1. USE OF COMMERCIAL ARBITRATION
Arbitration is a well-established dispute resolution mechanism in New Zealand. In the nineteenth and twentieth centuries, New Zealand enacted various statutes modelled on the English Arbitration Acts. These were supplemented by a sophisticated body of case law, influenced by English law.
Following a detailed report by the NZ Law Commission in its Report No 20 Arbitration (1991), New Zealand enacted in 1996 a modern statute based on the UNCITRAL Model Law on International Commercial Arbitration (the Model Law). The statute applies, with variations, to domestic and international commercial arbitration and puts New Zealand in the forefront of modern arbitration law. As a result of this legislation and a very supportive judiciary and legal profession, New Zealand has become a highly attractive venue for arbitration. A 2003 review by the NZ Law Commission Report No 83 Improving the Arbitration Act 1996 (2003) found that the 1996 Act was working well. It said at pp ix–x:
‘That the Act appears to be working well. Relatively few flaws or ambiguities have been identified in decided cases. The courts appear to be applying the Act in accordance with underlying themes, viz:
The Arbitration Act 1996 (the Act) governs both domestic and international arbitrations. It applies to any arbitration agreement, whether made before or after commencement of the Act, and to any arbitration under such an agreement commenced after the Act came into force (s 19(1)(a) and (2)). The Act came into force on 1 July 1997.
The Act is divided into:
(a) a principal part, referred to below for convenience as ‘the Act’, containing general statutory provisions which apply to domestic and international arbitration proceedings;
(b) a First Schedule, which also applies to domestic and international arbitration proceedings; and
(c) a Second Schedule of optional rules which applies to domestic arbitrations unless the parties opt out but does not apply to international arbitrations unless the parties opt in.
The First Schedule incorporates the Model Law with minor but important modifications. Subject to those modifications, all references below to articles in the First Schedule should be read as references to the articles of the Model Law, since the Model Law numbering has been retained. The First Schedule is designed to provide parties with a minimum standard of procedural protection, in accordance with the obligations of the New Zealand government under the arbitration treaties it has ratified (described in section 2.2 below).
The Second Schedule contains optional rules, primarily designed for use in domestic arbitrations, which depart in certain respects from the Model Law, most significantly by allowing, in limited circumstances, appeals on questions of law arising out of an award. The additions to the Model Law in the Second Schedule were considered appropriate because:
(a) parties to domestic arbitration are likely to have a closer connection with national laws;
(b) such parties may not have equal bargaining power; and
(c) the state may have a greater interest in the subject matter of domestic proceedings.
In this chapter, ‘s’ is used to refer to a section of the first, principal part of the Act, ‘art’ refers to an article of the First Schedule to the Act, and ‘cl’ refers to a clause of the Second Schedule to the Act.
Part 17 of the High Court Rules supplements the Arbitration Act by setting out certain procedural rules for court proceedings in relation to arbitral matters.
Since New Zealand is a common law jurisdiction, court decisions are an important source of law in so far as such decisions interpret the Act.
The Arbitration Act 1996 has been described above.
New Zealand is a signatory to a number of treaties or protocols relating to arbitration, which are set out in the Third Schedule to the Act, notably the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 1958 (the New York Convention). New Zealand acceded to the New York Convention on 6 January 1983 and it entered into force in New Zealand on 6 April 1983.
New Zealand has also enacted the Arbitration (International Investments Disputes) Act 1979 and the Arbitration (International Investments Disputes) Amendment Act 2000. The principal Act incorporates the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Washington, 1965 (the Washington Convention) into domestic legislation. These Acts provide for the enforcement of Washington Convention (ICSID) Awards. The Arbitration Act 1996 does not apply to a dispute within the jurisdiction of the International Centre for Settlement of Investments Disputes (ICSID) established under the Washington Convention or to an award made under that Convention (Arbitration Act 1996, s 9).
The Arbitrators’ and Mediators’ Association of New Zealand, Inc (AMINZ) is the major institution which acts as an appointing authority and assists in the administration of domestic and international arbitrations. AMINZ originated as a branch of the Chartered Institute of Arbitrators (UK) in 1979 and became the Arbitrators Institute of New Zealand in 1987. The Employment Arbitrators and Mediators Institute and the Mediators Institute of New Zealand have since joined with the Institute to form AMINZ. The AMINZ office is located in its own premises at Level 3, 276–278 Lambton Quay, Wellington, New Zealand, tel: +64 4 499 9384, fax: +64 4 499 9387, www.aminz.org.nz. AMINZ has hearing rooms available for hire.
AMINZ is in the process of establishing an Arbitration Appeals Tribunal: see (2005) 8 International Arbitration Law, ALR June 2005 N34. It will provide a private forum for the resolution of appeals on questions of law as an alternative to High court resolution of such appeals (see section 17.2 below).
The International Chamber of Commerce has a direct presence in New Zealand through ICC New Zealand, an ICC national committee located in Auckland which is administered and supported by the Auckland Regional Chamber of Commerce. There are two New Zealand members on the ICC Court of International Arbitration in Paris. The London Court of International Arbitration (LCIA) also maintains an indirect presence through the inclusion of a New Zealand member on the LCIA Court and a New Zealand representative on the Asia-Pacific Users Council.
Article 5 of the First Schedule provides that ‘in matters governed by this schedule, no Court shall intervene except where so provided in this Schedule’.
The New Zealand courts generally uphold arbitration agreements by striving to give effect to the intention of the parties to submit disputes to arbitration and by not allowing any inconsistencies or uncertainties in the wording or operation of an arbitration clause to thwart that intention: Attorney-General v Mobil Oil NZ Ltd [1989] 2 NZLR 649; CBI NZ Ltd v Badger Chiyoda [1989] 2 NZLR 669; Marnell Corrao Associates Inc v Sensation Yachts Ltd (2000) 15 PRNZ 698.
This approach is aligned with a number of provisions in the Act which reflect a presumption of non-interference and judicial restraint in relation to the arbitral process and a similar presumption that arbitral awards should be enforced whenever reasonably possible. Thus, in addition to the provisions of the Model Law as enacted in the First Schedule, the express purposes of the Act include: ‘to redefine and clarify the limits of judicial review of the arbitral process and arbitral awards’; and ‘to facilitate the recognition and enforcement of arbitration agreements and arbitral awards’ (s 5(d) and (e)).
As to anti-suit injunctions, it is doubtful whether the courts retain powers to issue such injunctions in respect of arbitration in New Zealand due to the combined effect of arts 5 and 8 of the First Schedule but the point has not yet been decided by the courts. On this topic see F Bachand ‘The UNCITRAL Model Law’s Take on Anti-Suit Injunctions’ in E Gaillard (ed) Anti-Suit Injunctions in International Arbitration (Paris, Juris Publishing, 2005) pp 87–112.
The courts must stay court proceedings in favour of arbitration if the requirements of art 8 are met. The New Zealand legislature has modified the requirements of the Model Law by providing, in art 8 of the First Schedule to the Act, that a court will not be required to stay court proceedings if ‘there is not in fact any dispute between the parties with regard to the matters to be referred.’ This addition has come in for strong judicial criticism: see [2002] New Zealand Law Review 49 at 61–65. However, the NZ Law Commission has supported its retention in its Report No 83 Improving the Arbitration Act 1996 (2003) pp 110–113.
A stay will be refused if the applicant for a stay has previously filed a statement on the substance of the dispute. A stay of proceedings was denied in Pathak v Tourism Transport Ltd [2002] 3 NLZR 681. The claimants had filed a statement of claim and sought interim relief from the court on the basis that the dispute was governed by an arbitration agreement. If they had applied for a stay at that point, it would likely have been granted. However, they then took steps in relation to the substance of the dispute in the court, including seeking and providing particulars of pleadings, giving discovery, and participating in a judicial directions conference. The claimants then sought to stay the court proceedings in favour of arbitration. The court held they could no do so: by taking these further steps without seeking a stay, the claimants submitted the substantive dispute to the jurisdiction of the court and their request for a stay came too late.
New Zealand has adopted art 16 of the Model Law, thereby permitting the arbitral tribunal to rule on its own jurisdiction including any objections regarding the existence or validity of the arbitration agreement. The requirements for a plea before the arbitral tribunal that the arbitral tribunal does not have jurisdiction are specified in art 16(2) of the First Schedule to the Act.
Article 16(3) of the First Schedule sets out the circumstances in which a court can address the issue of the jurisdiction and competence of a national arbitral tribunal and again enacts the Model Law. It provides that the arbitral tribunal may rule on the plea as a preliminary question or in an award on the merits. If the tribunal rules on the plea as a preliminary question, any party may, within 30 days after having received notice of that ruling, request that the High Court decide the matter. While such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award. There is no right of appeal from the High Court decision.
The decision of the arbitral tribunal as to its jurisdiction may be reviewed by the High Court after the award has been rendered, either in the context of an application to set aside the award under art 34 or in an enforcement proceeding under art 36.
NZ Law Commission Reports
Report No 20 Arbitration (October 1991) Wellington, New Zealand Report No 83 Improving the Arbitration Act 1996 (February 2003) Wellington, New Zealand
Books
P Green and B Hunt, Arbitration Law and Practice (Wellington, Brooker’s, 2005) D A R Williams QC The Laws of New Zealand, Arbitration (Wellington, LexisNexis, 2004) A A P Willy Arbitration in New Zealand (Wellington, LexisNexis, 2nd edn, 2003)
Journals
D A R Williams QC ‘The New Zealand Arbitration Act – Adoption of the Model Law with Additions’ [1998] 1 International Arbitration Law Review 214
D A R Williams QC ‘The Confidentiality of Arbitral Proceedings under the New Zealand Arbitration Act 1996’ [2000] International Arbitration Law Review N-24
D A R Williams QC and A Buchanan ‘Correction and Interpretation of
Awards under Article 33 of the Model Law’ [2001] International
Arbitration Law Review 119
Sir I Barker QC ‘A Report on Recent Developments in Arbitration in New Zealand’ [2003] International Arbitration Law Review 124 D A R Williams QC ‘Recent Developments in Arbitration in New Zealand’ [2004] International Arbitration Law Review 127
Note: since 1989 The New Zealand Law Review has published annual reviews of arbitration and dispute resolution. The Review is published quarterly by the Legal Research Foundation. For further information contact:
New Zealand Law Review
P O Box 741
Auckland, New Zealand
Tel: +64 9 373 7599 ext 87759
Email: lrf_secretary@auckland.ac.nz
or visit the following websites:
Legal Research Foundation: www.legalresearch.auckland.ac.nz
New Zealand Law Review: www.nzlawreview.auckland.ac.nz
Seminar materials
D A R Williams QC and F J Thorp ‘Arbitration Act’, New Zealand Law Society Seminar, 1997 D A R Williams QC and F J Thorp ‘Arbitration for the 21st Century – A Practical Guide’, New Zealand Law Society Seminar, 2001
An arbitration agreement may be made orally or in writing. The only exception is a consumer arbitration agreement which, for reasons of consumer protection, must be in written form and must also satisfy certain additional procedural requirements (s 11).
An arbitration agreement may take the form of an arbitration clause in a contract or a separate agreement. A reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement, provided that the reference is such as to make that clause part of the contract.
The Act defines an arbitration agreement as an agreement to submit to arbitration all or certain disputes which have arisen or which may arise between the parties in respect of a defined legal relationship, whether contractual or not (s 2(1)). In Methanex Motunui Ltd v Spellman [2004] 3 NZLR 454, the New Zealand Court of Appeal said that there is a ‘dispute’ for this purpose where two or more individuals express and maintain in relation to each other conflicting views or positions, the resolution of which will or may be of legal consequence, or there are questions which may give rise to such dispute if left unresolved. The court further said that there is a ‘defined legal relationship’ where there is a possibility that one party is entitled to some form of legal remedy against the other. Both definitions can be characterised as broad and inclusive.
The Act does not specify any content requirements for an enforceable agreement to arbitrate. Rather, s 10(1) provides that any dispute that the parties have agreed to submit to arbitration may be determined by arbitration, unless the arbitration agreement is contrary to public policy or, under any other law, the dispute is not of a type that is capable of determination by arbitration under any law. The Act applies to noncontractual as well as contractual disputes and, unlike the Model Law, is not restricted to ‘commercial’ arbitrations. Accordingly, the Act creates a general preference in favour of the arbitrability of a broad range of disputes which, as a matter of New Zealand law, are capable of settlement by direct agreement by the parties. So eg competition law matters are suitable for arbitration: Attorney-General v Mobil Oil NZ Ltd [1989] 2 NZLR 649. By contrast, criminal offences or actions in rem may not be referred to arbitration.
As noted above, art 7 of the Model Law has been varied to provide that ‘an arbitration agreement may be made orally or in writing’. This extended definition may help to overcome some of the difficulties experienced in other countries with the Model Law and the New York Convention ‘writing requirement’.
Arbitration is not mandated for any standard type of commercial dispute in New Zealand. There are some limited statutory provisions – such as s 142 of the Biosecurity Act 1993, s 6(6) of the Airport Authorities Act 1996, and s 118(3) of the Animal Products Acts 1999 – that contemplate or mandate arbitration in certain cases but these are not of general relevance.
As a general rule, there are no restrictions on the types of commercial disputes that may be referred to arbitration: see s 10 and Attorney-General v Mobil Oil NZ Ltd [1989] 2 NZLR 649. As set out in section 6.1 above, arbitration agreements contrary to public policy will not be enforced (s 10 and art 36 of the First Schedule).
New Zealand has adopted art 16(1) of the Model Law, which provides that the arbitration agreement is independent of the contract in which it is found. A decision by the arbitral tribunal that the contract is null and void does not automatically entail the invalidity of the arbitration agreement. The tribunal must find that the defect causing the nullity of the contract affects the arbitration clause before the clause itself can be considered null and void.
As a general rule, there are no formal nationality or professional requirements for arbitrators other than those the parties may choose to impose through their agreed selection criteria (First Schedule, art 11(1)).
Article 11 provides that the High Court may make arbitral appointments where the agreed procedure for appointing arbitrators has broken down. If the court makes an appointment it must have due regard to any qualification required of the arbitrator by the arbitration agreement and, in the case of an international arbitration, it must take into account the advisability of appointing an arbitrator of a nationality other than those of the parties.
Clause 1 of the Second Schedule provides for the default appointment of arbitrators in relation to domestic arbitrations. It creates a ‘sudden death’ procedure which may enable a valid unilateral appointment to be made if one party refuses to co-operate. The procedure was upheld in Hitex Plastering Ltd v Santa Barbara Homes Ltd [2002] 3 NZLR 695 but the court said that it must be demonstrated that the appointing party has acted reasonably.
As to independence and impartiality, New Zealand again follows the Model Law. An arbitrator must disclose ‘any circumstances likely to raise justifiable doubts as to his or her impartiality or independence’ to the parties without delay, from the time of appointment and throughout the arbitral proceedings, unless the parties have been previously informed of the circumstances by the arbitrator (First Schedule, art 12). The New Zealand Court of Appeal has held that the test for apparent judicial bias should be applicable to arbitrators: BOC NZ Ltd v Trans Tasman Properties Ltd (1996) 10 PRNZ 199. The modern formulation of that test, which has had regard to the shift that has occurred in recent English jurisprudence to a specifically objective approach, asks whether ‘the reasonable, informed observer would think that the impartiality of the adjudicator might be/might have been affected?’: Ngati Tahingi v Attorney-General (2003) 16 PRNZ 878 at 883.
The foregoing principles apply both to domestic and international arbitrations. AMINZ has confirmed that it will regard the IBA Rules on Conflicts of Interest in International Arbitration (2004) as a guideline in its arbitral appointment processes.
New Zealand has adopted arts 12 and 13 of the Model Law. An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence, or if the arbitrator does not possess the qualifications agreed to by the parties. A party may challenge an arbitrator appointed by that party or with its participation only for reasons of which that party becomes aware after the appointment has been made. The challenge procedure is set out in art 13 of the First Schedule to the Act.
Section 13 of the Act provides that an arbitrator is not liable for negligence in respect of anything done or omitted to be done in the capacity of arbitrator. This applies equally in domestic and international arbitrations. This protection will not apply if the arbitrator is motivated by bad faith. Provided the arbitrator is acting in good faith, the arbitrator will not be liable for negligence even if he or she exceeds jurisdiction.
An arbitrator may also be protected from a claim for defamation by the common law doctrine of qualified privilege or, possibly, absolute privilege.
10. PARTY REPRESENTATION
The Act does not impose any formal requirements as to those who may act as ‘counsel’ in an arbitration. Article 24(3), which is an addition to the Model Law, provides that the parties may appear or act in person or may be represented by any other person of their choice.
Article 20 of the First Schedule to the Act provides that the parties may agree on the place of arbitration and, failing agreement, the tribunal may determine it. In doing so, the tribunal must have regard to the circumstances of the case and the convenience of the parties.
Unless otherwise agreed by the parties, the arbitral tribunal is free to meet, hold hearings, or inspect goods, other property or documents away from the seat of the arbitration.
Subject to the parties’ contrary agreement to particular procedural provisions of the First Schedule and to the requirements that parties are to be treated with equality and that each party is to be given a full opportunity to present its case (First Schedule, arts 18 and 19(1)), the arbitral tribunal is free to conduct the arbitration in such manner as it considers appropriate (art 19(2)). This principle applies equally in domestic and international arbitration.
The First Schedule, reflecting the Model Law, does set out certain procedural provisions applying to all arbitrations, some of which are discussed elsewhere in this paper. For example:
Parties to domestic arbitrations are taken to have agreed that further powers relating to the conduct of the arbitral proceedings apply, unless they have opted out of the relevant provision (Second Schedule, cl 3). The deemed powers of the tribunal in domestic arbitrations are the powers to:
The approach to the gathering and tendering of evidence is largely the same in domestic and international arbitrations.
In accordance with art 23(1), parties to arbitration proceedings may submit with their statement of claim or statement of defence all documents they consider relevant, or refer to the documents or other evidence they intend to submit in the proceedings. Parties increasingly adopt, through supplementary procedural agreements, the IBA Rules on the Taking of Evidence in International Arbitration (2004) as a guide in matters of document production and the evidence of witnesses.
While it is not specifically provided for in the Act, it is common practice in New Zealand for witnesses to present signed statements of their evidence in chief in advance of an oral hearing. Oral evidence at the hearing is subject to cross-examination and re-examination in the normal way that is followed in court proceedings.
The arbitral tribunal has the power to determine the admissibility, relevance, materiality, and weight of any evidence (First Schedule, art 19(2)).
A witness giving evidence, and counsel, expert, or other person appearing before an arbitral tribunal, has the same privileges and immunities as witnesses and counsel in proceedings before a court (First Schedule, art 19(3)). For most purposes, this means they are immune from suit.
No party is required to disclose privileged documents or information at any stage of the arbitration.
As referred to above, under art 26 of the First Schedule, unless otherwise agreed by the parties, an arbitral tribunal may also appoint one or more experts to report to it on specific issues that it is to determine. The tribunal may require a party to give to the appointed expert any relevant information or to produce or provide access to any relevant documents, goods, or other property for the expert’s inspection. If a party so requests of the tribunal deems it necessary, the expert must attend a hearing, at which the parties may put questions to the expert and present expert witnesses to give evidence on the points at issue. These provisions apply unless otherwise agreed by the parties.
The tribunal’s direct power to order discovery and production of documents is limited to documents within the possession or power of a party. Generally, to compel the production of documents by or taking of evidence from a third party, it is necessary to have recourse to the courts: see First Schedule, art 27.
The arbitral tribunal or a party acting with the approval of the tribunal may request that the High Court or district Court assist in taking evidence (First Schedule, art 27(1)). The requirement for prior approval by the tribunal suggests that the other party must be informed of the request. The court may execute the request within its competence and according to its rules on taking evidence (First Schedule, art 27(1)). The court has a discretion whether to accede to the request or not.
The powers of the court to respond to a request are specified in full, in accordance with the legislative intention that the Act provide a comprehensive statement of New Zealand law relating to arbitration. In particular, the High Court or district Court may subpoena or summons a witness to appear before an arbitral tribunal to give evidence or produce documents (First Schedule, art 27(2)(a)). A witness may also be ordered to submit to examination on oath or affirmation before the arbitral tribunal, or before an officer of the court, or any other person, for the use of the arbitral tribunal (art 27(2)(b)). Further, the High Court or district Court may make an order for:
which is in issue in the arbitral proceedings (art 27(2)(c)). These provisions apply equally in international and domestic arbitrations. However, they do not apply to arbitrations under the Washington Convention administered by the ICSID.
Unless otherwise agreed by the parties, an arbitral tribunal may, at the request of a party, order any party to undertake any interim measure relating to the subject matter of the dispute that the tribunal considers necessary (First Schedule, art 17(1)). The power to order interim relief is discretionary. The arbitral tribunal may require a party to provide appropriate security for the purposes of the interim measure.
There is no definition or definitive list of the interim measures that may be granted by the arbitral tribunal pursuant to art 17. However, it is generally accepted that interim measures may fall into two broad categories. The first of these is measures that have the objective of preserving the status quo prior to the final determination on the merits, eg injunctive measures. The second is measures that are designed to stop the other party from disposing of assets or property either which form the subject matter of the dispute or against which a later award may be enforced.
Unless otherwise agreed by the parties, the rules relating to recognition and enforcement of awards apply to interim orders made by an arbitral tribunal as if a reference to an award were a reference to such an order (art 17(2)). By the introduction of this provision, New Zealand has avoided the current international debate on the question of enforcement of arbitral interim measures and ensured the enforceability of orders granting interim measures. However, pursuant to art 24(3), ex parte interim measures are not possible. That article provides that all information provided to the tribunal must be supplied to the opposing party.
A court is entitled to grant interim measures under art 9(1) of the First Schedule, which provides that it is not incompatible with an arbitration agreement for a party to request from a court, before or during arbitral proceedings, an interim measure of protection and for a court to grant such measure. Accordingly, a party does not forgo its right to arbitration by requesting or obtaining from a court interim measures of protection. In other words, the court is not precluded from granting interim measures of protection by the mere existence of an arbitration agreement, especially in cases where, because the arbitral tribunal is not yet established, only the court is able to provide urgent interim measures. However, the court will be reluctant to express views on the merits or take steps that might be seen as intruding upon the arbitrator’s domain.
The range of interim measures able to be granted by a court is wider than for an arbitral tribunal. The court may impose orders affecting third parties and then enforce the orders imposed. New Zealand has added to the Model Law by providing in more detail for the kinds of interim measures that a High Court or a district Court may grant, subject to its ordinary jurisdiction. These are listed in the First Schedule, art 9(2) as follows:
● orders for the preservation, interim custody, or sale of goods that are the subject matter of the dispute;
As a result of recent High Court decisions the principles as to when the arbitral tribunal and High Court have jurisdiction to order security for costs are settled, if somewhat illogical.
Interim measures in support of foreign arbitrations are permissible under s 7 of the Act. Interim measures were ordered by the New Zealand High Court in support of a London arbitration in Darby Maritime Ltd v Sensation Yachts Ltd (HC Auckland, M 1146-SW02, 1 November 2002).
Liability to New Zealand income tax is generally dependent on residence in or connection with New Zealand. A foreign arbitrator conducting an occasional hearing in New Zealand is unlikely to be subjected to New Zealand income tax on the fees earned.
In both domestic and international arbitrations, the tribunal may continue the proceedings and make an award on the evidence before it if a party fails to appear at a hearing or to produce documentary evidence without providing a satisfactory explanation (First Schedule, art 25(c)).
Article 31 lists the formal requirements of the arbitral award. The award must be made in writing and signed by the arbitrator or arbitrators. In arbitral proceedings with more than one arbitrator, the signatures of the majority of all members of the tribunal shall suffice, provided that the reason for any omitted signature is stated.
Unless the parties have agreed that no reasons are to be given or the dispute is settled during arbitral proceedings, the award must state the reasons upon which it is based. A failure by the arbitral tribunal to give reasons would result in non-compliance with the agreed arbitral procedure and, in consequence, an award would be liable to be set aside. The tribunal would, however, have an opportunity to remedy the default.
The award must state its date and place and the place of arbitration. The award is deemed to have been made at that place. After the award is made, a copy signed by the arbitrators must be delivered to each party. In practice, the parties are asked to pay the tribunal’s costs before the award is released.
Unless otherwise agreed by the parties, an arbitral tribunal applying New Zealand substantive law can award any remedy or relief that could have been ordered by the High Court if the dispute had been the subject of civil proceedings in that court (s 12).
Punitive damages may, therefore, be awarded by an arbitral tribunal in the same way that they may awarded by a court. In theory at least, the scope of punitive damages is broader in New Zealand than in England. In New Zealand law, punitive damages are awarded where there has been a ‘contumelious disregard of the plaintiff ’s rights’ or some type of malice toward the claimant: Taylor v Beere [1982] 1 NZLR 81. There must be high-handed or outrageous conduct by the respondent. However, recent cases indicate that awards are generally unlikely to exceed NZ$30,000 (US$20,000): A v B (HC Auckland, CP310/96, 10 May 1999, Young J).
An arbitral tribunal would be free to order rectification or issue injunctions in the same way as a court.
The question of costs is not dealt with explicitly in the Model Law. It is usual practice for arbitral tribunals in international arbitrations to establish costs and fees agreements with the parties, either on an ad hoc basis or under the auspices of an administrative institution.
However, cl 6 of the Second Schedule, which applies to domestic arbitrations unless the parties agree otherwise, and international arbitrations if the parties expressly agree, is more prescriptive in its approach. Clause 6(1)(a) provides that an arbitral award or additional award may fix and allocate the costs and expenses of an arbitration, the fees and expenses of the arbitral tribunal, and any other expenses related to the arbitration, unless the parties agree to the contrary. The costs and expenses of an arbitration are deemed to be legal and other expenses of the parties.
In the absence of an award or additional award fixing or allocating the costs and expenses of the arbitration or the contrary agreement of the parties, each party is responsible for his or her own legal and other expenses, an equal share of the fees and expenses of the arbitral tribunal, and any other expenses relating to the arbitration (Second Schedule, cl 6(1)(b)).
A party may make an application to the High Court for an order to vary the amount and the allocation of costs and expenses made by an award or additional award of the arbitral tribunal (Second Schedule, cl 6(1)(b)). The High Court may vary the amount and/or allocation if it is satisfied that it is unreasonable in all the circumstances. The tribunal is entitled to appear and may be heard on any such application (Second Schedule, cl 6(3)). The applicant must establish that the order was one that no reasonable tribunal could have made; the High Court is, therefore, expected to exercise its review power sparingly.
An arbitral tribunal may award interest on all or part of a sum awarded to a party to the proceedings, for the whole or any part of the period up to the date of the award (s 12(1)(b)). An arbitral tribunal may also award interest on all or part of any sum that is in issue in the proceedings but was paid before the date of the award, for the whole or any part of the period up to the date of payment.
Payment of interest after the date of the award is governed by art 31(5) of the First Schedule, which is an addition to art 31 of the Model Law. It provides that, in the absence of agreement and unless the award otherwise directs, a sum payable under the award shall carry interest as from the date of the award and at the same rate as a judgment debt. This provision applies on a residual basis to both international and domestic arbitrations, because, under art 35(1) of the First Schedule, a judgment may be enforced by entry as a judgment in the High Court in terms of the award. A party who would prefer the residual rule not to apply must make that known during the course of the arbitral proceedings.
Article 33 of the First Schedule to the New Zealand Act confer upon both domestic and international arbitral tribunals the power to correct errors in an award, interpret specific points or parts of the award or make an additional award dealing with claims presented but omitted from the award. A party must make an application for correction, interpretation or an additional award ‘within 30 days of the receipt of the award’ unless the parties have agreed upon another period of time (art 33(1) and (3)). See D A R Williams QC and A Buchanan ‘Correction and Interpretation of Awards under Article 33 of the Model Law’ [2001] 4(4) International Arbitration Law Review 119 for further discussion.
In international commercial arbitration, consistent with the international position, there is no such right of appeal, unless the parties agree that it should be incorporated (s 6(2) of the Act).
The Act provides that in domestic arbitrations there may be a right to appeal on a question of law, unless that right is expressly excluded by the agreement of the parties (Second Schedule, cll 5 and 6). Appeals on questions of fact are precluded, as are appeals on the basis that the arbitral findings are unsupported by any evidence: Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318.
An appeal on a question of law arising out of an award may be made where the parties agreed prior to the making of the award that such appeal was able to be made, or every other party has consented after the making of the award, or with leave of the High Court (Second Schedule, cl 5(1)(a)–(c)). The High Court may not grant leave to appeal unless it considers that the determination of the question of law concerned could substantially affect the rights of one or more of the parties (Second Schedule, cl 5(2)). Otherwise, the High Court may grant leave to appeal on such conditions as it sees fit (Second Schedule, cl 5(3)).
In the absence of further statutory criteria, eight guidelines have been set down by the Court of Appeal as to the grounds upon which the court may grant leave to appeal, namely: the strength of the challenge and/or the nature of the point of law; how the question arose before the arbitrators; the qualifications of the arbitrators; the importance of the dispute to the parties; the amount of money involved; the amount of delay in going through the courts; whether the contract provides for the award to be final and binding; and whether the dispute before the arbitrators is international or domestic. See Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd [2000] 3 NZLR 318.
The procedure to be followed for appeals when leave is not required is set out in rr 879–890 of the High Court Rules. When leave is required, rr 891–894 of the High Court Rules apply. There is a three-month time limit for an appeal on a question of law arising out of an award and the time runs from the date the person seeking to appeal the award received the award, unless the award was induced or affected by fraud or corruption (First Schedule, art 34(3); Second Schedule, cl 5(8)).
As noted in section 3.1 above, AMINZ is in the process of establishing an Arbitration Appeals Tribunal which will allow questions of law to be determined in a private forum as an alternative to High Court appeal proceedings.
The enforcement of foreign and domestic awards in New Zealand is governed by the New York Convention and arts 35 and art 36 of the First Schedule. For the purposes of enforcement in New Zealand, an ‘award’ includes any decision interpreting, revising, or annulling an award and any decision that is to form part of an award.
Article 35(1) of the Model Law, adopted in the First Schedule, provides that an arbitral award is to be recognised as binding, irrespective of the country in which it was made, and that, on an application to the High Court, an arbitral award is to be enforced by entry as a judgment in terms of the award or by action. The grounds for refusing recognition or enforcement are as set out in art 36 of the Model Law.
The procedure to be followed for entry of award as judgment under is set out in rr 895–900 of the High Court Rules. The procedure to be followed to resist enforcement under art 36 is set out at r 901 of the High Court Rules.
New Zealand courts generally recognise and enforce arbitration awards.
Two recent court decisions, Downer-Hill Joint Venture v The Government of Fiji [2005] 1 NZLR 554 and Amaltal Corpn Ltd v Maruha (NZ) Corpn Ltd [2004] 2 NZLR 614, CA) have confirmed that the courts’ jurisdiction to set aside an award under art 34 is a limited one. These decisions go a long way to ensuring that court intervention under art 34 is limited to only those cases where it is truly required: see Downer-Hill Joint Venture v Government of Fiji [2004] International Arbitration Law Review 177.
New Zealand is unique in having a statutory protection of confidentiality in arbitration. Unless the parties agree otherwise, there is a presumption of confidentiality in all arbitrations in New Zealand in that the parties shall not publish, disclose, or communicate any information relating to arbitral proceedings under the arbitration agreement or to an award made in those proceedings (s 14(1)). The implied term of confidentiality is, however, subject to the proviso that publication may otherwise be permitted if the publication, disclosure, or communication is contemplated by the Act, or publication is to a professional or other adviser of a party (s 14(2)).
However, if the matter is referred to the court, the confidentiality of arbitral proceedings must give way to the court’s rules as to public access in judicial proceedings. Generally speaking, court records and proceedings are open to the public unless sealed; and sealing orders are granted only in exceptional cases: TVNZ v Langley Productions Ltd [2000] 2 NZLR 250.
Rule 889 of the High Court Rules provides in relation to appeals under cl 5 of the Second Schedule that the court has all the powers and discretions of the arbitral tribunal to hold the hearing or any part of it in private and to make orders prohibiting the publication or any report or description of the proceedings or any part of them. Under r 66(7) of the High Court Rules, the court may prohibit the search of court records generally.
Practically, arbitral proceedings may not be protected by confidentiality if:
(a) the parties agree otherwise;
(b) matters relating to arbitration are the subject of court proceedings;
(c) disclosure is reasonably necessary for the protection of the legitimate interests of an arbitrating party; or
(d) disclosure is otherwise in the interests of justice. The Official Information Act 1982, which permits general access to governmental information, may also operate to override the presumption of confidentiality. Parties may also need to take into account pre-existing contractual obligations, such as stock exchange reporting requirements, to provide information relating to the award.
The New Zealand Law Commission is currently considering an amendment to s 14. It is likely that there will be law reform reinforcing the current position of an implied term of confidentiality in arbitral proceedings while specifying with greater clarity the precise situations in which the implied term does not apply.
First, it is important to note that the 1996 Act begins with the following statement of the purposes of the Act:
(a) To encourage the use of arbitration as an agreed method of resolving commercial and other disputes; and
These purposes must be kept in mind when interpreting the Act. Secondly, s 3 of the Act states:
‘3. Further provision relating to interpretation – The material to which an arbitral tribunal or a court may refer in interpreting this Act includes the documents relating to the Model law referred to in section 5(b) and originating from the United Nations Commission on International Trade Law, or its working group for the preparation of the Model law.’
Thirdly, it should be noted that in several important respects, most of which have been referred to above, the First Schedule has made additions or variations to the Model Law. The original text of the Model Law needs to be checked against the wording of the First Schedule.
Finally, the nature of the public policy exception to the enforcement of arbitral awards has been recently considered in two important New Zealand cases noted in section 18.1 above. These decisions confirm that this ground should not be invoked lightly and that awards will only be set aside or enforcement refused for the reason that the award is in conflict with the public policy of New Zealand in the clearest of cases.
No court may intervene in the arbitration processes promulgated by the First Schedule except as provided by the rules governing that process in the First Schedule (First Schedule, art 5). It should be noted that art 5 applies only in a circumscribed field – in matters governed by the First Schedule, ie the Model Law – and judicial intervention may take place in matters not covered by the Model Law. Within the allotted field, judicial intervention can be invoked only in the following circumstances:
The New Zealand courts have greater jurisdiction to deal with procedural issues in domestic arbitrations. In addition to the powers stated above, optional rules in the Second Schedule allow the High Court or the district Court, upon request by the tribunal or a party with the approval of the tribunal, to assist in the exercise of the powers conferred on the arbitral tribunal, set out in cl 3 of the Second Schedule, relating to the conduct of the proceedings. For these purposes, the relevant court has the same powers to make orders as it would have in civil proceedings before that court.
