The Law Commission has issued a second consultation paper in support of its review of the Arbitration Act 1996, revisiting two themes from the first paper, and introducing an additional topic for consultation.
Background
The Arbitration Act 1996 (the "Act") provides the legal framework for arbitrations seated in England & Wales – it sets out the powers of the court to support arbitration in this jurisdiction, and provides certain mandatory provisions which will apply to arbitrations seated here.
The Law Commission (the "Commission") is reviewing the Act to ensure it remains fit for purpose and promotes England & Wales as a leading destination for international commercial arbitration.
The Commission's first consultation paper, issued in September 2022, sought views on a wide range of proposed reforms to the act, including the topics of summary disposal, discrimination in arbitral appointments, and codifying the arbitrator's duty of disclosure. For more information on the first consultation paper, please see our earlier article: Arbitration Act – consultation launched on proposed reforms.
Second consultation
This second consultation is largely the result of feedback from the consultees who responded to the first consultation, and focuses on three discrete areas.
1) Proper law of an arbitration agreement
In its first consultation paper, the Commission asked if there was any other topic not already shortlisted, which consultees thought the Commission should consider for reform. Over a quarter of consultees indicated the Commission should also consider whether the Act should make provision for determining the proper law of an arbitration agreement, in circumstances where the parties have made no express choice. Although this issue was the subject of a recent Supreme Court decision in Enka v Chubb, the Commission acknowledges that the court's judgment in that case is complex and arguably provides opportunity for argument and satellite litigation. Accordingly, in the interest of certainty and simplicity, the Law Commission has now provisionally proposed introducing a new rule providing that, unless the parties expressly agree otherwise, the law of the arbitration agreement is the law of the seat.
2) Challenges to arbitrator's substantive jurisdiction
The second paper also revisits two of the more controversial proposals from the first consultation. The first is the proposed approach to court challenges to an arbitrator's substantive jurisdiction under s.67 of the Act, in circumstances where a party has already made such a challenge before the tribunal itself. In response to feedback on the first consultation, the Commission has evolved its proposals. Its proposal would limit a party's ability to lay new grounds of objection or new evidence before the court that were not aired with the tribunal. Rather than make provision for this in the Act itself though, the Commission proposes to insert a power into the Act to make detailed court rules to this effect.
3) Discrimination in arbitral appointments
Similarly, the Commission's proposals in relation to discrimination in arbitral appointments have evolved. In response to feedback, the Commission now proposes to make clear that it is justified to require the appointment of an arbitrator who has a different nationality from the parties – something that is common practice internationally and which assists in the appearance of impartiality. The proposal would not require that an arbitrator must always have a different nationality from the parties; only clarify that any such requirement would be justified.
The Commission also asks, rather than just prohibiting discrimination in arbitral appointments, whether discrimination in arbitration more generally should be prohibited.
The Commission's second consultation paper is available here. Responses are requested by Monday 22 May 2023, and will feed into the Commission's Final Report, on which we will report in due course.
To discuss any of the points raised in this article, please get in touch with Gordon Bell.
Footnotes
[] While the Act also governs arbitrations seated in Northern Ireland, the Law Commission's remit is to propose reforms to the law of England & Wales. It therefore remains to be seen what impact any proposals for reform may have on the Act as it applies in Northern Ireland.