Papua New Guinea’s New Arbitration Regime Moves from Paper to Practice

Papua New Guinea’s (“PNG”) arbitration reforms have moved from the statute book to the courtroom. The Arbitration (Domestic) Act 2024 (“DAA”) and Arbitration (International) Act 2024 (“IAA”) were passed on 20 February 2024 and commenced by Gazette notice on 9 July 2024, replacing the pre-independence Arbitration Act 1951 with a modern dual-track regime (collectively, the “2024 Acts”).

That was the easy part. The harder question is whether PNG courts will apply the new framework in a way that promotes the overall objective of creating an arbitration-friendly jurisdiction, that respects party autonomy, gives primacy to the arbitral process, and keeps judicial intervention within the limits set by the legislation.

One of the first decisions to consider the 2024 Acts demonstrates that the National Court, which functions as PNG’s superior trial court and stands beneath the Supreme Court in the judicial hierarchy, is willing to give effect to the framework.

Although only a first-instance decision, the National Court’s approach in PN Electrical Ltd v Matrix Constructions (PNG) Ltd and Air Niugini Ltd [2025] PGNC 192 (“PN Electrical Decision”) is significant. There, the National Court gave practical effect to the central principles of the 2024 Acts, including respect for party agreement, limited judicial intervention, finality, and the need for arbitral proceedings to reach their proper conclusion before court processes are invoked.

This is a promising signal that PNG’s new arbitration regime was designed not only to replace an outdated statute, but also to change dispute-resolution culture in PNG.
 

From Reform to Implementation

As discussed here, unlike the old pre-independence statute, which followed an outdated UK model, the 2024 Acts adopt a dual-tracked structure more familiar to international users of arbitration and better suited to contemporary commercial disputes.

The IAA governs international arbitration, gives domestic effect to PNG’s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”), and is substantially aligned with the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”) (IAA, s. 2).

The DAA governs domestic arbitration and introduces court-annexed arbitration, reflecting PNG’s broader interest in reducing pressure on the courts and promoting alternative dispute resolution (DAA, ss. 2 and 7).

Together, the 2024 Acts encourage arbitration, limit judicial review, support recognition and enforcement of agreements and awards, and promote finality (DAA, s. 2; IAA, s. 2). The DAA adds a domestic focus on reducing court backlogs and litigation costs, while the IAA emphasises international trade, Model Law consistency, and PNG’s New York Convention obligations (DAA, s. 2(1); IAA, s. 2(1)).

Both Acts direct the National Court, when exercising powers under them, to have regard to the parties’ agreement to arbitrate and to the intended certainty and finality of arbitral awards (DAA, s. 2(2); IAA, s. 2(2)). Each Act also contains an express limit on court intervention: unless otherwise provided, courts may not intervene in matters governed by the respective Act (DAA, s. 10; IAA, s. 9).

In passing the IAA and DAA, PNG has therefore adopted legislation that treats arbitration as an autonomous dispute resolution process, not a prelude to litigation.

Court’s Attitude to Arbitration – The PN Electrical Decision

Background

The PN Electrical Decision concerned a construction project for Air Niugini Ltd’s (“Air Niugini”) residential development near Jacksons International Airport. Air Niugini was the project owner, Matrix Constructions (PNG) Ltd (“Matrix”) the main contractor, and PN Electrical Ltd (“PN Electrical”), the sub‑contractor engaged to perform electrical works.

Although the substantive proceedings began as a claim by PN Electrical against Matrix for monies retained under the sub-contract for electrical works, the PN Electrical Decision involved an interlocutory dispute concerning a different issue under the construction performance agreement between Air Niugini and Matrix (“Construction Agreement”), which contained an arbitration clause.

Matrix had sought to draw Air Niugini into the litigation as a co-defendant by alleging a set‑off and cross‑claim under the Construction Agreement, even though those same matters had already been referred to domestic arbitration.

The arbitral dispute between Matrix and Air Niugini had been partially determined by the arbitrator, with Matrix’s claim for monies alleged to be due under the Construction Agreement dismissed, but several issues, including Air Niugini’s delay and defective-work claims and Matrix’s claim for release of retention monies, remained on foot.

Matrix nevertheless attempted to litigate its claim for release of the retention monies in Court through the cross-claim against Air Niugini, asserting that the arbitration had “failed”. In response, Air Niugini produced correspondence from the arbitrator confirming that the arbitration was still on foot, with outstanding matters left in abeyance at the parties’ election.

The main question for the Court was therefore whether Matrix could pursue its cross‑claim in Court while the arbitration remained alive.

The National Court’s Decision

The National Court found for Air Niugini. The decisive evidence was the correspondence from the arbitrator stating that the arbitration was “partially concluded”.

Justice Coates found that Matrix’s claim for payment due under the contract had been decided against it in domestic arbitration, but the other claims remained unresolved and interdependent.

This was critical as Matrix could not isolate its claim for release of retention monies for the Court’s determination without cutting across the arbitral process the parties had chosen.

Justice Coates thus held that the arbitration had not been completed and that completion was a condition precedent to recourse to the Court. Even then, the Court’s role would be limited to enforcement of an award.

The reasoning closely tracks the policy and objectives of the DAA.

First, the Court emphasised that the parties’ arbitration agreement remained operative: disputes were to be resolved by arbitration, with legal proceedings limited to enforcement.

Second, the Court treated the DAA as reinforcing that result. Although the agreement pre-dated the DAA, the Court noted that the new Act had subsumed the former framework where there was conflict (DAA, s. 66). The Court also referred to the DAA’s objectives of encouraging arbitration, redefining the limits of judicial review, and stating that the courts must have regard to the parties’ agreement to arbitrate.

Third, the Court rejected the notion that Matrix’s litigation against Air Niugini could proceed simply because the arbitration had become dormant and without Matrix taking any step to continue the arbitration.

Fourth, the Court found no reasonable cause of action against Air Niugini, and described the proceeding as frivolous and vexatious, and an abuse of process. To deter further attempts to circumvent arbitration, the Court declared Matrix a vexatious litigant in relation to further litigation against Air Niugini on this matter, requiring leave of the Court for any future proceedings until arbitration is exhausted.

Why the Decision Matters

The PN Electrical Decision shows that the National Court is prepared to use the new legislation to control proceedings and insist that parties honour their bargain. Although the case does not answer every question likely to arise under PNG’s new arbitration legislation, it is still important for four reasons.

1. The Court did not treat the DAA as background noise. It used the Act’s objectives and structure as part of the operative legal context for deciding whether the court proceedings should continue in the face of the matter still being open for arbitration.

2. The judgment also confirms that an arbitration clause is not optional language to be bypassed when the process becomes inconvenient.

3. It shows an instinct for restraint: rather than entering the merits of unresolved issues, the Court recognised that those matters remained for the arbitrator.

4. Finally, the PN Electrical Decision suggests that PNG courts will pay close attention to the distinction between a dormant arbitration and a terminated one.

    

What Next?

The PN Electrical Decision concerns domestic arbitration, not international, and therefore speaks more directly to the DAA than to the IAA. Even so, the broader signal is encouraging. Respect for party agreement, reluctance to duplicate arbitral proceedings in court, and insistence on finality and procedural completion are central to both branches of the regime and to PNG’s credibility as an arbitral seat.

Much remains for PNG courts to develop, including stays, jurisdictional objections, interim relief, setting-aside standards, and New York Convention enforcement. International cases will also test Model Law-consistent interpretation.

Conclusion

In the author’s view, PNG’s arbitration reforms in 2024 were ambitious. They replaced an outdated statutory inheritance with a modern dual-track framework aligned with contemporary arbitral practice and PNG’s international obligations. The key question was whether the courts would implement that framework consistently with its underlying philosophy.

The PN Electrical Decision suggests that the courts will. The National Court treated the arbitral bargain as binding, refused parallel judicial encroachment into an unfinished arbitration, and reinforced the statutory preference for completion of arbitral proceedings with limited judicial intervention.

For PNG, that is a promising start. The country’s arbitration law has moved from reform on paper to implementation in practice. If future decisions continue in the same direction, the 2024 Acts may help establish a more predictable and arbitration-supportive dispute resolution environment.