Australian Center for International Commercial Arbitration - Assignment Example

Alexander & Alexander Solicitors MEMORANDUM OF ADVICE __________________________________________________________ To: Partner – Commercial Litigation From: Alexander & Alexander Date: 16 March 2012 Subject: International Commercial Arbitration Ref: Memorandum of Advice No. 1. Author: (Student Name) __________________________________________________________ AUSTRALIAN CENTER FOR INTERNATIONAL COMMERCIAL ARBITRATION (Author’s name) (Institutional Affiliation) Abstract The rise in commercial disputes on an international level is behind the use of arbitration to resolve the same. An arbitration that takes a non-judicial course is not only attractive, but proves to be very effective. Since arbitral awards are final and binding, parties can avoid drawn-out appeals. Arbitration can take two forms; institutional and ad hoc, with the first one being one that an institution is given to handle while the latter is conducted independently without the parties but in accordance with the set out measures by the parties and their legal representatives. Keywords Modern Law, International Commercial Arbitration Introduction The purpose of the review of the International Arbitration Act of Australia was to ensure that it provides a clear and all-inclusive framework for governing the international arbitration in the country. Another aim was to improve the efficiency and effectiveness of the process of arbitrary and at the same time minding the essential consensual basis of arbitration and to reflect on whether to take up the developments of the best practice in the arbitral law from abroad1. Australian Center for International Commercial Arbitration These changes would hopefully make Australia the most attractive venue for carrying out international commercial arbitration (ICA) law, especially within the region of the Asia pacific. Regrettably, Australia is not the best venue now for the ICA because the clear leaders are Singapore, China and Hong Kong2. For Australia to have a chance at this, it needs a better reform than the what is envisioned in the AGD’s discussion paper, and it needs to appreciate the more long term and diffuse gains of this reform. Other institutions in the country of the same arbitration have received a strong government backing, unlike Australian Center for International Commercial Arbitration (ACICA). It also lengthens to the regular reforms to the legislation of the arbitration where the government has been negligent. Though it amended its International Arbitration Act (IAA) in 1989 and adopted the Model law of UNCITRAL on International Commercial Arbitration, unlike Singapore and Hong Kong who adopted the same model, Australia has not made changes to this law for almost twenty years3. This is in spite of some strange decisions in the courts of Australia and clear errors in drafting the legislation. Even small countries like New Zealand adopted the Model law and ratified amendments to its IAA due to revisions to the Model law as agreed by the United Nations in 2006. For Australia to be able to compete with the almighty or the leading countries in this area, they need to be bold in taking up emerging or new global standards that are depicted in the revised Model law. This also means that Australia should consider the choice of eliminating the writings for an arbitration agreement and allow ex parte preliminary orders to support the interim measures of the arbitrators. The recommended solutions would assist in restoring the informality and effectiveness of the cost in the proceedings of the ICA. This is crucial because of various studies, which confirmed that a re-emergence of the trend of the ICA is now more of a regular litigation of the court. Furthermore, if these recommendations are achieved, Australia still is not realistic and requires to be so. The achievements of Hong Kong and Singapore in this issue means that probably it will never have the same increase in the caseloads of ICA4. The focal point on commercial arbitration as a form of resolving disputes has normally been offered, but hardly ever delivered. The uniform legislative scheme for domestic arbitration is outdated and in serious need of a reform. The delay of the Commercial Arbitration Act is humiliating as it is not an area where harmonization focuses on the appropriate principle of the lowest common denominator. Previously, the Australian legislation and the case law were supportive of international arbitration and the existence of a separate legislative scheme, added to a considerable complexity5. Consequently, IAAA was ratified to offer a clear cornerstone for the international arbitration regime of Australia. The amendments of the act were to emphasize on the necessity of fairness, cost and speed in the international arbitration. At the same time, it also defines and binds the function of the court in the international arbitration without conceding the vital function of protection that the courts exercise. One of the major amendments of the IAA is the repeal of the Section 21 that has beforehand let parties choose to resolve their disputes, which is not according to the Model law. At this point, another term arises, semi-consensual. Arbitration takes the form of an arbitral clause that works to provide for disputes anticipated to occur in the future between the two concerned parties. In the event that a dispute occurs, a party may no longer consent to the agreement. The respondent may refuse such and the arbitration may continue. On the other hand, the claimant may want arbitration as stipulated by the arbitration agreement but the respondent may not agree. This does not in any way hinder the arbitral tribunal from proceeding to make an award6. Arbitration is a private procedure The above element states on the privacy of the arbitration process and its separation from the State system of courts. The fact that arbitration results in an award that is enforceable by the courts implies that the state must have an interest on the same. Consequently, it has led to some countries enforcing control over arbitration more than any other dispute settling procedure.7 What must follow therefore is the awarding of an arbitral tribunal full autonomy. From the analysis of the conclusion case between Dow Jones and Company vs. Gutnick, the case missed an extremely significant chance to restore the reputation of Australia as a center for international commercial arbitration. However, the arbitration rules of ACICA tries to avoid the exclusion of the Model law8. Courts will give effect to the provision and allow the Model law to operate simultaneously with the rules that are in place. If parties opt for the CAA to rule on their agreement, then Model law would be irrelevant because the new section 21 does not let legislations of the state to apply if Model Law applies. However, the legislative history supports the notion of choosing a law instead of the Modern Law. If this notion is right, then the same conclusion of the case should also follow in cases where parties choose foreign arbitration law. Domestic and international arbitration Arbitration is broadly guided by the law that governs the particular state that it is taking place. Hence, arbitration that takes place within a particular state is termed as a domestic arbitration in that state. It is paramount at this stage to point out that some states have clear definitions of what constitutes a domestic or an international arbitration. At times, the distinction may be that disputes are divided into two, those that are submitted as domestic and those submitted for international arbitration. This is largely based on the Model Law that allows for a state to uphold laws in reference to domestic and international arbitrations. National law therefore is responsible for this distinction. Arbitration is considered as international based on two concepts. Firstly, one can consider the transactions taking place or two, the persons involved. Most often than not, it is about persons who are citizens of different states. According to Model Law, if: “1). the parties to the arbitration agreement have, at the time of the conclusion of the agreement, their places of business in different States, or; 2). the place of arbitration, if determined in or pursuant to, the arbitration agreement, is situated outside the State in which the parties have their places of business, or: 3). any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected is situated outside the State in which the parties have their places of business, or: 4). the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one county, “ then, that can be considered an international arbitration. With such guidelines, the consideration of whether arbitration is international may seem too much. However, it is to be noted that the parties have a choice of deciding the place of arbitration9. Choice of international commercial arbitration by a state The major bone of contention at this point is what makes arbitration applicable as an international commercial arbitration in a particular state. Comparison of state courts and arbitral tribunal reveals that the latter require some sort of expertise with regard to the type of transaction in question. Such include architects, lawyers and doctors as arbitrators. However, it is noted that some States do not allow such professionals but only lawyers are arbitrators. Secondly, arbitrators serve as so only in a specific dispute10. The individual or group arbitrators commence the case and conclude it. This allows them to familiarize themselves with the dispute in question. This is quite different with regard to State Court Systems where different judges may handle a dispute. Thirdly, the concept of agreement of parties is highly valued in arbitration. As provided for in the Model Law, arbitration leaves some procedures to follow the agreement of the parties concerned. Each party in the dispute settlement is an equal and therefore equal opportunity with regard to case presentation is awarded. Fourthly, arbitration by fact is not subject to appeal. Errors made in the decision of the tribunal cannot be corrected. Therefore, arbitration lacks legal security. The gain however, is related to the time consumed before a decision is reached and the resultant reduced costs. However, this is described as a traditional argument whereby the modern view is that no empirical evidence of use of variables has been able to confirm this. The logic is that the process can be made faster if only the parties choose to and therefore costs reduced. According to the Attorney – General’s Department (AGD), the review was meant to make Australia a conducive venue for international commercial arbitration. It was meant to work the relations with regard to international arbitration in the Asia-Pacific region. Unfortunately, the lack of the amendment of the Australia’s International Arbitration Act leaves the country behind of other countries such as China, Singapore and Hong-Kong who did otherwise. There is need for a reform of the IAA, one that is highly placed. There are steps that Australia made initially to capture the mood of international arbitration. In 1989, it amended the IAA for the purposes of the adoption of the 1985 UNCITRAL Model Law on International Commercial Arbitration. In the recent past however, no amendment Recent past however, no amendments have been made. It should follow suit with such countries as New Zealand adopting the Model Law in 1996 and further enacting amendments on the New Zealand Arbitration Act in 2007 to accommodate the revisions of the Model Law in 2006. Wagner’s Nouvelle Caledonie Sarl v Vale Inco Nouvelle Caledonie SAS were involved in a case of dispute or rather difference regarding the meaning of an arbitration clause11. The case was centered on the meaning of contract. Contractual disputes are to be submitted for arbitration with the UNICITRAL Arbitration Rules. The arbitration was to ascertain whether the clause consist an agreement that Model Law could not be applied to any dispute or arbitration between the parties. The question in this particular case was to answered as (a) if clause 8.17 of the contract that was made between the Respondent and the Appellant constituted an agreement between the two within the of section 21 of the international arbitration act of 1974.(b) whether the principle that was contained the 12th paragraph of the ruling of the Queens Court of Appeal while handling Australian Granites Limited v Eisenwerk Hensel Bayreuth Dipl-lng GmbH.(C) Whether the answer to question (b) is “no” if the Eisenwerk Principle was rightly decided. Cargill International SA v Peabody Australia Mining Ltd12. This was an application connected to a partial award by David Jackson as an arbitrator in December 7th 2009. This was in a dispute that arouse out of an agreement between Cargill International SA and Peabody Australia Mining Ltd for a supply of coal to Cargill. The term international commercial arbitration bears no clear definition, but there are some characteristic elements that guide its users. The New York Convention works to provide each State with regulations to undertake commercial arbitration with regard to what its own law states as commercial13. Arbitration is considered international depending on a specific state. However, there are some guidelines as to in domestic or international arbitration. For a country to be considered as an attractive venue for international commercial arbitration, it must have made reviews and amendments in its laws to suit the country laws that govern the process. Australia has been able to attain the minimum requirement as venue for international commercial arbitration. This was facilitated by the IAA Act 2010 that saw the amendment of the IAA 1974. This enabled the use of arbitration as one of the techniques of resolving disputes which arouse as a result of transnational contracts References Australia. 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Rusden, George William. 2011. History of Australia. Cambridge: Cambridge University Press. Simon Greenberg, Luke Nottage and Romesh Weeramantry, Richard Garnett. (2010).The 2005. Kitharidis Sophocles. (2011). Australia's Reputation as a Centre for International Arbitration: Wagner’s Nouvelle Caledonie Sarl v Vale Inco Nouvelle Caledonie Sas Missing a Critical Opportunity to Reverse the Eisenwerk Decision. Bond Law Review, Vol 23, No.1, pp 1- 17. Rules of the Australian Centre for International Commercial Arbitration‐Revisited. Sydney: Federation Press. Read More