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When even fraud is not nearly enough

Market Insight
9 May 2014

This article first appeared in Volume 80, Issue 2 (2014) of Arbitration – The International Journal of Arbitration, Mediation and Dispute Management, and is reproduced with permission.

The new regime for domestic commercial arbitration reflects how far Australia has come in creating a substantively distinct jurisdiction for commercial dispute resolution as an alternative to the courts. An avowed desire to avoid the replication of processes through the courts motivated the authors of the UNCITRAL Model Law on International Commercial Arbitration (the Model Law).1 Their aim was to restrict drastically the scope for curial intervention in order to achieve speedy, cost-effective, fair and final resolution of disputes.

The Model Law has now been adopted into Australian state law for domestic commercial arbitrations,2 following its earlier reception into Australian federal law for international arbitration.3 It is a moot point whether this makes Australia a more attractive jurisdiction for those contemplating arbitration. Perhaps the point to be made is that the new legislation should make domestic arbitration in Australia more time and cost effective than before.

1. Statutory ethos: England and Wales versus Australia

The English4 and Australian legislatures have each taken different approaches to drafting their legislation to allow recourse against awards. The objectives of both regimes are generally the same, but their methods of reaching those objectives are significantly different. While England and Wales take a restrictive approach, which reflects the special public policy considerations underpinning the English legislation, the Australian approach is a more general reflection of the Model Law, as adopted into the Australian legislation: the uniform Commercial Arbitration Acts (State Acts) and the International Arbitration Act 1974 (Cth) (IAA 1974), respectively. The differences between these textual approaches are significant, but as regards the practical implementation of those provisions, the distinctions are perhaps not all that great. In England and Wales, only the most exceptionally serious of cases will be set aside, even where serious procedural irregularities occur. By contrast, in Australia, following the literal text of the legislation, any breach of natural justice in connection with the making of an award may arguably be contrary to or in conflict with Australian public policy, triggering the possibility of recourse, including setting aside.5

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2. England and Wales

An expression of public policy

The notion that a judgment can always be set aside if impugned by fraud14 is not the norm in commercial arbitration, unlike in litigation in general. The recent English decision in Chantiers de l’Atlantique,15 where the arbitration was tainted by fraud, illustrates this point. The English High Court held that even though the critical expert evidence (given at the arbitration hearing) was fraudulent, the award should not be set aside. In coming to this decision, the Court’s view was that the result would probably not have been any different even if truthful evidence had been given.

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3. Australia

Public policy and Australian domestic commercial arbitration

The State Acts allow an arbitral award to be set aside if the court finds that “the award is in conflict with the public policy of … [the State]”.38 The reference to public policy should be understood in the context of the paramount object of the legislation, which is:

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To all intents and purposes, this is the last word on the exclusivity question.54 Yet it has been suggested that this may amount to a denial of “curial

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