The standard of reasons required in an arbitral award (in a domestic arbitration context) has been the subject of some significant judicial activity recently in Australia (see Legal update, Three Australian courts rule on standard of reasons required in awards). The recent appeal to the Australian High Court in the case of Gordian Runoff Limited v Westport Insurance Corporation [2010] NSWCA 57 (Gordian Runoff) (see Legal update, Leave to appeal granted in the Gordian Runoff case) will hopefully resolve the issue by deciding whether to follow the lower court decision in Gordian Runoff or the ruling in Oil Basins Ltd v BHP Billiton Ltd [2007] VSCA 255 (Oil Basins). The Oil Basins approach, where the court appeared to equate the standard of reasons required for an arbitral award with a common law judicial standard, had drawn significant attention in Australian arbitral circles. The court had rejected such an approach in Gordian Runoff.

The Australian High Court heard arguments on the case over 3 and 4 February 2011 and received joint written and oral submissions from four arbitral bodies (who were jointly represented):

The court also heard from the Commonwealth Attorney-General.

Those parties spoke in favour of supporting the arbitral process and international practice by preferring the Gordian Runoff approach.

It is hoped that the decision of the Australian High Court will finally resolve the uncertainty regarding the standard of reasons required in an arbitral award and provide clarity as to the appropriate test to be applied. It is not yet known when the decision will be handed down, but we will continue to report on developments.