Arbitration Amendment Bill

Thank you, Mr Speaker. It’s a pleasure to stand and take a call on this, the second reading of the Arbitration Amendment Bill. A couple of things: the first thing I want to start with—and it does relate to this bill and it relates to this bill because I’m talking about international arbitration, and this bill is actually going to have, I think, a very positive effect for us as a nation in terms of being seen as a genuine destination, location, for international arbitration.

But if you remember the passage of the Trans-Pacific Partnership (TPP) agreement, and I sat on the select committee that had the Trans-Pacific Partnership agreement come through it, there was a lot of concern around the investor-State dispute settlement (ISDS) provisions, and the ISDS provisions relate directly to the international arbitration or the arbitration that would be required if there was a dispute contained inside that free-trade agreement or in the Combined and Progressive Agreement for Trans-Pacific Partnership, as it’s called now. During that debate, there was a lot of opposition around the ISDS provisions and, actually, the TPP free-trade agreement from the Government, from Labour. I noticed that when they went from Opposition to Government, they very quickly embraced that agreement. And that was a good thing because, in terms of trade, historically, both the major parties in this House have tried to support and make sure that there was good quality. Yes, I’m going to narrow it and come back to the bill.

💬 SPEAKER: You’re going to get there pretty soon, I hope.

I’m going to narrow it and come back to the bill. The point that I’m making is this: the reason why there was so much tension around the ISDS provisions was because there wasn’t a high level of confidence in terms of where the jurisdiction would be and how that process would actually be undertaken. And so the reason why having this Arbitration Amendment Bill in the House is so good is that it’s actually strengthening our own legislation in New Zealand that will help us be seen as a genuine location for people to come and actually have international arbitration cases heard here.

I’ve been sitting in the House today and I’ve been listening to a lot of speeches running this down. I was very lucky recently to have a visit to Hong Kong, which of course now is part of Mainland China and they recognise that: one country but two very different systems. And the thing that Hong Kong has been very, very good at doing—and they identified that there was a clear opportunity around international arbitration—is they’ve set themselves up as a hub to be able to attract a lot of that global business, and they’re doing very, very well. They’ve recognised that there’s actually massive international investment going on, especially around infrastructure and that there’s actually a genuine opportunity.

I see here that every case heard in New Zealand around international arbitration is worth, on average, $1 million to the local economy. So if we just stop and reflect on that and we just think about creating and being seen ourselves as a genuine location destination for international arbitration, just think about the amount of revenue that we can actually generate through that professional service in itself. The reason why this bill is going to help us be seen even more as a destination for this type of professional service is because we’re already highly trusted. We already have very strong institutions. We have a very strong judicial system. We’re seen as one of the least corrupt countries in the world. And so for Andrew Bayly to bring this bill—and I just want to acknowledge, actually, Paul Foster-Bell, who, I think, was the original sponsor of this bill and brought this bill to the House.

💬 SPEAKER: Chris Finlayson.

What’s that?

💬 SPEAKER: Chris Finlayson, maybe.

It’s Chris Finlayson?

💬 SPEAKER: Well, I think he initiated it, didn’t he?

I think Paul Foster-Bell brought it originally, but the Hon Chris Finlayson did have a lot of work to do on it too, Mr Speaker. You’re right.

So if I could acknowledge both of them, it would be appropriate, but especially Paul Foster-Bell as the original sponsor of this bill, taking it to the first reading. So can I acknowledge him for bringing it into the House, but now can I acknowledge Andrew Bayly, who has religiously come to the select committee during the deliberation and debate around this bill. It’s his input, in terms of the changes that have been made. So can I acknowledge him and the work that he’s done around removing clause 6(4) and other considerations. Well done to him.

So I would just like to finish my contribution by again just reinforcing and restating that, in actual fact, although this arbitration bill has gone a long way to making sure that it’s much fairer, that it’s easier to access, that it removes pressure from our own courts system, not only for our own people—for Kiwis—but it’s also setting us up to develop a genuine professional service that could be world leading and could create very strong revenues and opportunities for us as a country. Thank you very much, Mr Speaker.

Thank you, Mr Speaker. It’s a real pleasure to speak on the second reading of the Arbitration Amendment Bill. This bill is incredibly technical in nature, and because I didn’t sit on the select committee that heard all the submissions about the bill or was not part of the deliberations, I’m going to keep my comments to be quite high level.

Just thinking about arbitration and the differences between arbitration and going through full court proceedings, there is a number of issues relevant to that, which are highlighted in this bill. I think the first one is that parties can choose their own arbitrator, and I think that’s really important in terms of having somebody who understands the technical nature of the disputes that you’re involved in. And this bill touches on some of those aspects to make them a fairer process. The second thing is that often disputes can be resolved much more quickly by arbitration than by waiting for the full court process to work its way through. And the third thing is that arbitration is usually conducted in private while court proceedings are generally not, and that’s something, again, that this bill touches on, in particular. It’s really important, when you’re dealing with disputes of a commercial nature, to be able to have many of those considerations deliberated on in private. Finally, arbitration has that added advantage that it reduces the pressure on our stretched courts system because it allows a lot of disputes just to be settled via arbitration as opposed to taking up that valuable court time.

Labour supported this bill to select committee because we felt that it did make some big improvements to the arbitration framework; however, what we did signal quite early on at the first reading was that we had a number of concerns, particularly about the changes that were being proposed to the confidentiality of those court proceedings. We wanted to be able to spend that time during the select committee process hearing from submitters and considering what the best way forward was in that area. There were a number of changes to the original bill that were made during the select committee, and so Labour members are happy to support the bill in the amended form. And so what I just want to do is go through in a bit more detail some of those key aspects, and I think the first and most important one relates to making sure that we have retained that open justice.

As I was saying, the default in arbitration is that those proceedings are conducted in private, and that’s really important when you’ve got parties talking about disputes of a commercial nature. People need to be able to get on and do that. However, the issue is that once arbitration is elevated to courts, then the default is that the proceedings are conducted in public, although either party could apply for some or all of those proceedings to be, again, heard in private. So clause 5 of the bill, what it was hoping to do was extend that presumption of confidentiality through to court proceedings related to arbitration, and this was one of the things that was mentioned as a way of then making it much more attractive for people internationally to come to New Zealand, in terms of having arbitration. What this bill, basically, then tried to do was reverse the presumption that proceedings should be happening in public. What it just said is that it allowed the court to make a direction regarding how that information would be published, and making that much more restrictive.

The problem we’ve got is that that goes against the principle of open justice, because the public need to know, one, what the law is, and then, secondly, they need to know how it’s being applied. Basically, what you’ve actually got under the current provisions is that there is still flexibility in that respect, because, while the presumption is that the proceedings will be heard in public, it still allows a court order for whole or part of the proceedings to be conducted in private if it is believed that the public interest is outweighed by the interests of any of the parties involved. And so it was the view of Labour members that the current legislation did strike the right balance between open justice and the private nature of that legislative process. We were considering whether extending that presumption of confidentiality to court proceedings would make New Zealand an international hub for arbitration and, basically, I think the feeling of the Labour members was that it wasn’t sufficient of an advantage to displace the presumption of open justice, in Labour members’ views, and so we were keen to preserve that open justice.

There’s a couple of other things that the bill does do, however, that have been retained, and one was reducing the possibility of late jurisdictional challenges. What the bill does is insert additional clauses, and what we’re trying to do here is reduce the possibility that a party could raise a late procedural challenge on jurisdictional grounds, which could invalidate the award after both parties have spent a lot of time and expense arriving at it—if they were sensing that that award was not going to go in their favour. So what this bill does is it inserts clauses that talk about this, and there were some minor changes to the wording, which happened as a result of the select committee deliberations. Basically, now the clause states that “failure to pursue a request made under paragraph (3) in a timely manner operates as a waiver of any right to later object to a ruling of the arbitral tribunal as to its jurisdiction.” That’s really important; people need to know that they’re committed to that whole process and that somebody can’t pull out quite far down the line after all that expense has been put in.

The other one that was looked at was the process for the appointment of arbitrators, and the committee considered some of the issues around the appointment process because selecting who is going to do that arbitration is one of the key parts of the process. So, at present, there’s a clause in Schedule 2 that sets out the default process if people can’t agree, and it’s often called the “quick draw” procedure, and what that means is that one party can trigger a process to appoint an arbitrator if the other party fails to respond to communications within seven days. The select committee received quite a lot of strong submissions that that particular clause should be repealed, and while it’s not in the amended bill, what the committee recommended was that a new clause should be inserted, when we get to the committee of the whole House stage, that would effect those changes. It was felt that it was really important that we didn’t have that “quick draw” procedure, meaning that there wasn’t that consensus on who should be doing the arbitration. There are a whole lot of other aspects that were covered in the bill, around trusts and other technical matters, but I’ve tried to highlight what I thought were the three sorts of key important ones.

So, just in summary, arbitration is really, really important as a way of working our way through disputes of a commercial or other nature, and what we were keen to see was a number of improvements around that to make that a better process. So what we’ve done is introduce the clauses which reduce the possibility of having late procedural challenges just on jurisdictional grounds—around where people have invested a lot of time and money and process into that process to date. And also, while the change hasn’t been put into the amended bill, the expectation is that once we get to the committee of the whole House stage further changes would be made, including addressing that “quick draw” procedure so that there is a bit more of a consensus around the selection of arbitrators.

Finally, the bill as amended still preserves the principle of open justice and ensuring that the public knows what the law is and how it’s being applied, and so what it does is retain the assumption that, when arbitration ends up in court, the proceedings will be heard in public. So this is an important bill, and I commend this bill to the House. Thank you.

Thank you, Mr Speaker, for allowing me to stand in support of the Arbitration Act 1996 amendment bill. This bill, basically, amends the original Act and brings in some changes. I would like to acknowledge Andrew Bayly, the present sponsor of this bill, for bringing this, and I would also like to acknowledge Paul Foster-Bell, the original sponsor of this bill.

As we know, the arbitration process is a way that some commercial and other disputes can be resolved, and I feel that, with arbitration, we can have the services of some experts who can contribute in many matters. As we know, in court sometimes technical issues don’t get resolved because the judges are not expert on some of those issues. As was mentioned earlier, in the recent signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, there was also a clause where arbitration was an issue.

I would like to give an example of where international multinational companies take those cases to a neutral place where they feel that arbitration will be the best outcome for their dispute. I was reading one of the reports recently where a company in India sold their business for multimillion dollars and there was a dispute later on between both entities, and that was taken to Singapore, where it was resolved. And once we update our Arbitration Act over here, it is possible that for companies—because, internationally, New Zealand has got a good reputation for being transparent and independent—those arbitration cases can come to New Zealand, and that can be helpful for the economy. I remember that that particular case which I have mentioned earlier was resolved over a period of more than six months, and a lot of money was spent over there, which benefited the Singapore economy. We know that Singapore and Hong Kong are two very popular places where international arbitration takes place.

As I said earlier, arbitration is an effective method of resolving commercial and other disputes. We should have a proper mechanism available for companies to resolve these issues, and international arbitration, as I said, is growing with time. In the last two decades, we have seen that more and more cases are being resolved through arbitration. Every arbitration case heard in New Zealand averages about a million dollars to the local economy, including the usage of conference centres, hiring of accommodation, and other means. That means that if we are able to encourage people to use New Zealand as a centre, then our economy will be helped.

Another part of arbitration is that privacy and confidentiality are frequently cited as defining characteristics of the valuable benefits of arbitration—87 percent of respondents to our survey said that it is one of the best ways to resolve their cases, and it was also mentioned that the commercially important aspect not be made public. Most respondents—about 74 percent—believe that confidentiality should be an opt-out rather than opt-in feature. We understand that these issues can’t be resolved quickly, but we have to have a mechanism available. Improving the arbitration proceedings generally in New Zealand is also an important objective.

This is because when disputes arise, many New Zealanders genuinely want to be able to access professionally run alternative resolution systems, because sometimes the court process becomes very expensive and people don’t want to take that route because it will be a very lengthy process as well as being an expensive process. There are many reasons for this. Arbitration is a bona fides option as it offers advantages—a much cheaper process for resolving disputes. It is often quicker and, compared to the court process, it is less confrontational and is a logical first step for resolving these issues.

Once again, I stand in support of, and acknowledge, Andrew Bayly for his contribution in getting this bill to this stage, and I would also like to acknowledge the Justice Committee for their contribution and for their deliberations on this. Some of the recommendations which have been made will be coming up at the committee of the whole House, and they will be resolved there. With these words, I commend this bill to the House.

Bill read a second time.