Media

Arbitration's not coming together

The Australian Financial Review 3 August 2007
By By Rachel Nickless

Though the C7 case has put the spotlight on the cost and delays involved in mega-litigation, lawyers say that domestic arbitration has the same problems because key players mimic the court process.

It is not uncommon for complex domestic arbitrations to take two years and the cost of production of documents alone to amount to millions of dollars for one party, according to Mallesons Stephen Jaques litigation and dispute resolution partner Max Bonnell.

"From my point of view, these days there's very little point in domestic arbitration," he said.

Allens Arthur Robinson litigation and dispute resolution partner Oscar Shub said arbitration had "largely become litigation by another name".

The discovery process had become one of the most time-consuming and expensive elements in both litigation and arbitration, he said.

Mr Bonnell said that within his practice there had been a distinct decline in parties using arbitration over the past 10 years. "Other than the confidentiality, which is important to some clients, there's no particular benefit in going to an arbitration process ."

Mr Shub said the cost and time involved in litigation and arbitration was encouraging parties to consider mediation - where parties reached their own solution with the help of a mediator.

The Institute of Arbitrators and Mediators Australia launched a fast-track arbitration process last month to reverse the declining interest in arbitration. The new optional rules limit arbitrations to a maximum of 180 days, but some question whether they will be effective, because of the cultural problems.

Mr Bonnell blamed solicitors and barristers, as well as "a small army of retired judges" who acted as arbitrators, for trying to mimic litigation in arbitration.

"A lot of arbitration practitioners are too conservative to take advantage of the benefits of arbitration," he said.

He called for lawyers to be more adventurous and for arbitrators to take a tougher line on parties to meet timelines and on what documents were necessary in the discovery process.

"In cases I've had in the past where parties miss deadlines, the arbitrator shrugs their shoulders and says, 'What can I do, it's your process'."

IAMA president Laurie James said the fast-track rules would be effective only if they were backed by cultural change - although he believed the problems lay with some of the lawyers assisting parties rather than the arbitrators. IAMA will start a national roadshow in two months to sell the package to industry and other stakeholders.

Mr James said fast-tracking would work only if courts allowed arbitrators to write awards of two to three pages, rather than expecting awards to mimic long court decisions.

A Victorian Supreme Court decision last November overturned an arbitrator's ruling that BHP Billiton owed $19 million to Bermudan company Oil Basins, finding that the arbitrators who gave the ruling failed to give adequate reasons for their decision.

We gratefully acknowledge the permission from Rachel Nickless at The Australian Financial Review to reprint this article.