Commonwealth Attorney-General Robert McClelland said the Sydney CBD-based centre, which is due to commence operation around May this year and will be known as the Australian International Disputes Centre (AIDC), comes in response to the rapidly expanding market for international commercial arbitration.

"The explosion in arbitration is largely due to the fact that international investors want to avoid the uncertainty of litigation in a foreign court system with the associated lack of familiarity over the process," he said.

And McClelland believes that Australia can readily take advantage of the sudden increase in demand.

"Australia is well placed to capitalize on the booming global market for cross border dispute resolution, particularly in the Asia Pacific region," he said.

"We enjoy very close ties to Asia and Europe, we have stable and robust economic, political and legal environments, and we boast some of the best legal practitioners in the world."

McClelland admitted that although Australia has some catching up to do in relation to similar centres already established in Hong Kong and Singapore, the establishment of the AIDC, along with imminent state and federal legislative changes, represents a significant step towards securing a framework for international commercial arbitration in Australia.

NSW Attorney-General John Hatzistergos said he is excited about the venture, and is confident that Australia's strategic positioning will work in the AIDC's favour.

"This will be a world class seat in a prime CBD location close to existing legal services that will position Sydney as the new regional hub for international dispute resolution," he said.

The centre, which is jointly funded by the Commonwealth and NSW Attorney-General departments, the Australian Centre for International Commercial Arbitration and the Australian Commercial Disputes Centre, cost $600,000 to construct and includes top of the range facilities and technology.

McClelland also said that while there was some indecision as to whether Sydney or Melbourne would be the preferred destination for the AIDC, the final decision came down to the excellent preparatory investigations and research done by Hatzistergos.