31/08/2011 - 11:11

Privacy key in new arbitration regime

31/08/2011 - 11:11

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The business community is waiting for the WA government to pass legislation overhauling the arbitration regime.

COST-EFFECTIVE and efficient alternatives to litigation are an essential part of any legal system. Small and large businesses alike benefit when they are able to resolve their disputes without having to endure the excessive costs and time delays of bringing a case to court. 

In today’s market, arbitration is a popular and effective dispute resolution tool that has been particularly prominent in the Western Australian construction industry. However, the effects of an efficient and modern arbitration regime extend beyond the boundaries of any single industry. Businesses across the board rely on arbitration to ensure that disputes are resolved as efficiently as possible.

Currently, arbitrations that take place in WA are regulated by legislation implemented in 1985. At the time, this was a significant overhaul of the existing legislation, which had been in place for 90 years. The legislation that was implemented was intended to be uniform with other Australian states in an effort to simplify the area for practitioners as well as businesses throughout the country.

Unfortunately, the implementation was not entirely uniform. This led to different lines of authority developing in different jurisdictions.

Further, in the past 26 years, significant developments have come about in the area of arbitration, and the WA business community only stands to benefit by remaining at the forefront of these developments.

In 2006, the United Nations Commission on International Trade Law introduced a revised model law on international commercial arbitration. It is intended that nations around the world adopt this model law in an attempt to provide a consistent and efficient framework for international commercial arbitration. International arbitration is recognised as an essential element of any modern legal system, as it allows for the most efficient manner of cross-border dispute resolution that is enforceable in the relevant jurisdictions. 

Parties to international disputes will rarely accept the hassles of attempting to utilise national courts to determine their disputes, a process that is inevitably frustrated by a lack of familiarity with foreign courts, as well as the difficulties of having a foreign judgement enforced in a different jurisdiction.

Recognising the importance of ensuring that Australia remains current with developments in international arbitration, the federal government has adopted the UNCITRAL Model Law to regulate international arbitrations that take place in Australia. In May 2010, the Standing Committee of Attorneys General (SCAG) decided to implement the UNCITRAL Model Law domestically within Australia.

Despite agreeing in the middle of 2010 to implement the model law, to date New South Wales is the only Australian state to have the new law come into effect. In the middle of June this year, the new bill was introduced into the WA Legislative Assembly, where it awaits approval from both houses.

While implementation of the UNCITRAL Model Law on international commercial arbitration may seem an odd choice for a national law on domestic arbitration, it actually makes a lot of sense. 

The model law was specifically drafted so as to be able to be used in a domestic context. Further, the SCAG modified and optimised the existing model law, in order to ensure its suitability for all Australian states. 

What has emerged is legislation that not only conforms to international best practice, but has been refined to ensure that it is best suited for use by Australian parties resolving domestic disputes.

One of the most important elements of the new legislation is that it deals with disputes confidentiality. A well-known advantage that arbitration has over litigation is that, where court battles are often very public affairs, arbitrations are by their nature, private. 

In a controversial 1995 High Court decision, it was decided that documents produced in the process of an arbitration were not confidential simply because they had been produced in an arbitration. 

This decision, known as the Esso decision, brought Australia to the attention of the international arbitration community for all the wrong reasons. Much was written about the Esso decision, a good deal of it critical of the High Court’s position, but its was not until 15 years later that Australia’s international arbitration legislation was amended, allowing parties to an international arbitration the option of choosing to keep their arbitrations confidential.

Fortunately, the domestic arbitration bill reverses the obligation of the parties, and assumes that (subject to certain exemptions) documents and information made available during an arbitration should be confidential and imposes a duty on the parties to keep that information confidential. This is fundamental to the concept of arbitration, and WA parties deserve an arbitration regime that supports and understands these important aspects of private dispute resolution.

Another important aspect of the new legislation is the simplified manner in which it deals with recourse against the award. 

Once an arbitration tribunal has reached its decision, there is only limited scope to challenge that decision. Again, this is a fundamental part of arbitration, and while the existing legislation acknowledges that limited scope, the new bill clarifies and simplifies the grounds on which an arbitrator’s decision can be challenged. This ensures that parties to an arbitration can have confidence in the outcome of the arbitration, and minimises the chances of illegitimate challenges that waste time and money.

In addition to the new legislation, the WA government has expressed enthusiasm in developing international arbitration in Australia. The state has a key part to play in the development of international arbitration being close to South-East Asia and a thriving mining and oil and gas economy.

WA’s business community is modern, advanced and is responding to new challenges as it continues to expand at a tremendous rate. In order to meet these challenges, and in order to ensure that WA’s legal policies remain innovative and current, the sooner the state government passes the new legislation, the sooner WA’s business community can reap the benefits of the overhauled arbitration regime.

• Doug Jones is national head of international arbitration at Clayton Utz.


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