Page 772 - Week 03 - Tuesday, 21 March 2017

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I do note the scrutiny committee’s comments on this bill, and I have provided a written response to each of the issues that has been raised. It is important in that context to be clear about what this bill does and does not do. The bill does not impose arbitration on anyone and it does not remove basic legal rights. Instead it provides a framework for parties to commercial agreements to agree that they wish their disputes to be settled by arbitration instead of litigation. There is no obligation to enter into an arbitration agreement as a result of this legislation.

The arbitrations provided for in this bill mirror a process that is commonly used in international business. There are occasions when, for certainty of process and efficiency of resolving disputes, two businesses in different countries will agree in advance on arbitration. This means that local court rules and legal questions that cross jurisdictional lines are less relevant to the outcome of a dispute. The two parties to a transaction will instead know in advance what process they will undertake to resolve a dispute. The commonwealth’s International Arbitration Act 1974 provides the same sort of framework for international businesses as this bill will for domestic business.

The same principles of certainty of process and avoidance of local legal arguments apply within Australia. Having legislation to support these agreements helps make Australia a more attractive place for companies to do business across different states and territories.

As parties to commercial arbitration agreements have agreed to have their disputes resolved more quickly and cost effectively through arbitration, and not through litigation, it is important that they be prevented from undermining that same agreement. Allowing for legal arguments that effectively undo an arbitration agreement makes Australia a less attractive place to do business by adding a layer of legal review that two parties have explicitly agreed to avoid.

Arbitrations, by their nature, are intended to be binding on the parties. The legislation balances flexibility in the arbitration process with the need for certainty of outcome. Because of this, the bill includes provisions which prevent a party from being able to overturn a decision of the arbitrator or arbitral tribunal as long as the agreement itself and the process of arbitration comply with the legislation.

The bill has two limitations for parties to commercial arbitration agreements. One is clause 8, which provides that a court before which an action is brought must generally refer the parties to arbitration unless the agreement is null and void, inoperative or incapable of being performed. The clause is based on article 8 of the United Nations model law. What it means in practice is that one party who wants to avoid arbitration cannot delay the process by filing a lawsuit seeking review. The arbitration has to proceed first to an outcome.

The second limitation is clause 34A, which allows appeals to be made with the agreement of all parties and with leave of the court. This means that if both parties are unhappy with an arbitration result and cannot agree on a way forward, they have access to the court system. These limitations have the effect of ensuring that, where a person agrees to enter into arbitration, in most cases any dispute will be resolved outside court.

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