Doing business in Australia: Why International Commercial Arbitration is an Attractive Option to Resolve Disputes

Introducion

In the world of international commercial arbitration, many countries have harmonised their respective laws by using the same core documents from UNCITRAL (the United Nations Commission on International Trade Law).  In this regard, Australia is one of the many signatory States to two key UNCITRAL documents, namely, the UNCITRAL Model Law on International Commercial Arbitration (Model Law) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).

The Model Law covers all stages of the arbitral process from the arbitration agreement, composition and jurisdiction of the arbitral tribunal and the extent of court intervention through to the recognition and enforcement of the ‘arbitral award’ (the final decision in arbitration) (award).  The Model Law has been used by sovereign States (the relevant countries) for decades to provide a template for legislation in their respective jurisdictions regarding international commercial arbitration. 

The New York Convention has also been in place for decades and provides for the recognition and enforcement of foreign awards by the domestic courts of signatory States.

The Model Law and the New York Convention have, through their adoption by signatory States, established an international platform for commercial arbitration. This platform provides international parties with confidence, certainty and consistency in relation to the arbitration process and the recognition and enforcement of foreign awards by the domestic courts of signatory States.

Why International Commercial Arbitration?

Foreign companies negotiating contracts for their investments and operations overseas often use international commercial arbitration as an alternative to court litigation. The benefits of international commercial arbitration include the following:

• international parties to projects in foreign jurisdictions are often reluctant to submit to the jurisdiction of foreign domestic courts;
• in arbitration the parties can choose the governing law of the contract and the seat (the legal place) of the arbitration, the language of the arbitration and the number and identity of arbitrators;
• arbitration allows the parties to appoint specialist arbitrators (some who may not be legally qualified) to the tribunal (including from other jurisdictions) to meet the technical and often complex needs of the dispute;
• the process during the arbitration can be more flexible and customised, and therefore more efficient than litigation;
• arbitration is nearly always a confidential process with the decisions of tribunals (including the award) not often published or made public;
• the location of hearings in the arbitration can be chosen as convenient to the parties and the arbitrators (many being increasingly virtual);
• once the award is delivered by the tribunal it is usually difficult to appeal; and
• an award can be recognised and enforced through the courts of all States that are signatories to the New York Convention.

International Commercial Arbitration in Australia

Australia is a member State of the international commercial arbitration community and Australia’s courts are a pro-recognition and enforcement jurisdiction.

Australia is a geographically attractive location to arbitrate disputes between parties in the Asia Pacific region and beyond.  The east coast of Australia, with the key seats of Sydney, Melbourne and Brisbane, offer time zone convenience with East Asia, while Perth offers time zone convenience with Singapore. 

Australia’s International Arbitration Act 1974 (Cth) (IAA), which gives legal effect to the Model Law and Australia’s obligations under the New York Convention, governs all international commercial arbitrations in Australia and is a modern and transparent legislative framework.  Part II of the IAA provides Australia’s accession to, and implementation of the New York Convention, and the Convention’s wide adoption around the world and clear processes make it a valuable tool for parties looking to have either their foreign awards recognised and enforced in Australia or their awards from arbitration seated in Australia recognised and enforced in foreign jurisdictions.  As Australia is a signatory to the New York Convention, Australian courts rarely decline to recognise and enforce foreign awards, and have earned a reputation as a pro-enforcement and “arbitration-friendly” jurisdiction¹.

In support of arbitration, Australia’s judiciary is independent and highly respected.  Jurisprudence has consistently demonstrated that Australian courts take a transparent approach to the recognition and enforcement of foreign awards² . In 2021, Australia’s Full Federal Court, in Hub Street Equipment Pty Ltd v Energy City Qatar Holding Company³, affirmed the primacy or first place of arbitration agreements and demonstrated a reluctance on behalf of Australian courts to interfere with the outcomes of foreign arbitral awards where no material prejudice has been suffered.  This arbitration-friendly reputation was reinforced last year in Daewoo Shipbuilding & Marine Engineering Co Ltd v INPEX Operations Australia Pty Ltd⁴, which concerned the high-profile Ichthys LNG project in Australia.  That decision, which involved an injunction over a performance bond being called pending the determination of an international commercial arbitration, demonstrates how Australian courts support the international commercial arbitration process.

DLA Piper has been at the forefront of international commercial arbitration in Australia and is recognised by Legal500 as a Tier 1 team in Australia. 

The Australian Centre for International Commercial Arbitration (ACICA)

Australia’s key international dispute resolution institution is the Australian Centre for International Commercial Arbitration (ACICA).  It released its updated ACICA Arbitration Rules and Expedited Arbitration Rules in 2021 and parties can agree to conduct arbitrations in accordance with these rules.  The new ACICA Arbitration Rules were a welcome addition to Australia’s blooming arbitration sector.  Key amendments included rules for virtual hearings, electronic filing, multi-party and multi-contract arbitrations, third party funding, the early determination of disputes and time limits for the delivery of awards.  The ACICA Arbitration Rules also include provisions for Emergency Arbitrations, which allow parties to apply to ACICA for emergency interim protection measures, such as an order preventing another party from disposing of assets, prior to the constitution of the arbitral tribunal.  Helpfully, ACICA provides both a Model Arbitration Clause and an Expedited Arbitration Clause to be used by parties in their contracts. ACICA is also the sole default appointing authority under the IAA. 

In late 2022, ACICA released its report “Reflections on the Last Decade of Activity at ACICA”, which celebrated 10 years since significant legislative reforms were introduced to improve the efficacy and efficiency of arbitration in Australia.  Importantly, it highlighted that ACICA has been involved in AUD24 billion worth of arbitrations over the last 10 years.  Of this amount, AUD18.8 billion concerned energy and resources disputes, while construction and infrastructure disputes accounted for almost AUD4 billion.  In addition, the report details ACICA’s increased international reach – 39% of ACICA cases involved at least one party not based in Australia, while 11% involved parties entirely based outside Australia.  ACICA's consistent adherence to international best practice through regular updates of its Arbitration Rules have likely played a role in the growth of its international reach.

Why is this relevant to you?

For international projects, when deciding whether to resolve disputes by court litigation, arbitration or another alternative process, it helps for parties to be aware that the legal framework for international commercial arbitration around the world is underpinned by UNCITRAL, including its Model Law and the New York Convention. It also helps for parties to be aware that Australia is a signatory State and is a pro-arbitration and enforcement jurisdiction.

For foreign companies wanting to use international commercial arbitration to resolve disputes in their projects and investments in Australia or the Asia Pacific region, ACICA is the leading source of model arbitration clauses and rules, and these can be readily adopted and incorporated into the relevant contract documents.

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_{1 Hub Street Equipment Pty Ltd v Energy City Qatar Holding Company [2021] FCAFC 110 at [102].}

_{2 TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd [2014] FCAFC 83.}

_{3 [2021] FCAFC 110.}

_{4 [2022] NSWSC 1125.}