Arbitration Amendment Bill 2017 passes into law (finally)

The Arbitration Amendment Act 2019 makes three amendments to the Arbitration Act 1996:

(1)   Jurisdictional Challenges - new article 16(4)

Article 16 already provides that any jurisdictional challenges are to be raised with the arbitral tribunal before the statement of defence is submitted.  Any High Court challenge to the arbitral tribunal's rolling must be raised in the High Court within 30 days under article 16(3).

The new paragraph provides that a failure to pursue such a challenge in a timely manner will operate as a waiver to any subsequent right to object to jurisdiction.  The intention of this amendment is to avoid the situation arising in Astro v Lippo where the unsuccessful party held off making its jurisdictional challenge until enforcement of the award.

(2)   Saving for provisions in agreements which breach the Act - article 34(2)(a)(iv)

In the case of Carr v Gallaway Cook Allan, Arnold J issued a dissenting judgment, applying the saving in article 34(2)(a)(iv) to the provision in the agreement to arbitrate allowing for appeals on questions of fact.  Such appeals are prohibited under clause 5(10(b) of the Second Schedule.  The difficulty with Arnold J's reasoning is that the saving in that article applies only to "non-derogable" provisions in Schedule 1.  The amendment corrects that deficiency, making the saving apply to the entire Act, consistent with the UNCITRAL Model Law.

The difficulty with this amendment is that the majority of the Supreme Court held that the agreement to arbitrate itself was deficient, which is covered in article 34(2)(a)(i), to which the saving does not apply.  So, while the amendment would not affect the majority's reasoning that the agreement to arbitrate itself was fundamentally flawed, hopefully that finding will be restricted to the particular facts of the case.

(3)   "Quick draw" appointments procedure - clause 1

For some time there has been a conflict between the default appointment of arbitrators under article 11 of Schedule 1 and the default appointment procedure in clause 1 of Schedule 2.  This is a "muddle" described by one judge as being something which the legislature must fix.  

Under clause 1(4) & (5), where there is a failure to agree on the arbitrator, or a default in the agreed appointment process, either party may serve notice on the other specifying the default and nominating an arbitrator.  If the other party failed to rectify the default within 7 days, then the nominated arbitrator (unilaterally nominated by the other party) was to be appointed.  The difficulties with are twofold - (1) providing for unilateral appointment of the arbitral tribunal is inconsistent with the Model Law, and (2) a failure to agree is hardly a "default", and it is incapable of rectification other than agreeing to the nominated arbitrator.

This "quick draw" provision was inherited from the NSW domestic arbitration legislation, and was repealed in NSW shortly after NZ adopted the Model Law in 1996.  The rationale for the procedure has also been accepted as out of date since AMINZ was appointed as the default nominating body under article 11 in March 2017.

The provisions relating to the arbitration of trust disputes are to be picked up in the Trusts Bill.  Establishing a rebuttable presumption on the confidentiality of related court proceedings will have to live for another day.