International Arbitration 2024

Last Updated August 22, 2024

Cook Islands

Law and Practice

Authors



Bankside Chambers is Aotearoa New Zealand’s leading set of independent barristers, arbitrators and mediators. It has more than 40 members, who include some of New Zealand’s leading international and domestic arbitration advocates and arbitrators, together with many of New Zealand’s leading mediators. Its barristers represent major global and New Zealand-based companies, private commercial entities, charities, private individuals and government departments. Many of its members are King’s Counsel and a number of former members have served as Justices of the High Court and Court of Appeal, as well as judges in various foreign jurisdictions such as Samoa and the Cook Islands. Its current and former members also sit on important tribunals and public bodies in New Zealand and abroad. Bankside Chambers is ranked Band 1 by Chambers & Partners for Dispute Resolution in New Zealand. It is the first New Zealand barristers’ chambers to have a presence in Singapore, based out of Maxwell Chambers Suites.

The Cook Islands has sought to promote international arbitration as a method of dispute resolution in order to improve the climate for foreign investment. It has sought to do so principally by becoming a party to the New York Convention in 2009 and by enacting modern arbitration legislation in 2009 and 2014, implementing the Cook Islands’ commitments under the New York Convention and providing a comprehensive framework for international arbitration in the Cook Islands that generally reflects the UNCITRAL Model Law.

We are not aware of any industries in the Cook Islands for which international arbitration is more or less popular.

There are no arbitral institutions established in the Cook Islands.

In the limited circumstances in which courts are permitted to intervene in arbitral proceedings, the Arbitration Act 2014 (the “Act”) designates the High Court of the Cook Islands as the supervisory court in matters of arbitration. The High Court is a court of general jurisdiction that is responsible for the administration of justice in the Cook Islands.

The composition of the High Court reflects the Cook Islands’ status as a country that attained self-governance in 1965, but which remains in free association with New Zealand. The Court consists of the Chief Justice and other judges, who must have practised in New Zealand or another Commonwealth country, or hold or have held office as a judge of the senior courts of New Zealand. At present, all the judges of the High Court, including the Chief Justice, are New Zealanders.

The Act governs arbitration proceedings seated in the Cook Islands, including international arbitrations. The Act has the same structure, and virtually the same content, as New Zealand’s Arbitration Act 1996 (with a notable difference in relation to appeals on questions of law, described further below). Given the similarities between the Act and the New Zealand Arbitration Act 1996, and the makeup of the Cook Islands judiciary, it is to be expected that judgments of the New Zealand courts under the New Zealand Arbitration Act 1996 will be highly persuasive in interpreting and applying the equivalent provisions of the Act.

The Act contains three core parts:

  • The general provisions of the Act, which are denoted by “sections” on various matters including: arbitrability (s 11); the power of arbitral tribunals to grant relief (s 13); arbitrator immunity (s 14); and confidentiality and privacy (s 15).
  • Schedule 1, which contains “articles” that substantially reproduce the Model Law.
  • Schedule 2, which contains “clauses” with additional rules on, for example: the appointment of arbitrators (cl 1); consolidation (cl 2); and preliminary determinations of, and appeals on, points of law by agreement (cls 4 and 5).

The general provisions of the Act and of Schedule 1 to the Act apply to all domestic and international arbitrations. Schedule 2 to the Act applies to a domestic arbitration unless the parties agree that it does not, and to an international arbitration only if the parties agree that it does.

There are some notable differences between the Act and the Model Law, including the following:

  • An arbitrator is not liable in respect of anything done or omitted to be done in their capacity as arbitrator, unless the act or omission was in bad faith (s 15).
  • Express requirements of privacy and confidentiality (ss 15–15F).
  • The arbitration agreement may be made orally or in writing (Art 7(1) of Sch 1).
  • A stay of court proceedings may be refused if “there is not in fact any dispute between the parties” (Art 8(1) of Sch 1). However, the New Zealand Supreme Court has held that the identical words in the New Zealand Arbitration Act 1996 were not intended to expand the jurisdiction of the courts beyond that provided for in the Model Law, and therefore a court may only grant summary judgment despite the existence of a valid arbitration agreement if there is no actual dispute (and not merely no arguable defence) (Zurich Australian Insurance Ltd v Cognition Education Ltd [2015] 1 NZLR 383).
  • The powers of courts to grant interim measures are assimilated to those of an arbitral tribunal, though the courts are bound by any findings of fact made by the tribunal (Art 9(2)–(3) of Sch 1).
  • The ability of a party to request a decision on jurisdiction from the High Court is not limited to situations where the tribunal has positively ruled as a preliminary question that it has jurisdiction (Art 16(3) of Sch 1).
  • Security for costs is available as an interim measure (Art 17 of Sch 1, definition of “interim measure”).
  • Witnesses and counsel have the same privileges and immunities as witnesses and counsel in a court proceeding (Art 19(3) of Sch 1).
  • If a claimant fails to prosecute its claim, the arbitral tribunal may make an award dismissing the claim or give directions for the speedy determination of the claim (Art 25(d) of Sch 1).
  • The High Court is empowered to take various steps to assist the arbitral tribunal in taking evidence (Art 27(2) of Sch 1).
  • Unless the arbitration agreement provides otherwise, or the award otherwise directs, any sum awarded shall carry interest from the date of the award at the same rate as a judgment debt (Art 31(5) of Sch 1).
  • The death of a party does not terminate the arbitration, unless otherwise agreed by the parties (Art 32(4) of Sch 1).
  • Grounds for setting aside, or refusing to recognise or enforce, an arbitral award on the basis that it is contrary to public policy expressly include the award having been induced or affected by fraud or corruption, or a breach of the rules of natural justice (Arts 34(6) and 36(3) of Sch 1).

There have been no significant changes to the Act in the past year, and there is no pending legislation relating to arbitration of which we are aware.

Section 3(1) of the Act provides that an arbitration agreement is “an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not”.

An arbitration agreement may be made orally or in writing (Art 7(1) of Sch 1).

Section 11 of the Act provides that any dispute that the parties agree to submit to arbitration may be determined in that way “unless the arbitration agreement is contrary to public policy or, under any other law, such a dispute is not capable of determination by arbitration”. However, Section 12 of the Act clarifies that “[t]he fact that an enactment confers jurisdiction in respect of any matter on the High Court but does not refer to the determination of that matter by arbitration does not, of itself, indicate that a dispute about that matter is not capable of determination by arbitration”.

Whether a particular type of dispute is considered arbitrable is therefore a matter for the courts, having regard to either relevant public policy factors in the Cook Islands, or other laws.

There are two recent decisions of the New Zealand courts on the concept of arbitrability under the equivalent to Section 11 in the New Zealand Arbitration Act 1996. One decision has confirmed that matters relating to child guardianship (that is, the care and custody of children) are not arbitrable (Wade v Wade [2022] NZHC 3254). Another decision, which has proved controversial, held that issues of whakapapa (loosely translated as one’s genealogical identity) could not be arbitrated and that to do so would be an abuse of process (Ngawaka v Ngāti Rehua-Ngātiwai Ki Aotea Trust Board (No 1) [2021] NZHC 291).

There are no judgments of the Cook Islands courts under the Act with respect to determining the law governing the arbitration agreement. The Cook Islands courts would, however, likely follow the UK Supreme Court decision in Enka v Chubb [2020] UKSC 38.

Likewise, there do not appear to be any judgments of the Cook Islands courts under the Act with respect to the enforcement of arbitration agreements. However, it is to be expected that – like the New Zealand courts – the Cook Islands courts would take a pro-arbitration stance and strive to enforce arbitration agreements where possible (see, eg, Maritime Mutual Insurance Association (NZ) Ltd v Silica Sandport Inc [2023] NZHC 793). Indeed, in Aitu v Faireka [2011] CKCA 1, the Court of Appeal of the Cook Islands cited with approval the New Zealand judgment in Marnell Corrao Associates Inc v Sensation Yachts (2000) 15 PRNZ 608, in which it was held that a liberal interpretation of arbitration agreements should be favoured, and that inconsistencies or uncertainties in the wording used by the parties in their arbitration agreement should not be allowed to thwart their intent to arbitrate disputes.

An arbitration clause in a contract may be considered valid even if the rest of the contract in which it is contained is invalid. Article 16(1) of Schedule 1 to the Act states that, for the purposes of the arbitral tribunal’s competence to rule on its own jurisdiction, “an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract”, and that “[a] decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure (necessarily) the invalidity of the arbitration clause”.

The parties are “free to determine the number of arbitrators” (Art 10(1) of Sch 1 to the Act). If the parties do not make such a determination, in an international arbitration, the number of arbitrators shall be three; in every other case, the number of arbitrators shall be one (Art 10(2) of Sch 1).

No person shall be precluded from acting as an arbitrator by reason of their nationality, unless the parties agree otherwise (Art 11(1) of Sch 1). The parties are also “free to agree on a procedure of appointing the arbitrator or arbitrators” (Art 11(2) of Sch 1).

If the parties’ chosen machinery for selecting arbitrators fails, then (unless the parties have agreed otherwise) at a party’s request the High Court shall take the necessary measures under that machinery (Art 11(4) of Sch 1 to the Act).

If the parties have not agreed any machinery, then the applicable default procedures are specified in the Act:

  • In an arbitration with two parties:
    1. If there are to be three arbitrators, then each party shall appoint one arbitrator, and the two arbitrators thus appointed shall appoint the third arbitrator. If a party fails to appoint an arbitrator within 30 days, or if the two arbitrators fail to agree on a third arbitrator within 30 days, the appointment shall be made by the High Court upon request (Art 11(3)(a) of Sch 1).
    2. If there is to be a sole arbitrator, if the parties are unable to agree on the arbitrator, a party may request the High Court to make the appointment (Art 11(3)(b) of Sch 1).
  • If the parties have agreed to an arbitration with two or four or more arbitrators, or there are three arbitrators and more than two parties, then, unless the parties have agreed otherwise, the High Court may appoint the requisite number of arbitrators upon the request of a party (Art 11(6) of Sch 1).

The courts may intervene in the selection of arbitrators only upon request, in the circumstances described above.

Articles 12 and 13 of Schedule 1 to the Act govern the challenge and removal of arbitrators. An arbitrator may be challenged “only if circumstances exist that give rise to justifiable doubts as to that arbitrator’s impartiality or independence, or if that arbitrator does not possess qualifications agreed to by the parties”.

The parties are free to agree the procedure for challenging an arbitrator. Under the default procedure, the challenging party must send a written statement of the reasons for challenge to the arbitral tribunal within 15 days of the constitution of the tribunal or after becoming aware of the circumstances giving rise to the challenge. The arbitral tribunal shall decide on the challenge. However, if the challenge is unsuccessful, the challenging party may request the High Court to decide on the challenge.

The Act has adopted the Model Law requirement that a person who is approached in connection with appointment as an arbitrator must disclose any circumstances likely to give rise to justifiable doubts as to that person’s impartiality or independence. An arbitrator also has an ongoing duty to disclose any such circumstances (Art 12(1) of Sch 1 to the Act). As set out above, an arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence (Art 12(2) of Sch 1).

The Court of Appeal of the Cook Islands has held the test for impartiality is objective: “The concept of objective impartiality is well-established in the context of professional disciplinary proceedings. The question is what the fair-minded and informed observer would think” (George v Cook Islands Law Society [2017] CKCA 6). The New Zealand courts have held that such a fair-minded observer has an awareness of the circumstances of the case, but is objective and does not stand in the complainant’s shoes (Todd Taranaki Ltd v Energy Infrastructure Ltd HC Wellington CIV-2007-485-2684, 19 December 2007).

As set out above, Section 11 of the Act provides that any dispute that the parties agree to submit to arbitration may be determined in that way “unless the arbitration agreement is contrary to public policy or, under any other law, such a dispute is not capable of determination by arbitration”.

Pursuant to Article 16 of Schedule 1 to the Act, an arbitral tribunal may rule on whether (and, if so, to what extent) it has jurisdiction to determine the particular dispute.

The tribunal may rule on the point as a preliminary question, or in an award on the merits.

There are three circumstances in which the High Court might address the question of jurisdiction and competence of an arbitral tribunal:

  • When a question of jurisdiction is referred to it after a tribunal has already ruled on the point as a preliminary question. There is no appeal from such a decision of the High Court (Art 16(3) of Sch 1 to the Act).
  • When the jurisdictional ruling is given in an award on the merits. If Schedule 2 to the Act applies (Schedule 2 applies automatically to domestic arbitrations, but not to international arbitrations unless the parties specifically agree), an appeal might lie on a question of law under clause 5 of Schedule 2, if the parties have so agreed (or so agree). Alternatively, the issue of jurisdiction may be considered by the Court in connection with setting-aside or enforcement proceedings (Arts 34(2)(1)(i), (iii) and 36(1)(a)(i), (iii) of Sch 1).
  • When deciding whether to stay court proceedings to allow an arbitration to proceed.

If the arbitral tribunal rules on jurisdiction in a preliminary ruling, the parties have 30 days from notice of that decision to apply to the High Court to decide the question (Art 16(3) of Sch 1 to the Act).

If the arbitral tribunal rules on jurisdiction in an award on the merits, the parties have three months from the date on which the award is received (or a request made for a correction, interpretation or additional award is disposed of) within which to exercise any right of appeal on a question of law (see cl 5 of Sch 2 and Art 34 of Sch 1).

The court can review jurisdiction on a de novo basis (see the judgment of the New Zealand High Court in Downer Construction (New Zealand) Ltd v Silverfield Developments Ltd HC Auckland CIV-2004-404-4488, 26 October 2004).

If a party commences court proceedings in breach of an arbitration agreement, it is for the opposing party to apply to have the court proceeding stayed while arbitration is in train. Any application for stay must be made before the applicant submits its first statement on the substance of the dispute.

Article 8(1) of Schedule 1 to the Act provides that a court must stay the proceeding and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed, or there is not in fact any dispute between the parties with regard to the matters agreed to be referred. In Ursem v Chung [2014] NZHC 436, the New Zealand High Court held that the correct approach is to stay court proceedings if the court is satisfied of the prima facie validity of an arbitration agreement. The Cook Islands courts are likely to follow this approach.

As with other Commonwealth courts of general jurisdiction, the High Court has an inherent jurisdiction and therefore retains a residual discretion to grant a stay of proceedings in circumstances where Article 8(1) is not engaged. For example, in Danone Asia Pacific Holdings Pte Ltd v Fonterra Co-operative Group Ltd [2014] NZCA 536, the New Zealand Court of Appeal upheld a temporary ‘case management’ stay of court proceedings on the basis that the court proceedings between Danone and Fonterra were duplicative of arbitral proceedings involving Danone and wholly-owned subsidiaries of Fonterra.

As set out in 3.1 Enforceability, the Act defines “arbitration agreement” to mean an agreement to submit to arbitration disputes “in respect of a defined legal relationship, whether contractual or not”. Thus, while the point does not appear to have been decided by the Cook Islands courts, they are likely to follow the New Zealand (and other) courts in holding that an arbitral tribunal cannot assume jurisdiction over persons that are not party to an arbitration agreement, and that “a person is a party to an arbitration agreement only if that person is one of the persons who has submitted the dispute to arbitration and the arbitration is in respect of a defined legal relationship which involves that person” (Methanex Motunui Ltd v Spellman [2004] 3 NZLR 454 (NZCA)).

Some questions might remain with regard to third-party non-signatories, implied consent, groups of companies and principals/agents. A Cook Islands court would likely also follow the approach taken by the House of Lords in Fiona Trust & Holding Corporation v Privalov [2007] 4 All ER 951, such that an arbitration agreement contained in one of a number of related contracts would bind a party to those contracts even if they have not signed the arbitration agreement, on the basis that “rational businessmen” are likely to have intended that disputes arising out of their relationship be decided by the same tribunal. But, generally speaking, the Cook Islands courts would regard the compulsion of arbitration with non-signatory parties as being at odds with the basic principle that arbitration must be consensual.

The powers of an arbitral tribunal to grant interim relief in the Cook Islands are based on the Model Law, as amended in 2006 (see Arts 17–17M of Sch 1 to the Act). Such relief is binding and not merely recommended. As set out in 6.3 Security for Costs, such relief may include an order to give security for costs.

If a party requests an interim measure of protection from the High Court before or during arbitral proceedings, the High Court “shall have the same power as it has for the purposes of proceeding before that court” to make specified orders, including orders “to ensure that any award which may be made in the arbitral proceedings is not rendered ineffectual by the dissipation of assets by the other party” (Art 9 of Sch 1 to the Act).

The Cook Islands courts must also recognise and enforce interim measures granted by an arbitral tribunal, including a foreign arbitral tribunal, unless there are grounds for refusing recognition or enforcement (Arts 17L and 17M).

Notably, the Act does not refer to emergency arbitrators. Indeed, unlike the New Zealand Arbitration Act 1996, which was amended to include emergency arbitrators within the definition of an arbitral tribunal, the Act does not include a definition of “arbitral tribunal”. This appears to be an anomaly, as such a definition is contemplated elsewhere in the Act (eg, Art 2(a) of Sch 1).

In addition to the interim measures specified in the Model Law, interim measures under Article 17 of Schedule 1 include an order to “give security for costs”.

The Act governs the procedure of arbitration in the Cook Islands. Schedule 1 to the Act, “Rules applying to arbitration generally”, includes rules of procedure and expressly covers the following matters of procedure:

  • the date of commencement of arbitral proceedings (Art 21);
  • the language to be used in the proceeding (Art 22);
  • the form and timing of statements of claim and defence and the circumstances in which they may be amended or supplemented (Art 23);
  • the receipt and consideration of evidence and argument by the tribunal (Art 24);
  • the power of the tribunal to make or authorise a request for court assistance in taking evidence (Art 27);
  • the conferring on witnesses giving evidence and counsel, experts or other persons appearing before an arbitral tribunal, of the same privileges and immunities as witness and counsel in proceedings before a court (Art 19(3));
  • the powers of the tribunal in the event of default of a party (Art 25); and
  • the power of the tribunal to appoint an expert or experts (Art 26).

The parties are generally free to agree on the procedure to be followed by the arbitral tribunal (Art 19(1) of Sch 1 to the Act). Failing agreement, the arbitral tribunal is authorised to conduct the arbitration in such manner as it considers appropriate (Art 19(2)).

Any procedure adopted by the arbitral tribunal must not conflict with: (a) the requirements of equality of treatment and full opportunity to present each party’s case imposed by Article 18 of Schedule 1; or (b) any other provision of Schedule 1 from which the parties may not derogate or the relevant public policy, which would have the effect of rendering an award susceptible to being set aside or being refused recognition or enforcement.

The Act provides for a range of powers for arbitrators, including: procedural powers; the power to award any remedy or relief that could have been ordered by the High Court in civil proceedings (s 13); and, unless the parties have agreed otherwise, the power to grant interim measures (Art 17A of Sch 1).

Further, unless the parties have agreed otherwise, clause 3(1) of Schedule 2 to the Act provides for an arbitral tribunal to have certain powers in those arbitrations to which Schedule 2 applies (again, Schedule 2 applies automatically to domestic arbitrations unless the parties ‘opt out’, but applies to international arbitrations only if the parties expressly ‘opt in’). Those powers include drawing on their own knowledge and expertise and ordering any party to do such things to enable an award to be made properly and efficiently.

As for duties, many of the mandatory rules in Schedule 1 operate as duties on the arbitral tribunal in practice. For example, an arbitral tribunal must: ensure the equal treatment of the parties and provide the parties with an opportunity to be heard (Art 18 of Sch 1); decide the dispute in accordance with the rules of law chosen by the parties (Art 28 of Sch 1); and issue an award in writing, signed and with reasons (Art 31 of Sch 1).

There are no requirements or restrictions on persons able to represent a party in an arbitration under Cook Islands law. Foreign counsel may appear in Cook Islands-seated arbitrations.

As set out in 7.2 Procedural Steps, in the absence of an agreement between the parties to the contrary, the arbitral tribunal has the power to conduct the arbitration in the manner it considers appropriate. In exercising that power, the general approach followed by arbitral tribunals in practice is likely to follow the approach in New Zealand-seated arbitrations:

  • In relation to discovery/disclosure, arbitral tribunals can be expected to make orders for the production of documents.
  • Evidence may be given informally or under oath. Witnesses may provide written witness statements prior to the hearing. If they do, such evidence may be taken as read during the hearing or read out, depending on the preference of the arbitral tribunal.
  • Cross-examination and re-examination would typically follow. Following cross-examination, arbitrators will commonly ask questions of the witness.

In the absence of an agreement between the parties to the contrary, the arbitral tribunal has the power to conduct the arbitration in the manner it considers appropriate, including to determine the admissibility, relevance, materiality and weight of any evidence (Art 19(2) of Sch 1 to the Act).

Subject to the requirements of equal treatment and a full opportunity to be heard (Art 18 of Sch 1), there are no rules of evidence that apply to arbitral proceedings in the Cook Islands. In practice, however, arbitrators may be guided by the rules of evidence that would apply to court proceedings in the Cook Islands.

If the optional Schedule 2 to the Act applies, clause 3 states expressly that the parties shall be taken as having agreed that the arbitral tribunal has the power to “order the discovery and production of documents or materials within the possession or power of a party”, “order the answering of interrogatories”, “order that any evidence be given orally or by affidavit or otherwise”, and “order that any evidence be given on oath or affirmation”.

Arbitral tribunals do not have the power to compel a witness to appear before them.

Sections 15–15F of the Act contain a code on confidentiality that applies to every arbitration for which the place of arbitration is or would be the Cook Islands.

  • Arbitral proceedings must be conducted in private.
  • Arbitration agreements are deemed to provide that the parties and the arbitral tribunal must not disclose confidential information. There are, however, limits on that prohibition.
  • Disclosure may be made to a professional or other adviser of any party, or if the disclosure is necessary to ensure each party has a full opportunity to present its case, for the establishment or protection of legal rights in relation to a third party or for making and prosecuting any application to a court, provided disclosure is no more than what is reasonably required to serve the purposes for which it is necessary.
  • Disclosure is also allowed if required under a subpoena issued by a court.
  • Another circumstance is where disclosure is authorised or required by a competent regulatory body (eg, a stock exchange) and written details of the disclosure are provided to the opposing party. The arbitral tribunal and High Court also have discretion, in certain circumstances, to order disclosure.

Court challenges are generally heard in public. However, in limited circumstances, the High Court may make an order allowing the whole or any part of the proceeding to be conducted in private. Such an order can only be made if the Court is satisfied that the public interest in having the proceedings conducted in public is outweighed by the interests of any party to the proceeding in having the whole or any part of the proceedings conducted in private.

Confidential information from an arbitral proceeding may be disclosed in a subsequent proceeding if the parties agree or if permission is given, either by the arbitral tribunal or by the High Court (eg, in response to a subpoena).

The formal requirements for a valid arbitral award are contained in Article 31 of Schedule 1 to the Act, which follows the Model Law. The award must be in writing, signed by (a majority of) the tribunal, state reasons and include the date and place of the arbitration. The signed award must be delivered to each party after it has been made. There is no requirement that the arbitrators sign each page of the award.

Such formal requirements apply to substantive awards as well as corrections/interpretations of an award, and to any additional award made by the tribunal. They also apply to any costs award.

The Act does not contain any time limits on the delivery of an award.

Section 13(1)(a) of the Act provides that, unless otherwise agreed by the parties, “an arbitral tribunal may award any remedy or relief that could have been ordered by the High Court if the dispute had been the subject of civil proceedings in that court”.

Parties are generally entitled to recover interest and legal costs.

In relation to interest, Article 31(5) of Schedule 1 to the Act states that “[u]nless the arbitration agreement otherwise provides, or the award otherwise directs, a sum directed to be paid by an award shall carry interest as from the date of the award and at the same rate as a judgment debt”. Section 13(1)(b) also provides arbitral tribunals with a broad power to award interest. The rate of interest is a matter for the tribunal.

In relation to costs, tribunals have the power to award costs under the broad power given to arbitral tribunals under Section 13(1) of Act to award any relief that could have been ordered by the High Court in the dispute (see the judgment of the New Zealand Supreme Court in General Distributors Ltd v Casata Ltd [2006] 2 NZSC 8).

Schedule 2, which applies to domestic arbitration (unless otherwise agreed) and is optional for international arbitration, also contains specific provisions on costs. Clause 6 of Sch 2 states that: (a) the costs and expenses of the arbitration (including legal costs) shall be fixed and allocated by the tribunal; (b) the default position on costs in the absence of an award is that the parties bear their own legal costs and share equally the costs of the arbitration; and (c) the tribunal may have regard to settlement offers that are without prejudice save as to costs (ie, Calderbank offers).

The practice as to costs in the Cook Islands is generally that costs follow the event.

There is no right to appeal (whether by consent or otherwise) a question of fact arising from an arbitral award (see the judgment of the New Zealand Supreme Court in Carr v Gallaway Cook Allan [2014] 1 NZLR 792 (SC)).

However, under Schedule 2 to the Act (which, again, applies automatically to domestic arbitrations unless the parties ‘opt out’, but applies to international arbitrations only if the parties expressly ‘opt in’), there is a limited ability to appeal against a question of law arising from an arbitral award, but only “if the parties have so agreed before the making of that award” or “with the consent of every other party given after the making of the award”. In this respect, clause 5 of Schedule 2 differs from the equivalent provision of the New Zealand Arbitration Act 1996, in which the parties have such a right to appeal against a question of law arising from an arbitral award if they agree or if they receive leave of the High Court.

Clause 5(8) of Schedule 2 provides that a question of law “(a) includes an error of law that involves an incorrect interpretation of the applicable law (whether or not the error appears on the record of the decision); but (b) does not include any question as to whether – (i) the award or any part of the award was supported by any evidence or any sufficient or substantial evidence; and (ii) the arbitral tribunal drew the correct factual inferences from the relevant primary facts”.

If an appeal on a question of law is successful, the court may choose to vary the award, set it aside or remit the award back to the tribunal.

As set out in 11.1 Grounds for Appeal, the parties can agree to allow for the appeal of an award to the High Court on a question of law arising out of an award. The parties cannot otherwise agree to exclude or expand the scope of appeal against an arbitral award (eg, to encompass appeals on questions of fact).

The standard of review on appeal is de novo, not deferential, in relation to the question of law that is appealed.

The Cook Islands has signed and ratified the New York Convention without reservation. Section 6(1)(f) of the Act confirms that a purpose of the Act is to give effect to the New York Convention, which is attached as Schedule 3 to the Act.

The recognition and enforcement of awards – both those made in the Cook Islands and those made overseas – is governed by Articles 35 and 36 of Schedule 1 to the Act, which reflect the Model Law and basic New York Convention requirements.

Article 35 of Schedule 1 provides that awards must be recognised as binding and, on application, enforced by entry as a judgment or by action.

If the award has been set aside by the courts in the seat of arbitration, the Cook Islands courts have discretion to refuse enforcement of that award (Art 36(1)(a)(v) of Sch 1). While the point has not yet been tested in the courts, it seems likely – given the general respect for the law of the seat that is well established in New Zealand and therefore likely also the Cook Islands – that awards set aside by the courts of the seat will not be enforced in the Cook Islands, unless the set-aside decision was procured by judicial corruption.

If an award is subject to ongoing set-aside proceedings, the Cook Islands courts have discretion to adjourn their decision on enforcement (and may require the payment of security) (Art 36(2) of Sch 1). But if the court considered that the application lacked merit, the court may refuse an adjournment request and enforce the award.

In relation to sovereign immunity, the common law doctrine continues to apply in the Cook Islands. Sovereign immunity applies only to the State’s sovereign or public acts as opposed to its commercial activity. The Cook Islands has not seen any cases regarding enforcement of an arbitral award against State assets.

The approach of the Cook Islands courts to the recognition and enforcement of arbitral awards can be expected to be consistent with the New Zealand courts: encouraging arbitration as a method of dispute resolution and facilitating the recognition and enforcement of arbitral awards (ss 6(1)(a) and (e) of the Act; see also Gallaway Cook Allan v Carr [2013] NZCA 11 (CA) at [66]; Carr v Gallaway Cook Allan [2014] 1 NZLR 792 (SC) at [30]–[32]).

Article 36(1)(b) of Schedule 1 to the Act provides that recognition or enforcement may be refused if it would be “contrary to the public policy of the Cook Islands”. The Act confirms that an award is contrary to the public policy of the Cook Islands if (a) the making of the award was induced or affected by fraud or corruption, or (b) a breach of the rules of natural justice occurred during the arbitral proceedings or in connection with the making of the award.

However, the courts are likely to find that the bar for establishing such a conflict with public policy is very high. In Amaltal Corporation Ltd v Maruha (NZ) Corporation Ltd [2004] 2 NZLR 614, the New Zealand Court of Appeal concluded that a fundamental principle of law and justice must be at issue to establish a conflict with public policy, and that the alleged conflict should be obvious. Similarly, in Hi-Gene Ltd v Swisher Hygiene Franchise Corporation [2010] NZCA 359, the New Zealand Court of Appeal held that “a narrow reading is to be given to the public policy ground”. In relation to the circumstances in which a breach of natural justice will amount to a conflict with public policy, the Court held that such a breach would need to be something that violates a State’s “most basic notices of morality and justice”, constitutes an abuse of process, or “shocks the conscience of the court”.

While Article 36(1)(b) of Schedule 1 expressly refers to the public policy “of the Cook Islands”, it is less clear whether there is a difference between Cook Islands public policy as applied to domestic and to foreign arbitral awards. However, in both Amaltal and Swisher Hygiene, the New Zealand Court of Appeal cited overseas judgments involving the enforcement of foreign awards, which suggests that the distinction between domestic and foreign may have limited practical relevance under Article 36(1)(b).

The Act does not provide for class action or group arbitration.

As in New Zealand, the Cook Islands has a “fused” profession whereby most lawyers are “barristers and solicitors”. Lawyers can opt to be a barrister sole. Lawyers must comply with the Law Practitioners Act 1993–94. Cook Islands lawyers with a Cook Islands practising certificate are bound by the Law Practitioners Act whether the arbitration is seated in the Cook Islands or elsewhere.

Counsel from countries other than the Cook Islands would not automatically be bound by the Law Practitioners Act simply by virtue of an arbitration being seated in the Cook Islands. Those lawyers would, however, continue to be governed by the laws of their own home jurisdiction.

There are no specific laws regulating third-party funding of arbitration in the Cook Islands.

Schedule 2 to the Act provides for the consolidation of separate arbitral proceedings by agreement (cl 2(9)) or, absent agreement:

  • Where the proceedings have the same arbitral tribunal, consolidation may be ordered by the tribunal on terms the tribunal thinks just, failing which by the High Court (cl 2(1)).
  • Where the proceedings do not all have the same arbitral tribunal, consolidation may provisionally be ordered by a tribunal on terms the tribunal thinks just (cl 2(2)). Consolidation ceases to be provisional when consistent consolidation orders are made for all the arbitral proceedings, failing which the High Court may make such orders.

As set out in 5.7 Jurisdiction Over Third Parties, non-signatories may sometimes be regarded as parties to and therefore bound by an arbitration agreement, and award. Third parties cannot otherwise be bound by an arbitration agreement or award.

The Cook Islands courts do have the ability to bind third parties in circumstances in which an arbitral tribunal cannot, eg, in making interim orders, or making an order of subpoena or issuing a witness summons, compelling the attendance of a witness before the tribunal to give evidence or produce documents.

Bankside Chambers

Level 22 Shortland & Fort
88 Shortland Street
Auckland 1010
New Zealand

+64 9 379 0802

reception@bankside.co.nz www.bankside.co.nz
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Bankside Chambers is Aotearoa New Zealand’s leading set of independent barristers, arbitrators and mediators. It has more than 40 members, who include some of New Zealand’s leading international and domestic arbitration advocates and arbitrators, together with many of New Zealand’s leading mediators. Its barristers represent major global and New Zealand-based companies, private commercial entities, charities, private individuals and government departments. Many of its members are King’s Counsel and a number of former members have served as Justices of the High Court and Court of Appeal, as well as judges in various foreign jurisdictions such as Samoa and the Cook Islands. Its current and former members also sit on important tribunals and public bodies in New Zealand and abroad. Bankside Chambers is ranked Band 1 by Chambers & Partners for Dispute Resolution in New Zealand. It is the first New Zealand barristers’ chambers to have a presence in Singapore, based out of Maxwell Chambers Suites.

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