New Commercial Arbitration Act based on UNCITRAL model law passed by Western Australian Parliament

On 29 August 2012, the Western Australian parliament passed the Commercial Arbitration Act 2012 (WA) (Act) (with ss 1A and 1B commencing on this date and a commencement date for the rest yet to be proclaimed) to repeal the former Commercial Arbitration Act 1985 (WA) (1985 Act).

 The Act is the next stage in Australia’s adoption of uniform national laws on domestic arbitration. New South Wales was the first State to introduce the legislation which commenced on 1 October 2010, followed by Victoria, South Australia and the Northern Territory. Tasmania has assented to the legislation but not yet proclaimed a commencement date, the Queensland parliament introduced a Bill in 2011 which has now lapsed and the Australian Capital Territory does not presently have a Bill.

 The Act replaces the regime provided for under the 1985 Act, based on the old English arbitration acts, with one that reflects international best practice. It does this by adopting the provisions of the UNCITRAL Model Law and harmonising the procedures for resolution of domestic commercial disputes with the procedures applicable for the resolution of international commercial disputes under the International Arbitration Act 1974 (Cth).

 The paramount objective of the Act is to ‘facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense’. It aims to achieve this by ‘enabling parties to agree about how their commercial disputes are to be resolved….and providing arbitration procedures that enable commercial disputes to be resolved in a cost effective manner, informally and quickly’ (Sections 1C(1) and (2)).

 Key provisions of the Act include:

• Section 8(1) – requires a court to refer the parties to arbitration in a matter which is the subject of an arbitration agreement unless it finds the agreement to be ‘null and void, inoperative or incapable of being performed’. Under the 1985 Act, the courts had a discretion to decide if proceedings would be stayed when a valid arbitration existed.
• Sections 12(3), (5) & (6) – states that an arbitrator may only be challenged in their appointment ‘if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence’. The section is substantially the same as Article 12 of the Model Law, except for subsections (5) and (6) which adopt the test of a ‘real danger of bias’ to determine the question of an arbitrator’s impartiality or independence. In the absence of any agreement to the contrary, the arbitral tribunal must decide on the challenge before resorting to a court determination (Sections 13(1) - (4)).
• Section 17 – provides that an arbitral tribunal has the power to grant interim measures (unless otherwise agreed by the parties) similar to the interlocutory orders that could be obtained from a court during litigation prior to final determination of a dispute. Section 17 is in substantially similar form to Article 17 of the UNCITRAL Model Law but contains an additional subsection (3) which sets out examples of the orders that a tribunal may make, including orders for security for costs, discovery of documents and interrogatories and for ‘stop clock’ arbitration. This represents a broadening of the tribunal’s powers from the 1985 Act.
• Sections 27(E - I) – introduces a confidentiality regime. The confidentiality provisions apply unless the parties opt out, the rationale being that parties to arbitration often assume that the arbitration is both private and confidential.
• Section 34A – limits the circumstances in which parties can appeal an arbitral award. The rights of a party to appeal from an award are more restricted than those found in the appeal provisions of the 1985 Act, requiring (for an appeal on a question of law) the parties to agree that an appeal may be made and for the Court to grant leave. The threshold for the Court to grant leave is high requiring it to be satisfied on a number of grounds including that on the basis of the findings of fact:

-  the decision of the tribunal on the question is obviously wrong; or

-  the question is one of general public importance and the decision of the tribunal is at least open to serious doubt; and

-  that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the Court to determine the question.

Implications

The adoption of the UNCITRAL Model Law as the basis for Western Australian and other State and Territory legislation has a number of significant benefits:

• the UNCITRAL Model Law is widely recognised and understood worldwide. Legislation based on the UNCITRAL Model Law has been adopted in many jurisdictions around the world. Parties are likely to approach it with more confidence than they would other more unfamiliar domestic commercial arbitration legislation;
• there will be national consistency in the regulation and conduct of international and domestic commercial arbitration. This is particularly important given the federal system under which Australia operates and the sometimes competing and disparate bodies of law that have developed across the different Australian jurisdictions at a Federal and State level. There is clear benefit to businesses which operate both domestically and internationally, being able to have regard to a common procedural framework for managing commercial disputes;
• national uniformity in legislation between the States is likely to promote greater consistency between courts in different Australian jurisdictions; and
• the more limited avenues of recourse against arbitral awards will promote greater certainty for parties who use arbitration as a means of dispute resolution.

Final note

The Act, together with other State based acts, provides parties with a much improved framework for the conduct of arbitration which, if used properly, has the potential to make arbitration a genuine alternative to litigation.