Professor Gillian Triggs gives keynote address at ... · Dr Tom Altobelli to speak on mediation after AGM and conciliation. He was one of the most experienced family mediators in

Quarterly Bulletin of The Chartered Institute of Arbitrators (Australia) Limited - Issue No 6 - March 2008

Arbitration • Mediation • Adjudication • Expert Determination • Conciliation

The Australian

ADRReporter50th Anniversary of N

ew York

Convention Special E

dition

Professor Gillian Triggs gives keynote address at commemoration event:

“New York Convention is the success story of public and private international law”

www.arbitrators.org.au

Speakers at the commemoration event for the 50th Anniversary of the New York Convention held in Sydney on 28 February at the offices of Freehills were (l-r) Professor Gillian Triggs, Dean of the University of Sydney Law School who gave the keynote address; Malcolm Holmes, President of the Chartered Institute of Arbitrators (Australia) Limited; Rashda Rana, Barrister and member of ArbitralWomen; Sir Gerard Brennan, former Chief Justice of the High Court of Australia who acted as chairman; and Bronwyn Lincoln, a Partner in Freehills Melbourne office and inaugural chairperson and co-founder of the Australasian Forum for International Arbitration. A full report of the event appears on pages 7 -10.

ADR Reporter March 20082

31 Mar Board Meeting

8 Apr “Improving International Arbitration” - talk by David W Rivkin, Blake Dawson, Level 36, Grosvenor Place, Sydney 5.30pm for 6pm.

28 Apr Annual General Meeting, Mallesons, Level 61 Governor Phillip Tower, Sydney, 5.30pm followed by talk by Dr Tom Altobelli on Mediation. (See page 5 for AGM details)

26 May Board Meeting

1 Jun - 14 Jun

Diploma Course in International Commercial Arbitration, Kuala Lumpur, Malaysia (see pages 4 and 28).

30 Jun Board Meeting

28 Jul Board Meeting

25 Aug Board Meeting

29 Sep Board Meeting

The Chartered Institute of Arbitrators

(Australia) Limited

Level 6, 50 Park Street, Sydney, NSW, 2000, Australia Executive Officer:Emma Matthews( (02) 9267 1513Fax: (02) 9267 3125email: [email protected]

President: Malcolm Holmes( (02) 9232 8409Fax: (02) 9232 7626email: [email protected]

Vice-presidents:James CreerNeil Brown

Hon Treasurer/Company SecretaryMichael Sanig( 0404 023 006Fax: (02) 4362 8864email: [email protected]

Board of Directors:Alan ChuckSteven GriffithAlan LimburyHarry McIverPeter MegensDerek MinusAlbert MonichinoDavid MoorePathma NagarajanIan NosworthyPaul RobertsAlfred Willings

Australian Business Number: 27 118 131 016

Chapter Convenor:NSW: Michael SanigVIC: Albert MonichinoQld: Steven GriffithSA:WA:

From an historical perspective

From the Editor

Michael Sanig

BranchDiaryThe

This issue, comprising 32 pages, is the largest that we have ever produced. A good proportion of this edition

is dedicated to the 50th Anniversary of the signing of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention, which was adopted at a United Nations diplomatic conference on 10 June 1958.

The Convention is, without doubt, the single most important convention applying to the cross-border enforcement of arbitration awards and is widely considered as the foundation instrument for international arbitration. The fiftieth anniversary of this event is a landmark which is worthy of commemoration.

We have included a number of interesting historical pieces – newspaper cuttings from The New York Times, an article by Pieter Sanders, a delegate to the 1958 Conference who wrote about the making of the Convention on its fortieth anniversary and a considered piece by Professor Geoffrey Hartwell looking at the Convention from a different point of view.

For those readers not totally familiar with the New York Convention we have also published a Fact File which details the Convention, its background, a summary of the Convention’s provisions and some information on which countries have ratified it. Australia did not ratify the Convention until March 1975 after the enactment of the International Arbitration Act 1974 (Cth).

There are still 42 member countries of the United Nations which have not ratified the Convention. This list includes every Pacific nation which is a member of the UN other than Australia, New Zealand and the Marshall Islands. If you or your clients are planning to do business in Equatorial Guinea, North Korea, Libya, PNG or East Timor to name but five countries which have not signed up, then you’ll need to be extra careful as to how any disputes might be resolved especially as these countries are such strong advocates of the rule of law !!

Acknowledgment to Gianna Totaro of IAMA

It is often said that great minds think alike. Several days before putting this issue

to bed I received an email from Gianna

Totaro of IAMA which, amongst other things included pdfs of several news clippings relating to the Convention signing in 1958. Two of those clippings, illustrated on page 11, I had already found myself during my own research for our coverage of the 50th anniversary. However, the page from The New York Times of 15 September 1958, which features the UN General Assembly Agenda for its 13th session I did not have.

I take this opportunity to thank Gianna for her investigative work of which I have taken full advantage. Equally, I have used a cropped photograph of Norman Drogemuller and his wife Lorraine at last year’s IAMA conference which accompanied IAMA’s notification of Norman’s award of an AO in the Australia Day Honours List.

I believe in giving credit where credit is due.

Michael Sanig

Other meetings are planned throughout 2008. More details will be published in the next issue of The Australian ADR Reporter

3ADR Reporter March 2008

Dr Tom Altobelli, one of Australia’s foremost family lawyers, former University of Western Sydney law

professor and currently a Federal Magistrate, will be guest speaker following the Annual General Meeting to be held in Sydney on 28 April at the offices of Mallesons.

His talk will be an informal presentation on “Mediation - experiences of a family lawyer.”

Tom started practising family law in 1984 and is now widely regarded as a leading expert in the field.

Prior to his appointment to the Federal Magistrates Court in 2006, Tom was Special Counsel to Watts McCray and also Associate Professor in the School of Law at the University of Western Sydney.

His books on family law (Family Law: Theory Meets Practice, 1999 and Family Law in Australia: Principles and Practice, 2003) are widely used both by family lawyers and students of family law across Australia.

Tom is a prolific writer of articles and presenter of papers on family law and alternative dispute resolution, both in Australia and internationally.

He is an Accredited Specialist in Family law, Mediation and Children’s Law. The leading Australian legal publisher, CCH Australia, recently described Tom as “one of Australia’s foremost authorities on Alternative Dispute Resolution”.

He has also written on and practised extensively in the complex field of family law and bankruptcy.

As well as being an experienced litigator, whilst in practice, Tom had a passion for helping people solve their own legal problems through mediation, negotiation

Dr Tom Altobelli to speak on mediation after AGM

and conciliation. He was one of the most experienced family mediators in Australia.

Tom was the only law professor in Australia who actually practised family law. This combination of roles of family law scholar, practitioner and mediator meant that his clients benefited from a deep knowledge of family law and a practical problem-solving approach to their legal dispute.

David W Rivkin to speak in Sydney on 8 Apr

ADRReporterEditor:Michael Sanig

Editorial correspondence, articles etc for publication should be sent to:-

PO Box 57,OURIMBAH, NSW, 2258Tel: (02) 4362 8854Fax: (02) 4362 8864Mobile: 0404 023 006e-mail: [email protected]

Articles can be submitted in Word or RTF format. Please submit photographs or images as JPEG files 300dpi or greater.

Please do not use double spacing within paragraphs. Please use endnotes not footnotes.

All opinions expressed in The Australian ADR Reporter are those of the contributor and publication of same does not imply endorsement by The Chartered Instituite of Arbitrators (Australia) Limited or any of its officers.

Published four times per year.

Copy Dates:

Jun 2008 - 15 MaySep 2008 - 15 AugDec 2008 - 15 NovMar 2009 - 15 Feb

All articles © 2008 The Chartered Institute of Arbitrators (Australia) Limited - Permission to reproduce any item should be obtained by writing to the Editor at the address stated above.

CIArbNews

The Australian

David W Rivkin, the Chairman of the International Bar Association’s Legal Practice Division and a prominent

international arbitrator, will be speaking to the NSW Chapter of CIArb Australia on 8 April at the offices of Blake Dawson, Level 36, Grosvenor Place. The meeting will commence at 5.45pm for 6pm.

His topic will be “Improving the efficiency of International Arbitration” with particular emphasis on what is called the “Town Elder model.”

David will be in Sydney to give the opening address at an International Bar Association Conference which is being held jointly with the Law Council of Australia on the subject of mergers, acquisitions and

(Continued on page 5)


CIArbNews

From 1-14 June 2008, the Malaysian and Australian Branches of the Chartered

Institute will co-present the Diploma Course in International Commercial Arbitration in Kuala Lumpur, Malaysia.

For the past two years the course has been run by the Australian Branch in Sydney at the University of New South Wales and at the offices of major Sydney law firms. This year will be the first time that the course has been run outside of Australia with the intention of attracting more participants from South-East Asia who will be spared from making the long air flight to Australia.

The Course Director is Malcolm Holmes, President of the Australian Branch, and he is supported by the Australian Centre for International Commercial Arbitration (ACICA), the Australian Commercial Disputes Centre (ACDC), the Law Society of New South Wales and Continuing Legal Education Centre, Faculty of Law, University of New South Wales (UNSW).

More than twenty presenters and tutors – experts in their own fields - have been lined up for the course and will be travelling to Malaysia from Singapore, Indonesia, Hong Kong, Australia, UK and USA.

This intensive residential course in International Commercial Arbitration is offered over two weeks. Participants will be taught the practice of international commercial arbitration, including all major forms of international arbitration and related dispute settling mechanisms such as WIPO, WTO and Investment Treaty Arbitration. Participants will gain the ability to appear in or act as an arbitrator in such arbitrations in different contexts.

This course is accredited for Post Graduate Law studies at the University of New South

Wales and can also be done in conjunction with the Master of Legal Studies course designed for non lawyers to obtain the desired legal background.

In the first week, a series of lectures cover the fundamentals of international commercial

a r b i t r a t i o n . They follow and analyse lega l concepts and issues ar is ing d u r i n g t h e course of an arbitration.

In the second w e e k , t h e l ec tu re s w i l l

examine Trade Law disputes and arbitration under Bilateral Investment Treaties and Free Trade Agreements and other specialist areas such as maritime arbitration. Meanwhile in the afternoon sessions, participants take part in practical group workshops, under the guidance of experienced arbitrators. Students will be given practical training in the conduct of an international arbitration and will discuss a range of problems which may arise in the course of conducting an international arbitration.

The cost of the course is A$7,500 which includes tuition fees, course materials, accommodation and all meals in a five star Kuala Lumpur hotel. Places are limited.

Further information and registration details can be obtained from:Ms Emma MatthewsChartered Institute of Arbitrators (Australia) LimitedLevel 6, 50 Park Street, Sydney, NSW, 2000, AustraliaPhone: +61 2 9267 1513Fax: +61 2 9267 3125Email: [email protected]: www.arbitrators.org.au; orMs Flora KangChartered Institute of Arbitrators, Malaysia BranchG-3-8, Plaza Damas, 60, Jalan Sri Hartamas 1, Taman Sri Hartamas, 50480 Kuala Lumpur, MalaysiaTel: +60 3 6203 5457Fax: +60 3 6203 5471Email:[email protected]: www.ciarbmal.org.my

1-14 June in Kuala Lumpur:

2008 Diploma Course to be jointly held by Australian and Malaysian Branches

Who’s presenting at this year’s course

The Faculty for the two weeks of lectures, expert commentary and

tutorials includes; Hon Justice James Allsop, Federal Court of AustraliaAlex Baykitch, Blake Dawson Waldron, UNCITRAL delegateDr Andrew Bell SC, Author, Forum Shopping and Venue in Transnational LitigationMax Bonnell, Mallesons Stephen Jaques, Hong Kong and SydneyThe Hon Neil Brown QC, Melbourne, WIPO Domain Name ArbitratorThaw Sing Chong, Chairman, Chartered Institute of Arbitrators, MalaysiaDr Clyde Croft QC, APRAG Delegate to UNCITRALHew Dundas, Scotland, Past President Chartered Institute of ArbitratorsBjorn Gehle, Clayton UtzGavan Griffith AO QC, Aust delegate & vice chairman of UNCITRAL 1984-1997; Solicitor-General of Aust 1984-1997Professor Malcolm Holmes QC President Chartered Institute of Arbitrators (Australia) LimitedJonathon Hoyle, Mallesons Stephen JaquesMichael Hwang SC, SingaporeJudith Levine, White & Case, New York and Legal Counsel at the Permanent Court of Arbitration in The HagueAlan Limbury, WIPO Domain Name ArbitratorPeter McQueen, Australian Maritime and Transport Arbitration CommissionLucy Martinez, Freshfields, New YorkAlbert Monichino, Barrister, MelbourneDaniel Moulis, International Trade Lawyer, CanberraThe Hon Trevor Morling QC, former member Federal Court of AustraliaProf Michael Pryles AM, London and Sydney, President, ACICAVinayak P. Pradhan, Skrine, MalaysiaRashda Rana, London, Hong Kong and SydneySundra Rajoo, Chartered Arbitrator, MalaysiaJun Wang, Lawyer, admitted China and Australia


CIArbNews

Sydney AGM to be broadcast live to Melbourne, Brisbane and PerthThe Annual General Meeting of the Branch will be held on Monday, 28 April, 2008 commencing at 5.30pm Australian Eastern Standard Time (4.30pm in Brisbane and 3.30pm in WA). The AGM will be video-conferenced live from the offices of Mallesons in Sydney to Melbourne, Brisbane and Perth. Tom Altobelli’s presentation, which will take place in Sydney after the AGM, will also be broadcast live to the other states.

The ‘live’ meeting of the AGM will be held in the Sydney offices of Mallesons at:-

Level 61Governor Phillip Tower1 Farrer Place, SydneyThe AGM will also be videocast to the

Melbourne, Brisbane and Perth offices of Mallesons:-

Mallesons Stephen Jaques - BrisbaneLevel 30, Waterfront Place1 Eagle Street, Brisbane; Mallesons Stephen Jaques - MelbourneLevel 50, Bourke Place600 Bourke Street, Melbourne;andMallesons Stephen Jaques - PerthLevel 10, Central Park, 152 St Georges

Australia Day Honours for CIArb Members

Congratulations to our former Executive Committee member, Norman Drogemuller, who was awarded an AO in the Australia Day Honours list for his service to arbitration and mediation particularly in the areas of architecture and contruction.

Norman is pictured at last year’s IAMA Conference with his wife Lorraine. The photograph, which has been cropped, was included in IAMA’s notice to its members advising them of Norman’s honour.

Terrace, Perth.This is the third Annual General Meeting

since the Branch was incorporated in 2006. Three Board members - Albert Monichino, Pathma Nagarajan and Paul Roberts are required to retire from office as they were Board appointed councillors during the previous year.

One third of the current Board is also required to resign under the constitution of the Branch and, as the longest serving members, Steven Griffith, Alan Limbury, David Moore and Alf Willings must stand down. All seven members of the Board are able to offer themselves for re-election.

Nomination forms for Board members were sent to all members on 22 February.

Current Board Member David Moore was also awarded an AO in the Australia Day Honours list for his

service to agriculture, particularly through the seed and grain industry and for his service to the community of Gawler,

David is one of two South Australian members of CIArb who serve on the Board of Directors. He is particularly involved in the resolution of agricultural disputes.

Norman Drogemuller and David Moore awarded AOs

private equity.David is a litigation partner in the New

York and London offices of Debevoise and Plimpton LLP. He has broad experience in the areas of international litigation and arbitration.

He has handled internat ional arbitrations throughout the world and before virtually every major arbitration institution, including the ICC, AAA, LCIA, ICSID, IACAC and the Stockholm Chamber of Commerce.

Subjects of these arbitrations have included long-term energy concessions, investment treaties, joint venture agreements, insurance coverage, construction contracts, distribution agreements and intellectual property, among others.

David also represents European, Latin American and Asian companies in litigation in the United States involving disputes over the enforcement of arbitral awards and arbitration agreements, as well as other transnational disputes.

David W Rivkin(Continued from page 3)


CIArbNews

CIArb Australia gives grants to Universities

Who is competing where

Vis Moot, Vienna13-20 March 2008Deakin UniversityGriffith UniversityMacquarie UniversityMonash UniversityMurdoch UniversityUniversity of New South WalesUTS, SydneyVictoria University

204 universit ies competing from approximately 60 countries

Vis Moot, Hong Kong3-9 March 2008Deakin UniversityGriffith UniversityLa Trobe UniversityMonash UniversityVictoria University

32 universtities competing from 13 countries

ELSA WTO Moot, Geneva24 April - 3 May 2008University of SydneyUniversity of Melbourne

For the second year in succession, CIArb Australia has sponsored universities which responded to a request for

grants to assist in competing in international mooting competitions .

In late 2007, CIArb contacted all the university law schools in Australia asking them if they required assistance in competing in overseas competitions. Nine universities responded and have been given $1,500 each. The universities are:-

University of New South Wales, University of Sydney, UTS, Sydney, Griffith University, La Trobe University, Monash University, University of Melbourne, Victoria University and Murdoch University.

Macquarie University and Deakin University did not respond to the Branch’s enquiry and were consequently not awarded a grant despite the fact that both universities are competing in the Vis Moot in Vienna and Deakin University is also competing in the Hong Kong Vis Moot which takes place a week earlier from 3-9 March.

The grants can be used towards the costs of competing in any international mooting competition including the Vis Moots in Vienna and Hong Kong, the WTO Moot in Geneva, the ICSID Moot in Frankfurt, the International Maritime Arbitration Moot in Perth or the ICC International Mediation Competition which was held in Paris in 2007.

Last year, the University of Melbourne won the WTO Moot in Geneva and received a sponsorship grant from the Branch.

New Jewish service for civil disputes

The Australian Jewish News reported in its 15 February edition that the

Sydney Jewish community is working to establish an arbitration and mediation service for civil disputes.

Graham Segal OAM, president of the NSW Society of Jewish Jurists and Lawyers, told the newspaper that negotiations between the society and the Sydney Beth Din (SBD)* had been ongoing for some time, with the objective of establishing “a Jewish arbitration and mediation service” for the resolution of civil disputes.

Segal said the impetus was the need to have a system that made the Beth Din work within the secular legal system, as well as the practical issue of there being only four members of the SBD, who each have other responsibilities, and were unable to devote the necessary time and energy for resolving complex civil disputes.

The new proposal would provide “a much greater manpower pool”, said Segal, which would draw on more rabbis and secular lawyers with some background in Jewish law.

Segal was pleased to report that negotiations had reached the stage where the SBD had formally accepted the proposal in principle. The Society of Jewish Jurists and Lawyers was meeting on to finalise the proposal to the SBD.

SBD registrar Rabbi Jeremy Lawrence commented: “The Sydney Beth Din can confirm that it has been discussing this matter with Graham Segal for some months, and is glad that it is coming to fruition.”

*The Beth Din is a Jewish legal court or tribunal which comprises three ordained rabbis and is empowered to adjudicate cases involving criminal, civil, or religious law.

The history of such institutions goes back to the time the twelve tribes of Israel appointed judges and set up courts of law (Deuteronomy 16:18).

Michael SweeneyIn the last issue we omitted to mention that Michael Sweeney, author of the article on Criticism of mega litigation and the implications for private arbitration, is a barrister practising in Melbourne.

International Arbitration Library

Acquisition of books for our collection, to be housed in the Supreme Court Library, continues.

Unfortunately, it has not been possible to obtain a complete set of back issues of Arbitration, the journal of the Chartered Institute, which dates back to 1935.

If any reader knows of any member, perhaps retired or deceased, who might be prepared to donate all or part of a set, please contact the Victorian Chapter.

We propose to have a cocktail party to mark the placing of the international arbitration library in the care of the Supreme Court librarian – details shortly.

Victorian Chapter Notes CPD event

The next CPD event will be an award writing workshop, to be run jointly with

IAMA, in April or May. Full details will be sent to all members having an address in Victoria.

Personal

Th e C h a p t e r e x t e n d s i t s

congratulations to committee member Be th Cub i t t on two counts – the imminent arrival of her first child, and her admission to

Fellowship of the Chartered Institute.


CIArbNews


50th Anniversary of the New York Convention

Dean of University of Sydney Law School delivers keynote address

Triggs declares “New York Convention one of the success stories of public and private international law”On 28 February, in front of a packed audience of more than 100 people, Professor Gillian Triggs, Dean of the Faculty of Law at the University of Sydney and one of Australia’s leading academics in the field of public international law, delivered a keynote address to mark the fiftieth anniversary of the signing of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, more popularly known as the New York Convention.

Professor Tr iggs opened her remarks by declaring that, over the last ten years, we have seen a phenomenal growth in the number

of international commercial arbitrations - witness to the burgeoning of global trade and economic development.

“Resort to international arbitration has been dramatically stimulated by the growing number of bilateral investment treaties negotiated by states to attract foreign direct investment. Parties have shown a growing confidence in international arbitration and its processes”, she said

Professor Triggs added that the appeal of arbitration is well known. It lay in the unprecedented freedom of private parties to choose their tribunal, the applicable procedural and substantive rules and the situs of the arbitration. Such party autonomy was buttressed by complementary principles of neutrality, confidentiality, cost-effectiveness and relative speed of arbitration in preference to the procedures of national courts.

While noting these advantages, however, she said that the overwhelming attraction of international arbitration lay in the capacity for enforcement of an award by the national courts of countries other than the place of arbitration adding that, as practitioners fully understand, clients gain little comfort from advice that the law is on their side, but that their rights cannot be enforced against assets.

She said that in establishing an effective system for the enforcement of foreign arbitral award, the New York Convention has been one of the success stories of public and private international law. Sadly, effective mechanisms for enforcement are almost invariably absent from most international treaties she noted. Indeed, she continued, one might have assumed that it would be easier to gain enforcement by one national court of the judgment of another state’s



CIArbNews



courts than to it would be to enforce the award of private arbitrators whose authority is derived from the agreement of individual parties. “In fact, the reverse is true”.

As the Chief Justice of NSW, the Hon. J. Spigelman has observed, while the New York Convention provides an ability to ‘effectively and efficiently enforce arbitration awards throughout the world… Nothing remotely like that exists if one obtains judgement from a court’.

Professor Triggs referred to the fortieth anniversary celebration and said that when commenting on the value of the New York Convention ten years ago, the UN Secretary General, Kofi Annan had observed that ‘International trade thrives on the rule of law’, and that the Convention was ‘one of the most successful treaties in the area of commercial law… and it has proved to the world, as early as the 1950s, that the UN could be a constructive, leading force in matters affecting relations among States and among commercial actors on the world scene’.

With the 50th anniversary this year of negotiation of the New York Convention, we have an opportunity to celebrate a treaty that has now been ratified by 142 states and to reflect upon its successes, limitations and future.

She said that she came to the New York Convention very much as a public

international lawyer. She noted that one of the intriguing features of the Convention was that it formed a crossroad for different legal disciplines. The development of international arbitration and the enforcement of awards provided a meeting place for otherwise somewhat unfamiliar bed fellows; public international lawyers, national commercial lawyers, private international lawyers and government officials.

Professor Triggs noted that The New York Convention, as a treaty between nation states, raised classic questions of public international law such as the Vienna Convention on the Interpretation of Treaties, the limits of national sovereignty and the principles of substantive international law.

The Convention also raised the rules of private international law (or conflicts of laws) in giving effect to arbitration agreements through the laws applied by national rather than international courts, she added.

The lawyers concerned with international commercial arbitration have usually cut their teeth on corporate commercial matters and have come to public international law

through transnational contracts.Professor Triggs concentrated her

presentation upon five areas – a dissection of the core features of the New York Convention including a discussion of when a court may refuse to recognise and enforce and arbitral award; a case study of the Ecuador v Occidental Exploration and Production Company case which was still rumbling through the English courts in 2007; the issue of public policy as a reason for excluding enforcement of the Convention; Enforcement practices in the Asian region; and fifthly a brief look at future directions

The Gillian Triggs Presentation

(Continued from page 7)

Top left: Sir Gerard Brennan, former Chief Justice of the High Court of Australia, who chaired the evening. Centre: Malcolm Homes, President of CIArb Australia who opened the proceedings.Bottom Right: Bronwyn Lincoln, a partner in the Melbourne office of Freehills who is an inaugural co-chair and founder of the Australasian Forum for International Arbitration and Rashda Rana, the President of ArbitralWomen



CIArbNews



and suggestions.Of several major issues arising from the

New York Convention the most important of these was the ability of nations to opt out of enforcing awards on the grounds of public policy. Professor Triggs said that whilst one of the exclusions allowed by the Convention that is especially vulnerable to inconsistent national court policies on enforcement is that of public policy, the courts had, in fact, adopted a robust approach to their discretion and challenges on grounds of public policy were seldom successful. Indeed, a possible tension between public policy and national perceptions of sovereignty had not proved to be a significant disincentive to enforcement in practice she said.

While rarely successful, the public policy exception remained a last option for parties seeking to avoid enforcement and would be employed by parties where ever it proved to be strategically necessary. By facilitating a delay in enforcement, for example, the public policy exception imported vulnerability in the enforcement regime.

Like all treaties between sovereign countries, the New York Convention recognised the reality that states and their domestic courts will always act to protect fundamental national interest as they understood them.

Enforcement practices in the Asian region

Professor Triggs noted that international arbitration of disputes has not been

confined to West European states and that there has been a significant growth in requests to CIETAC, the HK International Arbitration Centre, ICSID, the Singapore International Arbitration Centre, the Stockholm Chamber of Commerce and the Vienna International Arbitral Centre from Eastern Europe and the Middle East.

Similarly, there has been a dramatic increase over the last ten years in requests for arbitration from Asia where the region’s substantial economic growth has attracted international investment. This has been so particularly following China’s integration into the WTO. Between 20003 and 2004, for

example, CIETAC received a 20% increase in requests and SIAC a 24% increase.

There is a high level of acceptance of the New York Convention in Asia with ratifications by Australia, Brunei, Cambodia, China, India, Indonesia, Japan, Laos, Malaysia, Mongolia, Nepal, New Zealand, Pakistan, Philippines, Republic of Korea, Russia, Singapore, Sri Lanka, Thailand, and Vietnam. International and national arbitration centres have been established including the Kuala Lumpur /Malaysia, Singapore, China, Indonesia, Thailand and Hong Kong International Arbitration Centre to name the major ones. Each of these jurisdictions has amended its domestic legislation to adopt more effective rules that are in harmony with international developments.

Formal agreement to enforce awards does not, of course, provide a complete picture. There are, she said, significant variations in implementation of the Convention. Moreover, the patchy pattern of adoption of the Model Law, (adopted with the region




Top: (l) Susan Blackwell and Barbara Pearson; (c) Amanda Lees and Sonya Willis; (r) Ian Bailey and Malcolm HolmesBottom: Nicola Nygh and Claire Cresham; (c) Fahmi Shahab and Neil Brown; (l) Katherine Williams and James Konidaris


CIArbNews



by Hong Kong in 1990), and implementing legislation in the region, has lead to high levels of uncertainty in enforcement. Generally, however, national courts within Asia have been pro-enforcement.

Future developments

As regards to the future, the Professor believed that we are likely to see

a continuing growth in international arbitration, particularly through bi-lateral investment treaties.

She also foresaw a greater complexity of cases where there are several parties and legal issues as well as an increased involvement of supranational and regional legal systems such as the European Union and OHADA, and international organisations.

She believed that in an ideal world, there was a need for harmonised interpretation and enforcement of international arbitration through an International Commercial Court, as first envisaged by Judge Howard Holtzman and Judge Stephen Schwebel fifteen years ago.

This vision remained a dream she observed. More achievable goals are those of harmonisation of enforcement practices


and encouragement of further ratifications of the New York Convention and adoption of the Model Law.

She concluded by saying that it was axiomatic that the quality of arbitration depends on the quality of the arbitrators and on the arbitration counsel.

It has been argued that few of the developing countries that have ratified the Convention have taken steps to ensure that the judiciary has been trained to ensure that awards are enforced.

The pool of international arbitrators in the Asian region has comprised retired senior judges, senior expat lawyers and lawyers from local and international law firms.

Today, she added, we need to develop local communities of experienced arbitration lawyers through training programmes, building teams of young lawyers with a specialisation in the area and broad familiarisation with the case law and jurisprudence.

It might be that one role for Australia in the region is to offer training in enforcement. Law Faculties could offer specialist courses at the undergraduate and graduate levels, and encourage the internationalisation of commercial law generally.

Conclusion

At the conclusion of her presentation, the chairman Sir Gerard Brennan,

former Chief Justice of the High Court of Australia, opened the floor to questions. One speaker wanted to know what could be done to enforce arbitral awards in Fiji, Papua New Guinea and East Timor. Interestingly Professor Triggs played a straight bat and attempted to answer the question saying that we needed to encourage these nations to accept notions of alternative dispute resolution and accept arbitration as part of their legal process. She could, of course, have dismissed the question as a ‘no ball’ - other than Australia, New Zealand and the Marshall Islands, no other country in the Pacific region has ratified the New York Convention. Maybe it will be a different story when we mark the sixtieth anniversary.

Apart from Sir Gerard Brennan, other speakers on the night were Malcolm Holmes, President of CIArb Australia who opened the proceedings, Rashda Rana, a member of ArbitralWomen and Bronwyn Lincoln, a partner in the Melbourne office of Freehills who is an inaugural co-chair and founder of the Australasian Forum for International Arbitration.

Top Row: (l) Professor Tania Sourdin and John Wakefield; (r) Sir Ian Barker, Scott McDonald and David FairlieBottom row: (l) Julia Soares, Jacqueline Wooton and Leah Ratcliff; (r) Justice James Allsop and Chris Lemercier



CIArbNews



A recent and notable instance in which a state challenged an arbitral award on the ground that the arbitrator exceeded their

jurisdiction arose in Ecuador v Occidental Exploration and Production Co.

This matter included an original arbitral award followed by four separate decisions of English courts, culminating in a judgment of the Court of Appeal on 4 July 2007.

This case provides an example of how a national court will approach the validity of a foreign arbitral award and is an object lesson on how complex, lengthy and ultimately ineffective enforcement of an international arbitral award can be in practice.

The case concerned a dispute between Ecuador and Occidental, a US national, with respect to VAT taxes paid by Occidental to the Ecuadorian government under a contract granting exclusive rights to hydrocarbons in the Amazon basin.

Occidental invoked the arbitration provisions in the bilateral investment treaty between the United States and Ecuador claiming a refund of the tax.

The arbitration was to be held in London (in fact, it was held in Washington) under the

trial on a preliminary issue. Aikens J then considered two arguments:

(a) Ecuador’s challenge that the award was beyond the jurisdiction of the BIT.

(b) Occidental’s challenge that an English court does not have the power to interpret the provisions of a BIT between the USA and Ecuador as to do so would contravene the rule of English law, making such issues ‘non-justiciable’

Aikens J unsurprisingly concluded that the award was validly within the dispute resolution clause of the BIT and could be enforced under the UK Arbitration Act. Of greater legal interest was his rejection of Occidental’s argument on the ground of non-justiciability.

Thwarting the New York Convention:

Ecuador v Occidental: If you don’t like the award - try, try and try again


Professor Gillian Triggs outlines the protracted legal case that has taken place between the Republic of Ecuador and the Occidental Exploration and Production Company.

UNCITRAL Rules. The arbitrators concluded on 1 July 2004:

First, that they had jurisdiction under the bilateral investment treaty (BIT); and

Secondly, that Ecuador was in breach of its obligation to accord Occidental fair and equitable treatment and national treatment as required by the BIT.

Accordingly, the arbitrators directed Ecuador to refund the taxes.

The arbitration itself was, however, to be just the start of a significantly more convoluted process. Ecuador issued proceedings in the English commercial court under the Arbitration Act of 1996 to set aside the award on the ground that the arbitrators had acted beyond their jurisdiction. Justice Colman conducted a


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by such a treaty. On this ground, the rule of judicial restraint does not apply and the Court of Appeal dismissed Occidental’s appeal. The result was that the English court could properly assert jurisdiction under the Arbitration Act to decide whether the award should be set aside.

The path was now clear for a newly constituted Court of Appeal, this time comprising the Master of the Rolls, Sir Anthony Clark, LJ Toulson and LJ Buxton, to consider whether the arbitrators had exceeded their jurisdictional powers under the BIT.

Applying the Vienna Convention on the Law of Treaties, the Court found that the arbitrators had jurisdiction within the object and purpose of the BIT and dismissed Ecuador’s challenge. The award thus emerged from this process intact, so that Ecuador was bound to refund the VAT taxes to Occidental.

An end to the story, at least for the moment,

is that Ecuador has now expropriated the concession contract and, of course, no taxes have been repaid to Occidental.

The irony of this case is that it was not a usual attempt to enforce an award against assets. Rather, Ecuador was seeking to invoke the jurisdiction of an English court to refuse to enforce the award, while Occidental wanted to resist the exercise of jurisdiction by the English courts, fearing that the favourable award would be set aside.

While the investment protection treaty was between two sovereign states, the USA played no role whatsoever, and did not protest against the proposal that an English court might interpret a treaty to which it was a party when assessing whether the arbitrators had acted within their powers.

England had no necessary role at all in the matter, other than as a party to the New York Convention. Ecuador invoked the jurisdiction of the English courts, not to enforce the award, but rather to avoid it.

Where to find the four cases

The Republic of Ecuador v Occidental Exploration and Production Company [2005] EWHC 774 (Comm)in the High Court of Justice Queen’s Bench Division Commercial Court

Occidental Exploration and Production Company v The Republic of Ecuador [2005] EWCA Civ 1116 in the Supreme Court of Judicature Court of Appeal (Civil Division) on appeal from Queen’s Bench Division.

The Republic of Ecuador v Occidental Exploration and Production Company [2006] EWHC 345 (Comm)in the High Court of Justice Queen’s Bench Division Commercial Court

The Republic of Ecuador v Occidental Exploration and Production Company [2007] EWCA Civ 656 in the Supreme Court of Judicature Court of Appeal (Civil Division) on appeal from the High Court of Justice Queen’s Bench Division.

It was this more troublesome issue that became the basis of Ecuador’s appeal to the Court of Appeal, (comprising Lord Phillips, MR, Lord Justice Clarke and Lord Justice Mance), which handed down its judgment on 9 September 2005.

In a scholarly opinion, Lord Justice Mance examined the submission made by Occidental that the English Courts cannot or should not adjudicate upon a transaction between foreign sovereign states contrary to the principle of ‘judicial restraint or abstention’ stated by Lord Wilberforce in Buttes Gas and Oil Co. v Hammer.

Lord Mance considered whether to enforce the award was tantamount to enforcing treaty based rights of the USA or whether Occidental was in reality pursuing, in its own name, treaty based rights against the other state party.

The point of raising this issue was that the English courts would have no jurisdiction

over a BIT between sovereign nations under the rule of judicial restraint if the correct characterisation of enforcement was that Occidental was trying to indirectly to enforce the rights of a sovereign state.

LJ Mance concluded that the better construction, in light of the aims of investment protection treaties, is that Occidental has directly enforceable rights that are not dependent upon enforcement under the classical principles of public international law relating to diplomatic protection. He stated that the BIT was a:

‘deliberate attempt to ensure for private investors the benefits and protection of consensual arbitration; and this is an aim to which national courts should, in an internationalist spirit and because it has been agreed between States at an international level, aspire to give effect…’

This was not therefore a case of giving effect to an unincorporated treaty but rather of giving effect to the direct rights created

The Ecuador v Occidental case


The expense incurred in the process was presumably substantial and the case illustrates how national courts can be used to delay enforcement to the disadvantage of the successful party to the award.

What are the solutions to this delaying tactic? One option is to encourage courts with no obvious connection to the award to refuse to accept jurisdiction simply to set aside the award.

Occidental workers in South America


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Celebrating 40 years of the New York Convention 1958 brings us back to its origin.

In 1953 the International Chamber of Commerce (ICC) produced a first draft. The ICC draft was presented to the United Nations Economic and Social Council (ECOSOC).

It was a draft Convention on the Recognition and Enforcement of International Arbitral Awards. This notion of an international arbitral award was at the time too progressive a concept. ECOSOC changed it into a draft for a Convention for the Recognition and Enforcement of Foreign Arbitral Awards.

It was this ECOSOC draft of 1955 which was submitted to the International Conference which lasted three weeks from Tuesday, 20 May to Tuesday, 10 June 1958 and was held at the United Nations Headquarters in New York.

The Conference was chaired by the Dutch Permanent Representative at the United Nations, Willem Schürmann.

Oscar Schachter functioned as Executive Secretary.

At the time of the New York Conference I was 45 years old. Today 40 years later, many of the delegates at that Conference are no longer with us, but their names are still alive among all of us who are involved in international arbitration.

Some of these names I may mention in this historical review of the birth of the Convention: Professor Matteucci, who together with Professor Minoli represented Italy, Professor Holleaux from France, Professor Bülow from Germany, Professor Wortley from England, Professor Pointet from Switzerland and Mr. Haight on behalf of the ICC, to mention only a few names.

My review of the Convention’s history will deal in particular with what, during the Conference, was called the “Dutch proposal”. It was conceived during the first week-end of the Conference. I spent that week-end at the house of my father-in-law in a suburb of New York. I can still see myself sitting in the garden with my small portable type-writer on my knees. It was there, sitting in the sun, that the “Dutch proposal” was conceived. Upon return to New York on Monday, 26 May, this draft was presented to the Conference.

At the meeting of Tuesday, 27 May, this proposal was welcomed by many of the delegates. The meeting decided that the Dutch proposal would be the basis for further discussions. I will not go into details of these discussions and the amendments made. I will only mention that the Conference, initially, preferred not to deal in the Convention with the arbitration agreement, as the Dutch proposal did. Preference was first given to a separate Protocol, as we knew from the Geneva Protocol on Arbitration Clauses (Geneva, 1923) (the 1923 Geneva Protocol).

Nevertheless, at a very late stage of the Conference, a provision on the arbitration

The Making of the New York Convention

Pieter Sanders, a Delegate at the 1958 Conference; Honorary President, International Council for Commercial Arbitration in 1998 wrote about the making of the Convention on the 40th anniversary. This is an edited version of what he wrote.

Fact File:

The ConventionThe Convention on the Recognition

and Enforcement of Foreign Arbitral Awards, also known as the New York Convention, was adopted by a United Nations diplomatic conference on 10 June 1958 and entered into force on 7 June 1959.

The Convention requires courts of contracting states to give effect to private agreements to arbitrate and to recognise and enforce arbitration awards made in other contracting states.

Widely considered the foundation instrument for international arbitration, it applies to arbitrations which are not considered as domestic awards in the state where recognition and enforcement is sought. Though other international conventions apply to the cross-border enforcement of arbitration awards, the New York Convention is by far the most important.

Background

In 1953, the International Chamber of Commerce (ICC) produced the first

draft Convention on the Recognition and Enforcement of International Arbitral Awards to the United Nations Economic and Social Council (ECOSOC).

With s l ight modif icat ions, the ECOSCOC submitted the convention to the Internationl Conference in the Spring of 1958. The Conference was chaired by Willem Schurmann, the Dutch Permanent Representative to the United Nations and Oscar Schachter, a leading figure in international law who later taught at Columbia Law School and School of International and Public Affairs, and served as the President of the American Society of International Law.

Internat ional arbi t rat ion i s an increasingly popular means of alternative dispute resolution for cross-border commercial transactions. The primary advantage of international arbitration over court litigation is enforceability: an international arbitration award is enforceable in most countries in the world. Other advantages of international arbitration include the ability to select a neutral forum to resolve disputes, that arbitration awards are final and not ordinarily subject to appeal, the ability to choose flexible procedures for the arbitration, and confidentiality.

Once a dispute between parties is settled, the winning party needs to collect the award or judgment. Unless

The cover of the original Convention document

(Continued on page 14)(Continued on page 14)


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agreement was inserted in the Convention, the present article II.

Was the Dutch proposal really, as Professor Matteucci called it, “a very bold innovation”? At the

time, I regarded it rather as a logical follow-up of the Geneva Convention on the Execution of Foreign Arbitral Awards (Geneva, 1927) (the 1927 Geneva Convention), taking into account the experience gained since then in the increased use of arbitration for the solution of international business disputes.

The main elements of the “Dutch proposal” were, first of all, the elimination of the double exequatur, one in the country where the award was made and another one in the country of enforcement of the award. Under the 1927 Geneva Convent ion we always requested both. It is logical t o r e q u i r e a n exequatur only in the country where enforcement of the award is sought and not also in the country where the award was made, but no enforcement is sought. Another element of the proposal was to restrict the grounds for refusal of recognition and enforcement as much as possible and to switch the burden of proof of the existence of one or more of these grounds to the party against whom the enforcement was sought. This again stands to reason.

However, nothing is perfect in this world. After 40 years of practice with the Convention its text could certainly be improved. For example, one could consider the introduction of uniform rules for the procedure of enforcement. In this respect, the Convention only contains the requirement that the award and arbitration agreement shall be supplied to the court (article IV) and that no more onerous conditions or higher fees should be imposed than when enforcement of a domestic award is sought (article III).

For the rest, the procedure is left to national arbitration law. There does not exist a central jurisdiction for the enforcement of New York Convention awards as in recent years has been suggested by several authors. At the Conference of 1958 this idea was not

even discussed.I do not propose an amendment of the

Convention. It seems rather unrealistic that a consensus may be reached by the 117 States. Neither would I recommend an additional Protocol which some of these States might be willing to agree upon. This would create a situation of two categories of New York Convention States.

Rather, I would recommend relying on harmonisation of the Convention’s application and interpretation on those issues on which the Convention falls back on national arbitration law. I refer, in particular, to the fifth ground for refusal of enforcement contained in article V(1): the award has been set aside in the country where the award was made under the arbitration law of

that country. Falling back on national arbitrat ion laws apparently cannot be avoided. In my Lectures for the Hague Academy in 1975, I compared i n t e r n a t i o n a l arbitration with a young bird. It rises in the air, but from time to time it falls back on its nest. In my opinion this still applies today.

Harmonisation of national arbitration law is indeed taking place. In particular, harmonisation has gained momentum since the appearance in 1985 of UNCITRAL’s Model Law on International Commercial Arbitration (the Model Law), now adopted by some 28 States, of which some 10 did so for domestic arbitration as well. The Model Law virtually repeats the grounds of article V of the Convention, not only for enforcement (article 36) but also for setting aside (article 34). We did not foresee this effect of the Convention in 1958.

Harmonisation of the application and interpretation of the Convention can also be furthered by the publication of court decisions on the Convention. As the Convention became more and more widely adhered to and court decisions started to appear, it became apparent that a compilation of national court decisions on the Convention would be useful. Such a publication would reveal different interpretations and, by making them public, might lead to some harmonisation. In

the assets of the losing party are located in the country where the court judgment was rendered, the winning party needs to obtain a court judgment in the jurisdiction where the other party resides or where its assets are located.

Unless there is a treaty on recognition of court judgments between the country where the judgment is rendered and the country where the winning party seeks to collect, the winning party will be unable to use the court judgment to collect.

Who’s ratified

Countries which have adopted the New York Convention have agreed

to recognise and enforce international arbitration awards. As of December 2007, 150 of the 192 United Nations Member States and the Holy See have adopted the New York Convention. 42 Member States and Taiwan, including every Pacific nation except Australia, New Zealand and the Marshall Islands, have not yet adopted the Convention.

Papua New Guinea was excluded by virtue of s5 of the original International Arbitration Act 1974 (Cth). That section was repealed by the International Arbitration Amendment Act 1989 (Cth) although PNG became independent on 16 September 1975.

The first country to ratify the Convention was Israel on 5 January 1959. Australia did not ratify the Convention until 26 March 1975. The United States of America ratified the Convention on 30 September 1970 and the United Kingdom on 24 September 1975.

Summary of provisions

Under the Convention, an arbitration award issued in any contracting state

can generally be freely enforced in any other contracting state, only subject to certain, limited defences. These defences are:

1. A party to the arbitration agreement was, under the law applicable to him, under some incapacity;

2. The arbitration agreement was not valid under its governing law;

3. A party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings, or was otherwise unable to present its case;

4. The award deals with an issue not contemplated by or not falling within the terms of the submission to arbitration, or contains matters beyond the scope


The first country to ratify the New York

Convention was Israel on 5 January 1959.

Australia did not ratify the Convention until 26

March 1975.

Fact File


(Continued on page 16)(Continued on page 16)



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Published: June 11, 1958Copyright © The New York Times

From the New York Times, 11 June 1958

Published: June 11, 1958Copyright © The New York Times


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of the arbitration (subject to the proviso that an award which contains decisions on such matters may be enforced to the extent that it contains decisions on matters submitted to arbitration which can be separated from those matters not so submitted);

5. The composition of the arbitral tribunal was not in accordance with the agreement of the parties or, failing such agreement, with the law of the place where the hearing took place (the “lex loci arbitri”);

6. The award has not yet become binding upon the parties, or has been set aside or suspended by a competent authority, either in the country where the arbitration took place, or pursuant to the law of the arbitration agreement;

7. The subject matter of the award was not capable of resolution by arbitration; or

8. Enforcement would be contrary to “public policy”.

addition, publication of these national court decisions might also be useful for the choice of the place of arbitration in an international arbitration.

In 1976, I was present at the United Nations again, this time as consultant to UNCITRAL for the drafting of its today well known UNCITRAL Arbitration Rules. I approached the United Nations asking whether they would be prepared to start such a publication. A publication of Court decisions on the Convention, although not replacing a central jurisdiction, would be at least a kind of alternative. However, this was not envisaged.

This was one of the reasons, maybe even the main reason, why in 1976 I started on behalf of ICCA with the Yearbooks of ICCA. By now, in the 22 Volumes that have appeared since 1976, 728 court decisions on the Convention, coming from 42 countries, have been published in extract form. Times have changed.

Today the United Nations may be complimented for its recent initiative to publish CLOUT, an abbreviation of Case Law on UNCITRAL Texts, including, inter


alia, its Model Law. Harmonisation of court decisions on the Convention is also envisaged in the well known Treatise of Van den Berg, originally a dissertation at my University, the Erasmus University of Rotterdam. The full title of this work is The New York Arbitration Convention of 1958. Towards a Uniform Judicial Interpretation. A second edition will soon appear and I expect it will reveal that indeed some harmonisation has been achieved.

It is time to conclude my introduction on the birth of the New York Convention. I recalled some memories of the Conference of 1958 and added some views on the future which, in my opinion, lies in harmonisation.

Looking back on 40 years, the Convention has been a great success and, as a whole, works satisfactorily. The business world is grateful to the United Nations for having provided it with this instrument in a world where arbitration is more and more resorted to for the solution of international commercial disputes. To end in a language, once common to all civilised nations: Vivat, Floreat et Crescat New York Convention 1958.

Fact File:(Continued from page 14)


The United Nations Building in New York where the Convention was adopted on 10 June 1958


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Published: September 15, 1958Copyright © The New York Times

New York Times report of the Agenda at the 13th Session of the United Nations General Assembly published 15 September 1958.

The items concerning the NY Convention have been highlighted.


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Arbitration and the Law

It is often said that the process of arbitration is a creation of law. In many jurisdictions, arbitration is regulated as if it were a part of the state legal

system, private only in the sense that those taking part are not employed by the state. One of the consequences of this approach is the assertion that arbitrators, even in an international context, have some overriding responsibility to the public interest or to the concept of ordre publique.

In my submission, however, the New York Convention of 1958 is entirely consistent with a different view. Certainly it has a link with state legal systems; it records an agreement by subscribing states that properly made arbitral agreements and the awards which result from them will be enforced; it recognises the pragmatic right of states to refuse to enforce decisions which are counter to the policy of those states.

There is nothing principled about that. Power is with the state and one may expect, as a condition of recognition of awards in general, that a state reserves the right not to act counter to its own beliefs and interests. A convention which did not accept that would simply not be observed in practice.

The basis of the Convention is the agreement. Agreements are not created by law; they are created by people. The principle pacta sunt servanda is not a principle of law, although it is a principle recognised by law. The expression pacta sunt servanda, which lies at the root of all human commerce and is the basis upon which commercial principles of law are built, is not even an axiom which has to be assumed before a philosophical justification of law can be constructed. It is quite simply a truism. An unassailable fact. A mathematician would describe it as an equivalence - pacta = servanda, so to speak.

It is not a statement that pacts should be observed, or agreements followed. The definition is recursive; if a bargain is not to be followed, it is simply not a bargain. The law of contract is about the way in which a bargain will be enforced at law. In certain of its aspects it may be about the circumstances in which a party will be excused his bargain or in which a bargain will be undone by process of law. The law

is not, however, the source of the bargain; the nature of bargains is itself a source of law, a supra-legal principle, a fundamental necessity of human life itself. Arguably then, where systems of law have to deal with commercial matters, they must first recognise the principle; generally they do. Both secular and religious systems of law recognise the duty, the overriding duty, of honouring a promise.

Because the principle is a truism, it may be said to be morally neutral. No judgement is made as to whether the pact is good or bad. Society, however, may decide that certain pacts should not exist, or that, if they are allowed to exist, it will not support them. Law will give effect to such matters of social or political policy.

Thus we have, in the various jurisdictions of the world, pacts that the state will allow to exist but will not honour or enforce (gambling arrangements for example) pacts that can be destroyed by the intervention of the state (voidable contracts) pacts that are not permitted in law to exist at all (void ab initio) and the extreme category of pacts the formation of which is, of itself, an offence against the state.

Arguably, the principle pacta sunt servanda precedes the law in these examples, but law places limits upon the extent to which the principle is free. Generally, the freedom to make a promise is limited only within the jurisdiction of the law which purports to limit it; there are, however, aspects which some jurisdictions seek to impose more widely (USA Anti-Trust legislation is an example) but that is a topic for another occasion.

The arbitral process is not a creation of law, although it has similarities and, like other aspects of life, is governed by it. Arbitration is the creation of a promise between the disputing parties; it is the determination of differences between parties, by the parties themselves through the services of a third party or third parties whom they employ for the purpose.

How does this argument draw comfort from the New York Convention? The answer to that question lies in the structure and wording of the Convention itself.

The essence of the Convention is that the subscribing Nations agree that their nationals

will abide by an agreement to arbitrate and that those who agree to determine their differences themselves, with the aid of a person, or persons, or Institution of their own choice will be allowed to do so without the intervention of a state court. In other words, where contracting parties have agreed to decide issues without recourse to law, they will have the opportunity to do so. A recalcitrant party is not exempted. That is entirely in accordance with the principle of the promise.

There are several provisions which loosely could be said to be in the general category of “due process” requirements. Again it is suggested that these are not interventions of law. All can be said to be requirements that the parties and the arbitral tribunal comply with what commonsense requires as part of the bargain - fairness is to be presumed.

One necessary intervention of law, for which the convention provides, comes into the provision that an award set aside where it is made will not be enforced. That is a fetter on the freedom to promise, but a necessary one, because the Court of which exequatur is requested may not be in a position to enquire into what has been done in another jurisdiction and the award in question has been made a legal nullity in its own home, so to speak.

It is conceivable, however, that there might be matters where such an intervention was not appropriate and there have been jurisdictions in which an award in an international matter simply would not be examined by a local Court at all. The provision for awards locally set aside, therefore, is not absolute but is a practical limitation to the freedom upon which we are reflecting in this note.

The final intervention, the feature of the Convention without which few states would be prepared to accept the validity of arbitration at all, is that any state, of whose courts exequatur is sought and who may be called upon to support the award with the

The New York Convention of 1958 - A Basis for a Supra-National Code?A reflection by Professor Geoffrey Beresford Hartwell



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power of the state, has a right to refuse where the award is contrary to public policy. That has been described already as a pragmatic right of the state (although, where states are concerned, the distinction between a right and a practical power is probably academic).

Subject to those two limitations, which are limitations of practical politics, the Convention seems, therefore, to be a Convention in which the subscribing nations agree to support a private regime of determination which is based upon a philosophical principle rather than upon any formally recognised system of law.

To that extent, I argue that the Convention supports a supra-legal view of the nature of agreements between persons. Where the agreement is between legal entities, rather than natural persons, other matters come into play, of which the legal capacity of the legal entity is a key example, but again, that is outwith this discussion.

What, if any, are the practical implications of this “lawless” approach to arbitration? As to substantive issues, there are few practical implications.

In construing a contractual or other relationship, an arbitral tribunal will address itself almost entirely to the legal regime which the parties adopted for their arrangements and will decide in accordance with that regime of substantive law (although it may be an indeterminate regime as “according to accepted principles of law” or it may be subjective as in “according to the justice of the matter”).

In the procedural area, however, this approach serves to remind those concerned of the important distinction between the law and custom which govern procedure in state courts, and may or may not be of assistance elsewhere, and the mandatory rules, generally few in number, with which other deciders must comply.

Because arbitration is, of its nature, distinct and separate from the process of law, it follows that those legal practices which are not mandatory need not be employed in arbitration. (Nevertheless, where legal practices have developed as an aid to justice, they may well be of practical assistance outside the court system.)

A corollary to this meta-jurisprudential approach to arbitration is that there will be some rare occasions on which the legal and arbitral analysis of an issue may fall to be considered. Although such instances are

rare and likely to involve issues which are in some way special as to their facts, they repay contemplation.

A case which has had some notoriety concerned a Contract which was almost overtly a Contract for bribery to be carried out on behalf of a commercial concern. A Contract for pots-de-vin. The arbitrator decided against the Claimant who sought to be paid what he claimed to be commission in respect of contracts which were not contemplated at the time of the agreement, which did not produce any business. He did so on the basis, put simply, that the Contract was not one which could in conscience be enforced.

The reference has been analysed and

discussed at length, notably by the late Gillis Wetter and it is not the present writer’s intention to do other than use it to pose this question: is the arbitrator to be seen i) as a judge with an international

jurisdiction, with a duty to enforce an international ordre publique, or is he or she ii) no more than a person chosen and put in place by the parties, who must expect him or her to conduct themselves in such matters at least according to their private conscience, or is the arbitrator iii) to be someone with a pragmatic eye to the practicability of enforcement in a jurisdiction which is likely to hold the assets of a paying party and thus unwilling to make an award which will not be enforced? Three fundamentally different ways of looking at the task, each leading more or less to the same result.

It is the submission of this note that arbitration differs fundamentally from litigation as to the basis of the arbitrator’s role; that arbitration falls to be considered solely as a contractual creation sui generis rather than as a branch of any known legal system; and that the New York Convention can be construed as a practical device which recognises that view of arbitration while providing a link to the legal systems of the subscribing nations.

One might go further and perhaps open a debate by suggesting that the provisions of the Convention itself are all that is required of legislation, whether for international or, mutatis mutandis, for domestic arbitration.

Whether this theoretical musing is of assistance in dealing with the issues of a specific reference may be

open to conjecture. It is offered, however, not as an alternative to conventional legal analysis but as one method of analysing procedural questions in arbitration from a non-legal standpoint.

That, in turn, may be a step towards the consideration of how the process of commercial arbitration may be returned to the control of the parties (who are, after all, our employers).

This paper was first published at the meeting of the Swiss Arbitration Association in Zürich on 2 February 1996 and is reproduced by kind permission of the author. The Editor believes that it is as relevant today as it was twelve years ago.

The New York Convention of 1958 - A Basis for a Supra-National Code?



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&OpinionComment


Malcolm

Holmes

There is no international civil justice system. In its absence, the international community, both in a public and

private sense, has embraced arbitration as the preferred process for dispute resolution.

In the public sense, this is demonstrated by the common practice of inserting clauses into the various bilateral investment protection treaties between sovereign states which have been proliferating in recent years and which confer a right on an investor to have disputed claims against a host state settled by international arbitration.

In the private sense, this is demonstrated by the almost universal accession to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Currently some 142 states have signed up to the New York Convention which provides an ability to “effectively and efficiently enforce arbitration awards virtually throughout the world…Nothing remotely like that exists if one obtains a judgement from a court.”1

Its success led Lord Mustill to write in 1989 that the New York Convention could perhaps “lay claim to be “the most effective instance of universal legislation in the entire history of commercial law”.2

Lord Mustill’s views were recently quoted with approval by the Supreme Court of Canada in the Dell Computer case3. This case concerned, what the Court described as one of “the growing number of juridical acts entered into via the internet”.4 It arose out of an attempt to purchase a computer over the net. The order page on Dell’s website indicated a price of $89.00 rather than the intended price of $379.00 for a particular

hand held computer. When the error was detected Dell blocked

access to the erroneous order page through the usual web address route, although the incorrect page itself was not withdrawn from the website. Shortly afterwards the plaintiff was told about the prices by a friend who sent him the detailed deep links which made it possible to access the order pages without following the usual route.

The plaintiff then placed the order, Dell advised that it would not process the order and relied upon an arbitration clause requiring arbitration in the US under the rules of a particular arbitration institution. Ultimately the Supreme Court of Canada upheld Dell’s insistence that the dispute should be referred to arbitration.

Importance of International Arbitration

Why is international arbitration so important? It is trite to say the world

in which we live in is changing rapidly. The facts of the Dell case are evidence enough of this. Breakthroughs in communications technology are having an affect not only on how we communicate but how we behave. A gathering such as this, if held 10 or 20 years ago, would have been held in comparative attentive silence and the audience would wait until the session concluded before vacating the room.

Now at any public conference, the eyes of the audience are not fixed on the speaker but are slightly lowered and hands are clasped nervously twitching away

on electronic hand held wizardry busy communicating to person or persons located around the globe.

Multitasking in public is accepted form of behaviour. Not only is the audience’s attention not fixed on the speaker, but it is also accepted behaviour for people to rise and slowly leave the room during a conference to attend to their communications in a way that requires use of their vocal chords.

I won’t ask how many people have their Blackberry’s or PDA’s switched on silent and are still communicating to the outside world during a meeting or conference, and I won’t hazard a guess at the number of people who would walk in and out during the course of a conference session. But can I illustrate how this change in technology and change in behaviour has gone one step further and has even affected the physical architecture of our modern world.

In March last year, during a visit to Zurich, I went to the headquarters of a very large international organisation. This purpose built building was recently opened to much fanfare and it was reported in the press to have cost over €200m.

A large organisation needs an auditorium to accommodate plenary sessions and large meetings and this building was no exception. On being given the guided tour of the auditorium, I was told by the attendant proudly that the design was such that anybody in the auditorium, which held approximately 300, could get up from their chair and leave during the course of the meeting without interrupting the person

International Arbitration: What is it and why is it so important ?

ADR Reporter March 2008 21


Comment&Opinion

system”.5 On the other hand, justice is a concept

which citizens of a sovereign state have a right to expect from the court system imposed by the State. By contrast it is a fundamental characteristic of arbitration that the parties enter the process as a result of the parties consent and the process is not imposed by an outside legal order.

International Arbitration Act

The process of international arbitration in Australia is governed by the International

Arbitration Act 1974 under which the Model Law on International Commercial Arbitration6 is given full force and effect.

The Model Law is a template for domestic legislation which the United Nations recommends that States take into account in order to standardise the rules of international commercial arbitration. In Australia, when the Parliament took this template, it enacted s.16 of the Act which relevantly states that the “Model Law has the force of law in Australia”.

The Model Law deals with various matters relating to an international arbitration but critically for present purposes, Article 5 of the Model Law states that no court shall intervene except where so provided in this law. There is no right of appeal that one would expect from a judgment of a court.

Obviously an aggrieved party seeking justice from judicial proceeding would expect that there would be an appellate process in order to ensure that justice is done according to the values and mores of a particular State’s judicial system.

On the other hand “arbitration is part of no State’s judicial system”.7 In short an arbitration is a creature that owes its existence to the will of the parties alone. The parties voluntarily choose the process and the arbitrator either directly or indirectly through their arbitration agreement.

By contrast, the traditional justice system is a process which is determined and imposed by the State and is normally accompanied by the full panoply of appellate processes with all the attendant costs and delay in reaching a final result.

Where there is an appellate process, “reversal by a higher court is not proof that justice is thereby better done”8 and the only judicial decision which matters is that of the ultimate court of appeal.

An extreme illustration of this proposition is the recent decision of the High Court of (Continued on page 27)

seated next to them. There before me were seats in groups of two in rows across the room. Rather than one aisle down the centre there were several aisles. On either side of each two seats there was an aisle!

These rapid changes in technology, behaviour and architecture, accompany the general expectation in the business community that things have to be done more quickly than they have been done in the past. The users of the international arbitration system share this expectation. Their expectation is for a faster and more efficient process, but with a containment of time and cost.

The world of widgets

Every commercial operation has a reason for its existence and, to use non-descript

terms, it is to produce and/or sell the ubiquitous widgets. A widget is a term often called in aid where the speaker does not want to, or cannot, identify the particular item or commercial product involved. Every commercial entity is driven by the present and continuing need to produce and sell widgets at a profit in the competitive environment in which it operates.

A commercial entity will accept that, inevitably disputes will arise and that those disputes will need to be resolved whilst the entity focuses on its primary objective of continuing to produce and sell widgets. As with any technical or other problem which might arise during the course of its operation, a commercial entity will endeavor to isolate that problem whilst it is being fixed and carry on trading. So too with a commercial contractual dispute.

From a business perspective it is then necessary to contain both time and costs in achieving a fair resolution of that dispute. Business doesn’t demand perfect justice or complete justice. From its perspective, it seeks a fair hearing and a reasonable determination. But it needs to have an approximate idea as to how long the dispute resolution mechanism will take and an approximate idea of the costs of obtaining that outcome.

Arbitration generally allows the participants to have a rough idea as to the time and costs of obtaining an award. Business accepts that it is not perfect justice but recognises that the needs of industry are being met in a way which could not be achieved “when compared with the traditional justice

Australia in the decision of Old CGU Inc.9 In that case, four members of the High

Court on 18 May 2006 upheld a preliminary objection taken by a defendant party to proceedings which had been commenced by the applicant in May 2001 and restrained the further hearing of the proceedings.

The case had involved fourteen judges in the judicial process over the preceding five years. The minority, that is the ten other judges involved (which included the three dissenting members of the High Court and all seven members of the three courts below) disagreed with the majority and delivered judgments which would have allowed the applicant to proceed with his case.

The legitimate use of the full panoply of appellate and supervisory judicial processes by the defendant party took five years to consider this preliminary issue of jurisdiction and to arrive at a final outcome.

The only decision which mattered was that of the final appellate court. This calls to mind what one member of the highest appellate court in the US said whimsically “we are not final because we are infallible; we know that we are infallible only because we are final.”10

On the other hand, with an international arbitration, the decision which matters is that taken by the arbitrator of the parties’ own choosing. It is the arbitrator’s award which counts and that award, unlike a court judgment, attracts all of the international enforcement advantages provided by the New York Convention.

Endnotes1. Per Spigelman CJ, Transaction Costs and International Litigation, an address to the 16th Inter-pacific Bar Association Conference in Sydney on 2 May 20062. M.J. Mustill, “Arbitration: History and Background” (1989) 6 Journal of International Arbitration, 43 at page 49 quoted recently by the Supreme Court of Canada in Dell Computer Corporation v Union Des Consommaterus & Anor. [2007] SCC 34 per Deschamps J. at 39. Such is its success that, rather than alter the Convention and jeopardize its universal acceptance, on 7 July 2006 UNCITRAL adopted a recommendation regarding a contemporary interpretation of article II, paragraph 2, and article VII, paragraph 1, of the Convention. 3. Dell Computer Corporation v Union Des Consommaterus & Anor. [2007] SCC 34

Why International Arbitration is important


Jim

CreerGuidelines regarding how to formulate terms of remuneration

Comment&Opinion

1. Appointments By Parties

Appointment of a Sole Arbitrator

It is desirable that the arbitrator’s terms of appointment are agreed with the parties

before he accepts appointment. However, there is nothing preventing an arbitrator from accepting the appointment in principle, subject to clarification at a preliminary meeting.

The agreed terms should be reduced to writing and signed by the appointing parties and counter-signed by the arbitrator. Any later amendments should also be reduced to writing and signed.

Appointment of a Multi-Arbitrator Tribunal

In some instances, part icular ly in international arbitrations, the parties

will agree to the constitution of a three person arbitral tribunal, unless the amount in dispute is small. In these instances it is common for each of the parties to nominate or appoint an individual arbitrator and for the two party- appointed arbitrators to appoint the chairman or the umpire of the tribunal.

It is considered advisable for the arbitrator appointed by each party to advise the other party of his appointment. It is appropriate for the party-appointed arbitrators to agree their terms of appointment with the party that appointed them, in accordance with the same principles highlighted above.

To the extent that there is a contractual fee agreement between an arbitrator and a party, the latter is contractually bound to pay the arbitrator’s full remuneration. Each party-appointed arbitrator should ensure that the terms for his appointment are disclosed to the other party concerned and the other arbitrators.

The two party-appointed arbitrators will then appoint the chairman or the umpire, who will agree terms of appointment with both parties. In a multi-arbitrator tribunal, it is not unusual for the various arbitrators to charge different rates, however some senior arbitrators frown upon this practice by taking the view that the perception of the

parties (that is it may give the appearance of unfairness if one arbitrator is paid more than another.) In the opinion of these arbitrators you should decline to accept appointment unless each arbitrator is to be paid equally.

Terms to be coveredThe arbitrator’s terms of remuneration should cover the following:

• Fees• Cancellation charges• Disbursements• GST• Interim payments• Security for fees and disbursement• Arrangements in case of settlement• Period for payment and interest on

delayed payments• Periodic adjustment of rates

2. Appointment by Institutions

With the exception of the International Cour t o f A rb i t r a t i on o f the

International Chamber of Commerce, nominating institutions will leave the appointed arbitrators to fix their terms of engagement with the parties.

Matters to be coveredFees

It may sometimes be possible to fix a lump sum fee in very simple disputes where

the time required may be estimated with reasonable accuracy.

Normally, however, provision may be made for payment at an hourly rate for time spent on the matter generally and/or meetings to be attended at a distance from the arbitrator’s home or office, involving overnight stays, provision may be made for adjustment of the daily rate to allow for this. If hearings or meetings are to be held in a remote location or overseas or involving days necessarily being spent at that location during which no actual work may be done on the arbitration, arbitrators may think it appropriate to fix a rate for such unproductive days.

Where the location to be attended is a considerable distance away involving long

travel by air it may also be appropriate to make specific allowance for rest days before and after the event attended and for weekends and also aircraft mode of travel (e.g. first class, business class or economy).

Cancellation Charges

If arbitrators wish to protect themselves against the consequences of hearings or

meetings being cancelled at relatively short notice they must make provision for this in their terms; to do otherwise would expose the arbitrator to charges of misconduct in the event of not having prior contractual agreement to do so.

This may be done in a number of ways. Some arbitrators stipulate a non-returnable booking fee as a proportion of the full daily rate for the time set aside to be paid at the time the hearing is firmly fixed.

Others stipulate a sliding scale of percentages of the total fee for the hearing to be paid according to the period of notice of cancellation.

Disbursements

It is advisable to make specific provision for reimbursements of out-of-pocket

expenses at net cost plus GST thereon (if applicable).

GST

Arbitrator must deal appropriately with GST, where applicable. They should

therefore make specific provision for the addition of GST as appropriate to their fees and disbursements. In relation to arbitral work performed out of Australia, GST will not be applicable.

Interim payments

It is advisable to provide for interim payments of fees and disbursements.

The terms should stipulate when interim payments are to be made and which party or parties shall pay these interim amounts. It is customary for interim payments to be paid equally by all parties to the arbitration.

Security for fees and expenses

It is advisable that arbitrators should make specific provision for security for their own

fees in their terms of appointment so that this is dealt with separately from any question of security for the parties’ costs. Arbitrators may wish to secure their fees and expenses after taking into account the financial credibility or otherwise of the parties.

The Australian Branch of the Chartered Institute of Arbitrators provides trust account facilities for the holding of cash security. An appropriate form of security may be a cash sum to be lodged with a stakeholder such as the arbitrator’s solicitor(s), or in a special deposit account at the arbitrator’s bank on




Comment&Opinion

ADR in Malaysia

One step at a timeSr Noushad Ali Naseem Ameer Ali presents an overview of Alternative Dispute Resolution in Malaysia including proposals for a Construction Industry Payment and Adjudication Act

Much of the world - especially A u s t r a l a s i a ( i n c l u d i n g Malaysia, Austral ia, and China), the Middle-East and

the UK - is competing for human and natural resources.

For example, the Iskandar Development Region1 in the southern part of Peninsular Malaysia boasts a development of over 2,200km2, an area three times the size of its neighbour, Singapore, and is valued at several hundred billion Malaysian Ringgit (GBP tens of billions).

Yet, despite this scale of construction work, many in the Malaysian construction industry (including construction p r o f e s s i o n a l s ) c o m p l a i n about serious delayed and non-payment. Recently, an architectural practice in Malaysia was awarded RM7.7m (over £1.1m) by the Federal Court after 17 years’ battling over professional fees.

Payment issues are a serious problem in Malaysia, but litigation is neither quick nor cheap and arbitration, in practice, is not much different.

The Malaysian Construction Industry Master Plan 2015

The Construction Industry Development Board Malaysia

(CIDB)2 gathered together captains of the Malaysian construction industry in 2003 and 2004 at meetings chaired by the Malaysian Minister of Works. A Malaysian ‘Latham Report equivalent’ was considered and 10 areas of priority were identified and working groups formed. Among the areas of priority identified were technology, human resources, health and safety, industrialised building systems, productivity and quality, and payment. I chair the working group on payment (WG 10).

In August 2007, the Deputy Prime Minister formally announced that a Malaysian Construction Industry Master Plan 2015 had been drawn up. The vision is clear: for

the Malaysian construction industry to be world-class, innovative and a knowledgeable global solution provider.

The WG 10 vision

The WG 10 also has a vision: everyone within the construction industry pays

all appropriate amounts due in a timely manner. Among the recommendations is the introduction of a quick, economical, binding, contemporaneous dispute resolution mechanism called adjudication.

A ‘world-class’ industry in 2015 cannot still be bickering about basic issues such as delayed or non-payment or continue to have construction disputes that typically take years to resolve.

Mediation

The CIDB has trained a pool of over 70 accredited mediators

and yet mediation is not a common route for resolving disputes. The reasons may include:

• the purely facilitative model that is insisted upon during the training and assessments for accreditation, where the mediator is not to give an opinion, as opposed to the evaluative model where the mediator does evaluate the case and starts to give opinions

• the strict regime of holding on to institutional mediation rules. Once rules are contemplated, parties would either rather have a binding decision or prefer to stick to the total freedom and informality of negotiations

• mediators who, instead of explaining and ‘marketing’ what mediation is when faced with disputes, expect mediation appointments to land on their laps.

Adjudication

The primary scope of WG 10 under the Master Plan was

to look into ways of resolving payment-related issues within the construction industry. As chair, I made several recommendations: the primary one proposed a Malaysian ‘Construction Industry Payment and Adjudication Act’, which, in the main, received overwhelming industry support.

After four years and many open and closed consultations, a government cabinet paper has been prepared but, at the time of writing, awaits approval for circulation by government legal

officers. It will then be circulated for cabinet review, comment and approval. Attached to the cabinet paper is an industry draft version of a Bill. If the cabinet paper is circulated soon and cabinet approves the

The Petronas Twin Towers in Kuala Lumpur



Comment&Opinion

paper, there is hope for a Bill to be presented in Parliament some time in 2008.

Malaysia has the benefit of learning from two major models - the UK/New Zealand model and the New South Wales, Australia/Singaporean model. So far, the preferred model has been based on the UK/NZ model with modifications. The current proposals include:

• a scheme for regular payment, but only where there is no provision for a payment mechanism

• outlawing ‘pay-when-paid’ and ‘pay-if-paid’ clauses in construction contracts

• the rights for a party who has not been paid to suspend works and to recover time and costs — but only following an adjudicator’s decision

• the statutory right to recover interest on late payments

• the introduction of adjudication for disputes relating to a construction contract

• and uniquely, but without getting industry consensus yet, the provision of payment bonds as security for payment.

The proposed model covers written and oral contracts and those with a combination of both. Authority has also been given for adjudicators to decide on their own jurisdiction. Construction contracts covered include those in the oil and gas industries and all construction professionals.

The absolute time for payment is left free

for the parties to agree - with a timeframe specified only as a default provision. The proposals call for only one scheme of adjudication with one set of rules for the industry. If the parties don’t agree on an adjudicator there will be one nominating body for the industry, which should, of course, have a pool of accredited adjudicators with varied and relevant expertise.

An adjudicat ion appeals tribunal scheme has also been proposed to provide a greater safety net on the quality and integrity of adjudicators’ decisions. The durations of adjudications are also longer than in all other jurisdictions, with 30, 45, and 60 days being contemplated.

Quality of Adjudicators

This is fundamental and I would rather there was no

adjudication in Malaysia than have incompetent adjudicators dispensing quick injustice. The need for mandatory accreditation of adjudicators and mandatory

continuing professional development has been proposed. Adjudication can ill-afford the sometimes negative reputation that arbitration has, to a certain extent, portrayed.

Among the prerequisites c o n t e m p l a t e d f o r accreditation are:

• minimum of 10 years’ experience

• k n o w l e d g e i n construction law and construction contracts

• k n o w l e d g e o n practice and procedure o f a d j u d i c a t i o n , possibly acquired over a minimum of a five-day course including writing decisions

• ethics, management, and communication skills

• written and oral tests on adjudication, ethics, management, communication and areas relating to construction law and contracts.

Proposed post-accreditation requirements include the mandatory reporting of all adjudications and the submission of ‘sanitised’ decisions (within, say, one year of issuing the decision) to the nominating body to aid continuing professional development. Adjudication determinations in Singapore, and New South Wales and Northern

Territory in Australia are published on the web; whether Malaysia also does this will be decided in the future.

Challenges

The one major challenge to the proposed Act is objections from the Malaysian Bar

Council. Among their concerns is speculation that adjudication will provide a ‘source of employment for quantity surveyors’ and a ‘blatant attempt to exclude other competent professionals’

Success by RICS in promoting adjudication, and the large number of UK adjudicators with a background in quantity surveying, may have led to this speculation. The exclusion of legal representation in the Building and Construction Industry Security of Payment Act 1999 amended in 2002 in New South Wales, Australia, may also have sparked speculation that this may happen in Malaysia. However, there never was any attempt to exclude or include any competent professional.

The Bar Council has also questioned whether payment really is an issue and claims there is no empirical evidence to show that cash flow is a problem in the construction industry. However, the regular surveys done by the Master Builders Association Malaysia and a survey carried out by the CIDB together with the highly regarded University of Malaya in early 20063 merely confirm the size of these issues.

One wonders if the statistics from the UK showing a significant decline in arbitrations and cases in the Technology and Construction Courts since adjudication took root in 1998, might also be part of the reasons for the Bar Council’s objections.

I believe the future success of dispute resolution lies in methods that:

• are cheap - perhaps those that provide value for money

• are speedy - in theory and in practice

ADR in Malaysia



Comment&Opinion

• are fair and just• are closed out, i.e. not left hanging

without a binding decision or a mutually agreed settlement agreement

• take heed of the advice that ‘justice delayed is justice denied’, i.e. ideally those that can be resorted to when the differences happen (contemporaneously) and not years later

• where, if there are negative impacts of differences (e.g. confrontational attitudes exist) the impact is minimal.

Mediation meets these criteria best, followed by adjudication and, although failing in several aspects , arbi t rat ion could complement these routes and act as a net for ‘finer’ justice.

The introduction of statutory adjudication in Malaysia could lead to an increase in the amicable resolution of disputes through negotiation or mediation - particularly if training and practice inculcates the procedure of encouraging the parties to meet at least once (with no fees or expenses involved) before the appointment of the adjudicator is formalised and time starts ticking.

The briefing by the adjudicator on the strict and tight timeframe for the whole process before the formal commencement

of the time-bound adjudication process may well induce all parties involved to resolve their disputes through negotiation or mediation routes. I have seen such an approach adopted in practice by some adjudicators in New Zealand.

The future of adjudication

On adjudication itself, given its tight timeframe and the number of cross-

border projects involving multi-nationals, I believe the use of information and communication technology would play an increasingly vital role in adjudications of the future. Unlike arbitration, adjudication cannot (unless the parties agree) slip into delays the way arbitration has. Efficient communication is thus critical.

And given that parties are increasingly accepting the adjudicator’s decisions as ‘final’, enhancing the quality of adjudicators and their decisions would be vital.

Lessons learned

Any country contemplating quicker, more economical dispute resolution methods

must seriously give due consideration to mediation and adjudication. The wealth of experience from over 15,000 adjudications around the world, and over 400 court cases relating to adjudication (mainly on peripheral issues like jurisdiction, definitions of construction contracts, and whether contracts are ‘evidenced in writing’), must surely mean any new model should be an improvement over earlier Acts.

The New Zealand model under the guise of Construction Contracts Act 2002 appears

to have taken heed of many of the earlier lessons learned (including issues considered in the recent UK consultation by the then Department of Trade and Industry for improving the Housing Grants Construction and Regeneration Act 1996).

Likewise, in Malaysia, many of these issues have already been considered and

appropriate solutions incorporated in the proposals, including the fair allocation of costs associated with the adjudication process, and costs and delay issues following rightful suspension of works.

Client organisat ions, contractors, and construction professionals who are performing their obligations properly could look forward to much greater efficiency when referring a problem to a formal dispute resolution mechanism. Quantity surveyors and other professionals could have a role in ensuring that by 2015, ‘everyone pays all appropriate amounts due in a timely manner’ and that ‘construction disputes are resolved much more efficiently (over days or weeks instead of years) at a fraction of the cost.4

And if the current proposals for a high standard of accreditation are accepted, the quality of decisions is likely to be high and unlikely to be reopened in other ‘higher’ levels of dispute resolution methods such as arbitration and litigation. Arbitration and litigation could remain a ‘net’ for exceptional cases. And in the process, if less money and time is spent on the (secondary) dispute resolution industry, the (primary) construction industry, the nation and society should be pleased.

Sounds ideal, but a tall order. So are the declared visions for a ‘world-class’ construction industry by 2015 and the Malaysian vision of becoming a developed nation by 2020 - set many years ago. But these are not impossible to achieve. The proposed Act is only a ‘small step’. Other ‘leaps’ can follow later.

References1. Details of the Iskandar Development Region can be found on www.irda.com.my2 . I n f o r m a t i o n o n t h e Cons t ruc t i on I ndu s t r y Development Board Malaysia can be found on www.cidb.gov.my3. A Report of a Questionnaire Survey on Late and Non-payment I s sues in the Malaysian Construction Industry, March 2006, www.cidb.gov.my 4. Comments taken from articles by the author in the Master Builders Journal from 3rd Q 2006 and 4th Q 2006, CSNaseem(ACTpt1) and CS

Naseem (ACTpt2), www.mbam.org.mySr Noushad Ali Naseem Ameer Ali is

immediate past president of The Institution of Surveyors Malaysia and chair of the Construction Industry Working Group On Payment (WG 10) in Malaysia.

[email protected]

ADR in Malaysia



Leg

alU

pdat

e


How does it affect you?

Parties considering agreements for international arbitration in Australia

should ensure that they do not opt out of the Model Law.

Parties should be aware of their appeal rights and carefully scrutinise the reasons of any award made against them.

Arbitrators should be careful to give full reasons to ensure compliance with the relevant rules and procedural law

Introduction

The recent decision of Oil Basins Ltd v BHP Billiton Ltd [2007] VSCA 255 upholding

the judgment of Justice Hargrave, which set aside an arbitral award on the basis of inadequate reasons, came as a surprise to many in the arbitration community. The decision is important for a number of reasons, not the least because it reinforces the desirability of the UNCITRAL Model Law on International Commercial Arbitration (the Model Law) implemented by the International Arbitration Act 1974 (Cth) as the procedural law for an international arbitration in Australia rather than the respective Commercial Arbitration Acts of the various states. The approach taken by the Victorian courts represents a departure from previous authority.

The decision

The first judgment of Justice Hargrave (BHP Billiton Ltd v Oil Basins Ltd [2006]

VSC 402) set aside an arbitral award on the grounds that it did not disclose adequate reasons, which constituted a manifest error of law, and also on the basis that the arbitrators were guilty of technical

misconduct in failing to consider important submissions and evidence presented by the parties. The judgment controversially held that the arbitrators were under a duty to give reasons of a standard equivalent to the reasons expected from a superior court judge deciding a commercial case. Justice Hargrave found that the requisite standard of reasons depended upon the circumstances of the case.

For example, a lower standard would be required in a straightforward arbitration before a trade expert than would be required of a retired judge acting as arbitrator in a large-scale commercial litigation. The Victorian Court of Appeal upheld Justice Hargrave’s decision on all points.

The Court of Appeal, however, pointed out that it was the way in which the evidence and submissions were presented that dictated the standard of the award rather than the other elements referred to by Justice Hargraves such as the fact that two of the arbitral panel were retired judges.

The relevant arbitral law in this instance was the Commercial Arbitration Act 1984 (Vic) (the CAA), which allows parties to apply to the court for an award to be set aside on the basis of a manifest error of law under s 38(5) of the CAA. Section 29(1) of the CAA requires arbitrators to include a statement of reasons.

The court followed previous authorities in finding that the effect of an arbitrator’s failure to include an adequate statement of reasons could constitute a manifest error of law and thus render an award susceptible to being set aside.

However, the BHP Billiton v Oil Basins decisions represent a departure from previous authorities regarding the standard to be applied when assessing the adequacy

ArbitrationCourt upholds judgment in Oil Basins case

Inadequate reasons as a ground for setting aside an arbitral award

In our April 2007 issue, we reported on the judgment in BHP Billiton Ltd v Oil Basins Ltd in which two former judges were criticised over a ‘faulty’ arbitration award. In the first of two articles, AAR Special Counsel Nicola Nygh (pictured left)and Lawyer Anna Brown comment on the recent Victorian Court of Appeal decision in the

matter which explored the adequacy of reasons given in an arbitral award and the implications for parties in their choice of arbitral law and the exercise of appeal rights.


LegalUpdate

“

of the reasons. Before Justice Hargrave’s decision, it was

generally understood that awards were not equivalent to judgments. This approach was in keeping with the general principle that courts should not be overly zealous in scrutinising awards for defects and should,

where possible, construe in favour of upholding the validity of an award.

By agreeing to arbitrate, parties are said to acknowledge that rights of appeal and challenge are severely limited. In drafting their reasons, arbitrators, in theory, unlike judges, do not have to be mindful that an appellate court may need to interpret and scrutinise their findings of fact and law. This in itself helps to bring greater efficiency to the arbitral process compared with litigation.

The importance of choice of arbitral law – the CAA v the Model Law

Importantly, the provisions of the CAA differ to those of the International Arbitration Act

(the IAA), which implements the Model Law in relation to international arbitrations conducted in Australia.

The Model Law is an internationally adopted set of procedural laws developed by UNCITRAL to govern international commercial arbitrations. However, under the IAA, parties can opt out of the Model Law either expressly or implicitly and have been known to do so inadvertently.

If parties opt out of the Model Law, Australian courts will apply the CAA as the procedural law governing an international arbitration in Australia to the extent that it is not inconsistent with the provisions in the IAA.

As a result, parties to an international arbitration in Australia, where the arbitration clause has not been carefully drafted, may find that the broader provisions for

setting aside arbitral awards in the CAA will apply.

While the Model Law contains a requirement that an arbitral award should stipulate the reasons on which it is based, it does not provide for an explicit right to challenge an award on the basis of inadequate reasons.

Nor does the Model Law provide for an award to be set aside for manifest error of law or misconduct by the arbitrator(s), the two grounds applied in Oil Basins v BHP Billiton.

The only basis on which a challenge for inadequate reasons could be brought under the Model Law would arguably be under article 34(2)(a)(iv), which provides that a court may set aside an award on the basis that the arbitral procedure was not in accordance with the agreement

of the parties or the Model Law. The extent to which Australian courts

will examine the adequacy of reasons in an international arbitral award under the Model Law remains to be seen.

In the meantime, parties to an international arbitration wishing to provide for greater finality in the determination of their disputes should elect to arbitrate under the Model Law provisions in the IAA rather than under the CAA, or should otherwise provide for arbitration other than under the CAA.

Other implications

Quite apart from the strong signal this decision sends in regard to judicial

interference in arbitral awards, there are some important lessons for parties and arbitrators alike stemming from the decision.

In order to make their awards ‘challenge-proof’, arbitrators should be careful to:

- give full reasons for their decision, including supporting conclusions with reasoning;

- give reasons for preferring the evidence of one witness over the other, rather than simply stating the preference; and

- deal with the primary submissions of opposing parties to the arbitration and give reasons for rejecting or accepting the submissions.

Nicola Nygh is a Special Counsel and Anna Brown a lawyer in the Sydney office of Arthur Allens Roibinson.

This article is reprinted with permission from the December 2007 edition of Focus on Arbitration.

The Oil Basins appeal

(Continued from page 26)4. Supra at [95].5. Dell Computer, supra at [1], and as one eminent judge has recently observed; “every aspect of litigation has tended to become sprawling, disorganized and bloated,” see “Reciprocal duties of Bench and Bar” by J.D. Heydon (2007) 81 ALJ 23 at 28,6. UN Doc A/40/17, 1985.7. Dell Computer at 51.8. Ibid9. Old CGU Inc. v Industrial Relations Commission of New South Wales in Court Session, [2006] HCA 24, 18 May 2006, overruling Old CGU Inc, v. Industrial Relations Commission (2004) 60 NSWLR 620 (Court of Appeal), United Globalcom v McRann [2003] NSW IR Comm 318 (Full Bench) and McRann v United Globalcom Inc (2003) 142 IR 275 (Peterson J). 10. Brown v Allen, 344 US 443, 9 February 1953, per Jackson J at 540.

terms that may be drawn upon on the arbitrator’s signature alone.

Arrangements in case of settlement of a consent award

It is advisable to make specific provision for a time limit for payments of outstanding fees and disbursements in the event of the parties reaching a settlement of the issues, whether or not in the context of an agreed or consent award.

Period for payment and interest on delayed payments

It is also advisable to specify a time limit for payment of fees following a request

for interim payment and to specify a rate of interest as a percentage above a specified clearing bank’s base lending rate for payments made after the expiry of the time limit.

Periodic adjustment of rates

If it appears likely that the arbitration will continue for more than 12 months,

provision may be made for adjustment for the rates of fees, according to a specific formula.

Why international arbitration is important


Guidelines regarding how to formulate terms of remuneration(Continued from page 22)


LegalUpdate

Introduction

Arbitration is designed to be both fast and final. However the decision of the

Victorian Supreme Court in Oil Basins Ltd v BHP Billiton Ltd demonstrates that this may not always be the case.

The Victorian Supreme Court upheld BHP’s bid to have an arbitral award against it set aside, with the result that the product of three years of arbitration was overturned following a further two years of litigation in the courts.

BHP was a powerful adversary in this dispute and had the means to conduct what is essentially Arbitration-by-Attrition.

The key question here is; what can be done to prevent a party from conducting Arbitration-by-Attrition and to ensure that arbitration proceedings are both fast and final?

So what was it all about?

In 1960 BHP concluded a royalty agreement with Oil Basins relating to

the production of hydrocarbons from the “Blackback” field (Blackback) in the Bass Strait off the coast of Victoria. The royalty agreement was governed by New York law and contained a clause requiring the parties to resolve any disputes by way of arbitration in Australia.

Production of hydrocarbons from Blackback commenced nearly 40 years later 1999. In 2002 Oil Basins commenced arbitration proceedings against BHP seeking the payment of royalties under the 1960 royalty agreement.

The parties concluded a Deed of Submission to Arbitration which recorded the parties’ “agreed goal of efficient resolution of the Dispute” and their agreement to use their best endeavours to facilitate the making of an award by the Arbitrators “expeditiously and without undue delay” and that any interim award be made in writing, as soon as reasonably practicable, stating the reasons for making the award, and be final and binding upon the parties.

The Arbitral Tribunal was composed of two retired Australian judges (one a former Federal Court judge, the other a former Supreme Court judge) and an American lawyer. The Chairman and the other Australian arbitrator formed the majority, finding in favour of Oil Basins and ordering BHP to pay royalties under the royalty agreement. In doing so the majority made findings of fact as to New York law.

BHP’s bone to pick…

Needless to say, BHP wasn’t happy with the award and

appealed to the Supreme Court. The trial judge concluded that

the Arbitral Tribunal had failed to give adequate reasons for making the award and that this was both an error of law on the face of the award within the meaning

of section 38 of the Victorian C o m m e r c i a l

Arbitration Act (the Act) and technical misconduct within sections 42 and 44 of the Act.

The trial judge ordered that the award be set aside and the arbitration remitted for determination before a differently constituted arbitral tribunal. Not surprisingly, Oil Basins appealed.

What the Court of Appeal thought about BHP’s argument

The Court of Appeal dismissed the appeal and left the orders of the trial judge

intact. Importantly, the Court of Appeal held

that “in arbitration, the requirement is that parties not be left in doubt as to the basis on which an award has been given. To that extent, the scope of an arbitrator’s obligation to give reasons is logically the same as that of a judge”.

The Court of Appeal went on to say “[a]s with reasons which a judge is required to give, the extent to which an arbitrator needs to go in explaining his or her decision depends on the nature of the decision”.

Relevantly, the court noted that it was common ground that the scope of the obligation to give reasons was the same under both the Deed of Submission to Arbitration and the Act.

Why arbitration wasn’t fast & final

Arbitration proceedings were commenced in mid 2002 and the interim award was

handed down in September 2005. The first appeal of the interim award was decided in

November 2006 and the second appeal was decided in November 2007.

Arguably three years for the resolution of a large and complex technical claim

between intransigent parties is fairly reasonable.

What is less reasonable is two years spent appealing the arbitral award in the

courts, with the result that the matter is remitted to a differently constituted arbitral tribunal to be completely re-heard.

Effect of the Court of Appeal’s decision

Parties are entitled to expect arbitrators to give proper reasons for their decisions.

But the standard expected of arbitrators needs to be balanced against the importance of ensuring that arbitration remains a fast and final way of resolving disputes.

Amongst other things, if this decision causes a broadening of appeal rights under the state-based Commercial Arbitration Acts

Arbitration-by-Attrition: Does Oil Basins appeal decision send a wrong message ?Damian Sturzaker (pictured left) and Megan Vaslinger-Clark argue that the appeal decision in BHP Billiton Ltd v Oil Basins Ltd sends a wrong message about the finality of arbitrations and the speed of the process.



LegalUpdate

Facts

Seeley International Pty Ltd (Seeley) entered into a distribution agreement

with Electra Air Conditioning BV (Electra) to distribute, on an exclusive basis, Airwell air conditioners in Australia for a three year period.

The agreement required, amongst other things, Seeley to submit purchase orders to Electra which Electra was obliged to accept in defined circumstances. The agreement provided for extended credit terms in the first year and reduced credit terms thereafter.

A dispute arose when Electra refused to accept purchase orders from Seeley because of lower than expected levels of credit insurance. Seeley claimed that it had an unconditional right to have purchase orders accepted. Clause 20(1) of the agreement contained an arbitration clause which provided for arbitration by one arbitrator in Melbourne under the IAMA Rules.

The scope of the arbitration clause related to any “dispute, question or difference between the parties concerning or arising out of this Agreement or its construction, meaning, operation or effect or concerning the rights, duties or liabilities of any party”. In addition, clause 20(3) also provided that nothing in the clause “prevents a party seeking injunctive or declaratory relief in the case of a material breach of threatened breach of this Agreement”.

Seeley began proceedings in the Federal Court for a declaration and summary judgment. Electra sought a stay of the proceedings pursuant to section 7 of the International Arbitration Act (Cth) 1974.

Issues and decision

His Honour Justice Mansfield concluded that the terms of clause 20(1) of

the agreement were a valid and binding agreement to arbitrate. In coming to this conclusion, his Honour stated that in considering an arbitration clause there were “sound commonsense and commercial reasons why the scope of the disputes agreed to be arbitrated, should be robustly assessed”.

This approach is consistent with the recent decision of the Full Federal Court in Pan Shipping.

However, his Honour considered that the terms of clause 20(3) were such that, upon a proper construction, the parties had intended that certain types of dispute and forms of relief were matters which were not to be arbitrated (namely, matters relating to injunctive or declaratory relief for a material breach or a threatened material breach of the agreement).

In coming to this conclusion, his Honour adopted a very close textual analysis of clause 20 a amongst other reasons, on the following:

He rejected Electra’s contention that the words of 20(3) referred to an arbitrator being empowered to provide injunctive or declaratory relief. This contention was rejected, in part, because his Honour took the view that clause 20(3) operated as a clear expression of the parties’ intention to preserve the ability to pursue certain rights in a forum other than arbitration.

The agreement was the subject of extensive negotiation and careful drafting. Therefore, the parties must have been aware of what they were doing and, bearing in mind the language of clause 20(3), have intended to treat certain types of dispute outside the operation of the arbitration clause.

Notwithstanding the need for a robust and commonsense approach to whether parties intended disputes to be arbitrated (in particular, bearing in mind the need to avoid disputes under the same agreement being determined by different methods), it did not “flaunt business common sense” that the parties should have agreed upon an “optional dispute resolution process” in certain circumstances.

Given this, his Honour refused a stay on the basis that the parties did not agree to submit Seeley’s claims to arbitration. He then proceeded to give summary judgment to Seeley.

Comment

Whilst the judge’s expressions of general principle in this case are to

be welcomed (if only because they reinforce

the approach of recent Australian decisions in support of arbitration), his decision is nevertheless somewhat surprising for two reasons.

Firstly, the judge’s approach (i.e. of close textual analysis) would seem to go against the trend of recent decisions in Australia and elsewhere which suggest that courts should adopt a robust approach to interpretation and avoid overly fine linguistic distinctions. Put another way, the court should consider that where there is a reasonable inference that the parties wanted disputes to be arbitrated then that should be respected.

It is a surprising outcome for a party (in this case Electra) to be told that in circumstances where there is a clear and wide arbitration clause, they have nevertheless committed themselves to having substantive disputes heard in court (which is the consequence of this decision).

Secondly, the difficulty in this case primarily stemmed from the less than clear language adopted in clause 20(3). The judge himself acknowledged that but for clause 20(3) he would have had no hesitation in concluding that the parties had agreed to arbitrate their disputes. In this regard, one suspects (although one cannot be sure) that the parties probably intended clause 20(3) to operate to preserve a party’s right to seek urgent interlocutory relief from a court.

Such a clause is relatively common in arbitration agreements as it confirms a party’s right to seek urgent relief that an arbitrator may not be empowered to give or in a position to order.

Unfortunately, the way the clause was drafted, and interpreted, led to a substantive dispute - which would otherwise clearly have come within the terms of the arbitration agreement - being heard in court.

The case is an object lesson of the continuing need for parties, when negotiating their contracts, to take the utmost care in drafting their arbitration clauses so that they reflect the choice to arbitrate.

Jonathan Hoyle is a Senior Associate in the Sydney office of Mallesons. This article is reprinted with permission from the February 2008 edition of International Arbitration Update.

A salutary lesson in failing to draft dispute clauses properlyJonathan Hoyle comments on a recent decision of the Federal Court that has once again highlighted the difficulties that parties can experience when they do not pay sufficient attention to the drafting of their arbitration or dispute resolution clause.


LegalUpdate

Mediation:

“A case that cries out for mediation”As mediation practitioners, you might enjoy this pro mediation quote from Lord Justice Ward in the recent English Court of Appeal decision in Darren Egan v Motor Services (Bath) Ltd [2007] EWCA Civ 1002 (18 October 2007) at paragraph [53].

The case concerned a dispute following the purchase of a motor vehicle with an alleged defect which went all the way to the Court of Appeal

“What I have found profoundly unsatisfactory, and made my views clear in the course of argument, is the fact that the parties have between them spent in the region of £100,000 arguing over a claim which is worth about £6,000.

In the florid language of the argument, I regarded them, one or other, if not both, of them, as “completely cuckoo” to have engaged in such expensive litigation with so little at stake. At the time of writing this judgment I rightly do not know whether any, or if so what, attempts have been made to settle this case and the remarks that follow are of general application.

I raise that matter again in this judgment to make the point, as firmly as I can, that this is a paradigm case which, if it could not have been settled by the parties themselves, customer and dealer, then it behoved both solicitors to take the firmest grip on the case from the first moment of instruction.

T h a t , I appreciate, may not always be easy, but perhaps a copy of this judgment can, at the first meeting, be handed to the client, bristling w i th r i gh teous indignation, in this case the customer who has paid a small fortune for a motor car which does not meet his satisfaction, and the dealer anxious to preserve the reputation of his prestige product. “This case cries out for mediation”, shou ld be the advice given to both the claimant a n d t h e defendant.

Why? Because i t i s pe r f e c t l y obvious what can happen. Feelings are running high, early positions are taken, positions become entrenched, the litigation bandwagon will roll on, experts are inevitably involved, and, before one knows it, there will be two/three day trial and even, heaven help them, an appeal. It is on the cards a wholly disproportionate sum, £100,000, will be to fight over a tiny claim, £6,000.

And what benefit can mediation bring? It brings an air of reality to negotiations that, I accept, may well have taken place in this case, though, for obvious reasons, we have not sought to enquire further into that at this stage. Mediation can do more for the parties than negotiation.

In this case the sheer commercial folly could have been amply demonstrated to both parties sitting at the same table but hearing it come from somebody who is independent. At the time this dispute crystallised, the car was practically brand new.

It would not have been vastly different from any demonstration car. The commercial possibilities are endless for finding an acceptable solution which would enable the parties to emerge, one with some satisfaction, perhaps a replacement vehicle and the other with its and Audi’s good name intact and probably enhanced, but perhaps with each of them just a little less wealthy.

The cost of such a mediation would be paltry by comparison with the costs that would mount from the moment of the issue of the claim.

In so many cases, and this is just another example of one, the best time to mediate is before the litigation begins. It is not a sign of weakness to suggest it.

It is the hallmark of commonsense. Mediation is a perfectly proper adjunct to litigation. The skills are now well developed. The results are astonishingly good. Try it more often”.

“And what benefit can mediation bring? It brings an air of reality to negotiations that, I accept, may well have taken place in this case, though, for obvious reasons, we have not sought to enquire further into that at this stage. Mediation can do more for the parties than negotiation.”

C v D [2007] EWHC 1541 (Comm) (5 December 2007) considered the question of which court exercised

supervisory jurisdiction where the parties did not stipulate a law in relation to the arbitration agreement.

In granting the anti-suit injunction, the English Court of Appeal relied on the contractual promise between the parties that the procedural law of the arbitration would be English law - by virtue of the parties choosing London as the seat of the arbitration - irrespective of the question of the proper law of the arbitration agreement itself (which was not relevant).

Background

C v D arose out a dispute between a US insured (C) and the respondent US

insurer (D) on a Bermuda form of insurance contract governed by New York law but which provided for all disputes under the policy to be “finally and fully determined in London, England under the provisions of the English Arbitration Act 1950 as amended”.

C referred the dispute to arbitration in London following D’s rejection of C’s claim under the policy. Both parties agreed on the appointment of the tribunal and on London being the seat of the arbitration. Both parties also agreed that whilst New York law was the law applicable to the policy, the law of the arbitration was English law. The tribunal issued an award in C’s favour.

D subsequently applied to the tribunal to correct the award on grounds that the tribunal had manifestly disregarded New York law. D also intimated that it was considering applying to a US federal court to vacate the award on grounds that the award was reviewable for error for having manifestly disregarded New York law.

Application for anti-suit injunction

C sought an anti-suit injunction from the English Court of Appeal to prevent


Arbitration:Reliance on proper law of arbitration agreement results in

anti-injunction findingTanya Jeyamohan (pictured above) comments on a case from the English courts.


LegalUpdate

D from doing this. C argued that D’s potential referral to the New York courts was inconsistent with the fact that D had already committed itself to the jurisdiction of the English court over the arbitrations in London (by agreeing to have London as the seat of the arbitration). Given this, D had committed itself to be bound by the supervisory jurisdiction of the English court regardless of any questions of the proper law of the arbitration agreement.

In granting the injunction, the Court of Appeal held that notwithstanding the substantive law of the contract was New York law, by agreeing to London as the seat of arbitration, the parties had made a contractual promise that the procedural law of the arbitration would be English law.

The court rejected D’s argument that the proper law of the arbitration agreement was New York law and therefore provided jurisdiction to the New York courts. D was also ordered to pay indemnity costsagainst C (to reflect D’s unconscionable conduct).

C v D demonstrates the willingness of the English courts to take action to preserve the arbitration framework. In particular, the decision supports the view that the parties’ choice of seat will determine which courts exercise supervisory jurisdiction (and not the law that applies to the arbitration agreement).

What this means to you

The supervisory jurisdiction for an International Arbitration will

usually be determined by the parties’ contractual choice of seat. However, to avoid any argument concerning the law relating to the arbitration agreement, parties should stipulate that the law of the agreement is the same as the law of the seat (e.g. if the seat is London then English law should be stipulated).

Tanya Jeyamohan is a Senior Associate in the Perth office of Mallesons. This article is reprinted with permission from the February 2008 edition of International Arbitration Update.


it may make it easier for a party to throw lots of time and money at a dispute until it goes away (Arbitration-by-Attrition).

Preventing Arbitration-by-Attrition

So what can be done to prevent Arbitration-by-Attrition following the court’s decision

in Oil Basins? Parties can agree that any arbitration

proceedings will be governed by the International Arbitration Act (Cth), which has much narrower appeal rights than the state-based Commercial Arbitration Acts.

Specifically, an award can be appealed under the International Arbitration Act where, for example, the subject matter of the award is not capable of being referred to arbitration (like criminal matters) or where the award offends public policy (where the making of the award was induced by fraud, etc).

The application of the International Arbitration Act is particularly appropriate in

Reliance on proper law of arbitration agreement results in anti-injunction finding

a situation like the one in Oil Basins, where you have a dispute involving an international party, arising from an agreement relating to the production of hydrocarbons in Australia and governed by the law of New York.

If you prefer domestic arbitration, but want to exclude the appeal rights under the state-based Arbitration Acts, it is possible to do so by concluding an exclusion agreement once arbitration proceedings have commenced (see, for example, section 40 of the Commercial Arbitration Act (NSW)).

In doing so, it is possible to ensure that arbitration remains what it is intended to be; a method for the fast and final resolution of disputes.

Damian Sturzaker is a Partner and Megan Valsinger-Clark is a Solicitor at Gadens Lawyers, Sydney. Both specialise in Cross Border Dispute Resolution and Commercial Litigation. This article is reprinted with permission from Gadens Commercial Litigation Update February 2008.

Arbitration-by-Attrition: Does Oil Basins appeal decision send a wrong message ?(Continued from page 28)

“Improving the efficiency of international arbitration”

A presentation by

David W RivkinChairman of the International Bar

Association’s Legal Practice Division and prominent International Arbitrator

Tuesday, 8 April 2008Offices of Blake Dawson

Level 36, Grosvenor Place, Sydney5.45pm for 6pm start

RSVP to Emma Matthews on 9267 1513 by Friday 4 April

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CIArb


2008 Diploma Course in International Commercial

Arbitration

Kuala Lumpur, Malaysia 1-14 June 2008

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CIArb

MalaysianBranch

CIArb

This intensive residential course in International Commercial Arbitration is offered over two weeks. Participants will be taught the practice of international commercial arbitration, including all major forms of international arbitration and related dispute settling mechanisms such as WIPO, WTO and Investment Treaty Arbitration. Participants will gain the ability to appear in or act as an arbitrator in such arbitrations in different contexts.

This course is accredited for Post Graduate Law studies at the University of New South Wales and can also be done in conjunction with the Master of Legal Studies course designed for non lawyers to obtain the desired legal background.

In the first week, a series of lectures cover the fundamentals of international commercial arbitration. They follow and analyse legal concepts and issues arising during the course of an arbitration. In the second week, the lectures will examine Trade Law disputes and arbitration under Bilateral Investment Treaties and Free Trade Agreements and other specialist areas such as maritime arbitration.

Meanwhile in the afternoon sessions, participants take part in practical group workshops, under the guidance of experienced arbitrators. Students will be given practical training in the conduct of an international arbitration and will discuss a range of problems which may arise in the course of conducting hypothetical international arbitrations.

Ms. Emma MatthewsChartered Institute of Arbitrators (Australia) LimitedLevel 6, 50 Park Street Sydney, NSW, 2000, AustraliaTel: + 61 2 9267 1513; Fax: +61 2 9267 3125Email: [email protected]: www.arbitrators.org.au

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For further information and registration details please contact:

Places are strictly limitedCost: A$7,500 includes tuition, course notes, all meals and accommodation

Documents

Professor Gillian Triggs gives keynote address at ... · Dr Tom Altobelli to speak on mediation after AGM and conciliation. He was one of the most experienced family mediators in