The uniform Commercial Arbitration Acts in NSW and Victoria
require that arbitral awards "include in the award a statement
of the reasons for making the award". There is currently a
lack of clarity as to standard of reasoning required.
In Victoria, it has been held that, at least in complex
arbitrations, the standard of reasoning should be the same as those
provided by judges.
In contrast, a recent decision by the NSW Court of Appeal has
held that arbitral awards are not required to have the same level
of reasoning as that of judges.
The disparity between the two differing approaches means that
the standard of reasoning required in an arbitral award (and
consequently the rights of appeal) currently differ between each
Oil Basins Ltd v BHP Billiton Ltd
In 2006, in the context of a large arbitration concerning a
royalty agreement and the production of hydrocarbons, the Victorian
Supreme Court (VSC) was asked to consider the implications of
requiring arbitrators to "include in the award a statement of
the reasons for making the award" under section 29(1) of the
Commercial Arbitration Act 1984 (Vic) (BHP
Billiton Ltd v Oil Basins Ltd  VSC). The VSC read this
section as mandating arbitrators, at least in the context of a
complex commercial arbitration, to provide reasons in their awards
which were of the same standard expected from a judge, namely an
intelligible explanation of why one set of evidence has been
preferred over another; why substantial submissions have been
accepted or rejected; and why the arbitrator prefers one case over
The VSC set aside the arbitrators' award on the basis that
it failed to disclose adequate reasons which amounted to an error
of law on the face of the award. The VSC also found that the
arbitrators were guilty of technical misconduct by reason of their
failure to consider and adjudicate upon substantial and serious
submissions. This decision was upheld by the Victorian Court of
Appeal (Oil Basins Ltd v BHP Billiton Ltd  VSCA 255
The above decisions were the subject of much comment at the time
and were seen by many commentators as raising the bar in relation
to the standard of reasoning expected from an arbitrator.
Gordian Runoff Ltd v Westport Insurance Corporation
Recently, in Gordian Runoff Ltd v Westport Insurance
Corporation  NSWCA 57 (Gordian Runoff) the NSW
Court of Appeal (NSWCA) declined to follow the approach taken in
Oil Basins. After an examination of Oil Basins,
the UNCITRAL Model Law, international arbitration practice and
authorities, and the legislative history of the uniform Commercial
Arbitration Acts, the NSWCA found that there was no basis for
requiring an arbitral award to contain reasoning of the same
standard as a judge.
Tension between Victoria and NSW positions
Given that Oil Basins and Gordian Runoff were
interpreting similar provisions contained within uniform
legislation, the disparity between the conclusions reached by the
NSW and Victorian courts is undesirable.
Westport Insurance Corporation has until 29 April 2010 in which
to seek leave to appeal to the High Court. Unless the High Court
has an opportunity to clarify and confirm which approach is
correct, then the standard of reasoning applicable to arbitrators
will differ between NSW and Victoria and consequently differing
appeal rights will arguably exist between NSW and Victoria for
challenging an arbitral award.
Until this disparity is resolved, parties considering engaging
in an arbitral process (or including arbitration clauses in
contracts) will need to consider whether such arbitrations should
occur under NSW or Victorian law and the differing standards (and
consequently differing rights of appeal) that flow from such a
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.
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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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