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THE COMMERCIAL ARBITRATION ACT 2011:

The Implementation of a New Domestic

Commercial Arbitration Regime in Victoria

Introduction

Arbitration offers an excellent alternative to litigation when it lives up to the promise of being, “...a timely, private, less formal and cost effective approach for the binding determination of disputes.”  All too often that promise has been unfulfilled under the Commercial Arbitration Act (Vic) 1984.

However, arbitration is set for a renaissance following the passing into law of the Commercial Arbitration Act (Vic) 2011 on 17 November 2011 enabling Victoria to catch up with similar Acts that have already been passed in New South Wales, Tasmania, South Australia, Western Australia and the Northern Territory.

Much like its interstate equivalents, the Act is based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration which reflects the current world standard for arbitrating commercial disputes, taking into account the International Arbitration Act 1974 (Cth).

Arbitration Agreements

The Act requires courts to refer a matter to arbitration if that matter was subject to an arbitration agreement and a party so requests.

The Process of Arbitration

Under the Act, parties are given the flexibility and autonomy to select an arbitrator or arbitral tribunal to decide their dispute. This not only allows parties to agree on the number of arbitrators but also the process by which they will be selected. In the event that parties should not be able to reach an agreement on this point, the Act provides for a default position.

The grounds for challenging the appointment of an arbitrator are clearly set out under the Act and a further obligation is imposed on arbitrators to disclose any circumstances likely to give rise to reasonable doubts as to their impartiality or independence in the matter.

The Jurisdiction of Arbitral Tribunals

Arbitral Tribunals are deemed competent under the Act to determine whether they have the requisite jurisdiction to hear a matter but also parties still reserve the right to have matters of jurisdiction heard before a court.

Increased Efficiency

Tribunals are given the power to conduct arbitration on a ‘stop-loss’ basis, and unless the parties agree otherwise, time limits can be enforced in an effort to conduct arbitrations in a manner proportionate to the amount of money involved and the complexity of the matter.

Costs limits can be imposed on all or any part of the arbitration process unless the parties agree otherwise. Therefore, a central focus of the Act is the facilitation of efficient and cost effective dispute resolution.

Flexibility

A requirement of the Act is that parties be given a fair hearing and that they possess the freedom to agree on the procedure to be adopted. Should the parties not be able to come to an agreement, the arbitral tribunal can nominate its own procedure as it deems appropriate under the circumstances. This gives both parties and arbitral tribunals the flexibility to tailor the procedure according to the nature of the dispute rather than just having a uniform procedure for all matters.

Duties Imposed on Parties

Under the Act, parties must uphold the general duty to do all things necessary for the proper and expeditious conduct of arbitral proceedings.

In the event that one or more of the parties causes unnecessary delay or fails to comply with directions, the Act grants the tribunal sufficient powers to deal with any such impropriety.

Confidentiality

An optional confidentiality regime is available to parties under the Act and is seen as one of the key benefits of selecting arbitration as a means of resolving sensitive commercial disputes.

Parties often assume that arbitration will be both private and confidential however, if the arbitration agreement between the parties does not cover confidentiality, the Act permits them to opt-out of arbitration in order to preserve the confidential nature of sensitive information.

Costs and Interest

Business stakeholders have long been demanding a harmonised treatment of costs and interest across international and domestic commercial arbitration legislation and under the Act,  the issue of costs and interests are dealt with in conformity to the International Arbitration Act 1974 (Cth).

Enforcement and Recognition of Awards

Under the Act, arbitral awards made in other jurisdictions of Australia are given recognition and are enforceable irrespective of the State or Territory in which an award was made. The Act also provides grounds for which enforcement can be refused.

What does the new commercial arbitration legislation mean for your business?

Businesses are given greater access to efficient and cost effective dispute resolution that can be tailored to the needs of parties and the complexity of disputes.  Parties are given the ability to agree on how to come to a resolution with it being a much less formal approach than under the previous commercial arbitration regime.

There is now greater finality in arbitration because in effect, an award gives parties a final resolution which can only be appealed in limited circumstances.

The Act moves Victoria into line with the other States of Australia and prominent overseas jurisdictions such as New Zealand and Singapore who have already taken to the model approach. Therefore, there is now greater harmony in commercial arbitration legislation across Australia thus reducing the onus on business owners and legal practitioners to have knowledge of two distinct arbitral systems.

If your company is involved in a dispute, please contact Berrigan Doube Lawyers to discuss the matter on (03) 9600 2755 or (02) 9251 6699.