Posted on 19/10/2020 by Oz Susler

Does Choice of Dispute Resolution Method Affect the Application of the Law?

An Open Question in Australia, Regarding the CISG

The ADRRN Blog encompasses the diverse methods of ADR, arbitration being one of them. This week my colleague Ben Hayward has kindly contributed an article in relation to a significant multilateral treaty utilised in international commercial arbitration known as the CISG. The article is a timely one as we celebrate the 40th year of the CISG. Thank you Ben.

Dr Ben Hayward is a Senior Lecturer in the Department of Business Law and Taxation at the Monash Business School, and completed his PhD at the Monash Law Faculty in 2015. He has previously worked at the Deakin Law School, and in private practice at Arnold Bloch Leibler Lawyers & Advisers. I thank Ben for his contribution to this week’s blog.

This image has an empty alt attribute; its file name is light-bulb-image-for-bens-article.docx.jpg — Photo: Nroose/ Public domain

Author: Ben Hayward

Substantive law doesn’t feature regularly on the Australian Dispute Resolution Research Network blog. Nevertheless, in today’s post, I’d like to look at one instance where substantive law and choice of dispute resolution method may collide. This concerns the United Nations Convention on Contracts for the International Sale of Goods: commonly referred to as the CISG.

The CISG is a substantive law treaty developed by the United Nations Commission on International Trade Law. It seeks to harmonise international sales law, around the globe. Differences in national sales laws are thought to create barriers to trade, increasing merchants’ costs of doing business. If merchants deal with the same sales law across national borders, their costs of doing business are reduced, and trade is encouraged.

What does this have to do with choosing between dispute resolution methods? There might be a difference in the way the CISG is applied: though at present, we don’t know.

Because the CISG is intended to apply the same way in all jurisdictions where it is adopted – currently 94 States – its interpretation requires sensitivity to that international context. According to Art. 7(1) CISG:

In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.

This provision sets out a rule of autonomous interpretation. The CISG is to be given its own meaning, rather than being read in light of any particular State’s regular domestic law. In Australia, therefore, we shouldn’t treat the CISG as if it replicates the rules in the Goods Act 1958 (Vic): even though this might be tempting, where this is the law we’re most familiar with.

Does the choice between dispute resolution methods impact the extent to which such internationally-minded interpretations are achieved? This is an open question in Australia, and one that I hope to explore in my future research.

Litigation and international commercial arbitration are two different dispute resolution processes that both involve the application of substantive law. Judges and arbitrators both interpret the CISG, where it applies in the cases they decide.

While the CISG came into force in Australia in 1989 – over 30 years ago – we still don’t have many Australian court cases concerning the Convention. One of the most highly regarded international databases, the Albert H Kritzer CISG Database, records 28 Australian decisions. In research I recently conducted for a forthcoming Melbourne University Law Review article, I identified an additional 5 cases via Lexis Advance: bringing the total to 33. Even still, some of these are appeal decisions, some involve parties opting out of the CISG’s operation, and still others only mention the CISG in passing. As I address in my forthcoming article and also in prior scholarship, Australian court cases directly applying the CISG tend to take a parochial approach to its interpretation. It’s not uncommon for judges to equate the Convention’s operation to that of Australia’s ordinary Sale of Goods Acts: even though this is inconsistent with Art. 7(1) CISG’s interpretative rule.

What about the situation in arbitration? Nearly 20 years ago, Jacobs, Cutbush-Sabine and Bambagiotti suggested that the CISG’s ‘modest treatment’ in Australian case law might be attributed to ‘the prevalence of arbitration, and particularly international arbitration, as a means of resolving dispute[s], although there is no empirical evidence of this’.

If CISG cases involving Australian businesses are being arbitrated rather than litigated, are those arbitral proceedings approaching the Convention in a more internationalist spirit?

At present, this remains an open question. There is still no empirical evidence concerning the CISG’s use in arbitration involving Australian parties. Since international arbitration is private/confidential, arbitral awards are not on the public record in the same way that court judgments are. International evidence does suggest that arbitration is the primary forum for resolving international trade disputes, in a quantitative sense. Since arbitrators may be chosen for their particular expertise, we might hypothesise that they would be more likely to take the CISG’s international context into account in their decision-making. Nevertheless, one international study addressing the ‘quality’ of CISG analysis in arbitral awards (compared to court judgments) concluded that the relationship between the Convention and arbitration was ‘a picture of disinterest and neglect … rather than a fruitful marriage’. [1]

The CISG is intended to benefit merchants and their international trading activities. In future research, I hope to assess the extent to which choices made by Australian businesses between dispute resolution methods impact the Convention’s achievement of this goal.

[1] Petra Butler, ‘CISG and International Arbitration – A Fruitful Marriage?’ (2014) XVII International Trade and Business Law Review 322, 323, 356.

Of Dry Cleaning, Arbitration, and International Commercial Courts: When Courts Can Learn From ADR

Posted on 17/06/2020 by Dr Benjamin Hayward

By Dr Benjamin Hayward and Dr Drossos Stamboulakis

‘Those of you who have been to a dry cleaner in the United States may have seen a sign that says, “Fast. Good. Cheap. Pick two.” What this means is that you can have your dry cleaning good and fast, but it won’t be cheap. Or you can have it good and cheap, but it won’t be fast. Or you can have it fast and cheap, but in that case it won’t be good. What you can’t have is all three …

Some people … seem to think that what applies to dry cleaning doesn’t apply to international arbitration.” [1]

Image: Cosmocatalano, public domain

Alternative dispute resolution might be alternative to the courts, but that doesn’t mean it’s disconnected.

International commercial arbitration and the courts have an important, and mutually beneficial, relationship. Arbitration relieves pressure on our civil justice system. Courts use their powers to support the arbitral process and enforce arbitral awards. Arbitration and the courts also can – and do – learn from each other.

This last notion might seem strange, given that arbitration was traditionally seen as quicker and cheaper than litigation. The reality now, however, is that both arbitration and litigation can be time consuming and expensive. In light of this reality, both dispute resolution mechanisms have sought to improve their procedures over time. When arbitration innovates, courts learn. And when courts innovate, arbitration learns too.

All the while, both dispute resolution mechanisms must also deal with inevitable tensions arising between speed, quality, and cost.

In recent years, a number of international commercial courts (ICCs) have been established around the world. To take just two examples, there are ICCs in Singapore and also in China. They exist as part of those countries’ regular (national) court systems, but they specialise in hearing international commercial cases. Australia doesn’t yet have an ICC. Establishing an Australian ICC has been proposed, though the idea is also controversial for some.

If an Australian ICC was to be established, in the future, what could it learn from arbitration?

Potentially, quite a lot: especially given that ICCs aim to attract disputants, and as a result, they might draw inspiration from some of arbitration’s ‘distinctive features’.

One of those features is the power held by parties to select their arbitrators. Of course, you can’t pick your judge in court. However, an ICC can be constituted by judges having a range of international backgrounds and having specialist international expertise. Arbitration is also renowned for its procedural flexibility. An ICC might take a more flexible approach to the taking of evidence, and the process of proving foreign law. ICCs may similarly allow for representation by foreign lawyers. An ICC might further learn from arbitration’s capacity to offer more limited discovery than traditional litigation.

As courts, however, ICCs also bring with them their own benefits. They include, for example, the judiciary’s contribution to the ongoing development of commercial law via the doctrine of precedent, and its ability to offer greater and more directive case management features designed to promote proportionality in the pursuit of civil justice. ICCs can also more readily act beyond the parties’ autonomy, such as by joining third parties to proceedings where beneficial and expedient to do so.

Though historically thought of as rivals, arbitration and the courts have always learned from each other. The genesis of ICCs merely makes this process explicit, shedding light on the ongoing and conscious hybridisation of dispute resolution procedures in commercial dispute resolution. It is this potential for greater responsiveness to the needs of commercial disputants, premised upon procedural innovation in the pursuit of just and efficient outcomes, that underpins the potential of a future Australian International Commercial Court.

– – –

[1] Jennifer Kirby, ‘Efficiency in International Arbitration: Whose Duty Is It?’ (2015) 32(6) Journal of International Arbitration 689, 690.

The authors are members of the Monash University Faculty of Law’s Commercial Disputes Group.

Challenges and Opportunities for Asia-Pacific International Arbitration: Symposium Report, and News on a Forthcoming Publication

Posted on 10/06/2020 by Dr Benjamin Hayward

By Dr Benjamin Hayward, Professor Luke Nottage, and Dr Nobumichi Teramura

On Friday 15 November 2019, Sydney Law School hosted the ‘Challenges and Opportunities for Asia-Pacific International Arbitration’ symposium.

The event addressed a range of dispute resolution issues: international commercial arbitration, investor-State dispute settlement (including investor-State mediation), and the rise of international commercial courts. Academics, practitioners, and (both current and former) judges were in attendance: ensuring that a wide spectrum of views were addressed throughout the day.

The symposium focused on dispute resolution in the Asia-Pacific region. This is a topic of significant interest to the Australian arbitration community. As far back as 2009, the then-Attorney General Rob Hulls introduced reforms to Australia’s International Arbitration Act aiming to promote Australia as a regional dispute resolution hub. More than 10 years later, this is a goal to which Australia still aspires.

The symposium addressed arbitration in the Australian, New Zealand, Japanese, Indonesian, Hong Kong, and mainland Chinese contexts. It followed a counterpart event hosted by the University of Hong Kong in July 2019.

The symposium’s international comparisons provide much food for thought for the Australian arbitration community, as we seek to continually improve the local landscape. For example, what degree of confidentiality should be preserved in Australian arbitral proceedings? And what lessons can we learn from arbitration experience, in the region, relating to the possible future establishment of an Australian international commercial court?

A collection of papers presented at both events will be published in late 2020 (or early 2021) in a Kluwer volume titled New Frontiers in Asia-Pacific International Arbitration and Dispute Resolution. Details of the volume, including links to pre-publication versions of some papers, are available here.

Of particular interest in the Australian context will be:

* Professors the Hon Marilyn Warren and Clyde Croft’s chapter titled ‘An International Commercial Court for Australia: An Idea Worth Taking to Market’;

* Albert Monichino SC and Nobumichi Teramura’s chapter ‘New Frontiers for International Commercial Arbitration in Australia: Beyond the “(Un)Lucky Country”’;

* Luke Nottage addressing ‘Confidentiality and Transparency in International Arbitration: Asia-Pacific Tensions and Expectations’; and

* Luke Nottage and Ana Ubilava’s chapter on ‘Novel and Noteworthy Aspects of Australia’s Recent Investment Agreements and ISDS Policy’.

Readers of this blog might also be particularly interested in Stacie Strong’s chapter titled ‘Promoting International Mediation Through the Singapore Convention’, that Convention also having been addressed at the December 2019 ADRRN Roundtable. This chapter will mention some empirical data from a study addressing the use of mediation in resolving international commercial disputes.

Interestingly, while Australia’s geographic isolation is thought to be impeding its emergence as a regional dispute resolution hub, COVID-19 has led to the rapid adoption of virtual hearings in civil litigation and in arbitration. The pandemic may have unintentionally highlighted a means by which Australian arbitration and an Australian international commercial court could flourish in the region: notwithstanding the unavoidable ‘social distance’ between Australia and our neighbours.

These recent developments, post-dating the symposium, will be addressed in the forthcoming Kluwer volume. They will be of great interest to those invested in Australia’s potential as a venue for international commercial dispute resolution.

International Commercial Arbitration, its Application of the Law, and the Flexibility of its Process

Posted on 03/06/2020 by Dr Benjamin Hayward

By Dr Benjamin Hayward

In a previous contribution to the ADRRN Blog, I argued in favour of taking a little bit of flexibility away from international commercial arbitration.

In my previous post, I noted that while arbitration is ADR, it remains a type of formal dispute resolution. It also involves application of the law. Still, where a contract doesn’t include a choice of law clause, arbitrators have to identify the law they will apply. My doctoral research explored the significant discretion arbitrators have in this regard.

That discretion is a problem if parties chose to arbitrate because they want enhanced certainty about their legal rights. It’s even more problematic in some particular categories of case where arbitrators have to identify the governing law even after the parties tried to agree on this issue themselves.

I’ve been thinking a bit more about this topic following a recent episode of The Arbitration Station podcast, which included a really great discussion about becoming an arbitrator. Co-host Brian Kotick made some interesting observations about this issue, set in the context of how arbitrators decide their cases:

‘[I]t’s all discretionary at the end of the day and you can’t really predict universally what’s to be decided … I think it depends on how you approach being an arbitrator. I know some arbitrators, their approach is “I’m only going to decide on the arguments – legal arguments and factual arguments – that are presented to me”. And if you take that approach I think it’s much easier because your intellectual curiosity will not lead you in the wrong direction …

Another approach is finding justice – “capital J justice” – in which case you’re going to kind of take a more active role, do your own independent research perhaps … in which case it’s much more difficult of a task …”

So is arbitration about applying the law, or is it about more general notions of commercial justice? Or is the true position somewhere in between? Parties can specifically agree to give arbitrators the power to decide based on principles of equity and fairness, but this is extremely rare. What, then, is the best view of arbitration’s decision-making process where they don’t do so?

In 2013, the High Court of Australia decided a constitutional challenge to the validity of an important part of Australia’s International Arbitration Act. In upholding the legislation, it conceptualised the role of courts in enforcing arbitral awards as holding the parties to their initial agreement to arbitrate: rather than merely rubber-stamping arbitrators’ legal analyses. The Court also held that there is no strict legal rule, in international commercial arbitration, that arbitrators must apply the law correctly.

This gets us part-way to the answer. For a bit more, we can look to the grounds for challenging arbitral awards.

Under the Model Law and the New York Convention, both adopted in Australia, these grounds don’t include an error of law. They do include public policy grounds. Public policy doesn’t cover arbitrators’ ordinary legal errors, but it might cover very significant infringements of fundamental legal principles, such as the rule against double recovery.

Of more interest to me, however, is the ground relating to arbitrators not following the parties’ agreed procedure. Application of the law is a matter of substance, but identifying what law to apply in the first place is a procedural question. As I’ve discussed previously on this blog, arbitration laws and rules give arbitrators significant discretion in identifying the governing law. However, they do still set out at least broad frameworks for making that decision.

While potential mistakes in the law’s application are just part and parcel of choosing arbitration as a form of ADR, in my view, parties remain protected against arbitrators violating the procedure required for identifying that law in the first place.

This is an idea I’ve been interested in for a while now. What does it say about the exact nature of decision-making in international commercial arbitration? I’m not yet sure, but I’m looking forward to exploring that question in my future research.