A&O's view on the Law Commission's final report on reform of the Arbitration Act 1996: jurisdictional challenges to arbitral awards (Part 1 of 5)
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On 6 September, the Law Commission published its final report on proposed reforms to the Arbitration Act 1996 (the Act), along with a Draft Bill to implement the reforms. In this series of posts, we describe and assess the key reforms.
Reforming the process for challenging an award on the basis that the tribunal lacked jurisdiction
The first reform that we consider, and perhaps the most hotly contested, is the proposal by the Law Commission to reform the process for jurisdictional challenges under s.67 of the Act.
The main issue considered by the Law Commission in relation to s.67 was how the court should approach a challenge to an arbitral award on the basis that the tribunal lacked jurisdiction. The current position under English law is that a challenge under s.67 involves a full rehearing of the jurisdiction issue.
This approach has been criticised. It has been argued that it is expensive, time-consuming and inefficient for the court to re-hear the issue of jurisdiction when it has already been fully heard once already, by the tribunal. This criticism prompted the Law Commission to propose, in its first consultation paper in September 2022, that a jurisdictional challenge to an arbitral award should be by way of an “appeal” from the award, rather than a rehearing.
Equally, the current approach has its supporters. The main defence to the current approach (made by us, among others) is that, if a tribunal has no jurisdiction, there should be no deference to its decision that it does have jurisdiction. Thus, if a party considers that it has not consented to arbitration, it should be able to make that argument before the court without any restriction.
This divergence of views led the Law Commission to propose a middle way in its second consultation paper. This middle way is largely retained in the proposal made by the Law Commission in its final report. The middle way involves three restrictions on a party advancing a s.67 challenge. First, the party may not raise an objection to jurisdiction which was not raised before the tribunal. Second, the court will not hear new evidence unless it could not with reasonable diligence have been put before the tribunal. Third, the court will not rehear evidence already heard by the tribunal unless this would be in the interests of justice. These changes would be made through rules of court rather than statutory amendment.
The Law Commission’s final proposal is a pragmatic compromise between opposing views. In our view, there may be little change in practice in most cases. Parties are already precluded by s.73 of the Act from putting forward new objections when making a s.67 challenge. Parties to a challenge tend to rely on the evidence put forward in the arbitration and, if they seek to introduce new evidence, the court already has the power to control their ability to do so. Nevertheless, it is sensible for the sake of predictability to set out these limitations, and helpful for fine-tuning the limitations in the future for them to be set out in court rules rather than the Act itself.
In our second blog post in this series, we cover the Law Commission’s recommendation to provide arbitral tribunals with an express power to summarily dispose of unmeritorious claims and defences.