In Westport Insurance Corporation v Gordian Runoff [2011] HCA 37, the Australian High Court resolved the issue of the standard of reasons required in arbitrations, at least under the old New South Wales Commercial Arbitration Act (old Act).

In the earlier case of Oil Basins Ltd v BHP Billiton Ltd [2007] VSCA 255 (Oil Basins), the Victorian Supreme Court had generated much controversy by holding that, in certain cases, the standard of reasons required in arbitrations under the domestic legislation was equivalent to that of a common law judicial decision. This decision was seen as undermining the desirability of arbitration by increasing its complexity and increasing the risk of a costly appeals process.

In Gordian Runoff Ltd v Westport Insurance Commission [2010] NSWCA 57 (Gordian Runoff), the New South Wales Court of Appeal declined to follow the approach taken in Oil Basins (see Legal update, Three Australian courts rule on standard of reasons required in awards). Instead the court preferred the test applied by Donaldson LJ in Bremer Handelgesellschaft mbH v Westzucker GmbH (No 2) [1981] 2 Lloyd's Rep 130 (Bremer), as approved by the Privy Council in Bay Hotel and Resort Ltd v Cavalier Construction Co Ltd [2001] UKPC 34:

The decision in Gordian Runoff was appealed to the Australian High Court. The majority allowed the appeal, finding that the tribunal's reasoning was inadequate and criticised the approach taken in Oil Basins as placing "an unfortunate gloss upon" the requirement of an arbitrator to give reasons.

According to the majority, "no wholly satisfactory formula can be found to flesh out" the obligation to give reasons. They accepted the test formulated by Donaldson LJ in Bremer, and noted that the quality and standard of reasons required was referable to the nature of the dispute and the particular circumstances of the case.

However, it is important to note that the decision made substantial reference to the old Act, which is no longer current law in New South Wales. Furthermore, there are sufficient changes in the new Commercial Arbitration legislation such that it is not clear to what extent the court's decision will apply under the new statutory framework.

2011 saw significant progress made in the process of aligning Australia's domestic arbitration regime with the legislation applying to international arbitration:

Once passed in all the States and Territories, the Commercial Arbitration Act will ensure that Australia has a relatively consistent domestic and international arbitration legislation based on the UNCITRAL Model Law.

Further progress is expected in 2012 (see Anticipated developments in 2012 below).

On 2 March 2011, the Australian government, through the International Arbitration Regulations 2011 (Cth), prescribed the Australian Centre for International Commercial Arbitration (ACICA) as the default nominating authority under the International Arbitration Act 1974 (Cth) (IAA). This applies in circumstances where parties cannot agree on the appointment of an arbitrator.

Previously, only the courts could appoint an arbitrator under the IAA. However, as the explanatory statement accompanying the Regulations noted, industry bodies are likely to have more direct knowledge of who would be an appropriate arbitrator to resolve a particular dispute. The ACICA maintains a panel of arbitrators on their website, but the discretion granted by the Regulations to ACICA is apparently not limited to this panel.

The decision to have a single, centralised body is expected to increase efficiency and certainty of process and has been welcomed as another step in promoting Australia's arbitral laws as attractive for international users.

The process of reforming Australia's domestic arbitral legislation reforms is expected to continue apace into 2012. As detailed above, the Northern Territory and Tasmanian legislation has received Royal Assent and is awaiting a commencement date. Further progress is also expected in the remaining jurisdictions. Western Australia appears close to passing the Bill, with the Legislative Council recently sending minor proposed amendments to the Legislative Assembly. On 15 November 2011, the Commercial Arbitration Bill was introduced into the Queensland Parliament. Only the Australian Capital Territory is yet to introduce the Bill into its Parliament.

In July 2011, the Victorian Bar, the Law Institute of Victoria and other national dispute resolution bodies proposed the establishment of an Australian International Dispute Centre in Melbourne and sought funding for that purpose from the Victorian and Federal Governments.

It is expected that pressure on the Victorian and Federal Governments to help establish the centre will continue to build in 2012. The centre in Melbourne would likely be closely associated with the Australian International Disputes Centre opened in Sydney in 2010 and would therefore represent the second step in a national network (see Legal update, Australia advances arbitral law reform).

It is believed that a new centre in Melbourne would further enhance Australia's attractiveness as a place to conduct business and resolve commercial disputes.