International Arbitration in Australia: Rationalizing the Creep of Judicialisation alongside Commercial Necessity
This paper discusses the growing concern of judicialisation alongside the varying criticisms attached to international commercial arbitration in Australia. The author will argue that despite the trajectory of increased legalism, costs and formality— this will not dispense with the strong position that international arbitration bears in international commerce and the prudence of addressing the intervening inefficiencies rather than resorting to traditional litigation.
In the ebb and flow of institutional international commercial arbitration (“ICA”), Australia is dwarfed by the likes of its French, Singaporean and Chinese counterparts. Despite a series of legislative implementation and amendments designed to heighten Australia’s appeal as a seat for arbitration over the past decade, Australia has not traditionally been perceived as a favourable destination for ICA despite our comparatively efficient legal system and strong common law traditions.
Arguably, the culprit is two-fold. Firstly, to use the words of Justin Gleeson SC, Australian barrister and Chartered Institute of Arbitration fellow, Australia suffers from the “tyranny of physical distance” inhibiting it to be a key player in the Asia-Pacific and beyond, but secondly, and more importantly for our discussion, Australia bears a stigma of judicialisation where lines are blurred between arbitration and litigation whereby legalism, formality and exorbitant costs overstep their bounds in what should be an ‘alternative’ dispute resolution avenue. This is a vexing concern not only for Australia and it’s arbitral appeal in international commerce but also for the erosion of arbitration as a viable means in the international setting altogether.
The central thesis of this paper is to rationalise this judicialisation in Australia by reflecting on the commercial necessity of international arbitration against it’s generally displeasing trajectory. In doing so the paper will balance the unique advantages to arbitration against the immediate setbacks that judicialisation conveys. This paper is in two parts. Part II will provide a sweeping overview of judicialisation and why it can be damaging to the allure of arbitration drawing on Australia’s position in this regard. Part III will then account to the persisting need for arbitration despite the stigma of judicialisation and comment on best practices geared to address the concerns.
- Judicialisation: A Necessary Evil?
The stretch of institutional arbitral bodies are underwritten by objectives which promote and facilitate the efficient resolution of commercial disputes (domestically and internationally) with overarching aims of delivering expediency, neutrality of process, enforceability of outcome and commercial privacy to parties in dispute. This theory of ICA has been the lodestone of explanatory memorandums and arbitral agreements affirming international arbitration’s place in cross-border transactions. In practice, however, the ‘golden pillars’ of expediency, cost-effectiveness and commercial privacy dwindle to the tune of a tension between informality and formality. This plots the primary issue surrounding judicialisation being the trend by which arbitration imitates the courts and, predictably, not in stellar form. Arbitration on this wavelength has seen administrative layouts and procedures emphasising the antagonism between the parties and the mandatory nature of law which attacks the viability of arbitration where increasing levels of formality, legalism and costs strain what should naturally be a matter of contract between consenting parties dealt with efficiently, inexpensively and expediently.
In Westport Insurance Corp v Gordian Runoff Limited, Justice Heydon excellently, albeit glumly, positioned the crux of this issue. In a cursory tone directed to the matter at hand— he asserted:
The attractions of arbitration are said to lie in speed, cheapness, expertise and secrecy… [it] must be said that speed and cheapness are not manifest in the process to which the parties agreed. A commercial trial judge would have ensured more speed and less expense… [it] is unlikely that the arbitrators had any greater relevant expertise than a commercial trial judge. Secrecy was lost once the reinsurers exercised their right to seek leave to appeal. The proceedings reveal no other point of superiority over conventional litigation [emphasis added].
As would be apparent, Heydon J laid bare and disparaged the hallmarks of speed, inexpensiveness, calibre and confidentiality which stereotypically were the ‘golden pillars’ to the use of arbitration here revealing that it certainly was not the case. Trakman and Montgomery almost mirror the sentiments of Heydon J in affirming that rather than providing a cost-efficient and internationally-accessible method of alternative dispute resolution, ICA has increasingly become formalistic, expensive and merely another inefficient step parties must engage in before litigation. In like tone, Heydon J also, at least in this case, queries the difference between traditional litigation and commercial arbitration red-flagging that arbitration is not functioning the way it was intended.
These are the symptoms of a defective system and, by extension, the wean of arbitration towards formalisation— replicating national judicial procedures and their legal intricacies— are part and parcel with the trajectory. The immediate questions which follow are (1) whether international commercial arbitration is still a viable means of dispute resolution at all, and (2) has the judicial overtones crept in too far rendering the process indistinguishable and effectively a lacklustre intermediary? The answer is yes and no. Judicialisation has seen arbitration’s appeal and viability dwindle primarily from a costs point of view, although there are still fundamental differences between litigation and arbitration the latter being the sensible option in almost every occasion as we will discuss.
How the judicial creep appears will vary from tribunal to tribunal by virtue of arbitration agreements and intervention by national courts. Unfortunately, it is difficult to make definitive assessments of these symptoms due to the privacy afforded to these private arrangements, nonetheless Australia has been considered a prime model to explore judicial formalism in arbitration. Despite the shift in the Australian attitude towards greater ‘judicial support’ rather than ‘judicial intervention’ or the pro-arbitration position there remains an overt criticism of Australia being unduly judicialised highlighted by the puzzling predicament of not being a leading arbitration jurisdiction despite strong common law, rule of law and a relatively efficient system.
- Assessing Australia
A broad indication of Australia’s judicialisation can immediately be associated with lengthy, costly, and overly complex pre-hearing, hearing, and post-hearing proceedings and awards. Australia has a good common law system and naturally the substance of that intertwines into it’s arbitral process too. However, critics of late have pinned particular weak spots to this end. For example, Garnett and Nottage posit that Australia’s conservative and particularised adoption of the United Nations Commission on International Trade Law (“UNCITRAL”) Model Law in 1989 spurred the sense of formalism we see today. They note Australia’s explicit rejection of progressive and seemingly sensible UNCITRAL clauses have been precursive to this examples of which include: the denial of a compromise power granting power to tribunals to make ex-parte preliminary orders regarding interim measures; the restrictive funnel for opting out of the Model Law and wielding the domestic enforcement mechanisms as part of our adoption of the New York Convention cautiously.
There are proponents on either side of the tension although, arguably at the outset, the current position does not fit snugly under the ‘pro-arbitration’ attitude Australia champions. While it is not fair to say that Australia fails to be completely pro-arbitration— it certainly argues that the balance between the ‘localisation’ and ‘delocalisation’ theories (stretching, by extension, to empowering party choices and the mobility of decision makers) are more limited than one would assume.
Further, Justice Croft noted extra-judicially that Australian arbitrators, most of which account for barristers and former Judges, are accustomed to accept lengthy briefs, adopt formal proceedings and produce awards that resemble detailed common law decisions. A looming concern which remains in the hands of the parties by virtue of their arbitrator/s selection— but— out of their hands when the process begins to roll. Responsively, the Australian Centre for International Commercial Arbitration (“ACICA”) expressly adopted an ‘overriding objective’ to circumvent the stigma and redirect the form of arbitral proceedings in Australia. The objective is found at clause 3 of the Arbitration Rules which states:
Clause 3.1: [the] overriding objective of these Rules is to provide arbitration that is quick, cost effective and fair, considering especially the amounts in dispute and complexity of issues or facts involved.
Clause 3.2: By invoking these Rules the parties agree to accept the overriding objective and its application by the Arbitral Tribunal. [emphasis added]
The immediate flavour of the clause fits snugly under the umbrella of case management and it has been referred to as the ‘gold standard’ of idealised arbitration. The clause effectively aims to build on ACICA’s established practice of providing an effective, efficient and fair arbitral process and mirrored the International Chamber of Commerce emphasis on the time and cost efficiency of arbitration. Fittingly, it also stemmed from domestic case management principles that can be found in the Civil Procedure Act 2005 (NSW), the Federal Court of Australia Rules 1974 (Cth) and under the International Arbitration Act 1974 (Cth) which describes arbitration as an “efficient, impartial, enforceable and timely method by which to resolve commercial disputes”. Domestically these all garnered support as the fundamental basis to ensure civil proceedings accorded to expediency, procedural and substantive justice and affordability. Weiniger affirms that if the problems of delay and inefficiency can be solved, then you could address what 80% of people believe to be the biggest problem in arbitration today so it seems that the inclusion of this objective in the Arbitration Rules would be conducive to best practices internationally as well.
However, differently, Trakman and Montgomery posit that this alleged ‘gold standard’ is still met with a continuing apprehension in Australia that its arbitration process is “convoluted and cumbersome” as a result of Australia’s entrenched judicial tradition of rigid common law reasoning despite the early, albeit particularised, adoption of both the Model Law and its revisions in 2010. This is true to some extent, but it is also far too early to make entrenched claims about process 2016 onwards as it is far too early to tell whether the new Arbitration Rules will have influenced the stigma Australia suffered earlier on.
What is certain, however, is that costs and delay (due to this sway of formality) is the fundamental issue of concern and disadvantage stretching over to Australia just as much as foreign jurisdictions evidenced by the Queen Mary University surveys taking place between 2006 and 2010. Although those results are quite aged, the recent 2015 Report released from the International Chamber of Commerce regarding cultural reforms in ICA sternly asserted the concerns of costs expressing the continuity of such an issue.
One final point to be holistic, as we have identified, Australia is not as strategically positioned in terms of geography as other leading arbitral bodies in the Asia-Pacific and often commentators have recourse to this as the lead problem. Arguably, however, it would be ignorant to consider the distance alone as the fundamental factor leading to Australia’s lack of appeal in ICA. In fact, the above-mentioned Queen Mary Arbitration Survey indicated that the “preference [of arbitration] is based on intrinsic features of the local legal system, such as neutrality and impartiality, rather than factors of personal convenience, such as the location of the arbitration venue”. This will not speak to all private arrangements, but will certainly contribute to dispelling criticism that location is the prime reason Australia fails to appeal in ICA.
What remains the prevailing attitude of Australia’s ICA that it remains overly complex and falls short of international best practice by championing a lengthening and formalisation of ICA procedures, the replication of complex civil litigation proceedings and the preference of complex and nuanced awards. Understanding the overt tones of judicialisation in Australia, it is equally puzzling then to see that the ACICA remains a player in the game and commentary actually assumes that Australia is on the cusp of growth in this space. This is the blanket consideration that should be at the forefront of justifying the commercial necessity of ICA despite the movement away from what it may have been intended to be.
- THE PERSISTING NEED
FOR INTERNATIONAL ARBITRATION
There is reason to believe that judicialisation (or the gradual formalisation of alternative dispute resolution) is the natural trajectory of dispute resolution in an exponentially complex world of transactions. In suit, Nottage goes a little further to suggest that international commercial arbitration will likely remain characterised by ever-growing formalisation of international commercial arbitration.
The reason this ill-fated truth is not met with distress is the understanding that, at the end of the day, ICA is a commercial necessity and will continue to have a place as cross-jurisdictional corporate transactions show no signs of stagnating. The rule of thumb, however, is to strike a balance in the midst of addressing the looming issues. Chief Justice French opined extra-judicially that if, in the end, international arbitral processes came to resemble those of an inefficient and expensive national court, their disadvantages might begin to outweigh their advantages, even the advantage of privacy but, in dissimilar tone, arbitration must not be irreversibly guided by the dictates of time and cost so as to imperil the justice afforded to the detailed examination of documents, witnesses and awards.
On the other hand, Trakman and Montgomery suggest that selective aspects of judicialisation arguably add to the continued success of ICA. For instance, parties must seek formal justice which does not derogate from the flexibility essential to ICA underwritten by contract and consent. Without wanting to create a false dichotomy, Stipanowich considered that in the eyes of the user, the most fundamental value of arbitration is not efficiency, but the ability of users to tailor processes to serve particular needs. Understandably both are important, but the take away point is that ICA affords contract and consent as the compass directing private dispute resolution arrangements which can greatly assist the ends of each party catered to their arrangements rather than a one-size-fits-all approach.
Apart from flexibility, there is a plethora of other notable points: the unique confidentiality of the process is also a key factor underpinning commercial interests when cross-border transactions involve jargon of trade secrets; the selectivity and perceived neutrality of party-appointed arbitrator creates a dispute mechanism where procedural fairness is anticipated; and, the finality of awards (in Australia, enforceable across 157 sovereign states who are signatory to the New York Convention) certifying the legitimacy of the process. These hallmarks influence the use of arbitration and have perennially been an opportunity to escape ‘conveyor justice’ in national courts and have active control into how the procedural and substantive functions play out. Lastly, all of these revered aspects aside, it cannot be disputed that the fundamental significance of international arbitration will always be the convenience and ease to address multi-jurisdictional and cross-border disputes.
There is a resounding unattractiveness to litigating under the civil procedure of another sovereign state so it cannot be disputed that ICA is and always has been a key dispute resolution tool which is principally unique from other avenues, the best practices of which will undeniably be contextual depending on the desires of the litigants and commercial necessity.
2. Mitigating the Judicial Creep in Australia
Nottage and Garnett consider that a bolder and more progressive stance in ICA would highlight Australia as a distinctive and forward-looking player in the field although that does not mean that arbitration should lose sight of its fundamental basis’ similar to the ones identified in Heydon J’s comments in Westport Insurance Corp v Gordian Runoff Limited above. Trakman and Montgomery aptly comment that the ingredients of best practice moving forward is comprised of a functional assessment of what both attracts and adds value to ICA, promotes it as a sustainable alternative to civil litigation, and facilitates the implementation of emerging and viable standards of international best practice.
Bao draws on the ‘town elder model’ illustrated by David Rivkin, President of the International Bar Association and Co-chair of the International Dispute Resolution Group at Debevoise and Plimpton, whereby arbitration is reminded of first principles where an arbitrator would simply listen to both sides of the dispute and decide the issues in question asking for information only where necessary. Although, this may be too reductionist of an approach for something which can be quite complex, it concisely packets the ideal that arbitration should pursue in Australia.
Frankly, the immediate ways in which Australia can de-stigmatise and resonate the growth of ICA is to circumvent and address the concerns expressed above. Challenging the exorbitance of costs by simplifying processes and demanding capped-costs agreements; further embracing technology to cull administration; ensuring a greater degree of flexibility with entry into and the shaping of the arbitration; and expediting procedure where possible— are all policy points that require a comb through to remove inefficiencies and aid the attractiveness of ICA in Australia. Kaplan, as a leading Hong Kong arbitrator, advocates for shorter, succinct and head-noted arbitral awards, shorter legal submissions and arguments, low-cost hearing rooms and judgments that dispense with typical common law quirks such as procedural histories and legal submissions all of which would culturally shift the stigma Justices Croft and Alsop noted earlier.
Something not overtly discussed is to involve more innovation into arbitration by way of information and transparency. Mcilwrath notes that as arbitral avenues become more propagated the choices of arbitrators will be paramount to the ends of private parties. So affording parties informed choices as to who is instructed, arbitrator performance, and full disclosure of information wherever possible will alleviate concerns and bolster the attractiveness of Australia’s arbitrators. Further, incorporating feedback into the aftermath of employing the services of arbitral institutions and ensuring the accountability of institutions will also assist the cultural shifts.
Trakman and Montgomery also discuss the place of ‘specialisation’ by way of a single ICA institution and subsets of specialist divisions (i.e. telecommunications, energy and resources etc.) to promote the expertise of arbitral proceedings which would certainly be an interesting and unique development as well.
Australia, as of recently, is actually well placed to pursue these ends as ACICA’s new Arbitration Rules build on the established practice of providing an effective, efficient and fair arbitral process by include provisions on consolidation and joinder, the conduct of legal representatives, along with the introduction of an expedited procedure for lower value or urgent matters commenced. Granted the new Arbitration Rules were introduced in 2016, it may be too early to sense the developments— however key opinion leaders have all expressed optimism for Australia’s growth particularly with the rise of ‘investor-state arbitration’ and Australia being selected as joint host to the International Council for Commercial Arbitration in 2018. Time will tell where Australia will be positioned in due course but the spotlight will certainly be drawn onto the developments.
Although, judicialisation has permeated parts of the system— some of which have been improved, others of which have not— it is undeniable to see the persisting need for the avenue of ICA within international commerce and the same is true for Australia. Despite the nation’s shortcomings on this front, it is on the cusp of immense growth seeing through a series of legal and culturally significant changes over the past decade which have creatively targeted what Australia regards as ‘best practices’ stemming from a strong rule of law and common law tradition.
As the New Rules continue to unravel and be employed in arbitral agreements into the future, it can be anticipated that Australia, like its counterparts in the Asia-Pacific, can anticipate to be regarded as a first-rate, arbitration-friendly jurisdiction and a desirable situs of ICA but not without addressing some engrained tensions by way of our common law traditions seeping into the realm of arbitration as commonly understood.
 Undergraduate (Bachelor of Law (Honours)/ Bachelor of Philosophy) The University of Notre Dame Australia 2017. The author acknowledges Svetlana German, B.Sc/ LLB (UNSW), LLM (Columbia), Lecturer at the University of Notre Dame Australia, for her assistance in this paper.
 Emma Ryan, ‘Dynamic developments’ to impact Aus international arbitration’ 26 July 2017 LawyersWeekly <https:// http://www.lawyersweekly.com.au/wig-chamber/21562-dynamic-developments-to-impact-aus-international-arbitration>.
 Australian Disputes Centre, Arbitration: Overview (2015) Australian Disputes Centre <https:// www.disputescentre.com.au/arbitration/>; Australian Centre for International Commercial Arbitration, Introduction (2016) Australian Centre for International Commercial Arbitration <https://acica.org.au/>.
 Luke Nottage, ‘In/formalisation and Glocalisation of International Commercial Arbitration and Investment Treaty
Arbitration in Asia’ in Joachim Zekoll, Moritz Bålz and Iwo Amelung (eds), Formalisation and Flexibilisation in
Dispute Resolution (Brill, 2014) 211, 214.
 Joachim Zekoll, Moritz Bålz and Iwo Amelung (eds), Formalisation and Flexibilisation in Dispute Resolution (Brill, 2014) 96.
 Alan Redfern, ‘Stemming the Tide of Judicialisation of International Arbitration’ (2008) 2 World Arbitration & Mediation Review 21, 37.
 Tom Altobelli, ‘Mediation in the Nineties: The Promise of the Past’ (2000) 4 Macarthur Law Review 141. Other than procedural aspects, judicialisation will also be enlivened when national courts are called upon to pass judgment on matters relating to arbitration.
 Leon Trakman and Hugh Montgomery, ‘The ‘Judicialization’ of International Commercial Arbitration: Pitfall or Virtue?’ (2017) Leiden Journal of International Law 405.
 Ibid 408. For the sake of charity, it must be stated that judicialisation, although a growing concern, should not be treated as the crucible of arbitration’s problems. Even if streamlined proceedings are sometimes desirable, they are not expeditious if they oversimplify the applicable law, gloss over material facts, exclude expert testimony directed at clarifying both law and facts, and lead to protracted judicial review.
 Trakman and Montgomery (n 10) 405-406.
 James Allsop and Clyde Croft, ‘Judicial Support of Arbitration’ (Paper presented at the APRAG Tenth Anniversary Conference, Melbourne, 28 March 2014) 4; James Allsop and Clyde Croft, ‘The Role of the Courts in Australia’s Arbitration Regime’ (Paper presented as part of Commercial CPD Seminar Series, Monash University, 11 November 2015) 2; Albert Monichino, ‘The Future of International Arbitration in Australia’ (2015) 5(1) Victoria University Law and Justice Journal 60
 Trakman and Montgomery (n 10) 410-411.
 ibid 411.
 Richard Garnett and Luke Nottage, ‘The 2010 Amendments to the International Arbitration Act: A New Dawn for Australia?’, (2011) 7(1) Asian International Journal 1, 2-5, 8.
 Clyde Croft, Commercial Arbitration in Australia: The Past, The Present and the Future (Research Discussion Paper, Chartered Institute of Arbitrators, 2011) 4. The perception is exemplified further as judicial intervention regarding the enforcement of arbitral awards as well. See Clyde Croft and James Allsop, ‘Judicial Support of Arbitration’ (Paper presented at the APRAG Tenth Anniversary Conference, Melbourne, 28 March 2014) 1. Justice Allsop and Justice Croft again have criticised the “localisation” of ICA in Australia and how it undermines a transnational application by failing to properly balance judicial intervention while properly reflecting international best practice, values and codes.
 Trakman and Montgomery (n 10) 411.
 Australian Centre for International Commercial Arbitration (n 18).
 International Chamber of Commerce, ‘Techniques for Controlling Time and Costs in Arbitration’, (2015) ICC
Publication No 861-1: International Chamber of Commerce 4.
 Civil Procedure Act 2005 (NSW) s 56.
 Federal Court of Australia Rules 1974 (Cth) s 37M.
 International Arbitration Act 1974 (Cth) s 39(2).
 Angela Bilbow, The Hottest of Topics in International Arbitration (17 February 2016) Commercial Dispute Resolution <https://www.cdr-news.com/categories/arbitration-and-adr/6169-the-hottest-of-topics-in-international-arbitration>.
 Clyde Croft, Arbitration Law Reform and the Arbitration List of the Supreme Court of Victoria (Discussion Paper, Law Council of Australia 2010) 25; Traxys Europe SA v. Balaji Coke Industry Pvt Ltd (No 2)  FCA 276, 90 (Foster J). Justice Foster of the Federal Court of Australia and Justice Croft of the Victorian Supreme Court in favour of the objectives.
 Professors Richard Garnett and Luke Nottage contend Australia’s adoption of the revised Model Law in 2010 leant towards conservatism and formalism by, inter alia, rejecting compromise powers permitting tribunals to make ex parte preliminary orders for interim measures; and further by restricting the scope for opting out of the Model Law.
 Paul Friedland and Loukas Mistelis, ‘2015 International Arbitration Survey: Improvements and Innovations in International Arbitration’ (Survey, Queen Mary University of London and School of International Arbitration, 2015) 24-32.
 Gerry Lagerberg and Loukas Mistelis, ‘International Arbitration: Corporate attitudes and practices 2006’ (Survey, Queen Mary University of London and School of International Arbitration, 2006) 12; Paul Friedland and Loukas Mistelis, ‘2010 International Arbitration Survey: Choices in International Arbitration’ (Survey, Queen Mary University of London and School of International Arbitration, 2010) 23.
 Friedland and Mistelis (n 26) 14.
 Trakman and Montgomery (n 10) 413.
 Whittaker et al (n 2) 42; Ryan (n 3).
 Luke Nottage, A Weathermap for International Arbitration: Mainly Sunny, Some Cloud, Possible Thunderstorms (Research Paper, The University of Sydney Law School, 2015) 1.
 Robert French, ‘International Commercial Dispute Resolution and the Place of Judicial Power’ (Paper presented at the International Commercial Law and Arbitration Conference, Sydney, 22 August 2013) 7.
 Trakman and Montgomery (n 10) 408.
 Thomas Stipanowich, ‘Arbitration: The ‘New Litigation’’ (2010) 1 University of Illinois Law Review 1–2.
 Gerald F. Phillips, ‘Is Creeping Legalism Infecting Arbitration?’ (2003) 58(1) Dispute Resolution Journal 2.
 Edmund Bao, ‘Arbitration Culture’ (Working Paper, Australian National University, 21 August 2017) 2.
 Garnett and Nottage (n 15) 2-3.
 (2011) 244 CLR 239, 288 (Heydon J).
 Trakman and Montgomery (n 10) 417.
 David Rivkin, ‘Towards a New Paradigm in International Arbitration: The Town Elder Model Revisited’ (2014) 24(3) Arbitration International 375-381; Bao (n 36).
 Andrew Maher and Alex Price, Past and Future of International Arbitration in Australia (16 March 2015) Lawyers Weekly <www.lawyersweekly.com.au/opinion/16275-past-and-future-of-internationalarbitration-in-australia>.
 Trakman and Montgomery (n 10) 419.
 Australian Centre for International Commercial Arbitration (n 18).
 Whittaker et al (n 2) 42; Ryan (n 3).
 Whittaker et al (n 2) 58.