Australia: New ACICA Arbitration Rules for Resolving Project Disputes

Major projects can give rise to complex and costly disputes. It is in the interests of all parties to major projects to adopt dispute resolution mechanisms which are suitable for major project disputes, efficient, flexible and cost effective. The new arbitration rules recently adopted by the Australian Centre for International Commercial Arbitration (ACICA) provide a simple and useful alternative to other institutional rules such as the International Chamber of Commerce (ICC) and UNCITRAL rules. They are suitable for domestic and international construction disputes of all sizes, and should be one of the dispute resolution options considered when negotiating and drafting contracts for major projects.

ACICA is a non-profit public company established in 1985. Its objectives are to support and facilitate international arbitration. ACICA maintains a panel of international arbitrators and a list of experienced arbitration practitioners. It provides information on arbitration agreements, arbitration rules and the law and assists with hearing rooms, transcription and information technology services. In addition ACICA is involved with a range of educational activities including holding seminars and conferences to enhance knowledge and understanding of international arbitration.

When parties agree to arbitration they commonly select a set of arbitration rules which establish a procedural regime for the conduct of the arbitration. On 12 July 2005 ACICA adopted a set of arbitration rules that have been attracting a considerable degree of interest from within Australia and abroad. These rules are based on the UNCITRAL Arbitration Rules but have been updated and refined. They are in line with international norms and have been designed with party autonomy, fairness, simplicity and flexibility as underlying philosophies. They provide for a significant degree of supervision and support from ACICA in order to assist parties and guarantee quality control.

As arbitration is one of the preferred methods of resolving construction disputes, particularly where foreign parties are involved, these rules should be of particular interest to all in the major projects industry.

Notable features of the new rules include:

Notice of Arbitration and Answer. To commence proceedings the claimant must provide a Notice of Arbitration to ACICA, who will ensure that it complies with the rules, then invite the respondent to reply. Both the Notice and the respondent's reply must outline the general nature of any claim/defence. This ensures that issues are narrowed at an early stage, before detailed pleadings are submitted.

Number of arbitrators. ACICA will determine the number of arbitrators where the parties cannot agree. In making this decision ACICA will take the circumstances of each case into account, so that three arbitrators are appointed only when warranted by the complexity of the dispute or the amount of money claimed.

Multi-party disputes. Multiple parties (multiple claimants or multiple respondents) must act jointly when appointing arbitrators. This is required due to an important French Cour de Cassation decision, and will help to ensure the maximum enforceability of ACICA arbitral awards.

Appointment of and challenges to arbitrators. ACICA will appoint arbitrators where the parties fail to do so in the time provided, and will decide upon challenges to arbitrators when required.

Confidentiality. Many wrongly assume all arbitrations are automatically confidential. Because of the High Court of Australia's decision in Esso v Plowman (1995) 183 CLR 10, this is not true. However, under the ACICA Rules, all arbitrations will be confidential, except where:

• an application is made to a competent court for the enforcement of an arbitration agreement or arbitral award or, for supervisory measures;
• a court has ordered disclosure of documents or information;
• mandatory rules considered applicable by the arbitral tribunal require production of documents or disclosure of information; and
• disclosure of information or documents is required in order to comply with regulatory requirements, such as those of the Australian Stock Exchange.

Interim measures. There are detailed provisions governing interim measures. Many sets of arbitration rules provide little guidance on what interim measures are, and when they may be awarded by a tribunal. The ACICA Rules provide, inter alia:

• an expanded definition of "interim measures";
• criteria which must be established before an interim measure can be ordered; and
• provisions for the modification, suspension and termination of an interim measure.

Seat of arbitration. If the parties cannot agree on the seat of arbitration, the default seat will be Sydney.

Evidence. Parties are given autonomy to determine the manner in which arbitrators consider evidence. Absent any agreement, the tribunal will take guidance from the International Bar Association's Rules on the Taking of Evidence in International Commercial Arbitration.

Arbitrators' fees. Arbitrators and parties are encouraged to agree on the fees of arbitrators. Where they cannot do so, ACICA will determine an hourly rate taking into account the circumstances of the dispute and the experience and standing of the arbitrator. This is a unique feature which it is expected will be a popular alternative to the approaches of the UNCITRAL and ICC rules.

ACICA's fees. Another popular feature of the rules is the fees charged by ACICA, which are significantly less than those of many other institutions.

ACICA has drafted a model arbitration clause that is suitable for insertion into contracts. It has been designed for use in both domestic and international contracts, and is a safe and simply way of ensuring that all disputes are referred to arbitration.

Any dispute, controversy or claim arising out of, relating to or in connection with this contract, including any question regarding its existence, validity or termination, shall be resolved by arbitration in accordance with the ACICA Arbitration Rules. The seat of arbitration shall be Sydney, Australia [or choose another city]. The language of the arbitration shall be English [or choose another language]. The number of arbitrators shall be one [or three, or delete this sentence and rely on Article 8 of the ACICA Arbitration Rules].

Article 8 provides for ACICA to determine the number of arbitrators, taking into account all relevant circumstances. This may be desirable if the size and complexity of the dispute are not known at the time the contract is drafted.

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.