A fundamental philosophy of arbitration is that by agreeing to arbitrate a dispute, parties are bound by the decision of the arbitrator. Certainty and finality are often key drivers for parties deciding to resolve their disputes by way of arbitration. Accordingly, most parties to arbitration agreements expect to forgo their general right to appeal in exchange for a process which may be cheaper, more time efficient and of greater finality.
Regardless of whether parties want to forgo this right of appeal or preserve it, the recent Supreme Court decision of Ashjal Pty Ltd v Elders Toepfer Grain Pty Ltd (Ashjal)  highlights the need for parties to an arbitration agreement to agree upon the position and consider documenting that agreement. It also underlines the need to reconsider the terms of any existing arbitration agreements in light of the overhaul of the domestic arbitration regime in 2010.
Overhaul of the domestic arbitration regime
In 2010, the Standing Committee of Attorneys- General embarked on an extensive overhaul of the domestic arbitration regime with the introduction of new uniform State laws set out in the Commercial Arbitration Bill 2010 (Cth) (the 2010 Amendments).
New South Wales became the first of the Australian states and territories to adopt the 2010 Amendments, through the commencement of the Commercial Arbitration Act 2010 (NSW) (the Act) on 1 October 2010. The Act applies retrospectively to arbitration agreements entered into before this date (except where proceedings had already commenced prior to 1 October 2010). 
At the time of writing, Victoria, South Australia, Tasmania and the Northern Territory have also adopted the 2010 Amendments.  It is expected that Western Australia, Queensland and the Australian Capital Territory will soon follow suit. 
The 2010 Amendments, based on the UNCITRAL Model Law on International Commercial Arbitration, were designed to align Australian domestic arbitration law with international best practice. The amendments aimed to “facilitate the fair and final resolution of commercial disputes by impartial arbitration tribunals without necessary delay or expense”. 
New regime means limited right of appeal
Consistent with a desire to facilitate quick and cheap resolution of commercial disputes through arbitration, the 2010 Amendments brought in major changes to a party’s right to appeal an arbitral award.
Under the old regime, the courts had a very broad scope for judicial intervention. Parties were able to challenge an award by either:
seeking to have the award set aside for misconduct by the arbitrator; 
seeking leave of the court or agreeing between themselves for a right to appeal on a question of law. 
In contrast, the 2010 Amendments significantly restrict the scope for judicial intervention. Not only does the Act contain an exhaustive list of specific circumstances warranting recourse to the courts for setting aside an arbitral award,  the threshold to appeal an award on an error of law is now higher.
In order to appeal an award under the new regime, section 34A(1) of the Act requires the parties to:
agree that an appeal may be made, either in the arbitration agreement itself or otherwise before the expiration of the appeal period (3 months 
seek leave of the court. 
Accordingly, there is now no right of appeal from an arbitral award without the agreement of the parties.
This amendment has the salutary effect of lessening court intervention while promoting party autonomy. It creates an option for parties who wish to embark on an arbitration process that allows for judicial review of an award to opt in to a right of appeal. In this way, parties have an opportunity, knowing the nature and circumstances of the dispute, to agree between themselves to reserve the right to appeal an award.
In the absence of such an agreement, section 34A(1) strengthens the finality and authority of arbitral awards, and curtails the uncertainty, delay and cost which may be associated with appeals.
The case: what constitutes an “agreement” for the purposes of section 34A(1)?
The recent case of Ashjal is the first case to consider the new section 34A(1).
In Ashjal, the plaintiff entered into two contracts to sell wheat to the defendant. Both contracts included arbitration agreements concluded prior to the commencement of the new Act. A dispute arose under the contracts and was referred to arbitration. Subsequently, a final award was rendered in the defendant’s favour in November 2011.
In March 2012 (outside the appeal period), the plaintiff sought leave to appeal the award. Although the plaintiff subsequently conceded that there was no express agreement between the parties to enliven section 34A(1), it argued that there could be implied from the terms of the contracts a term that either party may appeal on a question of law with leave of the court.
In considering whether the contended term had been implied at the time the contracts were entered into, Justice Hammerschlag applied the well recognised tests for an implied term set out in BP Refinery Western Port Pty Ltd v Hastings Shire Council  and adopted by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of NSW,  under which an alleged implied term:
1. must be reasonable and equitable;
2. must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
3. must be so obvious that it goes without saying;
4. must be capable of clear expression; and
5. must not contradict any express term of the agreement.
Ultimately, his Honour found that the implied term contended for failed on three of the above requirements as: 
- it was not necessary to give the contracts business efficacy, as at the time they were entered into the old laws bestowed a right of appeal with leave or by agreement;
- it was not obvious in light of the position under the previous laws; and
- given the parties’ clear contemplation of possible amendments to the arbitration legislation in the contracts, the notion of the contended term contradicted an express term of the contracts.
On these grounds, his Honour held that the parties had not impliedly agreed to a right of appeal on an error of law (within the meaning of section 34A of the Act and before the end of the appeal period).  The plaintiff’s application for leave was dismissed.
Ramifications of the section 34A(1) amendment
As can be seen from the Ashjal decision, the ramifications of the section 34A(1) amendment are significant.
For those parties trying to avoid a right of appeal, it is clear that the court will infer an agreement to appeal into an arbitral award if the usual test for implication of a term is met.
For those parties wanting a right of appeal, it is clear that section 34A(1) requires “agreement”, be that express or implied. Once a dispute arises it is unlikely that parties would agree upon a right to appeal an eventual award. It is even more improbable for such agreement to be reached after an award has been rendered. It is therefore critical for parties to an arbitration agreement to consider and agree upon whether a right of appeal will exist at the time they enter into the arbitration agreement.
Given the Act’s partly retrospective application, it is probable that the rights of numerous parties already bound to arbitration agreements at the time of the new Act’s commencement have been amended, as agreements for a right of appeal were not mandatory under the old regime.
What does this mean for you?
If you are a party to an existing arbitration agreement you should:
- check to see if it is silent about whether a right of appeal exists (if so, consider re-visiting that agreement);
- if you don’t want a right of appeal, you should consider whether a court is likely to imply such a right of appeal. To remove doubt, you might want to consider seeking an agreement with the other party that no right to appeal exists and documenting that agreement; and
- if you want a right of appeal, try to obtain the other party’s agreement to include an express right of appeal and record that agreement in an amended arbitration agreement.
If you are negotiating a new arbitration agreement you should decide whether you want a right of appeal from the arbitral award (this will depend on your appetite for judicial intervention in the arbitration process. Bear in mind that limited or no rights of appeal are most likely to assist in achieving a quick, cheap and final determination of your dispute):
- If you don’t want a right of appeal, consider whether a court is likely to imply it. Again, in the interest of certainty, you might want to consider seeking an agreement with the other party that no right to appeal exists and documenting that agreement.
- If you want a right of appeal, try to obtain the other party’s agreement to include an express right of appeal and record that agreement in an amended arbitration agreement.
If you are currently arbitrating a dispute you should:
- consider whether you want a right to appeal the arbitral tribunal’s award;
- if you do, you may want to consider raising this prospect with the other party and seeking their agreement to a right of appeal for the purposes of section 34A(1). Again, bear in mind that limited or no rights of appeal are most likely to assist in achieving a quick, cheap and final determination of your dispute; and
- remember, you only have up to three months after receiving an award to reach an agreement with the other party and seek leave of the court to appeal.
On an ancillary note, during the hearing for the Ashjal application the plaintiff foreshadowed a constitutional challenge to section 34A(1).
The plaintiff’s contention was that section 34A(1) of the new Act is invalid as unconstitutional on the basis that the rights of appeal which it previously enjoyed under the old laws have been significantly curtailed by the new Act. 
In a move to motivate judicial consideration on this controversial point, Hammerschlag J granted the plaintiff leave to file an amended summons seeking leave to appeal on this basis. 
Watch this space!
This article was first published in Inhouse Counsel, Vol 15 No 8, July 2012
 Ashjal Pty Ltd v Elders Toepfer Grain Pty Ltd  NSWSC 545. [back]
 Section 2, Schedule 1, Commercial Arbitration Act 2010 (NSW). [back]
 Commercial Arbitration Act 2011 (Vic), commenced on 17 November 2011; Commercial Arbitration Act 2011 (SA), commenced on 1 January 2012; Commercial Arbitration Act 2011 (Tas), awaiting proclamation; Commercial Arbitration (National Uniform Legislation) Act 2011 (NT), awaiting proclamation. [back]
 Commercial Arbitration Bill 2011 (WA), awaiting assent; Commercial Arbitration Bill 2011 (Qld), previously introduced into the Queensland Parliament but lapsed 19 February 2012 due to a change in government following the Queensland State Elections held in March 2012; The ACT has yet to introduce the Bill into the Legislative Assembly. [back]
 Section 1C(1), Commercial Arbitration Act 2010 (NSW). [back]
 Section 42, Commercial Arbitration Act 1984 (NSW). [back]
 Section 38, Commercial Arbitration Act 1984 (NSW). [back]
 Section 34, Commercial Arbitration Act 2010 (NSW). [back]
 Section 34A(6), Commercial Arbitration Act 2010 (NSW). [back]
 Section 34A, Commercial Arbitration Act 2010 (NSW). [back]
 BP Refinery Western Port Pty Ltd v Hastings Shire Council (1977) 180 CLR 266; 45 LGRA 62; 16 ALR 363; 52 ALJR 20 at 26. [back]
 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347; 41 ALR 367; 56 ALJR 459; (1982) NSW ConvR 55-070. [back]
 Ashjal Pty Ltd v Elders Toepfer Grain Pty Ltd  NSWSC 545 at –. [back]
 Ashjal Pty Ltd v Elders Toepfer Grain Pty Ltd  NSWSC 545 at . [back]
 Ashjal Pty Ltd v Elders Toepfer Grain Pty Ltd  NSWSC 545 at . [back]
 Ashjal Pty Ltd v Elders Toepfer Grain Pty Ltd  NSWSC 545 at  and . [back]
 Ashjal Pty Ltd v Elders Toepfer Grai [back]