Disputes in the construction industry have historically lent themselves to the utilisation of alternative dispute resolution (ADR) processes. During the boom times of the late nineties and early noughties, parties to construction contracts focussed less on hard dollar contracts and strict legal claims, and more on relationship based contracting and dispute avoidance, such that reliance on more formal ADR fell away.

With the return of more difficult times, ADR has again come under the spotlight. It seems widely accepted that arbitration in the domestic arena in Australia has become largely undistinguishable, in terms of time and money spent resolving disputes, from litigation.

Meanwhile, international arbitration has also been under scrutiny across the globe. In 2006, UNCITRAL revisited its Model Law for arbitration and agreed revisions to the Model Law. These revisions have been accepted by the Australian federal government (as discussed below).

Although difficulties with domestic arbitration in Australia are arguably due to the way in which parties, lawyers and courts have interpreted that legislation, Australia has taken the opportunity to overhaul its domestic arbitration regime, and make it consistent with the approach taken in international arbitration.

The International approach

On the international stage, Australia is intent on becoming a hub for international arbitration. To this end, a dedicated Australian Disputes Centre opened in Sydney this year, and the Australian Government last month updated the International Arbitration Act (Cth) 1974 (IAA), to adopt the 2006 revisions to the Model Law. Australia is the fifth country to do so – following in the footsteps of Peru, Mauritius, New Zealand and Slovenia.

In the context of announcing the amendments to the IAA the Attorney-General, the Hon. Robert McClelland MP, highlighted the aim of the amendments is to

’emphasise the importance of speed, fairness and cost-effectiveness in international arbitration, while clearly defining and limiting the role of the courts in international arbitration without compromising the important protective function they exercise’.

To achieve these aims, the amendments to the IAA focus on clarifying matters of application and judicial interpretation and incorporating the greatest possible choices for parties to resolve their dispute. In summary, the amendments to the IAA:

1. provide increased protection for foreign awards by providing that a court may only refuse to recognise and enforce an arbitral award if one or more of the specific grounds listed in the IAA is satisfied;

2. provide clarification to the courts by inserting a new objects clause (which emphasises the important role arbitration plays in facilitating international trade and commerce) and a new interpretation clause (which requires a court to consider the objects of the Act, including that awards are intended to provide certainty and finality);

3. remove the parties’ previous ability to opt out from using the Model Law;

4. include a regime for interim binding orders to protect the rights of a party and maintain the status quo, preserve assets or preserve evidence (although Australia has not adopted the Model Law to the extent it allows for applications for interim order to be brought ex parte);

5. provide the parties with more flexibility by showcasing a range of optional provisions to govern their dispute (such as seeking assistance from a court in the form of a subpoena);

6. include a framework/regime for protecting confidential information; and

7. give the arbitral tribunal greater scope to limit the costs of an arbitration.

The Domestic approach

Each Australian state and territory has legislation allowing for commercial arbitration. In tandem with updating the IAA, the Standing Committee of Attorneys General have developed a ‘Model Commercial Arbitration Bill’, to bring Australia’s domestic arbitration regime in line with international expectations and law, and to achieve greater consistency between the commonwealth and state laws.

The Model Commercial Arbitration Bill largely adopts the Model Law. This acknowledges the greater success of international arbitration legislation.

If the Model Commercial Arbitration Bill is adopted throughout Australia, the business community and practitioners alike will no longer be required to have knowledge of two arbitral systems (one for domestic disputes and another for international disputes). This will assist in increasing both Australian and overseas businesses’ familiarity and confidence of Australian arbitral processes within Australia.

New South Wales has been the first to adopt the Model Commercial Arbitration Bill, by replacing its Commercial Arbitration Act (NSW) 1984 with the Commercial Arbitration Act 2010, which was passed in late June 2010. The NSW Act largely accepts the Model Bill but there are some notable differences, for example the NSW Act does not include a power to stay court proceedings. These differences make the NSW Act more consistent with international arbitration law and advance the object of arbitration.

The future

It remains to be seen whether the other states and territories will adopt the Model Commercial Arbitration Bill (and hence the Model Law), and whether or not they will make any amendments to it in doing so. Assuming the laws are adopted throughout Australia, it will be a matter of time to see whether the parties to disputes have confidence that arbitration has again been put in the position of being a viable alternative to litigation.

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