A Q&A guide to arbitration law and practice in Australia.
The country-specific Q&A guide provides a structured overview of the key practical issues concerning arbitration in this jurisdiction, including any mandatory provisions and default rules applicable under local law, confidentiality, local courts' willingness to assist arbitration, enforcement of awards and the available remedies, both final and interim.
To compare answers across multiple jurisdictions visit the Arbitration procedures and practice Country Q&A tool.
This Q&A is part of the PLC multi-jurisdictional guide to arbitration. For a full list of jurisdictional Q&As visit www.practicallaw.com/arbitration-mjg.
International arbitration is a popular means of resolving cross-border disputes in the Asia-Pacific region, including in Australia. With the growth in trade between Australia and countries in the Asia-Pacific region, in particular China, Thailand and Vietnam, arbitration has also become the method of choice for resolving disputes in matters related to energy, resources, oil and gas, and shipping.
A recent trend has been the use of investment treaty arbitration. In two recent firsts, an Australian entity has pursued an investment treaty arbitration against a foreign state and Australia has been on the receiving end of an investment treaty claim by a corporation (Philip Morris Asia Limited has commenced a claim under the Australia-Hong Kong bilateral investment treaty in relation to Australia's tobacco plain packaging legislation).
International arbitration is regulated by the International Arbitration Act 1974 (Cth) (IAA). It adopts the:
Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention).
UNCITRAL Model Law on International Commercial Arbitration 1985 (UNCITRAL Model Law).
Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention).
A key recent trend has been the updating in 2010 and 2011 of state and territory and Commonwealth arbitration legislation. The 2010 amendments to the IAA incorporated changes passed to the UNCITRAL Model Law in 2006. The amendments were also designed to address some problematic Australian court decisions. For example, the decision in Eisenwerk v Australian Granites Pty Ltd [2001] 1 Qld R 461, which held that parties could impliedly opt out of the IAA by choosing arbitral procedural rules such as the International Chamber of Commerce Rules of Arbitration to govern their arbitration, with the result that such arbitrations were governed by the relevant domestic arbitration legislation. Under the IAA now in force, it is not possible for a party to opt out of the mandatory provisions of the UNCITRAL Model Law (either expressly or impliedly). The majority of Australia's states and territories have also recently amended the law applying to domestic arbitration so that it aligns with the law applying to international arbitration.
There are a number of advantages to arbitrating in Australia, including:
Recently updated international arbitration legislation is in alignment with international best practice. Parties can also opt in to additional provisions, which provide for matters such as the consolidation of proceedings, interest rates, the enforcement of interim measures and confidentiality.
Representation through foreign lawyers. There is no bar in Australia to foreign lawyers representing a client in an international arbitration conducted in Australia.
Generally supportive courts. The courts are generally supportive of arbitration and the enforcement of awards and arbitration agreements, although there have been a few decisions which have strayed from this general approach.
Political stability. Australia is politically stable and is a safe destination.
While steps have been taken to promote international arbitration, a number of decisions of state courts have shown an inconsistent approach to the enforcement of awards and agreements. It is hoped this will change in the short term, particularly given the recent legislative amendments.
The Australian Centre for International Commercial Arbitration (ACICA) is Australia's only international arbitral institution and since 2 March 2011, it has been the sole default appointing authority competent to perform the arbitrator appointment functions under the amended IAA (see box, Main arbitration organisation).
The primary legislation in relation to international arbitration in Australia is the IAA. The IAA annexes as Schedules (and brings into law in Australia), the New York Convention, the UNCITRAL Model Law and the ICSID Convention. The IAA supplements the 2006 version of the UNCITRAL Model Law in a number of respects. For example, Division 3 contains optional provisions in relation to the consolidation of proceedings and confidentiality.
Each state and territory of Australia has adopted legislation governing domestic arbitrations held in that state or territory. It is proposed that this legislation in each jurisdiction be amended to adopt the UNCITRAL Model Law although not all jurisdictions have made these amendments yet.
Arbitration is mandatory under certain statutory regimes, for example the Gas Pipeline Access Act 1998 (Qld). Some state courts also have the power to order compulsory arbitration, for example pursuant to section 76B of the Supreme Court Act 1970 (NSW).
Arbitration is not permitted in various types of matters, such as criminal, family law, bankruptcy, and/or insolvency matters. Recently the courts have taken a more permissive approach to the arbitrability of consumer protection, competition law and intellectual property (IP) disputes. However, IP issues involving issues of validity of a registered right may not be arbitrable.
While arbitration agreements can be concluded either orally or in writing, for the agreement to be valid it must be evidenced in writing (section 16, IAA).
The law of limitation applies to arbitration proceedings in Australia.
Each state and territory has its own Limitations Act which fixes different limitation periods for different causes of action. In all jurisdictions except South Australia (and Western Australia for causes of action arising pre-2005), these statutory provisions expressly apply to arbitrations in the same way as they apply to actions. In South Australia (and Western Australia for pre-2005 causes of action), the statutory provisions apply to arbitrations by implication.
Therefore arbitration proceedings cannot be commenced after the statutory limitation period for the underlying cause of action has expired. Depending on the cause of action, this period will generally be six years from the date the cause of action accrues, however the relevant state/territory Limitations Act should be consulted.
Arbitration proceedings are taken to commence when one party serves a notice which:
Requires the other party to appoint an arbitrator.
Agrees to the appointment of an arbitrator.
Submits the dispute to a designated arbitrator.
Where an arbitration clause does not contain a notice provision, arbitration proceedings commence when one party gives the other party notice of the taking of any step required to bring the matter before an arbitrator (see Question 12).
An arbitration agreement must be in writing, recorded in any form (section 16, IAA adopting Option I to Article 7, UNCITRAL Model Law). This requirement is satisfied regardless of whether the agreement was concluded orally, in writing, by conduct or by other means. Option I to Article 7 also recognises agreements formed through electronic communication and through the exchange of statements of claim and defence (where the existence of an agreement alleged by one party is not denied by the other).
Generally, the agreement to arbitrate can be made before or after the dispute arises between the parties. However, arbitration agreements to which the Insurance Contracts Act 1984 (Cth) applies are invalid unless the parties agreed to arbitrate after the dispute or difference arose (section 43, Insurance Contracts Act). Similar restrictions are contained in state legislation dealing with domestic building contracts.
Australian courts tend to construe arbitration clauses widely. Case law has suggested that the words "arising out of, relating to or in connection with this contract" are the widest possible way to define the scope of an arbitration agreement (Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45).
A separate agreement containing an arbitration clause is not required for an arbitration agreement to be enforceable. An arbitration clause in the main contract is sufficient.
However, a separate agreement containing an arbitration clause is only sufficient where reference to that clause in the main contract makes the clause part of the main contract (section 3(5), IAA). It is uncertain whether a reference to the clause itself is required or whether broader reference to the separate agreement is sufficient.
Australian courts treat arbitration clauses as separable. The tribunal can consider objections to the existence or validity of the arbitration agreement (section 16(1), UNCITRAL Model Law). For that purpose, an arbitration clause which forms part of a contract is treated as an agreement independent of the other terms of the contract.
An arbitration agreement is not ineffective if the contract containing it is void or voidable.
Usually, a third party is not bound by an arbitration agreement without its consent. However, a third party can be joined in limited cases, such as fraud or the inappropriate use of company structures.
The parties can choose the number of arbitrators (Article 10(1), UNCITRAL Model Law), although in the absence of agreement the number of arbitrators is three (Article 10(2), UNCITRAL Model Law). Arbitrators do not need to be admitted as practitioners in Australia, nor are there any requirements on arbitrators' professional qualifications, nationality or residence.
Arbitrators must be both impartial and independent (Article 12(1), UNCITRAL Model Law).
Any person when approached regarding their possible appointment as an arbitrator, must disclose any circumstances likely to give rise to justifiable doubts as to their impartiality or independence. This duty is on-going throughout the arbitral proceedings (Article 12(1), UNCITRAL Model Law). Justifiable doubts exist only if there is a "real danger of bias" on the part of the person conducting the arbitration (section 18A(1), IAA).
The parties are free to agree a procedure for appointing arbitrators (Article 11(2), UNCITRAL Model Law).
Where the parties are unable to agree a procedure for the appointment of the tribunal (including when due to the parties failure to agree to institutional rules which provide for an institution to make the appointment), ACICA will appoint an arbitrator (Article 11(3), UNCITRAL Model Law and Regulation 4, International Arbitration Regulations 2011 (Cth)). ACICA is the sole authority for this purpose, and also becomes the appointing authority where an agreed procedure for appointment breaks down (Article 11(4), UNCITRAL Model Law).
Arbitrators can be removed if there is a real danger of bias (see Question 10).
The parties are free to agree a procedure for challenging an arbitrator (Article 13(1), UNCITRAL Model Law). Where no agreement has been made, any challenge is heard by the arbitral tribunal (Article 13(2), UNCITRAL Model Law). If the challenge procedure is unsuccessful, the challenging party can request that the courts decide the challenge although any challenge to the courts is not subject to appeal (Article 13(3), UNCITRAL Model Law).
Unless otherwise agreed by the parties, arbitral proceedings in respect of a dispute commence on the date when the request for arbitration is received by the respondent (Article 21, UNCITRAL Model Law) (see Question 5).
Subject to certain mandatory provisions (see below, Default rules), the parties are entitled to agree on the procedure of an arbitration (UNCITRAL Model Law). In the absence of such agreement, and again subject to the mandatory provisions of the UNCITRAL Model Law, the tribunal is entitled to conduct the arbitration as it thinks appropriate (Article 19(2), UNCITRAL Model Law).
The UNCITRAL Model Law governs the procedure of international arbitration (see Question 3) and local rules and court procedures do not apply. Many provisions of the UNCITRAL Model Law can be amended by agreement between the parties although some are mandatory, including:
The parties must be treated with equality and each party must be given a full opportunity to present its case (Article 18, UNCITRAL Model Law). Under section 18C of the IAA, the term full opportunity is defined to equate to "a reasonable opportunity".
Oral hearings must be held on the request of a party, unless the parties have agreed otherwise (Article 24(1), UNCITRAL Model Law).
The tribunal must give the parties sufficient advance notice of any hearing and of any meeting of the tribunal for the purposes of inspection of property or documents (Article 24(2), UNCITRAL Model Law).
Information supplied by the tribunal to one party must also be communicated to the other parties, and any expert report of evidentiary documents relied on by the tribunal must be communicated to the parties (Article 24(3), UNCITRAL Model Law).
While there is no express power to order disclosure or attendance, a party can apply to a court to issue a subpoena requiring disclosure or attendance (see Question 17).
Unless the parties agree otherwise a tribunal is empowered to appoint an independent expert to assist the tribunal, and they can also require parties to give the expert relevant information or to produce any documents (Article 26, UNCITRAL Model Law). In practice, it is far more common for expert evidence to be presented by experts engaged separately by the parties.
There are no mandatory requirements as to the disclosure of documents to other parties and/or arbitrators (see Question 14). Arbitrations are not required to comply with domestic rules of disclosure or evidence.
In practice, parties and arbitrators tend to deal with matters through some form of disclosure akin to common law discovery. Despite significant efforts by the courts and practitioners to limit the scope of discovery to only the most relevant documents, arbitrations can involve substantial discovery obligations.
In Australia, legal privilege is known as legal professional privilege (LPP). LPP protects confidential information from being disclosed, where it might otherwise be required by law to be provided to another party (such as the tribunal or a party to an arbitration). There are two limbs of LPP:
Advice privilege. This protects confidential communications made for the dominant purpose of a lawyer providing legal advice to a client.
Litigation privilege. This protects confidential communications made for the dominant purpose of use in or in relation to legal proceedings (whether existing or anticipated).
LPP is held by the client (not by the lawyer or any other person who may have made or received the communication). LPP can be waived by the client, either intentionally, or by the client engaging in conduct which is inconsistent with maintaining a claim of LPP (for example, by disclosing the substance of legal advice).
The legislation does not expressly refer to legal privilege generally or to LPP. However, it is common practice for the general principles of LPP to be applied to disclosure and subpoenas in arbitrations in Australia.
The parties are entitled to agree the rules on disclosure. Subject to any such agreement, the discretion provided to the tribunal under Article 19(2) of the UNCITRAL Model Law allows a tribunal to make whatever orders for discovery it considers appropriate.
In particular, the IBA Rules on the Taking of Evidence in International Arbitration (IBA Rules) can be adopted by agreement between the parties or by the tribunal's order. It is becoming more common for tribunals to apply the IBA Rules, or use them as guidance.
The IAA provides for a confidentiality regime which applies on an opt-in basis (section 22(3), IAA). If the parties opt-in, confidential information can still be disclosed where, for example, the parties have consented to disclosure, or disclosure is required by a court order, a law, or a regulatory body (section 23D, IAA).
If the parties do not opt-in to the IAA confidentiality provisions (and in the absence of any confidentiality agreement between the parties), the arbitration will be private (in the sense that third parties cannot get access to the hearing), but will not be confidential (Esso Australia Resources Ltd v Plowman (Minister for Energy & Minerals) (1995) 183 CLR 10).
Australian courts have the same power to issue interim relief in arbitration proceedings as they do in court proceedings, regardless of whether the arbitration is seated in Australia (see Question 22, Other interim measures). The court must exercise its powers in accordance with its own procedures, but must consider the specific features of international arbitration.
A court can grant an interim measure of protection on request, before or during arbitral proceedings (Article 9, UNCITRAL Model Law). Where a court subpoena is issued under section 23 of the IAA but not complied with, an innocent party can apply to a court to have the subpoena enforced (see Question 14).
The general approach of the courts is to encourage, rather than interfere with arbitration, particularly in light of recent legislative reforms.
The rules of civil procedure generally provide for a proceeding to be struck out on the grounds that it:
Discloses no reasonable cause of action.
Is scandalous, frivolous or vexatious.
May prejudice, embarrass or delay the fair trial of an action.
Is otherwise an abuse of process.
These rules provide a basis to object to repeated court applications which attempt to delay an arbitration.
The national and state courts are increasingly aware of the importance of enforcing arbitration agreements. The continuing trend is towards requiring parties to arbitrate if they have a contract to do so.
A local court will stay court proceedings in favour of arbitration if the:
Arbitration agreement is valid.
Relevant dispute falls within the scope of that agreement.
Dispute is capable of arbitration.
The Federal Court of Australia, as well as the Supreme Courts of the states of New South Wales and Victoria, all now have specialist commercial arbitration lists designed to facilitate such applications.
Injunctions that prevent the commencement or continuation of an arbitration, or anti-arbitration injunctions, have been issued in Australia. This will usually be the remedy sought when the validity of the arbitration agreement is disputed, and one party attempts to commence an arbitration regardless. Anti-arbitration injunctions may be issued even where the arbitration is seated outside Australia, with the extra-territoriality of the arbitrator being no bar to a finding that the party is in fact in contempt of court.
Local courts can issue anti-suit injunctions to restrain proceedings brought in a foreign jurisdiction in breach of a valid arbitration agreement.
An arbitral tribunal can determine its own jurisdiction (Article 16, UNCITRAL Model Law).
Where the tribunal has ruled on its jurisdiction as a preliminary question, an aggrieved party can request that the court decide the issue. There is no appeal against the finding of the court. However, the tribunal may continue proceedings and make an award while any such application is pending (Article 16(3), UNCITRAL Model Law).
An arbitral tribunal can order a party to pay security for costs at any time before an award is issued (section 23K, IAA). This provision automatically applies to proceedings commenced under an arbitration agreement, unless the parties agree otherwise. However, a security of costs order cannot be granted solely on the basis that:
The party is not ordinarily a resident in Australia.
The party is a corporation incorporated or an association formed under the law of a foreign country.
The party is a corporation or association with its central management or control in a foreign country.
Chapter VI A of the UNCITRAL Model Law, which governs interim measures, applies to any security of costs order (section 23K(3), IAA).
Unless otherwise agreed between the parties, a tribunal can grant interim measures at the request of a party and can require the party requesting an interim measure to provide appropriate security in connection with the measure (Article 17E(1), UNCITRAL Model Law).
An interim measure is any temporary measure or step taken by a tribunal that requires a party, before the issuance of the final award, to (Article 17(2), UNCITRAL Model Law):
Maintain or restore the status quo pending determination of the dispute.
Take action to prevent, or refrain from taking action that is likely to cause current or imminent harm or prejudice to the arbitral process itself.
Provide a means of preserving assets out of which a subsequent award may be satisfied.
Preserve evidence that may be relevant and material to the resolution of the dispute.
Other than in relation to the preservation of evidence, the party requesting the interim measure must satisfy the tribunal that (Article 17A(1), UNCITRAL Model Law):
Harm which cannot be satisfied by damages is likely to result if the measure is not ordered, and that harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted.
There is a reasonable possibility that the requesting party will succeed on the merits of the claim.
In relation to an order to preserve evidence, these requirements only apply to the extent that the tribunal considers it appropriate (Article 17A(2), UNCITRAL Model Law).
Article 17B of the UNCITRAL Model Law provides for a party to make an application, without notice to the other party, for interim measures along with a preliminary order designed to prevent the other party from frustrating the interim measure. However, a tribunal cannot grant such an order (section 18B, IAA). Therefore, any such preliminary orders must be sought from a court under Article 17J of the UNCITRAL Model Law.
There are no limits on arbitrators' powers to award appropriate remedies. However, parties can impose limits by agreement.
The power of arbitrators to award punitive or exemplary damages has not yet been considered by Australian courts.
There are limited grounds for challenging an arbitral award. The only recourse available is an application to set aside an award (Article 34(1), UNCITRAL Model Law).
An award may be set aside where:
A party was under some incapacity.
The arbitration agreement was invalid.
A party was not given proper notice of the appointment of the tribunal or was otherwise unable to present its case.
The award exceeds the scope of the submission to arbitration.
The composition of the arbitral tribunal or its procedure was not in accordance with the parties' agreement.
The dispute is not capable of settlement by arbitration.
The award is contrary to public policy.
An award is in breach of public policy if it was affected by fraud or corruption, or if there was a breach of natural justice in connection with the making of the award (section 19, IAA).
There is no provision for parties to exclude the right to challenge an award.
There are many different ways lawyers can charge legal fees. Generally, fees in commercial arbitration matters are charged on agreed hourly rates and clients must pay for disbursements or out of pocket expenses incurred on their behalf. Most courts or tribunals are also authorised to order that an unsuccessful party pay the other party's costs (see Question 26, Cost allocation). Lawyers must provide clients with costs agreements to sign.
Subject to parties opting out of the provision, the IAA sets out rules that apply to the awarding of costs in an arbitration. Costs are assessed at the discretion of the tribunal (section 27(1), IAA). The general rule in judicial proceedings that costs are awarded to the successful party is commonly followed by tribunals.
Costs are calculated at the sole discretion of the tribunal. Where an award does not address costs, a party may apply within 14 days of the award for directions as to costs from the tribunal (section 27(4), IAA).
The costs of arbitration include the fees and expenses of the arbitrator(s) (section 27(1), IAA).
An arbitral award made in Australia is binding on the parties (Article 35, UNCITRAL Model Law), and will be enforced by local courts.
An application for enforcement can be made to any court in Australia. The only basis on which enforcement can be refused against a party to the arbitration is if a valid appeal is available (see Question 24).
Australia has acceded to the New York Convention, which is enacted into Australian law by the IAA (see Question 3). Therefore, arbitration awards made in Australia will be enforceable in other states that are signatories to the New York Convention, by virtue of Article III of that Convention.
Australia is not a signatory to any other regional conventions concerning the enforcement of arbitration awards.
Foreign awards are enforceable as if they are a judgment or order of an Australian court (section 8, IAA).
There are two differences between the rules for enforcement of foreign awards and domestic awards:
A foreign award made in a country that is not a New York Convention country will only be enforced if the enforcing party is domiciled or ordinarily resident in Australia or another convention country (section 8(4), IAA).
A foreign award will only be enforced if the enforcing party meets a threshold requirement of showing that the other party was in fact a party to the arbitration agreement and arbitral award (insofar as this is not clear on the face of the documents) (IMC Aviation Solutions Pty Ltd v Altain Khuder LLC (2011) 282 ALR 717).
A party seeking to enforce a foreign award in Australia must produce to the court (section 9(1), IAA):
The authenticated original award or a duly certified copy.
The original arbitration agreement under which the award purports to have been made or a duly certified copy.
If these documents are not written in English, the party seeking enforcement must produce certified translations (section 9(3), IAA). A translation must be certified by a diplomatic or consular agent in Australia of the country in which the award was made, or otherwise to the satisfaction of the court (section 9(4), IAA).
Enforcement proceedings are usually efficient in Australia and can be expected to be completed within a few months. The time and costs associated with the proceedings will vary depending on a number of factors, including:
The amount of the award.
The complexity of the claim.
The position taken by the judgment debtor.
The legal framework in Australia has recently been the subject of significant reform. Therefore further change is not anticipated in the near future.
Main activities. ACICA is Australia's only international arbitral institution and since 2 March 2011, it has been the sole default appointing authority competent to perform the arbitrator appointment functions under the amended International Arbitration Act 1974 (Cth).
T +61 2 9296 2079
E max.bonnell@au.kwm.com
W www.kwm.com
Qualified. Australia, 1996
Areas of practice. Commercial litigation; international commercial arbitration; mediation.
T +61 3 9643 4253
E peter.megens@au.kwm.com
W www.kwm.com
Qualified. Australia, 1980
Areas of practice. Commercial litigation; mediation; domestic and international commercial arbitration.
T +61 2 9269 7082
E mark.darian-smith@au.kwm.com
W www.kwm.com
Qualified. Australia, 1984
Areas of practice. Commercial litigation; international commercial arbitration; mediation.
T +61 8 9269 7114
E beth.cubitt@au.kwm.com
W www.kwm.com
Qualified. Australia, 2001
Areas of practice. Commercial litigation; mediation; domestic and international commercial arbitration.
