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A milestone for New Zealand arbitration
Fiona Tregonning, Senior Associate | Tuesday 23 August 2016
This year marks 20 years since the passing of New Zealand’s Arbitration Act 1996 (the
Act), based on the 1985 UNCITRAL Model Law and substantially overhauling New Zealand’s previous arbitration regime.
With arbitration of commercial disputes increasingly common in New Zealand (as in many other jurisdictions), including for disputes with international counterparties, it is timely to reflect on the state of New Zealand arbitration practice.
Bell Gully, the
2016 Chambers Asia Pacific New Zealand Law Firm of the Year, has been at the forefront of New Zealand arbitral practice for many years. While New Zealand may be a geographically remote jurisdiction, our experience is that it has increasing exposure to the trends and practice in international arbitrations. Further, New Zealand courts routinely look to promote consistency with international arbitral regimes, as endorsed by the Act.
These are trends that we expect to continue over the next twenty years and beyond, supported by the growing number of international arbitrations held in New Zealand, and the overseas arbitration career experience many New Zealand arbitration practitioners, including our own, have had.
The Arbitration Act regime in a nutshell
The Act contains a core set of 20 basic mandatory provisions applying to all arbitrations governed by the Act, dealing with matters such as arbitrability, confidentiality, and the powers of arbitrators to award any remedies available in civil High Court proceedings.
It is supplemented by a regime of Schedules, with differing application for international and domestic arbitrations. An ‘international arbitration’ is as defined in Article 1(3) of the UNCITRAL Model Law, and includes where the parties have places of business in different states.
The rules in Schedule 1 apply to all arbitrations where the place of arbitration is New Zealand. These rules mostly echo the text of the UNCITRAL Model Law, with some amendments.
The rules in Schedule 2 to the Act are additional and, in some cases, optional provisions:
- They automatically apply to all domestic arbitrations, though some can be opted out of.
- They only apply to international arbitrations if the parties expressly agree.
Accordingly, when drafting an arbitration agreement, consideration always needs to be given as to whether it is desirable to include or opt out of any of the Schedule 2 rules.
There are also two features of the regime worth noting at the outset:
- Appeals on questions of law are optional
Only arbitrations to which Schedule 2 applies (or which choose to have it apply) can have appeals on questions of law. Such appeals are made to the High Court, if the parties so agree or if the High Court gives leave.1 - Confidentiality of arbitrations is protected
Since the 2006 amendments, the Act has contained a detailed set of default provisions preserving the confidentiality of all arbitrations for which the place of arbitration is New Zealand.2 However, court proceedings involving arbitrations (e.g. applications to set aside an award) are public, unless an applicant can convince a court that all or part of the proceedings should be conducted in private.
New Zealand courts supportive of arbitration
The New Zealand courts have proved to be highly supportive of and deferential to arbitrations:
- Stays in court proceedings in favour of arbitration are regularly ordered
The most significant recent development in this regard is a test case decided in 2014 by the New Zealand Supreme Court. The issue was whether, where the parties have agreed to arbitrate any disputes but a summary judgment application is filed in court on the basis that a defendant has no arguable defence to a claim, there is any “dispute” to be referred to arbitration.3 The Zurich case involved an insurer declining a claim, resulting in the insured filing a summary judgment application in court and the insurer seeking a stay of the summary judgment proceedings in favour of arbitration.4 The Supreme Court found that where both a stay and summary judgment application were filed, in principle the stay in favour of arbitration application would be determined first; only if it were rejected would the court consider the summary judgment application. The result is that courts are granting stays in favour of arbitration if the defendant is acting bona fide in rejecting allegations. In some instances this may be at the expense of a speedier summary judgment resolution in the courts. - Courts will assist in obtaining evidence for an arbitration
The Act incorporates the Model Law’s Article 27 provision permitting a tribunal to request court assistance in taking evidence. The Act expands on this to explicitly permit a court to compel a witness to attend before a tribunal to give evidence or produce documents, order a witness to give evidence on oath before a tribunal or any other person for the use of the tribunal, and makes clear that the court has its usual powers to order discovery or interrogatories, issue requests for taking evidence overseas and preserve or inspect any item in issue in the arbitration. Under this provision, for example, the court has recently ordered non-party discovery of market pricing information in a gas contract dispute being arbitrated (in which Bell Gully acted for one of the applicants).5 Additionally, via the Evidence Act 2006, the courts will also issue subpoenas for New Zealand-based witnesses to provide evidence for use in a foreign-based arbitration, at the request of an offshore arbitral tribunal (for example, an LCIA tribunal).6 - Interim measures can be ordered by the courts (as well as tribunals) to compliment and facilitate arbitrations
New Zealand imported – with a few adaptations – the new 2006 Model Law provisions on interim measures. The courts have the same powers as tribunals to grant such measures (though the courts may also do so against third parties). Even prior to the 2006 amendments, the High Court granted interim orders allowing access to and work on a super yacht so as to protect it from deterioration and allow it to be moved, following termination of a yacht building contract and where an arbitral tribunal had not yet been convened.7 In a separate case, the court ordered payment to protect a company obliged to continue building a super yacht, in a dispute in respect of which any arbitration would be held in England.8 However, such measures are not frequently ordered, and the courts have noted that measures will be ordered on the basis that they ‘complement and facilitate’ an arbitration.9 - Courts will not readily set aside awards for alleged breaches of natural justice or conflict with public policy
The New Zealand Act differs from the Model Law in expressly providing in Schedule 1, Article 34, that an award is in conflict with New Zealand’s public policy if there are breaches of the rules of natural justice during the arbitral proceedings or in connection with the award itself, or if the making of the award was induced or affected by fraud or corruption.10 The courts have, however, been slow to set aside awards on that basis, invoking the Act’s intentions of finality of arbitral awards and limitations on curial intervention in arbitrations. Most recently, the Court of Appeal confirmed that a breach of natural justice does not lead automatically to the setting aside of an award; there is a discretion and the court will consider if the breach was relatively immaterial or unlikely to have affected the outcome. The Court did not however consider there was any onus on an applicant to prove there would have been a different outcome if the breach had not occurred,11 as no single factor will be decisive in all cases. The Supreme Court effectively endorsed this approach in refusing leave to appeal the decision.12- In the first Ironsands challenge to an arbitral award,13 the High Court endorsed a ‘high threshold’ for what constitutes conflict with New Zealand’s public policy, suggesting that it is necessary to show some element of illegality or that the enforcement of the award would be clearly injurious to the public good or wholly offensive to a reasonable member of the public.
- Ironsands challenge,14 the High Court rejected a claim that an award had been induced or affected by (equitable) fraud or corruption (of process), as a result of the respondent’s alleged failure to discover relevant documents.
���Two other (related) cases in recent years in which Bell Gully was involved echo this judicial restraint in setting aside awards under Article 34:
Conduct of arbitrations in New Zealand
Most arbitrations in New Zealand are ad hoc arbitrations conducted under the Act’s rules. In practice, many such arbitrations, particularly those involving domestic parties, are conducted along lines similar to that of a High Court proceeding, including with relatively full discovery. That is primarily a function of many New Zealand counsel being familiar with court processes and relatively unfamiliar with international arbitration procedures.
However, things are beginning to change with ever-increasing exposure by New Zealand lawyers, at least at a firm like Bell Gully, to international and institutional arbitral rules, brought about in part by overseas counterparties wanting their disputes governed by other sets of rules with which they may be more familiar, or conducted in other jurisdictions. This year, for example, Bell Gully has been involved in an arbitration with a seat in Singapore, conducted under the UNCITRAL Arbitration Rules. Our arbitration practitioners also have familiarity with arbitrations under the ICC and LCIA Rules and under the ICDR Rules as administered by the American Arbitration Association, and routinely work alongside arbitration specialists from other jurisdictions for the purposes of either domestic or foreign-based arbitrations.
Also of note is that New Zealand now has its own institutional arbitration options. In 2010 the New Zealand Dispute Resolution Centre was launched. Under the NZDRC’s auspices is the New Zealand International Arbitration Centre which has separate rules for international commercial arbitration, intended “to support and facilitate international dispute resolution and to promote New Zealand as a venue for international commercial arbitrations and mediations”.15 There are also separate rules aimed at expedited commercial arbitrations (of 45, 60 and 90 days).16 While not incorporated by reference into the NZDRC rules, the NZDRC supports usage of the IBA Rules on the Taking of Evidence for guidance, and it appears the IBA Rules are becoming more frequently used in New Zealand arbitrations.
There is also now an AMINZ Arbitration Appeals Tribunal which parties can choose as a route for confidential appeals (rather than the potential publicity of an appeal in the High Court).17 Well-known New Zealand-based arbitrator David Williams QC has been the President of the Committee administering the Tribunal since 2008.
Overall, 20 years on from the adoption of the UNCITRAL Model Law, the state of New Zealand arbitration practice is healthy, well supported by the judiciary and legal profession and continuing to develop along lines consistent with international practice.
Foreign-based counterparties and their counsel should be confident about the prospect of holding an arbitration in New Zealand or seeking New Zealand Court assistance relating to overseas arbitrations.
Bell Gully experience
Bell Gully has a highly experienced team of dispute resolution specialists who regularly act in arbitrations across a wide range of industries. We are experienced in advising clients on the arbitration process, appearing as advocates in arbitration proceedings, and in advising clients on the drafting of arbitration clauses before any dispute arises. We have an extensive network of domestic and international contacts that we can utilise for both party appointed arbitrators and tribunal chairpersons.
We routinely conduct both domestic and international arbitrations under the New Zealand Arbitration Act 1996 (based on the UNCITRAL Model Law), and our practitioners have experience with arbitrations under the ICC Rules, UNCITRAL Arbitration Rules and LCIA Rules, among others, and familiarity with the IBA Rules on the Taking of Evidence. We also advise on investment treaty arbitration issues.
Our lawyers regularly work alongside overseas counsel to obtain New Zealand court assistance for foreign arbitrations in:
- the conduct of New Zealand-based arbitrations with international aspects, and
- assisting with overseas-based arbitrations involving New Zealand aspects or parties
Some of our arbitration practitioners have returned to New Zealand following time spent working in international arbitration practice in London, New York or elsewhere.
Our arbitration specialists sit within the broader Bell Gully litigation team, which is widely acknowledged as the strongest in New Zealand and deals with complex and contentious commercial disputes in all areas.
1 Schedule 2, Article 5 of the Act.
2 Sections 14 and 14A – 14I of the Act.
3 Schedule 1, article 8 of the Act requires that a court grant a stay in favour of arbitration unless there is “not in fact any dispute between the parties with regard to the matters agreed to be referred”.
4
Zurich Australian Insurance Ltd v Cognition Education Ltd [2014] NZSC 188. Bell Gully at this time was involved in a case involving the same clash between summary judgment and stay in favour of arbitration applications,
NZ Local Government Insurance Corporation Limited v R+V Versicherung AG [2013] NZHC 690.
5
Vector Gas Contracts Ltd v Contact Energy Ltd [2015] 2 NZLR 670 (HC).
6
Dalian Deepwater Developer Limited v Sveinung Dybdahl [2015] NZHC 151.
7
Marnell Corrao Associates Inc v Sensation Yachts Ltd (2000) 15 PRNZ 608 (HC).
8
Sensation Yachts Ltd v Darby Maritime Ltd HC Auckland M1146-sw02, 25 October 2002.
9
Safe Kids in Daily Supervision Ltd v McNeill [2012] 1 NZLR 714.
10 Schedule 1, Article 34(2)(b) and (6) of the Act.
11 While agreeing that there is the ordinary burden on the applicant to make out a case that the award should be set aside, the Court expressly departed from the approach taken by Hong Kong courts that there is a legal requirement to show the outcome would be different had the breach not occurred;
Kyburn Investments Limited v Beca Corporate Holdings Limited [2015] NZCA 290 at [47].
12
Kyburn Investments Limited v Beca Corporate Holdings Limited [2015] NZSC 150.
13
Ironsands Investments Ltd & Anor v Toward Industries Ltd & Anor HC Auckland, CIV-2010-404-4879, 8 July 2011 (Courtney J).
14
Ironsands Investments Ltd & Anor v Toward Industries Ltd & Anor [2012] NZHC 1277 (Ellis J).
15
www.nzdrc.co.nz
16
www.nzdrc.co.nz
17
http://www.aminz.org.nz/Category?Action=View&Category_id=172
Disclaimer
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.