Commercial Arbitration Bill 2012 (Qld) – A change for the better?

Introduction

The Commercial Arbitration Bill 2012 (Qld) (Arbitration Bill) amends the Commercial Arbitration Act 1990 (Qld) (Arbitration Act) and includes additional provisions which supplement the UNCITRAL Model Law for domestic commercial arbitration and was introduced into the Legislative Assembly on 30 October 2012. The Arbitration Bill has been referred to the Legal Affairs and Community Safety Committee for comment. A response is expected by 4 February 2013.

The Arbitration Bill is based on the UNCITRAL Model Law and is aligned with the Commonwealth International Arbitration Act 1974 (Commonwealth Act). It has been developed out of the Standing Committee of Attorneys-General's proposal in 2010 for a nationally-adopted framework for domestic commercial arbitration in Australia. The introduction of the Arbitration Bill represents another important step towards a uniform Australia-wide legislative regime.

The Arbitration Bill provides a number of features that attempt to ensure that disputes are resolved in a cost effective manner, informally and quickly.

The following is a summary of some of the key differences between the Arbitration Act and the new additions which are being introduced in the Arbitration Bill.

Relevant sections of the Arbitration Bill

Section 1AC

One of the primary objectives of Arbitration Bill as it is with the UNCITRAL Model Law, is to provide arbitration procedures that enable commercial disputes to be resolved in a cost effective manner, informally and quickly. Section 1AC represents what some commentators have described as the single most significant change to the domestic commercial arbitration regime.¹

The changes introduced in section 1AC of the Arbitration Bill are aimed at ensuring that arbitration in Queensland is an efficient, cost-effective alternative to litigation. The Arbitration Bill aims to achieve this objective by:

1. enabling parties to agree how their commercial disputes are to be resolved; and
2. providing arbitration procedures that enable commercial disputes to be resolved in a cost-effective manner, informally an quickly.

This section is a reminder that one of the main advantages of commercial arbitration, in the domestic context, is the ability of parties and arbitrators to tailor arbitration procedures for the most efficient resolution of the dispute.

Parties may have a preference for an arbitration that is as formal as court proceedings or for something that is relatively inexpensive and quick.

There is often difficulty when the parties have varying views of where on the line between theses two extremes the arbitration should sit. Parties may also have differing expectations to that of the arbitrator, and, as can often be the case, those expectations may sit outside the realms of practicality and reality.

Regardless, these issues should be taken into consideration by the arbitrator to ensure that procedures are appropriate to the nature and value of the dispute.

Section 4A

The changes introduced in section 4 of the Arbitration Bill provide that if a party knows there is a requirement to raise an objection to non-compliance without undue delay or within a specified time period, but fails to do so then the right to object will have been waived.

There has been some concern raised by a number of commentators that the incorrect use or adoption of such a provision can lead to a dangerous restriction of the parties' rights.²

The Commission in their Report of the United Nations Commission on International Trade Law on the Work of its 18th Session³ suggest that when considering a challenge to an arbitral award on the basis of a procedural irregularity, the court must also consider whether the objection was raised without undue delay.⁴ However, the Commission noted that the court is entitled to come to a different conclusion regarding the timeliness of the objection.⁵

Section 5

Section 5 of the Arbitration Bill is one of the more controversial additions and limits the access to the courts in commercial arbitration matters. The justification for its inclusion is that if the parties nominate arbitration as a dispute resolution method, they are making a conscious decision to exclude the court's jurisdiction and resolve their dispute by alternative means.

The inclusion of Section 5 is meant to resolve the difficulties regarding the scope of judicial intervention. However, the Arbitration Bill will permit court intervention at various stages of an arbitration to ensure that the arbitral process is conducted in accordance with the arbitration agreement, principles of procedural fairness, relevant public policy and the law.

Section 8

Under the Superseded Uniform Acts, where a party to arbitral proceedings simultaneously brought proceedings in a competent court, the court had discretion to decide whether to stay proceedings in order to let the arbitration proceed.

Section 8 of the Arbitration Bill provides that if there is a valid arbitration agreement, and the subject matter of the dispute is capable of settlement via arbitration, the court is required to stay proceedings while the matter is arbitrated.

Under the Arbitration Act, section 53 provides that the court has discretionary power to order that a proceeding be stayed until an arbitration takes place. Section 8 of the Arbitration Bill simplifies the procedure in applying for a stay in proceedings.

With the introduction of this section, the courts can maintain their supervisory jurisdiction, which in turn, ensures that if both parties have signed up to the arbitration process, parties can not disrupt and delay proceedings by avoiding the arbitral process.

Section 12

Section 12(3) provides that the appointment of the arbitrator may be challenged, "only if circumstances exist that give rise to justifiable doubts as to the arbitrator's impartiality or independence, of if the arbitrator does not possess qualifications agreed by the parties".

There must be a real danger of bias to create justifiable doubts as to the impartiality or independence of an arbitrator. Subsections (5) and (6) mirror the test for bias applied by the House of Lords in R v Gough [1993] AC 646.

A ground for challenge of the appointment of the arbitrator under section 12 of the Arbitration Bill is now fairly exhaustive. Some of the challenges to the appointment of the arbitrator that existed under the Arbitration Act have now been taken care of by other sections of the Arbitration Bill.⁶

The inclusion of section 12 goes some way to clarifying the natural justice obligations on arbitrators to hold proceedings in a manner equitable to both parties.

Now, specific procedural fairness requirements allow the courts to ensure the structural integrity of proceedings is maintained, while at the same time ensuring that the courts reserve the right to intervene on the substantive issues where parties have expressly agreed on that recourse.

Section 17

Section 17 is a considerable improvement on the provisions of the Arbitration Act that deal with interim measures. An arbitral tribunal will now have significant powers to order an interim measure (to preserve evidence) and attach conditions to granting an interim measure.

This new section provides that an arbitral tribunal is able to issue interim measures in order to protect the arbitral process and ensure that the arbitration remains effective as a mechanism of dispute resolution.

The scope of such orders is quite wide and may include such procedural considerations as orders for discovery, the provision of security for costs, the manner in which the arbitral hearings are run, and orders as to the preservation of evidence and assets.

Section 24B

Section 24B of the Arbitration Bill explicitly requires parties do all things necessary for the proper expeditious conduct of the arbitral proceedings.

Section 24B(1) also closely resembles Rule 5 of Queensland's Uniform Civil Procedure Rules 1999 (UCPR). Like section 24B(1), Rule 5 of the UCPR, the new section emphasises the key points of expeditious resolution, minimising expense and avoiding undue delay.

Section 27D

Section 27D is another controversial provision, and allows an arbitrator to act as a mediator, conciliator or other non-arbitral intermediary and, subject to the parties' agreement, to afterwards proceed as arbitrator.

What makes this section controversial is that it potentially does away with the confidentiality rights of the parties. If an arbitrator acts as a mediator, with the agreement of the parties, the arbitrator must treat information provided during the mediation as confidential, unless otherwise authorised.

If the mediation proceedings are terminated, then the mediating arbitrator may continue to act in the subsequent arbitration proceedings. If the mediating arbitrator does act, the arbitrator is required to disclose confidential information that is material to the proceedings disclosed during the mediation prior to the arbitration continuing.⁷ This obligation to disclose cannot be waived or contracted out of by the parties.

This effectively allows the parties to make informed tactical decisions as to whether they should consent to the arbitration continuing. It also allows both parties to have the opportunity of addressing material that the arbitrator may have been privy to in the mediation that may influence the arbitrator's decision.

What is interesting is that section 27D does not give a time limit for the parties to give their written consent for an arbitrator to continue to act. However, it is suggested that this is covered by section 24B which imposes a general duty on parties to do all things necessary for the proper and expeditious conduct of arbitral proceedings.

In comparison to section 27 of the Arbitration Act, the new section 27D contains greater specificity with respect to the procedural aspect of integrating mediation into an arbitral process.

The overall effect of this section is to:

1. allow the parties to take advantage of both mediation and arbitration;
2. allow a flexible and less adversarial process by which the parties may resolve their dispute; and
3. remove the discretionary power on the part of an arbitrator to initiate non-arbitral proceedings where the arbitrator deems it appropriate.

Section 39

Section 51 of the Arbitration Act provides that the Arbitrator is protected from negligence, but is liable for fraud. Section 39 of the Arbitration Bill amends section 51 by removing the reference to fraud and limits the immunity of the arbitrator to the concept of good faith.

What is significant about the new section is that the limitation of negligence has been removed. What this effectively does is bring the immunity of arbitrators better in line with the immunity provided to a judge.

Essentially, the limitations of immunity are:

1. the arbitrator must act in an arbitral capacity which arguably extends to communications with the parties, communications between the tribunal members, procedural orders and awards; and
2. that arbitrator must act in good faith.

Closing comments

The Arbitration Bill introduces new provisions that give the arbitral tribunal new powers to order interim measures, allow an arbitrator to act as a mediator, conciliator or other non-arbitral intermediary, and includes strict provisions regarding the circumstances in which confidential information in relation to arbitral proceedings may be disclosed.

The eventual enactment of the Arbitration Bill will bring long-awaited and much needed reform to arbitration in Queensland. It remains to be seen whether these changes will be what is required to ensure that arbitration in Queensland is less expensive and more efficient.

Footnotes

¹D Jones, Commercial Arbitration in Australia (Thomson Reuters, 2011) p 37.

²P Binder, International Commercial Arbitration and Conciliation in UNCITRAL Model Law Jurisdictions (3rd ed, Sweet Maxwell, 2010) p 359.

³UNCITRAL, report of the United Nations Commission on International Trade Law on the Work of its 18th Session, UN Doc A/40/17 (3-21 June 1985).

⁴Ibid p 57.

⁵Ibid.

⁶Some breaches of procedure, formerly technical misconduct, may now constitute a breach under section 18 of the Model Bill.

⁷Commercial Arbitration Bill 2012 (Qld), s 27D(7).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.