19 February 2021
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International arbitration is gaining ground across the South Pacific region. There are a wide range of benefits brought about by implementing an effective framework for international arbitration across the region, most prominently increased foreign investment opportunities and the economic advantages that brings.
Presently, eight countries from the South Pacific are parties to the New York Convention: Australia, New Zealand, Marshall Islands, Cook Islands, Fiji, Papua New Guinea, Palau, and Tonga. Three of those (Palau, Tonga and Papua New Guinea) have acceded to the Convention in the last two years. As more countries in the region accede to the New York Convention and adopt arbitration laws based on the UNCITRAL Model Law, the outlook is increasingly positive in terms of legal certainty and enforcement tools to attract and expand trade and development in the region.
Australia’s proximity, stable political environment, robust legislative framework and resilient economy allow it to be well placed to interact with the South Pacific region in trade and development generally, and in the international arbitration sphere in particular.
International arbitration in Australia
There are multiple factors which make Australia an increasingly active arbitration hub, including its pro-arbitration legislation and judiciary. Australian courts have exhibited a strong commitment to the New York Convention and the Model Law, a tendency towards minimal curial intervention, and widespread citation of international and regional jurisprudence in making decisions supportive of international arbitration.
In addition, Australia has a sophisticated legal profession with considerable international experience and specialist legal skills. Australia is also cost-competitive compared to other arbitral hubs in the Asia Pacific region.
The benefits international arbitration brings for investment and trade in the South Pacific
A stable legislative framework for resolving international commercial disputes creates an environment where foreign investment and trade can flourish.
The Asian Development Bank (ADB) has implemented, in conjunction with UNCITRAL, a regional “technical assistance” program which aims to establish an effective commercial dispute resolution regime among member countries in the Pacific. The reform framework is focused on international arbitration and devised to boost regional and international investor confidence in order to foster greater foreign direct investment and cross-border trade in the region.
A strong international arbitration framework is indeed vital for securing foreign investment, as investors require the assurance of an efficient and enforceable method of resolving project-related disputes. The positive corollaries of increased foreign investment include economic growth and further infrastructure projects and trade deals.
The South Pacific region has some of the fastest-growing economies in the world and the implementation of arbitration frameworks to boost investments in the area is very much a welcome development.
Australia’s impact in the Pacific
Australia’s role in international arbitration in the region follows a similarly significant role in terms of economic and development assistance in the South Pacific.
As an illustration, in 2020-2021 Australia gave an estimated A$1.44 billion to the Pacific for assistance with development. In light of the major economic impacts of COVID-19 on the South Pacific nations, that assistance will hopefully play a role in their economic recovery. In this regard, Australia’s Department of Foreign Affairs and Trade is implementing specific programs, such as the Australian Infrastructure Financing Facility for the Pacific, which will provide financing for transformational energy, water, transport and telecommunications projects. These commitments solidify Australia’s position as a leading trade, development and legal partner in the region.
Of particular note is the Pacific Agreement on Closer Economic Relations Plus (PACER Plus). PACER Plus is a regional development-centred free trade agreement covering goods, services and investment, which opened for signature on 14 June 2017, and has been signed by Australia, New Zealand and nine Pacific island countries (Cook Islands, Kiribati, Nauru, Niue, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu). PACER Plus entered into force on 13 December 2020 – New Zealand, Australia, Samoa, Kiribati, Tonga, Solomon Islands, Niue and Cook Islands are parties to the Agreement. The Australian Government expects it to provide significant benefits to communities, farmers, fishers, businesses and investors.
As discussed above, the development of effective international arbitration regimes is crucial in order to attract investment and foster development. In this regard, Australian arbitration institutions and practitioners are playing an increasingly relevant role in promoting best practices and awareness of international arbitration in the region.
As an example of such leadership, among other initiatives members of the Australian Centre for International Commercial Arbitration (ACICA) have participated in arbitration and mediation competency-building initiatives for practitioners in Fiji. ACICA recently hosted an event focused on exploring current developments in international arbitration law and practice in the South Pacific, ahead of the Third South Pacific International Arbitration Conference in Sydney on 17 March 2021. These initiatives will hopefully contribute to further progression in the international arbitration space which, in turn, will positively impact the region’s economies.
For further information, please contact:
Chad Catterwell, Partner, Herbert Smith Freehills
