A. LEGISLATION AND RULES
A.1 Legislation
International arbitration in Australia continues to be governed by the International Arbitration Act 1974 (Cth) (IAA). There have been no amendments to the IAA in the past year.
In December 2023, Australia and the United Arab Emirates (UAE) announced the commencement of negotiations for a Comprehensive Economic Partnership Agreement (CEPA), with negotiations concluding on 17 September 2024. The CEPA treaty was subsequently signed on 6 November 2024, and the Parliament of Australia’s Joint Standing Committee on Treaties accepted public submissions on the CEPA until 17 January 2025, which are now being considered. As the UAE is Australia’s largest trade and investment partner in the Middle East, the CEPA will strengthen the trade relationship between Australia and the UAE and encourage growth in key sectors of the Australian economy. Provided that the CEPA comes into force as expected, we anticipate an increase in trade which will likely result in further international arbitration activity in Australia.
A.2 Institutions, rules and infrastructure
There have been no changes to the Arbitration Rules of the Australian Centre for International Commercial Arbitration this year.
B. CASES
B.1 Arbitration agreements and stay of proceedings
In Icon Si (Aust) Pty Ltd v. Australian Nuclear Science & Technology Organisation [2024] NSWSC 324, the Supreme Court of New South Wales (NSWSC) found that an amendment to an expert determination clause which was part of a tiered dispute resolution clause did not render the contract’s arbitration clause invalid. The applicant (“Icon Si“) and respondent (“ANSTO“) entered into an agreement to construct a facility (“Contract“). Clause 42 of the Contract was a multi-tiered dispute resolution clause which included negotiation as a first step, followed by submission to expert determination, and finally submission of the dispute to arbitration. In October 2021, the Contract was amended to waive the right to expert determination (“Amendment Deed“).
In February 2024, ANSTO applied to the NSWSC for an order to refer the dispute to an arbitrator pursuant to section 8(1) of the Commercial Arbitration Act 2010 (NSW) (NSW CAA), which requires a court to refer parties to arbitration if so requested unless it finds that the relevant arbitration agreement is null and void, inoperative or incapable of being performed. In response to the application, Icon Si argued that the Amendment Deed rendered the arbitration clause inoperative as the precondition of expert determination could no longer be satisfied, while ANSTO’s position was that the waiver in the Amendment Deed only operated to waive the second tier of expert determination and not the “third tier” submission to arbitration. Justice Ball preferred ANSTO’s interpretation, holding that the Amendment Deed did not attempt to change the language of the arbitration agreement and that the waiver of expert determination did not waive the separate adoption of arbitration.[1]
The court also considered the relevant authorities on the question of whether it had jurisdiction to determine whether an arbitration clause is “null and void, inoperative or incapable of being performed” within the meaning of section 8(1) of the NSW CAA because section 16 of the NSW CAA confers that jurisdiction on the arbitral tribunal itself.[2] Justice Ball concluded that it was appropriate to determine the questions of the scope of an arbitration clause when that issue was before it and that it would be difficult to apply section 8(1) of the NSW CAA without doing so.[3] This decision highlights the importance of adhering to the dispute resolution mechanisms agreed between commercial parties and demonstrates the NSWSC’s position arbitration friendly approach.
We reported on the decision of the Full Court of the Federal Court of Australia (FCFCA) in Carmichael Rail Network Pty Ltd v. BBC Chartering Carriers GmbH & Co. KG (The BBC Nile) [2022] FCFCA 171. As reported, this case concerned the carriage, by BBC Chartering Carriers GmbH & Co KG (BBC), of steel rails within Australia (from South Australia to Queensland) pursuant to a contract between the appellant, Carmichael Rail Network Pty Ltd (“Carmichael“) and the second respondent (“OneSteel“) where, after the rails were damaged in transit and a dispute arose:
- BBC commenced arbitration proceedings in London in reliance upon an arbitration provision in clause 4 of BBC’s bill of lading which provided for arbitration in London applying English law
- Carmichael then filed an originating application in the Federal Court of Australia (FCA) claiming damages and seeking to restrain the London arbitration, maintaining that the agreement to arbitrate was rendered inoperative by article 3(8) of the Australian Hague Rules[4], which provides that “any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to goods or lessening such liability otherwise than as provided in these Rules, shall be null and void and of no effect”;
- BBC then filed an interlocutory application in the FCA seeking a stay of the Australian proceeding
- The competing claims were then referred to the FCFCA where Carmichael’s application to restrain the London arbitration was dismissed and the Australian proceeding was stayed in favor of the London arbitration, after BBC provided an undertaking to the FCA that it would maintain its admissions in the London arbitration that the Australian Hague Rules (as applied under Australian law) would apply to the bill of landing in the arbitration (“Undertaking“) and the FCFCA made a declaration by consent that reflected the Undertaking ( “Declaration“)
Carmichael subsequently applied for special leave to appeal to the High Court of Australia (HCA) on the basis that the FCFCA erred in holding that the arbitration provision in clause 4 of BBC’s bill of lading was valid. Carmichael contended that clause 4 should be held invalid, pursuant to article 3, rule 8 of the Australian Hague Rules[5] because there was a risk that BBC’s liability would be relieved or lessened in arbitration for the following reasons:
- A London tribunal would consider themselves bound to interpret article 3(2) of the Australian Hague Rules (which obliges a carrier to carefully load, handle and discharge goods)[6] as imposing a delegable responsibility on BBC in accordance with English law, and that Carmichael would therefore be deprived of the opportunity to have article 3(2) interpreted as imposing a non-delegable responsibility on BBC in accordance with Australian law[7]
- A London tribunal would not interpret clause 3 of the bill of lading in accordance with the Australian Hague Rules, thereby substantially reducing the package limitation defence[8]
- The expense and practical difficulty of Carmichael pursuing its claim against BBC through arbitration in London[9]
In Carmichael Rail Network Pty Ltd v. BBC Chartering Carriers GmbH & Co KG [2024] HCA 4, the HCA affirmed the FCFCA decision, finally dismissing Carmichael’s application to restrain the London arbitration and staying the Australian proceedings, holding the following:
- Article 3(8) of the Australian Hague Rules operates on the balance of probabilities and not any lesser standard of mere possibility, real risk, or reasonably arguable case (as Carmichael’s arguments assumed)
- Article 3(8) must be applied in the circumstances at the time an application is decided, which included consideration of the Undertaking and the Declaration by which BCC accepted that the Australian Hague Rules as applied under Australian law would apply to the bill of landing in the arbitration[10]
- Carmichael had failed to prove, on the balance of probabilities, that the arbitration provision in clause 4 of the bill of lading relieved BBC from liability or lessened such liability within the meaning of article 3(8)
Importantly, the HCA also found that Carmichael’s contention that BBC would be permitted to act contrary to the Undertaking in the arbitration was mere and impermissible speculation[11] and that the Australian Hague Rules cannot be applied under Australian law unless they are also interpreted in accordance with this law.[12] This case is another significant reflection of Australia’s pro-arbitration stance, reaffirming that the statutory and judicial frameworks in place allow commercial parties to resolve disputes by way of alternative means.
SFP Events Pty Ltd v. Little Swamp II Inc [2024] QSC 132 concerned a contractual dispute between SFP Events Pty Ltd (SFP), Little Swamp II Inc (“Little Swamp“) and Creative Artists Agency LLC (CAA). Little Swamp and CAA are the corporate entity and talent agency, respectively, of John Fogerty, the former lead singer of Creedence Clearwater Revival.
In 2023, SFP and CAA agreed on contractual terms (to be entered into by SFP and Little Swamp) regarding Mr Fogerty’s performance at a festival in Queensland, Australia, (“Agreement“). The Agreement included an immediate payment to CAA of a deposit of USD 700,000 (“Deposit“). Relevantly, clause 24 of the Agreement provided that “any claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration in Los Angeles, California in accordance with the commercial rules and regulations then in effect of JAMS…”[13]
Following SFP’s execution of the Agreement and payment of the Deposit to CAA, but before Little Swamp executed it, SFP attempted to renege on the arrangement and commenced proceedings in the Supreme Court of Queensland (“Proceedings“) seeking the following:
- A declaration that its offer to Little Swamp was validly withdrawn
- An order that CAA refund the Deposit on the basis that there was no binding agreement (and, hence, no submission to arbitration)
In response, Little Swamp and CAA each submitted that the contractual arrangements had been concluded by the date SFP attempted to withdraw its offer and that the Proceedings ought to be stayed under section 7 of the IAA in favor of Californian arbitration (in accordance with clause 24 of the Agreement) and, in the alternative, that, even if the Agreement was not enforceable, there was a separable, concluded arbitration agreement by virtue of the communications between the parties and the Agreement signed by SFP. Little Swamp also sought damages for breach of contract, while CAA also sought a specific declaration from the court that any claims arising out of the Agreement should be brought in the arbitration. The court made an order under section 7 of the IAA staying the Proceedings and referring the parties’ dispute, and the question of whether a binding agreement was, in fact, formed, to arbitration.
The court rejected SFP’s argument that it should hear and determine whether a valid agreement or binding arbitration agreement existed,[14] instead concluding that there was a separable arbitration agreement in accordance with the “competence-competence” principle derived from article 16 of the UNCITRAL Model Law[[15] (which grants the arbitral tribunal determining the matter a broad power to decide any question of jurisdiction, including whether any agreement was ever legally created). Additionally, as the separable arbitration agreement was contained in the document sent to Little Swamp for execution it was not necessary for CAA and Little Swamp to have affixed their signatures to the Agreement for the parties to have reached an agreement as to arbitration.[16]
B.2 Proportionate liability laws in arbitrations
In Tesseract International Pty Ltd v. Pascale Construction Pty Ltd [2024] HCA 24, the HCA allowed an appeal against a decision of the Court of Appeal of the Supreme Court of South Australia (SASCA), finding, by majority, that Australian proportionate liability laws can be applied in arbitration proceedings. Although this decision relates to a domestic arbitration, its findings will be equally relevant to international arbitrations involving Australian parties which are governed by Australian law, where Australia’s domestic arbitration legislation closely reflects the UNCITRAL Model Law.
In this case, the appellant, Tesseract International Pty Ltd (“Tesseract“), and the respondent, Pascale Construction Pty Ltd (“Pascale“), entered into a contract for the provision of engineering consultancy work by Tesseract (“Contract“). The Contract provided for conciliation of disputes in the first instance followed by referral to arbitration if the dispute remained unresolved (“Arbitration Clause“).[17] While the Contract was governed by South Australian law,[18] the Arbitration Clause did not include an express election of substantive rules of law or procedural rules under which an arbitration must be determined. A dispute arose concerning the quality of Tesseract’s work, and arbitration proceedings were commenced by Pascale for breach of contract, negligence and misleading or deceptive conduct. Tesseract denied liability for its alleged performance issues, but argued, in the alternative, that any damages it may be ordered to pay should be reduced because of each of the following:
- Pascale’s contributory negligence, in accordance with Part 3 of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) (Law Reform Act)
- The concurrent wrongdoing (negligence) of a third party (Penhall), in accordance with proportionate liability regimes established under Part 3 of the Law Reform Act (in respect of contract and negligence claims) and Part VIA of the Competition and Consumer Act 2010 (Cth) (CCA) (in respect of misleading or deceptive conduct claims),[19] without which, defendant concurrent wrongdoers, are left with full liability for a plaintiff’s loss, necessitating claims for contribution amongst concurrent wrongdoers to apportion responsibility as between themselves and also leaving concurrent wrongdoers who are held fully liable with a credit risk vis a vis recovery from each other.
Pascale denied the proportionate liability regimes applied in the arbitration, contending that Tesseract ought not enjoy the benefit of the proportionate liability in a forum (arbitration) in circumstances where Pascale was, itself, not entitled to join any other concurrent wrongdoers to the arbitration (so as to obtain the benefit of the a sharing of responsibility with respect to their concurrent wrongdoing but would need to commence its own, separate proceedings against Penhall for contribution or indemnity).[20]
The arbitrator directed Tesseract to apply to the SASCA for a determination as to whether the proportionate liability regimes applied in the arbitration. The SASCA held that, while Tesseract’s defences (including those based upon the proportionate liability regimes) formed part of the dispute that the parties had agreed to have resolved by arbitration, the proportionate liability laws did not apply in the arbitration because the manner in which the arbitrator could apply such laws would differ materially from the process intended by the relevant state and federal proportionate liability regimes because those regimes contemplated that a plaintiff would have the opportunity to join all concurrent wrongdoers in the one proceeding in order to seek full recovery as between concurrent wrongdoers, but it was not possible for Pascale to join Penhall (as a concurrent wrongdoer) to the arbitration without Penhall’s consent.[21]
In 2024, the majority of the HCA allowed Tesseract’s appeal against this decision, concluding that the proportionate liability provisions should apply either because they were impliedly chosen by the parties, or as a consequence of a choice of the relevant conflict of laws rules attributed by the HCA to the arbitral tribunal.[22]
The majority found that the Commercial Arbitration Act 2011 (SA) gives parties who have agreed to submit a dispute to arbitration distinct choices as to the substantive law, arbitral procedure and curial law,[23] and concluded that there was no public policy justification for treating a dispute under a Commonwealth or South Australian statute as incapable of settlement by arbitration[24] where such laws could be modified to apply to the agreement to arbitrate whilst retaining their integrity.[25] Additionally, the HCA noted that arbitration agreements are liberally construed to ensure that full effect is given to the contractual intention of the parties and that it was well known that a dispute between parties to an arbitration agreement may very well encompass disputes with non-parties.[26]
Notably, the dissenting judges considered that the proportionate liability laws should not be applied to the arbitration, because:
- the proportionate liability regimes would be distorted because key features could not be applied to an arbitration setting;[27]
- the parties impliedly chose the law of South Australia to be the substantive rules of law of the arbitration agreement[28] and the procedure and substance of proportionate liability laws did not fall within the scope of the parties’ choice of substantive rules of law in the Arbitration Clause;[29]
- the distributive operation of proportionate liability laws concerning a dispute detracts from the paramount object of arbitration which is to fully resolve disputes between parties without the need for further litigation (in this case, separate proceedings by Tesseract against concurrent wrongdoers for contribution).[30]
This judgment indicates that respondents may be able to rely upon proportionate liability regimes to apportion and reduce their liability in disputes where there are concurrent wrongdoers regardless of whether other concurrent wrongdoers are parties to the main contract and arbitration. It also indicates that claimants may need to have recourse to separate litigation against non-party concurrent wrongdoers to be made whole. The case is a pertinent reminder, in drafting arbitration provisions, to consider how local laws (including proportionate liability regimes) may impact the dispute resolution process and to ensure express terms are included in arbitration clauses to reflect parties’ preferences as to the choice of substantive law and joinder of parties.
B.3 Set aside of arbitral awards
The recent case of CBI Constructors Pty Ltd and Another v. Chevron Australia Pty Ltd [2024] HCA 28 flags potential issues with bifurcating arbitration proceedings whilst highlighting Australian court’s willingness to enforce arbitral awards (including interim awards).
In February 2017, CBI Constructors Pty Ltd (CBI) commenced arbitration proceedings against Chevron Australia Pty Ltd (“Chevron“). The dispute related to CBI’s allegations that Chevron had underpaid it for staffing services CBI provided under its contract with Chevron. The contract provided that any dispute “be exclusively and finally settled” by arbitration administered using the UNCITRAL Rules, and that any award would be “final and binding”.[31]
The proceedings were bifurcated, with liability to be determined first, followed by quantum and quantification issues. Following a liability hearing in November 2018, the arbitral tribunal issued an interim award against Chevron (“First Award“). In May 2019, the tribunal ordered CBI to replead its case on quantum. Chevron objected to the repleaded claim on the basis that, in making the First Award, the tribunal had discharged its duty and was precluded from considering CBI’s new arguments. In August 2022, following a second hearing in which Chevron’s objections and CBI’s arguments were heard, the tribunal issued a further award (“Second Award“) rejecting Chevron’s objections and declaring that CBI were not precluded from advancing the repleaded claim.
Chevron applied to the Supreme Court of Western Australia (WASC) for the Second Award to be set aside under section 34(2)(a)(iii) of the Commercial Arbitration Act 2012 (WA) (“Arbitration Act“) (an Act which emulates the UNCITRAL Model Law), again contending that the Second Award dealt with a dispute either not contemplated by, or falling within, the terms of the submission to arbitration, or containing decisions on matters beyond the scope of the submission to arbitration. The WASC held it was open to Chevron to have the court examine its objections afresh, and that the tribunal was functus officio, meaning its duty had been discharged.
CBI’s appeal of this decision to the Western Australia Court of Appeal (WASCA was dismissed, with the WASCA finding that the majority of the arbitral tribunal overlooked the meaning of many of the pleadings, submissions and procedural orders, and had made a number of erroneous findings. The WASCA also held that the arbitral tribunal was functus officio, and the Second Award should be set aside under the Arbitration Act. CBI appealed, unsuccessfully, to the HCA on two grounds. First, CBI contended that the WASCA erred in holding that the WASC had power to set aside the Second Award and should have instead held that the arbitral tribunal had exclusive authority to determine whether the First Award precluded the advancement of the repleaded claim. On this ground, the majority found that, unless otherwise agreed by the parties, an arbitral tribunal only has authority or jurisdiction to finally decide the dispute submitted to it by the parties once and that once an award is rendered, the parties rights and obligations under the arbitration agreement are replaced with new obligations created by the award, such that the tribunal no longer has the necessary agreement of the parties to revisit the issues that have been determined.[32] That is, once a final and binding award is made, an arbitral tribunal has no authority to further consider the subject of that award.[33]
Second, CBI contended the WASCA erred in finding that the WASC’s review of submissions in an application to set aside an arbitral award is a de novo review, meaning it was conducted without deference to the decision of the previous court. The majority of the HCA found that the language of the UNCITRAL Model Law does not provide for a standard of absolute or substantial deference to the arbitral tribunal and that the standard afforded to provisions of the Model Law with materially identical wording is de novo.[34]
This decision reinforces the “foundational” principal of party autonomy in determining the jurisdiction of an arbitral tribunal and is a reminder that, subject to any jurisdiction conferred by statute, the tribunal’s jurisdiction depends on the content and extent of the parties’ voluntary consent and agreement to submit their commercial disputes to arbitration.[35]
Mark Chapple (Partner), Sophie Snow (Senior Associate) and India Shores (General Associate) are members of Baker McKenzie’s Sydney and Melbourne Dispute Resolution Groups. The authors would like to thank Tilly Heal, Madeleine Salier, Siena Hopkinson, Jonathan Georgiadis and Ella Redman for their assistance in the preparation of this chapter.
[1] [2024] NSWSC 324 at [26] and [27].
[2] [2024] NSWSC 324 at [14].
[3] [2024] NSWSC 324 at [14].
[4] being the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading as amended by the Carriage of Goods by Sea Amendment Act 1997 (Cth) (COGSA).
[5] which provides that “any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to goods or lessening such liability otherwise than as provided in these Rules, shall be null and void and of no effect”.
[6] [2024] HCA 4 at [13].
[7] [2024] HCA 4 at [6].
[8] [2024] HCA 4 at [6].
[9] [2024] HCA 4 at [6].
[10] [2024] HCA 4 at [8].
[11] [2024] HCA 4 at [56].
[12] [2024] HCA 4 at [58].
[13] Judicial Arbitration and Mediation Services
[14] [2024] QSC 132 at [74] and [75].
[15] [2024] QSC 132 at [77] and [78].
[16] [2024] QSC 132 at [81].
[17] [2024] HCA 24 at [79].
[18] [2024] HCA 24 at [143].
[19] [2024] HCA 24 at [80].
[20] [2024] HCA 24 at [81].
[21] [2024] HCA 24 at [84].
[22] [2024] HCA 24 at [151].
[23] [2024] HCA 24 at [28].
[24] [2024] HCA 24 at [75] per Gageler CJ.
[25] [2024] HCA 24 at [140] per Gordon and Gleeson JJ.
[26] [2024] HCA 24 at [369].
[27] [2024] HCA 24 at [240] and [263] per Steward J.
[28] [2024] HCA 24 at [193] and [210] per Edelman J.
[29] [2024] HCA 24 at [210].
[30] [2024] HCA 24 at [222] per Edelman J.
[31] [2024] HCA 28 at [4].
[32] [2024] HCA 28 at [22].
[33] [2024] HCA 28 at [28].
[34] [2024] HCA 28 at [44]-[46].
[35] [2024] HCA 28 at [15].
