Recent Developments In National Arbitration

Discuss About The Recent Developments In National Arbitration?

A free trade area refers to the region entailing a trade bloc for those member countries that have entered into a free trade agreement (FTA). These agreements include cooperation between two countries with a view to reduce trade barriers, import tariffs and quota and enhance trade of goods and services with each other. These agreements are significant as it establishes a free trade area that enables to conduct trade with respect to commerce in goods and services across the common borders of those countries without any form of hindrances or tariffs. However, in such trade area commerce in goods and services are permitted to be conducted without any hindrances but free movement of capital or labor is prohibited, in contrary to a common market. A free trade area is permissible under article XXIV of GATT 1994 and the creation of such free trade areas are permitted provided they are not in conflict with any broader principles of the International trade law[1].

The members of World Trade Organization are required to fulfill their obligations under the WTO agreements. A WTO member is entitled to join a regional trade agreement (RTA) or free trade agreement (FTA) and such agreements may be bilateral or unilateral. Free trade is a policy that is followed by some international markets in which the parties to the agreement do not restrict exports to or imports from other countries[2]. The European Economic Area that has established open markets is an example of free trade. Majority of nations are parties to the World Trade Organization (WTO) Agreements.

The reduction of trade barriers to trade under free trade agreements has a positive effect on economic growth unlike the protectionism policies introduced by certain governments demonstrating a negative effect on the economic growth of the respective nations[3]. The significance of free trade agreements lies in the fact that such agreements enables to trade goods and services without taxes or other trade barriers such quotas on imports[4]. The nonexistence of the policies that distorts trade such as subsidies, taxes etc places the firms, households and other production factors at an advantageous position.

According to the Australian Department of Foreign Affairs and Trade in 2014, China was Australia’s largest export market for both services and goods which amounts to a third of total exports and is a growing source of foreign investment.  After 10 years of negotiation regarding the free trade agreement between Australia and Republic of China, the negotiation was concluded and the ChAFTA was commenced on 20 December 2015. China is considered the top market for Australia’s agricultural, export services and resources. There has been a steady incline in the investment made by China in Australia that has reached $A65 billion in the year 2014[5].

The Australian Trade and Investment Minister Andrew Robb and China’s Commerce Minister Gao Hucheng have signed the ChAFTA with an intention to comply with the agreement and act accordingly. The implementation of the agreement would make 95 percent of the Australian export goods tariff free, which includes the agricultural products such as dairy and beef.

The benefits of ChAFTA to China would include the following:

• Chinese exporters of goods will enable China to save billions of taxes;
• It would increase Visa approvals for the Chinese;
• There will be an increase in the FDI facilities in Australia;

The benefits of the agreement to Australia include the following:

• The Australia exporters shall be entitled to export goods at 95% duty free;
• There shall be removal of tariffs on Chinese imports benefitting the Australian businesses and consumers;
• There shall be an increase in the mobility of the Business and skilled workers with an enhancement in the visa approvals for the holiday makers and the workers to 5000 per year and improvement in the temporary entry access;

The primary objective of ChAFTA is to secure the competitive position of Australia with its largest trading partner and create a foundation for a stronger and deeper long-term planned partnership between the two countries. This Free Trade Agreement aims at developing a stronger engagement socially, politically and economically between both the countries.

The agreement has granted Australian Businesses with unprecedented access to the rapidly growing markets in the world, giving the nation an opportunity to earn billions of dollars through its exports and other investment opportunities[6]. The implementation of the ChAFTA is not only the responsibility of the governments of both the countries but it is necessary for the business communities of both the countries to support the agreement and cooperate with the respective governments to successfully implement the agreement[7]. In order to attain the primary objectives, the countries are required to come together for exploring opportunities for developing integrated partnership models that include the complete value chain from research and development to marketing and sales[8].

Advantages of ChAFTA for Australia are as follows:

1. The Australian consumers shall enjoy Chinese Manufactured products such as white goods and electronic goods at cheaper price with 5 percent tariff;
2. Tariffs on Australian manufactured goods has been eliminated up to 3-14 percent;
3. There has been a decline in some processed foods such as orange juice, canned fruit etc.;
4. The Australian tourism and hospitality operators are guaranteed that they can operate wholly-owned subsidiaries including hotels and restaurants in China;
5. The Australian firms shall be entitled to bring legal action against Chinese governments for making any change in their policies that would have an adverse impact upon the interests of Australia;

Australia is subjected to the following disadvantages due to implementation of the ChAFTA:

1. There has not been any decline in the tariff for wool, cotton, rice, maize or canola;
2. If the Chinese imported products such as beef or milk powders exceeds the stipulated limits, China shall be entitled to impose additional customs duties;
3. The Chinese firms shall be entitled to bring legal action against Australian government for incorporating any changes in the policies that adversely affects the interests of China;
4. The Chinese investors making investment in projects that values over $150 million shall be entitled to exercise additional rights of bringing in temporary migrant workers to Australia without undergoing any local labor market testing;

In case of a breach of the terms stipulated under the Investment Chapter of the ChAFTA, the disputed parties to the agreement may claim for Investor-State Dispute Settlement (ISDS). The ISDS claim can only be made in the event of a breach of either Party’s obligation to provide non-discriminatory treatment with respect to established investments of the other Party. The Investment Chapter and ISDS provisions aim at safeguarding the legitimate government regulation in the field of environment and public health. A claim for ISDS cannot be made for commission of breach of obligations in any other chapter of ChAFTA. The parties to this agreement are required to agree on the interpretation and application of this Agreement and shall attempt to come to a satisfactory resolution regarding any matter pertaining to this agreement. However, in case of disputes, the parties may resort to arbitration, conciliation or mediation.

Australia v Japan: New Zealand Intervening

Whether Japan’s whaling program under the second phase of Japanese Whale Research Program under JAPRA II was a conduct against its obligations under the International Convention for the Regulation of Whaling (ICRW)

The ICRW was developed in Washington with a view to conserve whale stocks and make development in the whaling industry. JAPRA II was created to estimate the number of Antarctic minke whales and Japan was ordered to reduce all lethal research. Australia alleged that Japan breached its obligation under ICRW. The basis of jurisdiction of the ICJ was the Optional Clause Declaration under Article 36(2) of the Statute of the ICJ. It states that the state parties to this statute is entitled to declare they recognize the jurisdiction of the Court in relation to any other state that accepts the same obligation, in every legal disputes regarding interpretation of treaty involving any question of international law.

Australia invoked the jurisdiction of the ICJ on the ground of reservation (b) of the Australia’s declaration which was invoked by Japan on the ground of reciprocity. Article VIII Para of the ICRW prohibits state parties to put zero catch limits for whaling for commercial purposes under para 10(e)[9]. The state parties are prohibited from undertaking commercial whaling of fin whales under Para 7(b). The state parties must treat the whales properly and must not kill them. The ICJ had jurisdiction to examine the application under Article 36 para 2 of the Statute of the ICJ.

The International Whaling commission allowed a reasonable amount of whales to be used for conducting scientific research and to obtain permission this legislative intent of Article VIII, Para 1 of ICRW to JAPRA II, which is to permit use of certain whales for scientific research, must be fulfilled by the applicant. The special permits that Japan granted was in contravention of Article VIII Para 1 of the ICRW and have acted against the moratorium stiulatd under Para 10(e), 7(b) as well.

Japan must cease its whaling program in the southern ocean and the program can be continues in compliance with the articles stipulated in ICRW.

Australia- Automotive Leather II (WTO)

Whether Australian government’s assistance and loan contract to Howe, a wholly owned subsidiary of Australian Leather Upholstery Pty Ltd that is owned by the Australian leather holding Limited were subsidies under Article 3.1(a)

A dispute under the World Trade Agreement (WTO) arises when a member of the WTO opines that another member is contravening the WTO. Article 4 of WTO allows member to consult with another meber regarding any measures that is affecting any agreement of the person consulting. If the dispute is not resolved within 60 days, the complainant may request for a panel.

Article 6 states a panel must identify the measures at issue and if panel is requested, DSB must establish a panel. After considering oral and written arguments, the panel issues its facts and arguments in the form of repot to the disputing parties. The panel submits its findings and conclusions to the disputed parties as an interim report under Article 12 of the WTO.

Article 3.1(a) of ASCM defines prohibited subsidies and export subsidies. According to Article 4.7 of eh ASCM a recommendation may be made by the Panel established in the Dispute settlement body under the WTO to withdraw a prohibited subsidy within 90-day period from the date the report of the panel is adopted by the DSB.

The United States made a complaint against Australia as the measures adopted by Australia was in contravention of Article 3.1(a) of the ASCM in relation to the grant contract and loan contract assisted by the Australian government to Howe. The dispute was not resolved within 90 days as a result of which US requested for a panel to identify the measures at issue.

As per the findings of the Panel, with respect to the grant contract, the payments that were made under such grant contract amounted to subsidies that are prohibited under Article 3.1(a). the findings were based on the ground that such payments made to the granted contract were actually ‘tied to’ export performance.

The Panel concluded that payments made with respect to the loan contract did not contravene Article 3.1(a) as the terms of the contract did not contain anything that would suggest a ‘specific link’ for anticipating earnings from exportation. The Panel further recommended as per Article 4.7 of the ASCM that Australia should withdraw the subsidies within 90 days from the date it adopts the reports issued by the DSB as such subsidies are prohibited subsidies under Article 3.1(a) of the Firebird Global Master Fund II Ltd v Republic of Nauru & Anor [2015] HCA 43

Whether Foreign States Immunities Act 1985, (Cth) applied to registration and enforcement of the Tokyo judgment

Australia is a signatory of the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. The Convention aims at ensuring that service is effected successfully between the parties to such Convention. Under The Hague Evidence convention, A letter of Request is required to obtain assistance with the taking of evidence under the International agreement. Judicial co-operation through the recognition and enforcement of foreign judgments is essential in order to determine concerned cases[10].

Section 9 of the Foreign States Immunities Act 1985 (Cth) entitles immunity from jurisdiction that is recognized under the Statute and that the exception under section 11(1) of the Act as ‘commercial transactions’ is not applicable to the proceedings for registration under the Foreign Judgment Act[11].

Firebird, the appellant, was the holder of bonds guaranteed by Nauru and Firebird obtained judgement from Tokyo District Court for default in the bonds along with costs and interests against Nauru as guarantor. Subsequently, the appellant also obtained an order from the Supreme Court of NSW that the foreign judgment shall be registered under the Foreign Judgments Act 1991 (Cth[12]). The appellant obtained a garnishee order against the Australian bank where Nauri had kept the accounts. Nauru filed motions to set aside the registration of the foreign judgment and the garnishee order, which was set aside. 

The High Court dismissed the appeal and held that proceedings for the registration of the foreign judgment under the Foreign Judgments Act are recognized under section 9 of the Foreign States Immunities Act. Hence, Nauru is entitled to immunity from execution against the bank accounts held in Australia under the Foreign States Immunities Act, as the purpose of the accounts was not commercial in nature.

Australian Centre for International Commercial Arbitration (ACICA)

Issue Caledonie Sarl v Vale Inco Nouvelle Caledonie SAS excluded UNCITRAL Model Law on International Commercial Arbitration

Section 21 of the International Arbitration Act 1974 (Cth) (IAA) allowed the parties to the dispute to resolve their disputes without applying the ‘Model Law’[13]. The change in the section shall not allow the parties in dispute to contract out of the ‘model Law’ in relation to International Arbitration in case, there is no selected Australian procedural law.

The amendments to the IAA suggest that no arbitration law except the Model Law can ever apply to an international commercial arbitration when the seat of arbitration is in Australia.

The NSW Supreme Court held that selecting to apply the ICC rule to resolve dispute does not imply that Model Law has been excluded under section 21 of the Act. With the implementation of the amendment, the decision whether international commercial arbitration in Australia is governed by the Model Law is to be determined as per the legislative intent of section 21 of the IAA 2010 (Cth)[14]. It states that the parties to dispute do not have any option to exclude Model Law and decide which arbitration rules should be applied to resolve commercial disputes[15].

Conclusion

The parties have excluded the Model Law under section 21 of the IAA by referring to the NSW Commercial arbitration legislation to resolve their disputes

Reference List

Australia- Automotive Leather II (WTO)

Australia v Japan: New Zealand Intervening [2014]

Australian Centre for International Commercial Arbitration (ACICA)

Dispute settling Body WTO

Firebird Global Master Fund II Ltd v Republic of Nauru & Anor [2015] HCA 43

Foreign  Judgments Act 1991 (Cth)

Foreign States Immunities Act 1985, (Cth)

Hoekman, Bernard M., and Petros C. Mavroidis. World Trade Organization (WTO): Law, Economics, and Politics. Routledge, 2015.

International Arbitration Act 1974 (Cth)

International Arbitration Act 2010 (Cth)

International Convention for the Regulation of Whaling (ICRW)

Matsushita, Mitsuo, et al. The World Trade Organization: law, practice, and policy. Oxford University Press, 2015.

McQueen, Peter, John Cooper, and Damian Watkin. "International commercial arbitration in Australia: Today and tomorrow." Ethos: Official Publication of the Law Society of the Australian Capital Territory 234 (2014): 22.

Morrison, James, and Mary Flanagan. "Recent Developments in International Arbitration in Australia 2015/2016." Journal of International Arbitration 33.6 (2016): 723-737.

Newman, Lawrence W., and Richard D. Hill. Leading Arbitrators' Guide to International Arbitration. Juris Publishing, Inc., 2014.

Petrovic, Jadranka, and Benjamin Grunberg. "Intersecting Trade, Politics and Human Rights: The Negotiation Phase of the Australia-China Free Trade Agreement." Journal of World Trade51.1 (2017): 67-104.

VanGrasstek, Craig. The history and future of the World Trade Organization. Geneva: World Trade Organization, 2013.

Wagners Nouvelle Caledonie Sarl v Vale Inco Nouvelle Caledonie SAS

Wang, Yi. Australia-China relations post 1949: sixty years of trade and politics. Routledge, 2016.

World Trade Agreement (WTO