PNG proposes a new regime for arbitration

PNG's shift toward a 'pro-arbitration' country 7 min read

Papua New Guinea has proposed a new regime for domestic and international arbitrations, which is an important part of PNG's shift toward being a 'pro-arbitration' country, and part of a broader move to facilitate international trade and commerce in PNG. If enacted, and depending on how it is interpreted and applied in practice, it has the potential to provide greater certainty for arbitrations in PNG, and the recognition and enforcement of arbitral awards within PNG. However, parties should be aware of areas where the legislation has diverged from the status quo, including with regards to statutory time bars and confidentiality.

How does it affect you?

• The Independent State of Papua New Guinea has proposed a new regime for domestic and international arbitrations: the Arbitration Bill 2019 (the Arbitration Bill).
• The draft Arbitration Bill is a significant advancement in the regulation and facilitation of arbitration in PNG and with PNG entities. If the Arbitration Bill is enacted in substantially similar form, it has the potential to aid with the recognition and enforcement of interim measures, arbitration agreements and arbitral awards in PNG, and may, over time, serve to increase domestic and international arbitration in the country.
• In this transition, practitioners and parties should be mindful of the key aspects in which the PNG legislation diverges from common arbitration practice (particularly through what will constitute an arbitration agreement, limitation periods for bringing a claim and issues of confidentiality), which may prejudice their rights. Of course, the attractiveness of PNG as a venue for international and domestic arbitration, including recognition and enforcement of awards, will depend on the judicial interpretation and practical application of any new regime. We await the developments with interest.

Some context - a broader move to facilitate international trade and commerce in PNG

The Arbitration Bill is an important part of PNG's shift toward being a 'pro-arbitration' country, and part of a broader move to facilitate international trade and commerce in PNG. It reforms the regulation of arbitration within PNG and brings it substantially in conformity with the UNCITRAL Model Law on International Commercial Arbitration (1985) (UNCITRAL Model Law) and the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). However, parties should be aware of areas where the legislation has diverged from the status quo, including with regards to statutory time bars and confidentiality.

If enacted, the new framework for domestic and international arbitrations in PNG would be globally recognised and harmonised. Depending on the way in which it is interpreted and applied in practice, it has the potential to afford greater certainty for arbitrations in PNG, and the recognition and enforcement of arbitral awards within PNG.

What is the purpose of the Bill?

Late last year, the Independent State of Papua New Guinea acceded to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention),¹ and has now proposed the Arbitration Bill to repeal and replace the existing arbitration law.

Overall, the Arbitration Bill has five 'overriding objectives and purposes':

1. to encourage the use of arbitration as a method of resolving disputes;
2. to facilitate international trade and commerce by encouraging the use of arbitration;
3. to promote the consistency of international arbitral regimes based on the Model Law and between PNG's international and domestic regimes;
4. to facilitate the recognition and enforcement of arbitration agreements and awards; and
5. to give effect to the New York Convention.

Application

The Arbitration Bill will repeal and replace PNG's current arbitration legislation, the 1951 Arbitration Act.

The new regime will apply to:

• international arbitration, which is where:
  • the place of arbitration, the place where a substantial part of the obligations of the commercial relationship are performed or the place with which the subject matter is most closely connected to is outside the country or territory in which the parties have their place of business; or
  • the parties expressly agree that the subject matter of the arbitration agreement relates to more than one country; or
  • at least one of the parties' place of business is any country or territory other than PNG;²
• domestic arbitration in PNG; and
• arbitrations which are commenced on or after the commencement of the Act, irrespective of when the arbitration agreement is made.

Different parts of the draft legislation will apply depending on the characteristics of the arbitration.

• For international arbitrations:
  • if the seat (ie legal location) of an arbitration is PNG, the full suite of provisions in Part 3 are applicable; and
  • if the seat of the arbitration is not PNG, only certain provisions concerning recognition and enforcement of interim measures, powers for court-ordered interim measures and court assistance with taking evidence, recognition and enforcement of arbitral awards and arbitration agreements, and the standard limited grounds for refusal of recognition or enforcement.³
• For domestic arbitrations, the full suite of provisions (in Part 3), together with two additional provisions (in Part 2) apply. The additional provisions relating to domestic arbitration are notably different and are considered below.

The familiar, the similar and the notably different

Familiar

The Arbitration Bill contains a number of provisions that are substantially similar to those under the Model Law, including:

• the tribunal's powers to order interim measures and make preliminary orders, and the recognition and enforcement of these measures;
• the rules relating to the conduct of the proceedings, such as equal treatment of the parties, determination of rules of procedure and the seat of arbitration;
• the rules applicable to the substance of the dispute, the making of the arbitral award and the termination of proceedings; and
• the supervisory powers of the PNG courts.

Similar

The procedure for appointment of an arbitrator is orthodox, save for circumstances when:

• an appointment procedure is agreed by the parties and a party fails to act as required;
• the parties or the two arbitrators are unable to reach an agreement expected of them; or
• a third party (including an institution) fails to perform any function required of it.
• In these circumstances, a party may request that the Minister of Justice appoint a suitably qualified body to resolve the matter.⁴

Additionally, the arbitral tribunal's competence to rule on its own jurisdiction goes further than the provision in the Model Law and includes the power to rule whether the tribunal is properly constituted and what matters have been submitted to arbitration in accordance with the arbitration agreement.⁵

Notable differences

While the Bill is helpful for the clarifying and unifying the law on conduct of arbitrations and the recognition and enforcement of agreements and awards, there are some peculiarities in the Bill which may prove to be problematic.

What constitutes an arbitration agreement? - Regarding the form of an arbitration agreement, the Bill states that an arbitration agreement must be in writing. However, unlike the Model Law and New York Convention, the Bill provides there will be sufficient evidence of a written arbitration agreement where in an exchange of statements of claim and defence an agreement is alleged by one party and not denied by another.⁶ This is a relatively unusual provision, the effect of which is that a party could effectively be taken to submit to arbitration in its memorials, even if it had never previously done so.

Statutory time bars - All arbitrations must be commenced within the statutory time bars for legal proceedings under PNG's Frauds and Limitations Act 1988 or any other applicable Acts.⁷ No materially similar provision was contained in the 1951 Arbitration Act. Therefore, claimants may need to act quickly to ensure they understand the time limitations and are not statute-barred from bringing a claim.

Confidentiality - There is no universal approach to confidentiality in arbitrations. In a number of jurisdictions, parties have the autonomy to decide whether to disclose information relating to an arbitration or award. In Australia, the International Arbitration Act 1974 (Cth) provides that, unless the parties agree otherwise,⁸ parties to arbitral proceedings must not disclose confidential information, unless an exception applies.⁹ Those exceptions include: the consent of all parties,¹⁰ disclosure for the purpose of obtaining professional advice,¹¹ or disclosure required by a court.¹² The domestic arbitration regime is substantially similar, and also applies on an opt-out basis.¹³

However, the PNG legislation will adopt a different position in relation to confidentiality. All documents and matters relating to arbitration proceedings are considered to be confidential, subject to one broad exception: disclosure can be made to protect or pursue a legal right or interest of a party.¹⁴ This is very broad and open to differing interpretations. It may give rise to issues concerning disputed disclosure.

Domestic arbitration

Two provisions in the Arbitration Bill, applicable only to domestic arbitration, are unique.

First, a PNG court may refer any matter not subject to an international arbitration agreement to arbitration with or without the consent of the parties.¹⁵ Second, in the event that a separate PNG Act provides for a functioning system of arbitration, that Act applies and will prevail to the extent of any inconsistency.¹⁶ We expect that this is intended to provide for, and protect, existing resource project agreements that have been ratified by statute which contain arbitration provisions (eg in relation to the Ok Tedi Mine).