- Arbitration Insights
A&O’s view on the Law Commission’s consultation on reform of the Arbitration Act (Part 1 of 3)
25 January 2023
Summary disposal of claims and issues that lack merit
The Law Commission has proposed the introduction of a non-mandatory provision that provides a tribunal with the power to adopt a summary procedure to resolve claims and issues that have no real prospect of success and where there is no other compelling reason to continue to a full hearing.
In our view, the provision for summary procedure (on the application of a party) is welcome. Summary disposal has the potential to save time and costs, as it can more quickly address, and hopefully deter, unmeritorious claims and defences. In the face of “due process paranoia”, this addition would put beyond doubt the power of a tribunal to summarily dispose of a claim/issue.
We believe that such a power will, if exercised properly, be compatible with a tribunal’s duty to give each party a reasonable opportunity to put its case (s.33(1)(a) of the Act). If a party is nevertheless concerned about the enforcement risks of a claim that is summarily disposed of, it should be able to either opt out of the procedure in the arbitration agreement or choose not to apply for summary disposal.
It is also our view (consistent with the view of the Law Commission) that:
- the tribunal should determine the procedure in any given case, as this is consistent with the approach to other procedural issues in international arbitration; and
- the threshold should be the same as in the English courts (“no real prospect of success”), as this test strikes an appropriate balance and has a clear meaning in English law (which creates certainty for parties and may be helpful in any challenges to awards in England based on the use of a summary process).
Jurisdictional challenges to arbitral awards (s.67)
The Law Commission has proposed that a challenge to an arbitral award by a participating party on the basis that the tribunal lacks substantive jurisdiction under s.67 of the Act should be by way of an appeal, not (as is currently the case) a rehearing. This has been a much-debated proposal, including within our own arbitration group.
The impact of this change would be that on a s.67 application, the court would no longer hear the matter afresh, as if for the first time. Rather: (i) the court would in general no longer be able to receive oral evidence, including evidence that was not before the tribunal; and (ii) the court’s approach would be limited to a review of the decision of the tribunal.
The arguments in support of this change are principally that:
- the time and costs involved in a s.67 rehearing can be a concern;
- there is a lack of parity between the approach under s.67 as compared to that under s.68 (challenges for a serious irregularity) and s.69 (appeals on a point of law); and
- the existing approach may undermine the important principles of limited court intervention in arbitral awards and that tribunals are responsible for determining their own jurisdiction.
Nonetheless, we disagree with the proposed change, for three primary reasons.
First, party consent is a touchstone of the arbitral regime. If a party finds itself in an arbitration that it never agreed to and before individuals that it did not appoint, it would rightly want the court to revisit in full the tribunal’s jurisdictional decision.
Second, it is not our experience or understanding that the current system is causing significant wasted time and costs. Nor is it clear that the possibility of adducing new evidence before the courts is necessarily unfair. After all, it is unlikely that parties would generally hold back evidence before a tribunal in relation to jurisdictional matters.
Third, the courts already have sufficient powers in our view to control s.67 proceedings, including powers of summary disposal and to reject new grounds of objection. If the concern is that the s.67 process is being abused, the courts have the power (at least to some extent) to control such abuse.
The confidentiality of arbitrations
On the knotty subject of confidentiality, the Law Commission has provisionally concluded that the Act should not contain a default rule addressing the confidentiality of arbitrations.
Our view is that the Act should include provisions dealing, at a high-level, with the duty of, and exceptions to, confidentiality. Enshrining confidentiality on a statutory basis would: (i) provide greater certainty as to the default position under English law; and (ii) potentially increase the desirability of London as a seat for arbitration in light of the importance of confidentiality to most parties.
The arguments highlighted by the Law Commission in favour of retaining the status quo can be overcome. For example, parties can contract out of confidentiality where they prefer transparency, and the non-exhaustive list of exceptions to confidentiality set out by the Law Commission should be capable of definition without hindering the development of the common law.
If Parliament were minded to codify confidentiality, however, further thought would need to be given to: (i) whether the Act should also address privacy; (ii) what and who would be covered by the default duty; and (iii) whether steps should be taken to manage any impact that a statutory duty might have on the existing causes of action and remedies for breach of confidence and misuse of private information.
Court orders in support of arbitral proceedings (s.44)
The Law Commission has proposed various changes to s.44 of the Act, which provides that the court has the power to make orders in support of arbitral proceedings.
The first topic addressed is the application of orders to third parties. The Commission has proposed an amendment to s.44 to confirm that orders can be made against third parties. This proposal appears to be sensible, as it will provide clarity on the status of the law.
The second topic addressed is the impact of emergency arbitrator procedures (commonly available under institutional rules). The Law Commission has proposed, amongst other things, that:
- the provisions of the Act should not apply generally to emergency arbitrators; and
- an amendment should be made to make clear that the availability of an emergency arbitrator procedure does not preclude recourse to the English courts.
We disagree with the first proposal. It is desirable to make amendments to clarify which parts of the Act are applicable to emergency arbitrator procedures and which are not. This would provide greater certainty and fill any gaps created by institutional rules or party agreement.
We agree with the second proposal. It would be helpful to stipulate in the Act that the availability of emergency arbitration does not per se preclude the availability of interim relief before the courts. We think it would be helpful if s.44 could define more broadly the circumstances in which relief from the court might be available.
In our second blog post in this series, we will cover four further areas where the Law Commission has proposed reform: (i) the immunity of arbitrators; (ii) discrimination in arbitral appointments; (iii) arbitrator independence and disclosure; and (iv) appeals on points of law.