Australian court rulings strengthen pro-arbitration stance and expand scope of arbitration

The Australian courts are known for being supportive and protective of arbitration agreements and the arbitral process. The judiciary’s pro-arbitration stance has continued as reflected in several recent rulings. In one of these cases the High Court of Australia – the country’s highest court – provided safe harbour to arbitration agreements in bills of lading. The case concerned a dispute over damaged goods arising from a carrier contract between a railway company Carmichael and BBC, a carrier booked by Carmichael to transport steel rails.

At the centre of the case was a bill of lading issued by BBC to Carmichael on the day the rails were loaded on the carrier ship. The document included an exclusion clause providing that the carrier would have no liability for damage to cargo, an English choice of law clause and an arbitration agreement requiring that any dispute related to the bill of lading be referred to arbitration in London.

Read more of our report on international arbitration in 2025

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• UAE: recent arbitration reforms while legacy DIFC-LCIA clause debate continues
• Saudi Arabia firmly on the map as key arbitration and dispute resolution hub
• New digital services and legal developments boost international arbitration usage in Qatar
• Egypt a ‘central hub’ for arbitration in the MENA region
• Investment disputes continue to drive international arbitration developments in Africa
• Southern African states form harmonised arbitration framework
• UK arbitration developments continue to enhance position as key dispute resolution jurisdiction
• French arbitration law evolves ahead of 2025 reforms
• Germany to become more attractive for international arbitration proceedings
• Singapore continues to rise as an international dispute resolution hub
• Continued improvements in international arbitration driven by new HKIAC rules and case law
• India continues work to modernise arbitration landscape
• Significant developments in Japan’s arbitration landscape
• South Korea strengthens international arbitration framework
• China continues to improve arbitration process efficiency and effectiveness
• Australian court rulings strengthen pro-arbitration stance and expand scope of arbitration
• Construction projects and contracts must consider sanctions risks
• New types of M&A disputes will drive up international arbitration cases
• Growing demand for expertise in cryptocurrency related arbitration in 2025
• Major changes crystallising in investor-state dispute settlement
• What the future holds for mediation in investor-state dispute settlement

Following the incident, BBC filed an arbitration against Carmichael in London regarding the damaged rails, while Carmichael filed an application in the Federal Court of Australia (FCA) seeking damages and to restrain any arbitration in relation to the contract. Carmichael argued that both the choice of law clause and the arbitration agreement were void as they contravened laws of Australia, such as the Carriage of Goods by Sea Amendment Act 1997 (Cth) (COGSA) and the Australian Hague Rules, which annul any contractual clause that attempts to limit the carrier’s liability for loss or damage to goods, unless it complies with the rules. It also claimed that BBC’s liability might be lessened if the dispute was heard by an English arbitration tribunal. BBC then applied for a stay of the proceedings in the FCA.

The High Court, agreeing with the FCA’s decision, dismissed Carmichael’s application to restrain the conduct of the London arbitration and granted BBC’s application to stay Carmichael’s proceedings in the FCA. The case clarifies several important issues concerning how certain clauses in international shipping contracts will be treated under Australian law.

The High Court considered Carmichael’s argument based on Australian Hague Rules, but decided that Carmichael had not established that the conduct of the arbitration in London under English law would lessen the liability of BBC. This decision reflects Australian courts’ pro-arbitration approach towards giving effect to the parties’ agreement to arbitrate and pragmatically dealing with local law issues in the context of international contracts and arbitration.

Another decision, made by the Supreme Court of New South Wales in April 2024, also highlights the continuing commitment of Australian courts to respect parties’ arbitration agreements. 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 court held that the arbitration clause in question remained operative and binding. It explained 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.

Increased scope and complexity of arbitration

Last year also saw the High Court deliver two other significant judgments that have major implications for arbitration in Australia. Both decisions include important statements of principle that are of international significance. The case of Tesseract International v Pascale Construction examined the applicability of proportionate liability statutes in arbitration, while the ruling in CBI Constructors v Chevron Australia considered the implications of ‘bifurcating’ an arbitration – a process of splitting the arbitration proceedings into two separate phases with each addressing different issues or parts of the disputes.

In the first case, the High Court ruled that proportionate liability laws do apply to arbitration proceedings, overturning the previous consensus that such laws did not ordinarily apply to arbitration cases. Generally, third-party wrongdoers could not be forced to join an arbitration, as they are non-signatories to the arbitration agreement. This meant a claimant would need to initiate separate proceedings in a court against other wrongdoers to achieve full recovery of its loss. 

According to the court decision, proportionate liability laws are capable of applying in arbitration through the parties’ choice of substantive law under Article 28 of the Model Law of the United Nations Commission on International Trade Law (UNCITRAL). It said that proportionate liability laws form part of the “law of the land” applicable to the substance of the dispute and will apply in arbitrations, but parties can explicitly exclude their application to arbitration in their contract.

This adds complexity to arbitration cases in Australia, as parties now need to consider the potential involvement of proportionate liability laws. It is important for businesses to engage in forward thinking when drafting the underlying transaction documents and arbitration agreement when choosing a particular Australian jurisdiction as a seat.

The CBI Constructors case involved a tribunal that had bifurcated the arbitration, splitting the proceedings into the ‘liability’ phase and the ‘quantum’ phase. After the tribunal had issued an interim award on liability issues, the claimants sought to bring in new liability issues during the quantum hearing. The respondent in the case, Chevron Australia, argued that the tribunal exceeded its authority by addressing a new argument on liability during the quantum phase, and applied to the court to set aside the second award on quantum.

Under Australia’s Arbitration Act, section 34 permits a court to set aside an arbitral award if the party making the application can prove that “the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration”. In this case, the High Court confirmed that the tribunal in question was “functus officio”, which means it had completed its task, regarding the liability issues. Therefore, it had exceeded its authority when addressing liability issues during the quantum phase and the arbitration award should be set aside.

This decision will have implications for the drafting of arbitration clauses, bifurcating arbitration hearings and how parties can challenge arbitration awards. It serves as a reminder that arbitral tribunals must adhere to their defined scope of authority. Tribunals may expressly reserve their jurisdiction to consider matters addressed in interim awards and draft bifurcation orders with great care. Parties must also ensure that new arguments are appropriately framed within the corresponding phases when bifurcating arbitration proceedings.

Investment arbitration on the rise

Australian investors and companies continue to be sophisticated users of investment arbitration, initiating claims against host states to protect their investments and projects.

The Australian company GreenX Metals, formerly Prairie Mining, is one of the claimants that have recently succeeded in their investor-state arbitration. GreenX Metals resolved its investment dispute with Poland over a coal-mining project through an UNCITRAL arbitration, which began in 2020 and concluded in October 2024. The company confirmed that it was awarded around £252 million in compensation under the Australia-Poland bilateral investment treaty award, as well as around £183 million in compensation under the Energy Charter Treaty (ECT) award, as the tribunal found that Poland had violated its obligations under these two treaties.

There are also a number of investment arbitration claims against Australia as a destination of foreign investment. For example, Singaporean company Zeph Investment filed claims against Australia under the ASEAN-Australia-New Zealand Free Trade Agreement. The disputes centred around Western Australia’s legislation affecting Zeph’s Australian subsidiary, Mineralogy. The legislation effectively nullified Mineralogy’s rights to pursue claims against Western Australia and declared two existing arbitral awards invalid.

Digital arbitration tools

In 2024, the Australian Centre for International Commercial Arbitration (ACICA) launched ACICA Connect, an online case management system for arbitration. It allows for e-filing and a secure online platform for storing all communications and documents shared between the parties and the tribunals. The system also enables parties and the tribunals to track deadlines and dates effectively. It is intended to drive up efficiencies and reduce the environmental footprint of ACICA cases.

Co-written by Anna Wren of Pinsent Masons.