Resolving Disputes Across International Borders
Many companies in Australia conduct business with companies and individuals overseas. Par for the course in a global economy. And as with any commercial business transaction, disputes can often arise that need to be resolved.
This can generally be done in one of two ways; through litigation in the courts, or by using alternative dispute resolution (ADR), such as mediation and arbitration.
These days, arbitration is becoming increasingly attractive. Unlike litigation, its confidential; the decisions dont get published. The companies involved appoint an arbitrator, often a solicitor, barrister or retired judge, to reach a decision, known as the award, which is binding. The idea is that disputes are resolved faster and more affordably than by going through the courts, which can take years.
It also means that overseas companies and investors dont have to go through litigation in a foreign country, where the procedures are unfamiliar. And arbitral awards tend to be easier to enforce around the world than court judgments.
Research has shown that major international arbitration centres overseas, including Hong Kong, Singapore and London, are seeing a marked increase in their case numbers.
In Australia though, arbitration has often been criticised for not being efficient or affordable enough.
Our system of international commercial arbitration is based on the New York Convention, to which 144 countries are party. If an arbitral agreement or award is made in one of these countries, its enforceable in the others. Our legislation is also based on the United Nations Commission on International Trade (UNCITRAL) Model laws.
But while the UNCITRAL Model laws were updated in 2006, our legislation hasnt yet been similarly amended. This is one of the aims of the International Arbitration Amendment Bill, introduced in late 2009.
The Bill also proposes that parties to an international dispute only be allowed to resolve it under a Model law, rather than having the option to draw on a state law, which was confusing (although state arbitration laws are now also undergoing change to bring them in line with federal laws.)
The Bill aims to make the role of the court clearer in international arbitrations, and clarify when courts can refuse to recognise foreign awards. Other changes include introducing new options for parties to an arbitration agreement, such as being able to get subpoenas and other court orders to assist with evidence in arbitration.
Australias first International Dispute Centre was opened in Sydney in 2010. The idea is that Australia will begin to be recognised as the place to come to resolve cross-border disputes fairly and quickly, rather than going to overseas centres.
Business across borders is clearly evolving. Arbitration clauses may soon become the norm in business contracts, binding parties to resolve their disputes through arbitration, outside of the courts.