The Law Commission has published its final report (here), and a summary (here), on its detailed review of the English Arbitration Act 1996 (the “1996 Act”), along with policy recommendations and a draft Bill comprising the proposed amendments. This will be presented to Parliament for consideration, and a decision as to whether to adopt the proposed amendments as set out in the draft Bill. So, if we are to get a revamped Arbitration Act next year, what changes can we expect to see?
The Law Commission’s invitation for reform proposals was answered by nearly 200 market participants. A consistent theme of the majority was that a root and branch reform was not necessary – or desirable. Many considered that the current legislation worked well and required no wholesome alterations. The Law Commission agreed and has consequently proposed targeted amendments to the 1996 Act, some of greater significance than others. We provide below a snapshot of the most significant proposed changes to the 1996 Act.
Key proposed changes
- Governing law – a recommendation that the law of the arbitration agreement be the law of the seat of arbitration, unless the parties expressly agree otherwise in the arbitration agreement. The current position is that the law governing the underlying agreement containing the arbitration agreement will, absent certain very specific indications, also govern the arbitration agreement. For more, see our related GAN article.
- Duty of disclosure – a recommendation to codify the headline principle in the UKSC decision of Halliburton v Chubb, namely: an ongoing duty of disclosure of circumstances that might reasonably give rise to justifiable doubts of impartiality (encompassing actual and constructive knowledge, i.e., what the arbitrator ought reasonably to have known).
- Power of summary disposal – a recommendation to expressly empower arbitrators with the ability to summarily dismiss claims or parts thereof where it appears that such claim has no real prospect of success, unless otherwise agreed. This mirrors the legal test applicable to English litigation cases.
- Arbitrator immunity – a recommendation to grant immunity to arbitrators from liability by virtue of their resignation, unless the resignation is deemed unreasonable in the circumstances. On similar lines, an arbitrator would be immune from being liable for costs incurred in connection with an application for its removal, provided the arbitrator has not acted in bad faith.
- Section 67 challenges – rather than amendments by way of legislation, a recommendation that power be conferred to make rules of court to implement changes, including that in a section 67 challenge concerning the tribunal’s alleged lack of substantive jurisdiction, (a) no new objections or evidence can be put before the court, unless a party can show that they couldn’t have produced this with reasonable diligence, and (b) evidence will not be reheard, save in the interests of justice.
- Court powers in support of arbitration – a recommendation to amend section 44 of the 1996 Act to confirm explicitly that orders can be made against third parties, who should have the usual rights of appeal. Further, a recommendation that the 1996 Act should facilitate court enforcement of the orders of emergency arbitrators.
The Law Commission was unpersuaded that the following matters required legislative reform, despite some strong contrary voices:
- Confidentiality –the Law Commission determined against an express rule of confidentiality to operate as a default rule, subject to party agreement, on the basis that any legislative amendment could not be sufficiently nuanced, or future-proof.
- Discrimination – despite careful consideration of possible mechanisms to address a prohibition on discrimination in the appointment of arbitrators, the Law Commission “reluctantly” concluded that introducing such language could cause more problems than it solves, resulting in unwarranted satellite litigation and disingenuous challenges to awards, without the benefit of necessarily improving the diversity of arbitral appointments.
- Appeals on a point of law – as this is already opt-out, and excluded by some arbitral rules, no change is recommended. The Law Commission consider that section 69 is a defensible compromise between promoting the finality of arbitral awards and correcting blatant errors of law.
- Emergency arbitrators – subject to the point above regarding court support of enforcement of emergency arbitrator orders, the Law Commission do not propose any amendments in relation to emergency arbitrators by way of either (a) a scheme of emergency arbitrators to be administered by the court, or (b) that the 1996 Act should apply generally to emergency arbitrators, so that reference to arbitrator or tribunal would include emergency arbitrator.
The proposed reforms are a step in the right direction. Their implementation will undoubtedly result in greater efficiency and simplify matters. Claims (and defences) that have no real prospect of success will be more frequently be given the short shrift they deserve, enabling time and cost efficiency. The simplification of the rules around the law applicable to the arbitration agreement, anchoring such to the seat of the arbitration by default, will prevent unwanted litigation and align English law with the laws of most other legal jurisdictions renowned for their arbitration work. Finally, permitting orders against third parties where appropriate will ensure that arbitration can serve as a one-stop shop, alleviating the need to seek court assistance where the arbitrator’s armoury prove insufficient. As such, we expect arbitration practitioners to support the proposed reforms and advocate their legislative adoption. The baton is now with the Ministry of Justice as the sponsoring government department to secure a legislative spot for consideration of the draft Bill. We’ll be watching this space.