Commercial Arbitration Act 2010 (NSW)

The Commercial Arbitration Act 2010 (the Act) received the assent of the New South Wales (NSW) Parliament on 28 June 2010, after the Standing Committee of Attorneys General agreed to update the uniform legislation. No commencement date has been proclaimed as yet.

The Act is the forerunner to establishing a new procedural framework for the uniform conduct of domestic commercial arbitration throughout Australia. The paramount objective, as stated in the Act, is to facilitate the fair, quick, cost effective and final resolution of disputes by arbitration by allowing the parties greater procedural control and further restricting the basis for court intervention and appeals of arbitral awards.

The Act is based on and supplements the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration. Objectives of the proposed uniform legislation include:

• Bringing Australian jurisdictions into line with international standards in commercial arbitration.
• Diminishing the difficulties resulting from two different arbitral systems, international and domestic.
• Delivering a national uniform system for domestic and international arbitration.

The Act will apply to domestic commercial arbitrations constituted by an arbitration agreement.

There are a number of opt-in or opt-out provisions, and where agreement cannot be reached, the Act provides certain default provisions. For example:

• An optional confidentiality regime consistent with the International Arbitration Act 1974 (Cth); if the parties do not reach agreement in relation to confidentiality, then confidential information is not to be disclosed by either the parties or the arbitral tribunal unless one of the circumstances listed in the Act applies.
• Preservation of appeal rights; if the parties do not reach agreement as to whether appeals on questions of law will be permitted, the Act still allows them to apply to the court to have an arbitral award set aside where they satisfy certain criteria.

A significant change concerns the extent to which recourse against arbitral awards may be available. Recourse by court intervention is restricted to:

• Where a party can prove the incapacity of a party or the invalidity of an arbitration agreement, lack of proper notice of the appointment of the arbitral tribunal, that the award deals with a dispute not contemplated by or falling within the terms of the arbitration submission or that the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the arbitration agreement or the Act.
• Where the court finds that the dispute is not capable of settlement by arbitration or that the award conflicts with public policy.
• Questions of law if, before the commencement of the arbitral proceedings, the parties have agreed that appeals may be brought and the court grants leave.

Leave to appeal on a question of law must satisfy the following criteria:

• The determination will substantially affect the rights of one or more parties.
• The question is one which the arbitral tribunal was asked to determine.
• On the basis of the findings of fact, the decision is "obviously wrong" or the question is of general public importance and the decision is open to serious doubt.
• It is just and proper for the court to determine the question.

Showing "manifest error" on the face of the award is no longer a requirement. The right to apply to a court to set aside an award to address serious irregularity has also been done away with.

If parties have not agreed to preserve appeal rights before the commencement of the arbitral proceedings, a party may suffer hardship and prejudice if unable to put right a serious irregularity which materially influences the consequences of an award.

Other significant changes to the current domestic arbitration regime include:

• Requiring a court to refer an action brought before it to arbitration at the request of a party to an arbitration agreement; the Act requires arbitration proceedings to continue (including to the stage of making an award) where an action is brought to refer a dispute to court or action a plea that the arbitral tribunal does not have jurisdiction.
• Instilling flexibility and autonomy to parties in selecting an arbitral tribunal, both in the process of selection and the challenging of selections and providing default provisions if the parties cannot agree.
• Clarifying that an arbitral tribunal can determine whether it has jurisdiction and reserving a party's right to seek a court ruling where jurisdiction has been determined.
• Allowing parties to choose the substantive law to be applied in determining the matter in dispute (as opposed to determining the arbitral law under which the dispute is resolved).
• Introducing extensive provisions dealing with interim measures such as those relating to preservation of evidence, preservation of assets, costs, disclosure of information and provision of security.
• Entrenching procedural flexibility by allowing parties to determine the approach to conducting the arbitration, and failing agreement allowing the arbitral tribunal to determine the appropriate process to achieve a fair hearing.
• Arbitrations can be conducted on a "stop clock" basis where time limits are recorded and enforced.
• Parties must do all things necessary for the proper and expeditious conduct of arbitral proceedings, and the arbitral tribunal has additional powers to address delay and procedural compliance issues.
• Allowing an arbitrator to act as a mediator or conciliator, and if not successful the arbitrator cannot continue to conduct the arbitration without the consent of the parties.
• Providing for costs to be limited in proportion to the amount in dispute.

The Act supplements the UNCITRAL Model Law with regard to awarding costs and interest, which are addressed in a manner that is consistent with counterpart provisions in the International Arbitration Act 1974 (Cth).

The range of procedural and jurisdictional matters which the Act leaves to be agreed by the parties warrants a careful review of arbitration clauses used in commercial agreements.