Most Read Contributor in New Zealand, December 2016
Just as Australia has modernised its international arbitration
legislation, two state courts have distanced themselves from the
infamous Queensland Court of Appeal decision of Eisenwerk
Hensel Bayreuth Dipl-Ing Burkhardt Gmbh v Australian Granites
Limited  1 QD R 461 (Eisenwerk), one finding it
was "plainly wrong".
17 June 2010, the Australian Federal Senate passed amendments
International Arbitration Act 1974 (Cth) (the Federal
Act), which are intended to improve the efficiency of
arbitration proceedings in Australia and thus enhance the
attractiveness of Australia as an international arbitration venue.
These reforms anticipate new legislation by Australian states to
conform domestic arbitration laws to the UNCITRAL Model Law on
International Commercial Arbitration (the Model Law). A
significant change is that the old s 21, which permitted parties to
opt-out of the Model Law into more permissive state arbitration
laws, has been replaced by a new s 21 with the title "The
Model Law covers the field", which provides "if
the Model Law applies to an arbitration, the law of a State or
Territory relating to arbitration does not apply to that
The former s 21 was the subject of two cases decided in August
2010, both of which are consistent with the objective of the new
legislation to encourage use of the Model Law.
In Cargill International SA v Peabody Australia Mining
Ltd  NSWSC 887, the New South Wales Supreme Court
was faced with a challenge to an arbitration award. The threshold
question to be decided was whether the applicable law for the
challenge was the Federal Act/Model Law, or whether the parties had
opted out of the Model Law in favour of the New South Wales
domestic arbitration legislation. This required reconsideration of
the Queensland Court of Appeal decision in Eisenwerk,
which had held that an arbitration clause incorporating procedural
arbitration rules (in that case, the ICC Arbitration Rules) must be
understood as implicitly opting out of the UNCITRAL Model Law.
Eisenwerk was initially followed by the Singapore High
Court in John Holland Pty Ltd v Toyo Engineering Corp
(Japan)  SGHC 48, but that decision was swiftly reversed
by a legislative amendment (s
15A of the International Arbitration Act, Chapter 143A).
Although there has been a general consensus in the arbitration
community that Eisenwerk was wrongly decided, it has remained good
law in Australia.
In revisiting this issue, the Cargill Court held that,
due to the deference owed to decisions of state appellate courts,
it could only depart from Eisenwerk if that decision were
"plainly wrong". It held that Eisenwerk
was, indeed, plainly wrong. The Court reasoned that the
Eisenwork principle was founded on a belief in the
"perceived inconsistency and irreconcilability as
between" the Model Law and ICC Arbitration Rules (at
), but that this belief resulted from misunderstanding the
distinction between the national law which governs an arbitration
and the procedural rules which apply to it. The Court concluded the
Federal Act applied and that there was no proper ground for
challenge to the award.
One week later, the Queensland Court of Appeal came to a similar
conclusion in Wagners Nouvelle Caledonie Sarl v Vale Inco Nouvelle Caledonie
Sas  QCA 219, in which the question was whether
adoption of the UNCITRAL Arbitration Rules was an implicit
exclusion of the Model Law. This contention was even more extreme
than the situation in Eisenwerk itself, given that the two
instruments are expressly designed by UNCITRAL to be compatible.
The President of the Court of Appeal gave a two paragraph judgment,
holding that there was no exclusion of the Model Law. The more
lengthy decision of Muir JA traversed the history of the Model Law
and concluded that any reasonable person would have been aware that
the UNCITRAL Arbitration Rules and the Model Law "were
capable of operating together" (at ). Muir JA thus
distinguished Eisenwerk, but did not overrule it entirely
It is to be hoped that this debate will now become academic as
Australian state and federal laws apply Model Law principles to all
arbitration proceedings in Australia.
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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This UK decision is particularly relevant as litigation funding is becoming more common in international arbitration.
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