Australia’s long-awaited International Arbitration Amendment Act 2010 (Cth) received Royal Assent on 6 July, after the Senate agreed on 17 June to the Bill introduced to the House of Representatives on 25 November 2009 as revised by the federal Government itself on 17 March 2010. The International Arbitration Act 1974, as thereby amended (‘amended IAA’, at http://www.comlaw.gov.au), is set in broader context by the first book devoted to this important field of dispute resolution (‘DR’) law and practice: Luke Nottage and Richard Garnett (eds) International Arbitration in Australia (Federation Press, Sydney, forthcoming October 2010: see Prelims PDF downloadable here).
This eleven-chapter work adds a Preface from NSW Chief Justice Spigelman, a powerful proponent of arbitration and broader access to justice as well as judicial exchange with Japan. It is partly dedicated to Professor Yasuhei Taniguchi, one of my inspiring former teachers at Kyoto University in the early 1990s and a Distinguished Visitor to Sydney Law School over July-August 2009. He is also renowned as a practitioner of international commercial arbitration (ICA), having served for example as arbitrator in an ICC arbitration in Melbourne, as well as a former Judge on the WTO Appellate Body.
The amended IAA brings new promise for ICA in Australia, and may offer lessons for countries like Japan. But Australia can also learn from Japan, especially the thorough way in which it goes about legislative reform.
Australia’s IAA was first amended in 1989 by adopting the 1985 UNCITRAL Model Law on ICA (ML), which also forms the core of Japan’s Arbitration Act of 2003. This ML regime was important in diminishing scope for court intervention in arbitration once agreed by the parties, thus promising greater potential for them to tailor the arbitral process to their particular DR needs. Australia’s amended IAA of 2010 goes a step further by largely adopting the 2006 revisions to the Model Law agreed by this United Nations Commission, which includes Australia and Japan as permanent members. These revisions further expand party autonomy, but Japan has yet to follow Australia – and earlier already Florida and Ireland (with enactments in 2010), Hong Kong (with a Bill proposed in 2009), Mauritius, Peru, Rwanda and Slovenia (enactments in 2008), as well as New Zealand (2007).
The amended IAA, even more so than the 1989 amendments and Japan’s 2003 legislation, also adds many extra useful features to the ML core provisions. For example, it sets out detailed provisions on arbitration confidentiality and privacy (ss 23C – 23G), which apply if parties expressly “opt in” to them. These draw on the NZ legislation, although that applies instead on an “opt out” basis (i.e., unless parties agree otherwise). Japan’s Act, like the ML, contain no provisions – and therefore guidance for parties, legal advisors and courts – regarding this topic, although confidentiality appears to be particularly valued in the Asian region by arbitration users and practitioners.
The amended IAA also now forms the core of Australia’s regime for domestic commercial arbitration disputes. In June, based on prior agreement among the states and territories to follow its lead, NSW enacted the Commercial Arbitration Act 2010 (CAA), modelled also on ML provisions. The new uniform CAAs include extra provisions not found in the more directly ML-inspired IAA, such as review of awards for certain serious substantive errors of law by the arbitrators, which derive from older English legislation and are considered a more appropriate starting point for domestic rather than international DR. However, the CAA still allows parties to opt in to the IAA regime, and thus avoid this extra possibility of supervision by local courts, if that suits their needs for greater finality and speed. (Japan’s 2003 Act also basically has the same regime for international and domestic arbitrations, but eg excludes labour arbitrations and allows consumers to terminate an arbitration agreement.)
Lastly, the amended IAA offers a platform for a real “cultural reform” in Australia, as the federal Attorney-General urged at a conference on 4 December 2009:
If Australia is to ever emerge as an arbitration centre we need our arbitrators to provide a service that is not available in those seats – something that is more than ‘litigation-lite’. We need to invent a form of arbitration that is tailored to the needs of the parties — to the needs of business. A form of arbitration that is prepared to do away with unnecessary formalities and get on with identifying and solving the problem that exists between the parties. A form of arbitration that delivers swift and cost-competitive outcomes. A form of arbitration that is innovative and creative and allows the undoubted talents that exist in the arbitration community to flourish. We need to be able to put ourselves forward as the place you come to when you want your problem fixed, and fixed fast and fairly.
However, the amended IAA may not be enough for this or to lead to a significant increase in ICA cases based in Australia, as opposed to the traditional ‘core’ venues (Paris, Geneva, New York and London) and now well-established Asian venues (Beijing, Hong Kong and Singapore: comparative data here, Luke Nottage and Richard Garnett © 2010). In this sense of persistently low caseloads despite legislative activity and the ongoing growth in ICA filings world-wide, albeit arguably for partly different reasons, Australia and Japan share a common experience. This may not be much of an upswing despite financial commitments in May 2010 by the NSW and federal governments, along with Australian arbitral institutions, to establish the dedicated new “Australian International Disputes Centre” in Sydney.
This more pessimistic prognosis arises first because party autonomy is not consistently promoted in the amended IAA. For example, no “opt out” is permitted. Not just into the CAA regime, which Courts in Queensland had allowed too readily. No opt out is permitted now into a foreign arbitral law, to govern their dispute, even though this would not usually be advisable anyway. New Zealand, and other countries inspired by its original Arbitration Act and earlier Law Commission report (such as Singapore and Malaysia), allows such opt-outs. Influential commentators in Japan, including Professor Taniguchi, argue that the 2003 Act’s silence on this issue allows scope for parties to exercise their free choice. Indeed, he suggests that opting out of the Act into a regime that allows review for serious error of substantive law, at least for domestic disputes, might even promote arbitration in Japan.
More importantly, it is unclear which provisions in Australia’s amended IAA are mandatory, i.e. incapable of any derogation by the parties. This extends even to “opt in” provisions such as those now related to confidentiality. Arguably there are some provisions (eg the scope of persons who can be bound by confidentiality obligations) which can be varied by party agreement. But there may well be others that instead are mandatory, such as the statutory “public interest” exemptions.
Also debatable is the Government’s assertion, in its Supplementary Explanatory Memorandum for its March 2010 amendments to the original Bill (via http://parlinfo.aph.gov.au), that various optional provisions were changed (especially from “opt in” to “opt out”) in order to align the amended IAA more closely with legislation in the UK, Singapore and Hong Kong. For example, both confidentiality and consolidation of related disputes are instead “opt-out” provisions in the English Arbitration Act 1996. And indeed failure to assist the arbitrators in specified ways is a mandatory provision in that Act, not “opt-out” as under s23A of the amended IIA.
The Australian Government also did not adopt several recommendations made in a public Submission by myself and Professor Garnett to the IAA Review initiated in November 2008. The following were some of our “Top 20” recommendations, developed into an article in the Asian International Arbitration Journal (and now Chapter 8 of our new book), which promised even greater potential for more cost- and time-efficient arbitral procedures for Australia:
– There is no additional clarification about what matters are ‘arbitrable’ for the purposes of enforcing agreements or awards, or running arbitrations with the seat in Australia, as opposed to being contrary to other mandatory laws such as trade practices legislation;
– The writing requirements for valid arbitration agreements have been liberalised, but not completely (even for arbitrations where the seat is in Australia);
– There is no clarification allowing Australian courts to enforce awards that have been annulled in foreign seats;
– There is no provision for arbitrators to issue (even non-binding) ex parte “preliminary orders” in support of interim measure of protection, as in almost all other countries that have adopted the 2006 revisions to the ML, and seemingly it is impossible for parties to agree otherwise on this point;
– There is no reference to international ‘soft law’ instruments such as the Rules on the Taking of Evidence in ICA agreed in 1999 (and amended in 2010) by the International Bar Association (IBA) or the ILA’s 2002 Recommendations regarding ‘public policy’ as one of the limited grounds for refusing enforcement of a foreign award;
– There are no provisions on Arb-Med (arbitrators actively encouraging settlement).
These deficiencies in substantive outcomes are also related, in my view, to a rather inadequate consultation process. In particular, the Government should have referred its Bill to a specialist parliamentary committee for a proper round of public inquiry, as eg in its recent amendment to trade practices and consumer law. Japan now has an admirably transparent process of shingikai law reform deliberation, partly thanks to the internet, and the strong influence still of academic experts helps produce impressive outcomes.
Despite these problems in process and outcome, the amended IAA may still result in some significant ‘cultural reform’ for Australia. One overlooked factor is to take full advantage of the expertise of professors expert in arbitration law (and, preferably, other related fields such as private international law, contract and commercial law). It is worth remembering that ICA grew almost out of nothing in the 1950s and 1960s thanks especially to an older generation of academics, such as Professor Taniguchi. Some of the leading arbitrators in Europe and North American are still professors, and the professoriate is also very prominent in the still relatively new burgeoning field of investor-state arbitrations (usually now pursuant to investment treaties or FTAs). Full-time professors can bring not only a comprehensive understanding of the field(s) of law, but also a willingness to resolve disputes quickly and therefore cost-effectively so they can return to their ‘day jobs’, which are still not dominated by the ‘billable hours’ mentality increasingly prevalent in legal practice.
In this respect more generally, it is somewhat disturbing to find over the last two decades that there is declining proportion of professors invited to present at the major biannual Congresses for ICA run by a leading association, the International Council for Commercial Arbitration:
(© 2010, Luke Nottage & Wan Sang Lung, also for the source data here)
Hopefully, in Australia especially, both arbitral institutions and policy makers will draw on and support a new and diverse generation of arbitration specialists in order to achieve real ‘cultural reform’ for ICA.
