New Zealand considers further amendments to its Arbitration Act

On 9 March 2017, the Arbitration Amendment Bill (Bill) was introduced to the New Zealand Parliament. The Bill proposes to amend the Arbitration Act 1996 (Act), and follows recommendations by the Arbitrators’ and Mediators’ Institute of New Zealand (AMINZ).

The proposed changes include:

1. permitting the inclusion of arbitration clauses in trust deeds;
2. greater confidentiality of arbitration-related court proceedings; and
3. narrowed grounds for the set-aside of an arbitral award.

Other amendments to the Act came into effect on 1 March 2017, which we earlier reported on here.

1. Trust-related arbitration

Arbitration can be a suitable mechanism for resolving disputes involving trusts, as its inherent privacy is more suited to the private nature of most trusts. However, the enforceability of arbitration clauses in trust instruments has often been doubted, including on the following grounds:

• There may be a lack of privity to bind any non-signatory beneficiaries of a trust to an arbitration clause which has been included in a trust deed by the settlor of a trust.
• Certain beneficiaries of a trust may be incapable, like minors, and arbitral tribunals often lack the power of national courts to name special guardians for such beneficiaries.

Nevertheless, many of the traditional obstacles to trust arbitration can now be addressed by legislative reform. The Bahamas and Guernsey have recently enacted such reforms.

The Bill proposes that arbitration clauses in trust instruments be considered arbitration agreements, thereby allowing such agreements to be enforceable in court. It also proposes that arbitral tribunals be given the power to appoint representatives on the part of an incapacitated or unascertained beneficiary, ensuring that those who cannot represent themselves will be effectively represented.

2. Confidentiality of arbitration-related court proceedings

The Act presently provides that any arbitration-related court proceedings in New Zealand will be public.¹ However, this does not accord with the expectation of many users of arbitration for the arbitral process and any ancillary processes to be confidential. It also places New Zealand out of step with leading jurisdictions around the world, such as England, Hong Kong and Singapore.

The Bill proposes that the presumption of confidentiality in respect of arbitration proceedings be extended to a rebuttable presumption of confidentiality in respect of satellite litigation proceedings (such as applications to set aside an arbitral award and appeals on questions of law) under the Act.

Upon an application by a party, courts would be required to make a direction as to what aspects of arbitration-related court proceedings may be published in law reports. In particular, courts would be able to redact certain aspects of such proceedings in law reports, and direct that these law reports not be published until after the end of a specified period (being not more than 10 years).

3. Narrowed grounds for the set-aside of arbitral awards

The Supreme Court of New Zealand recently held that an arbitration clause providing for invalid recourse against an arbitral award (in that case, an appeal on a question of fact, when only appeals on questions of law are allowed under New Zealand law) is not a valid arbitration agreement.² This was seen by some as unwarranted judicial interference in the parties' agreed arbitration process. The Bill proposes to amend the Act, to avoid the set aside or unenforceability of arbitration agreements by reason of their procedural provisions being incompatible with the Act.

The decision also highlighted that the Act provides that an arbitral award may not simply be set-aside for non-conformity with the arbitration agreement, where the arbitration agreement itself was in violation of a mandatory provision of Schedule 1 to the Act (which contains the Model Law). This means that an arbitral tribunal’s decision to derogate from the provisions of the arbitration agreement because it is bound by some mandatory provision of the Model Law is protected and that a resulting arbitral award cannot be set-aside on that ground. The Bill extends that protection to other provisions of the Act outside of Schedule 1.

It is encouraging to see New Zealand considering further arbitration-related reforms so promptly after previous reforms which were introduced only last year. Not only do these reforms address inadequacies in New Zealand’s current law, but they also lay a foundation for New Zealand to distinguish itself from other jurisdictions – particularly in respect of trust arbitration.

[1] Arbitration Act 1996, Schedule 1, Article 14F

[2] Carr v Gallaway Cook Allan [2014] NZSC 75