WA government may have ‘undermined the reputation of Australia as a pro-arbitration seat’

The WA government has “potentially undermined the reputation of Australia as a pro-arbitration seat,” Resolution Institute CEO Amber Williams said in a commentary on the government’s moves in its legal battle with billionaire miner Clive Palmer.

Palmer had challenged the constitutionality of the government’s closure of WA’s borders due to COVID-19, a challenge he lost before the High Court last Friday. He had also filed a $30bn damages claim against the state government in relation to the latter’s liabilities with regard to his company Mineralogy’s iron ore project in Pilbara’s Balmoral South. The project had been stalled by former WA premier Colin Barnett in 2012, according to News.com.au.

In response to Palmer’s damages claim, the WA parliament rushed to pass emergency legislation, the Iron Ore Processing (Mineralogy Pty. Ltd.) Agreement Amendment Bill 2020, in August to amend the state’s existing agreement with Mineralogy. The bill has the effect of blocking both the claim and existing arbitration between the two parties.

“While I can appreciate the WA government’s desire to keep West Australians safe, it appears, however, that it has used its legislative powers to nullify the independent decisions of an arbitrator,” Williams said. “It is generally considered to be bad form to pass retrospective legislation designed to overturn the result in an individual case particularly when the state passing the legislation is the losing party. Such action strikes at the certainty of the law.”

The Australasian dispute resolution organisation’s CEO pointed out that Mineralogy and the state of WA had agreed to the arbitration, and had appointed former High Court Justice Michael McHugh AC QC as the arbitrator.

“Commercial arbitration has at its very core party autonomy and respecting the wishes of the parties as to how they wish to have their disputes resolved,” Williams said. “Business and legal communities in Australia and worldwide are likely to be concerned with the retrospective nature of the new WA legislation and the precedent it sets.”

She called the passing of the legislation premature, saying that the final outcome of the arbitration “was not known and remains to be determined.”

“The Mineralogy parties may not succeed with being awarded the amounts they haves claimed. The statutory regime governing arbitration states that arbitration is to be conducted fairly, expeditiously and cost effectively and in a manner that is proportionate to the amount of money involved and the complexity of the issues,” she said.

With Palmer’s Mineralogy Pty Ltd and International Minerals Pty Ltd being subsidiaries of a Singapore-registered company, Williams said that the state’s actions would “expose the Commonwealth to an Investor-State Treaty Arbitration for essentially failing to treat an investor fairly or equitably,” even if the legislation should survive a challenge to its constitutionality.

As the situation is being monitored not just by Australian arbitrators but also arbitral seats in Hong Kong and Singapore, Williams emphasised the importance of “a healthy domestic arbitration environment,” which she said would “promote Australia's reputation as a seat to resolve international disputes.”

“The process delivers benefits of certainty, expediency, enforceability and commercial privacy and in the current global economic downturn, this is a better alternative than drawn out litigation in any jurisdiction,” she said.

The legal battle between Palmer and the WA government is now pending a judgment from the Supreme Court of Queensland, which had previously granted Palmer arbitration awards, according to The New Daily.