For over a thousand years – at least – mediation and arbitration have been practised in the English-speaking world. In fact, arbitration as a dispute settling mechanism is probably as old as human society itself, suggests Tom Bathurst in his survey of the history of arbitration published in the Building and Construction Law Journal (BCL).
And arbitration’s continuing vitality into the future is assured, concludes Bathurst, Chief Justice of NSW, “regardless of what the legal system says about it”.
In “The History of the Law of Commercial Arbitration” his address to the Francis Forbes Society published in the current issue of BCL (Vol 35 No 1), Bathurst considers how the law relating to arbitration has developed to reconcile the two “alternative” methods of dispute resolution – arbitration and the courts.
In Australia today, both the International Arbitration Act 1974 (Cth) and equivalent State legislation apply the UNCITRAL Model Law to the arbitrations they cover, respectively: “international” and “domestic”. The Model Law regime limits the role of courts in resolving disputes subject to “commercial arbitration” where there is an arbitration agreement: “removing the determination of … the ‘merits’ of a dispute from the courts”.
Bathurst notes the High Court in TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia (2013) 251 CLR 533;  HCA 5 upheld the Model Law regime, by accepting that there was nothing in the Constitution’s “judicial power” requiring courts “to be the sole arbiters of the ‘merits’ of a case”.
In considering how the law struck the balance between arbitration and the courts, Bathurst examines the history of the relationship from the “formative” period (1154–1698), through the “statutory” period (1698–1985), to the present “international” period.
During the formative period, the common law was emerging, with royal justice becoming centralised, but the royal courts displayed reluctance to assert jurisdiction over claims based on private agreements. Indeed, they actively encouraged “alternative dispute resolution” via mediation – a process then known as a “loveday”.
Bathurst demonstrates a lightness of touch in discussing these developments:
“It makes one wonder: ‘what if?’ Instead of having ‘court-annexed mediation’, we could have had ‘court-annexed lovedays’. Instead of ‘mediators’ and ‘mediation rooms’, we could have had ‘loveday-makers’and ‘love rooms’.”
Perhaps a clue to this early tenacity of arbitration lay in its utility for resolving commercial disputes. In the 13th century for instance, the Statute of Merchants permitted a creditor and debtor to record their arbitration agreement before mayors of certain towns or cities – even before appointed merchants at fairs. A further stimulus to the entrenchment of arbitration was the use of “conditional bonds” in the 14th and 15th centuries to secure compliance with an agreement to arbitrate.
Still there was a tussle with court authority over time. Bathurst discusses the doctrine of “revocability” which propounded that prior to the making of an arbitration award the authority of the arbitrators could be revoked by any one of the parties with the effect any award made by the arbitrators was a nullity. This doctrine, which remained in force for several centuries, originated in Sir Edward Coke’s report of Vynior’s Case in the early 17th century, even though Coke’s legal reasoning was “slightly questionable” said Bathurst.
The House of Lords’ decision in Scott v Avery in 1856 affirmed the “revocability” doctrine on the basis that the jurisdiction of courts to hear and determine disputes could not be ousted by private agreements to arbitrate.
Notwithstanding these assertions of court authority and litigation over arbitration, Bathurst discerns a general trend throughout history of the law’s increasingly positive acceptance of arbitration by private agreement as having a place in dispute resolution. A fillip to this development was the practice of courts starting from the mid-17th century to refer matters to arbitration or mediation as a “rule of court” (if both parties agreed) and also to allow for awards made to be declared a “rule of court”.
The “rule of court” procedure was given statutory form in the Arbitration Act 1698 by Parliament in response to “the increased level of commercial activity and need for an efficient means of arbitrating disputes”.
A series of legislative reforms in the 19th century in Britain, replicated in the Australian colonies – culminating in NSW in the Arbitration Act 1902 (NSW), ultimately extinguished the doctrine of “revocability”. Specific reform measures included that courts be required to grant a stay of proceedings where they were covered by an agreement to arbitrate, and the enforceability of an arbitration award as a judgment of a court. (Perhaps attesting to the law’s recognition of the validity of arbitrations, is the anecdote repeated by Bathurst about a Lord Chief Justice affirming the award of an arbitrator that was, effectively, a turkey!)
The 19th century reforms finally laid the foundation for the emergence of “the consensual dispute resolution process supported by statute” that prevails under the Model Law today in Australia.
Bathurst concludes that arbitration should not be treated “as an alien interloper inimical to our system of justice, but as an integral and longstanding feature of dispute resolution in our society”.
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