The Law Commission has just launched a consultation on its provisional proposals for reforming the Arbitration Act 1996 (the Act), designed to ensure the Act remains "state of the art".
The Act, which governs arbitrations seated in England & Wales, or Northern Ireland, provides a national legal framework for arbitration. It sets out the supportive powers of national courts before, during and after the arbitral process - for instance, in upholding arbitration agreements, preserving evidence and assets, and enforcing arbitral awards. The Act has been credited with helping London become a leading seat for international arbitration but, 25 years on from its enactment, some have mooted concern that the Act might be lagging behind more modern arbitration laws in other jurisdictions.
The Law Commission first identified the possibility of reforming the Act as part of its 13th programme of law reform in December 2017, where it listed "summary judgment procedures in arbitration" as a further potential project. While there was no bandwidth to progress that project under the 13th programme, in November 2021 the Law Commission announced that a wider ranging review of the Act would form a core part of its 14th programme of reform.
Proposals for reform
Following its own research and initial engagement with stakeholders, the Law Commission has concluded that the Act still functions well, and that there is little need or appetite for a major overhaul of its core provisions. It has, however, proposed some updates targeted at making the Act as effective, responsive and efficient as possible, to keep step with arbitration laws in competing jurisdictions.
The key proposals by the Law Commission for reforming the Act are set out below:
- Independence and disclosure - the proposal that case law on an arbitrator's duty of disclosure should be codified, and that the Act should provide that arbitrators have a continuing duty to disclose any circumstances that might reasonably give rise to justifiable doubts as to their impartiality. For more information on the duty of disclosure under English law, please see our article Apparent Bias in arbitration - avoiding and challenging it.
- Diversity & Discrimination - amending the Act to extend the effect of equality legislation to arbitrators, making it clear that parties will not be able to discriminate against arbitrators (in terms of their appointment) on grounds of protected characteristics under the Equality Act 2010 (namely age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex or sexual orientation). The Law Commission gives the example that this will make unenforceable a term of an arbitration agreement containing the formulation that the arbitrators must be "commercial men".
- Immunity - changes to strengthen the immunity of arbitrators and protect arbitrators from liability for the costs of challenges made against them in certain circumstances. These changes aim to limit the potentially chilling effect of disappointed parties threatening or pursuing challenges and satellite litigation against arbitrators.
- Summary disposal - introducing an express power for arbitrators to adopt summary procedures to dispose of issues that have no prospect of success. Although the Act already empowers arbitrators to adopt procedures that avoid unnecessary delay and expense, arbitrators seem reluctant to rely on this to adopt a summary procedure for fear of "due process" challenges being made against them. Making this power express mirrors steps taken by arbitral institutions in recent years. The proposal, however, is that this would be a non-mandatory provision of the Act - i.e. parties would be able to opt out of it in their arbitration agreements in the same way as they can currently opt out of other sections of the Act, including the right of appeal under s.69.
- Interim measures - the Law Commission considers that s.44 of the Act currently empowers the court to make interim orders against third parties in support of arbitration (e.g. orders for the preservation of evidence, or the grant of an interim injunction). It asks consultees whether this should be made express in the Act. It also proposes that such third parties should have full rights to appeal these orders, rather than the restricted appeal rights of the parties to the arbitration. Separately, while it concludes the Act should not have a code for emergency arbitrators, it proposes discrete changes that would empower the court to support the orders of emergency arbitrators.
- Jurisdictional challenges - the proposal that, where a tribunal has already ruled on its own jurisdiction in an award, any subsequent jurisdictional challenge made to the court under s.67 of the Act should be an appeal of the tribunal's award, not a full re-hearing.
While these changes are designed to ensure that the Act keeps step with the law in competing arbitration jurisdictions, it is notable that the Law Commission has also provisionally rejected reforming other provisions of the Act. For example, it concludes that the (non-mandatory) right of appeal to the court (on issues of law) in s.69 of the Act strikes the right balance between finality of arbitration awards and correcting errors of law. Similarly, while it proposes codifying an arbitrator's duty of disclosure, it has rejected introducing a requirement that arbitrators be "independent" (as some arbitral institutions and national laws require) because it considers it adds nothing to the existing requirement that they be impartial – it is no good requiring an arbitrator to be independent, if they are biased.
The full consultation paper can be found on The Law Commission's website. The Law Commission invites responses to the consultation by 15 December 2022.
We will, of course, keep you updated as more details emerge. In the meantime, if you have any questions about the proposed changes, or indeed international arbitration more generally, please contact Gordon Bell or Elinor Crowther.