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Quarterly Bulletin of The Chartered Institute of Arbitrators (Australia) Limited - Issue No 7 - June 2008

Arbitration • Mediation • Adjudication • Expert Determination • Conciliation

The Australian

ADRReporterArbitration • Mediation • Adjudication • Expert Determination • Conciliation

The Australian

ADRReporterCongratulations !!Griffith University wins Hong Kong Vis Moot

Griffith University of Queensland, one of the teams sponsored by CIArb Australia, were the winners of this year’s Hong Kong Vis Moot. Pictured above at the ceremony receiving the winning certificates were (l-r) Peter Swan (a member of the Griffith University team for the Vienna Vis Moot), Therese Wilson (coach), Suzannah D’Juliet (Vienna team member), Michael Evans (Sydney barrister and team supporter), Mathew Shelley (Griffith University Hong Kong team member), Doug Jones (Arbitrator), Eammon Atkinson (Griffith University Hong Kong team member), Ingeborg Schwenzer and Michael McConville (Arbitrators). A full report of the Griffith University victory together with reports of other sponsored university teams appear on page 6 onwards.

CIArbAustralia

www.arbitrators.org.auwww.arbitrators.org.au

ADR Reporter June 20082

30 Jun Board Meeting

9 Jul Dinner at the NSW Law Society

28 Jul Board Meeting

19 Aug The Annual Debate - “This House believes that lawyers should not be allowed to participate in arbitral and mediation proceedings.” See ad on page 28

25 Aug Board Meeting

29 Sep Board Meeting

Oct Adjudication - date to be advised

Oct 27 Board Meeting

4 Dec Christmas Wine and Cheese Tasting Party at Blake Dawson, Grosvenor Place, Sydney

The Chartered Institute of Arbitrators

(Australia) Limited

Level 6, 50 Park Street, Sydney, NSW, 2000, Australia Executive Officer:Emma Matthews( (02) 9267 1513Fax: (02) 9267 3125email: [email protected]

President: Malcolm Holmes( (02) 9232 8409Fax: (02) 9232 7626email: [email protected]

Vice-president and Hon TreasurerMichael Sanig( 0404 023 006Fax: (02) 4362 8864email: [email protected]

Vice-presidents:James CreerPeter MegensDavid Moore

Company SecretaryJohn Wakefield

Board of Directors:Alan ChuckSteven GriffithAlan LimburyHarry McIverDerek MinusAlbert MonichinoPathma NagarajanIan NosworthyPaul RobertsAlfred WillingsAustralian Business Number: 27 118 131 016

Chapter Convenors:NSW: Michael SanigVIC: Albert MonichinoQld: Steven GriffithSA: David MooreWA: Pathma Nagarajan

University Law Schools do us proud

From the Editor

Michael Sanig

BranchDiaryThe

Other meetings may be planned in 2008. Details will be published in the next issue of The Australian ADR Reporter.

Several pages of this issue of The Australian ADR Reporter are devoted to reports from the various universities

that CIArb Australia sponsored to take part in both domestic and international mooting competitions earlier in the year - in particular the two Vis Moot competitions held in Hong Kong and Vienna during March.

Eight Australian universities competed in Vienna and five in Hong Kong - four of the five universities which competed in Hong Kong also fielded teams in Vienna. The moots are run on exactly the same lines with the same problem but the same students cannot compete in both competitions.

In Hong Kong, Griffith University won from a field of 32 universities from 13 countries. In Vienna, Victoria University, Melbourne, were the highest ranking Australian team coming equal fourth out of a field of 204 universities from almost 60 countries. Griffith University, Macquarie University and Murdoch University were also quarter-finallists in Vienna.

The excellent achievements of these teams and the individual members who also scored high places and honourable mentions are a credit both to themselves and to the universities, which aided by dedicated staff and external volunteers, have been able to provide these students with the ‘opportunity, experiences and memories of a lifetime.’

This year the Australian Branch of the Institute gave $1,500 each to ten universities to assist students towards the cost of competing in competitions.

Our only request is that the universities provide us with a report of how they fared and, if possible, provide us with a photograph or two of their teams. I am pleased to report that this year, we received more reports from universities than we have done in the past and we are more than happy to give space to showcase their efforts.

As someone who mooted for the University of Western Sydney and was a member of the winning team that won the 2005 LexisNexis Constitutional Law Moot before Justice Michael Kirby in the High Court in Canberra, I can testify to the fact that competing in a mooting competition is a great experience and one which I am unlikely ever to forget.

What perhaps is less appreciated by those who have not experienced it, is what takes

place behind the scenes.The effort required by students to prepare

for any mooting competition is considerable. It requires dedication, passion, perseverance and substantial hard work and preparation - all of which is usually done outside of class hours and in the students’ own spare time on top of the normal workload of study and assignments. In the build-up to the actual competition, participants are required to be well-versed in the subject matter and ready to answer any question that might be thrown at them - it can be a very nerve wracking experience.

CIArb Australia offers its congratulations to all the teams that have competed this year. We understand that the costs of entering such competitions are high and are often borne by the students themselves and we hope that our small contribution to your efforts has helped to make a difference. You have done yourselves and your university’s law school proud.

Michael Sanig

3ADR Reporter June 2008

Presentations to top students

ADRReporterEditor:Michael Sanig

Editorial correspondence, articles etc for publication should be sent to:-

PO Box 57,OURIMBAH, NSW, 2258Tel: (02) 4362 8854Fax: (02) 4362 8864Mobile: 0404 023 006e-mail: [email protected]

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Please do not use double spacing within paragraphs. Please use endnotes not footnotes.

All opinions expressed in The Australian ADR Reporter are those of the contributor and publication of same does not imply endorsement by The Chartered Instituite of Arbitrators (Australia) Limited or any of its officers.

Published four times per year.

Copy Dates:

Sep 2008 - 15 AugDec 2008 - 15 NovMar 2009 - 15 FebJun 2009 - 15 May

All articles © 2008 The Chartered Institute of Arbitrators (Australia) Limited - Permission to reproduce any item should be obtained by writing to the Editor at the address stated above.

CIArbNews

The Australian

International Arbitrator, David Rivkin, made the presentations to the two top students in last year’s International Commercial Arbitration courses.

Nicola Nygh, Special Counsel at Allens Arthur Robinson in Sydney, was the top scoring student at the 2007 CIArb Australia/UNSW Diploma Course in International Commercial Arbitration.

Tom Beamish, was the top student in the University of Sydney’s International Commercial Arbitration subject which is part of the Law School curriculum.

Top: Nicola Nygh receives her award from David Rivkin.

Right: University of Sydney law student Tom Beamish receives his award from David Rivkin.


CIArbNews

David Rivkin believes that international arbitration is a victim of its own success – today it faces substantial

challenges to reduce the time and expense in each case. He proposes that the way to meet these challenges is a radical return to basics, described as “the Town Elder model.”

“When arbitration began, a town elder would simply listen to both sides of the dispute and issue his decision. He would ask for additional information only as necessary,” he said.

Similarly, David proposes that an arbitrator should use a zero-based budgeting method and adopt only those procedures that are necessary for that particular dispute.

In his presentation to the NSW Chapter of

CIArb Australia, he set forth several examples where this paradigm would be useful, including implementing procedures to name arbitrators more quickly, encouraging procedures that provide the opportunity to dispose of cases at an earlier stage and that encourage settlements, fashioning the appropriate scope and method of discovery, and limiting the use of post-hearing briefs.

International arbitration today faces a growing list of challenges. Ironically, most of these challenges arise from the success of the process itself. Because international arbitration has proven to be an efficient and effective means to resolve international disputes, including the enforcement of awards, it has become standard to include arbitration clauses in

any significant international transaction. In addition, the proliferation of bilateral investment treaties, the success of some investors in winning substantial claims under those treaties, and the changing economic environment worldwide have caused a boom in investment treaty arbitrations.

Many surveys have shown that there is a general belief that arbitration is expensive and slow. David’s aim is to tackle both of these perceptions head on.

The growth in caseloads has strained international arbitration institutions, parties, counsel, and the core of international arbitrators themselves.

The complexity of cases today and the size of the claims have led to more extenuated proceedings , mountainous wr i t ten submissions and longer hearings. Document discovery has become commonplace, even in Continental cases, and while the IBA Rules of Evidence have helped by providing standards to control the scope of discovery, other developments have caused new challenges. The growth in discovery of electronic documents is a test for all involved in arbitration.

He added that the goals of international arbitration have not changed. In short, they can be neatly summarised as (1) a fair and neutral process, (2) conducted by intelligent and experienced arbitrators, (3) resulting in a timely and well-reasoned decision, and (4) benefiting from an effective enforcement mechanism.

Economists use an effective tool known as zero-based budgeting. In that process, one does not start with the prior year’s budget and simply make revisions to that budget. Instead, one builds from scratch to identify only what expenses are necessary for the coming year.

The arbitration community should adopt the same approach to international arbitration procedure. We can and should all build on experience from procedures developed in prior cases. He questioned whether discovery was necessary at all. Add to that - witness statements, memorials and oral testimony.

His view is that, in each case, we should start with the Town Elder model and build into it only the additional procedure that is necessary for that particular dispute. - building from the ground up, rather than using a pre-conceived notion of how the case should proceed.

In order to achieve this new paradigm, every element of the international arbitration community must be involved. In particular, arbitrators must be more proactive and willing to assume control. They must learn as much as they can about the case at an early stage. And they should not be afraid to push the parties towards adopting those

(Continued on page 19)

David Rivkin’s presentation

“Town Elder model” - a return to basics


CIArbNews

Tom Altobelli’s presentation

Insight into workings of the Federal Magistrates Court

Federal Court Magistrate and a leading expert on family law, Tom Altobelli, was our guest speaker at the meeting

held in Sydney on 28 April. Whilst the topic was primarily concerned

with mediation within the context of family law, Tom’s presentation covered a more wide-ranging discourse on the current state of relationships in Australia, the introduction of alternative dispute resolution within the family law system, and how it works in the setting of the Federal Magistrates Court.

He also gave us an account of his own particular experiences both as a Federal Court Magistrate and as a former practitioner in family law in private practice.

We got an insight into how the more protracted and difficult cases involving children, total relationship breakdown and

disposition of assets between the parties are dealt with.

It should also be pointed out that, as Tom explained, Federal Court magistrates also deal with other areas of federal law such as bankruptcy and are not exclusively dealing with family law matters. One got the distinct impression that dealing with a bankruptcy would, at times, seem like a welcome relief.

We were given a grim overview of the statistics of marriage, divorce and family breakdown within Australia today. 2006, the last year for which the Australian Bureau of Statistics has released data, was a fairly typical year for marriages and divorces in Australia.

In 2006 there were just over 114,000 registered marriages – the highest number

since 1999. In the same year there were 51,375 divorces and of these just over half involved children. Interestingly the trend for divorces is dropping.

The number of children under 18 years of age affected by divorces each year is approximately 50,000. More than one in four children in New South Wales are known to welfare agencies and the Department of Community Services (DOCS).

It is the effect upon children and, above all their future welfare, which governs the difficult decisions that both Federal Court magistrates and Family Court judges have to make in their day to day rulings.

Tom gave us an insight into the difficulties of his job and the effect that legally mandated mediation has had on bringing warring parties to together to try and resolve disputes prior to proceedings before a judicial officer.

There are often conflicting stories from the parents involved, emotions run high and there is an innate lack of understanding of the processes involved especially where a party is not legally represented

We ranged over such matters as whether a judge could also act a mediator in a family dispute – something which Tom had attempted on only a few occasions with reasonable success.

We discussed the role of children - at what age does a judicial officer take into account the wishes of the child ? There is no simple answer as there is no set age and it depends upon the child’s maturity and understanding of his or her situation.

What was clear was that it was as easy to get it wrong as get it right; that officers of the courts needed to have the wisdom of Solomon and that when dealing with the consequences of family breakdown it was likely that, in some cases, neither party was going to be pleased with the outcome.

Family law is almost certainly one of the most emotive and difficult areas of law in which to practice.

For a practitioner it requires the ‘patience of Job’ and the belief that one must avoid becoming emotionally involved in cases at all costs.

For a judicial officer the realisation that decisions can impact heavily upon individuals’ lives is a heavy burden to bear.

Tom Altobelli has seen it from both sides of the fence – one cannot help but think that one wouldn’t want his job for quids.


CIArbNews

Griffith University wins Hong Kong Vis Moot

This year, Griffith University Law School sent a team of four students to the Vis East International Commercial

Arbitration Moot Competition in Hong Kong. The team then travelled onto the Vis International Commercial Arbitration Moot competition in Vienna.

Two of the Griffith University Law School students, Mathew Shelley and Eammon Atkinson, competed in Hong Kong; and the other two, Suzannah D’Juliet and Peter Swan, competed in Vienna. Both mooting competitions are run exactly on the same lines with the same problem being argued at each moot.

On 7 March, it was announced in Hong Kong that Griffith University Law School had made it into last 16 teams out of the 52 competing there and would proceed to the final knock out rounds.

The following day Griffith Law School team mooted against and defeated New York University, Stetson University and Fordham University all from the US, and was left one of the only two teams still in the competition with University of Freiburg.

On 9 March Griffith mooted in the Grand Final against the University of Freiburg and won!

In addition to winning the Moot Eammon Atkinson received an honourable mention in the individual oralist category, and Mathew Shelley was awarded “Second Runner Up Best Oralist” at the awards banquet in Hong Kong.

The following week Griffith Law School performed to an excellent standard in Vienna.

On 18 March it was announced that Griffith Law School was one of the 64 teams out of the 204 competing in Vienna, to qualify to compete in the final knock out rounds. The team progressed from the round of 64 to the round of 32 where it was unfortunately knocked out.

Nevertheless both Suzannah D’Juliet and Peter Swan performed to an excellent standard, and, at the awards banquet in Vienna, they were both awarded honourable mentions in the individual oralist category. These awards went to less than 5% of the students competing in Vienna, and required all arbitrators in every general round moot to have ranked them in the “excellent” category.

As a result, all four of the Griffith Law School students came away with individual oralist awards.

The team is grateful to CIArb Australia for its support. Thanks are also due to Sydney barrister Michael Evans who gave extensive amounts of his time and expertise to assist the team; and to Khory McCormick, partner at Minter Ellison Brisbane, who very generously sponsors the team and who was present in Vienna to cheer the team on.

Top (l-r): Preparing to moot at Vis East 2008 - Mathew Shelley (HK team), Peter Swan (Vienna Team), Suzannah D’Juliet (Vienna team) and Eammon Atkinson (HK team).Centre (l-r): After the Grand Final members of the University of Freiburg team, arbitrators Ingeborg Schwenzer, Doug Jones and Michael McConville and Griffith HK team members Mathew Shelley and Eammon Atkinson.Bottom (l-r): University of Lausanne team members, arbitrators and Griffith Vienna team members Suzannah D’Juliet and Peter Swan at the Vienna Moot.


CIArbNews

The road to the 15th Annual Vis Moot began in late October 2007 when Professor Zeller convened students

interested in participating in the moot. Preparation of the written submissions preceded oral argument in the months between November and January.

The Vis Moot for Victoria University commenced with four general round moots against Assas Paris II, The University of the Balearic Islands, Prishtina University and Central European University. Overall, we received excellent feedback in all of our moots and were announced as one of the teams to progress to the finals.

Our first final moot was against the Catholic University of America. The competition intensified in the finals, with competition increasing. We progressed from the Round of 64 onto the Round of 32.

In the Round of 32, we faced Griffith University. Again, this was an excellent moot, with both teams having to answer a lot of questions from the arbitral panel. We were beside ourselves when the announcement was made progressing Victoria University into the Round of 16.

Our Round of 16 moot was against Rutgers University. Once again, this was a tiring moot, with a very interventionist panel. The winner of this moot, was definitely going to earn their place in the next round, especially considering that the UNCITRAL Secretary was sitting on the arbitral panel. We then progressed on to the Quarter Finals against the University of Vienna.

This was both the most competitive and

tiring moot that we participated in. The moot lasted around two hours, with the panel ensuring that all mooters knew both the law and the facts of the case. Unfortunately, Victoria University was knocked out of the Vis Moot by the University of Vienna.

We must emphasise the invaluable contribution that Professor Bruno Zeller and made to our performance in the Vis Moot. He provided constant support for us throughout the duration of the moot. His dedication to the moot without a doubt assisted us in our performance and end result.

This report was written by Kristy Haining and Katalina Toth - the students who took part in the Moot.

Victoria University equal 4th at Vienna Vis Moot

The Victoria University team Katalina Toth (2nd from right at back) and Kristy Haining (back at right) with the team from the University of Vienna which knocked them out in the quarter-final.

Below: Murdoch University at the awards dinner: (l-r) Craig Williams, Samantha D’Silva, Kristian Maley, Vanja Tekic, Andrew Kirk, Gabriël Moens and assistant coach, Sam Luttrell.

Murdoch Uni placed 19th out of 203 at Vienna Vis Moot

Murdoch University Law School’s Vis Moot team returned from the oral rounds of the

competition in Vienna having won an Honourable Mention in the category for Best Memorandum for the Respondent.

The un ive r s i t y a l so ach ieved an impressive final ranking of 19 of 203 teams worldwide. Along with Victoria University, Griffith University and Macquarie University, the team proceeded to the finals, where they were defeated in the first elimination round by Buccerius University, Germany.

The team’s work began with the release of the problem in October 2007. Since that time, the team undertook a rigorous and intensive advocacy training programme under the direction and mentorship of their Dean and coach, Professor Gabriël Moens.

Their training also involved the significant input of numerous members of the Perth legal profession and judiciary who gave up their time to judge over thirty training moots. The team wish to express their sincere gratitude to all who assisted, as well as to the CIArb Australia for their support.

The team was comprised of speakers Andrew Kirk (who achieved an impressive average of 44.8 out of a maximum of 50) and Kristian Maley (whose average mark was 44.6), together with researchers Craig Williams, Samantha D’Silva, and Vanja Tekic.

Prior to the moot in Vienna, the team reached the Semi-Finals of the increasingly popular Pre-moot competition held in Leuven, Belgium.


CIArbNews

A team from the University of New South Wales Law School reached the quarter finals of the recent ICC

International Mediation Competition in Paris.

Inaugurated in 2006, the competition gives students an opportunity to test their problem-solving skills in a mock international mediation and to meet with experts from diverse legal and professional backgrounds.

The UNSW team (pictured above), comprising Anna Lewis, Joel Barrett, Michael Kalceff and Aman Saxena and coached by Dr. Rosemary Howell, competed against 29 other law schools from Belgium, Brazil, Canada, China, France, Germany, Hong Kong, India, Italy, Morocco, Singapore, Switzerland, Ukraine, UK and the US.

The UNSW team won all four preliminary rounds (including against Harvard Law School) and was ranked third of the eight teams selected to go forward to the quarter finals, where they met University of California, Hastings College of Law.

The judges were divided as to the winner

and UNSW lost on the mediator’s casting vote. Hastings went on to become runner up to FGV Sao Paolo Law School in the final, which was mediated by Alan Limbury.

The winners were awarded a trophy; internships in ICC’s ADR Secretariat; a year’s subscription for each student to the ICC International Court of Arbitration Bulletin; 2,000 euros in prize money and a legal reference book.

All participants received a copy of David Plant’s new book “We must talk because we can: Mediating International Intellectual Property Disputes” and the first three teams were each given a subscription to the International Journal of Arbitration, Mediation and Dispute Management.

The awards ceremony was presided over by the Chairman of the ICC International Court of Arbitration, Professor Pierre Tercier.

Michael Forbes Smith and Colin Wall, respectively Director General and former President of the Chartered Institute of Arbitrators were also present at the event, which the Institute supports.

Vienna Vis Moot ResultsAustralian placingsQuarter Finallists: Griffith University, Macquarie University, Murdoch University, Victoria University, Melbourne

Best memorandum for respondent: Honourable mention - Murdoch University

Best Individual oralist in General Rounds: 3rd place - Shen Narayanasamy - Monash UniversityHonourable mentions: Suzannah D’Juliet - Griffith University; Ishwar Singh - Macquarie University; Peter Swan - Griffith University

Board changes follow AGM

There have been some changes to the Branch’s Board of Directors

following the annual general meeting.Michael Sanig, Peter Megens and

David Moore have joined Jim Creer as vice-presidents and as a consequence Michael Sanig has relinquished his position of Company Secretary but remains as Honorary Treasurer.

John Wakefield (pictured above), a partner in the Sydney office of Holman Webb has been appointed Company Secretary.

John was educated at the Universities of New South Wales, Sydney and Cambridge and practices in commercial dispute resolution including securities enforcement, insolvency, Corporations Act, trade practices, general contract and equity as well as international and domestic arbitration and alternative dispute resolution.

He has current appointments as an arbitrator under the Uniform Civil Proceedure Act,2005 to the Supreme, District and Local courts of NSW and is a Fellow of the Chartered Institute of Arbitrators.

UNSW reaches quarter-finals of ICC Mediation Comp


CIArbNews

Melbourne Law School competed in the regional round of the European Law Students’ Association WTO

Moot Court Competition in Adelaide from 12 to 15 March 2008.

The competition was hosted by the Institute for International Trade (IIT) at the University of Adelaide and held at the Oaks Plaza Pier Hotel in Glenelg. For the Melbourne team, it represented the culmination of approximately four months of hard work.

Melbourne Law School excels in WTO Moot

The team comprised four LLB students: Olaf Ciolek, Emily Long, Jessica Rae, and Devon Whittle. They came together in late November 2007 for their first meeting with their coaches (Drs Andrew Mitchell and Tania Voon, both Senior Lecturers) to begin researching the problem, which focused on the WTO’s General Agreement on Trade in Services, with particular focus on trade in telecommunications services.

The issues raised by the problem involved the Annex on Telecommunications, the

Reference Paper (as adopted by the respondent in the case), anti-competitive practices, market access, national treatment, and domestic regulation.

The team finalised its written submissions – for both the complainant and the respondent – on 14 January 2008, after many weeks of long days and late nights in the Law Library.

The next two months were spent earnestly working on oral mooting skills, fine-tuning arguments, and learning how to present technical ideas as simply as possible.

On 6 March 2008, shortly before departing for Adelaide, the team held an exciting Exhibition Moot before a tough panel of five experts: Michael Coleman (General Counsel, Telstra Wholesale), Peter Gallagher (Principal, Inquit Communications), Dr Gavan Griffith QC (barrister and international arbitrator), Professor Anne Orford (Australian Professorial Fellow and Director of the Institute for International Law and the Humanities, Melbourne Law School), and Peter Truswell (Executive Officer of the WTO Disputes Section, Trade Law Branch, Department of Foreign Affairs and Trade (DFAT)).

The oral rounds in Adelaide comprised three preliminary moots for each team and then a Grand Final, held on Saturday 15 March. The preliminary moots revealed a diversity of mooting styles and arguments on the part of opposing teams, and the Melbourne team was excited to enter the Grand Final ranked first.

The Grand Final between the University of Melbourne (complainant) and the Victoria University of Wellington (VUW) (respondent) was of a very high standard and adjudicated by five eminent judges: Victoria Donaldson (Visiting WTO Fellow, IIT and Counsellor, WTO Appellate Body Secretariat), Professor Mary Hiscock (Emeritus Professor of Law, Bond University), Melissa Kelly (DFAT), David Morgan (Director, Economic Analytical Unit, DFAT), and Andrew Stoler (Executive Director, IIT).

The Grand Final was a tight competition and the Melbourne team-members’ nerves were running high as they awaited the final results to be announced at the presentation dinner on the evening of the Grand Final.

After all those late nights spent writing, the Melbourne team was thrilled to receive the awards for Best Complainant Written Submission, Best Respondent Written Submission, and Best Overall Written Submissions.

The team also received the award for Runners-Up in the regional round. The VUW team was announced the winners and proceeded to the final rounds that were held in Geneva in April-May. The competiton was ultimately won by the team from the Universidad de Los Andes (Colombia).

Left: The team from La Trobe University that competed in the Hong Kong Vis Moot.


CIArbNews


On Tuesday, 6 May 2008 the Victorian Chapter of the Chartered Institute of Arbitrators (“CIArb”)

held a luncheon at the offices of Bilfinger Berger Project Investments (“Bilfinger”) in Melbourne. Charles O’Neil of Bilfinger hosted the event as he has done on several occasions in the past. There were two topics for discussion.

First, Albert Monichino led a discussion on the decision of the Victorian Court of Appeal

(“the VCA”) in Oil Basins Ltd v BHP Billiton Limited [2007] VSCA255: implications for commercial arbitration in Australia.

The second topic for discussion was Dispute Resolution Boards: what are they and will they work in Australia? The discussion on this topic was led by Alan Chuck.

The summary o f the respect ive presentations appears below.

The VCA decision in Oil Basins Ltd v BHP Billiton Limited

Albert Monichino said that the VCA’s decision was important in terms of

identifying the required standard of reasons of an arbitrator’s award, certainly in a domestic arbitration. The VCA’s decision was a decision of an intermediate court of appeal in relation to uniform legislation and therefore would be followed by other Australian courts unless considered to be obviously wrong.

The VCA did not accept as self evident that the standard of reasons of an arbitrator’s award were not as rigorous as the standard of

reasons required of a superior court judge. It was not enamoured with the argument

that section 29 of the Commercial Arbitration Act (“the domestic Act”) requires a “statement of reasons” and not a “statement of reasoning”.

The VCA found that the requirement of an arbitrator to give reasons was founded upon notions of natural justice - that is, a person who imposes a decision upon parties is required to explain his reasons

for decision. The VCA did not accept the argument

that the requirement of an arbitrator to give reasons under section 29 was solely, or substantially, for the purpose of facilitating rights of appeal under s. 38 of the domestic Act.

By founding the requirement of an arbitrator to give reasons on broader notions of natural justice, the VCA broadened the requirement of an arbitrator to give reasons.

Disappointingly, the VCA did not acknowledge the policy objectives behind the domestic Act - namely, to promote the speed and cost effectiveness of arbitration as an alternative to litigation. Nor did the VCA acknowledge any major differences between a superior court’s judgment and an arbitral panel’s award. For example, unlike an award, a judgment has precedent value.

Albert added that the VCA’s judgment suggested that the standard of reasoning required of an arbitral award is variable - depending upon the nature of the dispute in each case.

The fact that the arbitrators are retired

judges may be indirectly relevant as indicating the nature of the dispute. Hence, it may indicate (along with other factors) that the dispute is a complex one. In this regard the VCA upheld the trial judge’s finding that in the instant case the majority arbitrators were required to provide reasons of a judicial standard.

It must be seriously doubted whether parties to a complex commercial dispute, in choosing arbitration, expect that the reasons of the award to be of the same standard of the reasons of a superior court judgment. But that is the premise from which the VCA’s judgment proceeds.

Albert questioned what then were the implications of the VCA’s decision for domestic commercial arbitration in Australia?

First, he felt that it signalled increasing judicial interference in arbitral awards in Australia.

Secondly, it undermined the finality of arbitral awards in Australia, or at least the perception of finality.

Thirdly, it would lead to longer and more prolix arbitral awards, with consequentially increased costs of arbitration.

Fourthly, it would slow up the arbitral process as arbitrators will require more time to publish their arbitral awards.

Overall, he said that it reduced the competitive advantage of arbitration as compared with commercial litigation.

The question was then posed: What should be done about the VCA decision?

Firstly, the question arose of whether any reform is required to the domestic Act - in particular, in relation to either section 29 or s. 38.

Reform of these sections does not appear to be on the agenda of the Expert Working Group (“the EWG”) which is looking at the question of reform of the domestic Act. It is suggested that the EWG should reconsider this.

Secondly, it was argued that parties and arbitrators should be alive to the possibility of expressly agreeing in their arbitration agreement the required standard of reasoning in any arbitral award. There is no impediment to parties (exercising party autonomy) specifying the required content of the arbitrator’s reasons under section 29, short of dispensing of the requirement to give reasons at all.

Thirdly, parties and arbitrators should bear in mind the possibility of entering into an exclusion agreement under section 40 of the

Victorian Chapter luncheondiscusses Oil Basins decision

(l-r): Alan Chuck, Albert Monichino and Charles O’Neil


CIArbNews

Jean Claude Najar to present annual Clayton Utz lecture on International Arbitration on 5 November

This year’s annual Clayton Utz / University of Sydney International Arbitration lecture will take place on Wednesday 5 November 2008. It will be held at the Banco Court in the Supreme Court of New South Wales.

The lecture will be presented by Jean-Claude Najar, who was General Counsel for GE Oil and Gas Division.

domestic Act following the commencement of the arbitration. The effect of an exclusion agreement will be to exclude rights of appeal under s. 38. However, an exclusion agreement will not remove the possibility of interference with the award under s. 42 on the grounds of technical misconduct.

Finally, Albert recommended that parties opt out of the domestic Act regime in favour of the International Arbitration Act/Model Law regime whenever any dispute involves an international element. That is, the parties should, whenever possible, expressly agree in their arbitration agreement that the subject matter of the agreement relates to more than one country, thereby rendering the arbitration an international arbitration for the purposes of the Model Law. In that way, the parties would be able to reduce the scope of judicial interference.

Victorian Chapter luncheondiscusses Oil Basins decision

Dispute Boards are a creature of contract. There are no statutory definitions or statutory rules.

Whether called Dispute Adjudication or Review or Resolution Boards, their purpose is the same: to head off disputes before they occur, or, if they do arise, to provide a quick and inexpensive resolution mechanism during the contract period.

Where did they originate?

The first DRBs were formed for major public works contracts in the USA in the

1960s and 70s. The World Bank adopted the DRB concept and included clauses in its standard procurement documents from 1995. Its DRBs were to give a ‘recommendation’ on a dispute.

In 1996, FIDIC revised its red book form of contract to provide for a DRB to give a ‘decision’ on a dispute before it could proceed to arbitration.

How do they work?

The DRB members are appointed at the outset, not after a dispute has

arisen. It is usual for both promoter and contractor to nominate one member each, and for those members jointly to appoint the chairman. The members are paid a retainer, and attend regular project

review meetings, incorporating a site visit and round-table discussion (often held quarterly on large projects).

The mere presence of a DRB tends to discourage the submission of spurious or overblown claims, as all contracts and incipient disputes are discussed in an open forum at every project review meeting.

What do they cost?

The cost of setting up and maintaining a dispute board for the duration of a

major project ranges from 0.1% to 0.3% of the project cost.

What skills are needed by DRB members?

Experience, qualifications, ability to write a concise

determination, contractual knowledge, availability, independence, procedural knowledge, languages, legal knowledge, impartiality. Unlike arbitrators or judges, DRB members do not withdraw after handing down their determination, but must live with the consequences until the end of the project.

Will they work in Australia?

No reason why not, although the cost of setting up yet another layer of dispute

resolution may be prohibitive for smaller projects. There have been 13 DRBs in Australia from 1987 to date, and five in New Zealand from 1997 to date.

The Sydney Water Desalination Project involves a DRB, comprising Ron Finlay and Graeme Peck as the technical members and George Golvan QC, a Melbourne silk, as the chairman. People will be watching this project with interest, to see if the DRB concept works with more modern alliancing schemes.

In an attempt to promote the acceptance of DRBs in Australasia, Dispute Resolution Board Australasia Inc has been established,

with a secretariat in Sydney. It is also the local chapter of DRBF, based in Seattle, USA. See www.drba.com.au.

Dispute Resolution Boards - What are they?

(Continued from page 10)


CIArbNews

Letter fromNew Zealand

On 17 October 2007, the New Zealand Parliament passed an amendment to

the Arbitration Act 1996. New Zealand had adopted the UNCITRAL Model in 1996, with only minor modifications. One of these was to place in the Act a Section regarding confidentiality.

Confidentiality Provisions

This was one of the first attempts worldwide to legislate in this area. It extended

confidentiality to arbitral proceedings but not to any consequential court proceedings such as appeals and applications to set aside and to enforce awards. That original section has now been repealed and extensively rewritten.

Under the Amendment Act, the exceptions to the general rule of confidentiality of arbitral proceedings are clarified.

There is a process whereby parties can apply for Court proceedings under the Act

to be heard in private but only where the Court is satisfied that the public interest in having the proceedings heard in public Is outweighed by the Interests of any party In having those proceedings heard in private.

The default provision is in favour of a public hearing.

Parties and arbitrators are prohibited from disclosing “confidential information”, as defined in the Act, relating to arbitral proceedings. They may do so to the parties’ professional or other advisers and to others if certain prescribed criteria are satisfied. Disclosure can be required by law (e.g. to the Stock Exchange) or by order of the Court.

Interim measures and preliminary orders

The Act reflects recent changes to the UNCITRAL Model Law. New Zealand

is one of the first countries to adopt these

changes relating to interim relief. Arbitrators may make interim or preliminary orders; an arbitrator may also direct a party not to frustrate the purpose of an interim measure.

The amendments are designed to reduce the occasions for and the delay in having to apply to the Court to exercise its powers of granting interim relief. The provisions reinforce the thinking that the arbitral tribunal should be the first port of call for interim measures.

Grounds of Appeal

Under Clause 5 of the Second Schedule to the 1996 Act, unless the parties

agree, either that there should be no right of appeal or that there shall be a right of appeal, a party has the right to seek leave of the Court to appeal an arbitral decision on a question of law arising out of an award.

The Second Schedule does not apply to international arbitrations unless the parties specifically opt into it. It applies to domestic arbitrations unless the parties agree to opt out of it.

The new provision clarifies the meaning of the expression “question of law”. This is not to include a question whether an award is supported by any evidence or sufficient or substantial evidence or whether the arbitrator drew the correct factual inferences from relevant primary facts.

The amendment confirms the position that an error of fact by an arbitrator is not reviewable on appeal. Disaffected parties had been prone to allege an error of law on the basis that there was no evidence to justify an arbitrator’s factual conclusion.

General

The provisions of the Amendment Act are quite detailed but can easily be

downloaded without charge. Just type in “new zealand legislation arbitration amendment act 2007”.

There are other minor amendments such as abolishing Umpires and calling them Third Arbitrators and improving the provisions regarding consumer arbitrations.

The Amendment strengthens the position of commercial arbitration in New Zealand and has been welcomed by arbitrators there.

AMINZ Conference

The annual conference of the Arbitrators’ & Mediators’ Institute of New Zealand is

taking place in Blenheim from 1 to 3 August 2008. Details of speakers, etc. have yet to be finalised but will shortly be available on the Institute’s website: www.aminz.org.nz. Australian arbitrators would be most welcome to attend. Blenheim is the seat of the Marlborough wine industry, located in the north-east of the South Island. It is a short flight from Wellington or Christchurch.

New Zealand passes amendment to Arbitration ActSir Ian Barker in Auckland


CIArbNews

A prospective member or member of the Institute who aspires to gain or elevate his or her arbitral qualifications

should study this article.The Institute has announced its program

as a world-class framework of knowledge and skills needed in order to be proficient in the field of non-court dispute resolution, covering the main disciplines of arbitration, adjudication and mediation.

The programme provides the platform to underpin and support the development of professional experience in more disciplines while also offering a tiered range of professional membership qualifications to provide recognit ion of levels of experience.

At this juncture the Australian Branch is only offering training in arbitration. In due course the Branch expects to be in a position to recommend ways and means for those of our members who wish to become accredited adjudicators and/or mediators to can gain those qualifications.

The Institute’s London head office has

published the structure of the Pathways as set out in the diagram above.

For the reasons mentioned above, Australian readers can ignore for the moment the ‘mediation’ and ‘adjudication’ legs of the structure. Set out below are some helpful observations concerning the acquisition of certain levels of arbitral membership.

Becoming an Associate (ACIArb)

Unless you have had some suitable prior experience, you will need to complete

a CIArb Introductory Course in arbitration. The Australian Branch Education Committee is in the process of investigating the best means of conducting this Course having particular regard to the far-flung geographic location of potential members.

It is hoped that the Committee will be in a position to announce within the next six months the syllabus and the method of conducting the Course.

Henceforth, it will be necessary to become an Associate member as a condition precedent to enrol for any Institute

Course.From Associate to Member (MCIArb)

Candidates need to complete two modules or demonstrate similar

knowledge from study of recognised external courses. Qualified lawyers are exempt from Module 1. Both modules combine self study with tutorials, assessment and written examination.

Module 1 – Law of Obligations and Civil Evidence – this covers the key aspects of our legal system and approach to contracts/obligations/evidence that influences how disputes may be handled by arbitration.

Module 2 – Law of Arbitration – this covers the relevant law to all Australian jurisdictions.

From Member to Fellow (FCIArb)

Module 3 – Practice, Procedure, Drafting and Deciding – this

covers the practical steps and procedural elements involved in handling a commercial

New CIArb Professional Pathways ProgrammeJames Creer comments upon the new CIArb Pathways Programme



CIArbNews

13th AFIA Symposium held in Hong Kong

On 8 March 2008, the Australasian Forum for International Arbitration (AFIA) held its thirteenth symposium at the offices of Allen & Overy in Hong Kong. Upwards of sixty

legal practitioners from numerous jurisdictions, particularly in the Asian region, but also the US and Europe attended.

AFIA symposia typically comprise two ‘Socratian style’ discussion sessions led by a panel of three moderators, and a key-note presentation in between the two sessions. The key-note speaker at this event was Pierre Karrer who presented on ‘The Need for Speed’ - focusing on procedural efficiency and duties placed on the arbitral tribunal in this regard.

The symposium coincided with the Willem C Vis (East) Moot, a week-long international arbitration mooting competition attended by 50-plus universities from around the globe. Many of the international arbitration practitioners who flew to Hong Kong to participate as Vis (East) Moot judges attended the symposium.

Some of the topics discussed included confidentiality, anti-suit injunctions, witness “interviews” under the IBA Rules, damages for breach of an arbitration agreement, the potential for investment treaty claims against China and the need for harmonization in international arbitration towards costs. Attendees benefited from hearing the different viewpoints expressed as well as hearing from practitioners as to relevant laws and practices in various jurisdictions.

Brenda Horrigan, Partner of Salans, Paris, said “The format of the

symposium allowed an open and frank discussion on a wide variety of arbitration topics of importance in the region, which proved quite valuable.”

Mary Thomson, the chair of the ICC arbitration committee of the Hong Kong national committee said: “Participants got a lot out of the symposium, it was very interactive and you obtain great insights into the experience of practitioners from many parts of the world. I hope to see more arbitration symposia held in Hong Kong.”

The overall event was convened by Elisabeth Opie, AFIA Co-Chair. Panelists were: Bjorn Gehle (AFIA Co-Chair & Clayton Utz, Sydney), James Kwan (Allen & Overy, Dubai), Romesh Weeramantry (City University, Hong Kong), Christopher Kee (University of Basel), Henny Mardiani (SIAC) and Simon Davis (Barrister, Western Australia).

An AFIA Symposium was held in Melbourne on 21 April 2008, which included a presentation by Simon Greenberg (Deputy Secretary General, ICC) in relation to the activities of the ICC in the Asia-Pacific region.

The 15th AFIA Singapore symposium will take place on 1 September and will coincide with the ICC-SIAC conference.

For details - www.afia.net.au

arbitration.Module 4 – Writing an Award – this

covers all the practical issues and skills involved in writing a final, reasoned and enforceable Award.

Chartered Arbitrator

This is the Institute’s highest level of arbitration qualification available to

arbitrators who can demonstrate a substantial record of both experience and continuing professional development.

Accelerated Course for Lawyers

The Branch will make available to legal practitioners who already have

significant legal knowledge and/or dispute

resolution experience an Accelerated Route to Membership. The course is for individuals who have a law degree and some limited knowledge or experience of non-court dispute resolution but which has not been formally assessed.

It is highly probably that the Australian Branch will conduct an Accelerated Course in October 2008. It will involve (inter alia) a one and a half day assessment workshop that includes group work and individual written exercises. Assessment consists of written coursework assignment and a 3-hour written examination.

It is also possible, if a sufficient number of Members (MCIArb) who are qualified practising lawyers indicate at an early date their interest in presenting themselves, that

the Branch will conduct an Accelerated Course to Fellowship in October 2008.

The Course is for individuals who can demonstrate they already have substantial knowledge of non-court dispute resolution (at least five years working as an arbitrator) and who wish to become a Fellow (FCIArb).

It will involve (inter alia) attending a 2 day workshop at which candidates are assessed as to their legal knowledge and practical know-how and skill in conducting an arbitration.

Successful candidates will then need to complete Module 4 Award Writing Examination.

Should you have any questions arising out of this article, please address them to the Executive Officer, Emma Matthews via

New CIarb Professional Pathways Programme

Pierre Karrer gave the keynote lecture at the 13th AFIA Symposium held in Hong Kong.



CIArbNews

&OpinionComment


Luke

Nottage

This year is the 50th anniversary of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC), as

we were reminded by Dean Gillian Triggs’ presentation in Sydney and other materials in the last edition of this Australian ADR Reporter.

A decade ago, on its 40th anniversary, other retrospectives also celebrated the remarkable success of this multilateral treaty, as well as whether and how to resolve some uncertainties or gaps that remained – intentionally or unintentionally – in the NYC regime.

The then Secretary-General of UNCITRAL and later President of the London Court of International Arbitration, Professor Dr Gerold Hermann, even posed a seemingly rhetorical question: “does the world need additional uniform legislation on arbitration?”. 1

The Legacy of the United Nations

One intentional limitation is that the United Nations’ NYC directly addresses

only courts, rather than arbitral tribunals themselves. It also only covers the initial phase of arbitral proceedings (requiring courts to defer to the tribunal, if the parties have properly agreed to arbitration: NYC Art II), and the end phase (court enforcement – but not execution – of a resultant award

from abroad). In 1985, the UN helped address those

gaps by promoting the Model Law on International Commercial Arbitration (Model Law). That provides mostly default (derogable) provisions for arbitrators, as well as for courts at the seat of the arbitration to set aside awards (albeit on identical grounds to NYC Art V: see Model Law Art 34).

The Model Law has successfully prompted

improvements in legislation g o v e r n i n g i n t e r n a t i o n a l commercial arbitration (ICA) in around 50 countries, including Australia from 1989 and New Zealand from 1996. This demonstrates a more widely observed phenomenon in harmonising (commercial) law.

As coverage is expanded, countries often cannot agree on further hard law (such as treaties). However, they or commercial parties themselves remain open to less direct harmonisation initiatives (“soft law” such as Model Laws).2 Another example of this phenomenon is the UNIDROIT Principles of International Commercial Contracts (1st ed 1994, 2nd ed 2004).3

Parties have to opt-in to this regime covering more types of contractual

relationships and topics than the 1980 UN Convention on Contracts for the International Sale of Goods (CISG, adopted by Australia in 1989), which applies to most cross-border sales of goods worldwide nowadays unless parties opt-out.

Another broad lesson for ongoing harmonisation of ICA emerges from a closer analysis of CISG. Its success in harmonising international – and sometimes

even domestic – sales law worldwide both directly, and indirectly (by providing the core for the UNIDROIT Principles), stems from deliberately using words not normally found in national contract law regimes. For

example, CISG allows an innocent party to “avoid” a contract following a serious breach. In Anglo-Australian law we refer instead to “termination” (ab futuro) or “rescission” (ab initio). New Zealand’s Contractual Remedies Act 1979 tried substituting the term “cancellation”.

The drafters of CISG invented a new term to signal to courts and legal advisors that they should try to give an autonomous and truly international interpretation to this treaty regime. CISG Art 7 adds express requirements to interpret and gap-fill the regime along these lines.

Although national courts (especially from the common law tradition) and even arbitrators sometimes fail to respect this

Reforming International Commercial Arbitration (ICA) Law: The United Nations, New Zealand – Why Not Australia?


(Continued from page 15)approach, most have resisted a “homeward trend” – applying CISG provisions consciously or unconsciously in the light of their national contract law concepts and rules.4

A similarly reassuring pattern is evident from the interpretations of the NYC, and more recently the Model Law, which have emerged especially over the last few decades in court judgments, arbitral awards, and expert commentaries.5

Nonetheless, those sources do also reveal instances where national courts, in particular, have taken the wrong turn and not followed understandings widely shared worldwide. A solution is often to educate those judges better. We must also keep educating the lawyers on both sides, who have the primary responsibility to present the shared understandings – at least in the common law adversarial tradition.6

Those who fail to meet clear “global standards” can be informally censured by their peers, as well as by arbitral institutions on the lookout for future arbitrators. If one side’s lawyers do not advance such global standards favouring their clients, they could even be subjected to professional negligence claims.

Sometimes, however, lawyers and judges are quite constrained by the way the international instruments have been incorporated in their national legislation.7

Inappropriate incorporation should be less problematic with a treaty like the NYC, but in practice it will be rare for another member country of such a multilateral convention to make a claim under public international law.

There is even more scope for divergences to emerge even among countries that have implemented the Model Law in national legislation, because states are free anyway whether to adopt it in part or whole.

Finally, there are areas in the NYC and Model Law regimes where there remain true gaps or areas where there is no readily discernable “global standard” for interpretation.

In such situations, we really need to consider amendments to these regimes at the multilateral level, or their implementing legislation in individual countries. Even a few such amendments may also have broader

effects. The effort may help precisely in the

continuing education of judges, lawyers and arbitrators. It should also signal that the country is serious about ICA as a whole. Empirical and other evidence shows that the legal framework is not enough to attracting ICA cases to a country; the factors “neutrality” and “convenience” are apparently almost as important.8

But a better legal framework does help, and it also educates our jurists to perform better when they travel abroad (permanently or for individual cases) to engage in ICA.9

New Zealand’s 2007 Amendments to its 1996 Arbitration Act

It is therefore encouraging that 2008 marks another milestone. It will

be the first full year of operation for New Zealand’s revised Arbitration Act, after the Arbitration Amendment Act received assent on 17 October 2007.10

Sir Ian Barker has succinctly outlined the major revisions in this issue of the Reporter, so I provide some further context primarily for readers in Australia interested in law reform implications here.

New Zealand’s Arbitration Act was originally enacted in 1996, based on the Model Law rather than following English arbitration law (including the English Arbitration Act of 1996). Indeed, the Act not only gives effect to the Model Law (basically reproduced in Schedule 1) for international arbitrations with the seat in that country, unless parties opt-out.

Section 6(2) also expressly allows for parties to domestic arbitrations to opt-in to the Model Law, abandoning the default provisions in Schedule 2 (such as clause 5 allowing for certain appeals to courts for arbitrators’ substantive errors of law, a legacy of the English arbitration law tradition).

New Zealand’s revised Act first clarifies the grounds for appeal under clause 5, which had given headaches to courts in that country (as do still the grounds for such appeals in the current English Act).

It makes clear that a question of law does not extend to questions about whether (i) the award or any part of it was supported by any evidence or any sufficient or substantial evidence, or (ii) the arbitral tribunal drew the correct factual inferences from the relevant primary facts.

This could help lessen the obligation on Australian arbitrators in most commercial disputes under the Commercial Arbitration

Acts to provide reasons “of a judicial s tandard”, as sugges ted qui te

controversially in Oil Basins Ltd v BHP Billiton Ltd & Ors [2007] VSCA 25 (especially at paras 54-9). However, the safest course is to agree to exclude any court review for error of law, for example by opting into the ML regime designed for international arbitrations.

Secondly, New Zealand’s revised Act (s 11) imposes stricter

writing requirements for consumer arbitration agreements. To protect

consumers, the original Act had already included some requirements.

One reason was that s 6(2) so openly allowed for parties to domestic arbitrations, such as consumers, to end up in the more liberal Model Law regime (which, for example, does not allow review of arbitrators’ substantive error of law: cf Model Law Arts 34 and 36).

Another that one major alteration to the Model Law in Schedule 1 of the New Zealand Act (clause 7(1)) was to dispense altogether with the Model Law’s lesser writing requirements designed for international arbitration agreements (cf Model Law Art 7(1)).

Because the Act, from the outset in 1996, thus allowed for purely oral arbitration agreements (except in the case of consumers,

Reforming International Commercial Arbitration Law


Comment&Opinion

ADR Reporter June 2008 17

under s 11), the revised Act did not need to further amend the Model Law provisions as adapted in Schedule 1.

In fact, UNCITRAL promulgated a revised Model Law in 2006 that encouraged Model Law countries either to dispense completely with the writing requirement (as in New Zealand), or to liberalise the 1985 Model Law writing requirements (as Model Law countries like Singapore did in their 1995 Act, but taken even further in the English Act of 1996).

However, thirdly, the rev i sed New Zea land Ac t d id decide to update Schedule 1 to adopt t he o the r ma jo r change contained in UNCITRAL’s Revised Model Law of 2006.11 Art ic le 17 of the latter clarifies of the scope and triggers for arbitrators’ “interim measures” and related “preliminary orders”, and their enforceability.

Such measures basical ly become enforceable as an award (reflected in Schedule 1 cls 17L-M). A party can apply also for preliminary orders, even ex parte, but if granted the tribunal must give the other party notice so it can present its counter-arguments. Such orders also otherwise expire after 20 days, and are anyway “binding on the parties” but not “enforceable by a court” (cls 17C-G).

These fine distinctions are another compromise after considerable wrangling at UNCITRAL meetings and other fora. One major issue was precisely whether natural justice (mandated under the Model Law) and contemporary practice could allow any such ex parte communications between parties and arbitrators.12

Article 28 of the ACICA Arbitration Rules of 2005, which I helped draft, tracked the Working Group’s deliberations and phrasing related to what became the Revised Model Law Art 17, except of course regarding enforceability – a matter for courts and the legislature.13

Further, our Subcommittee decided not to provide at all for ex parte applications, but this issue is clearly still open to debate. For now, it is enough to compliment the New Zealand government for following one attempted international compromise on this topic, of great contemporary significance

for ICA. In fact, when its Law Commission was

writing reports on possible amendments to the Act, I encouraged them to go beyond issues identified in some local court proceedings, and to take seriously the work of UNCITRAL particularly regarding interim measures.14

Fourthly, New Zealand’s revised Act largely follows the wording and rationales proposed by the Law Commission regarding

another vexed issue: privacy and conf ident ia l i ty regarding arbitral proceedings.

The original Act declined to follow the approach of E s so Aus t r a l i a Resources Ltd v Plowman (1995) 128 ALR 391 (HCA ) , wh i ch found no implied-

in-law obligation of confidentiality (only, of privacy). Instead, section 14 provided for an implied statutory obligation of confidentiality (and privacy).

This decision acknowledged a widespread consensus, confirmed by recent empirical studies, that confidentiality remains a major advantage for users of ICA as opposed to cross-border litigation.

The 1985 (and Revised) Model Law omit confidentiality obligations, as do the 1976 UNCITRAL Arbitration Rules they partly drew on. In turn, those Rules emerged out of a formative era when many international arbitrations involved investment disputes and states, where stronger public interests arguable justify greater transparency and third parties involvement.15

Article 18 of the ACICA Rules, based largely still on the UNCITRAL Rules, adds confidentiality obligations. Although the drafting subcommittee considered the New Zealand Law Commission’s original proposals regarding both the scope and limits of confidentiality, ACICA’s Art 18 is more broadly worded, in line for example with the Rules of the Singapore International Arbitration Centre.

New Zealand’s revised Act retains both confidentiality and privacy obligations (unless the parties agree otherwise – “in writing”: s 14). But it adds detailed provisions about possible limits, addressed to tribunals, parties, and also the courts. For example, setting-aside or enforcement

proceedings must be conducted in public, except in defined situations (s14F). Such issues have caused headaches not only for courts in New Zealand, but also for their counterparts – and lawyers and legislatures – in other countries.16

Confidentiality

Confidentiality is one of many topics identified by Hermann a decade ago as

a gap in both Model Law and NYC coverage. However, the UNCITRAL Working Group formed in 2000 under his leadership deferred deliberations on this topic.17

Instead, it concentrated first on interim measures, writing requirements, and what became the (most disappointing) 2002 Model Law on International Commercial Conciliation.18

The Group has now embarked on whole-scale revisions of the UNCITRAL Arbitration Rules, which are likely to take several more years,19 However, as “opt-in” Rules they have broad coverage and it may be relatively easier to reach consensus on new provisions compared even to the Model Law, and especially compared to a formal Protocol to the NYC.

Longer term, the revised Rules may become the basis for further revisions to those other instruments.

Meanwhile, Australia should take seriously the work done so far by UNCITRAL, followed already by New Zealand.

It should already use all these opportunities to systematically overhaul its legislative framework for ICA, dating back to 1974. In updating its law, the preference should be firstly for more globally acceptable solutions, not hidebound by the interpretations taken by some of our judges or the legacy of the English law tradition.

Secondly, we should aim for solutions that restore some of the more efficient and less formalised procedures, and related substantive principles of ICA, which helped grow the field in its earlier years, but which are also increasingly called for by the new generation of leading practitioners world-wide.20

Australia’s Turn to Step Up to the Crease

New Zealand has recently taken some positive steps precisely in those

directions, although they could have gone further. It is also worth mentioning that this year marked the passing of Sir Edmund Hillary. “Sir Ed” was celebrated as the country’s greatest 20th century hero, for first conquering Mount Everest (in step with his Sherpa friend, who also later joined him in helping countless Nepalese communities).

Reforming International Commercial Arbitration Law



Comment&Opinion


RUSSIA

ASIA

EUROPE

MIDDLE EAST

AFRICA

USA

SOUTH

AMERICA

AUSTRALIA

CANADA

ANTARCTICA

GREENLAND

New Zealand’s former Chief Historian explained that New Zealand’s veneration for Ed stemmed partly from the “ANZAC” tradition – former colonies showing they were “better than the British”.21

A similar impulse may explain not only New Zealand’s “Contract Statutes” enacted from the 1970s, more far-reaching even than their Australian counterparts, but also its bold enactment and now re-enactment of arbitration legislation.

But the ANZAC tradition is shared with Australia, of course, and Don Bradman is Sir Ed’s equivalent here. “The Don” was the “boy from Bowral”, who (mostly) beat the British at their own game – of cricket.23

Surely it is time too for Australia, then, to revisit its own International Arbitration Act and related legislation. Every year, my LLM course in ICA gets bigger. This year we have 45 students from 14 countries, despite Sydney Law School recently adding two new courses in international dispute resolution.

We are grateful for the CIArb’s (expensive) book prize for the best Research Essay in the ICA course. Several members also share their knowledge and enthusiasm with this increasingly diverse group of keen students – many with considerable practical experience already in their home countries.

Every year, though, our class’s list grows about things that should be clarified, gap-filled or simply just corrected in Australia’s legislative framework for ICA.

In themselves, such reforms will not lead to a flood of ICA cases rolling in to our shores, but they may help a little in that respect, and certainly a lot more in others.

I will not bore you now with my list, as this essay has grown long enough. But you can already read between the lines (or in the footnotes) for some, and I promise more soon.

Meanwhile, I invite you already to begin compiling your own, so we can compare notes in this Reporter or other fora.

The Author

Luke Nottage is an Associate Professor at the University of Sydney Law School.

He is also a Director of Japanese Law Links Pty Ltd and a Special Associate of the Australian Centre for International Commercial Arbitration (ACICA).

ENDNOTES:* This essay is inspired by recent discussions with my Dean, Professor Gillian Triggs, and Jonathan Kay Hoyle (about the New York Convention and the UK); with CIArb Chairman, Malcolm Holmes QC (about New Zealand); and with other members of the Arbitrator Forum (under Chatham House rules). I thank them all, while absolving them from any responsibility for my somewhat forthright views. In the spirit of disclosure that should characterise any contemporary arbitration specialist: I am a national of the UK, New Zealand and Australia.1. Hermann G, Does the World Need Additional Uniform Legislation on Arbitration? (1999) 15 Arbitration International 211.2. Nottage L, Legal Harmonization in Clark D (ed.) International Encyclopedia of Law and the Social Sciences (Sage, New York, 2007) 686.3. Find out more from the CLE Seminar with Prof MJ Bonell, supported by the Federal Court of Australia, at Sydney Law School on 25 June 2008: via www.law.usyd.edu.au/scil.

4. DiMatteo LA, International Sales Law: An Analysis of CISG Jurisprudence (Cambridge University Press, Cambridge, 2005).5. See especially the Yearbooks – Commercial Arbitration, and biennial ICCA Congress volumes, edited by Prof Albert van den Berg, both also now on www.kluwerarbitration.com. See eg the comprehensive update on NYC Art V case law world-wide in van den Berg A, Why Are Some Awards Not Enforceable? in van den Berg, A (ed.) New Horizons for International Commercial Arbitration and Beyond (The Hague: Kluwer, 2005) 291. Courts still refused enforcement in only about 10% of cases, although delays may be increasing, and the NYC’s text or structure do not seem to be problematic. Major reasons were mistakes in drafting arbitration agreements, tribunal or arbitral institution misconduct, and

(especially lower-court) errors in interpreting the NYC.6. The more pro-active role of judges in the civil law tradition, still, is perhaps part of the reason why there seem to be fewer aberrant judgments for example from courts in Switzerland, Sweden or Germany. Another factor is that such countries also attract more international arbitrations, so their courts and lawyers simply get more practice; but one of the reasons for their attractiveness is probably their sensible approach to civil justice.7. Eg Resort Condominiums v Bolwell [1995] 1 Qd R 406, highlighting omission of the word “only” in Australia’s International Arbitration Act 1974 s 8, in order to conclude that this attempted incorporation of NYC Art V made non-exhaustive its list of grounds for refusing enforcement. Compare van den Berg, op cit, pp 291-2.8. See generally Mistelis L, International Abitration - Corporate Attitudes and Practices - 12 Perceptions Tested: Myths, Data and Analysis - Research Report (2004) 15 American Review of International Arbitration 525 and www.pwc.com/arbitrationstudy. Over the last decade, London has belatedly started to attract more arbitrations, compared to traditional leaders like Paris and Geneva.

Yet the legacy of tight judicial control over arbitration has persisted in

key areas despite the UK’s Arbitration Act of 1996,

which drew in part on Model Law principles: Paulsson J, Arbitration Friendliness: Promises of Principle and Realities of Practice (2007) 23 (3) Arbitration International

477. This suggests that convenience (eg for Eastern

European economies), and perhaps broader economic or even

psychological factors (like the growth of financial services markets following London’s “Big Bang” deregulation), remain very important. Especially for countries like Australia lacking such advantages, however, the legal framework remains an important consideration that we can work on improving.9. Cf eg Drahozal C, Regulatory Competition and the Location of International Arbitration Proceedings (2004) 24 International Review of Law and Economics 371. He does not include the latter indirect economic benefits to arbitration experts and parties following enactment of better legislation in their home countries.10. Available via www.legislation.gov.nz. A concluding note on “Legislative history” shows that the Amendment Bill was introduced on 8 September 2006.11. Setting that case in comparative

Reforming International Commercial Arbitration Law(Continued from page 17)


Comment&Opinion


and historical context, see Gillies P and Selvadurai N, Reasoned Awards: How Extensive Must the Reasoning Be? (2008) 74 Arbitration 125 (also at http://ssrn.com/abstract=1120044). For the debate in New Zealand about the scope of “error of law”, see Kennedy-Grant T, The New Zealand Experience of the UNCITRAL Model Law: A Review of the Position as at 31 December 2007 (2008) 4 (1) Asian International Arbitration Journal 1 especially at pp 46-7. I thank Professor Peter Gillies for information and discussions on this point.countries.12. This must make New Zealand one of the first countries to enact major parts of the Revised Model Law. Unfortunately, UNCITRAL’s does not differentiate between states adopting the original versus revised parts of the Model Law: www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.htModel Law. A former Master of the High Court of New Zealand concludes that the country’s adoption of the revised regime for interim measures is “revolutionary”: Kennedy-Grant T, Interim Measures in Arbitration [March 2008] New Zealand Law Journal 83 at p 88. Revolutions can be messy, however. He goes on to identify several uncertainties created in the amended Act regarding the powers also granted to courts.13. Compare eg Houtte H, Ten Reasons against a Proposal for Ex Parte Interim Measures of Protection in Arbitration (2004) 20 (1) Arbitration International 85 with Hober K, The Trailblazers v. The Conservative Crusaders, or Why Arbitrators Should Have the Power to Order Ex Parte Interim Relief in van den Berg (ed.) New Horizons for International Commercial Arbitration and Beyond (Kluwer, The Hague, 2005) 272. Interim measures were also extensively discussed in the prior and subsequent ICCA Congress volumes. Ex parte communications also relate to the issue of whether and how arbitrators may more actively facilitate settlement (Arb-Med), which I discussed in the December (2007) issue of The Australian ADR Reporter.14. Under our IAA, if parties so agree in writing (s 22), arbitrators’ orders are treated as awards (s 23) enforceable under Chapter VIII of the Model Law, which is given force of law (s 16). This would make them enforceable even if rendered by foreign arbitrators, because s 20 makes inapplicable Chapter VIII (on enforcement) only if s 8 also applies (attempting to restate NYC Art V, in Part II of the IAA). Interim measures are usually unenforceable under the NYC: van

den Berg, op cit, p 317.15. See Nottage L, Reviewing the Arbitration Act 1996 (2003) February New Zealand Law Journal 34.. The Law Commission’s work in this field is available via www.lawcom.gov.nz/Publications.aspx.16. Miles K and Nottage L, Back to the Future for Investor-State Arbitrations: Revising Rules for Public Interests (2008) Sydney Law School Research Paper forthcoming via www.ssrn.com.17. At one extreme, for example, France basically extends confidentiality to such proceedings. See further eg Kouris S, Confidentiality: Is International Arbitration. Losing One of Its Major Benefits? (2005) 22 Journal of International Arbitration 127. For contemporary empirical evidence of users’ preference for confidentiality in ICA, see Mistelis, op cit.18. Sorieul R, Update on Recent Developments and Future Work by UNCITRAL in the Field of International Commercial Arbitration (2000) 17 (3) Journal of International Arbitration 163.19. Compare the defence of one of its principal architects, Abascal JM, Some Remarks on the UNCITRAL Model Law on International Commercial Arbitration in A van den Berg (ed.) New Horizons for International Commercial Arbitration and Beyond (Kluwer, The Hague, 2005) 415 with critiques by van Ginkel E, The UNCITRAL Model Law on International Commercial Conciliation (2004) 21 (4) Journal of International Arbitration 1 and Sanders P, UNCITRAL’s Model Law on International Commercial Conciliation (2007) 23 (1) Arbitration International 105. This Model Law has been adopted by Canada (2005), Croatia (2003), Hungary (2002) and Nicaragua (2005). UNCITRAL also remarks that some of its principles have influenced the Uniform Mediation Act (2001) adopted by some US states: www.uncitral.org/uncitral/en/uncitral_texts/arbitration/2002Model_conciliation_status.htModel Law.20. Deliberations can be followed via www.uncitral.org/uncitral/en/commission/working_groups/2Arbitration.htModel Law.21. Nottage L, The Procedural Lex Mercatoria: The Past, Present and Future of International Commercial Arbitration (2006) 06/51 Sydney Law School Research Paper http://ssrn.com/abstract=838028. See also eg the report on David Rivkin’s “town elder” model for contemporary ICA proceedings, in this issue of the Reporter.22. Phillips J, The Essential Kiwi, Vol 212 No 3533 The Listener (26 January – 1 February 2008) 18.23. Hutchins B, Don Bradman: Challenging the Myth (Cambridge University Press,

Cambridge, 2002).

Reforming International Commercial Arbitration Law(continued from page 18)

techniques that they feel are necessary to decide the case – and only those procedures – or even requiring them if necessary.

There is an age-old debate about who is in charge of the arbitration: the parties or the arbitrators. Recently, the view has become more common that it is the arbitrators.

When the major institutional rules were re-written in the late 1990s, all of them adopted provisions that gave the arbitrators the power to determine what evidence would be admitted and otherwise to exercise more control over the proceedings. (The AAA’s Rule 16, is one such example.) The IBA Rules of Evidence also clearly contemplate a more proactive arbitrator.

One way of achieving agreement on more limited procedures is to include the clients – and not just the counsel – in the process, because the clients may have more incentive to agree to a shorter, less expensive process.

Arbitrators must also do more to control the schedules: their own and the parties’. Parties should not find themselves in a position where three arbitrators cannot find a single free day in 6 months for a hearing on a jurisdictional motion that has been fully briefed or find a mutually free week for a one-week hearing in the fall of 2008, 18 months from now! And they should not easily accept a party’s desire to stretch out a process by asking for a prolonged schedule.

Arbitrators want to be fair, but they must be fair to both sides. Finally, they also have to exercise more self-discipline to issue awards more promptly after the hearings are concluded. He did not exclude himself from that criticism!

Finally, he added that institutions must also play an active role in achieving these goals. They can train arbitrators to understand better how the rules give them control but at the same time also train more on effective means to control the proceedings while achieving consensus with the parties.

In addition, they can more effectively share knowledge about new techniques developed by arbitrators in their cases to achieve efficient results. And they need to improve their own internal procedures to act more quickly when they are required to do so, such as in appointing arbitrators.

This is an edited version of David Rivkin’s full paper which can be found at www.arbitrators.org.au.

David Rivkin(Continued from page 4)

Comment&Opinion



The Supreme Court of New South Wales and the Federal Court in Arkansas were recently asked to apply the New York Convention

on arbitration in the context of long standing statutory provisions prohibitive of compulsory arbitration.

Their respective decisions reveal significant differences in the extent of homage paid to the New York Convention.

Both cases arose out of reinsurance agreements which typically involve overseas parties. Arbitration clauses are ubiquitous in such agreements.

The New York Convention supports the enforcement of arbitration agreements and directs courts to honour these agreements between international merchants. In each case, the reinsureds sought to avoid the New York Convention by relying on long standing government statutes which restrict the right to enforce an arbitration clause.

In HIH Casualty & General Insurance Limited (in liquidation) v Wallace [2006]1 the reinsured dusted off the long forgotten Insurance Act 1902 (NSW). Section 19 of this Act precludes insurers from enforcing compulsory arbitration clauses in contracts of insurance.

The Insurance Act 1902 has been a statutory relic since the Commonwealth

Government assumed legislative control of insurance contracts in its Insurance Contracts Act 1984. Curiously the 1902 Act was never repealed but left on the statute books like an un-marked reef. It had residual application to contracts not covered by the Insurance Contracts Act such as marine insurance. The 1902 Act was held to apply to reinsurance agreements on the basis that they are contracts of insurance as referred to in the Act. Of course section 19 was originally intended to protect consumers.

Einstein J in the New South Wales Supreme Court in HIH v Wallace held that despite the New York Convention, an arbitration clause in a reinsurance contract was not binding on the reinsured due to the 1902 Insurance Act.

By contrast in the recent decision of a United States Federal Court in Murphy Oil USA Inc. v SR International Business Insurance Co Ltd2 (“Murphy Oil USA”) an obtrusive Federal law was found to not override an international arbitration agreement.

Murphy Oil USA Inc v SR International

The case of Murphy Oil USA was heard by the Federal Court in Arkansas in

September 2007.Murphy Oil USA purchased insurance

from SR International (SRI) one of its excess insurance carriers. The policies were negotiated and prepared in Switzerland and delivered to Murphy Oil USA’s broker in London. The policies contained arbitration clauses that required arbitration in London and chose New York law to govern any disputes.

After Hurricane Katrina, Murphy Oil USA experienced an oil spill at its Louisiana refinery. A class action lawsuit was filed against Murphy Oil USA by residents who claimed damages from the oil spill and resulted in Murphy Oil USA agreeing to pay $330 million.

Murphy Oil USA had a dispute with its insurers. SRI wished to use the arbitration clause in the standard form policies of the insurers to arbitrate any coverage disputes in London. Murphy Oil USA commenced suit

by filing a motion for preliminary injunction to restrain SRI from arbitrating in England.

Murphy Oil USA argued that if SRI were to obtain an anti-suit injunction from a foreign tribunal, it would be irreparably harmed because it would be without a forum to assert protection of Arkansas law which made the arbitration clause unenforceable.

The McCarran-Ferguson Act

The McCarran-Ferguson Act3 is a United States federal law passed by Congress

in 1945 which empowered the states to regulate the business of insurance without interference from federal government.

The Act stipulates that the “business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business” (s1012(a)) and that no federal act “shall be construed to invalidate, impair or supersede” (s1012(b)) any state law which regulates the business of insurance unless the federal law explicitly relates to the business of insurance.

Murphy Oil USA argued that New York law violated Arkansas public policy which prohibits the enforcement of arbitration clauses in insurance policies.

SRI contended that even if New York law did not apply, the New York Convention applies which generally overrides any Arkansas law that may be applicable.

Murphy Oil USA relied on Stephens v American International Company4 which held that the McCarran-Ferguson Act allowed for the business of insurance to be regulated by the state without the interference of federal government. In addition, Stephens held that the McCarran-Ferguson Act displaced the Convention as it “applied to preserve state-law defenses to arbitration clauses contained in insurance contracts” (p 45).

However, the Court in Murphy Oil USA did not find Stephens persuasive and said its reasoning was “doubtful”. The Court was

Arcane or Arkansas: International Arbitration and Prohibitive State LawsTim Griffiths (pictured) and Thao Tran discuss the different approaches to the New York Convention by the Supreme Court of New South Wales and the US Federal Court in Arkansas.

Comment&Opinion


concerned as to whether the McCarran-Ferguson Act’s preservation of state law over federal laws in relation to insurance contracts also applied to international commerce disputes. In Stephens v National Distillers and Chemical Corporation5, the court had declined to address this question however it noted: “there is some indication in the legislative history of the McCarran-Ferguson Act that it was intended to apply only to [Interstate] Commerce Clause legislation”.

The New York Convention – the “highest law of the land”

The Court preferred the approach taken by the Fifth and Eleventh Circuits

and found that the Convention “must be enforced according to its terms over all prior inconsistent rules of law” (Industry Risk Insurers v M.A.N. Gutehoffnungshutte GmbH6; Sedco, Inc v Petroleos Mexicanos Mexican Nat’l Oil Co. (Permex)7. In Sedco, the court argued that Congress had enacted legislation “to make the Convention the highest law of the land” through the Federal Arbitration Act and “overcome the American courts’ common law hostility to the arbitration of disputes”.

It stated the goal of the convention, and the principal purpose underlying American adoption and implementation, “was to encourage the recognition and enforcement of commercial arbitration agreements and international contracts and to unify the standard by which the agreements to arbitrate are observed and arbitral awards are enforced in the signatory countries”.

These views were supported by the Eighth Circuit’s strong language which recognised that “international comity is a fundamental principle deserving of substantial deference” as Goss Int’l Corp. v Man Roland Druckmaschinen Aktiengesellschaft8 had established.

Goss also explained that the existence of world economic interdependence is the reason why comity is important as international commerce depends “to a large extent on the ability of merchants to predict the likely consequences of their conduct in overseas markets” (p 360).

Furthermore, the Convention’s intention is to “encourage the recognition and enforcement in international contracts and to unify the standards by which agreements to arbitrate are observed and arbitral awards are enforced in the signatory countries,” citing Scherk v Alberto-Culver Co9. As

Industry Risk Insurers explained, it is intended “to provide businesses with a widely used system through which to obtain domestic enforcement of international commercial arbitration awards resolving contract and other transactional disputes, subject only to the minimal standards of domestic judicial review for basic fairness and consistency with national public policy” (p 1441).

Ultimately, the court in Murphy Oil USA held that the refusal of a court to enforce an international arbitration agreement “frustrates the purposes of the New York Convention”.

Did the New York Convention Apply?

The Court had to determine whether the Convention superseded the McCarran-

Ferguson Act in the present case. The elements which it considered were:

(a) was there a written arbitration agreement between the parties?;

(b) was the arbitration agreement conducted in a country that is a signatory to the New York Convention?;

(c ) was the relationship b e t w e e n t h e p a r t i e s o f a

c o m m e r c i a l nature?; and

(d) was the relationship b e t w e e n t h e p a r t i e s “ n o t e n t i r e l y domestic?”.

The Court found that the present case satisfied the requirements because firstly, there was a written arbitration agreement between Murphy Oil USA and SRI that specified for arbitration in England, a signatory country to the Convention. Secondly, the relationship was not viewed as entirely domestic due to the insurance policies which arose out of and involved a commercial relationship.

The Court reasoned that because SRI and the other defendants were companies located in foreign countries and the policies were negotiated and prepared in Switzerland before being delivered to Murphy Oil USA’s insurance broker in London; the agreements were between international merchants and the Convention applied.

New York Convention Applied over State Laws

The Court found the Convention’s preservation of enforcing arbitration

agreements superseded the Arkansas state statute which prohibited arbitration agreements in insurance policies because the underlying dispute arose out of international commerce.

The private interests of Murphy Oil USA were outweighed by the interests of the United States and the principles of international comity.

The Court relied on multiple principles to establish its judgment. Firstly, at least two circuits had held that the New York Convention prevailed over previously enacted inconsistent rules of law.

Secondly, the Second Circuit held that the legislative history of the McCarran-Ferguson Act indicated that it was limited to domestic and not foreign commerce. Thirdly, the Eighth Circuit stated that international comity is a fundamental principle which deserved respect.

Finally, the US Supreme Court has on at least three occasions treated international arbitration agreements as distinct from domestic agreements.

HIH v Wallace

In 2006 HIH Casualty & General Insurance Limited (“HIH”) instituted proceedings in the New South Wales Supreme Court against Lloyds Syndicate 683 over a series of excess

layer quota share reinsurance agreements for the underwriting

period 1993 to 1997 (HIH v R J Wallace [2006] NSWSC 1150).The underlying dispute was whether

HIH being insolvent was required to have paid its insureds before being entitled to indemnity under the terms

of its reinsurances with Syndicate 683. In the UK it had been held by the House of Lords in the Charter Re case that the failure to pay by an insolvent insurer was not a defence to a reinsurer. There are no Australian decisions on this issue.

The point however was ultimately not decided.

Syndicate 683 applied to the Court seeking orders that the proceedings be stayed and referred to arbitration pursuant to the International Arbitration Act 1974 (Commonwealth), or in the alternative, pursuant to the Commercial Arbitration Act 1984 (NSW).

Arcane or Arkansas(Continued from page 20)


Arkansas

Comment&Opinion


Insurance Act 1902 (NSW)

HIH sought to invoke the 1902 Insurance Act (NSW). Section 19 of the Insurance

Act says that despite the existence of a policy term providing for arbitration the insured is not bound to arbitrate. HIH relied on this section to say that the arbitration clause in the reinsurance treaties was not binding.

Section 9(1) of the Insurance Contracts Act 1984 (Commonwealth) (“ICA”) says that the ICA does not apply to contracts of reinsurance. There is no similar provision in the Insurance Act (NSW) 1902.

Syndicate 683 argued that section 19 of the Insurance Act did not encompass reinsurance and that a reinsurance treaty is not a contract of insurance.

His Honour Einstein J held that:(a) the Insurance Act 1902 (NSW) applies

to reinsurance contracts. His Honour found that a quota share reinsurance treaty is a contract of insurance and that section 19 makes no distinction in its terms between direct insurance and contracts of reinsurance.

(b) section 19 of the Insurance Act applies as the agreements were governed by the laws of New South Wales and, in any event, the section would operate whatever law governs the policies, as a mandatory law of the forum.

International Arbitration Act

The Internat ional Arbitrat ion Act implements the Convention to which

Australia is a signatory. Article 2 of the Convention says:

“The Court of the contracting state … shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.”

Section 7 of the International Arbitration Act requires the Court to stay the proceedings where proceedings were instituted by a party to an arbitration agreement unless the Court finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

Syndicate 683 said that section 19 of the Insurance Act was inconsistent with section 7 of the International Arbitration Act and therefore inoperative because of section 109 of The Constitution 1901 (Commonwealth). Section 109 of the Constitution provides that where there is inconsistency between a Commonwealth and State law, the former shall prevail over the latter to the extent of

any inconsistency.His Honour found that:(a) the intention of the International

Arbitration Act was not to confer an immunity from the general law requirements for there to be a binding arbitration agreement.

(b) the International Arbitration Act was intended to operate within the settings of other laws, including Commonwealth and State, both common law and statute, which determined the circumstances in which an agreement is null and void, inoperative or incapable of being performed.

(c) there was no inconsistency between section 19 of the Insurance Act and the International Arbitration Act so that in the circumstance of section 19 otherwise applying (extending as it does to contracts of reinsurance) it renders non-binding and inoperative the arbitration clause on which the syndicate relies.

A Slip is not an Agreement in Writing under the New York Convention!

As a further argument to section 19 of the Insurance Act,

HIH said the Court did not have before it an arbitration agreement to which the International Arbitration Act applied s ince there was no “agreement in writing”. Signed treaty wordings could not be located for 1993 and 1994 although there were stamped slips.

Article 11(2) of the New York Convention states:

“The term “agreement in writing” shall include an arbitral clause in a contract on an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.”

His Honour thought there will only be an arbitration agreement between the parties within the meaning of the International Arbitration Act if it is:

(a) contained in a document signed by both parties; or

(b) contained in an exchange of letters or telegrams in the sense that the assent to be bound by both parties is given in writing by such documents.

Oral or tacit acceptance by a party is not sufficient. Confirmation in writing by one of the parties (kept without contest by the party) was not enough to establish an agreement in writing. Nor could a course

of dealing establish an agreement in writing (within the meaning of the Act).

His Honour found that the established London insurance market procedure of an insurer scratching or signing a broker’s slip did not make the slips “agreements in writing” within the meaning of the New York Convention and the International Arbitration Act. This represents a surprising outcome for the London market and which for many years has been merrily arbitrating pursuant to the mere reference to an arbitration clause in a slip.

Arcane or Arkansas?

In a nutshell the NSW Supreme Court decision does not give the New York

Convention the paramountcy it was accorded in Arkansas. The Australian decision eschews the strong rhetoric in Murphy Oil USA. It quickly descends into legalism, the ultimate effect of which is an enlivening of the otherwise defunct 1902 Act.

Minds will differ on whether the Australian judgment is technically correct. But there

is l i t t le doubt that the outcome in the Australian case is at odds with industry expectations.

On the other hand the Australian decision does expose some inadequacy in the drafting of the New York Convention and, in particular, its antiquated language in article 11(2) with its reference to an “exchange of letters and telegrams”.

The HIH v Wallace decision certainly demonstrates a need for some legislative housekeeping. This is likely to be the case in most

jurisdictions. More significantly however the spirit and the rhetoric behind the New York Convention plainly still receive uneven treatment amongst member states.

Tim Griffiths is a partner and Thao Tran, a paralegal, in the Sydney office of HWL Ebsworth Lawyers.

Endnotes:1. NSWSC 11502. No. 07-CV-1071, 2007, WL 2752366 (W.D. Ark Sept. 20, 2007)3. 15 U.S.C. 204. 66F 3d 41 (2d Cir 1995)5. 69 F.3d 1226, 1231 n.5 (2d Cir.1995)6. 141 F.3d 1434, 1440 (11th Cir.1998)7. 767 F.2d 1140, 1145 (5th Cir. 1985)8. 491 F.3d 355, 360 (8th Cir.2007)9. 417 US 506 (1974)

Arcane or Arkansas(Continued from page 21)

Comment&Opinion


Jim

CreerGuidelines regarding “Documents Only Arbitrations”Introduction

This guideline is intended to provide advice for arbitrators where a ‘documents only’ procedure is adopted

by agreement between the parties or by the exercise of the arbitrator’s discretion under s.14 of the Commercial Arbitration Act 1984 (NSW).

The procedure cannot be adopted if the arbitration agreement prohibits it unless, of course, the parties mutually agree subsequently to amend the arbitration agreement to permit documents only arbitration.

When the procedure may be used

The procedure is most clearly appropriate where all the evidence relevant to the

dispute is contained in documents, including expert reports, and there is no need for evidence from witnesses to supplement the documents.

However it can also be appropriate where the dispute involves simple issues of fact and opinion, but particular care must be taken by the arbitrator to elicit in writing from the parties that there is no material dispute on the facts before undertaking the prerequisites for writing the award.

Recommended procedure:Initial directions

Clear directions should be issued at the outset so that both parties are absolutely

clear as to what is required of them. The arbitrator must direct the parties that anything sent to him should be copied at the same time to the other party.

Submissions and documents

Normally the parties should be required to make their initial submissions

sequentially. Where both parties are fully aware of the other party’s case simultaneous exchange may be appropriate. If the initial exchange of submissions is done simultaneously, it will be appropriate to

have a further exchange of submissions so that each party may answer points raised by the other not anticipated in its initial submission.

The parties should be advised to set out their whole case in their initial submissions and to attached copies of all the documents on which they rely, including documents in their possession and unfavourable to their case.

As it is essential that the parties’ submissions and evidence cover all relevant matters to be considered, the parties should be allowed as much time as they reasonably need for their submissions.

Where witness statements and/or expert’s reports are necessary they should be attached to the parties’ submissions or exchanged later as appropriate. It may save time and costs if the parties, instead of each appointing its own expert, agree to the appointment of a single expert either jointly by themselves or by the arbitrator.

In that case the expert’s report should be requested after the parties have exchanged their submissions and documentary evidence and any statements of witnesses of fact so that the expert may know exactly the problem he has to address.

Examination of submissions and evidence

The arbitrator must retain the right to call a preliminary conference with parties or

to raise questions with the parties in writing should he consider it appropriate.

If a preliminary conference is called it should be made clear that this will not be a hearing at which the parties can examine each other or their witnesses, but that the arbitrator himself will ask the questions. It may be more convenient and cost effective if the arbitrator directs that the preliminary conference is conducted by means of conference call facility especially if the parties’ representatives live interstate or overseas.

I n mo re comp lex a rb i t r a t i on s ,

notwithstanding they can more readily be determined on documents only, it is far more likely that it is in the best interests of the parties for the arbitrator at the first preliminary conference to make orders for the claimant to serve the respondent with notice of contentions including particulars in support of its contentions following by the respondent serving a notice of contentions in reply.

It is always advisable for the arbitrator to write formally to both parties after the exchange of notices of contentions to require each party to state categorically whether the notices disclose any material discrepancy in the facts and, in that event, direct the parties to take such steps as they deem fit to agree or disagree as to fact or facts in dispute.

If after giving the parties a reasonable period of time to go through this process and the parties remain in dispute, the arbitrator should make such orders as he or she deems necessary to convene a preliminary hearing to permit the parties to put their respective arguments on the fact or fact in dispute in order to permit the arbitrator to determine the issue by hearing oral evidence and at the conclusion of the evidence make a ruling on that evidence.

If the arbitrator comes to the view that his or her determination materially indicates that it no longer would be appropriate to continue to proceed with the arbitration on a documents only basis, the arbitrator should not hesitate to make further orders to have the arbitration dealt with by way of oral evidence.

Inspection

If an inspection of the subject matter of the dispute is necessary this should be

carried out in the presence of both parties. Exceptionally if one of the parties does not wish to attend or refuses to do so and the arbitrator needs someone to guide him as to what he should be looking at it may be

Comment&Opinion



carried out in the presence of the one party only.

It should be made absolutely clear that the visit is for inspection only and that no evidence or submissions will be entertained from either party.

The Award

The arbitrator should ensure that he has covered all the issues raised by

the parties in his award and has fully understood their respective submissions and evidence.

Where the dispute is relatively complex it may be advisable for the arbitrator to check with the parties in advance that they have correctly defined the issues, and/or the undisputed facts, so that the arbitrator should not give them any opportunity to question his findings on the disputed facts.

It is also advisable for the arbitrator to require the parties to agree on the key issue or issues which the parties require the arbitrator to determine. Needless to say the issues to be determined must be recorded in writing.


Jim Creer’s column

From The Australian, 7 March 2008 Partnership apointments

Congratulations to our members Georgia Quick (pictured top)

and Rashda Rana on having been appointed partners in the Sydney offices of Blake Dawson and Holding Redlich respectively.

Comment&Opinion


Leg

alU

pdat

e


Court ordered preliminary discovery vs arbitration agreements

The case

Two I r i s h compan ie s , T imoney Technology Limited and Timoney

Research Limited (the “applicants”) were party to a contract with ADI Limited (the “respondent”).

Toge ther the compan ies jo in t l y developed the ‘Bushmaster’ vehicle, for use by the Australian Defence forces. As part of that agreement the respondent cou ld sub- l i cence the app l icant ’ s intellectual property to third parties for use anywhere in the world. It was this aspect of the relationship that gave rise to the proceedings.

The app l i can t s “had conce rn s” arising out of a particular sub-licensing arrangement with Oshkosh Truck, an American corporation, though lacked “sufficient information to enable it to decide whether to commerce a proceeding against ADI”.

The applicants’ concerns were based on possible breaches of the licensing arrangements as well as a possible right to obtain rel ief in a claim that the applicant had engaged in false and misleading conduct in the arrangements with Oshkosh.

Under the agreement between the parties, the respondent was required to provide the applicants with a copy of any sub-licence agreement as well as the relevant technical and other information relating to any sub-licence. The respondent had withheld this information on the basis that they were prevented from fulfilling this obligation due to the confidential nature of that agreement with Oshkosh.

Furthermore, the Oshkosh Bushmaster vehicles were to be sold to the US Military, and as a result the respondent argued that they could not comply with the relevant parts of its contract with the applicants due to the operation of “US ITAR control which prohibits disclosure to

external parties”. Originally the information had been said to be withheld as a result of a change in the Australian Defence Regulations.

In order to obtain sufficient information to enable i t to decide whether to commence proceedings, the applicant sought discovery of certain documents under rule 32(05) of the Victorian Supreme Court (General Civil Procedure) Rules 2005. That rule provides, subject to certain conditions being met, for discovery from a prospective defendant.

The operation of the arbitration clause

Ordinarily, under section 7(2) of the International Arbitration Act 1974

(Cth), where there is an operative arbitration agreement in an agreement a court is required to stay any court proceedings “on the application of a party to the agreement.”

The contract between the applicants and the respondent contained precisely such a clause. The relevant clause (18(1)) provided that:

“Any dispute aris ing out of or in connection with this Agreement shall be settled in accordance with the rules of conciliation and arbitration of the International Chamber of Commerce by a single arbitrator sitting in London, England”

Relevantly the respondent argued that rule 32(05) could not apply in circumstances where such a clause existed, as for that rule to be applied relief must be able to be obtained “in the Court”; this could not be possible when the dispute ought to be referred to arbitration.

Hargrave’s reasoning

His Honour accepted that “it may be a breach of an arbitration agreement

Peter Hillerstrom highlights a recent Supreme Court of Victoria decision - Tomoney Technology Ltd & Anor v ADI Ltd [2007] VSC 402 which discusses some very limited circumstances where the existence of a valid arbitration agreement will not necessarily prevent a party from seeking preliminary court orders.


LegalUpdate

be submitted to arbitration before an ad hoc tribunal.

The Czech Republic argued that under Article 8, the tribunal’s jurisdiction in relation to such disputes is limited to issues

as to the amount of compensation to be paid following an expropriation but not to the more substantive question of whether compensation should be paid at all.

In support of its position, the Czech Republic relied upon extrinsic material concerning the policies of communist States at the time the Treaty was entered into. It submitted that the policy of such states was “to agree to arbitration with private investors in relation to disputes as to the amount of compensation following expropriation” and that “wider agreements to arbitrate with investors ... were avoided by Communist

States as impermissible intrusions on their sovereignty”.

Hence, it was argued that Article 8 of the Treaty did not support the arbitral tribunal’s decision that it had jurisdiction to determine questions concerning the liability of a contracting party.

In contrast, EMV argued that the aim of the BIT was to promote and protect investments by providing direct rights between investors and host States and that “there was no immutable policy of the Czechoslovak Socialist Republic to confine Arbitration Agreements to the amount of compensation to be paid”.

Interpreting the Belgium-Czech Republic BIT

The nature of the dispute raised broader questions about the rules to be applied

in interpreting treaties. After quoting extensively from the Vienna Convention on the Law of Treaties, the Court affirmed that the proper approach “is to interpret the agreed form of words which, objectively and in their proper context, bear an ascertainable meaning”, rather than trying to identify what the notional underlying

intention of using a particular form of words might have been.

Simon J further said that “when considering the object and purpose of a Treaty a Court should be cautious about taking into account material which extends beyond what the Contracting Parties have agreed in the Preamble or other common expressions of intent” (emphasis added).

EMV had argued that, as a matter of context, the Preamble to the Belgium-Czech BIT stated that one of the objects of the Treaty (as distinct from the notional underlying common intent of the parties) was to create favourable conditions for investment in the Czech Republic, and that one of the central features of a favourable investment environment is the availability of international arbitration as an avenue for dispute resolution.

EMV further argued that “so far as the objective of a BIT is to provide effective protection for investors, it is permissible to resolve uncertainties in the interpretation of a BIT in favour of the investor.

In response to these submissions, the Court decided that when interpreting a BIT “the Court is entitled to take into account that one of the objects of the treaty was to confer rights on an investor, including a valuable right to arbitrate” but did not go so far as to say that, as a broad-ranging rule of interpretation, BITs should be interpreted in favour of an investor.

International Arbitration

Jurisdiction in investment treaty arbitration:The Czech Republic v European Media Ventures SA [2007] EWHC 2851 (Comm)

Armen Varvachtian comments upon a case where the English High Court clarified the proper approach to interpreting Bilateral Investment Treaties (BITs), in a recent dispute between European Media Ventures and the Czech Republic.


The Facts

The Czech Republic applied to the English High Court, under section 67(1)

(a) of the Arbitration Act 1996 (UK), to set aside an Award on Jurisdiction made in relation to an arbitration between itself and a Luxembourg company, European Media Ventures (EMV).

T h e a r b i t r a t i o n h a d b e e n commenced by EMV against the Czech Republic under a bilateral investment treaty entered into by the Czechoslovak Socialist Republic and the Be l g i an -Luxembourg Economic Union.

EMV complained of indirect expropriation of its investment in a Czech television station and referred the dispute to an arbitral tribunal comprising Lord Mustill, Dr Julian Lew and Professor Christopher Greenwood, which, finding that it had jurisdiction to hear the dispute both in relation to questions of both liability to pay compensation and the amount of that compensation, went on to make an award.

The Dispute as to Jurisdiction

The Czech Republic brought the matter to the English High Court, arguing that

Article 8 of the Treaty, under which EMV referred the dispute to arbitration, did not support the tribunal’s decision concerning its jurisdiction to make an award in relation to questions of liability.

Article 8 provides that disputes “concerning compensation due by virtue of the provisions of the Treaty concerning expropriation could


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to commence proceedings in a court”. He was mindful, however, that rule 32(05) should be construed “benevolently” and that the rule only requires that a party “may have” a right to relief in court.

Where there was no guarantee that the prospective defendant would seek a stay of proceedings in the event substantive proceedings were commenced against it in court, this requirement of rule 32(05) would be met.

This reasoning appears to be reasonably sound given that the defendant, in theory at least, may indeed decide that a Victorian court would be a preferable jurisdiction to resolve the dispute and waive its right to arbitrate.

Thus Hargrave J was of the view that “if proceedings are issued in this Court by Timoney they will not, as a matter of certainty, be stayed”. The inference that might be drawn is that his Honour might have refused the making of an order under r 32(05) had such certainty been demonstrated.

In any case, although Hargrave J found that the applicants were not “by reason only of the arbitration agreement, unable to obtain discovery under r 32(05)”, for other reasons they had not established an entitlement to preliminary discovery under r 32(05), and such an order was not made.

Peter Hillerstrom is a Solicitor in the Sydney office of Mallesons. This article is reproduced, with permission, from Mallesons International Arbitration Update, February 2008.

Court ordered preliminary discovery vs arbitration agreements(Continued from page 25)

The 2003 amendments to the Building and Construction Industry Security of Payment Act 1999 (NSW) (BCISPA)1 went to some

length to discourage actions to frustrate the enforcement of money payable under it.

It has enjoyed a measure of success. Generally, provided the adjudication complies with the essential prerequisites set out in Brodyn Pty Limited v Davenport2, the options to overturn or frustrate such enforcement action are either very limited or doomed to fail.

There is however, one line of attack that, if the facts permit, seems a reliable strategy to overwhelm BCISPA’s defences. The Constitution provides that Commonwealth legislation generally has precedence over that of the states. This presents opportunities to press ahead with action to upseta BCISPA enforcement action, despite that act’s prohibitions and limitations.

Instances of Commonwealth legislation overwhelming the BCISPA’s defences frequently occur in the context of winding up and bankruptcy action to enforce BCISPA debts, making those forms of enforcement action unreliable in the BCISPA environment.

The BCISPA’s defences have also been breached where the adjudication determination was procured by misleading or deceptive conduct in breach of s52 of the Trade Practices Act (Cth)3.

The recent case of Katherine Pty Limited v The CCD Group Pty Limited4 (Katherine’s case) demonstrates a further ground by which BCISPA’s defences may be circumvented.

In Katherine’s case the respondent faced adjudicated determinations to a value of $340,000. $100,000 of that figure related to work done and materials supplied. The balance was interest calculated in accordance with the terms of the contract, at an interest rate of 9% per month.

McDougall J was satisfied that such an

interest rate well exceeded the loss actually incurred by the claimant through late payment, to such an extent that it comprised a penalty, being a circumstance in which equity would grant relief on the basis that it is unconscionable.

Unconscionable conduct by a corporation in trade or commerce is prohibited under s51AA of the Trade Practices Act (Cth). Section 80 of the Trade Practices Act entitles the court to make such order as it thinks appropriate against the person who engaged in the unconscionable conduct, where the court considers that such orders will compensate the person who has suffered, or is likely to suffer, loss or damage by the offending conduct.

In Katherine’s case, the supremacy of the Commonwealth legislation barely rated a mention, indeed it was practically assumed. The claimant’s main line of defence was to propound the interest rate of 9% per month compounding as not being unconscionable. In the alternative, if it was, it argued that relief should not be granted in any event.

McDougall J held that the interest rate of 9% per month was unconscionable. In respect of the issue as to whether relief should be granted he noted that the respondent did not have adequate regard for its own interests and was lax in its attention to its payment obligations.

Despite that, he found that it would be an injustice to permit the claimant to have the full benefit of a bargain that is unconscionable.

To relieve the unconscionability, McDougall J upheld the adjudication to the extent that it related to the actual costs of goods and services supplied. However, enforcement of the balance was limited to the extent of the interest rate applicable from time to time on the claimant’s overdraft bank account, whilst such account was maintained within its limits.

Part V of the Trade Practices Act, dealing with unfair practices, presents considerable potential to upset the enforcement of debts owed under the BCISPA.

The grounds of misleading and deceptive and unconscionable conduct still have much unexplored potential.

Prohibitions on false or misleading representations (s53 TPA), harassment and coercion (s60 TPA), unsolicited goods and services (s64 and 65 TPA) and possibly others remain as yet untouched.

Robert Riddell is a Partner at Gadens Lawyers, Sydney.This article is reproduced, with permission, from Gadens’ Building and Construction Law Update, May 2008.

ENDNOTES:1. the 2003 amending Act is the Building and Construction Industry Security of Payment Amendment Act 2002 (NSW).2. (2004) 61 NSWLR 421.3. Bitannia Pty Limited v Parkline Constructions Pty Limited (2006) 67 NSWLR 9.4.[2008] (NSWSC 131)

Adjudication

Federal Law and the Enforcement of Security of Payment Debts

Robert Riddell looks at other possible defences to the enforcement of Security of Payment debts


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Conclusion

The parties presented a large amount of “contextual material” upon which they relied in arguing for their respective interpretations of Article 8 of the Treaty. The Court dealt with this material by finding that it threw “no clear light” on the interpretation of the

disputed words. Furthermore, in Simon J’s view, the scope of the arbitration clause was left unclear “possibly to the satisfaction of both sides”.

In the end, the Court decided that the words “concerning compensation” could not, on their ordinary meaning, be taken to mean “relating to the amount of compensation”. Rather, the word “concerning” should be read broadly, analogously to phrases such as “relating to” or “arising out of, with the consequence that Article 8 extends to every aspect of the compensation due by virtue of Article 3 of the Treaty concerning expropriation.

Applying these findings, the Court held that the arbitral tribunal did, indeed, have jurisdiction to decide the substantive question of whether EMV was entitled to compensation in addition to having jurisdiction to decide the amount of compensation that should be awarded.

Armen Varvachtian is a Solicitor in the Sydney office of Mallesons. This article is reproduced, with permission, from their International Arbitration Update, February 2008

Jurisdiction in investment treaty arbitrations(Continued from page 26)

The Annual Debate“This House believes that lawyers should not be allowed to participate in arbitral and mediation

proceedings”

Two lawyers will argue for the motion and two non-lawyers will argue against the motion !

to be held on Tuesday, 19 August 2008at

DLA Phillips FoxLevel 38, 201 Elizabeth Street, Sydney

commencing 5.45pm for 6pm start.

Please call Emma Matthews on 9267 1513 to confirm your attendance

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