This post by Dr Benjamin Hayward is based upon the work in progress that he presented at the ADRRN Roundtable on 9-10 December 2019.
Arbitration is an alternative dispute resolution mechanism that can be used to resolve international and domestic commercial disputes. It is a private process, grounded in the parties’ consent and separate to litigation, but it remains related: arbitration is a formal dispute resolution process; it is supported by national laws regulating its conduct; and those laws also set out the ways in which courts may intervene in the arbitral process for the purpose of supporting it. In Australia, the International Arbitration Act 1974 (Cth) regulates international commercial arbitration. Uniform State and Territory Acts, including the Commercial Arbitration Act 2011 (Vic), govern arbitrations relating to domestic commercial disputes.
Many Asia-Pacific arbitral centres, including the Singapore International Arbitration Centre, have seen their caseloads increase over recent years. Though there are no reliable local statistics, and despite a series of reforms to its international and domestic commercial arbitration laws over the past decade, Australia is still perceived as lagging behind.
Significant reforms to Australia’s international commercial arbitration laws were enacted in 2010, seeking to establish this country as a regional arbitration hub, though Australia is yet to realise this dream. Given all of this, and empirical evidence confirming that countries’ formal legal infrastructures are the most important factor motivating parties’ choices of arbitral seat (ie. legal location of an arbitration), two important practical and policy questions arise:
1. What ingredients make up a good arbitration law?; and
2. How do we go about measuring the success of law reform?
Jurisdictions’ arbitration laws are traditionally critiqued on the basis of their arbitration friendliness and/or their pro-arbitration natures. References to these concepts abound in online commentary. Yet these concepts are sometimes misapplied, and sometimes misused. Even aside from their nebulous natures, they may represent a binary and overly simplistic way of viewing what are actually difficult issues. Australia’s quest to become a recognised and respected arbitral centre will be frustrated if there is no way to adequately justify (or predict) the quality of future (or proposed) law reforms. An evaluative framework comprised of something more than just generalisations is required.
It is here that the views of Australia’s arbitration community have an important role to play. International and domestic commercial arbitration laws exist to serve merchants. It therefore stands to reason that the arbitration and merchant communities’ concerns should constitute the criteria against which developments in Australia’s arbitration laws are measured.
A 2009 conference organised by the Australian Centre for International Commercial Arbitration invited its participants to query the extent to which Australia’s international and domestic commercial arbitration laws lived up to efficiency, effectiveness, and economic viability ideals. These ideals reflect matters of continuing concern to the arbitration profession. Academics, practitioners, and their clients continue to critique costs and delay in arbitral proceedings. Effectiveness – which may be defined as the degree to which arbitration secures its intended results – also encompasses ongoing concerns around the degree to which Australia’s arbitration laws are consistent with consistent with the international templates upon which they are based, and market expectations.
Applying these efficiency, effectiveness, and economic viability criteria to developments in Australia’s arbitration laws over the 2009 to 2019 period provides some interesting insights. To take just one example, the International Arbitration Act 1974 (Cth) was amended in 2010 to include confidentiality provisions, though these applied on an opt-in (rather than a default) basis. Parties had to affirmatively choose these provisions in order for them to apply; a position not all that different in substance to the then-existing common law rule that arbitration is private but not confidential, unless parties specifically adopt their own confidentiality clause. Given confidentiality’s empirically-confirmed importance in international arbitration, these reforms were arguably contrary to market expectations on account of their opt-in nature: and, thus, ineffective. Further amendments in 2015 finally gave these confidentiality rules default operation, aligning their application with market expectations (albeit after a five year delay).
The efficiency, effectiveness, and economic viability criteria provide Commonwealth, State, and Territory legislators with a recipe for future reforms to Australia’s international and domestic commercial arbitration laws. The adoption of these criteria as policy standards (and legislative drafting tools) stands to assist Australia in developing high quality arbitration laws, and high quality law reform packages. This, in turn, has the potential to help Australia improve its attractiveness as a place to conduct arbitrations for the resolution of both international and domestic commercial disputes.
This is not merely a matter of semantics. Consistently applying the efficiency, effectiveness, and economic viability criteria to Australian arbitration law reform stands to generate different outcomes to those seen over the 2009 to 2019 period. Returning once again to the confidentiality example, reconsideration of the original 2010 reforms in light of market expectations (a matter of effectiveness) would have led to the International Arbitration Act 1974 (Cth)’s confidentiality provisions having default application from the outset.Commercial parties, when negotiating dispute resolution clauses in their contracts, will ultimately vote with their feet. If Australia’s arbitration laws don’t reach the mark, they will simply choose to arbitrate elsewhere. This is all the more reason to take on board the arbitration and merchant communities’ concerns when seeking to improve Australia’s arbitration laws for the ultimate benefit of commercial parties.
Dr Benjamin Hayward is a Senior Lecturer in the Department of Business Law and Taxation, at the Monash Business School. His research interests span international commercial arbitration, the international sale of goods, private international law, and Australian contract, commercial, sales, and consumer law. Dr Hayward is the author of Conflict of Laws and Arbitral Discretion – The Closest Connection Test (Oxford University Press, 2017), his publications are available on SSRN, he tweets at @LawGuyPI, and he is the co-director of his department’s International Trade and International Commercial Law research group.