Allen & Overy's view on the Law Commission's final report on reform of the Arbitration Act 1996: summary disposal (Part 2 of 5)

New express provision for summary disposal

The second proposal we consider is the Law Commission’s recommendation to provide arbitral tribunals with an express power to summarily dispose of unmeritorious claims and defences.  This proposal was suggested in the Law Commission’s initial consultation paper in September 2022 and received support from the majority of consultees.

The Draft Bill allows for an award to be made “on a summary basis” in relation to a claim, defence, or issue.  This power would therefore extend to jurisdictional and substantive issues raised by either the claimant or respondent.

The Law Commission recognises in its final report that arbitral tribunals seated in England and Wales probably have this power implicitly under their existing case management powers under the current Act.  However, the lack of express provision for this option, combined with concern that adopting a summary process could encourage arguments that arbitrators were failing in their duty to give each party a reasonable opportunity to put forward their case, has meant that arbitral tribunals can be reluctant to exercise this power in practice.  As such, an express power for arbitral tribunals set out in the Act would be a welcome clarification.  It would also provide an answer to the common criticism (eg, from banks) that summary judgment is not available in arbitration.

The Law Commission recommends that an arbitral tribunal will only be able to issue an award on a summary basis following an application by a party.  The other party must be given an opportunity to submit why a summary process would not be appropriate.  It will not be possible for the arbitral tribunal to summarily dispose of an issue on its own initiative.

No real prospect of success standard

The Draft Bill sets the standard for summary disposal as “no real prospect of success”.  The Law Commission favoured this over the “manifestly without merit” standard used in institutional rules to date.  Proponents of the “no real prospect of success” standard (including us, among others), argue that this approach promotes certainty by providing a clear, well-recognised standard under English law that can be applied by arbitrators.  Moreover, it is arguably a less exacting standard than “manifestly without merit”, and therefore likely to make the new summary disposal power more relevant and accessible in practice.

Comment

Most major sets of arbitration rules now allow arbitrators to dismiss a claim summarily.  Since the new provision (if implemented) would be subject to any agreement of the parties, the statutory provision may not apply in practice in many cases.  This has some practical relevance because, to date, the arbitration rules all set a “manifestly without merit” standard.  As noted above, this is probably a more exacting standard than “no real prospect of success”.

Nevertheless, as the Law Commission commented in its first consultation, it would be a “world-leading” development to incorporate a summary disposal power into an arbitration law.  It is notably absent from arbitral legislation such as the UNCITRAL Model Law.  An express provision on summary disposal could be beneficial in appropriate cases to reassure arbitrators that issues can be disposed of in a summary manner, and this could result in significant time and costs savings.

The new power of summary disposal should not be seen as the single answer to efficient and effective case management by arbitrators.  Rather, it should be viewed as one of a suite of options available to arbitrators, with others including, for example, bifurcating proceedings so that a potentially decisive issue is decided in a preliminary phase and using an expedited procedure in urgent cases.

It will be interesting to see how often, and in what cases, tribunals exercise the new power.  It is quite likely that arbitrators will continue to approach the issue with caution given their sensitivity over suggestions that a procedure may compromise the parties’ due process rights.  The parties themselves should equally consider carefully whether summary disposal is appropriate.  If there is a concern that an award made using powers of summary disposal could be unenforceable in certain jurisdictions on the basis that it violates due process rights, it would be sensible not to apply for summary disposal.

The increasing availability of summary disposal powers in international arbitration will be another factor to take into account when choosing arbitrators.  Parties may wish to consider arbitrators who are familiar with such processes, which are more frequent in common law systems.  A case in which summary disposal may be appropriate will also call for arbitrators who have the diligence, availability and conviction to adopt and pursue such a process.

Up next

In our third blog post in this series, we cover the Law Commission’s recommendation to overturn the decision of the Supreme Court in Enka v Chubb and create a new default rule that an arbitration agreement is governed by the law of the seat, unless the parties expressly agree otherwise.