Clifford Gouldson Lawyers

Commercial Arbitration: A viable option for business disputes

Print Version

2/04/2013

Investigating every reasonable avenue to minimise cost and disruption in resolving disputes is critical to a successful business.

Commercial arbitration is one of the avenues that is sometimes employed. Provided here is an outline of how it works and how it might benefit your business the next time it’s involved in a commercial dispute.

What is Commercial Arbitration?

Commercial Arbitration is the process by which parties to a commercial dispute agree to have that dispute decided by a third party appointed by agreement between themselves with very little (if any) intervention by the courts. 

Commercial disputes can be defined very broadly and includes disputes arising out of the supply of goods or services, distribution agreements, commercial agency appointments, leasing, building and construction work, consulting, engineering, licensing, transport of goods and many other forms of business or industrial cooperation. 

Parties must voluntarily agree to participate in and be bound by an arbitration process.  The decision of an arbitrator, which is called an Award, is binding on the participants and a party seeking to enforce an Award can enlist the assistance of the Court to do so. 

New Legislation

On 14 March 2013 the Queensland Parliament passed the Commercial Arbitration Act 2013 (‘the Act’).  The Act repeals the former Commercial Arbitration Act 1990 (Qld) and brings Queensland’s arbitration framework for domestic (as opposed to international) disputes into line with the national model (which has been adopted by most other States) and mirrors international best practice in this area.

Why Agree to Arbitrate Under the Act?

The purpose of the Act is to “facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense”.

There are a number of benefits to the arbitration process under the Act which make it an attractive option for parties wanting to resolve disputes including:

1.  Control over process

The Act gives the parties the ability to decide on the process to be adopted to resolve a dispute.

The only restriction is that parties must comply with the general duties outlined in the Act, including:

  1. doing all things necessary for the proper and expeditious conduct of the arbitration; and
  2. not wilfully doing or causing any act to delay or prevent an Award being made.

If the parties cannot agree on a procedure, the Act provides a number of ‘fall back’ positions and the arbitrator is able to make decisions about the process the parties are to follow.

The ability to control process gives the parties the opportunity to ensure the matter proceeds in accordance with their personal or business needs.

2.  Confidentiality

Arbitration proceedings are confidential.  Pleadings, submissions, statements, information, evidence, notes, transcripts, rulings and Awards that relate to an arbitration proceeding are all defined by the Act as confidential information.  

Unless the parties agree otherwise, confidential information can only be disclosed in very limited circumstances, such as to a professional advisor of a party or if it is required to be disclosed by law.  Limited disclosure is permitted in circumstances where a party is seeking the assistance of a court to enforce an Award.  

This is an attractive element of arbitration proceedings and is very different to the courts which keep a public record of commercial disputes and allows the public (and media) to attend hearings and trials. 

3.  Choice of Arbitrator

The parties are free to determine, by agreement, the number and identity of the arbitrators for a particular dispute.  The arbitrator/s must be independent and impartial.

This allows the parties to select an arbitrator with relevant experience - for example in the building and construction industry or the finance industry - which is likely to assist in the speedy resolution of issues. 

If the parties cannot agree on an arbitrator then they can ask a court to decide.

4.  Cost Effective

Allowing parties to agree on the process and appointing arbitrators with knowledge of a certain area can create a more cost effective process.  

Less time will need to be spent educating the decision maker about the particular industry or commercial relationship.  The decision maker will be able to understand industry specific concepts and assist the parties to tailor a procedure for dispute resolution that best meets their specific needs.

5.  Minimal Court Intervention

A court only has the power to intervene in arbitration proceedings where the Act allows it and generally only on application by one of the parties.  

6.  Enforcement and Appeal

A party seeking to enforce an Award can enlist the assistance of a Court to do so. 

Awards can be appealed to a court on a question of law only.

Entering into an Arbitration Agreement

The Act states that an arbitration agreement must be in writing.  It may be in the form of a clause in a contract or in the form of a separate agreement. 

When entering into either form of agreement it will be important to ensure that the agreement is made in accordance with the Act and it specifies a procedure that you are willing and able to comply with. 

Conclusion

While it may not be the best option in all circumstances it’s clear that commercial arbitration is a valuable tool to consider when dealing with disputes in your business.

If you have any questions in relation to entering into an arbitration agreement or participating in an arbitration process please contact a member of the CG Law Litigation & Dispute Resolution Team.

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