The Arbitration Amendment Bill 2017 before Parliament's Justice and Electoral Committee will make New Zealand a better place for arbitration, Arbitrators' and Mediators' Institute of New Zealand (AMINZ) President John Walton says.

The members' bill, sponsored by National MP Paul Foster-Bell, has had its first reading - which it passed by 107 to 12.

The bill proposes changes to the Arbitration Act 1996, which sets rules for resolving private and commercial disputes by arbitration in New Zealand. It aims to bring greater clarity and certainty to our arbitration law, and make it more consistent with laws in other countries.

Mr Walton says the bill would amend existing legislation to: ensure arbitration clauses in trust deeds are given effect; extend the presumption of confidentiality; clearly define the grounds for setting aside an arbitral award and bring New Zealand’s approach into line with foreign arbitration legislation; and, confirm the consequence of failing to raise a timely objection to an arbitral tribunal’s jurisdiction. It would clarify the reach of arbitration by reversing the presumption of confidentiality and clarifying the law.

AMINZ perspective

Mr Walton has prepared the following outline of why AMINZ supports the bill:

New Zealand has an enviable reputation as a place to do business, which is something which AMINZ is seeking to capitalise on both for its members and for the wider business community.  International commercial arbitration has grown considerably in the last 20 years, and promoting New Zealand arbitrators, New Zealand law and New Zealand as a destination for conducting international commercial arbitrations is consistent with both the current and previous governments’ promotion of NZ Inc.

We are consistently identified as one of the least corrupt places in the world; we are a Model Law country; we were among the first to adopt the 2006 amendments to the UNCITRAL Model Law; we have ratified the 1958 NY Convention on the Enforcement of Foreign Arbitral Awards; and we are regional leaders in arbitration.  For us to maintain that position, and consistent with the promotion of NZ Inc, it is important that we are responsive to issues such as those identified in the Bill.

These issues, while technical, are important to the international commercial arbitration world; they notice when countries like New Zealand respond in a way which is supportive to doing business, and to the rule of law.

The bill includes four amendments, each of which addresses relatively discrete, technical issues which puts New Zealand at the forefront of international commercial arbitration:

Arbitration of trust disputes (clause 10A)

There is a strong move internationally for trust disputes to be resolved in arbitration, rather than in the courts; such a move requires legislative intervention. Domestically, the recent disputes involving the estates of Michael Erceg, Sir Robert Chambers and Hugh Green have been prolonged, public and painful for their families.  

In our view, arbitration offers the opportunity for such disputes to be resolved promptly by experts in the field, with appropriate privacy for affected parties.

Globally, there is a trend towards arbitration of trust disputes, as evidenced by the International Chamber of Commerce publishing its standard clauses for such arbitration in 2009, recent academic writings and a decision of the New South Wales Court of Appeal upholding the arbitrability of trust disputes.

Restrictions on reporting court proceedings (clause 14F)

In 2007, New Zealand was one of the first countries to adopt the 2006 UNCITRAL amendments to the Model Law on Arbitration.  Included in those amendments, was confirmation of the confidentiality of arbitral proceedings.

However, where an application is made to court in relation to such proceedings (for example for interim measures, to challenge the appointment of the arbitral tribunal, to stay proceedings or to appeal on a question of law), the presumption is that the court proceedings will be held in public and will be reported.  This places New Zealand out of step with other jurisdictions in the region.

The proposed amendment reverses that presumption, with the expectation that cases of particular public or legal interest will be reported, but on a redacted basis which protects the private interests of the parties.  In appropriate cases, the expectation is that relevant details will be reported.

Challenge to jurisdiction (clause 6(1))

In a recent case in Singapore ([2013] SGCA 57 and commonly referred to as Astro v Lippo), following a lengthy and expensive arbitration on complex issues in the telecommunications industry, the successful party, Astro, sought to enforce the arbitral award.  In Singapore, the Court of Appeal declined enforcement on technical jurisdictional grounds which were also not raised in the arbitration.  That decision has been widely criticised both in Singapore and further afield; it has also caused not insignificant reputational damage to Singapore as a jurisdiction supportive of international commercial arbitration; not least when the award was subsequently enforced in Hong Kong.

The proposed amendment shows that New Zealand is responsive to such international developments; it closes a potential loophole in the New Zealand Act; and confirms New Zealand as a good place to do business.

Carr v Gallaway Cook Allan [2014] NZSC 75 (clause 6(2)-(5)

In June 2014, the Supreme Court released its decision in Carr v Gallaway Cook Allan overturning an arbitral award on also on technical jurisdictional grounds.

That case involved a failure to give timely notices in the settlement of a property transaction. Allegations of negligence on the part of a firm of solicitors were made, which the parties agreed were best dealt with by way of arbitration.  One of New Zealand’s leading commercial arbitrators (a retired judge) conducted the arbitration. The unsuccessful party resisted enforcement of the award on the ground, among others, that the agreement to arbitrate provided for appeals on questions of fact (which is expressly disallowed in the 2007 amendments to the Arbitration Act).

The Supreme Court allowed the challenge, and set aside the award.  The problem with this decision is, while undoubtedly correct on narrow technical legal grounds, the parties agreed to arbitration and willingly and enthusiastically participated in the arbitral proceedings; there has been no criticism of the award; the issue of the validity of the formal agreement to arbitrate was only raised when the losing party sought to resist enforcement; and the parties are now back in the position where they must either revert to the court or recommence their arbitral proceedings from scratch.

This case has also attracted considerable international attention, at potential cost to our reputation as a place which is supportive to settling disputes promptly and effectively at arbitration, with the support of the courts.

This Bill, while covering what may be perceived as narrow technical legal issues, provides an opportunity for NZ to show it is responsive to issues as they arise, promotes New Zealand as a place to do business and is, in our view, worthy of the support of the entire House.