Australia is attractive as a venue for international commercial arbitration. It is a Model Law country and has been a party to the New York Convention for many years.
International commercial arbitration is a consensual dispute resolution process for transnational commercial disputes.1 As an important aspect of international commerce, it has in recent decades proven spectacularly successful and has been recognised for some time as the preferred method for resolving such disputes.2 Its proliferation has led to the development of an “internationally recognised harmonised procedural jurisprudence”, which combines the best practices of both the civil and common law systems, taking into account diffuse cultural and legal backgrounds and philosophies. The new jurisprudence is establishing a generally accepted procedure for dispute resolution which is of benefit to international arbitration, as well as modern jurisprudence generally.3
Arbitration (international and domestic) is readily distinguishable from other forms of dispute resolution and has been described as “litigation in the private sector”.4 It is seen to offer many advantages over litigation including neutrality, confidentiality, expedition, party autonomy, flexibility in procedure, relative informality, the ability to choose the “judge”, and transnational enforceability of awards. These perceived advantages are integral to its success.
The commonwealth and state parliaments have recently legislated to improve the laws that govern commercial arbitration, both internationally and domestically which has served to enhance Australia as an arbitration friendly venue.5 Superior courts have established specialist arbitration lists to facilitate the resolution of disputes by arbitration. The Australian International Disputes Centre (AIDC) has been set up as Australia’s leading dispute resolution venue.6 The recent High Court decision in the TCL case, confirming in emphatic terms the constitutional validity and juridical basis of the International Arbitration Act 1974 (Cth),7 has significantly assisted in this process.
Arbitration agreement — the foundation of the arbitral process
The foundation of the arbitral process is the agreement by which the parties refer their disputes to arbitration. Once a binding arbitration agreement is entered into, the parties will be subject to it, so that if a dispute arises which falls within its scope, such dispute must be resolved by arbitration (if a party requires it). Unless settled by agreement, the arbitral process will culminate in an award capable of enforcement with curial assistance. The arbitration agreement’s terms will bind the parties, as well as the arbitrator appointed pursuant to it.8
An essential quality of the arbitration agreement is that it is considered to be a contract independent of the contract in which it is contained. On this basis, the arbitral tribunal can rule on its own jurisdiction even if the underlying contract has been terminated or is set aside.9
An arbitration agreement will commonly deal with such matters as the types of disputes which fall within its terms, the seat of the arbitration (which will determine the lex arbitri), the law according to which the dispute will be determined (the lex causa), a set of procedural rules, the number of arbitrators and their appointment, and the language of the arbitration. Parties may decide to incorporate the rules of a recognised arbitration institution and adopt the institution as the appointing authority, or to proceed ad hoc.
In Australia it is possible to use both international and local arbitral institutions. The major arbitration institutions, such as the ICC, LCIA; regionally, the SIAC, HKIAC, KLRCA, and CIETAC; and in Australia, the ACICA and ACDC; have recommended arbitration clauses, or the parties can devise their own.10
Scope of agreement
An issue that often arises concerns the scope of an arbitration clause — whether a particular dispute falls within its terms. If it does (in the face of opposition), the matter (or part) cannot be litigated in the courts. This issue will often arise when a court is asked to stay a court proceeding on the ground that the issues fall within the terms of an arbitration agreement.11
Arbitrability
A similar issue is the question of arbitrability which involves determining which types of dispute may be resolved by arbitration and which must go to court. This determination will be made initially by the arbitral tribunal, but may ultimately be made by courts of particular states applying national laws. Despite the principle of party autonomy, there are disputes which by their very nature must be determined by the courts, for example, insolvency, criminal proceedings, divorce, or registration of land or patents.12
International arbitration dependent on local laws
For international commercial arbitration to operate and be effective, the process must be supported by at least two bodies of national, or local, laws: first, the lex arbitri, which will give legal force and effect to the process of the arbitration; and second, national laws which enact or legislate for the enforcement mechanisms of the New York Convention (NYC).13
The NYC is the single most important factor explaining the success of international commercial arbitration. So far 148 countries have acceded to it. It is primarily concerned with two matters:
⢠the recognition of, and giving effect to, arbitration agreements; and
⢠the recognition, and enforcement, of international (non-domestic) arbitral awards.
It achieves the first by requiring a court of a contracting state to refer a dispute which has come before it, and which falls within the scope of an arbitration agreement, to arbitration; and the second by enabling the successful party to an arbitration award to easily and simply enforce the award in any country which is a party to the NYC in accordance with that country’s arbitration laws.14
Model Law — a template arbitration law
The next most influential international legal instrument in the present context is the United Nations Commission on International Trade Law Model Law (UNCITRAL) on International Commercial Arbitration, commonly known as the Model Law. The Model Law is not legally effective on its own, but is simply a template for legislation for an arbitration law (a lex arbitri) which may be enacted by individual states.15
In Australia, the lex arbitri is the International Arbitration Act 1974 (Cth) (IAA). Its stated objects are, inter alia, to give effect to Australia’s obligations under the NYC, as well as to give effect to the Model Law and the ICSID Convention. The IAA gives the Model Law force of law in Australia and cannot be excluded by the parties. The two principal matters addressed by the NYC are dealt with by the IAA.16
The jurisdiction to set aside an arbitral award is pursuant to Art 34(2) of the Model Law. Jurisdiction for enforcement, recognition and setting aside of awards is exercisable by the Federal Court, or if the place of arbitration is in a state or territory, the Supreme Court thereof.17
Procedure and evidence — how determined
If the parties to an international commercial contract have inserted an arbitration clause into their contract, which incorporates a set of arbitration rules, then these rules will govern issues of procedure and evidence, subject to the particular lex arbitri having mandatory provisions which govern procedural issues and which cannot be overridden by the parties or the arbitrator. Subject to this, the parties and the arbitrator will be able to adapt the chosen rules to suit the particular circumstances of a dispute.
Interim relief
Arbitration rules, such as the UNCITRAL Arbitration Rules, and applicable national laws (lex arbitri), such as those based on the Model Law, give the arbitral tribunal and sometimes local courts power to make interim orders in aid of the final award (which relief may be enforced in local courts).18
What remedies are available
While in general terms in international arbitrations arbitrators can give the sorts of remedies and relief that national courts can, what an arbitral tribunal can give in a particular arbitration will depend on the arbitration agreement, including any arbitration rules the parties have agreed to, the lex causa and the lex arbitri. Awards that may be made include payment of a sum of money, declarations, specific performance, injunction, rectification, costs and interest.19
Awards, setting aside, enforcement and challenges
The making of a binding and enforceable award by the arbitral tribunal is the object and purpose — indeed, the culmination — of the arbitration process. For both the arbitrator and the parties (or at least the successful party), it is critical that this be achieved. For the award to be enforceable it must, inter alia, be reasoned, deal with all the issues — but only those issues — referred to arbitration, effectively determine the issues in dispute, be unambiguous, be intelligible, correctly identify the parties and comply with all essential formalities.20 The particular lex arbitri engaged will set requirements which an award must contain. The precise requirements for an award will principally be determined by the arbitration agreement (incorporating any arbitration rules) as modified by the lex arbitri.21
If the arbitral process is subject to some irregularity in procedure (and in a limited range of other circumstances), the award is liable to be set aside, or refused recognition or enforcement. As noted, the circumstances by which an award may be set aside are set out in Art 34 of the Model Law, and those on the basis of which it may be refused enforcement or recognition are contained in Art 36. The circumstances under Arts 34 and 36 are virtually identical.
The domestic situation — the uniform Model Law Commercial Arbitration Acts
The Standing Committee of Attorneys-General (SCAG) meeting on 7 May 2010 agreed to implement the model Commercial Arbitration Bill 2010 based on the Model Law as uniform domestic arbitration legislation. The previous legislative regime of uniform Acts in force in Australian states and territories had several marked differences to the Model Law. New South Wales was the first state or territory to enact the Commercial Arbitration Act 2010. The Victorian legislation, the Commercial Arbitration Act 2011, came into operation on 17 November 2011. Most other states and territories have now followed suit.22
Conclusion
International commercial arbitration has proven spectacularly successful in the post-war era and will no doubt continue to be so. Australia offers many attractions as a venue and seat for international commercial arbitration, including an adherence to the rule of law, an expert legal profession, a stable political system and courts that have “an excellent record for enforcing foreign arbitral awards”.23 Both internationally and domestically it is a Model Law country and has been a party to the NYC for many years. With the greater opportunities for trade and commerce on the international stage brought about by globalisation, and notably the rise of Asia, Australia is well positioned to be an important hub for international commercial arbitration.24
By John K Arthur
John K Arthur is a member of the Victorian Bar practising in commercial litigation, wills, estates and other civil matters with a particular interest in dispute resolution.
1. This article is an abridged and revised version of a paper by the author delivered at the Law Institute of Victoria, Essentials Skills, CPD program, 14 March 2013, entitled “An Introduction to International Commercial Arbitration” available at www.gordonandjackson.com.au/online-library (posted 25.03.13)(“Arthur”). See The International Arbitration Act 1974: A Commentary, M. Holmes, and C. Brown, Lexis Nexis, 2011; and generally, Redfern and Hunter on International Arbitration, Student Edition, by Redfern, Hunter, Blackaby and Partasides, 5th Ed., Oxford Uni. Press, 2009; International Arbitration: A Handbook, by Phillip Capper, 3rd Ed., LLP, 2004; Court Forms Precedents and Pleadings — Victoria, Arbitration by D. Byrne, updated by D. Bailey, Lexis Nexis; Doug Jones, International Commercial Arbitration and Australia, 2-3 March 2007, available atwww.claytonutz.com/area_of_law/international_arbitration /docs/International_commercial_arbitration_and_Australia.PDF (“Doug Jones”)
2. TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia and Anor [2013] HCA 5 at [10](“TCL case”); The Hon. P. A. Keane, Justice of the High Court, (2013) 79 Arbitration 195-207; 2013 International Arbitration Survey, PWC and Queen Mary, University of London, School of International Arbitration. Available at: www.arbitrationonline.org/docs/pwc-international-arbitration-study2013.pdf and past years’ surveys.
3. Rt Hon. Sir Michael Kerr, Concord and Conflict in International Arbitration (1997) 13 Arbitration International 122 at 125-6.
4. Sir John Donaldson in Northern Regional Health Authority v Derek Crouch Construction Co Ltd & Anor [1984] 2 All E.R. 175 at 189 cited in Doug Jones at p2.
5. International Arbitration Amendment Act 2010 (Cth) and the new Commercial Arbitration Acts in the states which substantially enact the Model Law domestically; see R. Kovacs,“Putting Australia on the arbitration map” (2012) 86 LIJ 36.
6. For example, Arbitration List G of the Supreme Court of Victoria, and see “Arbitration law reform and the Arbitration List G of the Supreme Court of Victoria” by Hon Justice Croft, available on Supreme Court of Victoria website; in NSW, Commercial Arbitration List and see Practice Note No. SC Eq 9; in the Federal Court, see Practice Note ARB 1 — Proceedings under the International Arbitration Act 1974, and see “The Federal Court of Australia’s International Arbitration List” by Hon. Justice Rares available on Federal Court website; The AIDC, established in 2010 with the assistance of the federal and NSW governments, houses leading ADR providers including the Australian Centre for International Commercial Arbitration, the Chartered Institute of Arbitrators (Australia) Limited, the Australian Maritime and Transport Arbitration Commission and the Australian Commercial Disputes Centre. Seewww.disputescentre.com.au.
7. TCL case, see note 2 at [11], [12], [17], [29], [45], [81], [101].
8. See note 14; Rizhao Steel Holding Group Co Ltd (2012) 287 ALR 315; 262 FLR 1; [2012] WASCA 50 at [165]—[166].
9. See note 14; Rizhao Steel.
10. International Chamber of Commerce, London Court of International Arbitration, Singapore International Arbitration Centre, Hong Kong International Arbitration Centre, Kuala Lumpur Regional Centre for Arbitration, China International Economic and Trade Arbitration Commission, Australian Centre for International Commercial Arbitration, Australian Commercial Disputes Centre. Arbitration clauses which are inexpertly drawn may be flawed and inefficacious — so called “pathological” clauses.
11. Under s7(2)(b) IAA.
12. Redfern and Hunter at [2.111]; [2.114].
13. Capper at p11ff. Five systems of law may apply to international commercial arbitration: Redfern & Hunter, at p165, cited in Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 [36].
14. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards made in New York on 10 June 1958 known as the New York Convention; Redfern & Hunter at p72; the 148 countries which have acceded to the NYC are the vast majority of countries in the world. On 16 April 2013 Myanmar also acceded to the NYC: www.newyorkconvention.org/new-york-convention-countries/contracting-states; Articles II and IV NYC.
15. The 1985 Model Law was revised in 2006, available at www.uncitral.org.
16. First, the enforcement of foreign arbitration agreements; and secondly, the recognition, and enforcement, of foreign awards by ss8 and 9 IAA.
17. Section 18IAA. For applications to enforce a foreign award, or set aside an award, see Civil Procedure Victoria, Lexis Nexis, at [II 9.04.05]ff. See also Altain Khuder LLC v IMC Mining Inc (2011) 246 FLR 47; [2011] VSC 1; reversed on appeal in IMC Aviation Solutions Pty Ltd v Altain Khuder LLC (2011) 253 FLR 9; [2011] VSCA 248.
18. For example, freezing orders: Art 17(2)(c). Under the IAA local courts provide assistance to the arbitration process in a variety of ways, including a request to refer a matter to arbitration (s8). As to enforcement of interim measures in courts, see Art 17H.
19. Capper at pp113-117; as to interest see ss25 and 26 IAA.
20. Redfern & Hunter at p553ff; ibid, Capper at p118. Eg. Art 31 Model Law.
21. Redfern & Hunter at para 9.114; ibid, Capper at p. 117ff.
22. See note 70 in Arthur, note 1 above. See generally in relation to the new uniform domestic arbitration legislation, Commercial Arbitration in Australia, Doug Jones, 2nd ed., Thomson Reuters, 2012.
23. Doug Jones, pp9, 18-19.
24. Doug Jones, see notes 22 and 23; and see note 2, The Hon. P. A. Keane.
Editor’s Note: This article appeared in the most recent edition of the Victorian Law Institute Journal (November 2013 87 (11) LIJ, p.40. It is published courtesy of the Law Institute Journal.
