This is Part 1 of an ongoing series dedicated to unpacking the intricacies of International Commercial Arbitration.
As a member state of the international arbitration community, with a demonstrated pro-recognition and enforcement jurisdiction, Australia’s Federal Court is an attractive setting to resolve cross-border International Commercial Arbitration disputes.
International Commercial Arbitration is defined by the Attorney-General’s Department to be a private dispute resolution process in which parties from different countries choose to have their disputes decided by one or more arbitrators, without the involvement of the courts of a particular country.
Governing Legislation
Australian courts involvement in International Commercial Arbitration is governed by the International Arbitration Act 1974 (Cth) (IAA) which designates UNCITRAL Model law as the preferred procedural law and outlines the mandatory procedures for all International Commercial Arbitration proceedings in Australia.
The IAA additionally implements Australia’s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States.
Defining Features of International Arbitration
Choice: Arbitration allows both parties to appoint specialist arbitrators to meet their needs and allows the parties to choose the governing law of the contract, the venue of the arbitration and the language of the arbitration.
Confidential: Arbitration is primarily a confidential process (with exceptions) with the decisions of tribunals, including the award, not often being published or made public. However, it is important to note that there is no implied obligation of confidentiality in arbitrations in Australia.
Consensual: Arbitration is a consensual and voluntary process. An Arbitral Tribunal only has jurisdiction if all the parties to the dispute have agreed to submit their dispute to arbitration. This agreement is typically done through the insertion of an arbitration clause into their agreement.
Enforceability: In theory, an arbitration award can be enforced against the 172 signatories of the New York Convention. In comparison, when engaging in litigation there is no equivalent of the New York Convention and parties instead must rely upon reciprocal agreements in place.
Finality: An award in arbitration is equivalent to a judgement in litigation. It is ‘final and binding’ and generally cannot be challenged except in very limited circumstances.
Australia’s Stance on International Arbitration
Australian courts typically demonstrate a pro-arbitration approach to the interpretation of arbitration clauses. In Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13, it was held that arbitration clauses are to be construed widely, taking into account the language used, surrounding circumstances and the contracts’ purpose.
Although Australia has a liberal approach in interpreting arbitration agreement, parties still must ensure care when drafting arbitration agreements. Please contact our team if you would like assistance.
Australian courts also demonstrate a pro-enforcement jurisdiction as highlighted in Guoao Holding Group Co Ltd v Xue (No 2) [2022] FCA 1584. Here, the court reaffirmed the high threshold requirement for Australian courts to refuse to enforce a foreign award on public policy grounds being that ‘the award must be so fundamentally offensive to that jurisdiction’s notions of justice that, despite its being a party to the Convention, it cannot reasonably be expected to overlook the objection’. However, where there is an established ground for doing so Australian courts will refuse to recognise and enforce an award. For example, the enforcement of the arbitration award was refused in Hub Street Equipment Pty Ltd v Energy City Qatar Holding Company [2021] FCAFC 11 as the arbitral tribunal was not appointed in accordance with the agreement of the parties.
Why is International Arbitration Relevant?
Foreign companies negotiating terms of contracts for their overseas operations often use International Commercial Arbitration as an alternative to court litigation when disputes arise. This is because arbitration is a favoured method for resolving International Commercial Disputes as it enables both parties to agree that when a dispute arises, a neutral and respected third party will be appointed to resolve their dispute in a desired venue, with a particular set of laws to give the arbitration its legal basis and a separate set of laws with which the dispute will be resolved.
The significance of International Commercial Arbitration is demonstrated in the ACICA report ‘Reflections on the Last Decade of Activity at ACICA’ (2022) which highlighted that between 2011 and 2021:
ACICA has been involved in arbitrations concerning $24 billion;
Of the $24 billion, energy and resource disputes accounted for $18.8 billion;
39% of ACICA cases had at least one party not based in Australia; and
Between 2017-2019 there were 223 active arbitrations with an ‘Australian connection’ for a combined value in excess of $35 billion.
I Need Advice on International Commercial Arbitration
If you find yourself in a position requiring advice on International Commercial Arbitration, please contact our team.
ABOUT THE AUTHOR
Isabella Tziolis assists as a paralegal in commercial, defamation, employment and general matters and is committed to supporting BlackBay Lawyers mission of delivering exceptional legal services. Her work focuses on assisting in providing comprehensive legal support, conducting extensive research, and offering strategic guidance to clients.
Isabella is currently studying a Bachelor of Laws and a Bachelor of Arts, majoring in Politics and International Relations at the University of New South Wales. Her academic and professional experience has fostered her high attention to detail and strong analytical skills which allows her to efficiently handle high-pressure situations and contribute to effective legal strategies.
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