Australia’s standard of review on arbitration stays: an opportunity for the High Court

On appeal from Oil Basins Ltd v Esso Australia Resources Pty Ltd [2026] VSCA 6

The High Court of Australia may soon clarify the standard of review that a court applies when asked to stay proceedings in favour of arbitration. The Court has granted special leave to appeal from the decision of the Victorian Court of Appeal in Oil Basins Ltd v Esso Australia Resources Pty Ltd.¹ The appeal presents an opportunity to align Australian practice with the prevailing approach across the region, and to resolve a narrower question about the extent to which parties may reserve questions of jurisdiction to the courts of the seat.

The underlying dispute is long-running, and concerns royalties payable on hydrocarbons produced in the Bass Strait. A settlement agreement made in 1994 provided for arbitration seated in Melbourne, and for the agreement to be interpreted and applied under the law of the State of New York. In 2023, disputes arose over the treatment of GST, depreciation and decommissioning in the royalty calculation. Oil Basins Ltd commenced proceedings in the Supreme Court of Victoria, contending that those issues were not arbitrable; the producers applied to stay the proceedings under section 7 of the International Arbitration Act 1974 (Cth). At first instance, the Honourable Justice Croft granted the stay.² The Court of Appeal dismissed the appeal (save as to costs) in February 2026, upholding the stay. The High Court has since granted special leave to appeal.

The standard of review

On an application to stay court proceedings in favour of arbitration, a threshold question is how closely the court should scrutinise the arbitration agreement before referring the parties to the tribunal. Across the Model Law jurisdictions of the region, the answer is settled. The court considers the existence, validity and scope of the arbitration agreement on a prima facie basis only, and leaves any genuinely contested question to the tribunal. In Singapore, the Court of Appeal in Tomolugen Holdings Ltd v Silica Investors Ltd held that a stay should be granted where the applicant shows, on a prima facie basis, that there is a valid arbitration agreement, that the dispute falls within its scope, and that the agreement is not null and void, inoperative or incapable of being performed.³ Hong Kong applies the same low threshold. In Techteryx Ltd v Legacy Trust Company Ltd, the Court of First Instance asked only whether there was a prima facie or plainly arguable case that the arbitration agreement bound the party in question, a test satisfied where the supporting evidence is cogent and arguable rather than dubious or fanciful.⁴

Australia has not adopted that position in terms. The leading appellate discussion remains that of the Full Court of the Federal Court in Hancock Prospecting Pty Ltd v Rinehart.⁵ The Full Court did not accept the prima facie approach as such, while appearing to accept much of its underlying policy and logic, albeit with reservations. Specifically, the Full Court said that while ‘aspects of the prima facie approach have much to commend them’, an application for a stay under Model Law Article 8 ‘will depend significantly upon the issues and the context’, and therefore is not amenable to a ‘rigid taxonomy’ focused on a distinction between the prima facie and merits approaches.⁵ More practically, the Full Court considered that in order to determine a stay application, it is necessary to form ‘a view as to the meaning of the arbitration agreement’.⁵

Oil Basins is consistent with the regional direction of travel, even if not with the regional vocabulary. Both Croft J and the Court of Appeal favoured a ‘light touch’. Where there is a prima facie arbitration agreement, and the issues raised are legally or factually complex, those issues are appropriately left to the tribunal.⁶ In substance, that is close to the prima facie standard. Whether it is the same thing in principle, and whether Rinehart should now be revisited, is a matter the High Court is well placed to resolve.

Even if the Australian approach is distinct more in form than in substance, it is clear that, as things stand, Australian courts are less likely to grant a stay of proceedings than those in Singapore or Hong Kong in the same circumstances. For a jurisdiction that has worked hard to present itself as a safe and predictable seat, that is an awkward outlier. Those reservations may hint at something deeper. Competence-competence carries an inherent conceptual contradiction, namely that the tribunal is asked to rule on the very authority whose existence is denied. Australian courts’ rejection of the prima facie standard of review may give the impression that they are not entirely at ease with this tension. The courts of Singapore and Hong Kong, by contrast, have well and truly come to terms with the point: as Prakash J observed in Malini Ventura, having accepted and given effect to competence-competence for many years, the courts must ‘disregard that discomfort’.⁷

May parties refer questions of jurisdiction and scope to the courts of the seat?

The appeal also raises a narrower and more unusual question: may an arbitration agreement validly require that questions of the tribunal’s jurisdiction and the scope of the agreement be determined by the courts of the seat alone, and not by the tribunal? Oil Basins Ltd argued that, by choosing New York law to govern the interpretation of the settlement agreement, the parties had agreed that disputes about the scope of the arbitration agreement would be decided by a court rather than by the tribunal.

The answer, so far, is a firm no. Croft J and the Court of Appeal held that an arbitral tribunal seated in Australia is given the power to rule on its own jurisdiction by force of statute, through Article 16(1) of the Model Law, and that the parties cannot exclude that power by agreement.⁸ Even if the parties purport to reserve questions of scope to a court, those questions remain capable of settlement by arbitration for the purposes of Australian law.⁹ The choice of New York law governed only the interpretation and application of the settlement agreement. The curial law, the seat being Melbourne, was Australian, and it made Article 16(1) mandatory.

To my knowledge, this precise question has not been squarely decided in a judgment from the major regional seats. The decision of the Singapore High Court in Malini Ventura v Knight Capital Pte Ltd offers the clearest indication of how it might be approached. Prakash J observed that the Model Law deliberately omitted the possibility of jurisdiction being determined first by a court, and then by the tribunal, in order to prevent dilatory tactics.¹⁰ That reasoning, which has been applied in Hong Kong,¹¹ suggests that a clause seeking to reserve jurisdictional questions to the courts alone would sit uneasily with the scheme of the Model Law wherever that law governs the seat. The position reached in Oil Basins therefore appears consistent with the mainstream, although a definitive statement from the High Court would be welcome.

Looking forward

For my part, I hope the High Court takes the opportunity to adopt the prima facie standard in terms, and to remove one of the few remaining eccentricities of Australia as an arbitral seat. A clear and low threshold for referral gives effect to the parties’ choice of arbitration, and to the principle that the tribunal, and not the court, should ordinarily be the first to rule on its own jurisdiction. On the second question, the conclusion reached below appears to me to be correct, and consistent with the design of the Model Law.

The practical takeaway for those drafting arbitration agreements is straightforward. Choosing a foreign law to govern the underlying contract will not, without more, shift jurisdictional questions away from the tribunal where the seat is in Australia. The competence-competence principle in Article 16(1) is mandatory, and is not displaced by the choice of a governing law, nor by an attempt to reserve those questions to a court. Parties who genuinely wish to carve out particular questions for determination by a court will need to consider carefully whether that can be achieved at all and, if so, how.

Like many in the arbitration community here, I await the High Court’s judgment with interest.