International Commercial Arbitration in Australia - Research Paper Example

Heading: International Commercial Arbitration in Australia Your name: Course name: Professors’ name: Date Word Count (3092 without footnotes) Introduction Today, there is a considerable rise in demand to use arbitration in settling commercial disputes among business communities. This is because arbitration offers parties a flexible and efficient way of settling disputes that is less costly and time-wasting than using the court systems. Furthermore, arbitration helps in solving local disputes as well as international commercial disputes. Therefore, the paper sheds light on Australian international commercial arbitration’s status and nature. Moreover, the paper focuses on the features of Australian arbitral law and the way Australian courts treat arbitration. Besides, it outlines the function of the Australian Centre for International Commercial Arbitration (ACICA). It further highlights the center’s salient characteristics as well as the benefits of its arbitration rules. Lastly, by using cases, the paper illuminates on modern developments related to the law and practice of Australian international commercial arbitration, particularly with regard to state-investor disputes and its significance to Australia. What is arbitration? Arbitration is described as a private venture that is equivalent to the court system. Its existence and power is derived from a consensus that takes place between two or more groups to forward their dispute to a third party who will give a final, binding determination of the case in question.1 The third party, arbitrator should be decided upon through an agreement of the two parties involved in the dispute. The fact that an arbitration clause will be included in the process will limit the parties from remedy to the court, a case that would otherwise allow them to go without any restrictions. 2 Usually, a consensus to arbitrate takes place as a contract, and it states that in a case whereby the concerned parties disagree to the contractual terms, all or some of the disputes arising between them in relation to the consensus will be termed as an arbitration. 3Therefore, arbitration occurs only whenever there is a dispute between groups, and one of them invokes machinery offered for the arbitration clause.4 Nevertheless, the method has its share of complications that include the need to have an informed commercial choice, consideration transaction’s nature, nationality of the last resort’s assets, places of having the resort to litigation, and consideration of the arbitration process for adoption.5 Australian arbitration nature and status Explicitly, the country has ventured in strong commercial relationships with its neighboring countries, especially in the South-East Asia.6 The country is developing a powerful arbitration culture in its domestic and international affairs. This follows the increased application of arbitration in Asia that was caused by the mid 90’s advancement of the Asian economies. Being a Western country in the Pacific area, Australia is well-conversant with the law and practice in Europe and Asia.7 The country provides a developed and hospitable setting for global commercial arbitration. In fact, since 1975, the country has been the Convention on the Recognition and Enforcement of Foreign Arbitral Awards’ signatory.8 Besides, it was among the pioneer states to take on the UNCITRAL Model on International Commercial Arbitration in 1989. 9The country’s legislation has integrated the Model Law, but it is optional to the parties. In addition, Australia has membership to many Free Trade Agreements (FTAs), for example, the Singapore-Australia, and numerous bilateral investment treaties (BITs) that allow for arbitration.10 Locally, arbitration is shared among main business sectors and industries. Furthermore, in Australia, Alternative Dispute Resolution (ADR) and court-annexed mandatory arbitration are widely used. In the country, arbitration parties enjoy a great confidentiality level and freedom to determine the process of arbitration.11 Moreover, the courts have shown their substantial support for arbitration by preparing for grants stays so as to provide optimum outcome arbitration agreements.12 Moreover, the courts have a good record of giving awards that have been appropriately determined.13 In Australia, arbitration involves low costs of infrastructure, highly competitive fees for the lawyers, arbitral venues and hotels that are priced competitively, and overall prices are sensibly dependent on the exchange rate.14 Unlike some of the Asia-Pacific powers, the country offers a venue for global arbitration that is political and legally neutral.15 In addition, the country has advantages of political and economic stability. Because of the two factors, being a Western nation, and its strategic location in Asia, and its developing expertise in global arbitration make Australia a highly appealing international arbitrations’ spot.16 Therefore, worldwide recognition of the country as one of the important centers for global commercial arbitrations has grown with numerous main global arbitration cases in the country.17 Australia’s international commercial arbitration is aided by courts, legislation, and international and domestic arbitral bodies and institutions.18 Arbitral rules and legislation The country is a federation that comprises of legislative powers categorized between the Commonwealth, six States, and federal entity.19 Moreover, it has two federal borders with their governments. Some of the relevant treaties and statutes in the country International Arbitration Act 1974 (Cth), UNCITRAL model Law on International Commercial Arbitration, Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Washington Convention on the Settlement of Investment Disputes between States and National of Other States (ICSID Convention).20 Besides, there are commercial arbitration acts that include New South Wales 1984, Victoria 1984, Tasmania 1986, Queensland 1990, Australia Capital Territory 1986, and Northern Territory 1985. Global arbitrators are governed by the International Arbitration Act 1974 (Cth) (IAA). Here, there are three annexes to IAA: the Model Law, New York Convention and ICSID Convention. 21 Australia’s agreement to the New York Convention has no condition and affects all external borders apart from Papua New Guinea.22 According to section 32 of the IAA, ICSID convention’s chapters II-IV have a legal force in Australia, subject to a difference in IAA’s Part IV. On the other hand, IAA’s section 16 states that the Model Law has a legal force in Australia.23 In addition, the Model Law is applicable in international arbitration of Australia, unless it has been excluded by the parties of the case.24 Exclusion of the Model Law by parties will have the arbitration still controlled by the IAA. Nonetheless, the procedural law of arbitration will become the law that the parties have chosen.25 Besides, if there is no choice, there will be Arbitration Act (CAA) of Territory or State where arbitration happens. Because of the reforms that took place in 1984 and 1993, Territories and states’ CAAs are widely uniform.26 Nevertheless, there is a significant distinction between the CAAs and the Model Law. For instance, there is a higher judicial supervision’s degree under legal arbitration laws.27 Therefore, CAAs permits higher court intervention in the process of appointing and removing arbitrators, and particularly allows courts to eliminate arbitrators for misbehavior. This is unlimited to procedural irregularity and thus offers larger foundation for examination than it is required in the Model Law.28 Besides, in CAAs, there is a probability of appeals originating from awards on legal issues in few situations. On the contrary, Model Law offers no review for legal errors. Additionally, CAAs have conditional right to representation, whereas the Model law has automatic right to representation.29 More so, under the Model Law, the number of arbitrators by default is three, while it is one in CAAs. In local arbitration, courts have authority to fill vacancies on arbitral tribunals. What is more, there are various features of arbitral law and procedures that differentiate Australia from other jurisdiction. To begin with, it has an alternative to get out of Model Law. Here, parties of the arbitration can remove the UNCITRAL Model Law.30 Secondly, it has extra alternative provisions, that implies that the Model Law is complemented several respects. Besides, section 22 to 27 has optional provisions that parties may consent in writing consolidation. The model law also has provisions on definition of public policy and interpretation. 31Thirdly, it has state and federal arbitration laws because it is a federation. Therefore, there is need to draft arbitration clauses carefully in order to ensure that the applied arbitral procedural legislation is used appropriately.32 Australian courts’ attitude on arbitration The courts in the country support the independence of global arbitration, and they will stay court proceeding s with a valid arbitration consensus that covers a dispute.33 According to IAA’s section 7, stay court proceedings applications should take place when the procedure with regard to arbitration in arbitration consensus is controlled by a legislation of a nation that is a member of the New York Convention.34 Secondly, it is possible when arbitration procedure in arbitration consensus is controlled by nation that is neither Australia nor a Convention country.35 Here, a member should be Australia, or a person, or a country that was resident or domiciled in Australia when the agreement was made.36 Thirdly, it is applicable if an arbitration party is a Convention country’s Government, or territory of a Convention country’s government, or part of Convention nation. 37Fourthly, an arbitration agreement party should be an individual that, during consensus making, was ordinarily resident or domiciled in Convention country. Therefore, in all other cases, the Model Law’s article 8 will be applicable instead. In addition, IAA’s section 7(2) (b) carries out Australia’s obligations as required by New York Convention’s article II (3). 38It states that the court should stay proceedings only when there is a valid arbitration consensus, and when the dispute entails the establishment of a matter, which can be settled arbitrarily, in the process of pursuing arbitration consensus.39 The courts’ refusal to stay should only happen when the arbitration agreement is found to be null and void, incapable of performance or inoperative. 40 Further, in case section 7(2) (b) is inapplicable, Model Law’s article 8 might apply on condition that stay’s request is presented upon the first statement of the dispute by the applicant.41 Here, the court must make references to the arbitration party except when agreement is found to be null and void, incapable of performance and inoperative. 42 Arbitrability of disputes The courts in Australia have a positive attitude towards the international commercial arbitration of disputes. Subsequently, there are few limitations on the kinds of disputes to be handled arbitrarily. Arbitrability of disputes issues emerge whenever there is a need to stay court proceedings. IAA’s section 7 (2) (b) provides that a matter can be settled arbitrary if it is interpreted as any relief claim that is proper for court’s determination. Nevertheless, there are certain exceptions that include the subjection of the IAA to section 11 of Carriage of Goods by Sea Act of 1991.43 This act declares an arbitration agreement void in a bill of lading, or in the same document that relates to the global transport of goods to and fro Australia. Besides, Insurance Contract Act 1984’s section 8 might influence the arbitrability of disputes that are related to insurance. Moreover, the courts refuse stay applications in which disputes entail bankruptcy, antitrust or insolvency.44 Nonetheless, the courts have not declared that these issues are incapable of being settled arbitrarily.45 Instead, they have emphasized that the arbitration agreement scope is wide enough to include such disputes. Such circumstances often take place with regard to the Trade Practices Act 1974 (TPA), consumer protection and Australia antitrust laws.46 For instance, in the IBM Australia Limited v National Distribution Service Limited case47, the New South Wales Court of Appeal maintained that some of the issues that related to consumer protection according to TPA can be arbitrarily settled.48 Lately, the NSW Supreme Court in the case of Francis Travel Marketing Party v Virgin Atlantic Airways Limited49, and the Federal Court in the case of Hi-Fert Party v Kiukiang Maritime Carriers50, held that disputes whose basis was on PTA’s section 52 can be settled arbitrarily.51 Further, there is a theoretical probability that the public policy can be invoked in order to limit the independence of parties, who wish to present their disputes for arbitrary determination. Internationally, the probability is recognized.52 In fact, according to New York Convention’s article V (2), the courts can refuse the recognition and implementation of an arbitral award if doing otherwise would go against the country’s public policy.53 Locally, Australian jurisprudence that relates public policy restrictions on arbitrability is not as advanced as the United States’, even though its significance is recognized.54 For instance in the case of Commonwealth v Cockatoo Dockyard Party Limited55, Kirby P summarized that the rule of law determines that the court, in the course of protecting other private and public interests, will define and if appropriate declare the boundaries beyond which the powers pursuing private arbitration have intruded into rivalry with other legal private and public duties and rights.56 Evidently, arbitral tribunal must occur with caution where it seems likely that the award will not just have an incidental effect on the third parties’ rights or interests. Enforcing arbitral awards The country is New York Convention’s signatory. According to New York Convention’s article v has IAA’s section 8, and it maintains that a foreign award can be enforced the states’ or courts’ territory as though it was made in the territory or state according to their laws.57 Nevertheless, IAA’s article 8 extends the award to be enforced in any Convention nation outside Australia. Moreover, enforcement can be done under Model Law’s article 35, in case the New York Convention is inapplicable. Additionally, when an award is not covered by both Model Law and New York Convention, CAAs’ section 33 is applicable. In fact, the section works the same way IAA’s section 8 operates.58 Although Australia has a remarkable record for foreign arbitral awards’ enforcement, parties should be informed that the procedural or interlocutory orders of the court may not be featured as an award for enforcement’s purposes.59 Arbitral institutions-powerful domestic and global representation Some of the institutions include the London Court of International Arbitration (LCIA), which has an Australian chapter included in its Asian-Pacific Users Council.60 Moreover, there is the Chattered Institute of Arbitrators, and the International Chamber of Commerce (ICC) with an office in Melbourne and Sydney. Nationally, there is Australian Commercial Disputes Center (ACDC) and Australian Center for International Commercial Arbitration (ACICA). The two institutions focus on local arbitration.61 Some of the duties of ACICA include the provision of a variety of services that are associated with arbitration in order to promote international commercial arbitration, and distribution of information.62 It also keeps a list of arbitration experienced practitioners and a panel of global arbitrators. Besides, it provides information about arbitration agreements, laws and rules, and help with transcription, hearing rooms, and information technology.63 It also holds conferences and seminars that promote understanding and knowledge of global arbitration.64 Some of its members include leading organizations’ nominees both within and without the country. It is supported by law firms and Commonwealth Government. ACICA arbitration rules The institution released, July 2005, its set of arbitration rules, which offer an advanced, effective and flexible outline for conducting arbitration.65 The rules are founded upon the UNCITRAL Arbitration Rules, but have been refined and update, and largely affected by the new Swiss Rules of International Arbitration.66 Therefore, they offer an easy and user-friendly framework of conducting global arbitrations that are based on well-tested arbitration rules, which have international currency and usage.67 Some of the rules include arbitrators’ appointment whereby the absent consensus between parties ACICA will establish the number of arbitrators, one or three depending on the situation.68 Here, the flexibility is beneficial in reducing costs, especially whenever the complexity and size of the dispute are unknown during the drafting process of the arbitration agreement. Secondly, there is a rule concerning multi-party disputes, whereby many parties must act together in the appointment of arbitrators (article 11).69 Besides, there is rule of interim measures, which involve article 28’s detailed provisions that are in charge of the interim measures. Moreover, there is confidentiality rule that states that arbitration proceedings should be private, rather than confidential except when both parties are in agreement about it.70 The application of this rule is illustrated by the case of Esso v Plowman71 held by High Court of Australia.72 Other exceptions to this rule include disclosure of documents or information in pursuit of the tribunal order of competent power.73 Moreover, applications presented to the competent courts, and complying with regulatory institution. Other rules ACICA rule is evidence, Model Law preservation, arbitration fees, and ACICA’s fees. On arbitrators’ fees require that both parties consent on the remuneration of arbitration based on the hourly rates. arbitration. According to these agreements, parties must seek to settle disputes by negotiations and consultations.74 Usually, investor-state arbitration clauses will entail a choice made between parties of the dispute to arbitration according to the UNCITRAL Arbitration Rules.75 Nevertheless, the choices differ with various treaties.76 For instance, in Australia’s BITs with Lithuania and Romania, either party can commence litigation or present the claim to arbitration or the ICSID, only if the parties are members of the ICSID Convention.77 They can present the dispute to the arbitral court by an arbitral authority’s arrangement, or according to treaty’s Annex B.78 On contrast, Australia’s BITs with Poland and Hungary state that in case a dispute does not occur out of nationalization or expropriation, domestic remedies must be used exhaustively before its submission to arbitration.79 Conclusion Investor-state arbitration This occurs in pursuit of charges by persons against states in the situation of FTAs and BITs. 80This allows investors who think that states or state emanations have treated them poorly.81 Some of the benefits of employing direct investor-state arbitration instead of state-state resolution of dispute and litigation include avoidance of politicization of disputes, overcoming state’ unwillingness to surrender to the courts in other countries, prevention of the overseas investors’ reluctance to resolve disputes in their own courts, and that investors have control of the way in which the claim is pursued.82 Currently, Australia is currently a member of 20 BITs that include Czech Republic, Romania, Poland, Lithuania, Hungary, and Turkey. 83 Even though the use of these agreements is becoming popular, there is no uniformity in the way states conduct Commercial arbitration is a way of resolving global disputes is continuously becoming the best alternative to many parties. This applies to contractual agreements and investment disputes between investors and states. Australia has a significant role, not only as a member of the BITs and PTAs. It is a position for global commercial arbitration with numerous benefits that include a supportive judicial system, economic and political stability. Currently, it has ACICA Rules that have advantages of being founded on well-tested and global UNCILTRAL Rules, coupled with administrative and higher flexibility. Besides, its strategic location in Asia and its knowledge on Europe and Asia, the country is a sensible choice of place for global commercial arbitration. Bibliography Books Alan Redfern, Law and practice of international commercial arbitration (Sweet & Maxwell, 2004). Gary Brian Born, International commercial arbitration Vol. 2, (Kluwer, 2009). Kyriaki Noussia, Confidentiality in international commercial arbitration: a comparative analysis of the position under English, US, German and French law (Springer, 2010). Margaret L Moses, The principles and practice of international commercial arbitration (Cambridge University, 2008). Peter Ashford, Handbook on international commercial arbitration (JurisNet, LLC, 2009). Robin Burnett and Vivienne Bath, Law of international business in Australasia (Federation Press, 2009). Simon Greenberg, Christopher Kee and J. Romesh Weeramantry, International commercial arbitration: Asia-Pacific perspectives (Cambridge University Press, 2009). Journals Barnali Choudhury, ‘Recapturing Public Power: Is Investment Arbitration's Engagement of the Public Interest Contributing to the Democratic Deficit?’ (2008) 41Vanderbilt Journal of Transnational Law 35-49. David P Riesenberg, ‘Fee Shifting in Investor-State Arbitration: Doctrine and Policy Justifying Application of the English Rule’ (2011) 60 Duke Law Journal 12-19. Don Peters, ‘Can We Talk? Overcoming Barriers to Mediating Private Transborder Commercial Disputes in the Americas’ (2008) 41 Vanderbilt Journal of Transnational Law 23-25. Fulvio Fracassi, ‘Confidentiality and NAFTA Chapter 11 Arbitrations’ (2001) 2 Chicago Journal of International Law 34-39. John Yukio Gotanda, ‘Setting Arbitrators' Fees: An International Survey’ (2000) 33 Vanderbilt Journal of Transnational Law 22-29. Mark C Weidemaier, ‘Contracting for State Intervention: The Origins of Sovereign Debt Arbitration’ (2010) 73 Law and Contemporary Problems 11-17. Cases Commonwealth v Cockatoo Dockyard Party Limited (1994) 35 NSWLR 704. Esso v Plowman (1995) 183 CLR 10. Francis Travel Marketing Party v Virgin Atlantic Airways Limited (1996) 39 NSWLR 160. Hi-Fert Party v Kiukiang Maritime Carriers (1998) 159 ALR 142. IBM Australia Limited v National Distribution Service Limited case (1991) 100 ALR 361. Read More