07 May 2010

Domestic arbitration gets the green light for its much needed overhaul

In a move to be applauded by the arbitration community, the Standing Committee of Attorneys General (SCAG) on Friday agreed to the content of a new Commercial Arbitration Bill that will completely overhaul the existing Uniform Commercial Arbitration Acts (UCAAs) that are in place around Australia.

The benefit of this overhaul for Australian companies is that it will reinstate arbitration as providing a fair, quick and cost-effective process for the final resolution of commercial disputes - indeed this is spelled out in the Act as its paramount object. Whilst the text of the Bill approved by SCAG on Friday has not yet been released, some of the key changes as outlined in the 2009 Consultation Draft Bill include boundaries for court intervention in arbitral proceedings and limiting the grounds for appeal against an arbitral award. These amendments will give parties much greater confidence and certainty that when they embark on an arbitration the outcome will be final and binding.

The amendments are a much needed response to the consistent criticism of domestic arbitration. Domestic arbitration has been stifled in Australia not only by the limiting provisions of the existing UCAAs but also by the tendencies of parties and their lawyers to pursue time-consuming procedural processes and the intervention by some courts in the arbitral process. This stifling has been to such an extent that the attractiveness of arbitration as a fast and cost-effective alternative dispute resolution process has been undermined (in a domestic context).

How will the existing legislative regime be changed?

The fundamental change is that the new UCAAs will be largely based on the UNCITRAL Model Law on International Commercial Arbitration ("Model Law"), which was a template law developed by the United Nations Commission on International Trade Law to help countries to reform and modernize their arbitration laws. Its provisions cover the key steps in the arbitral process: arbitral agreement, appointment & jurisdiction of the arbitrator, the arbitral process, court involvement, and recognition and enforcement of the arbitral award.

Although the Model Law was primarily intended for international arbitration the drafters acknowledged that it could be used to reform domestic arbitration legislation, and indeed 37 out of the 80 countries that have enacted the Model Law have done just that. Australia will follow suit by largely incorporating the Model Law provisions into its amendments to the UCAAs - except for a few tweaks to make them applicable in a domestic setting.

Need to know more about how the new UCAAs will work?

The amendments to the existing domestic arbitration legislation will be so significant that they will render all previous commentary on this area redundant. To assist arbitration users and their advisers in navigating their way through the operation of the new UCAAs, Doug Jones, Head of the International Arbitration and Major Projects Group, will be publishing a book specifically on this topic. The book will provide a background to the reform process, an in-depth consideration of up-to-date case law affecting the use and treatment of arbitration agreements, an annotation of the new UCAAs and discussion of alternative forms of dispute resolution.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.