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This topic is within Resolving Civil Disputes.


Required Reading

Dorne Boniface, Miiko Kumar and Michael Legg, Principles of Civil Procedure in NSW (2d ed 2012) Thomson Reuters, [4.340]-[4.465]

M. Legg (ed), Future of Dispute Resolution LexisNexis (2013), Chapter 20.


[1] Arbitration is a quasi-judicial process by which a neutral third party makes a binding determination (award). It involves an adversarial process whereby the parties are heard and submit evidence while each other are present. There are two forms of arbitration:

  1. Compulsory arbitration - this is where the court orders the parties to resolve the dispute via arbitration. These arbitrations are governed by the CPA.
  2. Arbitration by agreement - this is where the parties agreed to resolve the matter via arbitration. These arbitrations are governed by the Commercial Arbitrations Act 2010 (NSW).

Compulsory Arbitration

[2] Under s 38 of the CPA, the court may refer a matter brought before it to arbitration. Exceptions to this include proceedings involving allegations of fraud and all proceedings in the Small Claims Division of the Local Court.[3]

Compulsory arbitration is provided for in Part 5 of the CPA. It is highly recommended for a student to read the entire part. Below are some very essential procedural rules:

  • The arbitrator is conferred with the same jurisdiction of the referring court: s 37.
  • The arbitrator issues a written and signed determination: s 39.
    • A dissatisfied party may apply for a re-hearing before a judge: s 42. See ss 42-47 for the procedure involved.
  • A determination which is not disputed is final and is treated as a judgment issued by the referring court: s 40.
  • The court may make a costs order regarding the arbitration and any rehearings: 46.

Compulsory arbitration is currently in decline, primarily because the District Court's jurisdiction has been expanded to cover most of the cases which previously were referred for arbitration.

Arbitration by Agreement

[4] Alternatively, the parties might agree between them to solve the matter through arbitration (this is called an arbitration agreement). Such arbitration is governed by the Commercial Arbitration Act 2010 (NSW) if domestic, and International Arbitration Act 1974 (Cth) if international. This section deals with domestic arbitrations.

The new legislative scheme is a part of a uniform domestic legislative scheme across States and Territories in Australia. It's advantages are:[5]

  1. It is a tested system of well understood developed frameworks.
  2. It creates national consistency in the regulation and conduct of itnernational and domestic commercial arbitration.
  3. Practitioners will be able to draw on case law and practice in the Commonwealth and overseas to inform interpretation and application of the provisions.


In order for parties to refer matters to arbitration, they must follow the procedure and rules set in the legislation. First of all, there must be an arbitration agreement. An arbitration agreement is defined in s 7 of the act, the essential subsections being:

(1) An "arbitration agreement" is an agreement by the parties to submit to
    arbitration all or certain disputes which have arisen or which may arise
    between them in respect of a defined legal relationship, whether contractual
    or not. 
(2) An arbitration agreement may be in the form of an arbitration clause in a
    contract or in the form of a separate agreement. 
(3) The arbitration agreement must be in writing.

Some other procedural rules from the legislation include:

  • Number of arbitrators - one arbitrator unless otherwise agreed by the parties: s 10
  • Appointment of arbitrators - as agreed by the parties, or if three arbitrators and two parties then one arbitrator by each party, with the third being chosen by the arbitrators themselves, or with court assistance: s 11
  • Challenging a person's appointment as an arbitrator - procedure provided in ss 12, 13
  • The arbitral tribunal's jurisdiction: s 16
  • Place of arbitration - as agreed by the parties or as determined by the arbitral tribunal: s 20.
  • Language to be used - as agreed by the parties or as determined by the arbitral tribunal: s 22.
  • Costs of arbitration - unless otherwise agreed by the parties, the costs of the arbitration may be determined by the arbitral tribunal, who may also cap the costs to a certain amount from the beginning: s 33B.
  • Parties to do all things necessary for the proper and expeditious conduct of arbitral proceedings: s 24B.
  • Power to deal with delay or failures to comply: s 25.
  • Power to issue subpenas: s 27A.

The jurisdiction of an arbitral tribunal was illustrated in Larkden v Lloyd Energy System:

  • Most cases can be settled by arbitration, with the exception of those that are in the exclusive domain of a national court or other tribunal.
  • Whilst things like granting patents are outside the jurisdiction of an arbitral tribunal, this case only involved settling a private dispute between the parties as to their respective rights and obligations under the licensing agreement.
  • Therefore, the matter was within the jurisdiction of the arbitral tribunal.

Part 5 of the Commercial Arbitration Act 2010 (NSW) deals with the conduct of arbitral proceedings, and Part 6 with the making of an award and termination of the proceedings. It is recommended to read both parts.

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Support for Arbitration

[6] Chief Justice Keane expressed his supports and thoughts about arbitration:

  • Arbitration is a quicker, cheaper and sometimes more expert process.
  • International arbitration also has the advantage that it is not skewed by local policies, peculiarities or prejudices.
  • However, arbitration also means more limited appeal possibilities - the courts have less power to intervene (and less procedural protections).


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BKL refers to Dorne Boniface, Miiko Kumar and Michael Legg, Principles of Civil Procedure in NSW (2d ed 2012) Thomson Reuters.

FDR refers to Michael Legg (ed), The Future of Dispute Resolution (2013) LexisNexis.

  1. BKL, p. 235.
  2. BKL, p. 235-42.
  3. UCPR, r20.8.
  4. BKL, p. 242-58.
  5. The Hon John Hatzistergos, Attorney-General, Second Reading Speech Commercial Arbitration Bill 2010, Legislative Council, Parliament of NSW, 12 May 2010.
  6. Chief Justice PA Keane, Federal Court of Australia, Judicial support for arbitration in Australia, Opening address, Financial Review International Dispute Resolution Conference, Sydney, 15 October 2010.
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