Australia Looking Back at Key Themes from 2021
14 December 2021
14 December 2021
2021 has been another incredibly interesting year to be an Australian arbitration practitioner. I have had the pleasure of continuing in my role as head of Ashurst's Australian arbitration practice throughout the year and in June I was privileged to be elected as the President of the Australian Centre for International Arbitration (ACICA). My fellow arbitration partner Bill Smith sits as the Chair of the ACICA Practice & Procedure Board. Adding to our established team of arbitration partners and practitioners, we were also recently joined by Matthew Blycha as a partner in our Perth office.
Our team have worked on a number of significant arbitrations, initiatives and events this year, and seen first-hand how Australia's leading arbitration practitioners and institution have grappled with the challenges of the global pandemic. Despite these challenges, it is clear that the practice of arbitration in Australia – and the Australian arbitration community more broadly – are thriving. Indeed, in many ways, the challenges presented by the global pandemic have presented opportunities for innovation, and in a world less physically connected, Australian arbitration practitioners have probably never felt more connected to each other and their colleagues overseas.
I would encourage anyone interested in arbitration in Australia to read the 2020 Australian Arbitration Report published by ACICA earlier this year with the support of FTI Consulting, the WA Arbitration Initiative, Francis Burt Chambers and the Australian Bar Association. In that report, readers will note that Australia has become a more appealing global arbitration destination for international arbitration in the post-pandemic world, as corporations, arbitral institutions and the legal profession have made the transition to virtual hearings and platforms. Australia has responded to these changes with recent legal developments and amendments to arbitral institution rules aimed at modernising the arbitration process and producing enforceable outcomes. Coupled with a stable economic and political environment, a high quality judiciary and legal profession and good institutional support, Australia has become a world class arbitration centre.
I would also like to take this opportunity to congratulate everyone who recently participated in events for another successful Australian Arbitration Week, particularly those from Ashurst, including Rob Palmer, partner from our Singapore office (and many other organisations) who spoke at the ACICA/Chartered Institute of Arbitrators Australia International Arbitration Conference and the many other successful events during the week.
In this update, the Global Arbitration Group at Ashurst look back at some of the key themes in arbitration in Australia arising in this exciting and challenging year. They provide a snapshot of the "state of the nation" which provides clues as to what developments may come next year and the year after that. I have every confidence that arbitration in Australia will continue to thrive in the years ahead and that a number of the developments outlined below will ensure that Australia remains at the forefront of arbitration practice around the world.
In March 2021, ACICA released its Australian Arbitration Report (a copy of which can be downloaded here).
One of the themes of the ACICA Report is the opportunity afforded to Australia as a global arbitration destination by major cultural shifts taking place as a consequence of the COVID-19 pandemic. Specifically, the major consequence of the COVID-19 pandemic has been a broad based normalisation of remote and video conferencing together with a proliferation of both general and specialised communications platforms that can be used for the conduct of online hearings.
On top of this, major arbitral institutions, including ACICA (as discussed below), have instituted guidelines for virtual conferences and hearings, and there is a growing expectation within the global arbitration community that many hearings in international arbitration proceedings will continue to take place online. This is particularly so for preliminary hearings, interim measures applications and other applications for interlocutory relief.
The consequence of this for Australia as an international arbitration seat is that the "tyranny of distance" has become a less potent factor than it was only a short while ago. The convenience offered by rival locations such as Singapore and Hong Kong is anticipated to be less of a lure to commercial parties in determining the seat of their arbitration. Instead, the obvious strengths of Australia as an arbitration destination have the opportunity to come to the fore.
In particular, Australia has enviable structural benefits in that it:
On top of the structural benefits identified by ACICA in its report, Australia as a political and legal jurisdiction is highly supportive of arbitration as a dispute resolution procedure. It is a Model Law country and has enacted a statutory framework that facilitates the clear and predictable enforcement of arbitral awards. This is coupled with a judiciary that also supports the international arbitral framework.
Our own experience also points to further, less readily quantifiable benefits available to parties choosing Australia as their arbitral seat. In particular, in recent years reforms to the Australian court processes have resulted in a much faster recognition and enforcement process than is available in other competing jurisdictions.
Furthermore, the Australian legal profession offers proven, long established excellence and expertise in arbitrations involving the oil and gas, construction, infrastructure and (more recently) renewable energy sectors. Each of which are regular and heavy "users" of arbitration.
To contribute to the growth of Australia as an international arbitration destination, Australian-based legal practitioners should be encouraging their clients to embrace arbitration on a broader scale and the clear benefits of choosing an Australian seat should be borne in mind in drawing up arbitration agreements.
This is equally true for established "arbitration-friendly" industries as for companies doing business in areas in which arbitration is not so commonly used (such as financial services, climate change, telecommunications and mergers and acquisitions).
In April 2021, ACICA published its revised and updated ACICA Arbitration Rules 2021, which contained substantive amendments aimed at modernising its arbitration processes and facilitating the adoption of technology and virtual communications platforms.
Unless the arbitration agreement provides otherwise, the updated rules automatically apply in place of the previous 2016 version.
The rule amendments include three key innovations amongst a number of administrative changes and clarifications.
ACICA has made the following changes aimed at improving efficiency:
The new rules empower ACICA to consolidate multiple arbitrations where:
Separately, ACICA has made it more straightforward to commence a single arbitration relating to multiple claims across several contracts by way of a composite Notice of Action that includes an application to ACICA that identifies:
The new rules aim to speed up the arbitral timetable and empower the tribunal to more proactively manage cases.
The new rules oblige the tribunal to:
Furthermore, the tribunal is granted an express power to make awards granting early dismissal or strike out of any claim, defence or counter-claim.
The revised ACICA rules align with recent developments in international best practice and are consistent with the rules and procedure of major international arbitral institutions.
Practices surrounding virtual hearings and electronic communications adopted during the COVID-19 pandemic have been formalised by international institutions to permit electronic filing, execution and hybrid hearings or conferences. The rules of the LCIA, AIAC, ICDR and ICC have all permitted virtual hearings and virtual arbitration proceedings, with many arbitral institutions also permitting electronic execution and filing (LCIA, AIAC and ICDR).
Multi-party and multi-contract consolidations are also consistent with other international arbitral institutions, with the relevant authority being satisfied that the arbitration agreements are compatible (ICC and SIAC Arbitration Rules) and contain a common question of law of fact (HKIAC, AIAC, LCIA Arbitration Rules).
Effective case management and early dismissal of claims have also become an increasing focus for international institutions. Arbitrations are to be conducted according to key principles such as being cost and time effective and to "ensure effective case management" (ICC rules, Article 22.2). Some institutions have also implemented timeframes to issue final awards no later than 3 months after the last submission from the parties (LCIA rules, Article 15.10).
Justin Gleeson SC and Jonathon Redwood SC commented in the Australian Arbitration Report that "Australia now stands out, amongst the arbitration seats and venues, as a stable liberal democracy committed to the rule of law and with an independent and supportive judiciary. These are advantages of a juridical seat that can no longer be taken for granted in the modern world."
Since the Australian Arbitration Report was published, there have been a number of decisions on the enforcement of arbitral awards in Australia that have been consistent with those comments.
Australia continues to be a "pro-arbitration" jurisdiction and is increasingly an attractive destination for international arbitration. However, pro-arbitration does not necessarily mean "pro-enforcement". Where the constituent elements of an enforceable award are found to be absent, the Australian courts will not simply overlook these requirements but will instead strictly enforce the need for compliance with them. Our further observations in relation to three recent decisions of the Australian courts which demonstrate this are available here.
In Australia, high profile climate change disputes are often activist led and therefore heard in courts, where decisions carry precedential value and tend to garner publicity. However, arbitration is increasingly being used to resolve climate change-related disputes internationally, in addition to there being an increasing number of renewable energy project disputes resolved by arbitration in Australia. There is therefore an increasing focus on the interaction between international arbitration and climate change in Australia.
Climate change disputes are often characterised by complex scientific, technical and financial concerns. Arbitration allows parties to establish tribunals comprising arbitrators with the relevant technical expertise to determine disputes in an efficient and effective manner. Independent experts can also be made available to the tribunal. Another advantage is the strength of arbitral decisions worldwide and the protection afforded to them by the instruments facilitating enforcement. Both the New York Convention and the Model Law make it difficult to establish a basis for refusal to enforce an arbitral award. Further, arbitration is typically a confidential process, which is attractive to commercial parties who might prefer to settle their disputes outside the public eye.
Foreign investors in renewable energy industries and emissions intensive industries have also been significant users of investor-state arbitration under investment treaties. As a response, states have started including carve-outs in their investment treaties for environmental measures. Companies looking to invest in a foreign country should therefore consider what recourse may be available to investor-state arbitration under any relevant investment treaty to ensure that their investment is structured appropriately in order to take advantage of such protections.
Finally, the arbitration community itself is making a concerted effort to function in a more environmentally conscious way. The Campaign for Greener Arbitrations is urging arbitration practitioners to commit to the Green Arbitration Pledge, a set of guiding principles aimed at minimising the environmental impact of conducting arbitrations. It is expected that, post-pandemic, virtual hearings will be utilised frequently given the greater efficiencies and reduced environmental impact.
There continues to be an increasing uptake in the use of virtual hearings despite the tapering off of restrictions imposed because of the global pandemic. With that, parties, tribunals and institutions have had to adapt to new ways of working and, although the results have been overwhelmingly positive, challenges sometimes remain.
Over the last two years, there appears to have been a steady increase, in both arbitrations and litigation, in the use of electronic hearing books and virtual hearings (or, at least, the attendance by lay and expert witnesses by videoconference). The progress towards fully virtual hearings is an inevitable, and welcome, development in the world of arbitrations and litigation. In time, and with greater functionality of technology and more users au fait with the various platforms and providers, it is likely that many more disputes will be suitable for resolution entirely electronically.
There appears to be a generational divide between those (usually advocates and judges/arbitrators) that have "paper-based" practices, and those practitioners whose practices are predominantly (or entirely) electronic. During this transition period, there is a temptation for arbitral tribunals and advocates to seek to conduct hearings on a “hybrid“ basis, with both paper-based and electronic elements. However, this has the potential to result in a "worst of both worlds" scenario. This is largely because different advocates and arbitrators may rely on different versions of the same materials, which invariably involves duplication of both electronic and paper-based materials to ensure that each party's advocate is not disadvantaged.
Even where a case is heard virtually, it is often advantageous for a party's commercial representatives/instructors, witnesses, experts, and legal representatives to be in close proximity during the hearing. This is because the party's advocates will almost always be assisted by the presence of instructing solicitors, and will invariably will be aided by the assistance of witnesses and experts at various times during the hearing (particularly during the cross examination of the other party's witnesses and experts) and, as was observed by The Honourable James Spigelman AC QC in his opening address at the ACICA/CIArb Australia International Arbitration Conference, there can be benefits in a tribunal who is able to freely discuss issues in person as they arise.
Of course, the "correct" process for hearing an arbitration is dependent on each case's circumstances; for example, where there are allegations of fraud or dishonesty, it may be that the principles of natural justice require the cross-examination of relevant witnesses in-person.
The results of the Australian Arbitration Survey published by ACICA showed that, in relation to domestic and international arbitrations conducted between 2016 and 2019 with an Australian connection, fewer than 10% of arbitrators appointed were women. For international arbitrations with an Australian connection, 92% of arbitrators were male and 8% were female and for domestic arbitrations, 93% of arbitrators were male and 7% were female. These statistics show that the arbitration community still has a long way to go in terms of diversity.
The statistics from the Australian Arbitration Survey are much lower than reported in the ICCA Report of the Cross-Institutional Task Force on Gender Diversity in Arbitral Appointments and Proceedings (ICCA Report). According to the ICCA Report, 21.3% of arbitrators appointed in 2019 were women. 42% of arbitral appointments made by the ICC are women, however, women make up only 18% of appointments by co-arbitrators. This is consistent with analysis in the ICCA Report which shows a marked improvement in the number of women appointed as arbitrators by institutions but not as much improvement in the percentage of female appointments by parties. These figures demonstrate a need for more work to be done by the legal industry to overcome gender bias in arbitration. We are optimistic that initiatives to increase gender diversity in arbitration such as the Arbitration Pledge, being a pledge to ensure that lists of potential arbitrators include a fair representation of female candidates and that gender statistics for appointments be collated and published, signed by the ICC on 19 May 2016, will continue to improve gender diversity in the coming years, even though progress so far has been slower than many hoped for.
In addition, a number of female arbitration practitioners are just now reaching greater levels of seniority making them suitable for appointments in the years to come.
Although some, albeit slow, progress is being made towards greater gender diversity in arbitrations, there is a real lacuna of data in relation to cultural and regional diversity. There appears to be a real need for more data on cultural and regional diversity in arbitrations, including in the appointment of culturally and regionally diverse arbitrators.
Editors: Georgia Quick, Partner and Luke Carbon, Senior Associate.
Contributors: Thomas Gaffney, Senior Associate; Ben Judge, Senior Associate; Prajesh Shrestha, Senior Associate; and Stephanie Douvos, Graduate.