‘Tidying up’ the Arbitration Act 1996

On 1 May 2019 Parliament passed the Arbitration Amendment Bill (the Bill).  The Bill – introduced as a Private Member’s Bill in 2017 – had a somewhat unusual legislative process, with various possible amendments considered and rejected along the way, before settling into its final (slim) form.  As one MP commented, it became “much more of a tidy-up bill” than previously hoped by some.[1]

We explain below what has changed, and what fell by the wayside.

What has changed?

Following consideration by the Justice Committee, reports from Hon Paul Heath QC and input from the Chief Justice and others, the Arbitration Act 1996 (the Act) has been amended in only three respects:

  1. to remove the ‘quick draw’ appointment procedure for arbitrators;
  2. to ensure that parties pursue objections to a tribunal’s jurisdiction to the High Court in a timely manner; and
  3. to further limit the Court’s scope to set aside awards where the arbitration procedure agreed by the parties conflicts with the Act.

The second two amendments are highly technical responses to controversial judicial decisions, both designed to remove potential loopholes and improve the enforceability of arbitral awards.

1. Removal of ‘quick draw’ appointment of arbitrators

The first change was introduced at a late stage, in a Supplementary Order Paper in March 2019, in response to concerns raised by a submission during 2018.

The amendment repeals the default appointment of an arbitrator by what has been called a ‘quick draw’ procedure, which enables one party to unilaterally appoint an arbitrator if a person’s default with an agreed or deemed appointment process is not remedied within a specified time period.[2]  The quick draw procedure had been criticised in previous cases, with the ability of one party to use a default notice to appoint its preferred arbitrator considered “repugnant”.[3]

The need for any such speedy or ‘quick draw’ procedure was removed by the 2016 amendment to the Act which enabled parties to apply to the Arbitrators’ and Mediators’ Institute of New Zealand (AMINZ) to appoint an arbitrator (rather than have to apply to the High Court).[4]

2. Timely objections to tribunal’s jurisdiction

The second change has been the addition of a new article 16(4), Schedule 1 to the Act.  This is intended to further underline that any objection by a party to a tribunal’s jurisdiction must be made in a timely manner.  The new article provides that a “failure to pursue a request… in a timely manner” for the High Court to decide a jurisdictional matter (following the tribunal’s own preliminary ruling on this), will waive the party’s right to later object to the tribunal’s ruling on jurisdiction.

This arose out of a controversial Singaporean decision, PT First Media v Astro Nusantara, not to enforce an arbitral award, despite the party resisting enforcement not having taken the tribunal’s preliminary ruling on jurisdiction to the High Court (though it did reserve its rights).[5]  The New Zealand amendment seeks to avoid the possibility of a lengthy arbitration being permitted to proceed, but the resulting award subsequently being set aside by the High Court because the tribunal lacked jurisdiction.

To be clear, however, this does not affect the situation where a party declines to participate in an arbitration at all, and subsequently raises a jurisdictional objection at the stage of recognition and enforcement of an award.

3. Further limiting the scope to set aside awards

There has also been a technical change to article 34(2)(a)(iv) of Schedule 1 regarding applications to set aside an arbitral award.  This amendment also arose out of a troublesome judicial decision, this time our Supreme Court’s judgment in Carr v Galloway Cook Allan.[6]The intention is to limit the scope for an award to be set aside in circumstances where the arbitration procedure was not in line with what the parties had agreed, but that agreement related to a matter which conflicts with any of the mandatory provisions of the Act.[7]

This should limit the likelihood of awards being overturned, and provides more consistency with the UNCITRAL Model Law.

What has not changed?

Earlier proposals for amendments in relation to confidentiality and the arbitrability of internal trusts disputes (and other matters) did not make it into the Bill as passed.  Key aspects of these proposals are set out below.

No extension of confidentiality

Parliament has not changed the current position in relation to confidentiality in arbitrations.  There had been a proposed amendment to make arbitration-related court proceedings private, unless the court made a direction otherwise.  The amendment intended, for example, that the default position would be that appeals from arbitral awards and applications to set aside an arbitral award were private.

That proposed amendment was not passed.  Notwithstanding the stated desire to ensure New Zealand would be an attractive location for international arbitrations, Parliament decided – for now – that the principle of open justice was more important than (some) parties’ desire for confidentiality.  Some MPs expressed disappointment at this, and it may be that the issue gets raised again at a later stage.

For now, however, parties will continue to need to consider possible steps to protect particularly sensitive disputes, particularly when drafting a dispute resolution clause in a contract proposing an arbitration seated in New Zealand.  They should consider whether they want to exclude any appeals at all, or whether they want to specify that any appeals are made to the (confidential) AMINZ Arbitration Appeals Tribunal.

No changes (in this Bill) re arbitration of trusts disputes

The Bill has not made proposed changes confirming the validity of arbitration clauses in trust deeds.  Our previous commentary outlined the current uncertainty as to whether an arbitration clause regarding internal trust disputes was binding under the Act, and the options being considered to improve the scope for ADR of trusts disputes: see https://www.minterellison.co.nz/our-view/new-frontiers-in-arbitration-update-on-new-zealand-developments.

Parliament has decided that the Arbitration Act is not the vehicle to effect change for trusts disputes.  Instead, some changes are likely to be made via the Trusts Bill 2017, a Government (as opposed to Private Member’s) Bill currently awaiting its second reading.  As presently drafted, the Trusts Bill is likely to address (among other things):

  • the situations in which a trustee or the Court may refer matters to ADR, including arbitration;
  • Court (not arbitral tribunal) appointment of representatives to act for beneficiaries who are unascertained or lack capacity in relation to internal trust disputes;
  • requiring Court approval of any ADR settlement of internal trusts disputes involving such beneficiaries (this requirement does not apply to arbitral awards); and
  • confirming the Arbitration Act will apply to any arbitrations under the Trustee Act.

It seems likely that the High Court will retain what it considers to be its appropriate supervisory jurisdiction over trusts disputes.  We will be following the progress of the Trusts Bill and providing updates on its implications for arbitration of internal trusts disputes.

If you have any questions or comments about the issues discussed in this update, please get in touch with someone from our team.

About the authors

Fiona Tregonning leads the MinterEllisonRuddWatts Arbitration team within the National Disputes Resolution Division, assisted by Emma Peart, Katherine Belton, and Kalyani Dixit, who have specialist expertise in arbitration.

Footnotes

[1] (3 April 2019) 737 NZPD (Arbitration Amendment Bill – In Committee, Duncan Webb)

[2] The amendment repeals clauses 1(4) and (5) of Schedule 2 of the Act (and makes a consequential amendment to clause 1(1)).

[3]Body Corporate 200012 v Naylor Love Construction Limited HC Auckland CIV-2017-404-247, 26 April 2017 at [3], and see Arbitration Amendment Bill 2017 (245-2), p5, available at https://www.parliament.nz/resource/en-NZ/SCR_80473/fd5ffa104b2e4965f73c0a7848d77e9d3ff395fe

[4] See discussion in the Report of Hon Paul Heath, on Arbitration Amendment Bill 2018, 12 July 2018 at [112] – [130], available at https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_72527/tab/submissionsandadvice,

[5] [2013] SGCA 57

[6]Carr v Gallaway Cook Allan [2014] 1 NZLR 792 (SC).  In that case, the parties had agreed to appeals on questions of fact, which Schedule 2 of the Act provides are impermissible (Schedule 1 does not address).  See the Report of Hon Paul Heath QC on Arbitration Amendment Bill 2018, 12 July 2018, supra, paras [88]-[107] and his Supplementary Report, 25 August 2018, paras 5.5 and 5.6 (available at https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_72527/tab/submissionsandadvice)

[7] The amendment replaces a reference in article 34(2)(a)(iv) to ‘Schedule 1’ with a reference to the (entire) ‘Act’. The effect is that it will be a ground for setting aside if the composition of the arbitral tribunal or arbitral procedure was not in accordance with the agreement of the parties, unless such agreement “was in conflict with a provision of this Act, from which the parties cannot derogate…”.

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