Law Commission Unveils Proposals to Update the Arbitration Act 1996

The Law Commission’s review follows the 25th anniversary of the Act coming into force. The Commission comments that the Act “works very well” and that wholesale reform is unnecessary. Instead, its consultation paper focuses primarily on eight topics for potential reform.

Key areas of proposed reform 

Summary disposal of claims and issues that lack merit 

A procedure to summarily dispose of claims and issues is a common feature in domestic court regimes. Historically it has been a less common feature of arbitration legislation although a number of jurisdictions have recently introduced it. The Act does not currently provide for this procedure, although it may fall within the wide powers conferred on arbitrators under the Act.

The Commission proposes the introduction of an express provision for summary disposal to resolve issues that have no real prospect of success. This will allow parties to avoid wasted time and cost. Making this power express will remove any doubt as to the availability of the procedure, which should reassure arbitrators and foreign enforcing courts. 

Court orders in support of arbitral proceedings

S.44 of the Act empowers the court to make orders in support of arbitral proceedings, such as to grant interim injunctions. There has been some confusion as to whether such orders can be made against third parties. There is also a question over how far it is possible to obtain interim relief from the court where it is available from an emergency arbitrator under arbitral rules.

Third parties: The Commission proposes that the Act should confirm that court orders under s.44 can be made against third parties. What constitutes an appropriate case for doing so will vary according to the particular order and the applicable rules, as s.44 of the Act imports law from domestic legal proceedings.

Emergency arbitrators: The Commission suggests that the Act should not apply generally to emergency arbitrators, nor should it include provisions for the court to administer a scheme of emergency arbitrators. However, the Commission wishes to provide clarity that where the parties have agreed emergency arbitrator provisions, they should nevertheless be able to seek the assistance of the court under s.44.

Jurisdictional challenges against arbitral awards

An arbitral tribunal is empowered to rule on its own jurisdiction. If a party is dissatisfied with that ruling, it may challenge the tribunal’s determination of its jurisdiction under s.67 of the Act. Current case law provides that such a challenge is a full rehearing. 

The Commission proposes that any challenge under s.67 should be by way of an appeal rather than a rehearing. An appeal would entail a limited review of the tribunal’s ruling. This would allow the court to retain the final say on the tribunal’s jurisdiction while reducing the delays and costs associated with a full rehearing. It would also be fairer than the current scheme, as the losing party will not be able to raise new evidence or new arguments before the courts that were not before the tribunal. 

The Commission also proposes that it be made clear in the Act that where a tribunal determines that it does not have jurisdiction, it can nevertheless issue an award on costs.

Other proposed changes

The Commission also envisions further changes.

• Immunity of arbitrators: The Commission considers strengthening the immunity of arbitrators from legal liability (s.29 of the Act) in two scenarios where they are potentially exposed. First, where an arbitrator resigns, for which the Commission suggests the arguments for and against reform are finely balanced. Second, where a party makes an application to court which impugns an arbitrator, in which circumstances the Commission proposes that immunity be extended to the costs of such proceedings.

• Discrimination: The Commission proposes to adopt language of the Equality Act 2010 to prohibit discrimination in the appointment of arbitrators. This would mean that arbitral appointments will not be challengeable for reasons that are based on the arbitrator’s protected characteristics (such as age, sex and religion). The exception will be if the arbitrator having that protected characteristic is a proportionate means of achieving a legitimate aim.

• Disclosure by arbitrators: The Commission proposes to make it clear in the Act for the first time that arbitrators have a continuing duty to disclose any circumstances that might reasonably give rise to a justifiable doubt as to their impartiality. However, the Commission asks for views on whether the arbitrator’s knowledge should be based on their actual knowledge or the knowledge that they should have had.

The Commission also discusses other minor amendments to clarify or streamline various provisions of the Act, such as whether to make express reference to remote hearings and electronic documentation.

If it aint broke don’t fix it

In other areas, the Commission proposes to retain the status quo.

• Independence of arbitrators: The Act provides that arbitrators must be impartial. The Commission does not believe the Act needs to be amended to create a parallel duty of independence for arbitrators. Complete independence is not always practically possible and what actually matters is whether the arbitrator is and is seen to be impartial.

• Confidentiality: The Commission takes the view that the Act does not need to codify English law on confidentiality. It recognises the need to retain flexibility and concludes that this is an area best left to be developed by the courts.

• Appeals on a point of law: The Commission does not propose any reform to s.69 of the Act, which allows an arbitral party to appeal a question of English law arising out of an award. It concludes that s.69 already strikes a good compromise between finality of arbitral awards and consistent application of the law.

Comment

The consultation paper is a welcome step towards refreshing the Act to ensure that it remains updated and effective. The thorough and sensible approach taken by the Commission is evident in the areas for reform that have been proposed.

The Commission invites responses to the 38 consultation questions put forward in the paper by 15 December 2022, with a view to publishing final recommendation by mid-2023. Allen & Overy will continue to engage with the Commission’s review process, as it has done in the past (including by hosting a panel discussion that was attended by Law Commissioner Professor Sarah Green in March 2022).