 1985 (WA), Commercial Arbitration and Industrial Referral Agreements Act 1986 (SA), Commercial Arbitration Act 1986 (Tas), Commercial Arbitration Act (NT), Commercial Arbitration Act 1986 (ACT). 4 As is well known, a review of the International Arbitration Act 1974 (Cth) is under way. The Commonwealth Attorney General has repeatedly stated that he is determined to make Australia a regional centre for international commercial arbitration, most recently in his opening address at the ACICA conference in Melbourne on 4 December On 25 November 2009, the International Arbitration Amendment Bill 2009 ( the IAA Bill") was introduced into the Commonwealth Parliament. It is expected to be debated in the in the Spring Session of Parliament commencing in August 2010.

7 CIArb & IAMA JOINT SUBMISSIONS on the COMMERCIAL ARBITRATION BILL OF 14 B. Uniformity between the CAA and IAA 3. Section 2A of the CAA Bill provides that as far as practicable uniformity between the application of the CAA to domestic commercial arbitrations and the application of the provisions of the Model Law (and inferentially the IAA) to international commercial arbitrations is to be promoted. It is highly desirable for Australia to develop a single, consistent body of jurisprudence in respect of the Model Law and for there to be uniformity between the IAA and the CAA. 4. It is therefore of concern that various topics dealt with in the CAA Bill are dealt with differently than in the IAA Bill, for no apparent reason for example confidentiality, interest and costs provisions. 5. As much as possible, there should be symmetry between the provisions of the new CAA and the IAA (as amended). This will necessarily involve coordination between the parliamentary draftsmen of the States/Territories and the Commonwealth respectively. C. Paramount object of Act 6. Both Institutes strongly support the inclusion of a paramount objects section (Section 1AC). The lack of such a section has long been a perceived weakness in the present CAA. D. Scope of application of the CAA 7. Section 1(1) of the CAA Bill provides that it applies to domestic commercial arbitrations. The expression is defined in section 1(3). In contrast the IAA Bill (following the introduction of a new section 21) will only apply to international commercial arbitrations. Article 1(3) of the Model Law defines what is an international arbitration. Section 16 of the IAA gives the Model Law the force of law in Australia. 8. It is undesirable for disputes to arise in future as to whether an arbitration is domestic or international and accordingly whether it attracts the IAA or the

8 CIArb & IAMA JOINT SUBMISSIONS on the COMMERCIAL ARBITRATION BILL OF 14 CAA. For example, while the Federal Court of Australia has jurisdiction under the IAA it will have no jurisdiction under the CAA Bill. 9. As presently drafted, there is no clear dividing line provided for in the CAA Bill between an "international" and a "domestic" commercial arbitration. For example, assume the following: (a) (b) (c) the parties to an arbitration agreement had at the time of conclusion of that agreement their places of business in Australia; the parties have in their arbitration agreement agreed that any dispute between them is to be settled in accordance with the CAA; the place where a substantial part of the obligations of the commercial relationship was to be performed and the subject matter of the dispute is most closely connected lies outside Australia. 10. The arbitration posited in the above example would be international within the meaning of Article 1(3)(b)(ii) of the Model Law (and hence the IAA) but would also be a "domestic commercial arbitration" for the purposes of section 1(3) of the CAA Bill. 11. Moreover, as presently drafted an arbitration does not qualify as a domestic commercial arbitration under the CAA Bill unless the parties have expressly agreed that their potential or existing dispute is to be settled in accordance with [the CAA]. To require that the parties make explicit reference to the CAA in their arbitration agreement is in our view undesirable as arbitration agreements are not always felicitously drafted. 12. Accordingly, we submit that a domestic commercial arbitration should simply be defined in the CAA Bill as an arbitration which is not an international arbitration for the purposes of the IAA. E. Recourse against an arbitral award 13. Section 34 of the CAA Bill adopts Article 34 of the Model Law in respect of recourse against arbitral awards. The Issues Paper raises the question whether the CAA Bill should provide for further grounds of judicial review in

9 CIArb & IAMA JOINT SUBMISSIONS on the COMMERCIAL ARBITRATION BILL OF 14 particular, error of law and/or serious irregularity, and if so, the detail of such provisions. For example, should such provisions apply on an opt-in, opt-out or mandatory basis? 14. Most Australian arbitration practitioners would agree that there is too much scope for judicial interference with arbitral awards under the current uniform Acts. In order for the proposed paramount object (contained in section 1AC of the CAA Bill) to be given effect, judicial intervention in the arbitration process must be kept to an absolute minimum. 15. However, to provide those parties that wish to embark on an arbitration process which allows for supervisory involvement by a court, we suggest that section 34 be amended to permit the parties to opt in by agreeing in writing after a dispute has arisen, that either of them may appeal against an error of law in the reasons expressed by the Arbitral Tribunal under the limited circumstances set out in section 38 of the current Uniform Commercial Arbitration Legislation. This would give the parties the opportunity, knowing the nature and circumstances of the dispute, to agree between themselves that in such a situation, they reserve the right to appeal against an error of law on the face of the record expressed by the Arbitral Tribunal. 16. We acknowledge that in general, the arbitration process should be final and the award binding upon the parties. However, in the interests of party autonomy, we believe that it would be appropriate to allow the parties, if they both see fit and at a point after the dispute between them has arisen, to enter into an agreement reserving a right to appeal. Such a right could be subject to the time limitation referred to in section 34(3), so that the right to appeal would have to be exercised promptly, or else be lost. 17. The above would, have the salutary effect of promoting the finality of domestic arbitral awards yet give parties the choice, after the extent, nature and type of dispute was known to them, to enter into a domestic arbitration that would be subject to judicial review, if that was their choice.

10 CIArb & IAMA JOINT SUBMISSIONS on the COMMERCIAL ARBITRATION BILL OF 14 F. Stay of court proceedings 18. The CAA Bill omits Article 8 of the Model Law and instead inserts a section 8A, based on section 53 of the present uniform domestic arbitration Acts, which provides the court with a discretion to stay court proceedings brought in the face of an arbitration agreement. On the other hand, Article 8 of the Model Law (reflected in section 7 of the IAA) obliges a court to stay court proceedings in the face of an arbitration agreement (with limited exceptions). 19. CIArb and IAMA are both of the view that a court should not have greater scope to stay a domestic arbitration than an international arbitration. The Arbitration Bill (HK), which treats domestic and international arbitrations alike in a single Act, does not apply different tests to the stay of court proceedings depending upon whether an arbitration is domestic or international in nature. Giving courts a broad discretion whether or not to stay court proceedings in the face of an arbitration agreement (as opposed to mandating that they do so) will, we think, seriously undermine the efficacy of arbitration agreements. 20. Some recent cases before Australian courts reveal a reluctance of the courts to stay court proceedings in the face of an arbitration agreement, even where the necessary preconditions for a stay are satisfied We submit that the CAA Bill should contain a provision equivalent to Article 8 of the Model Law (reflected in section 7 of the IAA) which obliges a court to stay court proceedings in the face of an arbitration agreement (with limited exceptions). G. Confidentiality 22. Sections 27E-27N of the CAA Bill contain an elaborate confidentiality regime which applies unless the parties opt-out. Sections 27E-27N appear to be drawn from the Arbitration Act (NZ). The language and detail of the confidentially provisions are different to the confidentiality regime proposed 5 See Viridian Noosa Pty Ltd v. Neumann Contractors Pty Ltd [2009] QSC 398 which considered section 53 of the existing uniform arbitration Acts. See also AED Oil v. Puffin FPSO Limited [2009] VSC 534 which considered section 7 of the existing IAA. Under section 7 of the IAA a court is mandated to stay a court proceeding where the necessary preconditions are satisfied. Yet the court refused to stay the court proceeding.

11 CIArb & IAMA JOINT SUBMISSIONS on the COMMERCIAL ARBITRATION BILL OF 14 by the IAA Bill. We think that this is undesirable. There should be consistency between the IAA and the CAA in terms of the respective confidentiality regimes. H. Power of the Arbitral Tribunal 23. The CAA Bill does not contain any provision which catalogues the powers that the arbitral tribunal may exercise, such as the power to: (a) (b) (c) order security for costs [Sub-sections 25(2)-(4) refer to orders for security for costs but the Act is silent as to the arbitrator s power to order such measure, which does not qualify as an interim measure under section 17(2) of the CAA Bill.] 6 order the inspection of property the subject of dispute, including taking photographs, taking samples or conducting experiments on such property (or plant and equipment), which again does not qualify as an interim measure under section 17 (2) of the CAA Bill conduct the arbitration hearing on a stop clock (or time-limited) basis 24. Provisions which catalogue the powers that the arbitral tribunal may exercise may be found in other arbitration Acts for example, the Singapore Arbitration Act 7 and the Malaysian Arbitration Act 8. We are of the view that it is desirable for the CAA Bill to contain such a provision. I. Power of the Court 25. While the CAA Bill contains provisions that confer power on a court to order interim measures (section 17J), to grant assistance to an arbitral tribunal in taking evidence (section 27), to order subpoenae in aid of an arbitration (section 27A) and to provide assistance where there is default in compliance with the arbitral tribunal s directions in relation to the taking of evidence 6 The power of an arbitrator to award security for costs is provided for in other countries - see for example section 38 (3) of the Arbitration Act 1996 (UK) and section 57 (1) (a) of the draft Hong Kong Arbitration Bill. 7 Arbitration Act 2001 (Singapore), section Arbitration Act 2005 (Malaysia), section 21(3).

12 CIArb & IAMA JOINT SUBMISSIONS on the COMMERCIAL ARBITRATION BILL OF 14 (section 27B), it does not provide the court with any general power to make orders in aid of an arbitration (like section 47 of the existing uniform arbitration Acts). 26. While it is desirable to limit court intervention in the arbitration process, there are times when court assistance is helpful to the arbitration process - for example, making an order against a third party requiring the third party to make available inspection of property which is relevant to the arbitral proceeding, or requiring the third party to preserve assets or evidence. Accordingly, we submit that the CAA Bill should be amended to clarify the powers of the court in relation to a domestic commercial arbitration (in addition to the provisions referred to above). We refer to sections 56 and 60 of the Hong Kong Arbitration Bill which is presently before the Hong Kong Parliament 9, as a useful guide. Section 56 of the Hong Kong Bill sets out the general powers exercisable by the arbitral tribunal while section 60 sets out the special powers exercisable by a court in relation to arbitral proceedings in particular, empowering the court to make orders for inspection of property. An alternative course would be to include a more general provision equivalent to section 47 of the existing uniform arbitration Acts. J. Role of arbitral institutions 27. Section 6 raises inferentially the question whether an arbitral institution (such as IAMA and/or CIArb) should, like ACICA in the international arbitration sphere, be nominated under the Act or regulations made under the Act as an authority to perform some of the functions referred to in Article 6 of the Model Law. 28. CIArb and IAMA submit that provision should be made in the CAA Bill for regulations to be made appointing a recognised arbitral institution to perform some of the functions referred to in the Model Law - in particular the appointment of an arbitrator in default of agreement between the parties where the parties have not nominated an arbitral institution in their arbitration agreement to perform that function - as is presently provided for in section 18 of the IAA Bill. 9 See footnote 6 above. See also section 12 of the Singapore International Arbitration Act (Cap 143A).

13 CIArb & IAMA JOINT SUBMISSIONS on the COMMERCIAL ARBITRATION BILL OF 14 K. Full or reasonable opportunity 29. Section 18 of the CAA Bill adopts Article 18 of the Model Law which requires that parties be treated with equality and must be given a full opportunity of presenting the party s case before the arbitrator. 30. A full opportunity might be regarded as an opportunity to embark upon a protracted presentation of voluminous documentation and other evidence, much of it irrelevant. The arbitrator should have the opportunity to determine to what extent a party's desire to present its case at great length is unreasonable. 31. The concept that each party must be given a full opportunity of presenting that party s case may also conflict with proposals to implement any form of fast track proceedings, whereby discovery, expert witnesses, the number of witnesses and the duration of submissions, are curtailed. 32. We are of the view that the CAA Bill should be amended to substitute the word reasonable for full, as this is more likely to result in the achievement of the paramount object of the Act. L. Statement of Claim and Defence 33. It would be desirable to introduce the procedural requirements of Section 23, by the words subject to the agreement of the parties or any direction by the Arbitral Tribunal to the contrary". This gives the parties the option of deciding not to proceed in this way and the arbitrator the power to determine that a simplified process would be more appropriate to the circumstances of the case. M. Extension of ambit of arbitration proceeding 34. Section 25 of the existing uniform arbitration Acts confers upon an arbitrator the power to extend the arbitration to include other disputes which may not have been the subject of the original notice of dispute or referral to

14 CIArb & IAMA JOINT SUBMISSIONS on the COMMERCIAL ARBITRATION BILL OF 14 arbitration. We cannot see any similar provision in the Model Law. We think it would be useful to include such a provision in the new CAA. N. Default of a Party 35. In section 25(1)(a) and (b), it is said that the Arbitral Tribunal is to" terminate or continue, as the case may be. We would prefer to see the wording used, corresponding to section 25(1)(c) where the Arbitral Tribunal has a discretion. We therefore suggest that the words, "is to" in sections 25(1)(a) and (b) should be replaced by the word may. O. Mediation & Arbitration (MedArb) 36. The CIArb and IAMA jointly support the inclusion of a clause that assists the resolution of disputes otherwise than by arbitration (for example, by mediation or conciliation) similar to the present section Section 27D of the CAA Bill adopts the old medarb provision contained in section 27 of the current uniform Acts but makes it apply on an opt-out basis. We believe that this is preferable to the current opt-in basis. 38. We have had the benefit of reading the ACICA submission regarding the strengthening of the language of clause 27D to provide the same ability to direct the parties to undertake non-arbitral means of dispute resolution as many courts in Australia currently exercise. 39. We support the adoption of the form of the section 27 that appeared in the original Commercial Arbitration Act 1984 (NSW) as follows: (1) Unless otherwise agreed in writing by the parties in an arbitration agreement, the arbitrator or umpire shall have power to order the parties to a dispute which has arisen and to which that agreement applies to take such steps as the arbitrator or umpire thinks fit to achieve a settlement of the dispute (including attendance at a conference to be conducted by the umpire or

15 CIArb & IAMA JOINT SUBMISSIONS on the COMMERCIAL ARBITRATION BILL OF 14 arbitrator) without proceeding to arbitration or (as the case requires) continuing with arbitration. 40. The adoption of a medarb clause will also align the revised arbitration act with the growth of mediation, which has significantly altered the manner of settling disputes within the legal system, over the past 20 years. 41. It is preferable that a medarb clause appear in both the domestic Act and the International Act and we have urged the Commonwealth Attorney General to reconsider the inclusion of a medarb provision in the IAA Bill. This is especially relevant as in every major country in the Asian region (the primary marketplace for an Australian brand of arbitration) there are provisions that allow an arbitrator to conciliate or mediate the dispute. P. Reasons for award 42. Section 31 of the CAA Bill mirrors Article 31 of the Model Law. In particular, section 31(3) provides that the arbitral award must state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given or the award is a consent award. 43. The CIArb and IAMA are of the view that section 31(3) should be amended to reverse the effect of the Victorian Court of Appeal decision in Oil Basins Ltd v BHP Ltd [2007] VSCA In this case, the Victorian Court of Appeal held in relation to a domestic arbitration that the failure of the arbitral tribunal to provide adequate reasons for their decision and, further, to deal with important submissions in evidence, amounted to an error of law in making of the award and, further, misconduct of the arbitral tribunal, resulting in the setting aside of the award. In the course of the trial judge's decision 10 his Honour held that in certain circumstances the reasons of an arbitral tribunal should be of the same standard as the reasons of a superior court judge. This finding was upheld on appeal. This case has raised eyebrows in international arbitration circles and is generally regarded as a retrograde decision for arbitration. 10 [2006] VSC 402.

16 CIArb & IAMA JOINT SUBMISSIONS on the COMMERCIAL ARBITRATION BILL OF 14 Q. Costs 45. Sections 33B, 33C and 33E deal with cost in quite an elaborate manner. There should be uniformity in the treatment of costs between the CAA and the IAA. R. Interest 46. Sections 33F and 33G deal with interest. Compound interest is not provided for. In contrast, the IAA Bill confers power on an arbitrator to award compound interest from the date of making the arbitral award. 47. We are of the view that domestic arbitrators should have the power to award compound interest both up to the date of making the award and following the date of the award. This is the case in other jurisdictions - for example, see section 49 of the Arbitration Act 1996 (UK). S. Interest 48. Section 33 of the CAA Bill provides for immunity of both the arbitrator and the arbitral institution appointing the arbitrator. This is desirable. In contrast the IAA provides for immunity of the arbitrator only. It is noted that the CAA Bill provides for immunity of the arbitrator in different terms to that provided for in the IAA Bill. 49. It is desirable that the immunity provision in the CAA be consistent with the immunity provision in the IAA, but also provide for immunity to be conferred on the relevant arbitration institution. The CIArb and IAMA gratefully acknowledge the assistance of Albert Monichino, Peter Megens, John Wakefield, Laurie James and Ron Salter in the preparation of this submission. DATED: 12 February 2010