Australia: Commercial Arbitration in Queensland gets much Needed Overhaul

New commercial arbitration legislation will bring Queensland in step with other States.

Queensland's out-of-date arbitration regime is about to get a much-needed overhaul with the introduction of the new Commercial Arbitration Bill (2011).

And, it's not before time. As the frenzy of Queensland's resources boom continues unabated, so too has there been an inevitable increase in disputes. Given the money, corporate profiles, commercially sensitive information and international connections typical of these disputes, commercial arbitration is fast becoming the preferred dispute resolution mechanism.

The arbitral process has a number of drawcards. Proceedings are confidential and disputes can usually be kept out of the public domain. Parties have more control over the process, including decisions about the appointment of arbitrators and procedural rules. The capacity of arbitration to enforce both international and local awards also ensures it is no toothless tiger.

Perhaps more than any other feature, arbitration has been promoted as a cheaper, faster means of dispute resolution than litigation before the courts. However strong anecdotal evidence suggests this has not been the case. In 2009, the then NSW Chief Justice, the Honorable James Spigelman AC, concluded Australia's commercial arbitration regime was 'not delivering the cost savings it promised'.

In an attempt to re-capture the expediency and cost benefits of arbitration, Queensland's new commercial arbitration bill explicitly instructs parties to a dispute to take action to avoid unnecessary delay or expense. A key section of the Bill is 24B. It expressly requires the parties to an arbitration to 'do all things necessary for the proper and expeditious conduct of the arbitral proceedings'.

The origins of 24B's intent can be traced back to section 40(1) of the UK's Arbitration Act 1996 which mandates the "proper and expeditious conduct" of arbitral proceedings. The inclusion of this statutory duty addresses delay tactics or tardy behaviour of parties which go against the spirit of the arbitral process.

Notably only a handful of reported disputes have relied on section 40 of the UK Arbitration Act to date.

Section 24B(1) also closely resembles rule 5 of Queensland's Uniform Civil Procedure Rules 1999 (UCPR) which introduced an 'overriding philosophy' into the civil procedure matrix. Like section 24B(1), rule 5, emphasises the key points of expeditious resolution, minimising expense and avoiding undue delay.

In Queensland, rule 5 of the UCPR has prompted litigation based on various complaints, including lengthy or inexcusable delays, deliberate frustration or abuse of process, recourse to unnecessary interlocutory proceedings and poorly timed settlement offers.

It remains to be seen whether parties to arbitration in Queensland will seek to rely on section 24B(1) as a basis to invite Queensland courts to intervene in the arbitral process or whether, like section 40 of the UK Arbitration Act, cases brought before the courts in reliance on section 24B will be rare.

In any event, Queensland courts will need to strike a balance - ensuring that, on the one hand, the Bill's intent is observed so that Queensland businesses maintain confidence in commercial arbitration as an effective means of dispute resolution. On the other hand, the courts will have to carefully consider the extent to which they will willingly intervene in the arbitral process.

Aside from section 24B, Queensland's proposed commercial arbitration legislation is closely aligned with the Model Commercial Arbitration Bill adopted by the Standing Committee of the Attorneys-General in 2009. This Model Bill, intended to be enacted by the states and territories as a uniform piece of legislation, aims to harmonise arbitration throughout all Australian jurisdictions. The Model Bill reflects international best practice by adopting the provisions of the UNCITRAL Model Law on International Commercial Arbitration which was last updated in 2006.

The eventual enactment of Queensland's Commercial Arbitration Bill will bring long-awaited and much required reform to arbitration in Queensland. It is to be hoped that arbitration is given every opportunity to prosper.

Note: The new Commercial Arbitration Bill 2011 (Qld) will replace the existing Commercial Arbitration Act 1990 (Qld). The Bill was introduced into the Legislative Assembly in November 2011, however it lapsed on 19 February 2012 with the prorogation of the state government. The Bill currently awaits reintroduction.

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