aida reinsurance working party the case against westport v gordian [2011] hca 37 rob merkin

AIDA REINSURANCE WORKING PARTY

THE CASE AGAINST WESTPORT V GORDIAN [2011] HCA 37

ROB MERKIN

Grounds for setting aside arbitration awards•No jurisdiction•Procedural irregularity (misconduct)•No dispute•Error of fact•Error of law

Advantages of arbitration

• Speed• Cost• Procedural advantages• Confidentiality• Expert judges• Finality• Neutrality of forum• Dispensing with legal technicalities • Enforcement of awards

How did it work in Westport

• Arbitration clause authorised arbitrators to act “by reference to considerations of general justice and fairness”• Arbitration proceedings commenced October 2004, award handed

down 2007, High Court gave final ruling September 2011• Case heard by 10 judges, High Court proceedings involved 9

barristers, three firms of solicitors, the Attorney-General and the Centre for International Commercial Arbitration• Confidentiality blown apart

Westport v Gordian

“The arbitration proceedings began on 15 October 2004 when Gordian served points of claim. This appeal comes to a close seven years later. The attractions of arbitration are said to lie in speed, cheapness, expertise and secrecy. But it must be said that speed and cheapness are not manifest in the process to which the parties agreed. A commercial trial judge would have ensured more speed and less expense. On the construction point it is unlikely that the arbitrators had any greater relevant expertise than a commercial trial judge. Secrecy was lost once the reinsurers exercised their right to seek leave to appeal. The proceedings reveal no other point of superiority over conventional litigation. One point of inferiority they reveal is that there have been four tiers of adjudication, not three. Comment on these melancholy facts would be superfluous.”

Analysis of High Court’s approach

• Commercial judge would have been cheaper and speedier• Parties wanted three arbitrators, two with market experience

• Commercial judge no less expert• Maybe so on s 18, but not on the intricacies of reinsurance placement• Commercial judge could not decide other than by reference to the law

• Secrecy lost once appeal lodged• Blame that on Australian procedural law

• Four stages rather than three

Alternative judgment at first instance“The proceedings before this Court consist of an appeal from an arbitration award. The arbitrators were empowered to act “by reference to considerations of general justice and fairness”. There is no challenge to their jurisdiction and no assertion that they acted unfairly in any respect. I fail to see on what basis this appeal can be founded. It should be struck out.”