Australia: Arbitration In Australia – Winds Of Change Or Merely A Breeze?

Last Updated: 2 July 2009
Article by Ron Salter

For the better part of a century – or perhaps even longer – arbitration has been the preferred method of dispute resolution in the maritime industry. Just as the concept of 'look and sniff' arbitration developed for commodity quality disputes, arbitration was presumably seen as the ideal means of dispute resolution, involving arbitrators appointed from within the industry seeking to resolve disputes expeditiously and inexpensively without the need for legal intervention.

In this article we look at the current state of affairs for arbitration and the debate surrounding legislative reform.

The changing face of arbitration

In a paper delivered at a Chartered Institute of Arbitrators International Dispute Resolution Conference in Kuala Lumpur last year, and published in (2009) 75 Arbitration 231, Bruce Harris, a leading maritime arbitrator, reflected upon his years of experience in maritime arbitration in London. Harris stated:

'45 years ago, most arbitrations were conducted by the parties themselves, their brokers or agents, but not by lawyers. Each would appoint an arbitrator. The claimant would send its nominee a short letter setting out its claim accompanied by the documents it relied on.

The claimant's appointed arbitrator would send that on to his counterpart who, in turn, would pass it to the respondent asking for comments by way of defence and any documents the respondent relied on, and those would then be sent back via the arbitrators to the claimant who would have a right of reply; and the arbitrators would then proceed to their award.

In this very quick and simple (and cheap) procedure there were no, or at least very few, requests for further information and no real question of any type of discovery. Procedural questions were happily ignored, as very often were the subtleties of legal argument. Whilst the arbitrators were bound to apply English law as best they could, they normally reached a commercially sensible decision which, happily, would usually be in line with the law.

In the absence of something going seriously wrong, no one would challenge the arbitrators or their proceedings; and there would be no question of arbitrators' conclusions being reviewed by the judiciary unless one party thought there was a real question of law involved and asked the arbitrators to state their award in the form of what was called a "special case" for the opinion of the court.

This meant that the arbitrators did not generally need any legal expertise either to run these informal proceedings or to reach their conclusions. If they found themselves in difficulty on the law, they would often consult a solicitor or appoint a lawyer as third arbitrator or umpire.'

Of course, as Bruce Harris himself pointed out in his paper, much has changed in the 45 years since he commenced his involvement with maritime arbitration. In particular, he observed that today's cases were often far more complicated, both on the facts and on the law than they had been in times gone by, and that conduct of arbitration had became far more elaborate and legalistic. Nevertheless, it is fair to say that arbitration remains the dispute resolution mechanism of choice in the maritime industry, particularly for disputes arising under charter parties and contracts of affreightment, for disputes arising under ship building contracts, and for salvage disputes.

A need for legislative reform?

In Australia, with its federal system of government, separate arbitration regimes exist in parallel for international arbitration and domestic arbitration. While the states and territories are concerned with domestic arbitration, the Commonwealth Government has a constitutional responsibility for international arbitration.

The relevant Commonwealth legislation is the International Arbitration Act 1974 (Act). As a result of a cooperative effort in the early 1980s, the states and territories each operate under legislation which is fairly uniform, but not entirely so.

The Standing Committee of Attorneys-General (SCAG), which involves state and territory Attorneys-General and the New Zealand Minister of Justice, has been discussing changes to the uniform state and territory legislation for quite some time without moving forward. However, with increased agitation for change emerging from a number of sources, not least Chief Justice Spigelman of the New South Wales Supreme Court, SCAG, at its last meeting in April 2009, agreed to the preparation of new uniform commercial arbitration legislation based on the UNCITRAL Model Law on International Commercial Arbitration, 'supplemented by any additional provisions as are necessary or appropriate for the domestic scheme'. The stated aim of the draft model Bill is to give effect to the overriding purpose of commercial arbitration, which is to provide a method of finally resolving disputes that is quicker, cheaper, and less formal than litigation.

A little earlier, in November 2008, the Commonwealth Attorney-General, the Honourable Robert McClelland announced a review of the Act, and his department published a discussion paper. The paper invited the making of submissions by interested parties, and despite the fact that a relatively short time frame was given for those submissions, some 24 separate submissions were made. Each of those submissions has been taken into account, and the process for the drafting of new legislation has been put into place. The last news we have had is that the Attorney-General's department is hoping to have the legislation ready for the spring session of Parliament.

The November 2008 discussion paper posed eight major questions and also invited other observations. Many of the questions posed received either unanimous or near unanimous responses, but two particular issues, which might be described as territorial disputes, brought a considerable divergence of opinion. One of these issues was whether the Act should allow for the appointment of an arbitral institution to perform a number of the functions set out in the UNCITRAL Model Law, and the other was whether the Federal Court of Australia should have exclusive jurisdiction in matters concerning international arbitration. The latter issue, in particular, provoked a wide divergence of views, with the state and territory Chief Justices pressing strongly for the retention of the jurisdiction of their respective courts.

For the Australian arbitration practitioner, and participants in the maritime industry involved with arbitration, the outcome of the various discussions and debates will be of interest. Whatever side of the argument a particular interest group supports, it is apparent that the common thread binding reform of the domestic and international regimes is one of improving both the substance and the perception of arbitration as a dispute resolution means.

However, it remains to be seen whether the reforms will occur soon, or whether we will be left waiting for several years for any action. The likelihood is that the winds of change will blow through the international arbitration regime while a gentle zephyr will waft through the domestic arbitration regime for a number of years.

Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

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