P&K Insights: Australian Courts Continue their Light Touch Approach to Arbitration

The Victorian Court of Appeal has delivered an important judgment for Australian international arbitration users in Oil Basins v Esso Australia Resources [2026] VSCA 6.

The Court has emphasised the “light touch” approach courts should take when considering whether a dispute falls within the scope of an arbitration agreement and should be determined in arbitration instead of court litigation.

Under Australian law, arbitrators always retain the power to determine the scope of their jurisdiction. As the Victorian Court of Appeal has confirmed, courts cannot assume this power and parties cannot override it.

If a party violates an arbitration agreement and commences court litigation, when faced with an objection ordinarily Australian courts should pause the proceedings.

This article by Cameron Sim, Jim Morrison, Alexis Schoeb and Deborah Tomkinson considers the judgment. The Court’s decision should encourage parties to follow their contractually-agreed dispute resolution processes and to dissuade them from bringing to court disputes that belong in arbitration. The decision demonstrates how critical it is to ensure a clearly defined scope in an arbitration agreement. This, along with other important drafting considerations are covered in our Guide to Arbitration Agreements.