Australia - Staying On The "Cutting Edge" - Proposed Amendments To The International Arbitration Act 1974 (Cth).

Legal News & Analysis - Asia Pacific - Australia - Dispute Resolution

26 September, 2018

 

What you need to know

 

On 17 September 2018, the Civil Law and Justice Legislation Bill 2017 (Cth) was introduced to the House of Representatives, proposing a number of amendments to "civil justice" legislation. 

 

Proposed amendments to the International Arbitration Act 1974 (Cth) include incorporating theUNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration into Australian law, clarifying the requirements for the enforcement of foreign awards and providing more flexibility to arbitrators to award costs. 

 

The Civil Law and Justice Legislation Bill 2017 (Cth) has already passed the Senate.

 

Background 

 

On 22 March 2017, the Civil Law and Justice Legislation Amendment Bill (Cth) (Bill) was introduced to the Senate. The Bill is an omnibus bill proposing a number of amendments to several pieces of "civil justice" legislation. It is intended to "improve the operation and clarity of civil justice legislation administered by the Attorney-General". It passed the Senate on 12 September 2018 and was introduced to the House of Representatives on 17 September 2018. 

 

The Bill proposes a number of amendments to the International Arbitration Act 1974 (Cth) (IAA). In his second reading speech in the Senate, the former Senator the Hon George Brandis QC said:

"[t]he Bill also reflects the Government's commitment to maintain its place in the international legal environment by amending the International Arbitration Act to help ensure that Australian arbitral law and practice stay on the global cutting edge, so that Australia continues to gain ground as a competitive arbitration friendly jurisdiction".

 

The following is a summary of the key reforms proposed by the Bill to the IAA. 

 

Transparency in investment-arbitration 

 

The Bill proposes to amend the IAA so that the existing confidentiality provisions in sections 22C to 22G do not apply to arbitral proceedings to which the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (the Transparency Rules) apply. 

 

The confidentiality provisions of the IAA were previously amended so that confidentiality would apply on an "opt out" basis, whereas it originally applied on an "opt in" basis (you can read more about the previous amendments to the IAA here). 

The current amendment would facilitate the conduct of investor-state arbitrations in accordance with the Transparency Rules by ensuring that confidentiality would not apply to investor-state arbitrations to which the Transparency Rules apply. 

 

The Transparency Rules, amongst other things:

 

  • require prompt and mandatory disclosure of new arbitrations;
  • establish a regime for the disclosure of arbitration documents;
  • allow for third parties to make submissions on matters relevant to the dispute; and 
  • create a default rule that all hearings are public.

 

The Transparency Rules apply to investor-state arbitrations under certain bilateral and multilateral investment treaties or free trade agreements concluded on or after 1 April 2014.

 

The United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (New York, 2014) that is otherwise known as the Mauritius Convention on Transparency (Mauritius Convention) extends the application of Transparency Rules to all investment treaty arbitrations initiated under treaties concluded before 1 April 2014. 

 

On 18 July 2017, Australia became a signatory to the Mauritius Convention (you can read more about the operation and the likely effects of the Mauritius Convention on arbitrations in Australia here). Although Australia has not yet ratified the Mauritius Convention, the proposed amendments will ensure that there is alignment between the IAA and the Mauritius Convention in the event that it is ratified. 

 

The amendments to the IAA proposed in the Bill would be relevant to arbitral proceedings to which the Transparency Rules apply, whether by reason of the Mauritius Convention or otherwise. 

 

The proposed amendments represent a continuation in the trend in favour of transparency in investor-state arbitration. 

 

Investor-state arbitration has been a controversial subject in Australia and around the world in recent years. The Mauritius Convention and the Transparency Rules recognise the legitimate public interest in the conduct of investor-state arbitrations.

 

This public interest derives not only from the financial consequences that might ultimately flow from an arbitral award, but also from the subject matter of investment disputes themselves (that may involve matters of public policy).

 

Increased transparency in investor-state arbitration should allow for increased public participation and oversight of the process and serve to increase public confidence in it as a means of safeguarding international trade.

 

Clarification for enforcing foreign awards 

 

The Bill proposes to amend subsection 8(1) of the IAA to clarify that a foreign award is binding between the "parties to the award". 

 

This proposed amendment seeks to bring Australian law into line with the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), which makes an award binding between the "parties to the award".

 

Section 8(1) of the IAA currently provides that "a foreign award is binding by virtue of this Act for all purposes on the parties to the arbitration agreement in pursuance of which it was made". This wording has given rise to some confusion regarding the enforcement of an arbitral award against non-parties to an arbitration agreement in Australia: see for example the contradicting decisions in Altain Khuder LLC v IMC Mining Inc & Anor [2011] VSC 1 and Dampskibsselskabet Norden AIS v Beach Building & Civil Group Pty Ltd (2012) 292 ALR 161. 

 

The amendment is intended to clarify that a successful party to an arbitration, or an award creditor, will only need to produce the relevant award and the relevant arbitration agreement in order to enforce a foreign award (even where the award debtor is not a party to that agreement). This is in line with the laws in other leading arbitration jurisdictions (including the United Kingdom, Singapore and Hong Kong). 

 

These amendments will apply retrospectively to arbitrations commenced before the Bill is passed.

 

Arbitrators' powers in relation to costs 

 

The Bill proposes amendments in respect of an arbitrator's power to award costs. Section 27 currently refers to an arbitral tribunal's power to award costs and to tax or settle the amount of costs to be paid as between "party and party" or "solicitor and client". The Bill proposes to remove references to the "taxation" of costs and delete the references to the settling of costs on a "party and party" or "solicitor and client" basis. 

 

The Bill would also insert a new subsection 27(2) providing that an arbitral tribunal is not obliged to follow the scales and practices adopted by the court on taxation when assessing the amount of costs. 

 

Arbitrators generally have a broad discretionary power to fix the costs of arbitrations. For example, the UNCITRAL Arbitration Rules provide that an arbitral tribunal has the discretion to "fix" costs. And the International Chamber of Commerce Arbitration Rules similarly confer an arbitral tribunal with a broad discretionary power to award and fix the costs of arbitration (including which parties shall bear them and in what proportion).

 

The Bill has the effect of removing "outmoded and inflexible" references to the taxation of costs on a "party and party" and "solicitor and client" basis and providing arbitrators with increased flexibility in line with international practice. 

Defining a "competent court"

 

The Bill proposes to add a new subsection 18(4) to the IAA that would provide that both the Federal Court and the State and Territory Supreme Courts are "competent court[s]" for the purpose of enforcing awards or obtaining interim measures under the UNCITRAL Model Law on International Commercial Arbitration.

 

Previous amendments to the IAA that were directed to ensuring that the Federal Court and the State and Territory Supreme Courts have concurrent jurisdiction did not address which courts are competent to enforce a non-foreign award or to grant interim measures. This has resulted in some uncertainty as to which courts are "competent courts" for these purposes. This latest amendment would resolve the prevailing uncertainty.

 

Next Steps and analysis

 

The Bill is required to pass the House of Representatives before it has force of law. Given that it is an omnibus bill that provides for amendments to several pieces of legislation its passage may take some time. 

 

In any event, the Bill is another encouraging sign that Australia remains a pro-arbitration jurisdiction and that the Legislature is committed to remaining at the forefront of arbitration globally. If passed, the Bill will enhance Australia's attractiveness as a seat for arbitration and should hopefully achieve the stated aim of ensuring that "Australian arbitral law and practice stay on the global cutting edge".

 

Our International Arbitration Group will keep you updated on the passage of the Bill.

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For further information, please contact:

 

Georgia Quick, Partner, Ashurst 
georgia.quick@ashurst.com