Making Australia a better place for arbitration - the new ACICA Rules

When parties who operate in different countries are in dispute, the question of where to hold any arbitration hearing can be complex. Until recently, one country that did not present itself as a preferred option was Australia. Distance from the rest of the world, coupled with arbitration rules that had not kept pace with technology, often ruled us out.

That changed in April 2021 when the independent, not-for-profit dispute resolution organisation, Australian Centre for International Commercial Arbitration (ACICA), released new arbitration model rules that bring Australia in line with international best practice, while also going a long way to overcoming the tyranny of distance.

This article discusses those new rules in the context of Australia’s efforts to become a preferred seat for international arbitrations on the global stage.

The new rules

ACICA’s new rules reflect technological advancements and increasing remote and virtual hearing best practice standards. As stated in the foreword to the new rules, their objective is to allow parties to ‘exercise greater flexibility and control and enjoy greater certainty in the arbitral process’.

The COVID-19 pandemic and changes in Australia’s legal industry have seen a trend towards virtual practice and procedure. This has led to improved efficiency and efficacy for other legal processes, such as court hearings and arbitrations. ACICA’s new rules show Australia’s commitment to operating as a world class seat for international arbitrations.

The main areas of practice and procedure addressed by the new rules are:

  • virtual hearings

  • paperless filing and electronic execution of documents

  • procedure for consolidation of multi-contract arbitrations

  • effective case management

  • third-party funding disclosures and enhanced costs oversight

  • early dismissal procedures.

The following comparison between the 2016 version and the new rules highlights the most relevant changes.

Old rules (2016)

New rules (2021)

  • Filing physical docs in duplicate (art 6, 2016)

  • Only provision for in-person conference/hearing arrangements – experts and witnesses required to physically attend (arts 9, 21, 23, 31, 32, 2016)

  • Previously no provisions for protection of physical and electronic information/data

  • Communications and delivery of notices by delivery to place/venue (arts 38.4, 38.5, 2016)

  • Independence/impartiality and ADR questions determined by Arbitral Tribunal after constituted – delay process

  • E-filing of docs by email or e-filing system = default position (arts 4, 6 and 7, 2021)

  • Virtual or ‘hybrid’ format conferences/hearings – taken to be held at seat (arts 10, 25, 27, 35 and 36, 2021)

  • Measures to protect both physical and electronic information/data in light of increased cross boarder movements (art 26.6, 2021)

  • Arbitral awards may be signed and transmitted electronically (arts 42.4, 42.5, 2021).

  • Streamline case management – resolve independence/impartiality in advance

 

Under the old rules, documents needed to be filed as duplicates in hard copy. Similarly, notices and communications during arbitration also had to be in hard copy, physically delivered.

There were no provisions for remote or virtual hearings and conferences; the convention was for hearings and conferences to be conducted in person.

Those requirements added significant costs and delays for all parties. Add to that the cost of travel and accommodation associated with in-person international cross border arbitrations. Even the cost of travelling to obtain physical signatures on documents added up over time.

Under those circumstances, who would want to add the further cost of travelling to Australia as the seat of the arbitration?

In addition to the old ‘paper’ rules, procedural delays often occurred after the arbitral tribunal was constituted regarding questions of independence and impartiality, or whether an alternative dispute mechanism was suitable. This meant that parties could not resolve such issues in advance of the arbitral tribunal’s constitution and commencement of the arbitration-proper was often delayed.

2021 / new rules

The new rules modernise arbitration in Australia by bringing ACICA’s practice and procedure rules into line with international best practice. This will support Australia’s goal of becoming a preferred seat of international arbitrations.

The new rules encourage e-filing of documents, either by email or through the ACICA e-filing system.

There are now provisions for virtual or hybrid hearings and conferences. If an arbitration agreement nominates Australia as the seat, then arbitration will take place there, even if any of the parties attend from another country.

An interesting addition is the arbitral tribunal’s broad power and discretion to protect information shared during arbitration. This recognises that cross border commerce and disputes increase the possibility of data compromise, justifying additional measures to preserve confidentiality.

The new rules also allow arbitral awards to be digitally signed and communicated.

There are also new rules to allow issues of independence and impartiality, as well as alternative dispute resolution options, to be addressed before the constitution of the Arbitral Tribunal, thus allowing arbitration to begin from that point.

Ultimately, the new rules allow greater flexibility in how arbitrations are managed. They will save costs, improve efficiency and ensure that Australia meets international soft law and best practice standards in remote arbitrations.

As well as the new rules, ACICA also provides a model arbitration clause which can be used to give parties the best chance of having a binding and enforceable arbitration clause.

Australian courts’ supervisory jurisdiction

Australia’s courts play a supervisory role in international arbitrations where Australia is the seat and may be called to intervene in interlocutory or procedural deadlocks. In all other respects, arbitrations are governed according to the parties’ agreement, and Australian courts will only decline to enforce foreign arbitral awards (including those given in international arbitrations with Australia as seat) that are contrary to Australian public policy.

Because the new rules are new, they are yet to receive much judicial consideration by Australian courts. This will be an interesting space to watch as parties test ACICA’s new rules and potential issues with virtual arbitrations arise.

One recent decision, in the Federal Court of Australia in December 2020, considered matters of convenience, cost and prejudice arising from a cross border international arbitration and virtual hearing rules.

In Dialogue Consulting Pty Ltd v Instagram, Inc [2020] FCA 1846, Instagram (based in California) sought a stay of proceedings on the basis of an arbitration agreement, the existence of which was denied by Dialogue Consulting (based in Australia).

Dialogue, a small business in Victoria, argued that there was no valid arbitration agreement with Instagram and even if there was, it would be prejudicial to Dialogue to have its dispute arbitrated in accordance with the propounded arbitration agreement because it would mean, at a high level, that:

  • Dialogue would incur the additional cost of travelling to and instructing lawyers in the United States

  • Dialogue would have to abandon a claim under Australian Consumer Law if the arbitration agreement is enforced and the law of California is found to be the applicable substantive law of the arbitration

  • Dialogue would have to run two concurrent sets of litigation, the second for matters falling outside the scope of the arbitration agreement, thus incurring further cost

  • Requiring Dialogue’s sole director and shareholder to attend arbitration in California would be detrimental to the ordinary operation of the business in Australia.

The Federal Court of Australia found that Instagram had waived its right to rely on the arbitration agreement, and therefore its stay application was dismissed. This suggests that issues of cost and convenience should and will be considered by courts when interpreting arbitration agreements.

Conclusion

Distance from the rest of the world need not be a deterrent to using Australia as the seat of international arbitrations. ACICA’s new rules bring Australia in line with international soft law and best practice standards and enhance the selection of Australia as the seat for arbitration. In addition, Australian courts will pay due regard to practical issues such as cost and convenience when interpreting arbitration agreements and parties’ conduct.

If you would like to know more about international arbitrations or you have a dispute with an international party, Gavin Stuart (partner) and David de Mestre (Lawyer) from Bartier Perry’s dispute resolution and advisory team can assist.

Authors: Gavin Stuart & David de Mestre