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20 Years of the UNCITRAL Model Law in NZ - How are we fairing?

  • 24 February 2017

John Walton
President Arbitrators’ and Mediators’ Institute of New Zealand
Commercial Barrister, Bankside Chambers, Auckland

On the 20 th anniversary of the adoption by UNCITRAL [1] of the Model Law on Arbitration in July 2005, Sir Ian Barker QC made the following observation at the AMINZ [2] annual conference in Queenstown:

Central to my paper is a realisation that New Zealand contributes to the world scene in so many separate fields of endeavour, to a degree far greater than its size and isolation would indicate. The continuing achievements of our sports people, scientists, researchers and business leaders lend validity to the cliché that ‘Kiwis box above their weight’. The spread of the concept of globalization means that we can no longer ignore international trends whatever our occupation.

Eleven years on, global trade has accelerated at an extraordinary rate, and international commercial arbitration with it. [3] In our own part of the world, global trade is set to continue its increase, with the Pacific Rim expected to play an increasingly important role in it. [4] The recently negotiated Trans Pacific Partnership Agreement links together 12 economies (excluding China) which together comprise 40% of global GDP, and one third of world trade. [5] The proposed Regional Comprehensive Economic Partnership can only cement the importance of trade in the region. [6]

Without the harmonisation brought by the UNCITRAL Model Law and the benefits of enforcement provided by the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, international commercial arbitration would doubtless be mired in relative obscurity, along with the ill-fated 1971 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, which has only five signatories. [7]

New Zealand acceded to the New York Convention on 6 January 1983 and was an early adopter of the Model Law with passing of the Arbitration Act 1996 on 2 September 1996; we were also the first to adopt the 2006 amendments to the Model Law with the Arbitration Amendment Act 2007.

So, how has the Model Law faired in New Zealand over the last 20 years?

The 1991 Law Commission report [8] recommended adopting the Model Law for international arbitrations and also for domestic arbitrations. However, it was not until Mr Peter Hilt, MP and AMINZ member, managed to win a ballot for a private members bill that the Arbitration Bill was introduced into the House. It is fair to say that the new Act was greater with some enthusiasm, [9] and its aims of encouraging the use of arbitration, promoting consistency in international and domestic regimes, redefining and clarifying the limits of judicial review of arbitral awards and promoting consistency in the use of the Model Law have been well understood and accepted by the profession and the judiciary. [10] With one or two exceptions, the judiciary has been highly supportive of arbitration in New Zealand, with the decisions of Doug Hood Ltd v Gold and Resource Developments NZ Ltd [11] (outlining the grounds for granting leave to appeal an arbitral award), Marnell Corrao Associates Inc v Sensation Yachts Ltd [12] (on the availability of interim relief and the enforceability of multi-tiered dispute resolution clauses), Carr & Brookside Farms v Gallaway Cook Allan [13] (clarifying the effect of invalidity in the agreement to arbitrate) and more recently the stay of court proceedings in New Zealand pending the outcome of an arbitration between related parties in Singapore ( Danone Asia Pacific Holdings PTE Ltd v Fonterra Co-operative Group Ltd [14] ).

It is fair to say that there has also been the odd bump in the highway over the last 20 years. [15] However, the overall conclusion is that the New Zealand Act is an exemplary piece of legislation which has enjoyed considerable support from the business community, the legal profession, and more critically the judiciary.

Where to from here?

Each year, the Queen Mary School of International Arbitration, part of Queen Mary, University of London, conducts an extensive survey of participants in international arbitration. [16] That survey consistently shows that a clear majority of corporate counsel has a policy of adopting arbitration in their commercial contracts, despite repeated concerns over cost and delay in international commercial arbitration (which the parties themselves are partly responsible for, it has to be said). Anecdotally, it would be surprising in New Zealand to come across a dispute resolution clause in a commercial contract which did not provide for arbitration, though perhaps those clauses do require more careful thought. [17]

There are a number of issues, however, where the Arbitration Act requires further modification, short of an overall review. There have been a number of developments since the 2007 amendments where further amendment to the Act will cement New Zealand’s place as a proactive supporter of the Model Law, but where we have perhaps been dragging our feet. Some issues, clarifying the availability of interim measures through an emergency arbitrator and changing the default appointing body from the High Court to a body nominated by the Minister, have already been covered in the Judicature Modernisation Bill, which currently languishes in Select Committee; there are others, however, which are struggling to gain traction.

The first is in relation to confidentiality. The current position, under article 14F of the First Schedule, is that any court proceeding relating to arbitration (whether judicial review or appeals on questions of law) are to be public. The concern is that confidentiality is a cornerstone of party autonomy, which draws the parties to arbitration, as opposed to court action. [18] The presumption of confidentiality in article 14F is out of step with other jurisdictions in the Pacific Rim, [19] with the result that parties to international arbitration are surprised to find themselves not only in court, but to have their dispute publicly reported. The current position has its origins in the Law Commission’s 1996 report, Improving the Arbitration Act.

AMINZ seeks an reversal of the presumption, not to exclude publication but to change the starting position. It is our view that the benefits identified by the Law Commission can still be achieved by providing for limited, redacted, publication in the first instance and full publication in exceptional cases.

The second relates to maintaining the validity of an agreement to arbitrate in the face of invalidity, discussed by the Supreme Court in the case of Carr v Gallawy Cook Allan. The purpose of the amendment is to deal with the technical difficulties identified by the Supreme Court, and to recognise that where the parties have agreed to go to arbitration, and have fully participated in that arbitration before a highly qualified and experienced arbitrator, they should not be able to avoid the inconvenient outcome of the award on technical grounds relating to the original agreement. Having lost in an arbitration, determined on solid ground, the parties were not well served by one of the parties requiring the entire process to start again.

The third amendment deals with a similar theme where, in a case in Singapore, [20] the unsuccessful party managed to resist enforcement of an arbitral award on jurisdictional grounds no raised in the arbitral proceedings; on the contrary, that party participated fully in the proceedings without demurral.

These are relatively minor issues which are being promoted as much to maintain New Zealand’s position in the region as a responsive and proactive supporter of the Model Law, as to deal with technical issues which would otherwise have the potential to frustrate the stated purpose of promoting arbitration as a means of commercial dispute resolution.

20 years of the Model Law in New Zealand is being celebrated by AMINZ at the Northern Club in Auckland on 1 September 2016.

[1] The General Assembly of the United Nations adopted a resolution approving the Model Law on International Commercial Arbitration, which had been prepared by the United Nations Commission on International Trade Law (UNCITRAL), on 11 December 1985 (Resolution 40/72, 40 GAOR Supp. No. 53, A/40/53).

[2] Arbitrators’ and Mediators’ Institute of New Zealand.

[3] See Williams & Kawharu on Arbitration at pages 573, and Born, International Commercial Arbitration (2 nd Ed, Wolters Kluwer, 2014) at page 94.

[4] See the 15 November 2014 edition of The Economist.

[5] See the 25 April 2015 edition of The Economist.

[6] RCEP participants currently comprise ASEAN nations (Brunei, Burma, Cambodia, Indonesia, Laos, the Philippines, Singapore, Thailand and Vietnam), Australia, China, India, Japan, South Korea and New Zealand. Of these, Burma, Cambodia, Indonesia, Laos, the Philippines, Thailand, India, China and South Korea are not signatories to the TPPA.

[7] Albania, Cyprus, Kuwait, Portugal and the Netherlands.

[8] Law Commission Report No. 20 on Arbitration.

[9] See the comments of Heath J in Pathak v Taxi Transport Ltd [2002] 3 NZLR 681.

[10] A view supported by the Law Commission in its report Improving the Arbitration Act 1996 (NZLC R83, 2003).

[11] [1991] NZCA 158

[12] [2001] NZHC 399

[13] [2014] NZSC 75

[14] [2014] HCNZ 1681 appealed unsuccessfully to the High Court; see [2014] NZCA 536, in which it was accepted that allowing the court action to proceed would prejudice the arbitration in Singapore.

[15] The case of Casata Ltd v General Distributors Ltd [2006] NZSC 8 is hard to reconcile with the express wording of the Act (see Williams & Kawharu at [3.39]-[3.42] for extensive discussion of the merits of the case) and Carr v Gallaway Cook Allan is not without its critics, including the author.

[16] Queen Mary, University of London, 2010 International Arbitration Survey: Choices in International Arbitration 5 (2010). See also Queen Mary, University of London, 2013 International arbitration Survey: Corporate Choices in International Arbitration: Industry Preferences 6 (2013), discussed in Born, International Commercial Arbitration at page 95.

[17] See Carr v Gallaway Cook Allan referred to above.

[18] See the comments of Lord Neill QC that the best method to drive away international arbitration is to reintroduce court intervention and to remove privacy and confidentiality from arbitration, Confidentiality in Arbitration (1996) 12 Arbitration International 287, at 316.

[19] See, for example, the reverse position in Hong Kong and Singapore.

[20] See PT First Media v Astro (2013) SGCA 57