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Volume 31 Number 2 November 2012 Australia’s leading ADR organisation since 1975

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Volume 31Number 2 November 2012

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Australia’s leading ADR organisation since 1975A

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thearbitrator

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Volume 31 Number 2 November 2012

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The Arbitrator & Mediator

This issue may be cited as(2012) 31 (2)

ISSN 1446-0548

General Editor: Russell Thirgood

Peer Review Panel: Professor Dale Bagshaw, AA de Fina OAM, George Golvan QC, Ian Hanger QC, Laurie James, Henry Jolson QC, Doug Jones AM, Philip Kennon QC, Associate Professor Angela O’Brien, John Sharkey AM, Robert Hunt, Russell Thirgood

Journal Sub- Committee: Susan Greenwood (Chair), Beth Cubbitt, Russell Thirgood

Editorial Office: The Institute of Arbitrators & Mediators Australia Level 9, 52 Phillip Street, Sydney NSW 2000 Australia P: (02) 9241 1188, F: (02) 9252 2911 Email: [email protected]

Publisher: The Institute of Arbitrators & Mediators Australia (Inc in the Australian Capital Territory) ABN 80 008 520 045

Typesetter: Art Throb Typesetters

Printer: Thinking Printing

Disclaimer: Views expressed by contributors are not necessarily endorsed by theInstitute. No responsibility is accepted by the Institute, the editors orthe printers for the accuracy of information contained in the text andadvertisements.

The Arbitrator & Mediator is included on the Australian Government DEST Register of RefereedJournals.

© 2012 The Institute of Arbitrators & Mediators Australia

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QueenslandLevel 23127 Creek StreetBrisbane Qld 4000Chair:

Khory McCormickAdministrator:

Alison MahoneyP: (07) 3220 2122F: (07) 3220 2133E: [email protected]

VictoriaLevel 13200 Queen StreetMelbourne Vic 3000Chair:

Jim Cyngler OAMAdministrator:

Isaac InocencioP: (03) 8648 6578F: (03) 8648 6480E: [email protected]

Western AustraliaP.O. Box 208Beechboro WA 6063Chair:

Kim DohertyAdministrator:

Helen GoddardP: (08) 6278 2022F: (08) 6278 2033E: [email protected]

New South WalesLevel 952 Phillip StreetSydney NSW 2000Chair:

Steven GoldsteinAdministrator:

Ros HunterP: (02) 9241 1188F: (02) 9252 2911E: [email protected]

TasmaniaAdministrator:

Isaac InocencioP: (03) 8648 6578F: (03) 8648 6480E: [email protected]

Northern TerritoryAdministrator:

Helen GoddardP: (08) 6278 2022F: (08) 6278 2033E: [email protected]

Australian Capital TerritoryP.O. Box 521Mawson ACT 2607Chair:

Rosemary DupontAdministrator:

Delice StewartP: (02) 6260 7117F: (02) 6282 0236E: [email protected]

South Australia213 Greenhill RoadEastwood SA 5063Chair:

Symoane MecurioAdministrator:

Georgia LloydP: (08) 8274 3765F: (08) 8280 9763E: [email protected]

NationalCEO: Suzanne GreenwoodE: [email protected]

Accounts and Trust Officer:Sharyn JacksonE: [email protected]

Membership Office: Lisa MaltbyP: (07) 3218 2168E: [email protected]

The Institute of Arbitrators & Mediators Australia

Registered Office

Level 9, 52 Phillip StreetSydney NSW 2000P: (02) 9241 1188W: www.iama.org.au

E: [email protected]

Chapter Offices and Contact Details

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President:Rowena McNally, LLB,FIAMA, Grade 2 Arbitrator, Adjudicator, Mediator

Senior Vice President:Neil Turner AM, RFD, BE, MEngsc, MConstLaw, FIEAust, MIAMA, CPEng, Grade 2 Arbitrator, Adjudicator, Expert Determinator, Mediator

Vice President:Alysoun Boyle, BA, MIAMA, AIJA, AAAS, Mediator

Hon Treasurer:Jonathan Smith, B.App.SC (QIT), B.Bus (Griffith), Professional Certificate in Arbitration (Adelaide),Graded Arbitrator, Accredited and Registered Adjudicator (QLD)

Immediate Past President:Warren Fischer, BE (Civil), RPEQ, FIAMA, FAICD, Professional Certificate in Arbitration and Mediation, Company Directors Course Diploma, Grade 1 Arbitrator, Accredited Mediator, Accreditedand Registered Adjudicator

Councillors:Paul Bartley, FPNA, ANZIIF, GAICD, Grad Dip ICSA, AIAMA, CertIVTAA, AFAIMRosemary Dupont, Cert Welfare Studies (Hons), BA (Politics), Cert IV TAA, MIAMA, MAICDScott Ellis, B Juris, LLB, LLM, Dip Int Comm ARB, MIAMA, FCIArbJosh FisherPaul GibsonMichael Heaton QC, LLM, LLB, BJUIS, MIAMAGraeme Robinson, B Engin, MBA, M.Constn, Law, FIE Aust, M.Ausimm, MIAMA, Arbitrator,Adjudicator, MediatorRussell Thirgood, BA, LLB (hons), LLM (Hons), MIMA

Honorary Fellows:Hon Mr Justice John Batt, BA (Hons), LLB (Hons)Hon Mr Justice David Byrne, BA, LLB (Hons)The Hon Ian Callinan, AC QC, Hon LLD (Queensland), Hon D University (Griffith)Hon Christopher Legoe, QCLi Dian XunHon Barry SJ O’Keefe, AM, QCHon Mr Justice William Ormiston, LLB (Hons)Hon Andrew Rogers, QCHis Honour Judge Frank J Shelton, BA, LLBRt Hon Sir Ninian Stephen, AK, GCMG, GCVO, KBE, KStJ, Hon LLD (Sydney & Melbourne)Hon Sir Laurence Street, AC, KCMG, KStJ, Hon LLD, (Macquarie, Sydney & UTS), LLB (Hons)

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Contents

Office Bearers and Honorary Fellows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iii

President’s Message Rowena McNally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vi

Editor’s Commentary Russell Thirgood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .viii

Articles

International Arbitration: An Australian Perspective Justice Lindsay Foster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Future Opportunities for Commercial Arbitration Robert McClelland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Dispute Resolution Boards – A Better Way Forward? Steven Goldstein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Mediating Native Title – In Whose Interests? Hans Paul Bokelund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Litigate or Arbitrate: What Are The Procedural Differences? Malcolm Holmes QC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

Investor/State Arbitration: Challenges Facing Capital Importing Countries Paul Obo Idornigie . . . . . . . . . . . . . . . . . . . . . .49

Preventing Conflict, Manage Change, Increasing Productivity – The Fifth Dimension Jim Cyngler . . . . . . . . . . . . . . .65

Case Notes

DampskibsselskabetNorden A/S v Beach Building & Civil Group Pty Ltd [2012] FCA 696 J.M. Healy . . . . . . . . . . .73

Michael Wilson & Partners Ltd v Nicholls & Ors (2011) 244 CLR 427; (2011) 86 ALJR 14; [2011] HCA 48 Albert Monichino SC and Alex Fawke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77

Built Environs Pty Ltd v Saunders International Ltd [2012] SASC 111Albert Monichino SC . . . . . . . . . . . . . . . . . . . . . . . .83

Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2012] WASC 228 Contractual Interpretation: When does “may” mean “must” in a dispute resolution clause? Tamara Watson . . . . . . . .91

Bharat Aluminium Co v Kaiser Aluminium Technical Services Inc Sanjay Basu and Kurt Stoyle . . . . . . . . . . . . . . . . . . . . .97

Notes for Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .103

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .108

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President’s MessageRowena McNally National President

Welcome to the last edition of the Journal for 2012.

Articles and case notes contained in this edition have been received from some of Australia’s mosteminent and experienced ADR professionals and support our new structure of streaming our servicesas:

• Determinative Stream – dispute resolution services provided by arbitrators and adjudicators andother forms of decision-making services in the ADR context;

• Facilitative Stream – with a focus on mediation, facilitation and other more facilitative ADRprocesses, and

• Preventative Stream – services such as probity advice and Dispute Resolution Boards.

As the year draws to a close, it is an opportunity to thank our Editor, Russell Thirgood, and the JournalCommittee for their dedication to producing an informative peer-reviewed journal that places the Instituteof Arbitrators and Mediators Australia at the leading edge of scholarly discussion on ADR in Australia.For their professionalism and commitment to this endeavor, I am truly grateful.

I am also pleased to welcome the new Chief Executive Officer for IAMA,Suzanne Greenwood, who commenced her role in early October. Suzanneis a skilled management executive with extensive experience as aChairman, Board Member, Executive and Company Secretary withmember-based organisations. She has received several business awardsincluding a National award for Excellence in Corporate SocialResponsibility and holds Masters level qualifications in Law. Suzanne isvery keen to meet as many of our members as possible and to hearyourviews on what IAMA is doing right and what it can do better to service member needs.

Finally, I thank our National Councillors, Chapter Chairs, Chapter Committee Members and all of theIAMA staff around Australia and look forward to 2013 as we continue to provide high qualityprofessional dispute resolution services, education and training.

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Suzanne GreenwoodCEO

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Editor’s CommentaryRussell Thirgood, Editor

Welcome to the November 2012 edition of the Arbitrator and Mediator.

The first contribution to this month’s publication is the keynote address delivered by His Honour JusticeLindsay Foster at this year’s National Annual Conference. His Honour reflects upon the evolving natureof international arbitration in Australia, from its humble beginnings in 1975 to its increasingly importantrole in international dispute resolution processes today. His Honour goes through the recent amendmentsto the International Arbitration Act 1974 (Cth), with particular reference to issues surrounding the publicpolicy ground for refusing enforcement of a foreign arbitral award. His Honour observes that thejudiciary are appropriately equipped and the time is ripe for consideration of the questions which willinevitably arise under the developing law.

The next article in this edition is pertinent for arbitration practitioners, as former CommonwealthAttorney-General Honourable Robert McClelland MP examines the recent changes to theCommonwealth and State statutory arbitration regimes. The new legislation is a timely response to thepressure to keep pace with developments internationally and to harmonise laws relating to internationaland domestic arbitration. The reforms ultimately give parties to the arbitration agreement greaterflexibility by limiting court intervention and allowing them to design their own process. At the sametime the legislative changes provide for a partnership with the courts in terms of judicial assistanceprovided through interim measures and preliminary orders.

In recent years, Dispute Resolution Boards have increased in popularity to become a favoured form ofdispute resolution, and not just in the building and construction industry. It has proved to be a particularlydesirable method for resolving differences, particularly given the fact that Dispute Resolution Boardsaim to avoid disputes, not just to settle them. Steven Goldstein examines the benefits of DisputeResolution Boards and argues that although they are mainly used on large scale contracts, there is noreason to preclude their use on smaller projects.

Hans Paul Bokelund’s contribution explores the Native Title mediation process in the context of recentreforms to the Native Title Act 1993 (Cth) which require mediation of claims to move from the NationalNative Title Tribunal to the Federal Court. There are frustrations with the current regime in terms of itseffectiveness in taking account of indigenous cultural differences, such as the nature of the indigenouspeoples’ connection to land under traditional customs. Bokelund ultimately questions whether, rather

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than dragging the indigenous people through western-style processes, there is an alternative way to meetthe indigenous parties’ interests and reach a mutually agreeable outcome.

Malcolm Holmes QC examines the harmonisation of procedural techniques used in arbitration andlitigation and considers whether such replication is really useful or beneficial. On the one hand, arbitralprocedures may mimic those in litigation due to the competitive urge to remain current and observe bestpractice, and because arbitrators and practitioners may often borrow from the litigious processes familiarto them. Similarly, the courts may copy aspects of arbitral procedure, for example in relation to the timelimits within which to render a decision. The effective and expedient nature of arbitration puts pressureon the court system to reduce costs and deliver prompt judgment.

The Convention on the Settlement of Investment Disputes between States and Nationals of Other Stateswas adopted in 1965 and established the International Centre for Settlement of Investment Disputes.Paul Obo Idornigie’s article looks at the challenges faced by capital importing countries in the contextof investor/state arbitration under the Centre. A conflict of interest arises between capital importing andcapital exporting countries, due to the capital importing country’s need to protect their natural resources,and the capital exporting country’s desire to protect their investment. Similarly, capital exportingcountries usually prefer independent international tribunals for dispute resolution, while capital importingcountries prefer litigation via their local court system as the mechanism for resolution of disputes.

Jim Cyngler next explores the meaning of conflict and how it is generated, examining the four traditionalresponses to conflict and then adding a fifth dimension of conflict management. This article serves as areminder, particularly in the context of competitive modern society, of the importance of empathy,sensitivity, honesty and openness in the development of relationships and resolution of differences.Cyngler advocates the transformation of conflict into a useful process to redesign preventative systemsand to use it as an opportunity to learn and improve. An understanding of this approach is invaluable inthe effective management of conflict and the achievement of the most desirable outcome for all involved.

A casenote on the recent decision of DampskibsselskabetNorden A/S v Beach Building & Civil GroupPty Ltd is provided by J. M. Healy. In that case, it was found that misdescription of the parties named inan arbitration agreement will not be a sufficient ground to prevent enforcement of an arbitral award.Where there appears to be a mistake in the description of the parties to the agreement, it may be prudentto obtain a judicial declaration on this matter. A strategic decision will also need to be made as to whetherto participate in the arbitration at all.

The second case note in this edition is by Albert Monichino SC and Alex Fawke who examine thedecision in Michael Wilson & Partners Ltd v Nicholls & Ors. In this case the High Court held that pursuitof claims in multiple forums against parties whose liability arises out of the same conduct did notnecessarily lead to an abuse of process. Although much of the High Court’s reasoning may rest on theparticular facts of the case this is a welcome articulation of the principles relating to abuse of process inarbitral proceedings, and a reminder of the limited nature of the grounds for refusing enforcement.

The recent case of Built Environs Pty Ltd v Saunders International Ltd involved an application by theaward creditor for adoption of two interim awards made pursuant to court ordered arbitration under theSupreme Court Act 1935 (SA). The court found that the tribunal had erred in relation to a number ofissues, which led the court to find that the presumption in favour of adoption had been displaced. Albert

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Monichino SC observes that this outcome is unfortunate since arbitration is generally promoted as acost-effective alternative to litigation, and the expenses which were incurred most likely exceed themonetary benefit of the award.

A case which has highlighted the need for precision in drafting is Cape Lambert Resources Ltd v MCCAustralia Sanjin Mining Pty Ltd. In this case it was argued that the use of the term ‘may’ in the disputeresolution clause meant that arbitration was optional. Corboy J held that in fact the dispute resolutionclauses constituted mandatory arbitration agreements, and a stay of litigation was ordered. TamaraWatson recognises that this may serve as a reminder to avoid ambiguities in drafting as it may lead tounnecessary expenditure in seeking judicial determination of the true interpretation of the clause inquestion.

Sanjay Basu and Kurt Stoyle provide a casenote on Bharat Aluminium Co v Kaiser Aluminium TechnicalServices Inc. This decision will be welcomed by members of the international arbitration community asit overturns the earlier decision of Bhatia international v Bulk Trading SA which has been the subject ofmuch criticism. The decision acts prospectively and makes it clear that Part I of the Indian Arbitrationand Conciliation Act 1996 will only apply to future arbitration agreements where the arbitration has aforeign seat. Applications for the setting aside of the award will thus only be possible in the countrywhich is the seat of arbitration. The decision brings India into line with other Convention countries andreflects the Model Law which requires that certain rights may only be exercised in the jurisdiction inwhich the arbitration took place.

I am sure readers will find this month’s publication both informative and enjoyable as it containsresponses to issues that are emerging in the context of alternative dispute resolution. I wish to expressthe journal committee’s thanks to all those who have contributed.

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1

International Arbitration: An Australian Perspective

Justice Lindsay Foster1

Keynote Address

The Institute Of Arbitrators & Mediators 2012 National Annual ConferencePalazzo Versace, Gold CoastSaturday 19 May 2012

IntroductionIn their recently published excellent text, International Arbitration in Australia,2 the editors, Luke Nottageand Richard Garnett, commenced Chapter 1 of the work by addressing a topic which they described as‘Australia’s arbitration ambivalence’. They said that, because Australia had inherited arbitrationlegislation from England, arbitration was utilised in Australia but, at least in terms of domestic arbitration,tended to be confined to certain narrow fields such as the construction industry. The editors correctlynoted that the English tradition generally involved extensive court supervision of arbitral processes andoutcomes. The editors even went so far as to suggest that the English tradition and its application inAustralia had been actuated by the commercial interest of the judiciary. The editors referred3 to the NSWCourt of Appeal decision of Raguz v Sullivan4 where Spigelman CJ and Mason P observed:5

47 The common law’s opposition to arbitration also stemmed from less worthyperspectives. The desire for exclusive control will often have an economic motive notfar below the surface. With arbitration, it was not just the barristers whose livelihoodwas threatened. In the famous case of Scott v Avery (1856) 5 HLC 811, 10 ER 1121, 28LT OS 207, the House of Lords settled the validity of arbitration agreements that madean award a condition precedent to any right of action under a contract. This decisionended much judicial conflict and judicial opposition that was shrouded in technicalityand arcane learning. However, the canny Scot Lord Campbell lifted the curtain onjudicial opposition (28 LT OS 208 at 211):

‘My Lords, I know that there has been a very great inclination in the courts fora good many years to throw obstacles in the way of arbitration. Now, I wish to

1 Justice Foster is a judge of the Federal Court of Australia (appointed in September 2008). He is the Arbitration Co-ordinating Judge and a member of the Competition and Corporations Panels in the Sydney Registry of the FederalCourt. He is also a Deputy President of the Australian Competition Tribunal.

2 Sydney: The Federation Press, 2010.3 At p 2.4 (2000) 50 NSWLR 236.5 (2000) 50 NSWLR 236 at [47]–[48] (pp 247–248).

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speak with great respect of my predecessors the judges; but I must just let yourLordships into the secret of that tendency. My Lords, there is no disguising thefact, that as formerly the emoluments of the judges depended mainly or almostentirely upon fees, and they had no fixed salary, there was great competition toget as much as possible of litigation into Westminster Hall, and a great scramblein Westminster Hall for the division of the spoil... Therefore, they said that thecourts ought not to be ousted of their jurisdiction, and that it was contrary tothe policy of the law.’

48 This frank self-revelation must have caused quite a stir, which is probablythe reason why it does not appear in later, revised reports of the decision. Contrast 28LT 207 at 211; 10 ER 1121 at 1138 and 5 HLC 811 at 853 where the passage has beenreplaced with: “It probably originated in the contests of the different courts in ancienttimes for extent of jurisdiction, all of them being opposed to anything that wouldaltogether deprive every one of them of jurisdiction.

Although in June 1975 Australia had been interested enough to accede to the Convention on theRecognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United NationsConference on International Commercial Arbitration at its 24th meeting (the New York Convention)and had incorporated into the International Arbitration Act 1974 (Cth) (the IAA) the United NationsCommission on International Trade Law (UNCITRAL) Model Law on international commercialarbitration, international arbitration activity in Australia had been slight, verging on the non-existent,until the current Australian government, at the instigation of its then Attorney-General, RobertMcClelland MP, released a discussion paper to stimulate debate about the future of the IAA.

The International Arbitration Act The IAA was first enacted on 9 December 1974 and came into force on 24 June 1975 in order to coincidewith Australia’s accession to the New York Convention. By 2008, Australian corporations wereextensively involved in international trade, particularly in Asia, and had become more involved ininternational arbitration as a consequence. By that time, the Australian government had come to realisethat the IAA no longer provided an appropriate statutory framework (if it had ever done) for the conductof international arbitrations in Australia and for the enforcement of foreign arbitral awards. London,New York, Hong Kong and Singapore all had sophisticated venues for the conduct of internationalarbitrations. They also had experienced practitioners and judges who understood the significance of theactivity and the importance of the activity in the economies of the UK, the USA, Hong Kong andSingapore. Australia had to catch up.

As a result of the debate which ensued after the release of the Attorney-General’s discussion paper, twosets of amendments were made to the IAA. These amendments coincided with the opening of the newarbitration centre in Sydney in 2010.

The first group of amendments to the IAA was made in late 2009. Those amendments gave to the FederalCourt of Australia broad general jurisdiction under the IAA. Before 2009, the Federal Court had had

2

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very limited jurisdiction under the IAA. Until 2009, most of the jurisdiction under the IAA had beenexercised by the Supreme Courts of the States and Territories. The jurisdiction is now exercisedconcurrently by the Federal Court and the Supreme Courts of the States and Territories.

The second group of amendments, made in 2010, was extensive.

The 2010 amendments did the following:

(1) The UNCITRAL Model Law which is a schedule to the IAA was updated so as to include the 2006amendment. The Model Law had previously been given the force of law in Australia. The 2010amendments expressly provided that the Model Law is intended to cover the field in respect ofinternational arbitration conducted in Australia. This amendment had the purpose and effect ofdenying to State domestic arbitration legislation any role to play in respect of internationalarbitrations conducted in Australia.

(2) The circumstances in which the courts in Australia could set aside an award made under the ModelLaw or refuse to enforce foreign awards under the New York Convention and the Model Law wereconfined to those which were truly available under the Model Law and the New York Convention.The opportunity for Australian courts to add to or modify those circumstances was removed. In thepast, in more parochial times, some State courts had tended to think that they had a larger supervisoryrole over such awards than perhaps they truly did.

(3) An object provision was inserted into the IAA6 and instructions to take those objects into accountwhen exercising powers and functions under the IAA or Model Law, when exercising a power orfunction under an arbitration agreement or award and when interpreting those instruments wereexpressly mandated.7 The objects of the IAA are:

(a) To facilitate international trade and commerce by encouraging the use of arbitration as a methodof resolving disputes; and

(b) To facilitate the use of arbitration agreements made in relation to international trade andcommerce; and

(c) To facilitate the recognition and enforcement of arbitral awards made in relation to internationaltrade and commerce; and

(d) To give effect to Australia’s obligations under the New York Convention; and

(e) To give effect to the Model Law; and

(f) To give effect to the Convention on the Settlement of Investment Disputes between States andNationals of Other States signed by Australia on 24 March 1975.

(4) The amendments also provided for optional machinery and procedural ancillary provisions designedto assist the parties conducting international arbitrations in Australia to do so efficiently and fairly.

6 s 2D. 7 s 39.

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These provisions are found in Division 3 of Part III of the IAA8 and cover such matters as:

• The issue of subpoenas in aid of the arbitration;

• The making of court orders to secure the attendance of particular witnesses and the productionof documents before an arbitral tribunal;

• The express sanctioning of ex parte proceedings before an arbitral tribunal in certaincircumstances;

• The control, use and release of confidential information in relation to arbitral proceedings;

• The consequences of the death of a party to an arbitration agreement;

• Enhancing the powers of arbitral tribunals to control the gathering and use of evidence;

• Empowering an arbitral tribunal to order security for costs;

• The consolidation of separate arbitral proceedings; and

• The payment of interest and costs.

(5) The removal of an arbitrator for bias was made more difficult by expressly providing that there mustbe ‘... a real danger of bias…’ not merely some imputed apprehended bias.

(6) The recognition and enforcement of foreign arbitral awards was brought into line with the relevantprovisions of the New York Convention and the Model Law. In essence, an Australian court maynow only refuse to enforce a foreign award made in a foreign international arbitration if the partyagainst whom enforcement is sought proves to the satisfaction of the court one of the groundsprovided for in Article V of the New York Convention (which are replicated in Article 36 of theModel Law). Although the IAA has adopted its own language in respect of these matters,9 thesubstance of the grounds nonetheless reflect the substance of Article V of the Convention. One ofthe available grounds is that enforcement would be against public policy.10

The scope of the public policy ground is a topic in itself. I shall return to it briefly in a moment.

This brief conspectus of our modernised IAA makes it clear that Australian courts are now appropriatelyarmed with the necessary tools and express statutory guidance to enable them to seize the day, as it were,and to develop a strong and sensible body of jurisprudence in relation to the conduct of internationalarbitrations in Australia and in relation to the recognition and enforcement of foreign awards in Australia.

In particular, those courts must give effect to the objects of the IAA as specified in s 2D and to Article2A of the Model Law when interpreting the IAA. Article 2A of the Model Law provides:

(1) In the interpretation of this Law, regard is to be had to its international originand to the need to promote uniformity in its Application and the observance ofgood faith.

8 s 22 to s 27.9 As to which, see s 8(5) and s 8(7) of the IAA. 10 See s 8(7)(b) of the IAA.

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(2) Questions concerning matters governed by this Law which are not expresslysettled in it are to be settled in conformity with the general principles on whichthis Law is based.

In the Explanatory Memorandum which accompanied the 2010 amendments, the Parliament said:

Ensuring that the Model Law is interpreted consistently with approaches takeninternationally is important in ensuring that Australia is an attractive venue for theconduct of international arbitration. Divergent interpretations undermine the purposebehind the Law, which is to establish a common approach to arbitration throughout theworld and hence promote international trade and commerce.

Some IssuesAs I mentioned earlier, s 8(7)(b) of the IAA provides that the enforcement court may refuse to enforcea foreign award if it finds that to enforce the award would be contrary to public policy. Subsection 7Aof s 8 provides that:

(7A) To avoid doubt and without limiting paragraph (7)(b), the enforcement of aforeign award would be contrary to public policy if:

(a) the making of the award was induced or affected by fraud or corruption; or

(b) a breach of the rules of natural justice occurred in connection with the makingof the award.

I have addressed the meaning of ‘public policy’ in s 8(7)(b) of the IAA in two judgments deliveredin recent times. The first is Uganda Telecom Limited v Hi-Tech Telecom Pty Ltd.11 The relevant passagesare at [126]–[130] (p 436). The second case is Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No2).12 In the latter case, I discussed the correct approach to the public policy ground for resistingenforcement.13 In the two cases to which I have referred, I expressed the opinion that the expression“public policy” when used in s 8(7)(b) of the IAA means those elements of the public policy of Australiawhich are so fundamental to our notions of justice that the courts of this country feel obliged to giveeffect to them in respect of claims which are based fundamentally on foreign elements such as foreignawards under the IAA. The public policy to be applied is that of Australia because that is the jurisdictionin which enforcement is sought but it is only those aspects of public policy that go to the fundamental,core questions of morality and justice in Australia as the enforcement jurisdiction which enliven thisparticular statutory exception to enforcement. The public policy ground does not reserve to theenforcement court a broad discretion and should not be seen as the basis of a catch all defence of lastresort. It should not be used to give effect to parochial and idiosyncratic tendencies of the courts of the

11 (2011) 277 ALR 415.12 (2012) 201 FCR 535.13 At [87]–[112] (pp 554–563).

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enforcement state.14 Nor, on the other hand, is the requisite ‘public policy’ some utopian internationalnotion.

Another fertile area for Australian courts will be the enforcement of awards delivered in internationalarbitrations conducted in Australia under the IAA. In Castel Electronics Pty Ltd v TCL Air Conditioner(Zhongshan) Company Ltd,15 Murphy J decided that the Federal Court had jurisdiction to enforce non-foreign Model Law awards delivered in respect of international arbitrations conducted in Australia. Itwas argued in that case that only the State Supreme Courts possessed that jurisdiction, an argumentwhich was rejected by his Honour.

Despite the renewed interest on the part of the Australian government and the Parliament ininternational arbitrations and the significance for the Australian economy and its citizens of havingstrong judicial support to the arbitral process (at least in the area of international arbitrations), the HighCourt of Australia may not be as pro-arbitration as the arbitration practitioners and the government wouldlike. For example, in Westport Insurance Corporation v Gordian Runoff Ltd, the High Court held that,although the making of an award under the Commercial Arbitration Act 1984 (NSW) lacked thedistinctive features of the exercise of judicial power, the performance of the arbitral function was notpurely a private matter of contract in which the parties had given up their rights to engage judicial power.One of the principal issues in that case was the extent to which arbitrators acting under that legislationneeded to give reasons for their decisions. The plurality (French CJ, Gummow, Crennan and Bell JJ)held that there was no wholly satisfactory formula to flesh out the content of reasons required by thatAct. The extent of reasons to be given will depend upon the nature of the dispute and the particularcircumstances of the case. In Gordian Runoff Ltd,16 the High Court held that the arbitrators had failedto give adequate reasons.

The plurality made a number of observations concerning the IAA.17 The plurality left for anotherday consideration of the extent to which arbitrators conducting international arbitrations in Australiaunder the Model Law were required to give reasons.

In his dissenting judgment, Heydon J delivered a scathing criticism of arbitration processes.18 HisHonour expressed in most definite fashion that, in his opinion, the resolution of disputes by anexperienced commercial trial judge is likely to be quicker and cheaper and more certain than theresolution of the same dispute by arbitration.

In the later case of Michael Wilson & Partners Ltd v Nicholls,19 Heydon J again made clear that, inhis view, arbitral processes had little to commend them when compared with the traditional processesundertaken by the courts.20

14 See esp [95] (p 557), [96] (p 557) and [105] (p 560) in Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) (2012)201 FCR 535.

15 (2012) 201 FCR 209. 16 (2011) 244 CLR 239. 17 (2011) 244 CLR 239 at [21]–[23] (p 262). 18 (2011) 244 CLR 239 at [111] (p 288).19 (2011) 244 CLR 427. 20 (2011) 244 CLR 427 at [119] (p 461).

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ConclusionThe recent interest in international arbitration by government and by legal practitioners alike willundoubtedly lead to some interesting questions being posed for the courts. It is likely that the High Courtwill be called upon to determine in an authoritative fashion some of these important questions including,for example, the relationship between Ch III of the Constitution and the requirements of the IAA to givejudicial support and recognition to arbitral processes in the international sphere.

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Future Opportunities for CommercialArbitration

Robert McClelland1

Presentaton to 2012 ADR WorkshopWestin Hotel, Sydney4 August 2012

AbstractRecent reform of Commonwealth and state legislation is decidedly pro-arbitration. That approach givesmuch greater flexibility to the parties to design their own procedures and limit the circumstances inwhich a court can intervene in the process or outcome of a commercial arbitration. At the same timethere are also opportunities to partner with the Courts to obtain assistance by way of enforceable orderswhere they are necessary to preserve the subject matter of the arbitration, to obtain evidence or to requirea party to conduct themselves in good faith towards the arbitration process. The ability to arrangecombined mediation/arbitration will also provide parties with more options to resolve a dispute. Thepaper concludes that laws can only ever provide a framework - how they are applied will determinewhether the reform of commercial arbitration laws in Australia has been a success.

IntroductionIn the past two years there has been significant reform of Australia's laws concerning both internationaland domestic commercial arbitration. The reforms are aimed at ensuring that Australia's domestic lawskeep pace with international developments and to create a flexible framework so that commercialarbitration becomes a genuinely cost-effective alternative to litigation before the courts. Further, therehas been a deliberate attempt to harmonise Commonwealth law applying to international commercialarbitration with state and territory laws that apply to domestic commercial arbitration. The reformsprovide the opportunity to develop our national expertise and to achieve greater certainty of outcomesby limiting the opportunity for legal challenges. At the same time there is an emphasis on developingpartnerships with the courts wherever assistance is required to give efficacy to the process or to enforcea decision or arbitral award at an interim or final stage. The extent to which these reforms will contributeto the further growth of commercial arbitration will substantially depend upon the willingness ofAustralian practitioners to develop their expertise and to creatively fashion processes to best meet thecircumstances of each arbitration.

1 The Hon Robert McClelland MP is the Federal Member for Barton (NSW). Mr McClelland served as the FederalAttorney-General from 2007 to 2011. Mr McClelland has a Bachelor of Law degree from the University of NSW and aMaster of Law from the University of Sydney. He is now practicing at the Sydney Bar. He is also a visiting fellow at theUniversity of New South Wales.

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As Australian laws are now very much based on contemporary international standards I will outline thebackground to the development of those standards and discuss how they are being applied inCommonwealth and state and territory legislation. Finally I will outline how the reforms will createadditional opportunities for Australian practitioners to enhance our reputation as a centre of excellencein commercial arbitration.

International JurisprudenceA universally applied and effective international system for commercial arbitration is vital to overcominginconsistent national and regional regulations that govern international trade. For these reasons, on 17December 1966 the United Nations General Assembly established the United Nations Commission onInternational Trade Law (UNCITRAL) as ‘the core legal body of the United Nations system in the fieldof international trade law’. 2

The international Model Law was developed by UNCITRAL and adopted on 21 June 1985. Its aim isto provide parties in a commercial dispute with ‘the maximum amount of freedom to expeditiously andwith finality settle their disputes, while limiting the circumstances in which courts may intervene in anddraw out such arbitral proceedings’.3

Australia’s International Arbitration Act 1974 (the IAA) incorporates the Model Law.4 It also implementsthe 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (theNew York Convention) and the 1965 Washington Convention on the Settlement of Investment Disputesbetween States and Nationals of Other States (the Washington Convention).5

The fundamental aim of the IAA remains to facilitate international trade and commerce by encouragingthe use of arbitration as a method of resolving disputes.6

Reform of Commonwealth LawsOn 21 November 2008, the Federal Government announced a major review of the IAA.7 The impetusfor the review was uncertainty caused by several decisions of Australian courts as well as the need torespond to overseas developments.

2 United Nations Information Service (UNIS), UN Commission on International Trade Law to Hold 42nd Session in Vienna,29 June-17 July 2009, media release, 26 June 2009, viewed 1 December 2009,<http://www.unis.unvienna.org/unis/pressrels/2009/unisl129.html>.

3 United Nations Commission on International Trade Law (UNCITRAL), UNCITRAL Model Law on InternationalCommercial Arbitration, 18. <http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/06-54671_Ebook.pdf>.

4 International Arbitration Act 1974 (Cth), s16.5 The text of the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other

States is available at <http://www.jurisint.org/en/ins/105.html>. Australia signed this Convention on 18 March 1965. 6 Explanatory Memorandum, International Arbitration Amendment Bill 2009, 3.7 Attorney-General’s Department, Review of International Arbitration Act 1974 — Discussion Paper, November 2008,

viewed 5 February 2010,<http://www.ag.gov.au/Documents/Review%20of%20the%20International%20Arbitration%20Act%201974%20-%20Discussion%20Paper.pdf>.

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In respect to uncertainty, the most concerning decision was that of the Queensland Court of Appeal inEisenwerk v Australian Granites Ltd (‘Eisenwerk’).8 In that case the Court held that, by adopting theInternational Chamber of Commerce Rules, the parties had opted out of the Model Law. Thisinterpretation meant that, by deciding to apply the rules of either the International Chamber of Commerceor the Australian Centre for International Commercial Arbitration, the parties would be taken to haveopted out of the Model Law in its entirety and, hence, unable to pursue avenues of relief provided for inthe Model Law.9 The reasoning in Eisenwerk10 had potential repercussions for both international anddomestic commercial arbitration conducted in Australia.

The most significant international development was the 2006 revision of the UNCITRAL Model Law.The main features of the 2006 revision were to:

• insert a new ‘art’ 2A, which is intended to promote uniform interpretation of the Model Law;

• amend the definition of ‘arbitration agreement’ in ‘art’ 7 to give parties the option of adopting a lessprescriptive definition;

• adopt more extensive provisions on ‘interim measures and preliminary orders’; and

• amend art 35(2) to remove authentication requirements when seeking enforcement of an awardthrough a court and to rationalise the requirements for translating awards.11

As discussed, reform of state and territory laws has also been based on the same principles.

Domestic Adoption of the International Model LawIn April 2009 the Standing Committee of Attorneys General (SCAG) agreed to reform state and territorylaws concerning domestic commercial arbitration. SCAG resolved that the reform be based upon theUNCITRAL Model Law and, significantly, identified two principles to guide the drafting of the uniformlegislation. They were:

• that the bill should give effect to the overriding purpose of commercial arbitration, namely, to providea quicker, cheaper and less formal method of finally resolving disputes than litigation; and

• that the bill should deliver a nationally harmonised system for international and domestic arbitration,noting the Commonwealth's review of the International Arbitration Act 1974 (Cth).12

Following public consultation, a draft model Commercial Arbitration Bill was prepared and approved atthe May 2010 meeting of SCAG.13

8 [2001] 1 Qld R 461.9 See also American Diagnostica v Gradipore (1998) 44 NSWLR 312.10 [2001] 1 Qld R 461.11 Explanatory Memorandum, International Arbitration Amendment Bill 2009, [62].12 SCAG Decisions, Summary of Decisions April 2009, Standing Committee of Attorneys-General

<http://www.scag.gov.au/lawlink/SCAG/ll_scag.nsf/pages/scag_meetingoutcomes>.13 SCAG Decisions, Summary of Decisions May 2010, Standing Committee of Attorneys-General

<http://www.scag.gov.au/lawlink/SCAG/ll_scag.nsf/vwFiles/SCAG_Communiqu%C3%A9_7_May_2010v2.pdf/$file/SCAG_Communiqu%C3%A9_7_May_2010v2.pdf>.

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Those laws are now in place in New South Wales, Victoria, South Australia, Tasmania, the NorthernTerritory and Western Australia.14

The Domestic Commercial Arbitration Framework

Commercial Arbitration Act 2010 (NSW)

As all jurisdictions have based their legislation on the Model Law approved by SCAG, I will focus mydiscussion on some of the more significant aspects of the Commercial Arbitration Act 2010 (NSW) (‘theCAA’).

Encouragement of Flexibility

Reflecting the tone of the reforms, s 1C of the CAA provides that the ‘paramount object’ of the Act isto ‘facilitate the fair and final resolution of commercial disputes by impartial arbitration tribunals withoutunnecessary delay or expense.’ Confirming the significance of that paramount object, ss 1C(3) providesthat the Act ‘must be interpreted... so that (as far as practicable) the paramount object of this Act isachieved.’

Similarly, s 1C(3) states that the arbitral tribunals functions should, as far as practicable, be exercised toachieve that paramount object. Importantly, s 1C(2) states that an aim of the legislation is to achieve thatparamount object by enabling the parties to agree on how their commercial disputes are to be resolved.In other words, an emphasis on flexibility is front and centre of the CAA.

Consistent with that object, s 19(1) provides that subject to the Act, ‘the parties are free to agree on theprocedure to be followed by the arbitral tribunal in conducting the proceedings.’

The most significant limits to that freedom of parties to determine their own process include:

• section 18, which requires that the parties be ‘treated with equality’ and given ‘a reasonableopportunity’ of presenting their case;

• section 24A, which provides for the right of a party to be represented in any ‘oral hearings’;

• section 24B, which provides that the ‘parties must do all things necessary for the proper andexpeditious conduct of the arbitral proceedings’ including ‘complying with any order or directionof the arbitral tribunal with respect to any procedural, evidentiary or other matter” and refrainingfrom wilfully doing or causing to be done ‘any act to delay or prevent an award being made’;

• section 25(2), which empowers an arbitrator to take remedial action in circumstances where a partyis not complying with their obligation to do all things necessary for the proper and expeditiousconduct of the arbitral proceedings;

• section 27, which provides that an arbitrator or a party ‘with the approval of the arbitral tribunal’may seek assistance from the court ‘in taking evidence’;

14 At the time of writing the West Australian Commercial Arbitration Bill 2011 is awaiting assent.

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• section 34(2)(a)(ii), which provides that arbitral award may be set aside where a party ‘was not givenproper notice of the appointment of an arbitral tribunal or of the arbitral proceedings or was otherwiseunable to present the party’s case’;

• section 34(2)(b)(ii), which provides that an award may be set aside where the court finds ‘the awardis in conflict with the public policy of this State.’15

Nevertheless despite those mandatory provisions, which are essentially aimed at giving efficacy to thearbitral process, the parties retain considerable flexibility to design their own process.

In particular, it is now very much up to practitioners to take full advantage of this new emphasis to tailoreach arbitration to best fit the circumstances of each dispute. In this context, Professor Doug Jones hascommented:

It is an unfortunate reality of contemporary arbitration that, more often than not,standard procedures are utilised. …While standard procedures are often the result of anexperienced arbitration’s best practice, developed through a wide variety and largenumber of arbitrations, it is to the detriment of the very nature of arbitration that thesestandard procedures are relied upon more than is necessary.16

Unless practitioners take advantage of the new legislation, to better manage the process of arbitration toachieve fair and cost effective outcomes, there will be little point arbitrating because the state and federalcourts are now actively engaged in sophisticated case management. For instance, s 56(1) of the CivilProcedure Act 2005 provides that the overriding purpose of the Act ‘is to facilitate the just, quick andcheap resolution of the real issues in the dispute or proceedings.’17 In the exercise of those casemanagement powers it is now common practice for courts to require parties to justify the evidence theyintend to call before a matter is set down for hearing and, during the course of a hearing, to limit theextent of cross examination and length of submissions. A range of innovative techniques such as referringa technical issue for specialist determination and ‘hot tubbing’ of expert witnesses have also beenintroduced.

The fact that arbitration has not lived up to expectations has been the subject of judicial commentary.Most recently in his decision in Westport Insurance Corporation v Gordian Runoff Ltd18 (‘WestportCase’) Heydon J, under the subheading ‘the merits of arbitration’, commented that he saw little evidenceof merit in that particular case. His Honour noted the matter took some seven years to resolve and that‘speed and cheapness are not manifest in the process to which the parties agreed.’19

The reforms reflected in the CAA will only change the culture if they are embraced and, in that sense,the gauntlet has very much been thrown down to practitioners to be innovative while following soundand fair process.

15 See Doug Jones, Commercial Arbitration in Australia, (Thompson Reuters, 2011) 253 [8.360].16 Ibid 223-224 [8.120].17 Civil Procedure Act 2005 (NSW). See also Part VB of the Federal Court of Australia Act. 18 [2011] HCA 37.19 [2011] HCA 37 (5 October 2011) at 111.

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Limited Opportunities for Intervention by the Courts

The seven year delay referred to by Heydon J in the Westport20 case was significantly contributed to bycourt intervention which necessarily added to time and expense. More generally, the prospect of courtintervention also detracts from certainty and early resolution of matters in dispute which is consideredimportant to developing confidence in Australia’s commercial arbitration system.21

Accordingly, an important aspect of the reforms, manifest in the CAA, is to limit the opportunity forlegal challenge in respect to the arbitration process and outcome.22 Specifically, s 5 of the CAA providesthat ‘no court must intervene except where so provided by this act’.

This has been described as one of the most significant sections of the CAA in that it ‘reflects one of theoverarching themes of the Law: the Principle of non intervention’. 23

Those sections of the Act that mandate judicial intervention are essentially limited to:

• section 6 which concerns the party’s ability to identify the competent court for the purpose ofproviding assistance and supervision;

• section 9 concerning applications for an interim measure of protection; and

• section 36 concerning grounds for refusing recognition or enforcement of an arbitral award.

In fact, confirming the principle of non intervention, s 8 provides that a court ‘must’, in circumstanceswhere the matter is the subject of an arbitration agreement, ‘refer the parties to arbitration unless it findsthat the agreement is null and void, inoperative or incapable of being performed’. Moreover, to ensurethe efficacy of the arbitration and to avoid delay, s 8(2) provides that an arbitration may be commencedand continued despite an application having been made to the court. In other words, the legislation givespriority to the process of arbitration, preventing the process from being usurped or even delayed bycreative litigation.

In summary, the section reflects the ‘modern trend both domestically and internationally to facilitateand promote the use of arbitration and to minimise judicial intervention in the process’. 24

Further, in determining the subject matter of an agreement to arbitrate the courts will construe relevantprovisions of a contract ‘liberally’ and in accordance with ‘the sensible commercial presumption that

20 [2011] HCA 37.21 The Hon. Justice Garry Downes AM, Comment on Papers by Justice John Saunders of the High Court of Hong Kong

and Judge Xingue Yang of the Supreme People's Court of China, International Commercial Law, Litigation andArbitration Conference, Sydney 5-7 May 2011.<http://www.aat.gov.au/Publications/SpeechesAndPapers/Downes/CommentOnPapersMay2011.htm#_ftnref1>.

22 Commercial Arbitration Bill 2010 Second Reading Speech the Hon John Hatzistergos 12 May 2010 p22432<http://www.parliament.nsw.gov.au/prod/PARLMENT/hansArt.nsf/0/FB3F6634694B4CD7CA25772F00054053>.

23 Jones, Commercial Arbitration in Australia, n 14, 52 para 3.210 and see reference to Article 5, Parrot to UNCITRAL,Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration, 18th Session, UN DocA/CN.9/264 (3-21 June 1985).

24 Larkden Pty Limited v Lloyd Energy Systems Pty Limited [2011] NSWSC 268 (1 April 2011) [65].

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the parties did not intend the inconvenience of having possible disputes from their transaction beingheard in two places’.25

However, it should be noted that s 8 may not displace the right of a party to approach a court for relief,despite being a party to an agreement to arbitrate, in circumstances where it is ‘apparent from the natureof the subject matter or the way that it is dealt with by the legislature that it is appropriate for disputesconcerning that subject matter to be resolved by the courts, or specialist tribunals established for thatpurpose’. 26

In Larkden Pty Limited v Lloyd Energy Systems Pty Limited, Hammerchlag J gave examples of ‘nonarbitral disputes’ as including ‘criminal prosecutions, determination of status such as bankruptcy, divorce,and the winding up of corporations in insolvency, and certain types of disputes concerning intellectualproperty such as whether or not a patent or trade mark should be granted’.27 His Honour described theseas being in the category of matters that ‘are plainly for the public authorities of the state, patents andtrade marks are monopoly rights that only the state can grant’.28

Opportunities to Partner with the Courts

While limiting scope for court challenges to the process and outcome of the commercial arbitration, theCAA also provides the opportunity for the parties and/or an arbitrator to benefit from judicial assistance.In particular, the legislation specifically permits a party to obtain the assistance of a court without therisk of derailing the arbitration process. For instance, s 9 expressly provides that an approach to the courton an interim protection measure will not be inconsistent with an arbitration clause.

In other words, the assistance of the courts can be obtained to preserve the subject matter of the dispute,or to assist in the evidentiary process, without giving rise to an argument that the party approaching thecourt is electing to forego the arbitration clause.

However, on a word of caution, it is imperative that a party that applies to a court for assistance inpreserving the subject matter of an arbitration does so in the context of making their purpose clear. Inparticular, the party must state their intention to proceed with the arbitration ‘not later than submittingthe party’s first statement on the substance of the dispute’ (s 8(1)). Such a controversy arose in GilgandraMarketing Co-Operative Limited v Australian Commodities & Marketing Pty Ltd & Anorwhere SlatteryJ held that an the application for a stay under s 8 failed because Australian Commodities did not requesta referral of the proceedings to arbitration not later than submitting its ‘first statement on the substanceof the dispute’.29

15

25 Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; 157 FCR 45 per Allsop J (with whom Finnand Finkelstein JJ agreed) at [165].

26 Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd (2011) 279 ALR 759, [2011] NSWSC 195 at [38] (2011).27 [2011] n 21 [64].28 Ibid. Referring to N Blackaby et al, Redfern and Hunter on International Arbitration, (Oxford University Press, 5th ed,

2009) at 2.118.29 [2010] NSWSC 1209 (22 October 2010)[58].

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In so finding, his Honour discussed the operation of s 9, commenting that ‘a critical distinction is to bedrawn between a party who initiates curial interim injunction proceedings in anticipation or in aid ofarbitral proceedings and a plaintiff who does not’.30 His Honour stated:

If proceedings are issued to seek an interim injunction without reference to thearbitration agreement, I am of the view that The Property People Ltd,31 and the caseswhich follow, apply to prevent a plaintiff who issues such proceedings from subsequentlyseeking a stay. Similarly, a defendant who opposes interim relief and fails to seek a stay(or protest jurisdiction) in respect of the substantive dispute will also be prevented fromseeking a stay.32

General Tightening of the Ability to Challenge Process and Outcome

Even in those areas where judicial challenge is still available, the opportunities for challenges have beensignificantly limited. For instance, s 12(5) provides that a challenge to the appointment of the arbitratoron the ground of bias requires that ‘there are justifiable doubts as to the impartiality or independence ofa person approached in connection with a possible appointment as arbitrator only if there is a real dangerof bias on the part of the person in conducting the arbitration’ [emphasis added].

The Explanatory Notes to the CAA makes it clear that the test is based on that applied by the House ofLords in R v Gough.33 In that case Lord Goff of Chievelley stated the process required the following:

... having ascertained the relevant circumstances, the court should ask itself whether,having regard to those circumstances, there was a real danger of bias on the part of therelevant member of the tribunal in question, in the sense that he might unfairly regard(or have unfairly regarded) with favour, or disfavour, the case of a party to the issueunder consideration by him.34

In respect to this issue, Professor Jones has usefully considered possible circumstances in which lack ofimpartiality or independence may arise.35 As a broad indicator of possible danger areas, Professor Jonesrefers to the International Bar Association Guidelines on Conflicts of Interest in InternationalArbitration.36 The ‘Non Waivable Red List’, contained in the guidelines, includes where:

• there is an identity between the party and the arbitrator, or the arbitrator is a legal representative ofan entity that is a party to the arbitration;

• the arbitrator is a manager, director or member of the supervisory board, or has similar controllinginfluence in one of the parties;

16

30 Ibid [47].31 (1999) 14 PRNZ 66.32 Ibid at [24].33 [1993] AC 646. 34 [1993] AC 646. 35 Jones, Commercial Arbitration in Australia, n 14, p137 [5.220].36 International Bar Association, International Bar Association Guidelines on Conflicts of Interest in International Arbitration

<http://www.ibanet.org/Publications/publications_IBA_guides_and_free_materials.aspx>.

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• the arbitrator has a significant financial interest in one of the parties or the outcome of the case; and

• the arbitrator regularly advises the appointing party or an affiliate of the appointing party, and thearbitrator or his or her firm derives a significant financial income there from.

A more extensive but less prescriptive list of possibilities is also included in the guidelines with arecommendation that, in those circumstances, the nominated arbitrator should only accept the nomination‘after disclosure has been made, with the informed consent of the parties’.37

The Facilitation of Arb-Med

To avoid a situation where comments by an arbitrator during the course of proceedings may be construedas an indication of bias, s 27D enables the parties to agree on the arbitrator acting as a mediator,conciliator or other non arbitral intermediary.

This is an important provision of the Act as it will enable parties to elect to conduct the arbitrationproceedings under an arbitration/mediation ‘arb-med’ framework. However, s 27D(4) provides that, asa safeguard, and in the context of the consensual nature of commercial arbitration, if a mediation orconciliation is not successful an arbitrator is prevented from resuming as an arbitrator without the writtenconsent of all parties.

Despite that final safeguard, there will be many more opportunities to resolve matters through the useof these combined skills. Equally, there will be new and additional opportunities for practitionerspossessing those broader skills to be brought into the arbitration process.

Procedural FairnessIn terms of the arbitration process itself, s 18 is the important procedural fairness provision. But eventhere, the Act introduces some relaxation of the standard usually associated with strict adherence to theprinciples of ‘natural justice.’

Section 18 provides that the parties must be treated with equality and each party must be given a‘reasonable opportunity’ of presenting the party's case. This is another area where the CAA has beenmodified from the previous Model Law which required the parties to be given a ‘full’ opportunity.

Justice Clyde Croft, in an extra judicial paper, has described the significance of this difference in thefollowing terms:

Article 18 of the [previous] Model Law states ‘… each party shall be given a fullopportunity of presenting his case’ [emphasis added]. In situations where a party wantsto delay arbitration proceedings it can rely on this provision to argue that it can presentevidence and submissions no matter how costly, lengthy and unnecessary they are.

...

17

37 Ibid.

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To remove doubt, the amendments to the …new Commercial Arbitration Act 2010 (s 18)changes the ‘full opportunity’ provision in the Model Law to be read as a ‘reasonableopportunity’. This will encourage parties to consider the flexibility of arbitral procedure.There needs to be proportionality between the complexity of the dispute and theprocedures adopted.34

This change is potentially very significant. As noted, the requirement for a party to be given a ‘reasonableopportunity’ of presenting its case does not mean that a party must be given ‘every opportunity’.Significantly, this will give the arbitrator the ability to control the extent of evidence that a party canpresent if, for instance, the arbitrator considers that it will be of little value and may unnecessarily prolongthe process and inflate costs. In that sense the reform enables the arbitrator to adopt practices akin tothose permitted in Part 6 of the Civil Procedure Act 2005 and Part VB of the Federal Court of AustraliaAct 1976.

ConclusionAustralian Courts are increasingly taking a decidedly pro-arbitration approach to the resolution ofcommercial disputes. Reform at Commonwealth and State level supports that approach by limiting thecircumstances in which a court can intervene in the process or outcome of a commercial arbitration, onthe one hand, while providing constructive opportunities for a partnership to support the process wherethere may be a need for state sanctioned enforceable orders. However, laws can only ever provide aframework - how they are applied will determine whether the reform of commercial arbitration laws inAustralia has been a success. An increasing number of Australian practitioners are gaining sophisticatedmediation and arbitration skills. The reforms provide the opportunity for arbitrators to combine thoseskills and, also, to draw upon a wide variety of case management options in order to assist parties toresolve their dispute as expeditiously as possible or to proceed to an arbitrated award that has greaterprospects of withstanding challenge. As a result of greater uniformity, there is also a real opportunityfor Australian practitioners to develop skills that can be applied in respect to both national andinternational commercial arbitrations.

18

34 Arbitration Division of the Commercial Court (VSC) [2010] VicJSchol 13 <http://www.austlii.edu.au/cgi-bin/sinodisp/au/journals/VicJSchol/2010/13.html?stem=0&synonyms=0&query=nsw%20consol_act%20caa2010219%20s18>.

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Dispute Resolution Boards– A Better Way Forward?

Steven Goldstein1

AbstractA Dispute Resolution Board (‘DRB’), which is also sometimes called a Dispute Review Board is a bodythat is established by the parties under a contract to assist in the avoidance and resolution of issues anddisputes that arise out of or in connection with the performance of work under that contract. In otherwords, a DRB is an alternative dispute resolution process. However, whereas most alternative disputeresolution processes such as mediation, conciliation, expert determination and arbitration only comeinto play when a dispute arises between the parties, one of the primary functions of a DRB is to avoiddisputes rather than merely provide an alternative process by which the parties can settle their disputes.The DRB is also empowered to determine any matters that cannot be resolved by the parties.

BackgroundAlthough Dispute Resolution Boards have been around since the early ‘60s, they have mainly been usedoverseas, particularly in the USA. Accordingly, the concept and use of a DRB is not all that well knownwithin Australia. However, their use has increased significantly over the past few years. In particular,the New South Wales Government has embraced the concept of having a DRB on a number of its largerprojects including:

• Sydney Ocean Outfall Tunnels – approximately $320m;

• Sydney Desalination Plant – approximately $1 billion;

• Port Botany Expansion Project – approximately $560 million; and

• South-West Rail Link – approximately $600 million.

Attached to this paper is document that has been obtained from the Dispute Resolution Board AustralasiaInc (‘DRBA’) website which identifies the projects which are currently known to have used a DRB inAustralia. Although DRBs are presently used in Australia mostly on a number of large scale contractsthere is potentially no reason why a DRB could not be used on much smaller projects such as for example,the development of a block of residential apartments.

Significantly, the effectiveness of the DRB concept as a dispute avoidance process can be seen fromstatistics provided by the DRBA which indicate that as at 2008:

19

1 Steven Goldstein was admitted as a Barrister in 1993 and specialises in building and construction matters. He iscurrently the NSW Chapter Chair of IAMA. Steven has also acted as a Supreme Court referee, District Court referee,District Court arbitrator, Local Court arbitrator, expert determiner, Grade 1 arbitrator and mediator. He also holds abachelor degree in civil engineering and is a Chartered Professional Engineer and Member of the Institution ofEngineers Australia and practised as a civil engineer for over 17 years prior to being called to the Bar.

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THE ARBITRATOR & MEDIATOR NOVEMBER 2012

• 60% of projects with a DRB had no disputes; and

• 99% of projects with a DRB recommendation had no subsequent arbitration or litigation.

The international DRB conference that was held in Sydney in May 2012 indicated that these figureswere being maintained.

The extent to which DRBs are used world-wide can be seen from the fact that the international ‘DisputeResolution Board Foundation’ or ‘DRBF’ is represented in 28 countries around the world.

Composition of the DRBTypically, the most common form of DRB is comprised of three members. However, there is nothing toprevent the use of a single board member on smaller projects. The usual process on a three memberboard is that each party to the contract selects one member of the DRB with the third member aschairman, being nominated by the other two DRB members.

One of the key features of a DRB is that each member must be entirely independent of both partiesregardless of the party who nominated that member. In other words, a member who is nominated by aparty is not the representative of the party that nominated that member.

Prior to his/her appointment as a DRB member, that person (including the chairman) is required to makea full and frank disclosure of any potential conflicts of interest so as to afford either party with theopportunity to object to that person’s appointment. The DRB member has an ongoing duty to make afurther disclosure of any new or previously undisclosed conflict which may come to their attention.

The appointment of a suitably qualified member to carry out the functions of the DRB is a key step inthe process. Essential qualifications that should be considered by a nominating party include: experience,contract and technical knowledge, language, qualifications, availability, impartiality and independence.

Formation of the DRBIn order to play a significant part in the dispute avoidance process, it is fundamental that a DRB shouldbe formed at the earliest possible time. Preferably, this should occur on, or shortly after, the parties enterinto the contract. A suggested draft clause which provides for the formation of a DRB may be found onthe DRBA website.

Some of the benefits that are to be gained from the early formation of a DRB are that:

• the DRB becomes familiar with the project from the commencement of the project;

• the DRB is aware of both parties’ plans and expectations for the project as well as their initialconcerns;

• the DRB is able to undertake regular visits to the site at an early stage and is able to monitorperformance generally; and

• the DRB has the opportunity to influence the parties from the outset and thereby avert issues thatcould result in disputes.

20

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Operation of the DRBAt the first meeting of the DRB, the DRB is usually briefed on the project by way of a joint presentationby the parties. There is also a discussion of the roles and objectives of the DRB on the project as are thedetails of the operating procedures. This usually includes:

• reinforcing the without prejudice nature of the DRB meetings and any documents produced by theparties for the purpose of those meetings;

• the importance of neutrality;

• communications by the parties with DRB members;

• documents to be progressively provided by the parties to DRB members including minutes ofmeetings;

• meeting frequency and venue;

• site visit protocols;

• preparation and distribution of DRB minutes;

• discussion of the procedure to be followed if a DRB determination is required.

A typical DRB agreement also makes provision for both the general operating procedures of the DRBas well as the procedures that are to be followed if the DRB is required to make a formal decision of adispute.

As the primary purpose of the DRB is to avoid disputes, the DRB usually meets with the parties at pre-arranged times and also meets regardless of whether or not differences or disputes have arisen betweenthe parties. Usually, DRB meetings are held every two months or so, but may increase depending onneed. Senior representatives from both parties which include both on-site and off-site personnel areusually required to attend DRB meetings.

Prior to, or at the conclusion of, each DRB meeting, the DRB members usually undertake a siteinspection in the company of both parties so that they can see first-hand the status of the ongoing works.Again, the parties are usually obliged to identify any areas of the site that are, or may be, the subject ofany potential issue or dispute.

By meeting regularly, even when there are no differences or disputes, the DRB is able to keep abreastof all developments on the project. By doing so, any potential differences can often be identified at anearlier point in time and can often be promptly brought before the DRB for discussion and resolution soas to avoid that issue being elevated to the level of a dispute. By raising matters of concern and potentialdisputes during the DRB meetings the parties are not only bringing these matters to the attention of theDRB, they are also giving themselves the opportunity to air their grievances and engage in open andhonest discussions with the other party in a without prejudice environment under the guidance of theDRB.

One of the key factors that often result in the early resolution of matters that have been brought before

21

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the DRB is the knowledge of the parties that if they are unable to sort out their differences during thediscussion stage, then the DRB will in any event become involved in the resolution of that dispute. Otherkey factors are that the parties recognise that the DRB is usually the best placed to determine any suchdisputes because the members of the DRB have been selected by the parties for their knowledge andexpertise in the relevant fields. In addition, the DRB has the benefit of having detailed andcontemporaneous knowledge both of the project and of the issues as they develop.

Resolution of DisputesWhere the parties are unable to resolve an issue in conjunction with the DRB, and have satisfied thepre-conditions for dispute resolution, the parties are entitled to elevate that unresolved issue to the levelof a dispute. In that event, such disputes are then referred to the DRB for their decision.

The typical DRB agreement provides for the operating procedure that is to be followed in the event thatsuch a dispute arises. The procedure is very similar to that which is followed in an expert determinationas it usually involves written submissions by the parties with the DRB being given the right to requestfurther information and/or call a conference if considered necessary. Significantly, the operatingprocedure often requires the dispute to be determined by the DRB within a relatively short period oftime. For example: the recommended DRBA operating procedure suggests a maximum period of 60business days after referral of the dispute to the DRB. This can usually be achieved by the DRB becauseof its familiarity and knowledge of both the project and the particular issues in dispute. The quickresolution of such disputes is vital in ensuring that the parties maintain their relationships by not allowingthese disputes to ‘fester’. It allows the focus to be maintained on progressing the construction of theworks.

Depending on the operating procedures, the decision that is handed down by the DRB may or may notbe required to contain reasons and also may or may not be required to be unanimous. However, it isobviously preferable that the DRB reach a unanimous decision. Depending on the terms of the contractbetween the parties the decision by the DRB may or may not be binding on the parties or may only bebinding in the event that the matter in dispute is less than a certain amount. Whether the decision hasbeen binding or non-binding, the experience world-wide on over 1,400 projects up until about 2007 hasbeen that 97% of decisions made by DRBs have been directly accepted or have led to a negotiatedsettlement between the parties.2

However, if the DRB’s decision is non-binding and is not accepted by one or more of the parties, thedecision by the DRB including any minority decision, may be admissible as evidence depending on theterms of the contract between the parties.

22

2 See paragraphs 3.6 and 3.8 of the paper by Peck and Dalland titled “The Benefits of Dispute Resolution Boards forIssue Management of Medium to Large Construction Projects” Volume 26 no.1 of the Arbitrator & Mediator at p21 andp23.

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Costs and Cost Effectiveness of the DRBRegardless of whether or not a DRB is ever required to adjudicate on a dispute there will be costs incurredin maintaining that DRB. However, the extent of those costs can be easily determined and allowed forby the parties before they enter into the Contract.

Typically, each of the parties is liable to pay 50% of each of the members’ fees and disbursements. Thisreinforces the fact that none of the members have any further alignment with their nominating party.However, in the end, it is the owner of the project who ultimately pays as the contractor simply includesits share of the DRB costs into its contract price.

For projects with a contract value greater than about $20 - $30 million it is considered that the use of a3 person DRB is easily justified with the costs of the DRB generally running in the range of 0.05% to0.3% of the contract value.3 In the writer’s opinion, this is very cheap ‘insurance’ having regard to thecosts of litigation.

For projects with a contract value less than $20 - $30 million it is considered by the writer that the useof a single person DRB may also be justified. The writer suggests that there is no lower limit on thevalue of a project that can use a DRB although obviously, the percentage costs of a DRB would increaseas the contract value decreased.

Further reading and informationSee the DRBA website: www.drba.com.au and the various publications referred to on that website.

23

3 Supra at paragraph 3.7 p 21 - 25.

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Mediating Native Title – in whose interests?

Hans Paul Bokelund1

AbstractAt the Native Title Conference in Townsville on 5-6 June 2012, which marked the 20th anniversary ofthe Mabo decision, the Commonwealth Attorney-General and Minister for Emergency Management, theHon Nicola Roxon MP, announced reforms that involved claims mediation moving from the NationalNative Title Tribunal to the Federal Court. The initiative builds on the Government's 2009 reforms, whichgave the Federal Court greater control of native title mediation.

In this paper I will examine the rights and interests in the native title mediation process, and analysewhether there is another approach to native title mediation, under the rubric of alternative disputeresolution, by not being stuck on one way of doing things, per the classic Winnie-the-Pooh scenario,where Christopher Robin drags his bear down the stairs – ‘bump, bump, bump, on the back of his head,behind Christopher Robin. It is, as far as he knows, the only way of coming downstairs, but sometimeshe feels that there really is another way, if only he could stop bumping for a moment and think of it. Andthen he thinks that perhaps there isn’t’.

IntroductionIs the current native title mediation process the only way to go?2 Or are there alternative ways to meetall the parties’ interests, particularly the Indigenous parties, because there is frustration within the nativetitle mediation process as exemplified by what Lindgren J said below in his introductory summary inHarrington-Smith v Western Australia (No. 9)3:

“The experience of hearing the case and resolving it has exposed me to what I considerto be an unsatisfactory state of affairs in the native title area. Perhaps the heart of theproblem is that the legal issue that the Court is called upon to resolve is really only partof a more fundamental political question…Several times during the hearing I encouragedthe parties to attempt to find a solution by mediation. I was given to understand thatmediation had previously taken place but without success. Apparently mediationcontinued, even following the hearing… Finally, however, mediation came to nothingand the parties informed me that a decision would be required. I do not know or wish toknow why mediation failed. I will only say that it is to my mind sad that the matter hashad to be resolved by an imposed solution.”

25

1 Hans Paul Bokelund LLB (Melb), MCommrclLaw (Melb), AIAMA is currently the CEO of the Goldfields Land and SeaCouncil. Prior to which he was a barrister at the Victorian Bar.

2 In this paper when referring to mediation in the native title context, I am referring to mandatory mediation per Part 4 Div1B of the Native Title Act 1993 (Cth).

3 (2007) 238 ALR 1

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26

4 Ibid.5 (1992) 175 CLR 1.

Why is there frustration with the native title mediation process as stated by Lindgren J in Harrington-Smith v Western Australia (No 9)4; is the problem just a political question as raised by His Honour, or isthe problem more do to with the mediation process itself as used in the native title context? Or is thecurrent native title mediation process comparative to the English fairy-tale experience of Winnie-the-Pooh who kept bumping his head as Christopher Robin dragged him downstairs backwards by his heels?“It is, as far as he knows, the only way of coming downstairs, but sometimes he feels that there really isanother way, if only he could stop bumping for a moment and think of it. And then he thinks that perhapsthere isn’t”.

(a) Major frustration

As part of Lindgren’s J ‘fundamental political question’ quoted above, a major frustration in the nativetitle mediation process has been whether the state (or territory) governments take a positional bargainingapproach to mediation by requiring ‘proof of connection’ to be established as a condition precedent toprogression of mediation. Practice varies between governments, particularly in regards to the State ofSouth Australia. This enduring problem has caused considerable frustration in the mediation processbetween the parties in respect of both the standard and timing of meeting evidentiary requirements.

For example government parties might argue that the fundamental requirement of the Act under s 86Ais proof of connection as a condition precedent and the standard of proof required is that of the court attrial. If state/territory policies make the provision of such proof as a condition precedent to mediation,Indigenous claimants are forced up-front to at least show some type of evidentiary proof of connection,which will forearm government with their evidence ahead of possible future litigation. This issue smacksof an adversarial style of dispute resolution.

A. Native title background

Shortly after the High Court's ground-breaking decision in Mabo v Queensland (No 2)5, the FederalParliament at the time laid the foundations for the statutory recognition of common law native title rights.The preamble to the Native Title Act 1993 (Cth) (‘the Act’) states:

A special procedure needs to be available for the just and proper ascertainment of nativetitle rights and interests which will ensure that, if possible, this is done by conciliationand, if not, in a manner that has due regard to their unique character. Governmentsshould, where suitable, promote negotiation on a regional basis between the partiesconcerned about:

(a) claims to land, or aspirations in relation to land, by Aboriginal peoples and TorresStrait Islanders; and

(b) proposals for the use of such land for economic purposes.

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27

As a result, the Act gave the Federal Court of Australia (‘the Court’) and the National Native TitleTribunal (‘the Tribunal’) complementary powers and functions to have native title issues resolved inthis less formal way.

B. Recent reforms

On 6 June 2012 the Attorney-General announced that the Australian Government will progress a numberof amendments to the Act.

Some of the proposed reforms will:

• clarify the meaning of ‘good faith’ under the ‘right to negotiate’ provisions and make associatedamendments to the ‘right to negotiate’ provisions;

• enable parties to agree to disregard historical extinguishment of native title in areas such as parksand reserves; and

• streamline Indigenous Land Use Agreement (‘ILUA’) processes. This will include simplifying theprocess for minor amendments to ILUAs, improving objection processes for area ILUAs andclarifying the coverage of ILUAs.6

As part of the reform package where claims mediation moves from the National Native Title Tribunalto the Federal Court, we need to wait and see if this will introduce a better way of doing things, orwhether the proposed statutory requirements for negotiations in good faith will only limit the ability ofthe parties to negotiate.

In Cox & Ors v FMG Pilbara Pty Ltd & Ors7, the High Court dismissed the native title party’s applicationseeking leave to appeal the Full Federal Court decision in FMG Pilbara Pty Ltd v Cox.8 The applicationchallenged the Full Federal Court decision regarding the interpretation of the good faith negotiationrequirements in the right to negotiate provisions of the Act. It has been suggested that the decision coulddiscourage parties to actively engage in negotiations to reach broad and practical agreements. However,it could be submitted per Mansfield J in Brown v The State of South Australia9 that “it would be a breachof any obligation to negotiate in good faith to use the carrot of consent to the determination as leverageto secure agreement on other matters such as a sustainable benefits term”.10

The issue in telling parties to act in good faith in a mandated native title mediation process, so as toprovide the incentives to improve the behaviour and to focus the attention of the parties and theirrepresentatives not only on the seriousness of the native title mediation process, is problematic becausebeing told it is in their best interests to do so, will only reify their positions, because of ‘Damocles sword’(the reporting process) hanging over their heads, for breaching good faith.

6 See Australian Government, Attorney-General’s Department<http://www.ag.gov.au/Indigenouslawandnativetitle/NativeTitle/Pages/Nativetitlereform.aspx> at 2 July 2012.

7 [2009] HCATrans 277 (14 October 2009).8 [2009] FCAFC 49.9 [2010] FCA 875.10 Ibid at 38.

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C. Interest-based mediation

The native title mediation process has been touted as ‘interest-based’, which refers to its process as‘multi-party, cross-cultural mediation in relation to areas of land and water, using a primarily interest-based model in a rights-based context’.11 There is no statutory definition under the Act what mediationmeans or entails, other than the recent requirement that the mediation must be conducted in ‘good faith’.Section 253 of the Act, for example, defines an ‘interest’ as ‘any other right…’ and native title itself isreferred to as common law rights and interests and statutory rights and interests: see s 223 of the Act.Section 223(1) goes on to refer to ‘native title rights and interests’ as ‘the communal, group or individualrights and interests of Aboriginal people or Torres Strait Islanders in relation to land or waters’. Whatthe Act fails to recognise is the nature and distribution of native title rights and interests, not only acrossIndigenous and non-Indigenous parties, but also among Indigenous individuals who for example mayshare membership of the larger native title claimant group. Often there is a ‘sum of the whole’ approachto Indigenous individual rights and interests, in which the rights and interests of group membership areseen to be homogenous. Where the rights and interests of Indigenous groups are most commonlyconceived as against those of non-Indigenous rights and interests. Thus allowing to be unchecked thediverging or conflicting Indigenous rights and interests of individuals to be subsumed into the largergroup(s); so the ‘sum of the whole’ approach does not necessarily mean the sum of its parts.12

Though the native title mediation process falls within the facilitative model, because it is interest-based,and has the main objective of trying to avoid positions and negotiate in terms of parties’ underlyingneeds and interests instead of the parties strict legal entitlements, this model does have failings in thenative title context; such as not reaching an agreed outcome, being lengthy and requiring uncommonskills from the parties, particularly the Indigenous parties.

Further, the likelihood that parties will engage in mediation that is interest-based will depend on whatthey see as other alternatives, such as what the Harvard school of mediation would term their BATNA– their ‘best alternative to a negotiated agreement’.13 A BATNA for the mediated reluctant party willinvolve an assessment of their chances of receiving a favourable outcome from a litigated determination.This is based upon the court making a determination upon the merits of the evidence placed before it,not so much the interests of the parties. It is argued that this weakens dialogue within the mediationprocess from an agreement outcome that is interest-based to position-based outcome, which isn’t reallyan appropriate method for native title, as native title is about interests and rights, not about positions.For the native title mediation process to work, the parties need to talk and engage. However, thefundamental political question raised by Lindgren J in Harrington-Smith v Western Australia (No 9)14

11 Neate G, Jones and Clarke G, ‘Against all odds: The mediation of native title agreements in Australia’, Paper presentedto the Second Asia Pacific Mediation Forum Singapore, 19-22 November 2003; see also Native title agreement-making

in Australia: a guide to National Native Title Tribunal practice (2nd ed, 2005) National Native Title Tribunal, 13 andChapter 2 for a fuller discussion of principles and theory in native title mediation.

12 See for example Sebastian v Western Australia [2008] FCA 926, in which the author gave legal advice to the smallerIndigenous group in the proceedings who were seeking an interlocutory injunction against the larger Indigenousclaimant group over the same area of land, thus illustrating the divergence of interests and rights.

13 Fisher and Ury, Negotiating an Agreement Without Giving In (2nd ed, 1994).14 Above n 3.

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which challenges the resolution of native title is related to the current burdensome legal and substantivecomplexities that are resource intensive. The reality is that native title is here to stay, thereforeconstraining realities means native title needs to be addressed not in forced good faith, but where lastingagreements are based upon clarifying relationships and interests. To work through another way of doingthings, an understanding of how things are currently running needs to be explored below, so lessons canbe learned and improved on.

Suffice to say that what happens at any mediation will be significantly influenced by the mediator's styleand limitations,15 and it follows that mediators must be effectively trained and mediation practice mustbe regulated through adoption and maintenance of suitable and sustainable standards and codes ofethics.16

The issues surrounding the title of this paper, ‘Mediating Native Title – in whose interests?’ will bebroken down under the following main headings: Mediation – in what context?; What is being mediated?;and What are the interests?

Mediation – in what context?It can be put that Indigenous people live in two intersecting worlds, western and traditional, with neitherfully capable of dealing with disputes involving Indigenous people. Purely western concepts ofalternative dispute resolution are often incompatible with the culture of Indigenous people and thus failto meet many of their interests and needs. Likewise, purely Indigenous concepts of alternative disputeresolution have also been found incompatible for present-day urban Indigenous people, because ofEuropean colonisation, thus weakening many traditional ways of resolving disputes between Indigenouspeople.17 Professor Larissa Behrendt has also stated that in disputes between Indigenous and non-Indigenous people, the application of western concepts may work against Indigenous needs andperpetuate disadvantage.18 Therefore it is important that mainstream dispute resolution programsrecognise these issues and adjust their practices accordingly, as ‘another way’ of doing things and, indoing so, promote culturally sensitive interest-based agreements with Indigenous parties participatingin the native title mediation process. Suffice to say that in the native title area, the Tribunal and theFederal Court have undertaken initiatives to improve their mediation practices. However, there are limitsto the Federal Court being sensitive to Indigenous culture. Because the native title mediation process isgoverned by statutory requirements requiring parties to use mainstream services, courts or tribunals,and these mainstream services don’t just target Indigenous parties. As a result, courts and tribunals donot always meet Indigenous interests, particularly in the native title mediation process.

15 For example, see Cobb S, ‘Empowerment and Mediation: A Narrative Perspective’, (1993) Negotiation Journal 245-55.16 See Kurien G V, ‘Critique myths of mediation’ (1995) 6(1) ADRJ 43-57; Zilinskas A, ‘The Training of Mediators -- is it

Necessary?’ (1995) ADRJ 58-69.17 National Alternative Dispute Resolution Advisory Council, Indigenous Dispute Resolution and Conflict Management,

January 2006, 3.18 Behrendt L, Aboriginal Dispute Resolution (1995).

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D. Western Concepts

The National Alternative Dispute Resolution Advisory Committee (‘NADRAC’) has describedmediation as follows:

‘Mediation is a process managed by a dispute resolution practitioner called a mediator.The mediator assists participants to present points of view and facts. They also assistparticipants to identify the disputed issues, develop options and try to reach anagreement. The mediator does not give advice or make a decision on the facts of thedispute or its outcome. They may give advice on or choose how the process of mediationis conducted. Mediation may be undertaken voluntarily, under a court order, or as partof a requirement in an existing contract.’ 19

The above description allows diversity in how mediation is practiced, and allows one to analyse hownative title mediation is being practiced. Laurence Boulle speaks about four (4) models of mediation,they being settlement, facilitative, transformative and evaluativemodels. These models provide a startingpoint and ‘are referred to as paradigm models in that they are not so much discrete forms of mediationpractice but rather ways of conceptualising the different tendencies in practice’.20

In the native title mediation context, the mediation may for example start out in the facilitative model,but later develop into the settlement or evaluative model, so one can start to understand the issues andfeatures within the native title mediation process.

It should be mentioned for completeness that there are other theories of mediation which do not fallwithin the four (4) paradigm models as mentioned above. For example the ‘narrative’ theory which looksat the complex cultural stories through which conflict is constructed by the parties.21 The focus of thisform of mediation is on the contextual nature of the conflict and the way in which meaning is constructedwithin a social and cultural context, as external influencing factors. The narrative theory focuses on thesocial context in which conflict occurs and helps the parties to deconstruct their competing conflictstories, by changing the discourse, to create an alternative narrative, which provides a single account ofthe situation. In this new account of understanding the parties may be able to find shared interests andresolve conflict. Under this theory the mediator is not neutral and is replaced with a mediator as themanager of the story-telling process.22

E. Indigenous Concepts

Indigenous communities have used consensual problem solving processes for thousands of years, andwere based on the kinship system and recognised network of rights and obligations, with the objectiveof restoring social harmony in the community.23

19 National Principles for Resolving Disputes and supporting Guide - Report to the Attorney-General, National AlternativeDispute Resolution Advisory Council, April 2011.

20 Boulle L, Mediation: Principles, Process, Practice (2nd ed, 2005) 43-45.21 See Winslade J and Monk G, Narrative Mediation: A New Approach to Conflict Resolution (2000).22 Boulle, above n 20, 47.23 See generally Behrendt L, Aboriginal Dispute Resolution (1995); Spencer D, ‘Mediating in Aboriginal Communities’

(1997) 3 Commercial Dispute Resolution Journal 245; Behrendt L and Kelly L, ‘Mediation in Aboriginal Communities:familiar dilemmas, fresh developments’ (2002) 14 (5) Indigenous Law Bulletin 7.

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Indigenous concepts of mediation is communally based, as opposed to the generally individualisticapproach behind western mediation, in that its about resolving current conflicts and preventing futureones, and empowering the community as opposed to the empowerment of the disputing individualsassociated with western mediation.

It’s noteworthy what Madeleine Sauve said on Indigenous concepts of mediation, that ‘Aboriginal people… seek a change of heart, a transformation, a healing of relationship and spirit – not simply a mutualcommitment to honour the terms of an agreement in the future’.24

F. Culture and Mediation

As just highlighted, because of the different mediation concepts between Western and Indigenoussocieties, it would be particularly pertinent to be aware of the cross-cultural issues in the mediationprocess. Therefore the mediation process should involve problem-solving with an awareness of culturaldifferences.25

In western societies generally, particularly Anglo-Australian culture, mediation is understood mainly incontractual terms, focusing on individual rights and interests leaning towards a heads of agreement.Whereas in traditional societies, mediation is less contractual and more socially-oriented, striving forreconciliation and community harmony between and beyond those directly involved.26

While western concepts tend to be rights-focused, individualistic, adversarial and reliant on rationallogic and documentation, traditional societies tend to be relational, collective, collaborative and relianton trust, moral persuasion and social consensus.27

The dichotomy in cultural differences is challenging when it comes to communication styles inmediation. Putting aside misunderstandings over meanings, denotations, connotations of words, phrases,colloquialisms and legal terms; misunderstandings can arise over non-verbal communications, such aseye contact, interruptions and silences – in Indigenous Australian culture, non-eye contact, and silenceare accepted features of communication, as signs of respect, sacred and privacy, but in Anglo-Australianculture, non-eye contact and silence is a sign of evasiveness, lying and guilt. Likewise the phenomenonof gratuitous concurrence exists in traditional societies, where the listener agrees to questions andstatements to which they don’t understand out of respect to the speaker, whereby in western societies, alack of understanding is communicated, be it verbally or non-verbally.28

24 Sauve M, ‘Mediation: towards an Aboriginal conceptualisation’ (1996) 80 Aboriginal Law Bulletin 10.25 See Boulle L, Mediation Skills and Techniques (2001) 6-7.26 Boulle, above n 18, 79; see generally Hofstede G, Culture’s Consequences: Comparing Values, Behaviours, Institutions

and Organisations across Nations (2nd ed, 2001).27 Lim Lan Yuan, ‘Impact of Cultural Differences on Dispute Resolution’ (1996) 7 ADRJ 197, 197; It is not the author’s

intention to over-generalise and stereotype in respect of culture, for example that all Indigenous Australians arerelationalists and Anglo-Australians are individualistic, but that cultural differences do influence the mediation process.

28 Pringle K L, ‘Aboriginal Mediation: One Step Towards Re-empowerment’ (1996) 7 ADRJ 253, 265.

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Recognising cultural differences is salient to the skills and techniques of the mediator, because a failureto recognise cultural differences can lead to a breakdown of the whole mediation process itself, allbecause of a misunderstanding or lack of understanding.29 Further, power imbalance can be aggravatedby communication misunderstandings, in that the dominant culture may prevail, particularly in the nativetitle context, because mediation is mandatory.30 So, the mediator needs to be culturally literate to thesignposts of behaviour, attitudes and communication styles of the parties involved in the mediationprocess, not meaning to understand every cultural nuance in a comprehensive way, but to promote gooddialogue and relations between the mediating parties.31

Mediator neutrality in the Indigenous concept, about confidentiality and privatisation plays a lesssignificant role in disputes,32 because generally the community is aware of the history of the disputeand those involved. For a mediated outcome, the community needs to know the details, so the communitycan place its moral weight behind its enforcement.33 These issues are highly relevant in the native titlemediation process.34

Reflecting on the Winnie-the-Pooh analogy being dragged down the stairs; there may be many ways inwhich one can come down the stairs. A cynic may say, ‘but isn’t it the ultimate destination that mattersmost, that which lays at the base of the stairs’; in our analogy it matters not for Christopher Robin howhe gets down the stairs, but it is in Winnie-the-Pooh’s interests in how he gets down the stairs. Likewise,with mediation there are differences in form, but it is the process that matters most and in who’s interests.So with the current native title mediation process, it needs to be in the interests of Indigenous Australians,not just a matter of being dragged along.

G. Why mediate native title?

The former Justice of the Federal Court, Wilcox J stated that mediation is ‘an integral element of thescheme embodied in the Act’.35 Even the High Court of Australia has endorsed the desirability ofmediated agreements on native title issues, where five High Court justices have stated:

“If it be practical to resolve an application for determination of native title by negotiationand agreement rather than by the judicial determination of complex issues, the Courtand the likely parties to the litigation are saved a great deal in time and resources.Perhaps more importantly, if the persons interested in the determination of those issuesnegotiate and reach an agreement, they are enabled thereby to establish an amicablerelationship between future neighbouring occupiers.”36

29 Lim Lan Yuan, above n 27.30 Young S, ‘Cross Cultural Negotiation in Australia: Power, Perspectives and Comparative Lessons’ (1998) 9 ADRJ 41.31 See generally Lederach J P, Preparing for Peace: Conflict Transformation Across Cultures (1995).32 Sauve, above n 24, 11-12.33 See Young, above n 30, 50.34 Dodson M, ‘Power and cultural difference in native title mediation’ (1996) 3 (84) Aboriginal Law Bulletin 8.35 Wilkes v Western Australia (2003) FCA 1206 at [17].36 North Ganalanja Aboriginal Corporation for and on behalf of the Waanyi people v Queensland (1996) 185 CLR 595, 617

(Brennan CJ, Dawson, Toohey, Gaudron, Gummow JJ).

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Meditation is a key mechanism for resolving native title issues and can be used to reach agreement –that an Indigenous group(s) hold native title and are recognised as such. But before an agreement canbe made, preliminary issues need to be settled, such as: whether native title exists and connection hasbeen maintained, and if so in whom title is vested; on the nature and extent of title and any other interestsin land or waters; whether native title rights confer exclusive possession, occupation and use; and howtitle rights relate to other interests over the land and waters in question.37

What is being mediated?A desired outcome of a native title mediation for an Indigenous party would be an agreement thatrecognises them under Australian law as having rights and interests to lands and waters, because theyhad those rights and interests before European settlement.38 For native title to be recognised, Indigenousgroups must, among other things show that they have kept their traditional connection to the land andwaters.39

If there is this recognition, many individuals and groups are affected, such as, traditional owners,pastoralists, conservationists, miners, explorers, fishers, providers of communication and energyinfrastructure, and all levels of government.40

Therefore because of native title, access to land/sea, and other complex social issues are raised, dealingwith factors of law, economics, land management and cross-cultural interaction. So, native title mediationplays a significant part in the needs and rights of the respective parties and developing future strategies.

(a) Power imbalance

Power imbalance in the native title mediation process has been highlighted and characterised as stemmingfrom the structure of the (non-Indigenous) system and the opinions of non-Indigenous participants, andwhere native title claimants come to the table without recognised rights.41 Put simply, the biggest singleoperating cause for this power imbalance is said to be the fact of colonisation and dispossession, becausenow Indigenous claimants need the recognition of current Australian law. As already stated, native titlerights and interests have been hard to legally define, with the onus on the Indigenous claimants to prove,and with the added shackle around contending with non-Indigenous interests.42

H. Native title mediation defined

It’s interesting to note how NADRAC defined ‘native title mediation’, in contradistinction to most otherforms of mediation, where native title mediation does not necessarily begin because of a dispute but byan application for settling pre-existing rights that may affect the rights and interests of others:

37 See ss 86A and 225 of the Act.38 See Mabo v Queensland (No. 2) (1992) 75 CLR 1; and Commonwealth v Yarmirr (2001) 208 CLR 1.39 Members of the Yorta Yorta Aboriginal Community v Victoria (2002) 214 CLR 422.40 Neate G, ‘Reconciliation on the Ground: Meeting the challenges of native title’, Asia Pacific Forum Adelaide (2001).41 See Dodson M, ‘Power and Cultural Difference in Native Title Mediation’ (1996) 3 (84) Aboriginal Law Bulletin 8.42 See Dolman K, ‘Native Title Mediation Is it Fair’ (1999) 4(21) ILB 8-9.

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Native title is essentially a recognition of traditional Indigenous rights in land andwaters. In many instances, these rights will co-exist with the rights and interests ofothers. A claim for native title may be made without any history of past relations ordispute between the claimants and other persons with interests in the area claimed. Themediation process aims at reaching agreement between parties about a number ofspecific matters. These matters include whether native title exists and, if so, who holdsnative title; what the native title rights and interests are; and the relationship betweenthose rights and interests and any other interests in relation to an area of land or waters.If agreement cannot be reached, these matters are determined by the Federal Court. Themediation does not necessarily involve the resolution of a particular matter in disputeand may include the consideration of matters of practical workability, for example, hownative title rights will be exercised in the future consistently with the rights of others.The involvement of different interests and groups, however, means that native title claimsmay, and often do, give rise to disputes. The term ‘ADR’ could therefore be seen as limitedto particular aspects of the native title recognition process.43

I. Indigenous cultural context

The non-Indigenous parties and the Federal Court need to recognise the centrality of land to Indigenousclaimant groups. The challenge for non-Indigenous parties and for anthropologists, lawyers and courts44

is to try to understand and describe the nature of Indigenous connection to traditional land undertraditional laws and customs to negotiate and potentially agree about any native title rights and interests.The Indigenous cultural context is central to the native title mediation process and its resolution.Otherwise a totally neutral stance in mediation, absent of appreciation of cultural contexts, can promotepower imbalance between the parties to the mediation.45

J. Historical context

Native title mediation process does not occur in a historical vacuum. All involved in the mediationprocess need to bear in mind the effect of colonisation and dispossession and its impact on the rightsand interests of Indigenous claimants. The watershed of time presents specific challenges to theestablishment of native title to be recognised by the Australian governments,46 judges47 and othersinvolved in native title mediation process.48 NADRAC’s report on ‘Indigenous Dispute Resolution andConflict Management’ recognises traditional Indigenous practices have been weakened over time and

43 National Alternative Dispute Resolution Advisory Council, ADR terminology: a discussion paper, June 2002, 10.44 See for example Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 (Blackburn J); The Queen v Toohey; ex parte Meneling

Station (1982) 158 CLR 327 (Brennan J).45 Kowalski J, ‘From the margins to the centre: Cross cultural skills in social issues mediation’, 4th National Mediation

Conference, 1998, pp 125-7; and Astor H, ‘Identity, Diversity and Mediation’, Proceedings, 4th National MediationConference, 1998, pp 21-8.

46 See the preamble to the Act.47 See for example De Rose v South Australia [2002] FCA 1342 and Daniel v Western Australia [2003] FCA 666.48 See for example Choo C and Hollbach S (eds) (2003) History and Native Title, Studies in Western Australian History No.

23 Centre for Western Australian History, The University of Western Australia, Perth; and Neate G (1997) “Proof of NativeTitle” in Horrigan B and Young S (eds), Commercial Implications of Native Title, Federation Press, 240-319.

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mainstream services are underutilised by, and often ineffective with, Indigenous people.49

K. Economic context

Indigenous Australians are for the most part among the poorest people in Australia. Most Indigenousclaimants do not, of themselves, have the resources to effectively lodge native title applications, norengage in intensive native mediation process.50 As a result governments recognising this fact havelegislated for native title representative bodies51 to assist Indigenous claimants not only with proceduralissues but also with financial assistance.52

Native title representative bodies play a crucial role in the preparation and progress of the mediationprocess within their geographic region.

Suffice to say the representative body play a major part on the capacity of the Indigenous claimantgroups to meaningfully and positively take part in the mediation process, and by providing a point ofreference for other parties to negotiate with them.

L. Social context

Indigenous people need to be involved at the local level in the design and delivery of dispute resolutionthat takes into account their perspectives on resolution outcomes. So the native title mediation processneeds to take into account the Indigenous social context, that includes the diverse rights and interests ofthe various claimant groups to which the parties belong, and thereby value-add to the process.

M. Political context

The political question raised by Lindgren J in Harrington-Smith v Western Australia (No 9) 53 resonateswell in the native title mediation process, because it is squarely placed within the political context of thestate, territory or region where native title is said to exist. And this is reflected when governments change,as do policies, in relation to native title.

But the political context is not limited to governments, but extends to the politics of Indigenous andnon-Indigenous parties and the communities from which they come.

So then, what is being mediated? The answer lies in the melting pot of Indigenous cultural, historical,economic, social and political contexts, the constituents of which flavour the native title mediationprocess.54

49 National Alternative Dispute Resolution Advisory Council, Indigenous Dispute Resolution and Conflict Management,January 2006.

50 See the Preamble to the Act.51 Ibid ss 201A-203AI.52 Ibid ss 203B-203BK.53 (2007) 238 ALR 1.54 See Neate G, ‘Mediating Native Title Agreements: Developing National Native Title Tribunal Practice’, Paper presented

to the Native Title Conference 2004: Building Relationships.

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What are the interests?N. Relational interests

As already stated, native title mediation process is conducted in a rights-based context, those rights beingset out in the Act and other statutes as understood in light of an increasing number of court judgments.For the purpose of resolving native title issues, interest-based mediation should focus on the parties’interests as distinct from their positions or rights and adopt a problem-solving approach to negotiationor to conflict resolution in order to achieve mutually acceptable agreements. It should be noted the‘interest’ in interest-based mediation is not restricted to material questions between the parties.

Christopher Moore states that for an agreement to be reached, interest-based processes must developoutcomes that meet, to the parties’ acceptability, the substantive, procedural and emotional(psychological) needs of all parties.55 Then Rhiân Williams and Toni Bauman took these three interests,by subsuming ‘rights’ under the term ‘substantive interests’, and in describing ‘emotional interests’ as‘needs’, as follows:

“Substantive interests refer to what needs to be negotiated and are often the central focusof negotiations. They include tangible things such as land, rights, and intangible thingssuch as relationships and respect. Procedural interests refer to how the process ofnegotiation is conducted. They relate to matters such as having a fair say and tonegotiations occurring in an orderly, timely and balanced manner. They also mean thatthe process focuses on meeting some of the mutual interests of all the parties rather thanforcing a party to agree to a predetermined position advocated by another. Emotional(psychological) interests refer to the emotional and relationship needs of parties bothduring and as a result of negotiations. They relate to issues of self-esteem and to beingtreated with respect by their opponents. Where relationships are to continue in the future,it may be important that parties have an ongoing positive regard for each other.”56

However needs, rights and interests may also be culturally specific, relative, and socially constructed.57

In Catherine Morris’ training of Thai and Cambodians mediators, participants expressed difficulty withthe word ‘interest’ and suggested that it be replaced with the word, ‘motivation’. On their translation,‘an ‘interest’ is anything at all that motivates a negotiator.’ However, as Morris points out, replacing theterm ‘interest’ with ‘motivation’ does not address deeper ethical concerns about the utilitarian moralframework on which many interest-based approaches seem to be founded.58

55 Moore C, The Mediation Process: Practical Strategies for Resolving Conflict (3rd Ed, 2003).56 Bauman T and Williams R, ‘The Business of Process: Research Issues in Managing Indigenous Decision-Making and

Disputes in Land’, Research Discussion Paper (2004) 13, Canberra: Native Title Research Unit, Australian Institute ofAboriginal and Torres Strait Islander Studies.

57 Morris C, ‘Interests, Needs, Rights, Morality and Conflict Resolution: A Heretical Perspective’ (2003), in Bauman T,‘Whose Benefits? Whose Rights? Negotiating Rights And Interests Amongst Indigenous Native Title Parties’, Native Title

Research Unit, Vol 3, Issues Paper No. 2.58 Ibid.

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As suggested by Toni Bauman, substantive conflict is nested not only in relationships, but also in systemsand structures.59 The native title mediation process can give rise to much conflict amongst Indigenousclaimant groups. Therefore it may be fitting to think in a more holistic alternative dispute resolutionprocess which takes into account a range of Indigenous community structures and systems andrelationships.

An approach to native title mediation needs to take into account Indigenous cultural and traditional rightsand interests, not bundling these rights and interests under just proprietary rights and interests. If nativetitle is approached as ‘a bundle of rights’ that can be fully or partially extinguished, the relational and,at times, negotiable rights and interests among Indigenous peoples are ‘internally disconnected’.60

Also there are intra-competing and conflicting rights and interests, which arise among Indigenous peoplesin the native title mediation process, which are not easily resolved. As Peter Sutton has outlined, thesemay include:

“Local individual and family rights versus tribal overrights and rights granted throughintertribal territory comity, rights versus privileges, primary versus secondary rights,unmediated versus mediated rights, presumptive versus subsidiary rights, actual versusinchoate rights versus potential rights, generic versus specific and core versuscontingent.”61

The misconceived non-Indigenous notion that Indigenous parties are bounded and homogenous oftenresults in conflict among Indigenous claimant groups. This is a normal human tendency to evaluateanother’s behaviour with reference to one’s terms of understanding, because it has been said that we tendto engage in ethnocentric behaviour in a sub-conscious way.62

Power struggles among members of any native title claimant group is unavoidable and individuals maybe self-interested in making decisions around group membership, based on, for example, matrilineal orpatrilineal descent.

Peter Sutton has intimated that a failure to distinguish rights within native title claimant groups from‘the whole country’s owning group members’ can lead to conflict ‘especially once these relationshipsbecome bureaucratised or enter into financial negotiations’.63

This where pre-mediation should take place between Indigenous parties so they may state their rightsand interests in relation to specific areas of land in the presence of other members of the groups aswitnesses. It may be useful at this stage for the mediator to separate rights, interests, needs and for

37

59 Ibid.60 Mantziaris C and Martin D, Native title corporations: A legal and anthropological analysis (2000); Glaskin K, ‘Native title

and the ‘bundle of rights’ model: Implications for the recognition of Aboriginal relations to country’ (2003) 12(1)Anthropological Forum 67-88.

61 Sutton P, ‘Kinds of rights in country: Recognising customary rights as incidents of native title’: National Native TitleTribunal Occasional Papers Series No 2 (2001) Perth: National Native Title Tribunal.

62 See Goh B, ‘Cross-Cultural Perspectives on Sino-Western Negotiation’ (1994) ADRJ 268-81.63 Sutton, above n 61,16.

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Indigenous parties to have a dialogue around their meanings – incorporating their duties andresponsibilities that certain kinship relationships involve.

Sufficient to say, native title mediation process is relational – subject to other factors. This idea movesaway from the reification of closed groups but affirms the full range of rights and interests of Indigenousgroup members. As Toni Bauman suggests it does not create dichotomies of abstractible rights andinterests, by not disconnecting rights and interests from social relations.64

ConclusionPoints that need to be remembered about the native title mediation process, is that:

• the mediation is supposedly interests-based in a rights-based context;65

• mediation is court directed not because of a dispute, but based on an application to the Federal Courtof Australia;

• there is no pre-existing relationship to the dispute;

• the parties have different interests in the land/water (i.e. mining, exploration, logging, developers,hunting, fishing, recreationalists, government); and

• there are cultural differences (Indigenous as opposed to non-Indigenous).

The effectiveness of the native title mediation process can be partly gauged according to its ability toassist in changing the attitude of parties who are initially reluctant to engage in mediation. During themediation process, if reluctant parties begin to communicate their interests with a positive attitude towarda mediated outcome, then the mandatory dimension in the mediation provisions could be said to beeffective. However, the likelihood that parties will engage in mediation in good faith is affected by theirabilities to move from position base to interest base.

In conclusion, a major issue with the native title mediated process, is its need to conform with the legalboundaries as stipulated by the Act and its associated rules, because when there is a native title disputebetween the parties, irrespective of the parties cultural divergence, the legal representatives, meaningthe courts, lawyers and court appointed mediators, modify disputes by focusing on those aspects whichare legally relevant and re-interpret them into terms and concepts with which the law is familiar.66 Nativetitle mediation process needs to be relational – connecting rights and interests from social constructs,otherwise Indigenous parties will continue to mimic poor old Winnie-the-Pooh being dragged down thestairs, without really considering their interests.

Bibliography

Primary Materials

38

64 Bauman T, ‘Whose Benefits? Whose Rights? Negotiating Rights And Interests Amongst Indigenous Native Title Parties’,Native Title Research Unit, Vol 3, Issues Paper No. 2.

65 See ss 86A & 86B of the Act.66 Felstiner, Abel and Sarat, ‘The Emergence and Transformation of Disputes: Naming, Blaming, Claiming …’ (1980-81)

Law and Society Review 631.

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Legislation

Native Title Act 1993 (Cth);

Case law

Brown v The State of South Australia [2010] FCA 875;

Commonwealth v Yarmirr (2001) 208 CLR 1;

Cox & Ors v FMG Pilbara Pty Ltd & Ors [2009] HCATrans 277 (14 October 2009);

Daniel v Western Australia [2003] FCA 666;

De Rose v South Australia [2002] FCA 1342;

FMG Pilbara Pty Ltd v Cox [2009] FCAFC 49;

Harrington-Smith v Western Australia (No 9) (2007) 238 ALR 1;

Mabo v Queensland (No. 2) (1992) 75 CLR 1;

Members of the Yorta Yorta Aboriginal Community v Victoria (2002) 214 CLR 422;

Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141;

North Ganalanja Aboriginal Corporation for and on behalf of the Waanyi people v Queensland (1996)185 CLR 595;

Sebastian v Western Australia [2008] FCA 926;

The Queen v Toohey; ex parte Meneling Station (1982) 158 CLR 327;

Wilkes v Western Australia (2003) FCA 1206;

Secondary Materials

Books

Behrendt L, Aboriginal Dispute Resolution (1995);

Boulle L, Mediation: Principles, Process, Practice (2nd ed, 2005);

Boulle L, Mediation Skills and Techniques (2001);

Choo C and Hollbach S, History and Native Title, Studies in Western Australian History No. 23 Centrefor Western Australian History, The University of Western Australia (2003);

Fisher and Ury, Negotiating an Agreement Without Giving In (2nd ed, 1994);

Hofstede G, Culture’s Consequences: Comparing Values, Behaviours, Institutions and Organisationsacross Nations (2nd ed, 2001);

Lederach J P, Preparing for Peace: Conflict Transformation Across Cultures (1995);

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Mantziaris C and Martin D, Native title corporations: A legal and anthropological analysis (2000);

Moore C, The Mediation Process: Practical Strategies for Resolving Conflict (3rd Ed, 2003);

Neate G, Proof of Native Title (1997) in Horrigan B and Young S (eds), Commercial Implications ofNative Title, Federation Press;

Winslade J and Monk G, Narrative Mediation: A New Approach to Conflict Resolution (2000);

Journals

Behrendt L and Kelly L, ‘Mediation in Aboriginal Communities: familiar dilemmas, fresh developments’(2002) 14 (5) Indigenous Law Bulletin 7;

Cobb S, ‘Empowerment and Mediation: A Narrative Perspective’ (1993) Negotiation Journal 245;

Dodson M, ‘Power and Cultural Difference in Native Title Mediation’ (1996) 3(84) Aboriginal LawBulletin 8;

Dolman K, ‘Native Title Mediation Is it Fair’ (1999) 4(21) ILB 8;

Felstiner, Abel and Sarat, ‘The Emergence and Transformation of Disputes: Naming, Blaming, Claiming…’ (1980-81) Law and Society Review 631;

Glaskin K, ‘Native title and the ‘bundle of rights’ model: Implications for the recognition of Aboriginalrelations to country’ (2003) 12(1) Anthropological Forum 67;

Goh B, ‘Cross-Cultural Perspectives on Sino-Western Negotiation’ (1994) ADRJ 268;

Kurien G V, ‘Critique myths of mediation’ (1995) 6(1) ADRJ 43;

Lim Lan Yuan, ‘Impact of Cultural Differences on Dispute Resolution’ (1996) 7 ADRJ 197;

Pringle K L, ‘Aboriginal Mediation: One Step Towards Re-empowerment’ (1996) 7 ADRJ 253;

Sauve M, ‘Mediation: towards an Aboriginal conceptualisation’ (1996) 80 Aboriginal Law Bulletin 10;

Spencer D, ‘Mediating in Aboriginal Communities’ (1997) 3 Commercial Dispute Resolution Journal245;

Young S, ‘Cross Cultural Negotiation in Australia: Power, Perspectives and Comparative Lessons’ (1998)9 ADRJ 41;

Zilinskas A, ‘The Training of Mediators - is it Necessary?’ (1995) ADRJ 58;

Reports

National Alternative Dispute Resolution Advisory Council, Indigenous Dispute Resolution and ConflictManagement, January 2006;

National Principles for Resolving Disputes and supporting Guide - Report to the Attorney-General,

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National Alternative Dispute Resolution Advisory Council, April 2011;

Papers

Astor H, ‘Identity, Diversity and Mediation’, Proceedings, 4th National Mediation Conference, 1998;

Bauman T and Williams R, ‘The Business of Process: Research Issues in Managing Indigenous Decision-Making and Disputes in Land’, Research Discussion Paper (2004) 13, Canberra: Native Title ResearchUnit, Australian Institute of Aboriginal and Torres Strait Islander Studies;

Bauman T, ‘Whose Benefits? Whose Rights? Negotiating Rights And Interests Amongst IndigenousNative Title Parties’, Native Title Research Unit, Vol 3, Issues Paper No. 2;

Kowalski J, ‘From the margins to the centre: Cross cultural skills in social issues mediation’, 4th NationalMediation Conference, 1998;

Morris C, ‘Interests, Needs, Rights, Morality and Conflict Resolution: A Heretical Perspective’ (2003),in Bauman T, ‘Whose Benefits? Whose Rights? Negotiating Rights And Interests Amongst IndigenousNative Title Parties’, Native Title Research Unit, Vol 3, Issues Paper No. 2;

National Alternative Dispute Resolution Advisory Council, ADR terminology: a discussion paper, June2002;

Native title agreement-making in Australia: a guide to National Native Title Tribunal practice (2nd ed,2005) National Native Title Tribunal;

Neate G, Jones C and Clarke G, ‘Against all odds: The mediation of native title agreements in Australia’,Paper presented to the Second Asia Pacific Mediation Forum, Singapore 19-22 November 2003;

Neate G, ‘Mediating Native Title Agreements: Developing National Native Title Tribunal Practice’,Paper presented to the Native Title Conference 2004: Building Relationships;

Neate G, ‘Reconciliation on the Ground: Meeting the challenges of native title’, Asia Pacific ForumAdelaide (2001);

Sutton P, ‘Kinds of rights in country: Recognising customary rights as incidents of native title’: NationalNative Title Tribunal Occasional Papers Series No 2 (2001) Perth: National Native Title Tribunal;

Internet Materials

Australian Government, Attorney-General’s Department<http://www.ag.gov.au/Indigenouslawandnativetitle/NativeTitle/Pages/Nativetitlereform.aspx> at 2July 2012.

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Litigate or Arbitrate;what are the procedural differences?1

Malcolm Holmes QC2

Arbitration and court procedures have each undergone major changes in the last fifteen years with

increasing harmonisation and copying of procedural techniques. The paper looks at recent instances of

this trend and considers the reasons for its increase. The paper also considers whether such

harmonisation is necessary or useful in the context of an international commercial arbitration.

IntroductionThe ‘litigization of arbitration proceedings’ in the context of international commercial arbitration wasobserved as long ago as 1989.3 There is, and has been, a harmonisation of the procedures of litigationand of international commercial arbitration. In order to consider whether this has been a necessary, orhelpful, development in international commercial arbitration, the reasons for the trend, and how it hasoccurred must be first considered. As with most issues concerning international commercial arbitration,the discussion necessarily starts with the 1958 New York Convention (‘the Convention’), a foundationstone of the system of international arbitration.4

The New York ConventionThe Convention addresses the two book ends of the process: the arbitration agreement and the award. Itdoes not directly concern itself with the procedure to be followed between them. Nevertheless, certainminimum procedural requirements can be inferred from the grounds stated in the Convention uponwhich an award may be refused enforcement. After all, an arbitrator’s mandate is to deliver, so far as ispossible, an enforceable award.

The Convention relevantly provides that an award may be refused enforcement if the ‘arbitral procedurewas not in accordance with the agreement of the parties’ or the law of the country where the arbitrationtook place (art V.1(d)). Of more significance in relation to procedure are the provisions of art V.1(b).The Convention allows enforcement to be refused if a party to the arbitration ‘was not given propernotice … of the arbitral proceedings or was otherwise unable to present his case’.

1 An earlier version of the paper was presented to “2012 ADR in Australia and Beyond”, a CPD conference held inSydney on 4 August 2012 by the NSW Bar Association and the Australian Centre for International CommercialArbitration.

2 FIAMA, FCIArb, Senior Counsel and Arbitrator, Eleventh Floor Wentworth Chambers,180 Phillip Street, Sydney.3 P. Fouchard, “Ou va l’arbitrage international?” (1989) McGill Law Journal 435, recently by Dominque Hascher in the

2010 ICC Bulletin on Arbitration Procedure at 6.4 “The coherent international system for resolving commercial disputes that has been devised in the interlocked

provisions of the UNCITRAL Model Law on International Commercial Arbitration, the New York Convention forEnforcement of Arbitral Awards and the Washington Convention for Investment Disputes,” International CommercialArbitration Conference: Opening By The Honourable J J Spigelman AC, Sydney, 10 August 2007.

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The Two Overarching PrinciplesThus the mandatory law of the place where the arbitration occurs and the mandatory terms of the parties’agreement, insofar as each regulates procedure, go without saying and must be adhered to. Anyprocedural requirement so imposed must be followed. That said, an arbitrator may conduct an arbitrationin any manner as the arbitrator ‘considers appropriate’ subject to what has been described grandiloquentlyas the ‘Magna Carta of Arbitral Procedure’5 namely, provided that the parties are treated with equalityand that at any stage of the proceedings each party is given a reasonable opportunity of presenting hiscase.6

Commencement and Arbitration RulesIn most international arbitrations, parties will agree to incorporate either the UNCITRAL ArbitrationRules or the arbitration rules of one of the established arbitration institutions such as the AustralianCentre for International Commercial Arbitration (ACICA) or the International Chamber of Commerce(ICC). The UNCITRAL Rules do not stipulate what an arbitrator must do once appointed. Aninternational arbitrator having been appointed, will invariably proceed to call a preliminary meeting withthe parties. ‘It is sensible for the tribunal to convene a meeting with the parties as early as possible inthe proceedings ... In modern times it is common practice for preliminary meetings to be conducted bytelephone or video conference’.7 There are exceptions and some rules do helpfully mention thepreliminary meeting, for example Rule 5 of the Arbitration Rules of the Institute of Arbitrators andMediators Australia (IAMA) relevantly provides: ‘the Nominee Arbitrator shall, within seven (7) daysof receiving advice of his or her nomination or agreed appointment, give written notice to the parties ofthe time and place of a Preliminary Conference which the parties or their duly authorized representativesshall attend...’.

The First MeetingAt the preliminary meeting the arbitrator and the parties will discuss and make, either by agreement, orby decision of the arbitrator, directions for the future conduct of the arbitration including if possible,arrangements for the hearing. The discussion may range far and wide and may even consider whetheran alternate process such as mediation should be considered. The nature and extent of any directionswill depend upon a multitude of matters including the complexity of the proceedings and the numberand nature of the issues to be resolved.8 An arbitrator may seek guidance from publications such as the

5 H Holtzmann and J Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration, KluwerLaw International, The Hague, 1989, page 550 and noted by the court in Methanex Motunui Ltd v Spellman [2004] 1NZLR 95 at 139.

6 This later requirement was originally expressed as a “full” opportunity where it was seen in Article 15 (1) 1976UNCITRAL Rules, Art 18 Model Law 1985, but now it is accepted as a “reasonable” opportunity, see s 33(1)(a)Arbitration Act 1996 (Eng, Ir and W), Art 15(2) ICC Rules 1998, UNCITRAL Rules 2010 and s 18C InternationalArbitration Act 1974 (Cth), although this change in terminoly has been described as a distinction without a difference,see Pacific China Holdings Ltd v Grand Pacific Holdings Ltd [2011] HKHCFI 424 at [16].

7 “Redfern and Hunter on International Arbitration”, 5th Ed, 2009, OUP, at para 6.27. 8 see generally, Redfern and Hunter, at para 6.27 and following.

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‘Notes on Organizing Arbitral Proceedings’, first published by UNCITRAL in 1996, and republished in2012. Programming is flexible and will involve accommodating the convenience of both parties to ensurea hearing where both parties are treated equally and given the opportunity to present their case. But it ishere where circumstances combine, both consciously and unconsciously, to intrude and inhibit thearbitrator’s freedom to conduct the proceedings as he or she thinks most appropriate.

The pressure to litigize the processArbitrators and party representatives imbued with a particular legal culture and tradition may find itcomfortable borrowing procedures from the litigation dispute resolution process most familiar to them.As a result, the legal culture of each of the participants will both consciously and unconsciously influenceany decision making. Retired judges could not be expected to abandon a lifetime of legal practice andprocedure before the courts. On the other hand, in the context of an international commercial arbitration,where the parties, and the members of the arbitration panel, may each come from countries with totallydisimilar court procedures, it cannot be presumed that any particular court procedure is preferable.

The competitive urge to keep up to date and follow best practice will also influence the decision makingand the procedure to be adopted. Even arbitration institutions, just as much as practitioners, look overtheir shoulder to see how other such bodies conduct their arbitrations to make sure that they are followingcurrent best practice. If one institution introduces a new procedural requirement which appears to respondto the needs of users, other institutions will quickly follow suit. This is seen in the recent rolling adoptionof expedited, or fast track, procedural rules by most arbitral institutions. A similar rollout occurred withrules for emergency arbitrators.9 The ‘me tooism’ of arbitration institutions is seen even in the form inwhich the rules are published - with most being printed in A5 format regardless of the country in whichthe institution is located. The advent of the internet and the development of instantaneous communicationfacilitated and fuelled this competition and the desire of individual institutions to keep up to date.

Another prime example relates to the long established requirement under the 1998 ICC Arbitration Rulesfor the arbitrator to produce a document described as the Terms of Reference. The Singapore InternationalArbitration Centre (‘SIAC’), wanting to adopt international best practice, decided in its 2007 rules toadopt a requirement to produce a document described as a Memorandum of Issues. This requirementwas modelled on, and performed the same function as the Terms of Reference required in an arbitrationunder the 1998 ICC Arbitration Rules. But subsequent experience demonstrated that this requirementwas not a useful procedural tool in a SIAC arbitration and SIAC removed the requirement for aMemorandum of Issues in later versions of its rules.

The corresponding competitive pressure to arbitrise the litigationprocessJust as the competitive urge to keep up to date and follow best practice influences the procedure to beadopted by arbitrators, the same is true of the courts. Judges do look at arbitration procedures and say,and have said, ‘why can’t our judicial system take a leaf out of’ the book of procedural rules used by

9 eg The adoption by ACICA in 2011 of Schedule 2 in the ACICA Arbitration Rules for Emergency Arbitrators.

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arbitration institutions. Those words were used in 1999 by the President of the NSW Court of Appealwhen giving the keynote address at an IAMA conference on international commercial arbitration. Heparticularly noted a recent international arbitration in Vancouver involving Australian interests that wasconducted on a ‘stopwatch basis’ as one of two areas ‘where the judges might borrow from ICCinitiatives’. He described the stopwatch process as involving: ‘a fixed hearing time which was dividedbetween the parties leaving each free to use its share as it wished. The time could be allocated amongthe examinaton or cross-examination of witnesses and in opening and closing addresses, as the partychose. But when the time was up, it was up’.10 These words, unheard of in relation to court procedure inthe 1990s, are now all too familiar to legal practitioners as demonstrated by the ‘stopwatch’ processwhich was later adopted by the NSW Supreme Court and is now found in Equity Division Practice NoteEq 3.11

The other area where he thought that judges might borrow from the ICC arbitration rules related to thetime limit placed on arbitrators under the ICC Rules within which to render the award. Under art 24 ofthe ICC Arbitration Rules, 1998, the arbitrator ‘must render’ the award within 6 months from the dateof the signing of the Terms of Reference (now see art 30 of 2010 ICC Rules). Critically time does notstart to run from the hearing date or the date when pleadings are closed but from the time of settling theTerms of Reference. This holistic approach he found attractive as it ‘places responsibility collectivelyon all players to ensure that the case moves to its conclusion within a controlled time limit. And it focuseson the end product’. The overall time limit approach of the ICC was to emphasise the need to reduce thetime, and necessarily, the cost in achieving a resolution.

Whilst the ICC approach has not been copied, the courts also faced pressures to contain costs and toprovide prompt justice. The courts are also seen as ‘an important aspect of the institutional frameworkof commerce. The efficiency or inefficiency of the courts has a bearing on the health or sickness ofcommerce’.12 Accordingly, any unfavourable comparison with the apparent speedy and cheaperalternative of arbitration may be viewed by some judges as something which should be avoided. Althoughit should be added that the processes of litigation and arbitration ought not be seen as alternate processes,or as adversaries in contest, each competing for a particular body of dispute resolution work, but shouldbe seen in a working relationship with each contributing, to the extent that each is lawfully able tocontribute, to an ultimate resolution of disputes between parties who cannot agree on the outcome oftheir dispute.

Nevertheless, there are competitive pressures and they have contributed to the overarching philosophyseen in the ICC approach being adopted in the provisions of s 56 of the Civil Procedure Act 2005 (NSW)(‘the overriding purpose of this Act and of rules of court, in their application to a civil dispute or civil

proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the dispute or

proceedings’) and the widespread management of cases by courts with the aim of ensuring the just,quick and cheap resolution of the real issues between the parties.

10 “Changing attitudes in the common law’s response to international commercial arbitration,” by Justice Keith Mason,President, New South Wales, Court of Appeal, the keynote address to the IAMA Conference at the Swiss-Grand Hotel,Bondi Beach on 9 March 1999, published at (1999) The Arbitrator, September, 73 at 77.

11 Paras 50 to 54.12 The words of Rogers J in Collins v Mead, unreported, Supreme Court of NSW, 7 March 1990 as quoted by Heydon J in

Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 at [137].

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Arbitration institutions are subject to the same pressure from the users of international commercialarbitration to provide a speedy and cost effective resolution process. This pressure and the perceivedneed to be equally speedy and cost competitive has in turn led to arbitration institutions adopting ruleswhich place similar overriding obligations on participants in an arbitration conducted under the particulararbitration institution’s rules, eg rule 10 of the IAMA rules provides: ‘the Arbitrator shall adopt

procedures suitable to the circumstances of the particular case, avoiding unnecessary delay and expense,

so as to provide an expeditious cost-effective and fair means of determining the matters in dispute’ andart 22 of the ICC Arbitration Rules 2012 which provides:

1) The arbitral tribunal and the parties shall make every effort to conduct the arbitrationin an expeditious, and cost-effective manner, having regard to the complexity and valueof the dispute, 2) In order to ensure effective case management, the arbitral tribunal,after consulting the parties, may adopt such procedural measures as it considersappropriate, provided that they are not contrary to any agreement of the parties.

Although the general response by both the courts and arbitration institutions, has been to adopt an overallobjective of faciliating the just, quick and cheap resolution of the dispute, one court has also adopted atime limit, albeit an aspirational one, on the delivery of judgments. The ACT Supreme Court now stateson its website that: ‘the Court has a goal of delivering each judgment within three months from the dateon which the judgment was reserved’.

A holistic approach and the use of compressed time limits as suggested by the President of the Court ofAppeal in 1999 do address the entire process. Such measures have advantages as they do require a freshand innovative look at the process as a whole to achieve the end product within the agreed time. Thisapproach can have a dramatic effect of the procedure to be followed. In one case13 the parties agreed toa provision which required the award to be delivered by the arbitral panel within 30 days of the lastarbitrator being appointed. This provision was enforced notwithstanding that the court found:

The project the subject of the Agreement is a very large one involving expenditure ofhundreds of millions of dollars over a considerable time. It must have been within thecontemplation of the parties that it was likely that disputes would arise between them,some straightforward and capable of relatively easy resolution and others extremelycomplex and difficult. Yet one dispute resolution mechanism is provided for all disputes,whether large or small, straightforward or complex. [The arbitration clause] requiresthat, whatever the character of the dispute, it will be resolved speedily and within a stricttime frame, no doubt in the interests of commercial expediency. If the dispute happensto be extremely complex, then the lawyers conducting the arbitration are required toadopt Procrustean measures to accommodate it to the available arbitration time.14

In Greek mythology, Procrustes (the stretcher), was a bandit from Attica. He had his stronghold in thehills outside Eleusis. There, he had an iron bed into which he invited every passerby to lie down. If the

13 State of New South Wales v Austeel Pty Limited [2003] NSWSC 1077.14 Ibid [24], upheld on appeal, see State of New South Wales v Austeel Pty Ltd [2003] NSWCA 392.

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guest proved too tall, he would amputate the excess length; if the victim was found too short, he wasthen stretched out on the rack until he fit. Nobody would ever fit in the bed because it was secretlyadjustable. Procrustes would stretch or shrink it upon seeing his victims approach. Procrustean proceduralmeasures are severe!

A contrasting approach suggested by a leading international arbitrator, is to adopt a town elder model.As its name indicates, this approach adopts a blank canvas approach, shed of any litigation model orpreconceived fixed procedure. It involves a meeting with the parties to discuss the nature of the disputeand the issues to be determined, and how the parties and the arbitrator see the most appropriate processto be followed. If all agree, well and good, and as the Convention requires, any agreement of the partiesmust be adhered to subject of course to treating the parties with equality and affording each a reasonableopportunity to present its case. What is reasonable will depend on what the parties have agreed. If thereis no such agreement on procedure, then the arbitrator will be far better informed when deciding whatprocedure should be placed on the blank canvas and imposed on the parties.

ConclusionThe pressures on an arbitrator in an international commercial arbitration to harmonise arbitrationprocedures with the courts with which the parties or the arbitrator are most familiar, are many and varied.Yet subject to the law and the parties’ agreement, and the two cardinal principles of equality of treatmentand a reasonable opportunity to present a case, arbitrators are completely free to conduct the arbitrationin such manner as the arbitrator thinks appropriate. Court procedure is not sacrosanct and does changeand does respond to the needs of its users. In the same way, arbitrators must be flexible in their decisionmaking when it comes to procedural directions. All who attend a preliminary meeting in an internationalcommercial arbitration would be well advised to recall the words of Rogers J, then Chief Judge of theCommercial Division of the NSW Supreme Court who said as long ago as 1991: ‘the heart of arbitral

proceedings lies in its ability to provide speedy determination of the real issues. Those aims, to a large

extent, are made impossible of achievement if the procedures of a court are mimicked’.15

15 Imperial Leatherware Co Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653 at 661.

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Investor/State Arbitration: Challenges Facing Capital

Importing CountriesPaul Obo Idornigie1

AbstractInvestor/state arbitration generally arises from a treaty. The treaty provides for dispute resolutionincluding arbitration under ICSID. Ordinarily, it appears that such arbitration clause will ensure foreigndirect investment in capital importing countries. However, there has always been conflict of interestbetween capital exporting countries and capital importing countries. For the former, they want to ensurethat their investment is guaranteed, protected and disputes resolved by international tribunals and forthe latter, they want to ensure that they retain or regain their right to their natural resources and disputesresolved by municipal courts. This article examines the challenges faced by capital importing countriesin arbitrating under ICSID.

IntroductionThe increasing importance of international investment has been accompanied by the rapid developmentof a new field of international law that defines the obligations of host states towards foreign investorsand creates procedures for resolving disputes in connection with those obligations. Investor-statearbitration (also referred to as investment treaty arbitration) examines the international treaties that giveinvestors a right to arbitration of claims. Investor-state arbitration analyzes the rights of private partiesunder these treaties to arbitrate disputes with countries, the arbitration rules most commonly employedin investor-state disputes, the important elements of substantive law and procedure, the enforcement ofawards (including annulment proceedings under ICSID), current developments, including conflict andconvergence of interests in capital-importing and capital-exporting countries, restrictions on statesovereignty, analysis of recent investor-state arbitral jurisprudence, and, finally, the emergence of aninternational investment jurisprudence.

Investor-state arbitration traces the evolution and rapid development of this phenomenon to theestablishment of the International Center for the Settlement of Investment Disputes (‘ICSID’) in 19652

and the more than 2,700 bilateral investment treaties, most of which treaties have originated in the lasttwenty years. This development has led to far greater certainty for foreign investors in dealing with theirhost countries and has incentivized growth in international trade and commerce. Through arbitration,

1 Professor Paul Obo Idornigie, Research Professor and Head, Commercial Law, Nigerian Institute of Advanced LegalStudies, Abuja, Nigeria is a Fellow of the Institute of Chartered Secretaries & Administrators, London; Member,Chartered Institute of Arbitrators, UK; Member, London Court of International Arbitration; Vice-Chairman, CharteredInstitute of Arbitrators, Abuja Chapter; Legal Consultant and Notary Public for Nigeria.

2 https://icsid.worldbank.org/ICSID/StaticFiles/basicdoc/CRR_English-final.pdf

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investors who have been negatively affected by the acts of a host country, such as, for example, theexpropriation of property, now have a fair means of redress.3 Herein lies the conflict of interests. Whereasthe capital exporting countries prefer international tribunals for the resolution of disputes, the capitalimporting countries prefer their municipal courts for the resolution of disputes. These, among others,are the challenges facing capital importing countries.

In this article, we intend to examine the jurisprudence of investor-state arbitration and challenges facedby capital importing countries.

Evolution of Investor/State ArbitrationThe developing countries have been at the mercy of the developed economies. This is compounded bythe fact that capital has accumulated in the money centres of the world. Such centres are looking foropportunities in the developing economies. The critical question has been how to balance and protectthe investment of foreign nationals vis-a-vis the interest of the host state. However, a development inthe latter part of the 20th century has fundamentally altered this. This was done by way of diplomaticprotection from the home state.4 In which case, the home state must agree to submit the arbitration ofthe dispute to a claim commission. This required the prior intervention of the home state.

There are various versions of the origin of bilateral investment treaties.5 However, until the seminal workof the Argentine jurist and diplomat, Carlos Calvo in 1868,6 an individual or a corporation who wishedto assert a claim against a foreign state for breach of customary international law could not do so directly.Instead, the individual or corporation concerned had to rely upon his/its government taking up the claimon its behalf. This worked against the colonies because in the case of the major trading countries,influential individuals or corporations convinced their governments to send a small contingent ofwarships to moor off the coast of the offending state until reparation was forthcoming – the so-called‘gunboat diplomacy’.7

Carlos Calvo fought for the rights of newly independent states to be free of such intervention by foreignpowers and promoted the so-called ‘Calvo doctrine’ whereby foreign investors should be in no betterposition than local investors with their rights and obligations to be determined through the exclusivejurisdiction of the courts of that state or submit to the arbitration of the dispute by a Claims Commission.His thesis was adopted by the First International Conference of American States in 1889. At theConference an ad hoc Commission on International Law adopted his position to wit, ‘foreigners areentitled to enjoy all the civil rights enjoyed by natives and shall be accorded all the benefits of the said

3 See generally, C F Dugan, et al Investor-State Arbitration (Oxford: Oxford University Press, 2008).4 See G V Harten Investment Treaty Arbitration and Public Law (Oxford: Oxford University Press, 2008) 9 and 18. See also

B Kingsbury ‘Sovereignty and Inequality’ (1998) 9 EJIL 599, 601 (noting that state sovereignty is the ‘means by whichpeople can express and be deemed to have expressed, consent to the application of international legal norms and tointernational institutional competences’).

5 Harten, above n 4, 3 and 12.6 “Derecho internacional terorico y practico de Europa y America”, Paris 1868.7 See M Hood Gunboat Diplomacy 1895-1905 (London: George Allen & Unwin, 1975) 187-8. Thus when the Venevuelan

Government announced that it would not repay its debts to European creditors, a naval armada was dispatched byGermany, Great Britain and Italy to blockade Caracas and bombarded coastal facilities.

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rights in all that is essential as well as in the form of procedure, and the legal remedies incidental thereto,absolutely in like manner as said natives.’8

The Calvo Doctrine was incorporated into the forerunner of the modern investment treaty, the ‘treaty offriendship, commerce and navigation’ (FCN Treaty).9 Gunboat diplomacy was brought to an end at theSecond International Peace Conference at The Hague in 1907 when the Convention on the PeacefulResolution of International Disputes was signed. The Convention provided the framework for theconclusion of bilateral investment treaties. Thus, in the event of a dispute between two states arising outof the particular interests of a national of the other state, an independent arbitral tribunal would be formedwhere the state could espouse the claim of its national (the so-called right of diplomatic protection).10

Although the diplomatic protection was a welcome development, Professor Brierley was concerned withthe possibility of its being politicized thus leaving investors particularly small and medium-sizedenterprises with little recourse save what their government might give them after weighing the diplomaticconsequences. This led to more reforms and the creation of the International Centre for the Settlementof Investment Disputes (ICSID) mechanism through the conclusion of the ICSID Convention of 1965.11

Bilateral/Multilateral Investment TreatyA byproduct of the ICSID Convention is the enactment of investment laws in various jurisdictions12 andthe entering into various bilateral investment treaties (‘BITs’).13 The BITs became the natural successorsto the FCN Treaties. All these developments provide a right of direct recourse to investors and not subjectto the political considerations inherent in the diplomatic protection era. Harten14 has argued that if foreigninvestors are permitted to claim compensation under international law, why not a migrant worker whois denied access to the rights and entitlements of domestic employees, or a refugee who is denied asylumand deported to torture, or an indigenous people whose land is polluted and livelihood destroyed by amultinational firm? As at June 30 2011, 157 countries have signed the ICSID Convention while 147countries have ratified it.15 Bolivia and Ecuador have withdrawn their membership while among thecountries that have signed, some are yet to ratify the Convention.16

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8 See Nigel Blackaby and Constantine Partasides Redfern and Hunter on International Arbitration (5th ed, Oxford, OxfordUniversity Press, 2009) 466.

9 See art 21 of the FCN Treaty between Italy and Colombia of 1894.10 See the Panevezys-Saldustsikis Railway Case decided by the Permanent Court of International Justice – Series A/B 76,

p.16 and J L Brierley, The Law of Nations (6th ed, Oxford University Press, 1963), 277.11 ICSID was established by the 1965 Convention on the Settlement of Investment Disputes between States and Nationals

of Other States (the ICSID Convention). 12 See the Nigerian Investment Promotion Commission Act of 2004 (s 26), Ghana Investment Promotion Act (GIPA) 1994,

South African International Arbitration Act, and Ugandan Arbitration and Conciliation Act of 2000.13 See the 1959 Abs-Shawcross Draft Convention on Investments Abroad and the 1967 OECD Draft Convention on the

Protection of Foreign Property. 14 Harten, above n 4.15 See ICSID 2011 Annual Report:

https://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDPublicationsRH&actionVal=ViewAnnualReports&year=2011_Eng.

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It is noteworthy that the first case brought by an investor under the investment protections of a BIT wasregistered in 1987 but was not decided until 1990.17 Similarly, the world’s first BIT was signed in 1959between Pakistan and Germany.18 The growth in this form of dispute resolution in the two decades sincethen has been exponential.19 From a humble beginning of 8 registered cases with ICSID in 1998, in 2003it registered 30 new cases with 63 cases pending. However, as at 30 June 2012, 390 cases were registeredunder the Convention and Additional Facility Rules out of which 29% are from South America,20 23%from Eastern Europe,21 16% from Sub-Saharan Africa,22 10% from the Middle East & North Africa,23

7% from Central America & Carribean,24 9% from South & East Asia & Pacific,25 5% from NorthAmerica26 and 1% from Western Europe.27 The oil and gas sector has 25% of these cases. The growth isfurther reinforced by the fact that as at 30 June 2011,28 there were over 2,700 BITs29 being concludedsince the first such treaty in 1959.30

Other than BITs, there are regional investment treaties (‘RITs’) and multi-lateral investment treaties(‘MITs’).31 Attempts have been made for a multilateral treaty that would codify liberal standards ofinvestor protection under international law. This would have meant the use of international adjudicationfor purposes of review and enforcement of such treaties but all such attempts failed.32

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16 http://en.wikipedia.org/wiki/International_Centre_for_Settlement_of_Investment-Disputes. The countries yet to ratify areBelize, Canada, Dominican Republic, Ethiopia, Guinea-Bissau, Kyrgyzstan, Namibia, Russia, Sao Tome and Principeand Thailand. Other non-members are: Andorra, Angola, Antigua and Barbuda, Bhutan, Brazil, Cook Islands, Cuba,Djibouti, Dominica, Equatorial Guinea, Eritrea, India, Iran, Iraq, Kiribati, Laos, Liechtenstein, Libya, Maldives, MarshallIslands, Mexico, Monaco, Montenegro, Myanmar, Nauru, Niue, North Korea, Palau, Poland, San Marino, South Africa,Suriname, Tajikistan, Tuvalu, Vanuatu, Vatican City, Vietnam, and the rest of states with limited recognition.

17 See Asian Agricultural Products Ltd (AAPL) v Republic of Sri Lanka, ICSID Case No. ARB/87/3, Final Award, June 27,1990 (1991) 6 ICSID Review – Foreign Investment Law Journal 526.

18 See http://www.bilaterals.org/article-print.php3?id_article=717. 19 C McLaclan, L Shore and M Weiniger International Investment Arbitration: Substantive Principles (Oxford University

Press: 2008) 5.20 Made up of Uruguay, Peru, Ecuador, Venezuela and Bolivia.21 Made up of Uzbekistan, Serbia, Romania, Macedonia, Georgia and Turkmenistan. 22 Made up of The Gambia, Rwanda, DRC and Tanzania.23 Made up of Jordan, Egypt and Algeria.24 Made up Grenada, El Salvador and Costa Rica.25 Made up of Cambodia and Bangladesh.26 Made up of Mexico, Canada and USA.27 http://icsid.worldbank.org/ICSID/FrontServlet. See also ICSID, “The ICSID Caseload – Statistics” (Issue 2012-1) p 11-12,

http:// icsid.worldbank.org/ICSID/Index.jsp and L Reed et al Guide to ICSID Arbitration (2nd ed, The Netherlands,Kluwer Law International, 2011) 7. 73% of the registered cases are investment treaty cases.

28 See ICSID 2011 Annual Report http://icsid.worldbank.org/ICSID/FrontServlet. 29 Out of this number, countries like Comoros, Guinea Bissau, Ireland, San Marino, Sao Tome and Principe, Somalia, St

Vincent and the Grenadines, Suriname, Tonga and Vanuatu entered into one BIT each while Germany has the highestnumber of BITs – 147. See http://icsid.worldbank.org/ICSID/FrontServlet.

30 See UNCTAD, World Investment Report (2006) XVII, 26. See also http://en.wikipedia.org/wiki/Bilateral_Investment-Treaty. 31 1987 Association of South East Asian Nations (ASEAN) Agreement for the Promotion and Protection of Investments,

Chapter 11 of the 1994 North American Free Trade Agreement (NAFTA), Pt 3 and Art 26 of the 1994 Energy CharterTreaty, and the 1994 Colonia and Buenos Aires Investment Protocols of Mercosur.

32 See the draft International Convention for the Mutual Protection of Private Property Rights in Foreign Countries, 1957 –usually referred to as ‘a return to the Gay Nineties’.

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Protection Offered by the Treaties (Substantive Rights)Generally, it is the host state that breaches the treaties and/or contract. It is pertinent, therefore, to examinethe protection offered by the treaties and remedies available to the investors.33 The implications andnature of these remedies are contentious. More fundamentally, there is no doctrine of judicial precedentin arbitration and thus each arbitration is self-contained. This is compounded by the fact that, on thesame facts and law, different tribunals can reach different decisions. As a general principle, arbitralawards bind only the parties.34 The Statute of the ICJ is even more definitive than the ICSID Conventionin rejecting the doctrine of judicial precedent.35

It should be stressed that there is substantial degree of uniformity in the substantive rights provided inall treaties. However, their scope and application have remained controversial36 and discomforting to thecapital importing countries. They are:

i) fair and equitable treatment37 (of the investors) and the international minimum standard. This isdetermined on a case-by-case basis as it is difficult to reduce the words ‘fair and equitable’ to aprecise statement of a legal obligation.38 Failure to ensure transparency in the functioning of publicauthorities, bad faith, inconsistency, discrimination, changes in the law, denial of justice and thelack of a predictable framework for investment contrary to legitimate expectations of the investorand commitments made by the host state, are breaches of fair and equitable treatment standards.The standard here is non-contingent and, therefore, an investor must take the laws as he/she findsthem. Indeed of all the catalogue of rights vouchsafed to investors, none has proved more elusiveor occasioned as much recent controversy as this right;

ii) full protection and security39 – it is also difficult to give a precise meaning to this. However, achange in law that undermines the investment may amount to a breach of this obligation. Thestandard here is also non-contingent;

iii) no arbitrary or discriminatory measures impairing the investment – these obligations are notdefined in the treaties;

iv) no expropriation without prompt, adequate and effective compensation40 – may be direct orindirect or creeping. Also includes measures ‘tantamount to’ or ‘equivalent to’ expropriation;

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33 See McLachlan, et al, above n 19, 199.34 See Article 53(1) of the ICSID Convention.35 Article 59 of the Statute of the ICJ provides that the decision of the Court has no binding force except between the

parties and in respect of that particular case.36 See McLachlan, et al, above n 19, 200.37 See Harten above n 4, 86. See also McLachlan, et al above n 19, 226.38 See CME Czech Republic BV (The Netherlands) v The Czech Republic, Partial Award, September 13, 2001: www.cetv-

net.com/arbitration.asp and Tecnicas Medioambientales TECHMED SA v Estados Unidos Mexicanos, ICSID Case No.ARB(AF)/00/2, Award, May 29, 2003.

39 See McLachlan, et al, above n 19, 247.40 See Maclachlan, et al, above n 19, 265. See also Harten above n 4, 90.41 See Maclachlan, et al, above n 19, 315.

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Expropriation is permissible if done for a public purpose, on a non-discriminatory basis, inaccordance with due process of law and on payment of compensation. Thus acts contrary toundertakings and assurances granted to investors may constitute expropriation. However, what isthe standard of compensation41 – full market value or fair market value or liquidated value,replacement value, book value, discounted cash flow (DCF), etc? If there is a track record ofprofitability, tribunals most readily adopt the DCF;

v) national and ‘Most Favoured Nation’ Treatment42 – treating investors no less favourably thanthat of nationals and companies of the host state (national treatment) or any other state (mostfavoured nation).43 They are relative standards and the scope cannot be defined in the abstract.44

These are contingent standards;

vi) free transfer of funds related to investments – this obligation entitles foreign investors tocompensation if suddenly affected by currency control regulations or other host state acts whicheffectively confine the investor’s money in the host state;

vii) observance of specific investment undertakings – the umbrella clause45 – does this clauseelevate any violation of contractual obligations in direct agreements between the host state andinvestors to the status of a treaty breach?46 The consensus is that it does not, to hold otherwisewould have had far-reaching legal consequences for the host states.

Attribution under the ILC’s Articles on State ResponsibilityThe Concept of Attribution47 in investor/state arbitration is well developed under the International LawCommission (‘ILC’) Articles on State Responsibility. Under art 2 of the ILC’s Articles on StateResponsibility, there is an internationally wrongful act of a state when conduct consisting of an actionor omission is attributable to the state under international law and constitutes a breach of an internationalobligation of the state. In theory, the conduct of all human beings, corporations or collectivities linkedto the state by nationality, habitual residence or incorporation might be attributed to the state, whetheror not they have any connection with the government. In practice, the general rule is that the only conductattributable to the state at the international level is that of its organs of government, or of others whohave acted under the direction, instigation or control of those organs, that is, as agents of the state.48

These articles are meant to protect the capital exporting countries to the detriment of capital importingcountries even when there are contrary provisions in the underlying contract.

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42 See Harten above n 4, 83. 43 See McLachlan, et al above n 19, 251 and 254.44 See Maffezini v Spain, Supra where the Argentine-Spain BIT was compared with Chile-Spain BIT.45 See Monique Sasson Substantive Law in Investment Treaty Arbitration (Wolters Kluwer: The Netherlands, 2010) 173.46 See SGS v Pakistan, ICSID Case No. ARB/01/13, August 6, 2003 and SGS v Philippines, Decision on Jurisdiction,

January 29, 2004: www.worldbank.org/icsid/cases/awards.htm. 47 This is one area where the application of international law inevitably entails consideration of municipal law. See Sasson,

above n 45, 1 and art 4 of the ILC Articles of State Responsibility where reference is made to municipal law (internal law)in art 4(2). See also art 5.

48 Ian Brownlie Systems of the Law of Nations: State Responsibility (Part I) (Oxford, Clarendon Press, 1983) 132-166.

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Contract versus Treaty ClaimsThe choice of rights by an investor will determine the course of the investment dispute. Does the investorneed to choose between treaty rights and contract rights or can the investor pursue both types of rightssimultaneously in the same forum, or simultaneously in separate fora? The dispute resolution mechanismin the treaties is usually international arbitration while the underlying contract can provide for litigationand domestic arbitration. The strategic importance of this decision cannot be exaggerated. This decisionrequires a clear understanding of the distinction and differences between treaty and contract claims.These include:

a) source of the right – the source of a treaty right is on the plane of international law which isseparate and distinct from a claim of breach of national law or terms of a contract which is theeffect of an investor’s contractual submission to the jurisdiction of the Host State courts or arbitraltribunals. Thus, a treaty claim is a right established and defined in an investment treaty while thebasis of a contract claim is some right created and defined in a contract. Generally, a treaty rightcan not arise from a contract.

b) the content of the right – the content of treaty rights is normally quite distinct from that of contractrights.49 Treaty rights are generic in nature and defined by international law – rights to nationaltreatment, most favoured nation treatment, non-discriminatory treatment, fair and equitabletreatment and compensation in the event of expropriation. Contract rights are normally specific tothe investment and defined by the domestic law of the Host State. However, it is possible for thecontent of the two to overlap. For example, an investor that enjoys a right to compensation forexpropriation under a BIT might negotiate and receive an identical right in a concession contractwith the Host State or such a right is provided for in a domestic legislation like the 1999Constitution of Nigeria50 and the NIPC Act.51

c) the parties to the claim - in the case of a treaty claim, an investor of the Home State and the HostState are usually the parties. The State Party is the state itself and not a federal or regional unit orany state entity or agency. This is so even if the investor has had no direct contract with the state.However, where the treaty claim is based on an exercise of governmental authority at a lower level,then the investor must demonstrate that the state is responsible for this conduct in internationallaw. The International Law Commission has published its Articles on State Responsibility.52 TheArticles provide that a state is responsible for the conduct of internal organs and such conduct isattributable to the state. According to art 2 of the Articles, there is an internationally wrongful actof a state when conduct consisting of an action or omission is attributable to the state underinternational law and constitutes a breach of an international obligation of the state.

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49 See McLachlan et al, above n 19, 199 and Blackaby and Partasides, above n 8, 488.50 See s 44(1) of the 1999 Constitution of Nigeria, as amended which provides, inter alia, that no moveable property or any

interest in an immovable property shall be taken possession of compulsorily and no right over or interest in any suchproperty shall be acquired compulsorily in any part of Nigeria except in the manner and for the purposes prescribed bylaw that, among other things requires the prompt payment of compensation.

51 See s 25 of the Nigerian NIPC Act 2004 which provides for guarantees against expropriation.52 See J Crawford The International Law Commission’s Articles on State Responsibility: Introduction, Text and

Commentaries (Cambridge: Cambridge University Press, 2005).

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In contrast, the parties to a contract are the parties to the contract. If the investor enters into aconcession contract with the Host State, then the parties to a treaty claim will be identical to theparties to a contract claim.

d) the applicable law53 – this is another potential difference. The applicable law under a BIT normallyincludes the provisions of the BIT itself, and the general principles of international law.54 Morefundamentally, BITs are regulated by international law.55 In contrast, concession contracts arenormally subject to the domestic law of the Host State. However, a state may not invoke theprovision of its internal law as justification for its failure to perform a treaty obligation.56 Similarlythe characterization of an act of a state as internationally wrongful is governed by internationallaw. Such characterization is not affected by the characterization of the same act as lawful byinternal law.57

e) the liability of the Host State – a successful treaty claim results in state responsibility ininternational law while a successful contract claim results in state responsibility under the rules ofits domestic law if the state is a party to the contract.

One of the challenges to an investor is how to avoid duplication of proceedings or parallel proceedings.Many investment treaties anticipate this by providing that an investor can prosecute his claims in domesticcourts/tribunals or an international forum or alternatively must waive claims in any other forum as aprecondition to international arbitration. However, these two techniques of election and waiver havecreated further confusion by failing to clearly distinguish between treaty and contract claims.

Dispute Resolution MechanismsAll BITs/RITs/MITs provide for dispute resolution mechanism. Such mechanisms include litigationbefore a domestic court/tribunal or arbitration under various rules. However, the most prominent isarbitration under the ICSID Convention.

Where arbitration is under ICSID, the jurisdictional requirements provided in art 25 of the ICSIDConvention58 must be fulfilled. The scope of the jurisdiction for any investment treaty tribunal isnecessarily circumscribed by the dispute settlement clause of the applicable investment treaty. It is thetreaty provision that contains the state’s consent59 to submit a defined category of disputes (jurisdiction

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53 See generally Sasson, above n 45, xxi and Harten, above n 4 at 45.54 See art 42 of the ICSID Convention and Reed et al, Op Cit at 71.55 See art 31 of the Vienna Convention on the Law of Treaties. 56 See art 27 Ibid.57 See art 3 of the ILC’s Articles on State Responsibility.58 See C H Schreuer et al The ICSID Convention: A Commentary, (2nd ed, Cambridge: University Press, 2009) 71. See

also S A Alexandrov The “Baby-boom” of Treaty-Based Arbitrations and the Jurisdiction of ICSID Tribunals: Shareholdersas “Investors” and Jurisdiction Ratione Temporis, 4 The Law and Practice of International Courts and Tribunals 19(2005) and R Happ and N Rubins Digest of ICSID Awards and Decisions: 2003-2007 (Oxford, University Press: 2009)330.

59 States can give their consent in three ways: by contract, domestic legislation and treaty. See A R Parra ‘The Role ofICSID in the Settlement of Investment Disputes’ (1999) 16(1) ICSID News 5. In Nigeria, the NIPC Act (s26) gives suchconsent by legislation where contracts and the various BITs also give such consent. See also Schreuer et al, above n58, 190.

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ratione materiae) with qualifying claimants (jurisdiction ratione personae) to arbitration.60 In the caseof the investor, it is the serving of the Request for Arbitration that gives the consent. Under art 25, theinvestor will have to demonstrate that:61

i) there is a legal dispute;

ii) arising directly out of an investment;

iii) between a Contracting State;

iv) the national of another Contracting State; and

v) which the parties to the dispute consent in writing to submit to ICSID.

It is noteworthy that the Convention provides no definition of ‘legal dispute’ or ‘investment’. All thesecan be ascertained from their definition in the BIT. The existence of a dispute may be in doubt in severalways. An open question may not have matured into a dispute between the parties. Or a difference ofopinion may not be sufficiently concrete to amount to a dispute that is susceptible to arbitration. Theremay have been a dispute that has since become moot. The International Court of Justice (‘ICJ’) hasdefined a dispute as ‘a disagreement on a point of law or fact, a conflict of legal views or interestsbetween parties’. ICSID Tribunals have adopted similar descriptions of ‘disputes’ often relying on theICJ’s definition.62

The disagreement between the parties must also have some practical relevance to their relationship andmust not be purely theoretical. It is not the task of ICSID to clarify legal questions in abstracto. Thedispute must relate to clearly identified issues between the parties and must not be merely academic.63

Generally the interpretation of art 25 of the ICSID Convention is contentious because that is the basisof its jurisdiction. There are arguments as to who is a national of a Contracting State64 and how consentin writing is given. However, consent through the BIT has become accepted practice.65 Such a BIT mustbe in force at the relevant time. In Tradex v Albania,66 the Tribunal found that the Request for Arbitration

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60 Jurisdiction ratione temporis refers to the application in time of the respective investment treaty. Normally a state canonly be liable for the breach of an investment treaty if that treaty was in force at the time the state took action allegedly inviolation of the treaty.

61 Reed et al, above n 27, 13 and Schreuer, above n 58.62 See Maffezini v Spain, Decision on Jurisdiction, 25 January, 2000, paras 93, 94.; Tokios Tokeles v Ukraine, Decision on

Jurisdiction, 29 April, 2004, paras 106, 107; Siemens v Argentina, Decision on Jurisdiction, 3 August, 2004, para 159;Luchetti v Peru, Award, 7 February, 2005 para 48; Impregilo v Pakistan, Decision on Jurisdiction, 22 April, 2005, paras302, 303; AES v Argentina, Decision on Jurisdiction, 26 April, 2005, para 43; El Paso v Argentina, Decision onJurisdiction, 27 April, 2006, para 61; Suez at al v Argentina, Decision on Jurisdiction, 16 May, 2006, para 29; MCI v

Ecuador, Award, 31 July, 2007, para 63.63 See Enron v Argentina, Decision on Jurisdiction, 14 January, 2004, Continental Casualty v Argentina, Decision on

Jurisdiction, 22 February, 2006, para 92 and Pan American v Argentina, Decision on Preliminary Objections, 27 July2006.

64 See Schreuer, above n 58, 160.65 See Schreuer, above n 58, 192.66 Decision on Jurisdiction, 24 December, 1996, 5 ICSID Reports 58. See also CSOB v Slovakia, Decision on Jurisdiction,

24 May, 1999, paras 37-43.

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had been submitted before the entry into force of the BIT between Albania and Greece. Therefore, itwas not possible to establish jurisdiction on the basis of that treaty. While the Host State may express itsconsent to ICSID’s jurisdiction through the BIT, the investor must perform some reciprocal act to perfectconsent. The investor may do this by submitting a request for arbitration to ICSID.67

Most BITs provide for ‘cooling off periods’ or ‘consultation periods’ for amicable negotiations.68 It isunsettled whether such provisions are merely procedural or jurisdictional and whether failure to complyvitiates consent.69

In practice, there are other issues like whether the pre-conditions can be avoided or relying on the ‘mostfavoured nation’ clause of the applicable treaty in order to access more favourable pre-conditions inother treaties concluded by the Host State of the investment;70 and whether a state’s consent to arbitrationin a BIT is overridden by a contractual arbitration clause in a related investment contract.71

Remedies – Compensation and RestitutionCompensation72 for expropriation is usually different from remedies for other international law breaches.BITs do not provide for the damages to which the investor is entitled as compensation for the treatybreaches. However, in appropriate cases, damages would be awarded in line with the 1928 principle setout by the Permanent Court of International Justice in the Chorzow Factory Case.73 It should be notedthat, in cases of successful claims for expropriation and other treaty breaches, compensation will not becumulative.74 Similarly, a respondent state has a duty to mitigate its losses; compound interest can beawarded to the investor and while each party bears its own legal costs, the tribunal costs are sharedequally.

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67 See also Tradex v Albania, supra where the tribunal said: ‘…. it can now be considered as established and not requiringfurther reasoning that such consent can also be effected unilaterally by a Contracting State in its national laws, theconsent become effective at the latest if and when the foreign investor files its claim with ICSID making use of therespective national law’. In Zhinvali v Georgia, (Case No. ARB/00/1) Award, 24 January, 2003 the tribunal found that thehost State’s offer of consent, contained in its Investment Law, was later accepted in writing by the claimant when it filedits Request for Arbitration. The same position applies where the consent is in a BIT. See AMT v Zaire, (Case No.ARB/93/1), Award, 21 February, 1997. See also Reed, et al Op Cit at 37.

68 See Schreuer, above n 58, 237.69 In Roland S Lauder v The Czech Republic, Final Award, September 3, 2001, it was held that a six-month waiting period

is not a jurisdictional provision and it was waived: www.cetv-net.com/arbitration.asp and Bayindir v Pakistan

(Jurisdiction) ICSID Case No. ARB/03/29. Compare Enron Corporation v Argentine Republic delivered on 14 January,2004 where it was held that such a six-month requirement was jurisdictional: www.asil.org, Goetz v Burundi (Award: FirstPart) 6 ICSID Rep 3, and Reed et al, above n 27, 49.

70 See Maffezini v Spain, ICSID Case No. ARB/97/7, January 25, 2000 (2001) 16 ICSID Review – Foreign Investment LawJournal 212 where Maffezini, a Spaniard relied on another BIT entered into with Chile.

71 Lanco v Arginetina, ICSID Case No. ARB/97/6, December 8, 1998, 40 I.L.M. 457, paras 39-40 where it was held that theBIT took precedence over the contractual claim as long as the arbitration claims allege a cause of action under the BIT.

72 See McLachlan, et al, above n 19, 315.73 Case Concerning the Factory at Chorzow (Claim for Indemnity) (Germany v Poland), Judgment on the Merits,

September 13, 1928, Collection of Judgments, Permanent Court of International Justice, Series A, No. 17 (1928) 47where it was held that reparation must, as far as possible, wipe out all the consequences of the illegal act and re-establish the situation which would, in all probability, have existed if that act had not been committed.

74 Blackaby and Partasides, above n 8, 488-508.

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Reparation, Restitution and Satisfaction75 - full reparation for the injury caused by the internationallywrongful act shall take the form of restitution, compensation and satisfaction, either singly or incombination, in accordance with the provisions of Chapter II of the ILC’s Articles of StateResponsibility.76 Reparation must, as far as possible, wipe out all the consequences of the illegal act andre-establish the situation which would, in all probability, have existed if that act had not been committed.77

Challenges Facing Capital Importing CountriesThe jurisprudence of investor/state arbitration is an evolving one and faced with challenges especiallywith respect to capital importing countries. The challenges include the following:

• maintaining a balance between rights of investors and the host state – the capital importingcountries are usually disadvantaged. Although there is a presumption of equality of bargainingpowers, this is not always the case. International law also recognizes the doctrine of the equality ofstates. However, in practice, states are unequal. No state would like to compromise on the issue ofits sovereignty and capacity to protect its territorial integrity. In the case of investor/state arbitration,there is usually a conflict between the need to protect the natural resources of the capital importingcountries and the investment of the capital exporting countries, on the one hand, the use ofinternational tribunals and municipal courts, on the other.

• enforcement of substantive rights – most of these rights can not be comprehensively defined northeir scope delimited. There is thus a challenge in enforcing them. It is hoped that with thedevelopment of a common law of treaty arbitration, a common thread would be found.

• ‘fork in the road’ provisions and the effect of ‘cooling off periods’ – the operation of such clauses(‘fork in the road’) has posed particular difficulties. These may arise as a result of the interrelationwith the treaty/contract divide. Has the choice by the investor of a forum to litigate another part ofthe same factual dispute really precluded it from treaty arbitration, or on analysis, the other claimwas founded on contract (eg a concession contract) rather than treaty? Consequently, the forum forthe resolution of disputes should be thoroughly examined bearing in mind the issue of res judicataand lis pendens. Some investment treaties provide for ‘cooling off periods’. It is not clear whethersuch periods are merely procedural or jurisdictional, however it is submitted that cooling off periodsshould be procedural and not jurisdictional.

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75 See arts 34, 35 and 37 of the ILC’s Articles of State Responsibility. See also Happ and Rubins, above n 58, 366.76 In Charzow Factory Case supra, the PCIJ provided the most-often-cited formula in this field: “The essential principle

contained in the actual notion of an illegal act – a principle which seems to be established by international practice andin particular by the decisions of arbitral tribunals – is that reparation must, so far as possible, wipe out all theconsequences of the illegal act and re-establish the situation which would, in all probability, have existed if that act hadnot been committed”.

77 See also Enron Corporation and Ponderosa, LP v Argentine Republic: ICSID Case No ARB/01/3, Award of 22 May, 2007;CMS Gas Transmission Company v Argentine Republic, ICSID Case No. ARB/01/8, Award of 25 April, 2005, Azurix

Corporation v The Argentine Republic, ICSID Case No. ARB/01/02 Award of 14 July, 2006; ADC Affiliate Ltd and ADC

and ADMC Management Ltd v The Republic of Hungary, ICSID Case No. ARB/03/16, Award of 2 October 2006 andSiemens AG v The Argentine Republic, ICSID Case No. ARB/02/8, Award of 6 February, 2007. See generally Happ andRubbins, above n 58.

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• constitution of arbitral tribunals – investment treaty arbitration is almost an exclusive preserve ofdeveloped economies. Capacity should be developed in capital importing countries so that theircitizens are made members of the tribunals. Just as Europe, during the colonial days established andadministered courts, that is almost the same way that Western Europe and North America stilldominate the number of arbitrators handling ICSID references.78 The other challenge is the extentto which states should empower privately contracted arbitrators to determine the legality of sovereignacts and to award public funds to businesses that sustain losses as a result of exercise of sovereignpowers.

• parallel proceedings79 – the very nature of investment arbitration gives rise to the possibility ofparallel proceedings80 or the determination in another forum which may be said to affect the issueto be determined by the investment tribunal. Similarly, it is possible that more than one investmenttribunal is constituted by a different investment treaty and may be asked to rule upon the sameunderlying factual dispute.81 In such a case, should one tribunal stay its proceedings in deference tothe alternative tribunal or insist on the priority of its own process?82 In the case of multiple claimsbetween the same parties on the same subject matter, to what extent are the principles of resjudicata,83 lis pendens84 and electa una via85 to be applied? Is there any international instrument onlis pendens when, from the same cause of action parallel proceedings are pending involving thesame parties?86 There is an obvious risk that, if the proceedings continue, this may result in twoirreconcilable judgments. Will one forum decline jurisdiction or suspend proceedings on the basisof forum non conveniens or the ‘mechanical first-seised approach’? Alternatively, should both setsof proceedings continue and rules of res judicata be used to prevent two judgments/awards? If thereare two judgments/awards, rules on recognition and enforcement could be used to decide which oneis to have priority. Unfortunately, ICSID does not have such rules but Contracting States are obligedto enforce the pecuniary obligations imposed by that award within their territories as if it were afinal judgment of a court in that state.87

• knowledge of existing BITs – how many nationals of the capital importing states are aware of theexistence of the various BITs signed by their governments? Is there any proper documentation as tothe exact number in compliance with art 102 of the Charter of the UN obligating member states whoare parties to treaties to deposit them with the UN Secretariat?

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78 71% of the Arbitrators/Conciliators appointed by ICSID are from Western Europe and North America: ICSID CaseloadStatistics, 2011-1, above n 27, 16.

79 See M Cremades and J D M Lew (eds) Parallel State and Arbitral Procedures in International Arbitration (Paris: ICCPublications, 2005) and McLachlan et al, above n 19, 79.

80 L O Baptista ‘Parallel Arbitrations – Waivers and Estoppel’ Cremades and Lew (eds), ibid, 127-151.81 As was the case with the Lauder Cases, supra based on Czech-Netherlands BIT and Czech-US BIT but with the same

facts and different results.82 See J J Fawcett (ed) Declining Jurisdiction in Private International Law (Oxford: University Press, 1995) 27.83 See Sheppard A ‘Res Judicata and Estoppel’ in Cremades and Lew (eds), above n 79, 219-267.84 See Vicuna F O ‘Lis pendens arbitralis’, ibid, 207-218.85 See McLachlan et al, above n 19, 95.86 See Article 21 of the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial

Matters, 1968.87 See Art 54 of the Convention.

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• sovereign immunity – in international law, a distinction is drawn between actus jure imperii (purelygovernmental acts of states) and actus jure gestiones (purely commercial activities). Thus, oncestates descend into the commercial arena, they should desist from claiming sovereign immunity.88

• arbitrating under ICSID or UNCITRAL Arbitration Rules – ICSID protects foreign investment.Under a BIT, the standards of substantive rights under ICSID arbitration are higher than arbitrationunder municipal laws under the UNCITRAL Arbitration Rules or similar rules. Arbitration underthe BIT adopts international law as its applicable law by virtue of the provisions of the ViennaConvention on the Law of Treaties while contractual rights are determined by domestic laws.

• complaints from capital importing countries – loss of sovereignty, unequal bargaining power andpoor governance. (ICSID tribunals awarded $133 million against Egypt for expropriating the landof two Italian citizens making it the largest award rendered to individual claimants and $353 millionagainst Czech Republic). Can ICSID be lenient when governments take measures that they view asnecessary to shield their citizens from an economic meltdown, with many prominent lawyers arguingthat contract maintenance is a priority?

• politicization of awards – Argentina has been unable to honour ICSID awards. US-based investorswho are owed money are applying pressure on their own government to step up its demands thatArgentina complies with the ICSID awards – awards being politicized. The good news is that ChineseInvestors (Ping An, a Chinese investment house, suffered a 90% loss on its investment in Fortisduring the crisis) are submitting claims against the Belgian government because of its role in pushingthe sale of Fortis Bank, a Dutch-Belgian financial firm, to BNP Paribas, a French financial firm,during the financial crisis.

• forum shopping89 – In CME Czech Republic BV v Czech Republic,90 CME Czech Republic, a Dutchcompany owned by Ralph Lauder, an American cosmetics billionaire but a Dutch investor, wasawarded US$353 million against Czech Republic under the Czech Republic-Netherlands BIT on 13September, 2001. However in Lauder v Czech Republic,91 Lauder, the same American but as theowner of an American company, initiated arbitral proceedings against Czech Republic under theCzech-US BIT, based on the same facts as CME Czech BV v Czech Republic,92 and the claim wasdismissed on 3 September, 2001. This is an invitation to forum-shopping by investors.

• annulment proceedings93 – one area of conflict between the capital exporting countries and capitalimporting countries in relation to ICSID is annulment proceedings provided in arts 50 and 52-53 ofthe ICSID Arbitration Rules.94 Under the provisions of art 50(1)(c)(iii) an award can be annulled if

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88 See M D Evans (ed) International Law, (2nd ed, Oxford, University Press: 2006) 367. See also Trandtex v CBN (1977)QB 529.

89 See Harten, above n 4, 113.90 (Merits) (13 September 2001) 14(3) World Trade and Arb Materials 109. As an aside, in 2006 Ralph Lauder reported

paid $135 million for Gustav Klimt’s Portraits of Adele Bloch-Bauer I, the highest price ever paid for a painting: C Vogel,‘Lauder Pays $135 million, a Record, for a Klimt Portrait’ The New York Times (19 June 2006).

91 (Final Award) (3 September 2001), (2002) 4 World Trade and Arb Materials 35.92 (Merits) (13 September 2001) 14(3) Word Trade and Arb Materials 10993 See Reed et al, above n 27, 162.94 See also arts 50-52 of the Convention.

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the Tribunal was not properly constituted, the Tribunal manifestly exceeded its powers, there wascorruption on the part of a member of the Tribunal, there was serious departure from a fundamentalrule of procedure and the award failed to state the reasons on which it is based. Quite unlike theprovisions in the 1958 New York Convention on the Recognition and Enforcement of Foreign ArbitralAwards where domestic courts can set aside an award, there is no such provision in ICSID. Whilethe capital importing countries would like their courts to be involved in the process of enforcementor setting aside an award, the capital exporting countries prefer the ICSID, where the only remedyavailable to an aggrieved party is application for annulment. While the capital exporting countriessee annulment proceedings as one of the strengths of ICSID, the capital importing countries seethem as infringing on their sovereignty. Over the years, there have been conflicting decisions on theinterpretation of arts 50 and 52-53 of the Arbitration Rules bearing in mind that ICSID excludes anyappeal or other remedy except those provided in ICSID.95

• judicial precedent – there is no hierarchy of arbitral tribunals and proceedings are generally privateand confidential. No award is absolutely binding on the other. Indeed from the ICJ’s judgment toICSID awards, they are binding on the parties to the proceedings only. It is more complicated whenone compares international commercial arbitration or investment treaty arbitration regulated byinternational law and domestic arbitration regulated by municipal law. Certainty of decision makingwhich is an attribute of judicial precedent is lacking in arbitration.96

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95 See Klockner v Cameroon, ICSID Case No. ARB/81/2, Award, 21 October, 1983 and Amco Asia v Indonesia 1CSIDCase No. ARB/81/1, Award, 20 November, 1984 (referred to as the first generation of annulment proceedings regardedas turning the annulment proceedings to appellant systems); MINE v Guinea, ICSID Case ARB/84/4, Decision onAnnulment (22 December, 1989) (second generation – ruled for failure to state reasons); Wena Hotels v Egypt, ICSIDCase ARB/93/1, Decision on the Application for Annulment, 5 February, 2002, Vivendi v Argentina, ICSID Case No.ARB/97/3, Decision on Annulment, 3 July, 2002 and CMS v Argentina, ICSID Case No. ARB/01/18, Decision onAnnulment, 25 September, 2007 (third generation – raised fresh issues including the role of ICSID Secretariat) andSempra v Argentina, ICSID Case No. ARB/02/16, Decision on Annulment, 29 June, 2010 and Enron v Argentina, ICSIDCase No. ARB/01/3, Decision on Annulment, 30 July, 2010 (fourth generation – defence of necessity under customaryinternational law and BIT failed): Promod Nair, ‘ICSID Annulment Awards: The Fourth Generation’ Global ArbitrationReview, Volume 5, Issue 5 (October 2010): www.GlobalArbitratioinReview.com. See also C Schreuer ‘Three Generationsof ICSID Annulment Proceedings’ in IAI International Arbitration Series, No. 1, Annulment of ICSID Awards, eds. EGaillard and Y Banifatemi (New York, Juris Publishing, Inc. 2004.

96 See generally Katia Yannaca-Small (ed) Arbitration Under International Investment Agreements (Oxford: OxfordUniversity Press, 2010).

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ConclusionOrdinarily, it appears that investor-state arbitration ensures foreign direct investment in capital importingcountries. However, there has always been conflict of interest between capital exporting countries andcapital importing countries. For the former, they want to ensure that their investment is guaranteed,protected and disputes resolved by international tribunals; for the latter, they want to ensure that theyretain or regain their right to their natural resources in accordance with the UN General AssemblyResolution on Permanent Sovereignty Over Natural Wealth and Resources (Resolution 1803). The capitalimporting countries would also like disputes to be resolved by their municipal courts. This is a majorchallenge.

Another major challenge facing capital importing countries is the rights and remedies available to thecapital exporting countries. Generally, it is the capital exporting countries that invoke the disputeresolution clauses. Instead of invoking the remedies in the underlying contract, the capital exportingcountries invoke the remedies in a treaty where one exists because of the protection offered by the treaties.However, the nature and scope of these remedies are indeterminate and unclear.

There are other challenges. The operation of ‘fork in the road’ provisions in the treaties makes it difficultfor the capital importing countries to determine what dispute resolution clause that will be invoked; theeffect of the ‘cooling off periods’ whether they are mandatory or optional because it is unsettled whethersuch provisions are merely procedural or jurisdictional and whether failure to comply vitiates consent;the possibility of parallel proceedings loom large; the percentage of arbitrators appointed from the capitalexporting countries is high; countries like the USA are now politicizing enforcement of arbitral awardsand the absence of the doctrine of judicial precedent creates uncertainty in the minds of the capitalimporting countries.

One wonders, therefore, if the dispute resolution mechanisms in the treaties are not skewed in favour ofthe capital exporting countries and whether indeed, entering into the treaties actually attracts directforeign investment.

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Preventing Conflict, Managing Change,Increasing Productivity –

the Fifth DimensionBy Jim Cyngler1

Synopsis 1. In this paper I will explain what conflict is, and explore what needs to be done to move through and

past conflict.

2. In this exploration I will explain what I call the ‘fifth dimension’ of conflict management and theskills that underpin it:

a. the role and importance of empathy, honesty and openness;

b. how the use of empathy, honesty and openness impact on societal motivations;

c. what are societal motivations and what is required to alter them from negative to positive;

d. how societal motivations relate to how dialogue is managed in conflict so that dialogue achievesgenerative change.

3. I will briefly explain how the skills that underpin the fifth dimension connect to the way society ismoving toward a new values paradigm from one based exclusively on the value of economic growthto one that places a primacy on human engagement and meaning.

4. This paradigm shift highlights the importance for those working in dispute resolution and inmanagement to mobilise ‘fifth dimension’ skills to help people engage empathically, positively,creatively and meaningfully in conflict, in dialogue and in their personal and working interactions.

Preliminaries I begin this paper by raising two preliminary questions:

• what if any connection exists between managing conflict, preventing conflict, managing change andincreasing productivity?

• is there a thread that connects managing past conflict with increased productivity?

I will describe the four responses to conflict resolution which are well known to us. I will then describewhat I call the ‘fifth dimension’ of conflict management and how this relates to the growth of productivecapacity for both individuals and organisations.

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1 Jim Cyngler OAM, B.Ec, LLB FIAMA. Director of Jim Cyngler Consulting.

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I will outline the key elements that underpin effective conflict management and enable people to engagemeaningfully, enhancing commitment to shared objectives and also to improved workplaces andproductivity.

1. What conflict is; moving through and past conflict

It is helpful to begin with an understanding of what conflict is and its characteristics. Conflict is generatedwhen our values or beliefs are challenged, when our fears and vulnerabilities are exposed.

Our response to the exposure of our fear and vulnerability is twofold. Both changes occur simultaneouslyand each exacerbates the impact of the other.

Firstly we experience a loss of self empowerment. This may manifest itself as a heightened sense ofuncertainty, confusion, frustration, anger, lack of control and feeling of powerlessness, a diminishedcapacity for clarity and decision making. Secondly, this experience is accompanied by an alienationfrom the other in the dispute; we see them as lacking clarity and understanding, vindictive anddeliberately looking to thwart our reasonable expectations. In severe conflicts the other is dehumanisedand seen as an object.2 These experiences lead to a level of self absorption which I describe as ‘there isonly one story, one understanding and one outcome and it’s mine’!

These feelings of disempowerment and self absorption are referred to in modern psychiatry as reflectionsof disequilibrium in mind equanimity. Disempowerment and self absorption for most people are reflectedin a short term interference with frontal cortex function. In severe conflict the ‘flip out’3 as it has beendescribed by Daniel Siegel interferes with our capacity to access left or right brain function as we moveinto a state of ‘chaos’ or ‘rigidity’ and move from frontal cortex responses to limbic, emotive responsesor even to more primitive responses of the brain stem or hippocampus (flight or fight).

Kenneth Cloke4 has identified that several outcomes are possible in dealing with conflict - other thanviolence or escape (fight or flight) - depending on the focus of the response to conflict. Each successiveresponse requires increasing levels of skill and sensitivity by either a third party or by the partiesthemselves, along with greater integrity and commitment. Each leaves less of the conflict remainingafter it is completed. I have modified and extended his analysis:

1. The fighting can be stopped and the conflict de-escalated. Most mediators understand the importanceof this outcome and have the basic skills and techniques needed. This is often done by separatingthe people in dispute and talking calmly to each.

2. The issues over which people are fighting can be finalised and their dispute ended by discussingtheir issues and negotiating a compromise. This would normally involve setting ground rules forbehaviour, identifying issues, articulating reasons for settlement, meeting separately with each side

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2 Robert Baruch Bush and Joseph Folger, The Promise of Mediation – The Transformative Approach to Conflict (Reviseded: Published by Jossey-Bass, 2005).

3 Daniel J. Siegel, M.D., Mindsight – The New Science of Personal Transformation (1’st ed, Bantam Books, 2011).4 Dr. Kenneth Cloke The Crossroads of Conflict – A Journey into the Heart of Dispute Resolution (1’st ed, Janis

Publications USA Inc. 2006).

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and negotiating a compromise. Usually a successful compromise is identified as one where bothparties are equally unhappy with the outcome.

3. The material issues causing a dispute can be identified by exploring the underlying interests andneeds of the protagonists so that these issues can be settled. Ground rules are often set for the parties,material issues explored and strong feelings reframed by removing their heat or intensity. Heresettlement often achieves a finality of the overt areas of material disagreement and hostility but maynot ensure that each party understands the other’s fears and vulnerability.

4. The quality of the conflict interaction can be transformed by supporting the parties in their owndecision making. This may include choices regarding whether or not to have ground rules and if sowhat they are, what and when to talk about, whether or not they wish to talk about their feelings ofuncertainty and alienation from the other. Here settlement does not become the focus but one of thepossible outcomes. Here the parties move from separate conversations into one conversation.

5. Acceptance and forgiveness of the other as well as acceptance and forgiveness of self are possible.This consists of identifying and releasing ourselves from our false expectations. This process hasbeen described as ‘giving up all hopes of having a better past’.5 Forgiveness extends thetransformation of the conflict. This is an area rarely explored in conflict and requires skills often notunderstood by mediators, especially when it comes to a party forgiving themself.

6. The opportunity to renew our relationships with our protagonists and to reconcile so that the conflictdisappears and is transcended. This process is generally not understood as being available throughmediation. It is an opportunity for learning and growth. This involves letting go, learning,transcending and evolving.

7. Conflict provides the opportunity for redesigning preventative systems, structures, cultures andenvironments that make it more difficult for future conflicts to occur or for conflict to be betterunderstood and managed. Conflict can become a rich opportunity in understanding and dealing withother perspectives without feelings of fear and vulnerability.

2. The traditional responses to conflict and the fifth dimension –

As can be seen above, Cloke identifies the traditional responses to conflict which are:

• firstly, to stop the fighting;

• secondly, to compromise;

• thirdly, interest based settlement and

• fourthly, the transformative and narrative responses to conflict interactions.

These four responses are now enriched and encompassed in what I am describing as the fifth dimensionof conflict management. The fifth dimension allows for each of the four recognised responses and

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5 Annie Dillard, referred to by Cloke p 46.

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encompasses the possibilities of acceptance or forgiveness, reconciliation or transcendence, and conflictresponse redesign.

The fifth dimension is a journey away from a focus on outputs, settlement and growth to a world ofmeaning and connection. Here conflict is an opportunity to take responsibility for the conflict and itsconsequences; an opportunity to learn and improve. In order to do this it is necessary for that person toexperience a safe space and a way to find a voice, by being heard and understood. By experiencing thispeople can move out of a framework where their response to conflict is caused by the other rather thanconflict being in their own control.

a. The role and importance of empathy honesty and openness;

There is a large body of literature ranging across the disciplines of neuroscience, psychiatry, psychology,conflict resolution, dialogue theory and social science which suggests that the essential elements formoving beyond a transactional response to conflict to a response based on meaning and connection (thefifth dimension) are empathy, honesty, and openness. All three elements must coexist for this to bepossible.

b. How the use of empathy, honesty and openness impacts on societal motivations;

The use of empathy, openness and honesty enables people to be genuinely and unambiguously heard,understood and experienced. This appears to be the key to accessing the frontal lobe functions of logicalthinking as well as to intuition, creativity and emotion, even when confronted with high levels of conflict.

c. What are societal motivations and what is required to alter them from negative to positive;

Historically values such as unbridled competitiveness, aggression, self centeredness, anger, craving,fear, suspicion, short term thinking and anxiety have been the predominant values in society. Thesevalues are often seen in conflict situations. They are also integral to a growth focused economy. In recenttimes we are starting to see the emergence of values such as curiosity, openness, cooperation, goodlistening, integrity, trustworthiness, looking at the big picture and the long term as core individual andsocietal values.6

In their book Spiritual Capital, Danah Zohar and Ian Marshall outline 12 principles which allow oldmotivations to dissolve and new ones to be created:7

• ‘Self awareness. To know what I believe in and value and what deeply motivates me. Awareness ofmy deepest life’s purposes;

• Spontaneity. To live in and be responsive to the moment and all that it contains;

• Being vision and value led. Acting from principles and deep beliefs, and living life accordingly;

• Holism (a sense of the system or of connectivity). Ability to see larger patterns, relationships,connections. A strong sense of belonging;

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6 Danah Zohar and Ian Marshall, “Spiritual Capital” Ch 4 7 Zohar and Marshall pp118-9

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• Compassion. Quality of “feeling-with” and deep empathy. Ground work for universal sympathy;

• Celebration of diversity. Valuing other people and unfamiliar situations for their differences notdespite them;

• Field independence. To be able to stand against the crowd and maintain my own convictions;

• Tendency to ask fundamental “why?” questions. Need to understand things, to get to the bottom ofthem. Basis for criticising the given;

• Ability to reframe. Stand back from the problem and look for the bigger picture, the wider context;

• Positive use of adversity. Ability to own and learn from mistakes, to see problems as opportunities.Resilience;

• Humility. Sense of being a player in a larger drama, sense of my true place in the world. Basis forself criticism and critical judgment; and

• Sense of vocation. Being “called” to serve something larger than myself. Gratitude towards thosewho have helped me, and a wish to give something back’.

d. How societal motivations relate to the management of dialogue in conflict so thatdialogue achieves generative change.

The notion of moving from old motivations to new is also reflected in the analysis of effective dialogueby people such as William Isaacs, David Bohm and Otto Scharmer. Effective dialogue has been describedas ‘a process of movement through different fields or spaces of conversation’.8

Isaacs identifies 4 separate ‘fields’ of conversation each of which has distinctive characteristics. Eachtransforms into another field through significant change or crisis evoked by those involved in theconversation.

Field I: Politeness – shared monologues

People generally bring a set of norms as to how to behave and interact, each different, depending on thesetting. Protocols of behaviour are different but understood in settings such as a staff meeting, a lecture,a board meeting or a mediation. The language used initially is consistent with the social norms of theparticular environment and participants are unlikely to immediately move into what they think and feel.In a mediation for instance introductions and opening statements tend to be polite, structured and insular.

Generally in this field people operate as best they can within the rules. There is little or no reflection.This is an area of civility in which the thoughts and feelings of each participant are repressed. Peopleexperience a frustration that there is no shared meaning. This becomes a crisis in the dialogue. The jointsession in many mediations will cease at this point.

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8 William Isaacs, “Dialogue and the Art of Thinking Together” p253.

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Field II: Oppositional – breakdown

In this field people are no longer polite, and say what they think. However there is still little or noreflection. Each participant attempts to convince the other that they are right and enters into a contestfact by fact.

The conversation becomes oppositional and confronting. No quarter is given or sought.

Here the parties are likely to go into a crisis of suspension: how to suspend judgment so that they cango into a period of inquiry and reflection. ‘The great quest in this phase is for a set of new rules or newways of operating that can enable people to think, talk, and work together differently. But insteadbreakdown comes. The dominant emotion in this field tends to be anger. This seems to arise as peoplediscover that not only can they not make dialogue happen, they also cannot get anyone to even agreewith them’!9

The crisis that develops arises from the inability of each party for self-reflection. Mediations often failat this point as each party blames the other for the wrong position they are taking. The challenge is toseparate people from their point of view. This is a trigger to people being willing to listen to other views.

Fields I and II are both blaming and non-reflective.

Field III: Inquiry – reflective dialogue

There is a shift in this field from third person data and stories to first person. People become reflectiveabout what they are doing and about the impact they are having. People become genuinely curious. Theybegin to notice and are willing to explore their assumptions. People feel no obligation to require thatothers respond or agree with their perspective.

There is a crisis of fragmentation as people loosen their preconceptions and come to realise theythemselves are not one and the same as their point of view. They begin to see a wider set of possibilitieswhich involves moving from an isolated reality to a more connected one. ‘Two people who come togethercan learn, in other words, to transcend the limits of their identities and come to the point of knowing alarger sense of destiny together than they might have experienced on their own’.10

This is an opportunity for people to become much more creative than they have been.

Field IV: Creativity – generative dialogue

People generate new rules for interaction. Traditionally held positions are loosened and new possibilitiescome into existence. They move from reporting from our memory to speaking from our hearts. Theyshift so that it is legitimate, as they speak their thoughts, to notice, value and share their insights and notdiscount them because they are undeveloped or small. ‘People are no longer primarily in opposition,nor can they be said to be interacting; rather they are participating in this pool of common meaningwhich is capable of constant development and change’.11

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9 Ibid pp266-7. 10 Ibid p279. 11 Ibid p285.

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3. The role and importance of meaning

The gradual change in the emphasis of social motivation referred to above has been described as a shiftfrom a community of wealth to a community of meaning.12 It has also been discussed by Danah Zoharand Ian Marshall13 in reviewing Maslow’s hierarchy of needs. Zohar and Marshall conclude that thesearch for meaning is society’s ‘missing link’. They assert that the other elements of Maslow’s hierarchyhave been achieved in Western society leaving the attainment of meaning.

‘We know today that human beings are by definition primarily creatures of meaning and value (that isof “self actualisation”). We need a sense of meaning and driving purpose in our lives. Without it webecome ill or die’.14

The move towards the recognition of the importance of ‘Communities of Meaning’ represents a shifttoward the personal, toward independence and toward self development in our work.

This movement from one system to another with long periods of stability that are suddenly anddramatically altered has been described as punctuated equilibrium. This is happening now in relation tothe management of conflict and decision making. We observe, when looking at Cloke’s measures ofdealing with conflict (see above), the transition that has occurred over the past 40 years from stoppingthe fighting (courts and arbitral proceedings), to compromise (conciliation), to interest based bargaining(mediation framed on self determination) and more recently to transformative narrative and restorativepractices.

4. The impact of conflict on organisations

The surge in the focus on personal transformation and growth is beginning to have an impact on corporateleadership and organisational structure. The cost of conflict is being felt very substantially in financialterms:

27% of employees have seen conflict lead to personal attacks, and 25% have seen itresult in sickness or absence. Indeed, nearly one in ten (9%) even saw it lead to a projectfailure. 41% of employees think older people handle conflict most effectively, so lifeexperience evidently helps people become more effective. The skill of leaders in thisregard is the key determinant, however. Seven out of ten employees see managing conflictas a ‘very’ or ‘critically’ important leadership skill, while 54% of employees thinkmanagers could handle disputes better by addressing underlying tensions before thingsgo wrong.15

This study found that an overwhelming majority (85%) of employees at all levels experience conflict tosome degree. It also found that US employees spend 2.8 hours per week dealing with conflict, equatingto approximately $US359 billion in paid hours in 2008.

12 Kenneth Hey and Peter Moore, “The Caterpillar Doesn’t Know”. 13 Zohar and Marshall.14 Zohar and Marshall p26. 15 CPP Global Human Capital Report, Workplace Conflict and How Businesses Can Harness it to Thrive July 2008 p4.

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Mobilising fifth dimension skills These alarming statistics bear out the need for conflict managers, individuals and organisations to developthe higher order skills which I have discussed throughout this paper, not just as conflict managementskills but as vehicles for enabling and enhancing ‘meaning’. This is ‘about communication, deep andwide… communication is the foundation of our society, of our culture, of our humanity, of our ownindividual identity, of all our economic systems’.16

The need to develop communication capabilities within ourselves, our organisations and in our networksenables us not only to deal with, resolve and manage conflict, it also enables us to create a new paradigmof personal accountability, responsibility, decision making and change. Management increasingly isrequired to become mindful and focused on the here and now rather than focused on the past. ‘A dialogicapproach to change focuses on developing practices and capabilities on a large scale, where habitualand stuck patterns of interaction and thought are continually challenged and reflected on’.17

Mobilising fifth dimension skills enables difficult conversations to be had more easily, change to bedealt with inclusively rather than imposed, organisations to refocus on the skills and attributes whichsupport the development of ‘meaning’. Reducing the focus on outputs and growth will enable conflictto be better managed and productivity to be increased. Things that were impossible will become possible.

16 Kevin Kelly, “New Rules for the New Economy” (NY Penguin) by p5 17 Isaacs, p339

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Case Note Misdescription of Parties & Enforcement Issues

DampskibsselskabetNorden A/S v Beach Building & Civil GroupPty Ltd [2012] FCA 696

J.M. Healy1

AbstractThe Federal Court of Australia held that the respondent's argument that they were not a party to thearbitration agreement was not a sufficient ground to prevent enforcement of a final award in Australiaunder the International Arbitration Act 1974 (Cth) (‘Act’). The court held that the respondent was aparty to the arbitration agreement, and that it had not discharged its onus to establish that it was notbound by the final arbitration award.

A second issue was considered in the case with respect to the interaction between the Carriage of Goodsof Sea Act 1991 (Cth) and the Act, however this aspect of the decision is not considered in this casenote.

FactsOn 14 January 2011 a final arbitration award was made in London finding that Beach Building & CivilGroup Pty Ltd (‘Beach Civil’) owed DampskibsselskabetNorden A/S (‘DKN’) approximatelyUSD$820,000 with respect to demurrage costs under a charter party.

The demurrage dispute was referred to arbitration with a seat in London, and both DKN and Beach Civilagreed to the appointment of a sole arbitrator.

Under the Charterparty DKN chartered a vessel to Beach Civil to transport coal from Queensland toChina. Before the Arbitrator, DKN contended that Beach Civil had been misdescribed as ‘Beach Buildingand Construction Group (of which Bowen Basis Coal Group forms a part), Australia’ as opposed to thecorrect company which was ‘Beach Building & Civil Group Pty Ltd’.

The Arbitrator made a first award declaring that ‘Beach Building & Civil Group Pty Ltd’ was the correctparty to the charter party because the company described in the charter party was the business name ofBeach Civil.

The Arbitrator subsequently made a final award that Beach Civil owed DKN approximatelyUSD$820,000. DKN then took steps under the Act to enforce that arbitration award against Beach Civilin Australia.

IssuesThe issue to be determined in the arbitration was whether the final award could be enforced incircumstances where Beach Civil contended that it was not a party to the Charterparty or the arbitrationagreement because its name had been misdescribed.

1 J.M. Healy, Barrister Francis Burt Chambers Associate Member IAMA, MCIArb.

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Following making the first award, the Arbitrator ordered that Beach Civil serve particulars andsubmissions in respect of its defence however no such documents were served by Beach Civil, and theArbitrator was subsequently informed by Beach Civil’s then solicitors that they were no longer actingfor Beach Civil in relation to the arbitration.

Beach Civil then requested that the Arbitrator direct all correspondence to two persons nominated bythem. Ultimately the Arbitrator was informed by those persons that Beach Civil did not intend to defendthe arbitration. The Arbitrator then declared submissions closed and proceeded to consider the materialbefore him and made a final award. Beach Civil took no further part in the subsequent arbitrationproceedings.

DecisionThe Federal Court held that the Act is intended to give effect to the New York Convention and that it isto be interpreted in light of the New York Convention, and confirmed that the onus of establishing oneor more of the grounds upon which enforcement may be refused under ss 8(5) and (7) of the Act restsupon the party resisting enforcement.

Relevantly the ground being relied on by Beach Civil in this case was that ss 8(5) and (7) of the Actmeant that there was an invalidity in the award by reason of the misdescription of Beach Civil.

Section 9(1) of the Act obliges an applicant who seeks to enforce a final award under s 8 of the Act toproduce the duly authenticated original award or a duly certified copy of that award and the originalarbitration agreement under which the award purports to have been made or a duly certified copy of thatagreement. The Court then adopted the reasoning of Mance LJ (as he then was) in Dardana Ltd v YukosOil Co [2 Lloyd’s Rep 326] (‘Dardana’) and held that it was incumbent upon Beach Civil to identifyfor the benefit of DKN and the Court one or more of the grounds specified in ss 8(5) and (7) of the Actand prove such matters to the satisfaction of the Court.

That is, a successful party to a New York Convention award has a prima facie right to enforcement whichreflects the enforcement bias of the New York Convention. At the first stage of enforcement, uponproduction of the award and an arbitration agreement that is appropriately authenticated (according to s9(1) of the Act), the award creditor is entitled to have the award enforced. Enforcement may only berefused at the second stage if the award debtor proves to the satisfaction of the Court that the situationfalls within ss 8(5) and (7) of the Act.

Provided that the documents produced to the Court at the first stage establish that the Arbitrator hadpurported to act pursuant to the arbitration agreement produced at that stage, this is sufficient proof toestablish the first stage of enforcement, it is then for the award debtor to establish one or more of thestatutory grounds for refusing enforcement of the award.

Beach Civil called no evidence in the Federal Court proceedings in an attempt to demonstrate that itwas not truly the charterer in the Charterparty. All that Beach Civil did was point to the description ofthe charterer in the charter party and assert that, on the face of that document, it was not named ascharterer. The Court held that that assertion, without more, is not enough to overcome the evidentiaryeffect provided for in s 9(5) of the Act.

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DKN was able to establish to a prima facie level that each of the two arbitration awards was a foreignaward within the meaning of that expression in s 8(1) of the Act. Consequently, it was for Beach Civilto lead evidence to resist enforcement on one of the grounds specified in ss 8(5) and 8(7) of the Act. Inorder to do so it was incumbent upon Beach Civil to specifically identify for the benefit of DKN andthe court one or more of the grounds upon which it intended to rely and then prove those matters to thesatisfaction of the court. In this regard the court followed the reasoning of Mance LJ in Dardana, andheld that Beach Civil had failed to establish one of the grounds in ss 8(5) and 8(7) of the Act.

The Court also held that there were a number of other grounds as to why Beach Civil would have beenunsuccessful in resisting enforcement of the arbitration awards.

Firstly, the uncontested evidence before the Court was that the charterer was misdescribed in theCharterparty and that the entity which was intended to be nominated in that document was Beach Civil.The Court held that it was entitled to remedy that error by appropriate rules of construction and foundthat Beach Civil was a party to the Charterparty.

Secondly, the issue in relation to whether Beach Civil was a party to the Charterparty fell to bedetermined in accordance with the Laws of England given that that was the applicable law of thearbitration agreement. As a matter of construction using English law, the Court held that Beach Civilwas the charterer of the Charterparty.

Thirdly, s 30 of the UK Arbitration Act 1996 empowered the Arbitrator to rule on his own substantivejurisdiction and, in particular, to rule on the question of whether there was a valid arbitration agreement.Section 48 of the UK Arbitration Act gave the Arbitrator the same powers as the English CommercialCourt to order the rectification of a document. Once such a ruling had been made, the unsuccessful partyhad a short period within which to appeal such an award (s 67 of the UK Arbitration Act). In the extantcase, Beach Civil commenced no such appeal. Consequently, the first award was unable to be challengedunder English law and was determinative of the point with respect to whether Beach Civil was a party tothe Charterparty and the arbitration agreement included in that document.

CommentThis decision demonstrates that where a party is misdescribed in an arbitration agreement and thatappears to be a mistake, it may be prudent to apply to the local courts of the seat to obtain a declarationas to who the parties to the arbitration agreement are prior to commencing the arbitration. This wouldremove any arguments with respect to the jurisdiction of the Arbitrator to determine the dispute becauseof a misdescription of the parties, and would provide further certainty at the time of enforcement.

Further, if you consider you are not the correct party to an arbitration agreement a strategic decisionwill need to be made as to whether to participate in the arbitration proceedings at all. If you do participateand then subsequently withdraw, you will open yourself up to arguments that you consented to thejurisdiction of the arbitration which will then necessitate you making an application in the seat to obtaina declaration that you are not a party to the arbitration agreement. Failure to do so is likely to precludeyou from raising such an argument at the time of enforcement.

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This decision also shows that Australian courts are interpreting the UNCITRAL Model Law consistentlywith English courts, which is building up the level of jurisprudence in Australia with respect to the Act.

Although enforcement of the award was ultimately unsuccessful based on certain provisions of theCarriage of Goods by Sea Act 1991, this decision nevertheless continues the trend of Australian courtsinterpreting the Act consistently with other model law jurisdictions. This consistent approach tointernational arbitration in accordance with the principles of the NY Convention is central to Australia'sstrong reputation as a pro arbitration jurisdiction.

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Case NoteMichael Wilson & Partners Ltd v Nicholls & Ors

(2011) 244 CLR 427; (2011) 86 ALJR 14; [2011] HCA 48Albert Monichino SC and Alex Fawke1

The High Court of Australia has recently articulated the principles concerning abuse of process in relationto concurrent arbitration and litigation proceedings. The case concerned the uncommon circumstancein which a party pursued arbitration and litigation against separate parties whose liability arose out ofthe same conduct. The question before the High Court was whether it was an abuse of process for aplaintiff to commence litigation in Australia after commencing an arbitration in a foreign jurisdictionagainst a different party whose liability arose from the same transactions. It unanimously held that sucha course did not necessarily amount to an abuse of process.

Facts

Background

Michael Wilson & Partners Ltd (‘MWP’), a company incorporated in the British Virgin Islands, is alaw firm and business consultancy operating out of the Republic of Kazakhstan in Central Asia andEurope. It was founded in 1998 by Michael Wilson, a former partner at Baker & McKenzie, who remainsMWP’s managing director. In 2001, MWP entered an agreement with Mr John Emmott, an Australiansolicitor, pursuant to which Mr Emmott became a shareholder and director of the company. The contractwas described as a ‘co-operation agreement’ under which both parties agreed to do everything possibleto ‘create the leading independent legal and business consultancy firm’ in the region. The agreementstated that MWP would operate as a ‘quasi-partnership’ between MWP and Mr Emmott. Over the nextfew years, two other Australian lawyers, Mr Robert Nicholls and Mr David Slater, were employed bythe firm.2

By mid-2006, Messrs Emmott, Nicholls and Slater had all left MWP, taking several clients with them.MWP alleged that the three had conspired to divert clients and business opportunities away from MWPfor their own benefit. It pursued arbitration and litigation proceedings against all three, as well ascompanies they controlled, at a number of locations around the world. As outlined below, the particularproceedings which were relevant before the High Court of Australia were an arbitration in Londonbetween MWP and Mr Emmott and litigation in the Supreme Court of New South Wales between MWP,Messrs Nicholls and Slater and entities they controlled.

1 Albert Monichino is a barrister, arbitrator and mediator. Alex Fawke is research assistant at Monash University andformer intern at the ICC in Paris.

2 Unlike Mr Emmott, it does not appear that Messrs Nicholls and Slater became shareholders or directors of MWP.

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The London arbitration between MWP and Mr Emmott

In August 2006, MWP initiated arbitration proceedings against Mr Emmott in London. Mr Emmott’scontract provided that any disputes would be referred to arbitration in London and that the governinglaw of the contract was that of England and Wales. MWP alleged breach of contractual and fiduciaryobligations. It sought from Mr Emmott an account of profits, damages for breach of contract andcompensation for breach of fiduciary duties. In February 2010, the arbitral tribunal issued an interimaward dealing with questions of liability. They found that Mr Emmott was liable in respect to some, butnot all, of these allegations. The arbitral tribunal found that certain clients would have left MWP in anycase once Mr Emmott was gone, because they did not want to deal with Mr Wilson. Accordingly, thearbitrators did not grant MWP relief in respect of those clients.3 In relation to the remaining clientswhere a breach was found, the arbitrators ordered Mr Emmott to pay compensation4 to MWP, which wasto be set-off against various payments which MWP owed to Mr Emmott. The precise sum was to bequantified in a later hearing. MWP challenged the interim award in the English High Court, allegingserious irregularity and error of law.5 The English High Court had not handed down a decision at thetime of the hearing of the appeal in the High Court of Australia.

The NSW litigation

Trial Judgment

In October 2006, following the commencement of the arbitration, a separate proceeding was initiatedby MWP in the Supreme Court of New South Wales against Mr Nicholls, Mr Slater and their relatedcompanies. Messrs Nicholls and Slater could not be joined as parties to the London arbitration, as theiremployment contracts with MWP did not contain arbitration clauses, let alone arbitration clauses in liketerms to the arbitration agreement between MWP and Mr Emmott. Mr Emmott was invited to join theNSW proceedings, but declined. He could not be compelled to join the litigation because of thearbitration clause in his contract. However, as MWP alleged that Mr Emmott was the ‘principal offender’,his conduct was nonetheless relevant to MWP’s claims in the litigation.

Importantly, the Australian court proceedings were commenced, and judgment at first instance washanded down, before the arbitrators in London had rendered their interim award on liability.

At trial, MWP’s allegations against Messrs Nicholls and Slater were similar to those against Mr Emmottin the arbitration, but the overlap was not exact. In the litigation, MWP alleged breach of contractualand fiduciary obligations, as well as ‘accessorial liability’ for knowingly assisting Mr Emmott in hisbreaches of fiduciary duty. In addition, MWP alleged that the defendants were liable on the basis of the

3 Although a finding that certain clients would have left MWP in any case does not negate the existence of a breach of afiduciary duty. In AMP Services Ltd v Manning [2006] FCA 256 at [68], Finkelstein J made a similar finding, therebyindicating that the damages to be assessed in due course would be substantially reduced.

4 In the nature of equitable compensation for breach of fiduciary duty. 5 See Arbitration Act 1996 (UK), ss 68 and 69.

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tort of conspiracy and for wrongfully inducing a breach of contract. MWP sought damages,compensation and an account of profits. At first instance before Einstein J, MWP succeeded and wasawarded this relief, obtaining more than $8 million in compensation.6

Crucially, the defendants were held liable to compensate MWP even in respect of the clients that thearbitrators subsequently held would have in any case left MWP. Thus, there was an inconsistency betweenthe findings of the arbitrators and the findings of Einstein J (which impacted on the quantification ofdamages or compensation).

The NSW appeal

By the time the matter came before the NSW Court of Appeal, the arbitrators had rendered their interimaward on liability.7

Messrs Nicholls and Slater appealed against the decision of Einstein J on two main grounds. The firstground, which is of less interest for present purposes, was that Einstein J should have disqualified himselfdue to a reasonable apprehension of bias.8 The second ground, which is more relevant for those interestedin arbitration, was that instituting and maintaining the proceedings in NSW was an abuse of processbecause of the pending, related arbitration. In particular, the defendants argued that they could not haveany greater liability than that of Mr Emmott and that therefore the NSW proceeding was an abuse ofprocess. The NSW Court of Appeal accepted both grounds and allowed the appeal.

The comments of the NSW Court of Appeal on abuse of process deserve closer attention. As a generalprinciple, while what amounts to an abuse of process is not susceptible of formulation of closedcategories, one recognised category of abuse of process is when proceedings are initiated against a partyin a second forum while there are proceedings pending between the same parties in another forum.9 Thatwas not the case here, as different parties were involved. However, the NSW Court of Appeal drew onthis category to find, by analogy, that there had been an abuse of process due to the existence of relatedproceedings, namely the London arbitration.

Basten JA emphasised that MWP had been partly unsuccessful in the London arbitration and that itspursuit of those failed claims in NSW amounted to a ‘collateral challenge’ on the findings made in the

6 See Michael Wilson and Partners Ltd v Nicholls & Ors [2009] NSWSC 1377.7 The award was rendered in February 2010, which was after Einstein J’s judgment, but before the matter had been

determined by the Court of Appeal. See Nicholls & Ors v Michael Wilson & Partners Ltd (2010) 243 FLR 177, 219;[2010] NSWCA 222, [225].

8 Before trial, MWP applied, without notice to the defendants, for permission to use, for foreign proceedings and criminalinvestigations, affidavits sworn by Messrs Nicholls and Slater in the Supreme Court proceeding. The trial judge grantedMWP’s application and a number of similar applications over the following year, relying on MWP’s uncontested affidavitevidence. The applications were heard in closed court. Confidentiality orders were made calculated to prevent thedefendants from learning about MWP’s applications. These orders stood for about a year. When, before trial, theconfidentiality orders were lifted, the defendants became aware of MWP’s ex parte applications and applied to the trialjudge to disqualify himself from hearing the case further. The trial judge refused the application and proceeded to try theproceeding.

9 See Michael Wilson & Partners Ltd v Nicholls & Ors [2011] HCA 48, [90]. See also Voth v Manildra Flour Mills Pty Ltd(1990) 171 CLR 538.

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10 Nicholls & Ors v Michael Wilson & Partners Ltd [2010] NSWCA 222, [104]. His Honour came to this view even thoughthe arbitrators had made no determination prior to the hearing and determination of the litigation at first instance byEinstein J.

11 Ibid [225] and [295].12 Ibid [401].13 Ibid [393]. Of course, the trial judge could not have made such an assumption because the arbitral tribunal’s interim

award was not known by the time that he published his judgment.14 Therefore, the High Court reversed the NSW Court of Appeal’s treatment of the bias issue. The High Court held that a

fair-minded lay observer could not reasonably have apprehended that the trial judge might not bring an impartial mindto the case due to what had occurred in connection with MWP’s ex parte applications as the trial judge had not decidedany issue later arising at trial, nor were the confidentiality orders themselves enough to found a reasonableapprehension of bias.

15 Michael Wilson & Partners Ltd v Nicholls & Ors [2011] HCA 48, [99].

arbitration.10 His Honour appeared concerned that MWP was seeking to obtain a better result againstthe defendants than it did against Mr Emmott.

Lindgren AJA, who agreed with Basten JA, offered an additional analysis. His Honour acknowledgedthat the trial judge had handed down his decision before the arbitral tribunal’s interim award but did notseem to consider this an important fact.11 He held that it would be vexatious and oppressive, and it wouldbring the administration of justice into disrepute, if MWP could argue that Messrs Nicholls and Slaterbore accessorial liability (for knowingly assisting a breach of fiduciary duty) to a greater extent than theliability of the principal, Mr Emmott.12 Thus, the liability of Messrs Nicholls and Slater should be limitedby the London arbitrators’ findings against Mr Emmott, and MWP should not be permitted to argueotherwise. In this regard, his Honour noted that there may be a risk of double recovery, as MWP ‘mustbe taken to have received’ full compensation in the London arbitration and Mr Emmott would then havea right of contribution against the other wrongdoers.13

In the end result, the NSW Court of Appeal ordered a new trial in which MWP was prohibited fromobtaining a better result against Messrs Nicholls and Slater than it obtained against Mr Emmott in theLondon arbitration. It also ordered that the new trial be deferred until the final determination of theEnglish High Court review proceedings which, at the time of the Court of Appeal’s judgment, was stillongoing. MWP obtained special leave to appeal to the High Court of Australia.

High Court Decision The High Court unanimously reversed the NSW Court of Appeal’s decision. First, Gummow ACJ, Hayne,Crennan and Bell JJ, with whom Heydon J agreed, held that there was no reasonable apprehension ofbias.14 Secondly, their Honours held that the Supreme Court proceedings were not an abuse of process.It rejected the reasoning of the Court of Appeal as well as several reformulations of the argument madeby the respondents in the High Court. These are examined in turn below.

First, their Honours rejected Basten JA’s formulation of an abuse of process by ‘collateral challenge’ tothe arbitration. The High Court noted that the Supreme Court proceeding had been initiated before thearbitrators’ interim award on liability. In fact, judgment had been handed down by Einstein J before theinterim award was rendered. Because of this, the High Court held that the proceedings could not amountto a collateral attack on the arbitrators’ findings on liability, as there was not yet a relevant award to

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attack.15 With respect, this seems to be a matter of common sense. Indeed, the High Court noted that itwas unclear how and when the alleged abuse of process was said to arise.16

Secondly, the High Court rejected Lindgren AJA’s characterisation of the abuse of process. The majoritynoted that there would be no risk of double recovery, as Messrs Nicholls and Slater would have an equityto prevent this.17

Thirdly, the High Court pointed out that not all of MWP’s claims against Messrs Nicholls and Slaterrelated to Mr Emmott’s breach of fiduciary duty. MWP also made claims in contract and tort – claimswhich succeeded at first instance. Thus, it could not be said that the respondents’ liability was limitedby the nature and extent of the relief that MWP obtained against Mr Emmott in the arbitration.18

Fourthly, the High Court noted that liability for breach of fiduciary duty by a principal and that of aknowing assistant can, and often does, differ in nature and extent. It is true that liability for knowingassistance depends on proof of breach by a principal. Thus, in the NSW proceedings, MWP had toestablish that Mr Emmott committed a breach of fiduciary duty.19 But that does not mean that theirliability will necessarily be the same. For example, the principal may have made no profit from thedefault while the knowing assistant may have profited greatly. For this reason, the liability of MessrsNicholls and Slater in the litigation did not depend on the relief MWP obtained against Mr Emmott inthe arbitration.20

In obiter, the High Court commented on what would have happened if the arbitrators had found that MrEmmott had no liability for breach of fiduciary duty. Interestingly, their Honours stated that in thosecircumstances MWP would not have been prevented from pursuing its case against Messrs Nicholls andSlater:

It may be doubted that MWP would have been precluded from pursuing that allegationif, contrary to the fact, the arbitrators had found, before judgment was given in the NewSouth Wales proceedings, that Mr Emmott had not breached his fiduciary duty in anyrespect. Such a finding, in proceedings between other parties, would not estop MWPfrom asserting the contrary in the proceedings against alleged knowing assistants.[emphasis added]21

16 Michael Wilson & Partners Ltd v Nicholls & Ors [2011] HCA 48, [99].17 Ibid [101].18 Ibid [105].19 Ibid [107].20 Ibid [106].21 Ibid [107].

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Similarly, the High Court accepted that the NSW Supreme Court could have made findings that MrEmmott was liable for breach of fiduciary duty, even though he was not a party to the litigation.22

The High Court concluded with a general statement that pursuing claims in multiple forums againstparties whose liability arises out of similar conduct does not automatically lead to an abuse of process:

The fact that the same transactions and events are the subject of two separateproceedings in different forums may raise a question about abuse of the process of oneor other of those forums, but it does not lead inexorably to the conclusion that there isan abuse. There was no abuse in this case.23

The High Court thus allowed the appeal and remitted the matter back to the NSW Court of Appeal forfurther hearing of the issues which the Court had not decided.

Comment This case represents a welcome clarification of the law of abuse of process in the context of arbitration.In essence, we know that it is not necessarily an abuse of process to initiate litigation proceedings whilean arbitration proceeding concerning the same transactions, but between different parties, is pending.Nor is it necessarily an abuse of process to raise arguments which are inconsistent with the findingsmade in such an arbitration.

However, this will not always be the case. On different facts, such proceedings could amount to an abuseof process if the plaintiff tried to set up the same case as was to be heard and determined in the relatedarbitration. The High Court’s reasoning indicates that this may require a detailed technical analysis ofthe parties’ respective liabilities. The decision indicates that this kind of abuse of process is difficult toestablish unless the allegations and relevant liability in the arbitration and litigation are identical (or atleast substantially identical). The High Court did not expressly rule out the possibility that an abuse ofprocess may arise even when the two relevant proceedings involve different parties whose liability arisesout of the same transactions. The manner in which the High Court rejected each of the respondents’arguments seems to indicate, however, that such situations will be rare.24 That said, by leaving open thepossibility, the law on this matter is not entirely settled.

It is clear that some of the High Court’s reasons turned on facts particular to the case under consideration.The High Court could have arrived at its decision solely on the basis that by reason of MWP’s claims incontract and tort, MWP’s claims in the arbitration and litigation were not identical. That said, it shouldbe emphasised that, even if MWP had not pursued these claims and had simply alleged that MessrsNicholls and Slater were liable as knowing assistants, there would still have been no abuse of process.This is because of the High Court’s key finding that the nature and extent of an accessory’s liability forbreach of fiduciary duty is not limited by findings concerning the principal in separate proceedings.

22 Ibid [107].23 Ibid [110]. 24 See Michael Wilson & Partners Ltd v Nicholls & Ors [2011] HCA 48

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Case NoteBuilt Environs Pty Ltd v Saunders International Ltd [2012] SASC 111

Albert Monichino S.C.1

FactsBHP Billiton (‘BHPB’) invited tenders for the upgrade of its leaching circuit at Olympic Dam in SouthAustralia. Built Environs Pty Ltd (‘BE’) was the successful tenderer. BE’s contract with BHPB involvedfive separable portions, two of which involved the fabrication, rubber lining and painting of two steelleaching tanks and of a smaller repulp tank (collectively ‘the Tanks’). BE sub-contracted the fabrication,erection and painting of the Tanks to Saunders International Ltd (‘Saunders’) albeit no formal sub-contract was signed by both parties.

Saunders commenced the fabrication work in its workshop in October 2007 and the erection on site inJanuary 2008. Almost from the start, BE and BHPB’s quality assurance consultant expressed concernsabout the quality of Saunders’ work. Saunders undertook considerable rectification work but eventuallydeclined to do any more. On 14 September 2008 BE directed Saunders to leave the construction siteand, on 19 September 2008 BE gave Saunders notice of termination of its contract, contending thatSaunders had not performed its work to the standard required and in a timely fashion. BE asserted aright to terminate for convenience.

On 5 March 2009, BE commenced Supreme Court proceedings seeking damages and restitution ofmonies paid to Saunders. Saunders counterclaimed for variations, extensions of time and losses causedby the alleged unlawful termination of its contract.

In March 2009, at the request of both parties, the Court made an order under s 66 of the Supreme CourtAct 1935 (SA) (SCA) referring for trial by an arbitrator ‘the issues referred to in the Statement of Claimand all other issues between the parties in connection with [Saunders’] work at or in connection withthe Tails Leach Project at Olympic Dam’. The Court also ordered that, in the conduct of the arbitration,the Arbitrator was to have the powers of an arbitrator under the Commercial Arbitration and IndustrialReferral Agreements Act 1986 (SA) (the ‘CAIRA Act’).2

The parties agreed on the appointment of an arbitrator. The Arbitrator then conducted an extensivearbitration with an oral hearing extending over some 53 days, culminating in the Arbitrator making twointerim awards: one on 2 June 2011 in which he awarded Saunders $1,219,437.71 (the ‘First InterimAward’) and the second on 8 August 2011 in which he made awards in favour of Saunders with respectto interest and GST (the ‘Second Interim Award’).3

1 Albert Monichino S.C., Barrister, Arbitrator and Mediator. 2 The CAIRA Act is the South Australian equivalent of the old uniform domestic arbitration Acts, enacted throughout

Australia from about 1984. On 1 January 2012, the CAIRA Act was repealed and replaced with the CommercialArbitration Act 2011 (CA).

3 At the time of the Supreme Court adoption hearing, the Arbitrator had not rendered any award on the question of costs.

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Saunders sought the adoption by the Court of the whole of the First Interim Award and of all but part ofthe Second Interim Award.4 This was opposed by BE which contended that the Court should not adopteither of the two interim awards.

Principles relating to adoptionSection 66(4) of the SCA provides that the court will, ‘unless good reason is shown to the contrary’,adopt the award of the arbitrator as its judgment on the action or issues referred.

White J referred to the summary of principles adopted in relation to court references in New South Walesarticulated by McDougall J in Chocolate Factory Apartments Ltd v Westpoint Finance Pty Ltd.5

McDougall J noted that the purpose of the reference procedure would be frustrated if the Court wererequired to reconsider disputed questions of fact determined by the referee. His Honour also noted thateven if it were shown that the Court might have reached a different conclusion in some respect fromthat of the referee it would not be (in the absence of some error of principle, absence or excess ofjurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in factfinding) a proper exercise of the Court’s discretion to allow matters agitated before the referee to be re-agitated before the Court. Indeed, White J considered that as a result of s 66(4), the Court had a muchmore confined discretion than that contemplated by the New South Wales Rules of Court.

Having regard to the legislative history of s 66(4), White J considered that the section created a positivepresumption in favour of the adoption of an arbitral award, and that, for the Court not to adopt an award,good reason must be shown. His Honour further considered that a party wishing to displace thepresumption established by s 66(4) must establish to the level of ‘strong conviction’ in the Court someerror by an arbitrator which has affected materially the outcome of the arbitration. That error may be:

• one of law or principle;

• a failure to discharge a function of the arbitrator;

• a plain misapprehension of the evidence; or

• perversity or manifest unreasonableness in fact-finding.6

His Honour held that the error must be of a kind which makes it quite inappropriate for the award to beadopted as the judgment of the Court as a court of law, but that formulations of this kind must not obscurethe fact that s 66(4) requires that good reason be shown for the Court not to adopt the award as itsjudgment.7

4 Saunders objected to the Court adopting a portion of the Second Interim Award in which the Arbitrator impliedlyrejected Saunders’ entitlement to elect between contractual damages and the quantum meruit advanced by it: at [56].

5 2005] NSWCA 784 at [7].6 At [25]7 Ibid.

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Issues before the CourtThe central issue before the Court was whether the Arbitrator’s award was infected by a serious error(s)which justified the Court not adopting the Arbitrator’s award, notwithstanding the presumption in favourof adoption established by s 66(4).

The Arbitrator identified a number of ‘key’ issues for his determination. His Honour examined BE’schallenges to the Arbitrator’s findings on the first two issues:

1. Was there a contract? If so, what was it and when was it made? (‘The Contract Formation Issue’).

2. What was the scope of fabrication work required of Saunders? (‘The Scope Issue’).8

Contract Formation IssueThere was no serious question whether there was a binding contract between BE and Saunders. Rather,the real questions were, when was the contract created at law, and what were its terms.

BE’s submission9 to the Arbitrator was that, on an appropriate characterisation of the communicationsbetween the parties, they had, by 4 October 2007, concluded a contract falling within the fourth categoryof Masters v Cameron.10 Saunders, on the other hand, contended that the contract between it and BEhad been concluded in early January 2008.11

Depending on the date on which the contract was formed, the contract included or did not include (asthe case may be) certain terms, including a term permitting BE to terminate the contract at itsconvenience.12

In Masters v Cameron, the High Court stated that where parties who had been in negotiation reachagreement on terms that agree that the matter of their negotiations be dealt with by a formal contract,the case may belong to one of three categories:

1. the parties have reached finality in arranging all the terms of their bargain and intend to beimmediately bound to the performance of those terms, but at the same time propose to have theterms restated in a form which will be fuller or more precise but not different in effect;

2. the parties have completely agreed on all the terms of their bargain and intend no departure from oraddition to that which their agreed terms express or imply, but nevertheless have made performanceof one or more of the terms conditional on the execution of a formal contract; or

3. the intention of the parties is not to make a concluded bargain at all, unless and until they execute aformal contract.

8 At [55].9 At [90].10 (1954) 91 CLR 353 at 360-362.11 At [91]-[92].12 At [55].

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If the case falls into the first or second category, there is an immediately binding agreement. If it fallsinto the third category, the informal agreement is not binding at Law. The High Court said that thequestion depended on the intention disclosed by the language the parties had employed.

Often commercial parties negotiate the core terms of an agreement, leaving subsidiary matters andcontingencies to one side to be agreed later and, if agreed, incorporated into a comprehensive formalcontract. An informal agreement which contemplates the possibility of negotiations on further terms(yet to be agreed) does not fit neatly within the three categories articulated in Masters v Cameron. Forthis reason a fourth category has developed, comprising of cases where the parties were content to bebound immediately and exclusively by the terms which they had agreed upon whilst expecting to makea further contract in substitution for the first contract, containing, by consent, additional terms.13

Where at the time of entry into the informal agreement the parties contemplate future agreement onparticular matters, in determining whether the consensus reached is capable at law of forming a bindingcontract (and assuming the parties have manifested an objective intention to be bound immediately), thequestion is whether the terms of the informal agreement are sufficiently cohesive to stand as a contractin their own right.14

The Arbitrator rejected BE’s claim that a sub-contract of the fourth Masters v Cameron kind had beenconcluded by 4 October 2007. Instead, the Arbitrator found that the parties concluded a contract uponSaunders mobilising to commence work on site in early January 2008, and that the terms of their contractwere contained in a draft contract provided by BE on 19 November 2007 but modified in the mannerrequested by Saunders in an email of 22 November 2007.

BE made some 13 separate challenges to the Arbitrator’s findings on the Contract Formation Issue.White J did not consider it necessary to make findings with respect to all 13 challenges. His Honourfound, however, that the Arbitrator erred in the following ways in his treatment of this issue:

• the Arbitrator incorrectly applied the law – in particular, he found that in assessing whether a bindingcontract had been established at law, it was impermissible to look at the conduct of the partiesfollowing the alleged entry into the contract. As a result, he disregarded evidence which he shouldhave addressed when considering BE’s case that a contract had been concluded by 4 October 2007;15

• the Arbitrator did not identify in his reasons the fourth Masters v Cameron category nor thecircumstances referred to in the authorities in which it may be found; and

• the Arbitrator did not engage in any analysis of the evidence by reference to this discrete category.Given that BE’s contention that a contract of the fourth Masters v Cameron kind was at the heart of

13 The existence of a fourth category was first recognised in Baulkham Hills Private Hospital Pty Ltd v GR Securities PtyLtd (1968) 40 NSWLR 622 at 628. It has been recognised in numerous subsequent cases – see White J at [121].

14 Albert Monichino, ‘But we agreed’ (2007) LIJ 52.15 At [113]-[16]. Post contractual conduct is not relevant to the interpretation of a written contract, but it is relevant to the

question of whether a contract came into existence at law. That is, it is legitimate to look at the subsequent conduct ofthe parties in ascertaining whether it was their objective intention to be bound immediately by an informal agreement.

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its submissions on contract formation, it was desirable for the Arbitrator to address its submissionon this topic in more detail.16

Having found that the Arbitrator had erred in these ways, His Honour held that the court should considerthe principal evidence bearing on the issue and to form its own view as to whether the Arbitrator’sconclusion was wrong, or at least, sufficiently doubtful to establish that good reason existed for theCourt not to adopt his conclusions on the issue.18

Following such review, White J held that there was insufficient evidence that the parties had concludedan agreement by 4 October 2007. His Honour therefore held that BE’s challenge to the Arbitrator’sconclusions in respect of the contract formation issue did not meet the requisite threshold for the Courtto decline to adopt the conclusions in the interim award on this issue.19

The Scope IssueThe major issue in the arbitration was whether the scope of Saunders’ fabrication work included aspectsof surface preparation required to ensure the internal surfaces of the Tanks were suitable for rubber lining– in particular, whether Saunders was bound to comply with the requirements of a BHPB Standard (S-36). While the draft sub-contract prepared by BE did not refer to S-36 in the listed specifications, thedrawings included a note which required all fabrication to comply with S-36 and Saunders had beenprovided with a copy of S-36 as part of the invitation to tender. Moreover, Saunders had prepared aninternal memorandum for its staff which recorded that the surface finish had to comply with S-36.

The Arbitrator concluded that compliance with S-36 did not form part of Saunders’ work.20 Instead, theArbitrator found that the scope of Saunders’ fabrication work required it to achieve compliance with analternative Standard.21 This was notwithstanding that the specific note on the drawings and the fact thatBE had an obligation under its contract with BHPB to provide rubber lined tanks with a surface finishcomplying with S-36.22

His Honour held that the Arbitrator made a number of errors in his reasoning on the Scope Issue.According to His Honour, the Arbitrator:

• misunderstood the legal principles to be applied;23

• misconstrued or misunderstood the effect of relevant evidence;24 and

• engaged in processes of reasoning which, on proper analysis, could not be sustained.25

16 At [122].17 At [123].18 At [126].19 At [154].20 At [165].21 At [168].22 Ibid.23 Including by taking into account post contractual conduct for the purposes of interpreting S-36. 24 Including by failing to take into account the reference to S-36 in the contractual drawings, and by failing to take into

account the admission against interest constituted by the internal staff memo referring to the need to comply with S-36. 25 At [307].

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White J considered that if there had been one or two errors only, it may have been possible to concludethat they were subsumed by matters which supported the Arbitrator’s conclusion. However, His Honourfound that, given the multitude of the errors, a conclusion to that effect was inappropriate.26

Having found good reason not to adopt the awards after consideration of the Scope Issue, his Honourdid not proceed to consider the challenges to the Arbitrator’s other findings, on the basis that theArbitrator’s findings on the Scope Issue pervaded his consideration of the other issues.27

Standard of reasonsThe reasons for the First Interim Award extended over 291 pages. In addition, the Arbitrator attachedeight substantial annexures, so that in total the award comprised some four-and-a-half arch lever folders.28

White J stated that the reasons of an arbitrator in a court-ordered arbitration are amenable to much greaterscrutiny and supervision by the court than in the case of a consensual arbitration.29As a result, his Honourconsidered that the principles in the case law concerning the adequacy of arbitral reasons should not beapplied without qualification in the case of a court-ordered arbitration.30

His Honour noted that the High Court in Westport Insurance Corporation v Gordian Runoff Ltd 31 didnot fully resolve the difference of approach between the New South Wales Court of Appeal in GordianRunoff Ltd v Westport Insurance Corporation32 and the Victorian Court of Appeal in Oil Basins Ltd vBHP Biliton Ltd,33 although the majority of the High Court did endorse the statement of the VictorianCourt of Appeal in Oil Basins to the effect that what is required to satisfy the statutory requirement in s29(1)(c) of the Commercial Arbitration Act 1984 will depend upon the nature of the dispute and theparticular circumstances of the case.

White J considered that detailed reasons were required in the present case. Aside from the fact that itwas a court-ordered arbitration, all issues (and not just technical or limited issues) were referred toarbitration, the Arbitrator was an experienced legal practitioner and the arbitration was conducted in themanner of a conventional court trial, which was lengthy and hard fought.35 Nevertheless, his Honourconsidered that the approach suggested by Allsop P in Gordian Runoff Ltd v Westport InsuranceCorporation,36 with its emphasis on succinctness, had much to commend it.37

26 Ibid.27 At [314] – [315].28 At [29].29 At [33]. 30 At [35].31 [2001] HCA 37.32 [2010] NSWCA 57; (2010) 267 ALR 74.33 [2007] VSCA 255; (2007) 18 VR 346.34 At [40].35 At [41]. 36 [2010] NSWCA 57.37 At [43].

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White J stated:

…the duty to provide adequate reasons required as a minimum that the Arbitrator address each of the substantial points raised by each party; to make material findingsof fact and, at least in relation to each issue, to indicate the important parts of theevidence which he accepted or rejected and, at the least, the principal parts of theparties’ respective submissions which he had either accepted or rejected.38

White J considered that the Arbitrator’s reasons concerning the contract formation issue were not easyto follow because they ran together a number of matters that had no or limited relevance to the ContractFormation Issue.39 As previously stated, his Honour considered that the Arbitrator’s reasons concerningthe Scope Issue involved, in some respects, processes of reasoning which could not be sustained.

The ResultWhite J held that by reference to the serious errors exposed in the Arbitrator’s findings on the ScopeIssue, he was satisfied to the level of strong conviction that good reason had been shown why the interimawards should not to be adopted.40

The upshot was that considerable expense involved in the arbitration (running into millions of dollars)was wasted. Instead, on 10 August 2012 the Court listed the proceeding for trial with a view todetermining the issues (including the Contract Formation Issue) itself (on the basis of the evidenceadduced in the arbitration).

CommentsThe case is unfortunate and does little to promote confidence in domestic arbitration as a crediblealternative to litigation. For one thing, it is surprising that the arbitration hearing extended over some 53days. The combined costs of the arbitration hearing alone would have exceeded the amount of the award.For arbitration to be an attractive alternative, arbitrators need to do more to drive efficiencies into theresolution of disputes.

Post ScriptOn 28 August 2012, the parties settled the matter at mediation with Saunders reporting to the AustralianStock Exchange that it had agreed to accept $1.0 million in full and final settlement.

38 At [44].39 At [124]. 40 At [310].

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Case Note Cape Lambert Resources Ltd v MCC Australia Sanjin

Mining Pty Ltd [2012] WASC 228Contractual Interpretation: When does “may” mean

“must” in a dispute resolution clause?Tamara Watson1

IntroductionThe recent decision of Corboy J in Cape Lambert Resources Ltd v MCC Australia Sanjin Mining PtyLtd 2 (‘Cape Lambert v MCC Australia’) highlights the need for parties to be precise when draftingdispute resolution clauses to ensure certainty, as well as safeguarding the parties’ ability to enforce thedispute resolution clause in the event of a dispute.

The case is also instructive as it confirms the courts’ preference to construe a dispute resolution clausecontaining a right to arbitrate as an enforceable arbitration agreement in the event of ambiguity.

The FactsThe plaintiff, Cape Lambert Resources Ltd (‘Cape Lambert’) agreed to sell to MCC Mining (WesternAustralia) Pty Ltd (‘MCC WA’) (the second defendant) certain mining tenements and related assets(the ‘Assets’). This sale was governed by an Asset Sale Agreement (‘ASA’) which provided that thepurchase price was to be paid by a deposit and three instalments. The ASA was subsequently novated soas to substitute the first defendant, MCC Australia Sanjin Mining Pty Ltd (‘MCC Sanjin’) for MCCWA. The third defendant, Metallurgical Corporation of China Ltd (‘MCC’) agreed to guarantee theobligations of MCC Sanjin and MCC WA to pay for the Assets (the ‘Guarantee’).

A final instalment of $80 million was due to be paid by MCC Sanjin to Cape Lambert two years afterentry into the agreement. However, relevant mining approvals required to be obtained by Cape Lambertpursuant to the ASA were not obtained within the specified time frame. Due to Cape Lambert’s failureto obtain all relevant mining approvals, MCC Sanjin did not pay the final instalment. Cape Lambertthen issued a demand to MCC to pay the money owed under the Guarantee.

The plaintiff commenced proceedings in the Supreme Court of Western Australia by writ, seekingpayment of $80 million (the ‘Disputed Amount’). The plaintiff also sought a declaration that theDisputed Amount was due and payable under the Guarantee, as well as orders enforcing payment.

1 Solicitor, King & Wood Mallesons, practising in the general commercial litigation group, and member of the King & WoodMallesons international arbitration group.

2 [2012] WASC 228.

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The defendants applied for a stay of the plaintiff ’s action on the basis that both the ASA and theGuarantee contained arbitration agreements for the purposes of the Commercial Arbitration Act 1985(WA) (‘CAA’) and the International Arbitration Act 1974 (Cth) (‘IAA’). The defendants argued thatthe existence of the arbitration agreements required the court to stay the plaintiff’s action pursuant to s 53 of the CAA or s 7 of the IAA or, alternatively, the matter could be stayed under the inherentjurisdiction of the court.

The plaintiff contended that the dispute resolution clauses contained within the ASA and the Guarantee(DR clauses) were optional, and accordingly, it was entitled to elect to commence Supreme Courtproceedings. This contention was premised on the fact that the DR clauses provided that either party‘may’, by notice to the other party, refer the dispute for final and binding resolution by arbitration.

Further, the plaintiff applied for an interlocutory injunction requiring MCC to pay the Disputed Amountinto an escrow account pursuant to the terms of the Guarantee, or in the alternative, as a condition of thestay of the plaintiff’s action.

The DecisionCorboy J found that the dispute resolution clauses contained in the ASA and the Guarantee were bindingarbitration agreements. Corboy J relied on the decision of PMT Partners Pty Ltd v Australian NationalParks and Wildlife Service3 (‘PMT Partners v Australian National Parks’) which held that a term whichconferred an election to arbitrate was an arbitration agreement for the purposes of the CAA. His Honouralso held that there was no reason to read down the broad definition of an arbitration agreement foundin s 4 of the CAA and limit the type of dispute resolution clauses which can be characterised as arbitrationagreements.

Accordingly, Corboy J held that the existence of the arbitration agreements enlivened s 53 of the CAAand s 7 of the IAA and ordered a stay pursuant to s 53 of the CAA. Further, Corboy J found that he wasbound to grant a stay of proceedings against MCC under s 7 IAA as all the requirements set out in s 7(2) were satisfied.

However, Corboy J made an interim order under s 7(3) IAA requiring MCC to pay the Disputed Amountinto an escrow account, pending the outcome of the arbitration.

The following observations were made within the judgment.

1 When is a dispute resolution clause containing an arbitration provision a binding arbitrationagreement?

The plaintiff sought to have the dispute resolved through the courts and submitted that the ASA andthe Guarantee only contained an option to arbitrate. According to the plaintiff, a binding arbitrationagreement only arose when a party elected to refer the dispute to arbitration. Conversely, thedefendant argued that the clauses in the ASA and the Guarantee were mandatory arbitrationagreements.

3 (1995) 184 CLR 301.

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Clause 16.2 of the ASA contained procedures for resolving disputes between the plaintiff and MCCSanjin, including the following:

(a) clause 16.2(b) - subject to clause 16.2(d), the procedures prescribed in this clause must be strictlyfollowed to settle a dispute arising under this agreement;

(b) clause 16.2(c) - if any dispute arises out of or in connection with the agreement, including anyquestions regarding the existence, validity or termination of this agreement:

(i) within ten business days of the dispute arising senior representatives from each party mustmeet in good faith, act reasonably and use their best endeavours to resolve the dispute byjoint discussion;

(ii) failing settlement by negotiation either party may by notice to the other party, refer thedispute to resolution by mediation;

(iii) failing settlement by mediation either party may by notice to the other party refer thedispute for final and binding resolution by arbitration [emphasis added].4

Clause 9.9 of the Guarantee contained an identical provision.

The plaintiff relied on Hammond v Wolt,5 and asserted that the use of the word ‘may’ in cl 16.2(c)and cl 9.9(c) meant the clauses merely created an option to arbitrate and accordingly, the clauseswere not binding arbitration agreements.6 However, Corboy J preferred the High Court decision ofPMT Partners v Australian National Parks7 which disapproved of such a narrow approach toarbitration clauses.

Accordingly, the disagreement between the parties over the effect of the word ‘may’ was not relevantin determining the defendant’s application to stay the proceedings pursuant to s 53 of the CAA.8

Instead, the key consideration was the proper construction of cl 16.2(c) of the ASA and cl 9.9(c) ofthe Guarantee, rather than focusing on the narrow question of the effect of the word ‘may’.

Ultimately, Corboy J held that the provisions in cl 16.2(c) of the ASA and cl 9.9(c) of the Guaranteewere mandatory arbitration agreements which fell within the ambit of the CAA and IAA. Once anarbitration agreement is established, s 53 of the CAA and s 7 of the IAA provides a court with powerto stay the proceedings and make various orders to ensure the efficacy of the arbitration process.

4 The contract prescribed that mediation was to be held at the Singapore Mediation Centre under SMC MediationProcedures, and that arbitration was to be conducted at the Singapore International Arbitration Centre under theUNCITRAL rules in force at the date of agreement.

5 [1975] VR 108.6 [2012] WASC 228 at [47].7 see footnote no. 3 above: (1995) 184 CLR 301

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2 Can the proceedings be stayed under s 53(1) of the CAA?

Section 53(1) of the CAA provides that, if a party to an arbitration agreement commencesproceedings in a court against another party to the arbitration agreement, the court proceedings maybe stayed if the court is satisfied that:

a) there is no sufficient reason why the matter should not be referred to arbitration in accordancewith the agreement; and

b) that the applicant was, at the time when proceedings were commenced, and still remains readyand willing to do all things necessary for the proper conduct of the arbitration.

In respect of s 53(1)(a), Corboy J found there was no sufficient reason why the various disputesunder the ASA and the Guarantee should not be referred to arbitration. The plaintiff submitted thatthe failure of MCC to follow the Guarantee and pay the Disputed Amount into escrow was a reasonto refuse to refer the dispute to arbitration. However, Corboy J held that MCC’s position that it wasnot obligated to pay the Disputed Amount under the Guarantee reflected an alternate interpretationof the Guarantee, rather than an intention not to be bound by the arbitration agreement.9

In respect of s 53(1)(b), Corboy J found there were no grounds to suggest that MCC Sanjin or MCCwere not ready and willing to do all things necessary for the proposed conduct of the arbitration.There were some delays in the meetings between the senior executives and the arrangement ofmediation as required by cl 16.2 and cl 9.9, but it was held that the failure to strictly comply withsome elements of the dispute regime did not reflect an attempt to frustrate the resolution of thedispute. These delays, when viewed in the context of the defendants’ subsequent compliance withthe regime and the particular view they had taken of the proper construction of the Guarantee, couldnot be used to infer that the defendants were not ready and willing to do all things necessary for thearbitration.10

Having determined that the elements of s 53(1) of the CAA were satisfied, the Court noted that thepower to grant a stay was discretionary. The plaintiff submitted that the subject matter of the disputewas not suitable for arbitration and the court should not exercise its discretion to grant a stay,regardless of whether MCC Sanjin had used its best endeavours and acted in good faith.

Corboy J dismissed this argument and granted a stay under s 53 of the CAA. Corboy J held that thepresent disputes between the plaintiff and the defendants were the very kind of differences that theparties must have contemplated might arise when they agreed to the dispute resolution provisionsof the ASA and the Guarantee.11

8 Ibid at [52].8 At [96]-[98].10 At [101]-1[13].

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3 Application of the New York Convention

The plaintiff asserted that, pursuant to the reservations made by the People’s Republic of China(‘PRC’) when it signed the New York Convention, the IAA would only apply to agreements whichcould be characterised as commercial arrangements under Chinese law. Accordingly, the plaintiffraised the issue of whether MCC satisfied the standing requirements, as required by s 7(1)(d) of theIAA.

Section 7(1)(d) of the IAA states that a party to an arbitration agreement is a person who was, at thetime when the agreement was made, domiciled or ordinarily resident in a country that is a New YorkConvention Country.

It was not put in issue that MCC was domiciled in the PRC or that the PRC was a signatory to theNew York Convention. What was in dispute was whether the declarations and reservations made bythe PRC (being that the Convention only applied to differences arising out of legal relationships thatare considered commercial under PRC law) affected its applicability to the present case.12

Corboy J did not consider it strictly necessary to decide this point. However, he found that it wasestablished by expert evidence that the ASA and the Guarantee were commercial arrangements underPRC law.

Accordingly, Corboy J held that he was bound to stay the proceedings under s 7(2) of the IAA, asthe standing requirements were satisfied and the proceedings were capable of settlement byarbitration.13

4 The power to make interim orders

Section 7(3) of the IAA empowers a court, where it makes an order under s 7(2), to make interim orsupplementary orders as it thinks fit in relation to property that is the subject matter of the arbitrationagreement.

Corboy J held that it was clear that the Guarantee intended to avoid delay in the plaintiff receivingany payment if the dispute was resolved in its favour by mediation or arbitration.

Accordingly, Corboy J made an interim order pursuant to s 7(3) of the IAA requiring MCC to paythe Disputed Amount into an escrow account pending any arbitral award, thereby preserving therights of the plaintiff.14

11 [2012] WASC 228 at [115].12 At [41].13 At [117]-[125].14 At [126]-[134].

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ConclusionIt is extremely important that parties take care when drafting dispute resolution clauses within anagreement to ensure that the clause accurately reflects the intentions of the parties. As illustrated above,ambiguity in a dispute resolution clause may result in costly court proceedings in order to determine theeffect of the dispute resolution clause and the procedures that must be followed by the parties in theevent of a dispute.

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Case Note Bharat Aluminium Co v Kaiser Aluminium Technical Services Inc

Sanjay Basu and Kurt Stoyle1

The UNCITRAL Model Law (‘Model Law’) provides that an award debtor under an internationalarbitration award can resist enforcement (on limited grounds) in any country but can only seek to setaside the award in the country that is the seat of the arbitration. The distinction is that where the awarddebtor successfully resists enforcement in one country, the award is still valid and the award creditorcan seek to enforce it in other jurisdictions; where a court sets aside an award, the award is said to beinvalid through the world (though the practical ramifications will depend on whether courts in othercountries recognize the award as having been validly set aside).

India, unusually for a Convention country, permitted parties to seek to set aside an internationalarbitration award in India even if India was not the seat of the arbitration. The Indian courts also enabledparties to a foreign arbitration award to seek other forms of relief in India that under the Model Lawwould be available only in the country that was the seat of the arbitration.

The recent decision in Bharat Aluminium Co v Kaiser Aluminium Technical Services Inc (decided on 6September 2012, Supreme Court of India)2 (‘Bharat’) changes this position. Bharat concerns theinterpretation of the Arbitration and Conciliation Act 1996 (India) (‘Arbitration Act’) and overrulesthe decision in the earlier case of Bhatia International v Bulk Trading SA3 (‘Bhatia’). As an importantqualification, the ratio in Bharat4 will apply only prospectively; hence Bhatia will continue to governcurrent arbitration agreements, and a judgment debtor under an existing arbitration agreement can applyto the Indian courts to set aside the award irrespective of the seat of the arbitration.

The Arbitration Act and BhatiaThe Arbitration Act comprises five parts. Part I reflects, with some amendments, the Model Law butapplies to both domestic and international arbitrations. A key amendment is that s 2(2), which correlatesto art 1(2) of the Model Law, states as follows:

This Part shall apply to arbitration held in India,

whereas the Model Law counterpart states:

1 Sanjay Basu LLB is a Senior Associate with Khaitan & Co, India (a centurion law firm), India, and has practised inlitigation for 13 years. Kurt Stoyle BCom (Hons) LLB (Hons) is a Senior Associate with McCullough Robertson Lawyers inSydney, Australia, who specializes in international arbitration and construction law and has been practising for six years.

2 Civil Appeal No 7019 of 2005.3 [2002] 4 SCC 105.4 Civil Appeal No 7019 of 2005.

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The provisions of this Law ... apply only if the place of arbitration is in the territory ofthis State. (emphasis added)

The Arbitration Act omits the word ‘only’.

In Bhatia,5 the Supreme Court held that this omission means that Part I applies to all arbitrations,regardless of whether the seat of the arbitration is India. This interpretation was against the purpose andspirit behind the Model Law, which required that a party exercise certain rights (including the right tochallenge an award’s validity) only in the jurisdiction where the arbitration took place.

In Bhatia,6 the Supreme Court was considering the applicability of s 9 of the Arbitration Act. Section 9concerns interim measures, such as securing the award amount, before enforcement. It is likely that theSupreme Court in Bhatia7 wanted to ensure that the relevant party was not deprived of its options underthis section on the basis of the seat of the arbitration being outside India; and in itself the applicabilityof s 9 to arbitrations held outside India is not especially objectionable on policy grounds.

The ratio in Bhatia,8 however, did not confine itself to s 9. Under Bhatia,9 Part I in its entirety wasapplicable to international arbitrations regardless of their seat. The Indian courts applied Bhatia withthe effect that a party could challenge a foreign award in India (as distinct from merely preventing itsenforcement in the jurisdiction) (Venture Global v Satyam Computer Services Limited10 on the basis ofs 34 of the Arbitration Act, which falls within Part I of the legislation.

Parties could elect to exclude the application of Part I in the case of a foreign arbitral seat, but of coursemany agreements do not do so, particularly agreements that pre-date Bhatia.11 Hence, Bhatia12 has beenthe subject of sustained international criticism.

Bharat firmly rejects the reasoning in Bhatia,13 and overrules it so that Part I of the Arbitration Act willno longer apply to future arbitration agreements where the arbitration has a foreign seat.

Facts and background of BharatThe case concerns a 1993 agreement for the installation of a computer system. The agreement providedfor arbitration held in England. The law of the agreement was Indian law, while English law wouldgovern the arbitration. A dispute arose that encompassed a range of claims including claims for unpaidamounts, breach of intellectual property rights, and loss of profit. The parties validly referred the matterto arbitration in November 1997. In November 2002, the arbitration tribunal made its awards.

The appellant was dissatisfied with the awards and sought to invoke s 34 of the Arbitration Act to setthem aside. It was unsuccessful at the initial hearing in the District Court in 2004 and then on appeal

5 [2002] 4 SCC 105.6 Ibid.7 Ibid.8 Ibid.9 Ibid.10 [2008] 4 SCC 19011 [2002] 4 SCC 10512 Ibid.13 Ibid.

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before the High Court in 2005, and appealed again to the Supreme Court. In the course of argument, theappellants sought to rely upon Bhatia.14 The Supreme Court referred the matter to its ConstitutionalBench for consideration.

A number of other appeals were listed with Bhatia before the Constitutional Bench, as they turned onthe same question of interpretation.

Arguments put to the Supreme CourtThe appellants in Bharat15 sought to convince the Supreme Court that the Arbitration Act merely takesnotice of the Model Law but does not intend to uncritically adopt it, and that therefore the Court shouldfeel at liberty to reach an interpretation at odds with the Model Law if the language of the ArbitrationAct supported such an interpretation (which they argued it did). The appellants relied upon earlierSupreme Court authority including Konkan Railway Corporation Limited v Rani Construction PvtLimited16 for this purpose. They contended that Indian law required the Supreme Court to consider theintention of the parliament and that the Court could not add in missing words for the purposes ofinterpretation; the Court could ‘iron out the creases’ but in doing so it could not ‘substitute a new jacketfor the old’ (a proposition they said found support in earlier cases such as Nalinakhya Bysack v ShyamSunder Haldar.17

They also argued that applying a territorial limit to Part I would render certain provisions in the legislationredundant: ss 2(5) and 20 include a reference to ‘place’, which the appellants argued would have nomeaning if the legislation could apply only to arbitrations whose seat is India. Section 28(1) includesthe qualifier ‘where the place of arbitration is situated in India’, which in the appellants’ contentionpresupposes the possibility of places of arbitration outside India, while s 28(3) did not include any suchqualifier and in the appellants’ submission operated regardless of place of arbitration.

Another provision that the appellants emphasized is s 2(1) (e), which provides as follows:

‘Court’ means the principal Civil Court of original jurisdiction in a district, and includesthe High Court in exercise of its ordinary original civil jurisdiction, having jurisdictionto decide the questions forming the subject-matter of the arbitration if the same hadbeen the subject-matter of a suit, but does not include any civil court of a grade inferiorto such principal Civil Court, or any Court of Small Causes. (emphasis added)

In the appellants’ submission, this provision confirms that the Indian courts take their jurisdiction underthe Arbitration Act on the basis of subject matter. The appellants contended that the legislation is ‘subjectmatter-centric’ not ‘seat-centric’ and that the Supreme Court should not view the seat as the ‘centre ofgravity’ in interpreting the legislation.

A further contention of the appellants was that courts around the world had interpreted ‘place’ in amanner interchangeable with ‘seat’, and that – regardless of the physical location where the arbitration

14 Ibid.15 Civil Appeal No 7019 of 2005.16 [2002] 2 SCC 388.17 [1953] SCR 533.

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took place – the seat would be India if Indian arbitration law applied. Such an award would be, in theappellants’ submission, a ‘deemed’ domestic award and subject to Part I of the Arbitration Act.

The appellants also relied upon the point that Part II of the legislation, which concerns recognition andenforcement, could not serve as a complete code without drawing on certain provisions in Part I. Theappellants argued that Part I must therefore have an application even in the case of foreign awards,otherwise Part II would lack the necessary machinery to properly operate in respect of those awards.

The appellants contended that certain parties would be left remediless if the Supreme Court decidedthat Part I of the legislation could not apply to foreign awards. This line of reasoning reflected the Court’sprobable basis for deciding Bhatia18 in the manner it did in the first place.

One of the appellant parties also took the position that the arbitration agreement compelled Indian partiesto also choose Indian law as both the law of the dispute and the arbitration law; however counsel concededthat the case relied upon for authority, TDM Infrastructure Pvt Limited v UE Development India PvtLimited,19 may have a narrower ratio than would support this argument as a general proposition.

The Supreme Court’s decisionThe Supreme Court held that Bhatia20 was wrong in law and that the Arbitration Act does not entitle aparty to invoke Part I of the legislation in respect of foreign awards.

The critical issue was the interpretation of s 2(2) of the legislation. The Supreme Court accepted that itcould not interpose the word ‘only’ into s 2(2), as rules of statutory interpretation required it to take thelegislation as it found it. It nevertheless found that the intention of s 2(2) to limit Part I to arbitrationstaking place in India is clear on the face of the legislation.

The Court considered the history of the legislation and held that, in view of this history, the Indianparliament had intended to give effect to the Model Law in enacting the Arbitration Act. Section 2(2)reflected an intention to give effect to the ‘territorial principle’ in the Model Law (essentially, that a partycan invoke options such as those in Part I only in the seat of the arbitration). In ascertaining theparliament’s intentions, the overall scheme of the legislation outweighed the omission of the word ‘only’.If s 2(2) merely confirmed the applicability of Part I to arbitrations seated in India, and said nothing offoreign awards, it would be a superfluous provision because it would merely state the obvious. The Courtalso noted the absence of the word ‘only’ in comparable provisions in the international arbitration lawsof other nations, including Switzerland and the United Kingdom, and that those laws nevertheless acceptthe territorial principle.

The Court rejected the appellants’ contention that subject matter rather than physical location is the‘centre of gravity’ for the purposes of the Arbitration Act. It took the view instead that the Model Lawsees arbitrations as ‘anchored to’ the seat (place) of arbitration, and that the Arbitration Act is consistentwith the approach of the Model Law in this respect.

18 [2002] 4 SCC 105.19 14 SCC 271.20 [2002] 4 SCC 105.

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Rejecting the appellants’ argument that provisions such as ss 2(5) and 2(7) anticipate Part I dealing withawards made outside India, the Supreme Court held that those provisions are subject to s 2(2) and merelyconfirm that Section’s operation.

Section 20, as well, is subject to s 2(2). The Supreme Court dealt with that provision’s reference to the‘place’ of the arbitration by holding that it simply confirmed that parties arbitrating in India could selectany location within the country. Thus, the reference in s 20(3) to ‘venue’ does not create any problematicdistinction with ‘place’, because an arbitration occurring in India (the place) could involve meetings ina foreign location (the venue) without altering the fact that India is the seat of the arbitration.

The Court did not accept the appellants’ argument that the s 2(1)(e) definition went to the scope of PartI. It maintained that this provision was purely jurisdictional and did not affect Part I’s scope.

The Supreme Court also considered the scenario where an agreement provides that the Arbitration Actwill apply to a foreign arbitration. It considered the history of decisions in this area and concluded thatthe adoption of a foreign country as the seat of the arbitration brings with it an acceptance of thatcountry’s arbitration laws. The Arbitration Act could therefore not be made applicable by the inclusionof such a provision. Section 28 of the Arbitration Act is irrelevant to this question, as it concerns onlythe substantive law of the dispute.

As to the appellants’ contention that Part I must have an extraterritorial application for Part II to beworkable, the Supreme Court found it unconvincing. The Court reasoned that Part II relates only tocommencement and enforcement of arbitration, and therefore can operate independently of the Part Iprovisions. There is ‘complete segregation’ between Part I and Part II.

Bharat 21 has further held that no suit is maintainable for reliefs which are in the nature of interimmeasures pending arbitration. This position, too, contradicts the position in Bhatia.22 It is also at oddswith the Model Law, which recognizes such an exception.

ConclusionThe decision in Bharat23 more closely aligns the law of India, as declared by the Indian courts, withother Convention countries (though the Model Law recognizes an exception whereby parties canapproach a court in a jurisdiction that is not the seat of the arbitration to seek interim protection, andIndian law now does not). However, the change comes too late for parties who have executed anarbitration agreement before the delivery of the decision in Bharat.24 The Supreme Court held that, sinceearlier courts have followed Bhatia25 and Venture Global26 in various judgments and parties have orderedtheir affairs accordingly, the law laid down in Bharat27 will apply only prospectively, to arbitrationagreements formed after the date of judgment.

21 Civil Appeal No 7019 of 2005.22 [2002] 4 SCC 105.23 Civil Appeal No 7019 of 2005.24 [2002] 4 SCC 105.25 Civil Appeal No 7019 of 2005.26 [2008] 4 SCC 190.27 Civil Appeal No 7019 of 2005

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Contributions to the Journal are welcome, and should be sent to:

Russell Thirgood General EditorThe Arbitrator & MediatorNational OfficePO Box 13064Law CourtsVic 8010 [email protected]

When preparing submissions, the Journal Committee recommends the following for the Author(s)’ assistance:

Manuscript1 Author(s) are required to denote their details including postnominals, position, organisation and

other relevant information (50 words or less) in the first footnote of the manuscript.

2 In all submissions, the first footnote should denote the Author(s)’ name, position and other rel-evant information.

3 The manuscript should be provided electronically via email or disk in word format.

4 Authors should provide an abstract of the manuscript (60 100 words) to be included at the be-ginning of the published submission.

5 The manuscript should be approximately 3000 5000 words in length for articles, 1000 2000words in length for case notes and 750 1,000 words in length for book reviews. Case notes shouldprovide a brief outline of the facts and judgment together with evaluation and analysis of theimportance of the decision for alternative dispute resolution.

6 The manuscript should be in its final form, as corrections on proofs will generally be limited toliteral errors or changes necessitated by legislative developments. However, manuscripts mayon occasion be edited to correct spelling and syntax errors, clarify meaning, or enhance expres-sion. Minor amendments may occur without the Editor seeking the Author's approval. The Authorwill normally be consulted should major changes be considered advisable.

7 In the preparation of manuscripts, authors are to refer to the style points below. More detailedinformation is available from the Australian Guide to Legal Citation (AGLC), published by Mel-bourne University Law Review Association. The AGLC can be viewed electronically at<http://mulr.law.unimelb.edu.au/aglcdl.asp>. The recommended dictionary is the Macquarie Dic-tionary.

8 Authors are totally responsible for the accuracy of case names, citations and other references,spelling judges' names, accuracy of quotations, etc.

Notes for Authors

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9 It is assumed that an article submitted to The Arbitrator & Mediator has not been submitted toanother publisher or journal or that the material published in the journal has not been alreadypublished elsewhere. (It is the Author's responsibility to inform the Editor if the article has beensubmitted to another publisher or journal.) It is the Institute's Journal Committee policy to publishmaterial that has already been published only with the agreement and/or acknowledgement ofthe previous publisher.

10 Articles published in The Arbitrator & Mediator are critically appraised or reviewed by externalacademic or professional peers of the Author(s).

Style PointsGeneral:

(i) Levels of headings should be clearly indicated (no more than five levels).

(ii) Authorised reports should be used in citations.

(iii) Gender-neutral language should be used.

(iv) Quotations use single quotation marks. Double quotation marks are reserved for use within aquotation. Use a colon to introduce block quotations.

(v) Ensure that hyphens and dashes are differentiated.

(vi) Use a colon to introduce lists set off from the text, and to introduce run-on lists except thosethat begin with for example, that is, including, such as and so on, which do not require punctu-ation.

(vii) Abbreviations (except those that begin with an initial capital, e.g. ‘Mon.’) and contractions donot take a full stop.

Citations:

In all submissions, case, legislation, book, journal and internet citations should appear not in the textbut as footnotes, numbered consecutively throughout. All citations must conform to the AGLC (see 7above). The following style is preferred:

Cases:

Case citation follows case name. Case names should generally be omitted in accompanying foot-note when referred to in the text. Abbreviated case names may be used in references subsequent tothe initial citation. Abbreviated case names should be italicised and placed in single quotationmarks in parenthesis following initial citation, e.g. Imperial Leatherware Co Pty Ltd v Macri &Anor (Imperial Leatherware).

Legislation:

International Arbitration Act 1974 (Cth). Abbreviations should be used in pinpoint references todelegated legislation, excepting at the start of a sentence.

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Books:

David St John Sutton and Judith Gill, Russell on Arbitration (22nd ed, London: Sweet & Maxwell,2003) 3.

MJ Mustill and SC Boyd, The Law and Practice of Commercial Arbitration (2nd ed, London: But-terworths, 1989) 349.

Journal Articles:

Scott Ellis, ‘Arbitrators and Self Represented Parties’ (2004) 23 (3) The Arbitrator & Mediator 20,20–25.

Internet references:

References should include (where available): author, document title, year, website name, pinpointreference, URL and date of retrieval. The URL should be enclosed within angle brackets. The fol-lowing style is preferred:

Craig Pudig, Domestic Lessons from International Arbitration (2004) The Institute of Arbitrators& Mediators Australia [29] <www.iama.org.au> at 22 February 2005.

In footnotes, ‘op cit’, ‘loc cit’, ‘supra’ and ‘infra’ should not be used. The abbreviated form of thetitle and surname of author(s) should appear in subsequent references. Ibid should not be used torefer to a source of legislation, but the legislation should be cited in full in all subsequent references.Cases and treaties should be cited in full in all subsequent references. Subsequent references to asource other than legislation, cases and treaties should use ‘above n’. Ibid should be used to referto source in the immediately preceding footnote (whether ‘above n’ or full citation). Pinpoint ref-erences should only appear if a different page number is referred to. For example:1. David St John Sutton and Judith Gill, Russell on Arbitration (22nd ed, London: Sweet &

Maxwell, 2003) 3.2. Ibid. 57.3. Scott Ellis, ‘Arbitrators and Self Represented Parties’ (2004) 23(3) The Arbitrator & Mediator

20, 20–25.4. Sutton and Gill, above n 1, 33.

Deadline for SubmissionsThe Journal is published two times a year in April and October. All submissions are due eight weeks be-fore publication (28 February and 31 August). Late submissions may be considered for future editions.The editors cannot guarantee that all accepted submissions will be published in the next edition.

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AdvertisingThe Arbitrator & Mediator is available for the placement of advertisements. A list of advertising ratesappears below. Our readers include leading professionals from a wide range of professions includinglaw, architecture, engineering, psychology, building and construction, valuers and academics. If youwant to reach Australia's leaders, advertise in this journal.

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If you require any further assistance please email us at [email protected]. Digital files should becomposed preferably on a Mac platform and emailed.

When preparing your files

1 Always include all screen and printer fonts used in any document or imported graphic, even if theyare standard fonts.

2 When sending a job, include only the files that are going to be imaged. Additional files can createconfusion and delay the processing of that order. Be sure to label all the files appropriately so theyare easily identifiable.

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4 Include all linked graphic files and please provide only those files necessary for each particularproject and always include a PDF proof.

When sending a Quark file (preferred option)

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2 All graphics should be in the same folder as the Quark document.

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4 Do not insert an exported ‘Quark EPS' file back into your Quark document.

5 Include any special extensions required to open and output the document.

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When sending illustrator images (preferred option)

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4 Include all placed or linked components.

5 Specify Pantone colours correctly.

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NOTES

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