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CLAUSE NOTES
Commercial Arbitration Bill 2010
Overview of Bill
The paramount object of this Bill is to facilitate the fair and final
resolution of commercial disputes by impartial tribunals
without unnecessary delay or expense.
The Bill encourages the use of arbitration as a means of
resolving domestic commercial disputes and harmonises the
procedures for resolution of such disputes with those
applicable to the resolution of international commercial
disputes under the International Arbitration Act 1974 of the
Commonwealth (the Commonwealth Act).
The Bill facilitates the use of arbitration agreements to manage
domestic commercial disputes by adopting the provisions of
the United Nations Commission on International Trade Law
(UNCITRAL) Model Law on International Commercial
Arbitration (the Model Law), taking into account the
Commonwealth Act and with appropriate modifications for
domestic commercial arbitration.
The Bill also contains a number of additional provisions
supporting the arbitration process and some optional
provisions which may be used by the parties to an arbitration
agreement should a dispute arise between them. These include
provisions relating to assistance from the Supreme Court (or
another court nominated by the parties), the consolidation of
arbitral proceedings, the disclosure of confidential information
and the awarding of interest and costs.
The Bill also provides for the issue of subpoenas, and the
recognition and enforcement of awards with respect to
domestic commercial arbitrations.
In addition, the Bill:
(a) repeals the Commercial Arbitration Act 1986, and
(b) enacts provisions of a savings and transitional nature.
The places where the Bill and the Model Law differ (in other
than minor technical respects) are identified in the Bill by
notes. The Bill's section numbering reflects the numbering of
the Model Law and, as a consequence, to ensure consistency
with the numbering in it, the new sequence in the new Act
contains gaps in numbering and use of alphanumerical
numbering.
Outline of provisions
Part 1A Preliminary
Clause 1A sets out the name (also called the short title) of
the proposed Act.
Clause 1B provides for the commencement of the proposed
Act on a day or days to be appointed by proclamation.
Clause 1C states that the paramount object of the proposed
Act is to facilitate the fair and final resolution of commercial
disputes by impartial arbitral tribunals without unnecessary
delay or expense.
Clause 1D provides that the Crown will be bound by the Act
Part 1 General provisions
Clause 1 applies the proposed Act to domestic commercial
arbitrations. An arbitration is a domestic arbitration if the
parties to an arbitration agreement have, at the time of the
conclusion of that agreement, their places of business in
Australia and have (whether in the arbitration agreement or in
any other document in writing) agreed that any dispute that has
arisen or may arise between them is to be settled by
arbitration. It is not a domestic arbitration if it is an arbitration
to which the Model Law (as given effect by the Commonwealth
Act) applies as that Act covers the field with respect to
international commercial arbitrations.
Clause 1 (5) also makes it clear that the proposed Act is not
intended to affect any other Act that provides that certain
disputes may not be submitted to arbitration or may only be
submitted according to provisions which are different to those
of the proposed Act.
Clause 2 defines certain words and expressions used in the
proposed Act. In particular, it defines confidential
information, disclose, Model Law and party. The clause also
contains provisions for interpreting various phrases in the
proposed Act, including provisions relating to the meaning of a
reference to the fact that the parties have agreed and that a
reference to leaving the parties free to determine an issue
includes the right of the parties to authorise a third party
(including an institution) to determine the issue.
Clause 2A makes it clear that in interpreting the proposed
Act regard should be had to promoting uniformity between the
application of the proposed Act to domestic commercial
arbitrations and the application of the Model Law (as given
effect by the Commonwealth Act) to international commercial
arbitrations.
Clause 3 deems written communications to have been
received by a party in specified circumstances.
Clause 4 waives the right of a party to object to non-
compliance with a provision of the proposed Act or of an
arbitration agreement if the party proceeds with arbitration but
fails to object to that non-compliance either without delay or
within any time-limit.
Clause 5 makes it clear that a court is not to intervene in
matters governed by the proposed Act, except as provided by
the Act.
Clause 6 specifies the functions of arbitration assistance and
supervision to be performed by the Supreme Court, or by the
Magistrates Court if the parties so provide in the arbitration
agreement, under the proposed Act.
Part 2 Arbitration agreement
Clause 7 defines an arbitration agreement as an agreement
by the parties to submit to arbitration all or certain disputes
which have arisen or which may arise between them in respect
of a defined legal relationship, whether contractual or not. An
arbitration agreement must be "in writing".
The proposed section makes it clear that "in writing" has an
expanded meaning. An agreement may be concluded orally, by
conduct or other means, provided that its content is recorded
in some form, including electronic communication. An
agreement will also be in writing if it is contained "in an
exchange of statements of claim and defence in which the
existence of the agreement is alleged by one party and not
denied by the other".
Clause 8 requires a court before which an action is brought in
a matter that is the subject of an arbitration agreement to refer
the matter to arbitration if a party so requests in the
circumstances specified in the proposed section. It also enables
an arbitration to be commenced or continued while the issue is
pending before the court.
Clause 9 enables a party to obtain an interim measure of
protection from a court, before or during arbitral proceedings.
Part 3 Composition of arbitral tribunal
Clause 10 enables the parties to determine the number of
arbitrators and specifies that, in the absence of agreement
between the parties, the default number of arbitrators is one.
Clause 11 allows the parties to agree on the procedure for
appointing arbitrators. It provides a default procedure with
ultimate recourse to the Supreme Court (or another court
agreed by the parties under section 6) if agreement cannot be
reached or the agreed procedure is not followed.
Clause 12 sets out the grounds on which the appointment of
an arbitrator may be challenged. It obliges proposed arbitrators
to disclose any circumstances likely to give rise to justifiable
doubts as to their impartiality or independence, an obligation
which starts when a person is approached to be an arbitrator
and continues throughout the person's appointment as an
arbitrator.
Sub-clauses 12 (5) and (6) provide that the test for whether
there are justifiable doubts as to the impartiality or
independence of an arbitrator is whether there is a real danger
of bias. This is based on the test for bias applied by the House
of Lords in R v Gough [1993] AC 646.
Clause 13 provides that the parties are free to determine the
procedure for challenging an arbitrator and provides a default
procedure for challenging the appointment or continued
appointment of an arbitrator in the absence of agreement for
such a challenge. It also provides that if a challenge fails, a party
may have recourse to a court to determine the matter.
Clause 14 provides for the termination of the mandate of an
arbitrator in certain circumstances.
Clause 15 requires the appointment of a substitute arbitrator
according to the appointment procedure and any other
eligibility requirements that were applicable to the arbitrator
being replaced.
Part 4 Jurisdiction of arbitral tribunal
Clause 16 makes it clear that an arbitral tribunal is competent
to make a determination as to whether or not it has
jurisdiction to arbitrate a commercial dispute. It also makes it
clear that an arbitration agreement may be severed from the
contract in which it is contained (if applicable) so that it may
stand independently.
The clause expressly provides that any determination that the
contract is invalid does not mean that the arbitration clause is
invalid. The provision also enables a party to seek a ruling from
the Supreme Court (or another court agreed by the parties
under section 6) from a determination of the tribunal that it
has jurisdiction.
Part 4A Interim measures
Division 1 Interim measures
Clause 17 confers power on an arbitral tribunal to grant
interim measures (unless otherwise agreed by the parties)
similar to the ex parte orders that could be obtained from a
court during litigation prior to the final determination of a
dispute for purposes such as maintenance of the status quo and
preservation of assets and evidence.
Clause 17A requires a party requesting certain interim
measures to satisfy the arbitral tribunal (to the extent the
arbitral tribunal considers appropriate) that if the measure
concerned is not ordered then harm not adequately reparable
by an award of damages is likely to result and that there is a
reasonable possibility that the requesting party will succeed on
the merits of the claim.
Division 2 Preliminary orders
Articles 17B and 17C of the Model Law are not adopted by the
proposed Act but the clause numbering is retained to maintain
consistency with the numbering of the Model Law.
Division 3 Provisions applicable to interim measures
Clause 17D enables an arbitral tribunal to modify, suspend or
terminate an interim measure either on the application of any
party or, in exceptional circumstances and having given prior
notice, on the tribunal's own initiative.
Clause 17E enables an arbitral tribunal to require a party that
requests an interim measure to provide appropriate security.
Clause 17F enables an arbitral tribunal to require any party to
disclose any material change in the circumstances on the basis
of which an interim measure was requested or granted.
Clause 17G imposes a liability on a party that requests an
interim measure for any costs and damages caused by the
measure to any party to the arbitration agreement, if the
tribunal subsequently determines that it should not have
granted that interim measure.
Division 4 Recognition and enforcement of interim
measures
Clause 17H provides for the recognition and enforcement of
an interim measure issued under a law of Tasmania, or an
interim measure issued under a law of another State or
Territory of Australia, in certain circumstances.
Clause 17I outlines the circumstances in which the
recognition or enforcement of an interim measure may be
refused.
Division 5 Court ordered interim measures
Clause 17J makes it clear that the Supreme Court (or another
court agreed by the parties as referred to in proposed section
6) has the same power to issue an interim measure in
arbitration proceedings as it has in relation to proceedings in
courts.
Part 5 Conduct of arbitral proceedings
Clause 18 makes it clear that parties must be given a fair
hearing.
Clause 19 provides that the parties are free to agree on the
procedure to be followed by the arbitral tribunal and enables
the arbitral tribunal to conduct the arbitration in such manner
as it considers appropriate in the absence of such agreement.
The clause specifies the powers conferred on the arbitral
tribunal and provides that, by leave of the Supreme Court (or
another court agreed by the parties under section 6), an
arbitral tribunal's order or direction may be enforced by a
judgment being entered in terms of the order or direction.
Clause 20 provides that the parties are free to agree on the
place of arbitration and enables an arbitral tribunal to
determine the place of arbitration in the absence of such
agreement.
Clause 21 provides for arbitral proceedings to commence on
the date that a request for the referral to arbitration is
received by the respondent. The clause applies unless
otherwise agreed by the parties.
Clause 22 provides that the parties are free to agree on the
language or languages to be used in arbitral proceedings. Failing
such agreement the arbitral tribunal is to determine the
language or languages to be used. The agreement or
determination applies to written statements and any hearing,
award, decision or other communication of the arbitral tribunal
unless otherwise agreed by the parties. The proposed section
also enables an arbitral tribunal to make an order for
documentary evidence to be accompanied by an appropriate
translation.
Clause 23 sets out requirements with respect to statements
of claim and defence. The clause applies unless otherwise
agreed by the parties and is subject to directions of the arbitral
tribunal.
Clause 24 sets out the procedure for the conduct of the
arbitral proceedings. Unless otherwise agreed by the parties,
the arbitral tribunal is enabled to decide whether to hold an
oral hearing or to make a decision on the papers and other
materials submitted. The discretion to make a decision on the
papers is limited in so far as the arbitral tribunal must hold an
oral hearing if requested by a party, provided that they have
not agreed beforehand that no hearings are to be held. The
proposed section makes it clear that documents sought to be
relied upon must be communicated to another party to the
arbitration.
Clause 24A enables a party to appear in person or be
represented by any person of their choice in oral hearings of
the tribunal.
Clause 24B imposes a duty on the parties to do all things
necessary for the proper and expeditious conduct of arbitral
proceedings.
Clause 25 states the powers of an arbitral tribunal in the
event of a party's failure to communicate a statement of claim
or a statement of defence or to appear at a hearing or produce
documentary evidence. The clause applies unless otherwise
agreed by the parties.
Clause 26 empowers an arbitral tribunal, unless otherwise
agreed by the parties, to appoint experts to report on specific
issues determined by the tribunal, and if necessary to appear at
a hearing for the purpose of examination. It also empowers the
arbitral tribunal, unless otherwise agreed by the parties, to
require a party to give information or to provide access in
order to inspect documents, goods or other property.
Clause 27 enables a request to be made to the Supreme
Court (or another court agreed by the parties as referred to in
proposed section 6) by an arbitral tribunal or a party with the
approval of an arbitral tribunal, for assistance in taking
evidence.
Clause 27A enables the Supreme Court (or another court
agreed by the parties as referred to in proposed section 6) to
issue a subpoena requiring a person to attend the arbitral
proceedings for examination, or to produce documents, on the
application of a party made with the consent of the arbitral
tribunal. The clause is based on section 18 of the Commercial
Arbitration Act 1986.
Clause 27B provides that, unless otherwise agreed by the
parties, on application to the Supreme Court (or another court
agreed by the parties as referred to in proposed section 6) by a
party or the arbitral tribunal the court may order a person in
default to comply with a subpoena or a requirement of the
arbitral tribunal and may make consequential orders as to the
transmission of evidence or documents to the arbitral tribunal.
The clause is based on section 18 of the Commercial Arbitration
Act 1986.
Clause 27C enables the consolidation of certain arbitral
proceedings. The clause applies unless otherwise agreed by the
parties. The clause is based on section 26 of the Commercial
Arbitration Act 1986.
Clause 27D provides that an arbitrator can act as mediator in
the proceedings if the parties so agree. It also outlines the
circumstances in which mediation can be terminated. This
includes where any party withdraws their consent to the
mediation. It also prohibits an arbitrator who has acted in
mediation proceedings that have been terminated from
conducting subsequent arbitration, unless the written consent
of all the parties to the arbitration has been obtained.
Clause 27E provides for the protection of confidential
information. Confidential information is defined in proposed
section 2 as information that relates to arbitral proceedings or
to an award made in those proceedings and covers documents
associated with the proceedings such as statements of claim
and pleadings, evidence supplied to the arbitral tribunal,
transcripts of evidence, submissions and rulings and awards of
the arbitral tribunal. The clause applies unless otherwise agreed
by the parties. It prohibits the disclosure of confidential
information by either the parties to the arbitration or the
tribunal, except as allowed by proposed sections 27F27I.
Disclose is defined in proposed section 2 to include publishing
or communicating or otherwise supplying confidential
information. The provisions are adapted (with modifications)
from similar provisions of the Arbitration Act 1996 of New
Zealand.
Clause 27F sets out the general circumstances in which
confidential information can be disclosed by a party to the
proceedings or the arbitral tribunal. These circumstances
include where all the parties have consented, it is necessary for
the establishment or protection of the legal rights of a party,
disclosure is required by subpoena or a court order or where
disclosure is authorised or required by another relevant law
(including a law of the Commonwealth or of another State or
Territory) or for the purposes of enforcing an arbitral award.
Clause 27G allows an arbitral tribunal to authorise the
disclosure of confidential information in circumstances other
than those mentioned in proposed section 27F at the request
of one of the parties and only once the other parties have been
heard.
Clause 27H outlines the circumstances in which the Supreme
Court (or another court agreed by the parties as referred to in
proposed section 6) may make an order prohibiting the
disclosure of confidential information on the application of a
party and after giving all parties an opportunity to be heard. It
requires consideration of whether or not the public interest
would be served by disclosure or non-disclosure and whether
disclosure is more than reasonable for the purpose. The
proposed section deals with the situation where consent of all
the parties has not been obtained under proposed section 27F
(2) or where the arbitral tribunal refuses to make an order
under proposed section 27G.
Clause 27I outlines the circumstances in which the Supreme
Court (or another court agreed by the parties as referred to in
proposed section 6) may make an order allowing the disclosure
of confidential information and sets out the matters the court
must take into consideration before making an order.
Clause 27J enables a party to make an application to the
Supreme Court (or another court agreed by the parties as
referred to in proposed section 6), and confers jurisdiction on
the court, to determine a question of law that arises in the
course of arbitration, unless otherwise agreed.
Part 6 Making of award and termination of proceedings
Clause 28 enables the parties to choose the substantive law
to be applied to the particular facts of the matter in dispute (as
opposed to determining the arbitral law under which the
dispute is resolved). It makes it clear that an arbitral tribunal is
to make a determination in accordance with the terms of the
contract, taking into account the usages of the trade applicable
to it.
Clause 29 specifies that a majority of arbitral tribunal
members (if there is more than one arbitrator) is necessary to
constitute a decision of the tribunal unless otherwise agreed by
the parties.
Clause 30 provides for the recording of a settlement between
the parties in the form of an award.
Clause 31 prescribes the form and content of an award.
Clause 32 describes the circumstances in which arbitral
proceedings are terminated.
Clause 33 enables the correction or interpretation of a
provision of the award, or the making of an additional award. It
makes it clear that any interpretation of the tribunal forms part
of the award.
Clause 33A enables an arbitrator to make an order for
specific performance of a contract in circumstances where the
Supreme Court would have power to do so, unless otherwise
agreed by the parties.
Clause 33B allows the arbitral tribunal (unless otherwise
agreed by the parties) to determine costs (including the fees
and expenses of the arbitrator or arbitrators) at its discretion
and to direct that they be limited to a specified amount. A
direction limiting the amount must be given sufficiently in
advance for the parties to take it into account in managing their
own costs.
Clause 33C applies Division 11 (Costs assessment) of Part 3.2
(Costs disclosure and assessment) of the Legal Profession Act
2007 to the assessment of costs by a court exercising
jurisdiction under proposed section 33B.
Clause 33D enables the Supreme Court (or another court
agreed by the parties as referred to in proposed section 6), to
make orders with respect to the costs of an abortive
arbitration. It is based on section 36 of the Commercial
Arbitration Act 1986.
Clause 33E provides for the imposition (unless otherwise
agreed by the parties) by the arbitral tribunal of interest in an
award for payment of money for the period before the making
of the award.
Clause 33F provides for the imposition (unless otherwise
agreed by the parties) by the arbitral tribunal of interest on the
debt under an award.
Part 7 Recourse against award
Clause 34 outlines the circumstances in which an application
to the Supreme Court (or another court agreed by the parties
as referred to in proposed section 6) may be made for the
setting aside of an award, or an appeal against an award, and
the criteria to be applied. In particular it requires the court to
find either that the subject matter of the dispute is not capable
of settlement by arbitration under a law of New South Wales,
or that the award is in conflict with public policy. Section 19 of
the Commonwealth Act declares that, for the purposes of the
application of the Model Law by that Act, an award is in conflict
with public policy if the making of the award was induced or
affected by fraud or corruption or a breach of the rules of
natural justice occurred in connection with the making of the
award.
Clause 34A enables an appeal to the Supreme Court (or
another court agreed by the parties as referred to in proposed
section 6) on a question of law, if the parties have agreed prior
to the commencement of arbitration that such appeals may be
made and the court grants leave.
Part 8 Recognition and enforcement of awards
Clauses 35 and 36 establish a framework for the recognition
and enforcement of arbitral awards.
Part 9 Miscellaneous
Clause 37 outlines the effect that the death of a party has on
an arbitration agreement. It is based on section 52 of the
Commercial Arbitration Act 1986.
Clause 38 makes provision for relief by way of interpleader. It
is based on section 54 of the Commercial Arbitration Act 1986.
Clause 39 confers immunity on an arbitrator acting in good
faith.
Clause 40 enables rules of court to be made making further
provision for giving effect to the proposed Act.
Clause 41 enables the making of regulations.
Clause 42 refers to Schedule 1 which makes savings and
transitional provisions covering question of the application of
the Act to existing agreements and commenced arbitration
proceedings.
Clause 43 assigns responsibility for the Act to the Minister for
Justice and the Department of Justice
Clause 44 repeals the Commercial Arbitration Act 1986.
Schedule 1 Savings, transitional and other provisions
Clause 1 enables the making of regulations of a savings and
transitional nature,
Clause 2 covers the application of the Act to existing
arbitration agreements (usually contracts with an arbitration
clause) and to arbitral hearings which have already commenced.