A&O’s view on the Law Commission’s final report on reform of the Arbitration Act 1996: the reforms that failed to make the cut (Part 5 of 5)
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A statutory duty of confidentiality
There is currently no statutory duty of confidentiality applicable to arbitrations seated in England and Wales. This is a notable omission, given that the confidentiality of proceedings is frequently touted as one of the principal benefits of arbitration.
In its first consultation paper, the Law Commission asked for views on whether to codify the English law position on confidentiality in the context of arbitration. However, the Law Commission concluded in its final report that it was not possible to produce a statutory definition of the duty of confidentiality and its exceptions that was both comprehensive and future-proof. The Law Commission was also not persuaded that confidentiality should be the default position in all types of arbitration.
A majority of consultees agreed with the Law Commission’s position, and the law on this point has worked well enough to date. Nevertheless, there is room for debate on whether this was a missed opportunity. It leaves confidentiality as the most notable aspect of English arbitration law which is not set out in the Act. It could be said that a broad-based expression of principle in the Act would be consistent with the approach taken in the Act on other matters. The Act contains other broad-based standards, and more will be added if the Act is revised, such as a high-level statement of an arbitrator’s duty of disclosure. Moreover, arguably flexibility need not have been compromised given that parties could have contracted out of a default position in the Act.
One of the most difficult proposals considered by the Law Commission was its proposal to introduce anti-discrimination provisions into the Act.
In its first consultation paper, the Law Commission proposed introducing a rule that arbitration agreements should not require an arbitrator to have a protected characteristic (age, gender, race, etc) unless (in short) this could be justified (as it might be for certain faith-based arbitrations, for instance).
The Law Commission made two different proposals in its second consultation paper.
First, arbitration rules often provide that a sole or presiding arbitrator should have a different nationality from the parties, since nationality is viewed as a useful proxy for neutrality. While nationality is not a protected characteristic, the Law Commission agreed with feedback received by it that the Act should recognise the permissibility of requirements regarding an arbitrator’s nationality.
Second, in response to feedback that the problem was not so much discriminatory arbitration agreements as discriminatory appointments of arbitrators, the Law Commission proposed that the Act should provide for a “general prohibition” on discrimination in arbitration.
A majority of consultees disagreed with the second proposal. They cited the risk of conflict between the Equality Act and the Arbitration Act; the existence of satisfactory anti-discriminatory protections in the Act already (such as the ability to remove an arbitrator or challenge an award on the basis for discriminatory conduct) and outside it (e.g. in professional conduct rules); the difficulty of policing discriminatory arbitral appointments; the risk of “concocted” challenges to awards based on allegations of discrimination; and the lack of any answers as to what the remedies for breach of such a general prohibition would be.
These numerous complexities led the Law Commission to decide against any reform on discrimination. While the Law Commission was understandably reluctant to drop an anti-discrimination initiative, its decision seems sensible.
Appeals on points of law
Under s.69 of the Act, a party may appeal an arbitral award on a point of law decided by the tribunal. This is a non-mandatory provision of the Act, meaning that parties can, and routinely do, ‘opt-out’ of its application.
The current s.69 acts as a compromise between two competing aims:
First, preserving the finality of arbitral awards. Applicants must satisfy the court either that the tribunal’s decision is obviously wrong or that the decision is open to serious doubt and the question of law is of general public importance. This high bar is infrequently met.
Secondly, the development and uniform application of English commercial law. These policy aims require the courts to be able to rectify clear errors of law arising from arbitral awards. Moreover, the possibility of an appeal to the court on a point of law enhances the attractiveness of London as an arbitral seat, at least in some sectors such as shipping.
The Law Commission has concluded in its final report that s.69, as a non-mandatory provision of the Act, continues to achieve a defensible compromise between these two goals, and that there is accordingly no need for reform. Again, it seems sensible to retain the status quo when there is little opposition to section 69 as it stands.