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Wednesday, 25 November 2009
Page: 12790


Mr McCLELLAND (Attorney-General) (10:19 AM) —I move:

That this bill be now read a second time.

Introduction

Over time, international arbitration has developed as a practical, efficient and well-established method of settling commercial disputes without resorting to national courts.

Arbitration is typically faster, less formal and more tailored to the particular dispute than court proceedings whilst at the same time retaining the benefits of impartial expert adjudication.

Arbitral awards are also more readily enforceable around the world than are judgements of national courts.

Finally, arbitration is a method of dispute resolution that is chosen and controlled quite frequently by the parties.

This helps the parties to preserve their commercial relationship and resolve their dispute in a manner that suits their needs and is more likely to preserve their ongoing relationship.

The New York convention and the UNCITRAL model law

There are two pillars that underpin the modern system of international commercial arbitration.

The first is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards done at New York on 10 June 1958—commonly referred to as the New York convention.

The convention provides crucial support to international trade by ensuring that arbitral agreements and awards are enforceable as between the 144 contracting states.

This means that commercial parties can turn to arbitration in full confidence that the award made by the arbitral tribunal will be enforceable throughout the world.

The second pillar is the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration.

The model law was developed by UNCITRAL as a basis on which countries may choose to draft their own legislation governing international arbitration.

The model law was developed to address the wide divergence of approaches taken to international arbitration throughout the world and to provide a modern and easily adapted alternative to outdated national regimes.

As the explanatory note to the model law prepared by UNCITRAL states, ‘Since its adoption by UNCITRAL, the model law has come to represent the accepted international legislative standard for a modern arbitration law.’

The International Arbitration Act

In Australia, international arbitration is primarily regulated by the International Arbitration Act 1974.

The act implements Australia’s obligations under the New York convention to enforce and recognise foreign arbitration agreements and arbitral awards.

The act also gives the force of law to the UNCITRAL model law as the principal arbitral law governing the conduct of international commercial arbitrations in Australia.

Finally, the act also implements Australia’s obligations under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States done at Washington on 18 March 1965.

Review of the International Arbitration Act

On 21 November 2008, I announced a review of the International Arbitration Act and released a discussion paper to stimulate debate about the future of the act.

The reform measures I am presenting today are the product of the review’s work and have been developed following careful consideration of the more than 30 submissions made to the review as well as academic literature, court decisions and approaches that have been taken overseas.

The International Arbitration Amendment Bill

The reforms contained in the International Arbitration Amendment Bill will ensure the act remains at the forefront of international arbitration best practice.

It was very clear from the submissions received as part of the review that there was strong support for the provisions in this bill.

In particular, there was strong support for the retention of the UNCITRAL model law as the arbitral law governing international commercial arbitrations conducted in Australia.

Accordingly, rather than fundamentally alter the framework of the International Arbitration Act, the reforms to be enacted by the bill augment the act by addressing problems that have arisen in its application.

The reforms go further—however—by providing parties with a wider set of tools to help them resolve their disputes.

First, the bill will repeal section 21 of the act, which allows the parties to choose to resolve their dispute under a law other than the model law—such as one of the state commercial arbitration acts—a provision which has long been a source of confusion and concern.

Once amended, the act will provide a clear distinction between the application of Commonwealth legislation and state and territory legislation.

Secondly, the bill includes new interpretation provisions that are intended to provide greater guidance to the courts in exercising powers and functions under the act and in interpreting its provisions.

The bill will also clarify the circumstances in which the courts can refuse to recognise and enforce foreign awards.

One concern expressed in submissions to the review was that parties were finding increasingly novel ways to challenge awards and by doing so to delay the arbitral process.

These provisions are intended 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 that the courts exercise.

Thirdly, the bill will implement a number of amendments to the model law adopted by UNCITRAL in 2006.

These amendments concern interpretation of the model law, the introduction of a more sophisticated regime for making and enforcing interim measures, and minor changes to authentication and translation requirements.

Further, the bill will introduce additional provisions to supplement the operation of the model law.

At present, the act includes a range of optional provisions that parties can use to help resolve their dispute.

These provisions address issues such as the consolidation of arbitral proceedings, interest and costs.

The bill will add a number of new tools to this set of optional provisions.

The parties will be able to select new provisions that allow the parties to obtain subpoenas and other court orders to assist with them with the process of arbitration.

The bill will enable the parties to select new provisions dealing with the disclosure of confidential information.

Other ‘opt in’ provisions address the death of a party to an arbitration agreement and revise the provisions concerning interest on a debt under an award.

Finally, the bill includes a range of other measures directed at improving the general operation of the act, including providing a more expansive definition of what constitutes an agreement in writing for the purposes of the New York convention.

Jurisdiction of Courts

The discussion paper that I have referred to, which I released in November 2008, raised the possibility of conferring exclusive jurisdiction under the act on the Federal Court of Australia.

The primary advantage of this approach, identified in the discussion paper, was that it may lead to more consistent jurisprudence in applying the act.

Since the discussion paper was released, the states and territories have evidenced an intention to adopt the model law as the basis for redrafting the commercial arbitration acts that apply to domestic arbitration in Australia.

This should result in a more uniform scheme at both the Commonwealth and the state and territory level.

Over time, applying the model law to both domestic and international arbitration should result in more consistent interpretation of its provisions.

Given the intention to adopt the model law in this way, the government has decided not to proceed with the conferral of exclusive jurisdiction on the Federal Court of Australia at this time.

The government understands the benefits that consistent jurisprudence would bring to the facilitation of international arbitration in Australia.

The government therefore encourages all courts to adopt procedures that ensure international arbitration cases are heard by judges with particular expertise in this area—and there are certainly a number of very talented judges throughout Australia.

One possibility for achieving this could be by having specialist international arbitration lists in the respective courts.

Conclusion

Speaking on the 40th anniversary of the conclusion of the New York convention the then Secretary General of the United Nations, Kofi Annan, stated:

… international trade thrives on the rule of law: without it parties are often reluctant to enter into cross-border commercial transactions and make international investments.

Arbitration is an essential tool for doing business across borders.

This bill will not only assist Australian businesses in resolving their disputes but will ensure Australia is an attractive venue for parties from around the world to resolve their disputes. I thank my colleagues for their indulgence and I commend the bill to the House.

Debate (on motion by Dr Stone) adjourned.