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Proposed amendments to the International Arbitration Act 1974 (Cwlth)

Proposed amendments to the International Arbitration Act 1974 (Cwlth)

On 25 November 2009, the Federal Attorney-General introduced the International Arbitration Amendments Bill 2009 (Cwlth) (the Bill) into the House of Representatives. The Bill proposes a series of amendments to the International Arbitration Act 1974 (Cwlth) (the IAA), which is the legislation that gives effect to Australia’s obligations under the New York Convention of 1958 and adopts the UNCITRAL Model Law of 1985. The IAA regulates international arbitration in Australia, dealing with matters including:

  • the enforcement of international arbitration agreements

  • the enforcement of international arbitral awards, and

  • the role of Australian courts in support of international arbitration.

In its present form, the Bill is the most significant reform to international arbitration in Australia since the IAA became effective. In the second reading speech to the Commonwealth Parliament, the Attorney-General stated that the Bill will ensure the IAA remains at the forefront of international arbitration practice. The Bill includes the following proposed amendments.

Application of the UNCITRAL Model Law

In 2006, the UNCITRAL Model Law was updated for the first time since 1985. Except in relation to ex parte orders, the Bill incorporates the updated Model Law within the IAA. Importantly, this means that temporary means of protection known as “interim measures” will be recognised as binding and will be enforced by Australian courts.

Further, the Bill attempts to ensure that the UNCITRAL Model Law “covers the field” of international commercial arbitration in Australia. The existing section 21 of the IAA allows parties to opt out of applying the UNCITRAL Model Law and to resolve their dispute under a different arbitral law. This has created uncertainty as to the applicable rules and laws for international arbitrations conducted in Australia, most notably in Australian Granites Limited v Eisenwerk Hensel Bayreuth Dipl-Ing Burkhardt GmbH [2001] 1 Qd R 461 where the adoption of institutional arbitration rules was held to exclude the application of the Model Law. The Bill repeals the existing section 21 and proposes a new section which clarifies that parties are unable to opt out of the Model Law in any circumstance.

Interpretation of the IAA

The Bill provides further guidance on interpreting the IAA. Proposed section 2D sets out the objects of the IAA, including the facilitation of trade and commerce, of arbitration agreements, and of recognition and enforcement of arbitral awards. Proposed section 39 requires courts to have regard to these objects when performing functions under the UNCITRAL Model Law, as well as to arbitration’s efficient, impartial, enforceable and timely nature.

The Bill confines the circumstances in which courts can refuse to recognise and enforce foreign arbitral awards. The courts would no longer be able to apply the laws of the States and Territories when enforcing foreign awards (subsection 8(2)). Proposed subsection 8(3A) limits courts’ discretion to refuse to enforce a foreign award to the circumstances in subsections 8(5) and 8(7).

It is hoped that these amendments provide more certainty and consistency with respect to international arbitrations in Australia, strengthening confidence in the jurisdiction from overseas.

Concurrent jurisdiction of the Federal Court

The IAA currently grants exclusive first-instance jurisdiction to the State and Territory Supreme Courts to exercise judicial functions under the UNCITRAL Model Law. The Attorney-General’s review of the IAA, which led to the development of the Bill, considered extensively whether to confer exclusive jurisdiction upon the Federal Court. Ultimately the Government has decided not to amend section 18 of the IAA in this way. The Federal Court will instead exercise jurisdiction which is concurrent to the jurisdiction of the State and Territory Supreme Courts. Parties would be able to apply directly to the Federal Court in respect of matters arising under the IAA, but the Supreme Courts retain jurisdiction to hear the same matters.

The Government has foreshadowed that specialist international arbitration lists will be developed in the State and Territory Supreme Courts and in the Federal Court, in order to concentrate the expertise of those Courts. It remains to be seen whether these lists will sufficiently improve the consistency of judicial decision-making with respect to the IAA.

What this means for you

The Bill aims to make Australia a more attractive destination to host international commercial arbitrations. Successful reform will encourage parties to include arbitration clauses in cross-border contracts which name Australia as the seat for arbitration. This would have implications for the wider Australian business community, as an increase in arbitral proceedings would have flow-on effects for the wider economy.

Reform of the IAA is also provoking reform to domestic arbitration legislation. State and Territory legislatures will soon introduce bills designed to improve perceptions of arbitration as a viable alternative to litigation within Australia’s legal and business communities.

Although the Bill has not yet been passed in the House of Representatives, it appears likely that the Opposition will support the amendments.

Who does this affect?
Entities involved in cross-border transactions and companies with offshore investments including construction disputes and reinsurance disputes.

What do you need to do?
Review how the issues and developments covered in our publication impact your business. We can help.

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