Michael Keenan (Stirling, Liberal Party, Shadow Minister for Justice and Customs) Share this | Link to this | Hansard source

I rise to speak on the International Arbitration Amendment Bill 2009. Arbitration is the primary means by which parties to transnational commercial agreements resolve disputes without having to resort to national courts. They have the advantage of avoiding the complex choice of law and enforcement issues that can arise in national courts. They also typically provide for a process that is specifically formulated to the parties’ requirements and is therefore more likely to preserve the relationship between them. The principal act, the International Arbitration Act 1974, implements Australia’s commitments under the New York Convention of 1958 and the Washington Convention of 1965 and gives the force of law to the UN model law on international commercial arbitration. However, problems have gradually arisen in the interpretation and application of the act over the years, particularly as to the application of competing state legislation and the means by which arbitral awards can be challenged.

The amendments effect an agreement with the states for a uniform arbitration legislation scheme based on the UN model law on international commercial arbitration, provide for limitations on court intervention and give clearer guidance on the interpretation of the model law. Miscellaneous amendments will supplement the operation of the model law as it relates to interim measures, disclosure of information, interests and costs.

The International Arbitration Act 1974 implements Australia’s obligations to enforce and recognise foreign arbitration agreements and arbitral awards under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which was completed in New York in 1958. The act also gives the force of law to the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration as the primary arbitral law that governs the conduct of international arbitrations taking place in Australia. Finally, the act also implements Australia’s obligations under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which was completed in Washington in 1965.

The amendments to the act contained in the bill can be divided into four separate categories: amendments to the application of the act and the model law; amendments concerning the interpretation of the act; amendments to provide additional option provisions to assist the parties to a dispute; and miscellaneous amendments to improve the operation of the act. In 2006 the United Nations Commission on International Trade Law Model Law adopted the first set of amendments to the model law since it was originally adopted in 1985. With one exception relating to ex parte orders, the bill will apply these amendments to international commercial arbitration in Australia.

Section 21 of the act allows the parties to an arbitration agreement to resolve their dispute under an arbitral law other than the model law, as given the force of law by the act. For example, the parties could choose to resolve their dispute under state or territory legislation. This creates significant legal difficulties and confusion concerning the interaction of the different laws. The bill repeals section 21, removing the ability of the parties to an arbitration agreement to nominate an alternative arbitral law. The bill also amends the act to expressly provide that the model law covers the field with respect to international commercial arbitration. In doing so, the bill retains jurisdiction for state and territory supreme courts and confers jurisdiction on the Federal Court of Australia.

The bill includes new provisions which are intended to confine the circumstances in which the courts can set aside an award made under the model law or refuse to enforce foreign awards under the New York convention and the model law. The bill amends the act to provide guidance to the courts when exercising powers and functions under the act or the model law, exercising powers or functions under an arbitration agreement or award, interpreting the act or the model law, or interpreting an arbitration agreement or award. For example, the bill requires a court to have regard to the objects of the act and to the fact that arbitration is an efficient, impartial, enforceable and timely method of dispute resolution. The bill inserts an objects clause into the act which emphasises the importance of international arbitration in facilitating international trade and commerce and is intended to guide the interpretation of the act.

In addition to giving force to the model law as the primary arbitral law governing the conduct of international commercial arbitration in Australia, the act also provides a range of provisions that the parties to an arbitration agreement may adopt on an opt-in basis and which are intended to help them resolve any disputes between them fairly and efficiently. These provisions address issues such as the consolidation of arbitral proceedings and the awarding of interests and costs.

The bill includes a number of additional optional provisions that will be made available to the parties to an arbitration agreement. These provisions cover issues such as the availability of subpoenas and court orders to support an arbitration, the disclosure of confidential information and the death of a party.

This is the second amendment that has been made to the international arbitration regime—the first being the Federal Justice System Amendment (Efficiency Measures) Act (No. 1) 2008. Both pieces of legislation seek to increase the attractiveness of Australia as a venue for international commercial arbitration. This is a high-value service in which Australia should enjoy a competitive advantage. Any initiative that seeks to enhance that advantage is welcomed by the opposition. Therefore, we support the passage of this legislation.

Janelle Saffin (Page, Australian Labor Party) Share this | Link to this | Hansard source

I speak in support of the International Arbitration Amendment Bill 2009, which was introduced into this place in November last year. I want to thank the Attorney-General for causing a review of the act to be undertaken, after announcing it in November 2008. It was a timely review. I note that the review took into account some 30 submissions, a literature review, court cases and judgments—all manner of things—plus the model law and some amendments that were needed. No doubt the thinking of the Attorney-General and, I would say, the people in the Attorney-General’s Department was also brought to bear on this issue.

The predominant thinking around the act is to maintain its simplicity and its ease of take-up, application and enforcement. Yes, it is done within the rule of law but it is not so rule bound that it cannot take account of realities and agreements in the world of commerce. Any changes to the legislation need to be considered within this framework because amending laws can sometimes complicate, not simplify, an issue.

I have read the review and am familiar with the act and the conventions. One is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. It is also called the New York convention because it was agreed to there. This is often how such things are named—for instance, the Doha Round, the Uruguay Round, the Bretton Woods agreement et cetera. There is also the International Convention on the Settlement of Investment Disputes Between States and Nationals of Other States from 1965, and the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration is what we call the model law.

UNCITRAL was established by a resolution of the General Assembly back in 1966 to help states face the problem of the diversity of national laws. We should be aware that many states are also federal in some form, which brings with it another set of complexities when dealing with any international-national system. This is a common way for states to organise—in fact, it is one of the most common ways. The particular challenges and obstacles that this presents to the free flow of trade was one of the key problems that the commission was given to address. The commission’s mandate is to further the progressive harmonisation and unification of the law of international trade. ‘Harmonisation’ and ‘unification’ are terms that we are well familiar with and they sound good, but in practice they can be very difficult, particularly when we are dealing with 192 states.

Australia is one of the 60 states on the commission. People are elected for six years. I think that the terms of the current members expire this year. All of this can seem a bit complex but in practice it works well enough. However, it is recognised that it can always work better—hence the bill before this place. One of the problems we face in multilateral jurisdictions such as Australia is that state, territory and federal courts each apply their own enforcement or absence of procedures. Some parties agree to submit themselves, but they agree in the context of electing certain jurisdictions to be covered by certain arbitration settlement and enforcement rules.

I have had experience in negotiating some of those contract agreements by way of leases and licences with major international companies and states—namely, Timor Leste. I have also had experience in working on how to introduce a simple law that sets up a no-frills arbitration system for a state and then getting it off the ground so that business and commerce have some certainty and can work to build capacity vis-a-vis this whole area of trade law and trade capacity. It is challenging indeed.

In Australia, the states have their own commercial arbitration acts and tribunals. In fact, I was a member of the New South Wales Commercial Tribunal for a number of years—not that it sat in country New South Wales very much. I was also a member of the Administrative Decisions Tribunal. So I am familiar with the way in which some of this works at a very local level and how it manifests itself in a variety of configurations.

The amendments to the act seek to coalesce some of the matters that I have just discussed and some others that I have not discussed. There are three objectives to be achieved by the amendments. Firstly, they are to provide guidance to the courts in the interpretation of the act. If I remember correctly—because it was some time ago that I prepared these notes—it currently has none and, I believe, no particular or focused objects either. I think they are now being included. Secondly, they are to clarify the application of the act between the various Commonwealth, state and territory pieces of legislation. Thirdly, they will implement amendments to the UNCITRAL Model Law on International Commercial Arbitration.

The bill also gives effect to enhanced flexibility, including a range of optimal mechanisms that parties can use to resolve a dispute, recognising that it does not all have to be strictly legislated. If I remember correctly, it gives more certainty to what constitutes an agreement. There is a broader definition, including e-communications and e-commerce. Then it addresses some technical matters around confidentiality, court orders, capping costs and subpoenas or the availability thereof.

Regarding the model law provisions, there is a good inclusion in that parties will be able to preserve the status quo of disputed assets while arbitration is being resolved. That is always quite a problem in practice. Often those assets will disappear, flee or go missing in action while the matter is in dispute, so it will give some effect to that.

The bill will set out the types of matters that a court should have regard to when exercising functions under or interpreting the act. The model law and arbitration agreement, or arbitral award, and these provisions emphasise the importance of arbitration in supporting international trade and commerce—because that is what it is about—and recognise that arbitration is an efficient, impartial, enforceable and timely method by which to resolve disputes. That is the ideal, of course, because we want it to be efficient, impartial, enforceable and timely. These amendments will seek to further enhance those attributes.

The bill will also clarify the only grounds—and that is important—on which the court may refuse to recognise a foreign award, and these are the ones set out in section 8 of the act. They are consistent with Australia’s obligations under the New York convention.

In closing, I would just like to say that the bill will provide clear guidance to the courts on interpretation. That is a good thing. By adopting amendments made to the model law, the bill ensures that we stay at the forefront of international commercial arbitration practice. I will be interested to see how this works in practice, having had a little bit of experience in the area. I know that the object is to simplify and stay ahead of the game. I am sure that will happen, but often things need a bit of tweaking after they are implemented and this is one of those areas that I see as a work in progress. With those words, I commend the bill to the House.

Craig Thomson (Dobell, Australian Labor Party) Share this | Link to this | Hansard source

I rise to support the International Arbitration Amendment Bill 2009. The bill amends the International Arbitration Act 1974 to clarify the application of the act and the United Nations Commission on International Trade Law’s Model Law on International Commercial Arbitration to provide greater certainty concerning the interpretation of the act and the model law to provide additional optional provisions to assist the parties to a dispute and make other miscellaneous amendments to improve the operation of the act.

The proposed government amendments make a number of minor amendments to improve the operational provisions in the bill. In addition, they set out a new scheme for the application of optional provisions contained in the act and the bill, insert a new provision modifying the requirements in the model law such that parties be given a full opportunity to present their case to facilitate faster proceedings and add additional measures concerning matters such as evidence and security for costs. The government amendments were developed in response to issues raised by practitioners after the bill was developed.

This bill is about the facilitating international trade and commerce by providing a more effective regime for the conduct of international commercial arbitrations in Australia. Our trade is a vital part of our economy. The Australian government continues to support trade liberalisation unequivocally and resist protectionism. We are committed to helping developing countries gain access to international economic opportunities. One of the more recent major developments in trade in Australia was in January this year, when Australia welcomed the commencement of our largest free-trade agreement, the ASEAN free-trade agreement. The historic agreement spans 12 economies with over 600 million people and a combined GDP of $3.1 trillion. The agreement opens up significant opportunities for Australian business in one of the fastest-growing regions in the world. There is great potential for Australian exporters to enter new markets with Asia leading the global recovery and six out of 10 Asian markets expected to grow at rates at least double the OECD forecasted average in 2010.

Australia sees this agreement as an important building block towards deepening this country’s economic integration with the dynamic Asian region. The agreement covers over 70 per cent of Australia’s trade with Asian countries with which we do not have bilateral free-trade agreements. The agreement includes the elimination of tariffs on exports such as cheese, fresh grapes, wheat and sheep meat. It also dramatically expands the subject areas that Australian education providers can deliver in Vietnam. By 2020 the deal, which is Australia’s first multi-country free-trade agreement and the most comprehensive free-trade agreement ever concluded by ASEAN, will eliminate tariffs on 96 per cent of our current exports to ASEAN countries. ASEAN accounted for 15 per cent of Australia’s trade, valued at $83 billion, in 2008-09. This is as large as Australia’s trade with China, Australia’s largest trading partner. Forty-two per cent of our total exporter base, or around 18,500 Australian exporters, trade with ASEAN. That is just one picture of how important Australia’s trade is, especially our growing trade prospects with our own region. No doubt our business community will be doing its best to take full advantage of the many benefits that this far-reaching agreement with ASEAN has to offer.

Of course, the global financial crisis hit global trade right around the world. With the global financial crisis we saw the biggest downturn in the global economy since the Great Depression. The Rudd government’s intervention with the stimulus package helped to save jobs during this period. If we have a look at the effects of the recessions in the 1980s and 1990s, hundreds of thousands of Australian jobs were lost and it took years and years for those jobs to return. On the Central Coast the economy would have been devastated by the global financial crisis but for the fact of the stimulus package, which helped to support jobs in retail, manufacturing and construction in particular. In previous recessions the Central Coast was hit the hardest of the many regions in Australia. The member for Shortland, who was just here, shares part of the beautiful Central Coast with me. Unemployment in the 1990s peaked at around 15 per cent on the Central Coast. Without the stimulus package, unemployment was going to grow significantly on the Central Coast. As it is, our unemployment has peaked at 6.3 per cent. If in this current downturn due to the global financial crisis there had not been the government’s stimulus package, if there had not been the intervention, and unemployment rates reached 15 per cent as they did in the 1990s, that would have seen an additional 11,100 people on the Central Coast without a job. So that is the effect that the stimulus package had. It is in the context of trade that I raise that particular issue.

The bill facilitates international trade and commerce by providing a more effective regime for the conduct of international commercial arbitrations in Australia and the recognition and enforcement of foreign arbitration agreements and awards. The proposed government amendments to the bill have been developed following comments received from stakeholders—namely, arbitration practitioners—after the development of the bill. The government amendments can be divided into two categories: those directed at improving the operation of existing provisions in the bill and provisions that supplement the provisions of the bill. The key amendments to the existing measures in the bill will: simplify the arrangements for enforcement of foreign awards in Australia and make it clear that a court can only refuse to enforce an award on one of the grounds set out in the act; and amend the application of the optional provisions in a part of the act to specify that certain critical provisions apply by default, including those relating to costs and interest. The remaining provisions apply only if expressly adopted by the parties. This part of the act, as amended by the bill, supplements the model law with provisions addressing matters such as interest, costs, confidentiality and assistance from courts. It also removes an unnecessary duplication between the two proposed sections concerning court assistance.

In addition, the bill will provide that the parties to arbitration are entitled to a reasonable opportunity to present their case to a tribunal rather than a full opportunity as required by the model law. This measure is intended to give arbitral tribunals greater flexibility in managing particular matters before them. It inserts provisions into the act to provide arbitral tribunals with greater powers concerning evidence and security for costs. These provisions would apply unless the parties to the dispute agree otherwise. It modernises the drafting of the immunity provision in section 28 of the act and extends it to entities that appoint arbitrators to tribunals. It inserts a severability clause to provide guidance to the courts on the constitutional basis for the act and inserts a regulation-making power into the act. These amendments will help to ensure that the overall package of reforms contained in the bill achieves its desired outcome: a faster and fairer system for international arbitration that makes Australia an attractive venue for the resolution of disputes.

Over time, international arbitration has developed as a practical, efficient and well-established method of settling commercial disputes without resorting to national courts. Arbitration is typically faster, less formal and more tailored to the particular dispute than court proceedings whilst retaining the benefits of impartial adjudication. Arbitral awards are also more readily enforceable around the world than are judgments of national courts. Finally, arbitration is a method of dispute resolution that is chosen and controlled by the parties. This helps the parties to preserve their commercial relationship and resolve their dispute in a manner that suits their needs.

There are two pillars that underpin the modern system of international commercial arbitration. The first is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York on 10 June 1958 and commonly referred to as the New York convention. The convention provides crucial support to international trade by ensuring that arbitral agreements and awards are enforceable between the 144 contracting states. This means that commercial parties can turn to arbitration in full confidence that the award made by the arbitral tribunal will be enforceable throughout the world.

The second pillar is the United Nations Commission on International Trade Law’s Model Law on International Commercial Arbitration. The model law was developed by the commission as a basis on which countries may choose to draft their own legislation governing international arbitration. The model law was developed to address the wide divergence of approaches taken to international arbitration throughout the world and to provide a modern and easily adapted alternative to outdated national regimes. As the explanatory note to the model law prepared by the United Nations Commission on International Trade Law states:

Since its adoption by UNCITRAL, the Model Law has come to represent the accepted international legislative standard for a modern arbitration law …

On 21 November 2008 the Attorney-General announced a review of the International Arbitration Act and released a discussion paper to stimulate debate about the future of the act. The product of the review’s work were reform measures developed following careful consideration of the more than 30 submissions made to the review as well as academic literature, court decisions and approaches taken overseas. The reforms contained in the International Arbitration Amendment Bill 2009 will ensure the act remains at the forefront of international arbitration practice. The reform provides parties with a wider set of tools to help them resolve their disputes.

Once amended, the act will provide a clear distinction between the application of Commonwealth legislation and state and territory legislation. The bill will also clarify the circumstances in which the courts can refuse to recognise and enforce foreign awards. One concern expressed in submissions to the review was parties were finding increasingly novel ways to challenge awards and delay the arbitral process. These provisions are intended to emphasise the importance of speed, fairness and cost effectiveness in international arbitration while clearly defining and limiting the roles of courts in international arbitration without compromising the important protective function they exercise.

Thirdly, the bill will implement a number of amendments to the model law adopted by the United Nations Commission on International Trade Law in 2006. These amendments concern interpretation of the model law, the introduction of a more sophisticated regime for making and enforcing interim measures, and minor changes to authentication and translation requirements.

Further, the bill will introduce additional provisions to supplement the operation of the model law. At present, the act includes a range of optional provisions that parties can use to help resolve their disputes. These provisions address issues such as the consolidation of arbitral procedures, interests and costs. The bill will add a number of new tools to this set of optional provisions. The parties will be able to select new provisions that allow them to obtain subpoenas and other court orders to assist with the arbitration. The bill will enable the parties to select new provisions dealing with the disclosure of confidential information. Other opt-in provisions address the death of a party in an arbitration agreement and revise the provisions concerning interest on debt under an award.

Finally, the bill includes a range of other measures directed at improving the general operation of the act, including providing a more expansive definition of what constitutes an agreement in writing for the purposes of the New York convention. The former UN Secretary-General, Kofi Annan, once said:

… international trade thrives on the rule of law: without it parties are often reluctant to enter into cross-border commercial transactions or make international investments.

Arbitration is an essential tool for doing business across borders. The bill will not only assist Australian businesses in resolving their disputes but also ensure Australia is an attractive venue for parties from around the world to resolve their disputes. I commend the bill to the House.

Robert McClelland (Barton, Australian Labor Party, Attorney-General) Share this | Link to this | Hansard source

in reply—I would like to thank members for their contributions to the debate on the International Arbitration Amendment Bill 2009 and I would certainly like to thank the opposition for their support of the bill and indeed for facilitating its passage through this simplified process of the Main Committee.

The bill is the most significant reform to the International Arbitration Act 1974 since Australia implemented the UNCITRAL model law in 1989. Arbitration facilitates international trade and commerce by providing a quick, cost-effective and enforceable means for commercial players to resolve their disputes. As I said in introducing the bill into the House, the measures contained in the International Arbitration Amendment Bill will ensure the act remains at the forefront of international arbitration practice.

In summary, the bill will provide guidance to the courts on the operation and interpretation of the act, it will adopt key amendments to the UNCITRAL model law made in 2006, it will provide a wide range of additional tools to assist an arbitral tribunal to resolve disputes to the mutual benefit of the parties, it will clarify the relationships between the act and the state and territory laws regulating domestic arbitration, and it will make a range of other amendments to improve the operation of the act. The bill, along with other initiatives such as the establishment of the Australian International Disputes Centre in Sydney, will spark a fundamental change in the way international arbitration is conducted. I thank the state and territory attorneys-general and in particular the New South Wales Attorney General for the drive he has shown in this area.

The bill provides a strong legal framework for arbitration practitioners to find creative solutions to commercial disputes—solutions that are tailored to the dispute at hand and the real needs of the parties. The bill is not just about helping Australian businesses to resolve their disputes quickly and efficiently, although this is of course very important; it is also about making Australia a regional centre for international commercial arbitration. With the reforms contained in the bill and the strong support of our expert and highly regarded practitioners, Australia can certainly become a significant centre for international commercial arbitration in the Asia-Pacific region.

Question agreed to.

Bill read a second time.