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Australian court confirms pro-arbitration stance

A recent  decision of the Supreme Court of New South Wales is welcome confirmation of Australia’s pro-arbitration stance, highlighting the continued commitment of Australian courts to give effect to parties’ agreements to arbitrate.

In the case (11 pages / 85 KB), the court considered whether a contractual amendment waiving the application of a pre-arbitration step in a multi-tiered dispute resolution clause rendered the arbitration agreement “inoperative” or “null and void” under section 8 (1) of the 2010 Commercial Arbitration Act.

The dispute concerned claims raised by Icon Si (Aust) Pty Ltd (Icon) against the Australian Nuclear Science and Technology Organisation (ANSTO) arising from a contract by which Icon was engaged to construct a radiation facility. The contract included standardised general conditions of contract, which were a modified version of AS 4000 – 1997 General Conditions of Contract, and originally included a three-tiered dispute resolution clause providing for negotiation and expert determination, followed by arbitration. However, by a subsequent Amendment Deed, the parties agreed to waive the application of expert determination to any disputes arising under the contract.  

ANSTO sought a stay of the proceedings in favour of arbitration pursuant to s.8(1) of the Commercial Arbitration Act 2010 (NSW) on the basis that there was a valid arbitration clause in the contract. Icon resisted the application, arguing that the referral to expert determination was a pre-condition to commencing arbitration, and that the waiver of the expert determination clause rendered the entire arbitration clause inoperative.

The court sided with ANSTO, holding that the arbitration clause remained operative and binding. The court held that, by entering into the Amendment Deed, the parties had modified the rights and obligations under the contract, but they had not amended the language of the contract. The court highlighted that the parties’ intention in waiving expert determination did not equate to a waiver of arbitration, but simply removed one tier of the multi-tiered dispute resolution process – the obligation to submit disputes to arbitration had not been altered by the Amendment Deed.

Anna Wren, dispute resolution expert at Pinsent Masons, said: “This case is an important reminder to take care when dealing with multi-tiered dispute resolution clauses. Pre-conditions to arbitration should be defined clearly in the contract, and need to be carefully complied with (or carefully waived by agreement), to avoid costly arguments on admissibility or jurisdiction being raised later.”

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