Proposed updates to the Arbitration Act 1996

On 22 September the Law Commission published its proposed amendments to the Arbitration Act 1996 for consultation. The goal is to ensure the act is fit for purpose and that the UK continues to be the ‘foremost destination for international arbitration’. What should practitioners and parties to arbitration agreements take note of? 

The act has long been recognised as ‘state of the art’ (as the commission puts it), with few disputes arising out of its interpretation over the past 25 years. It is no surprise, therefore, that the recommendations are relatively light, providing mostly helpful clarifications rather than entirely new law.

While there may be missed opportunities (such as its proposals not to address third-party funding or to deal expressly with confidentiality in the act), the commission has struck a sensible balance in not proposing amendments for their own sake where the act works well, but ensuring that it remains up to date and fit for purpose in supporting London as a global leader for international commercial arbitration.

The commission has proposed the introduction of express powers for arbitrators to summarily dismiss claims manifestly lacking merit. Some arbitrators have been reluctant to summarily dispose of issues due to the risk of being challenged for procedural irregularity, particularly for breach of the requirement that a party did not have a reasonable opportunity to state its case. However, powers of summary dismissal are increasingly considered a competitive component of an arbitral institution’s offering, as reflected by the adoption of such powers by several established arbitral institutions in their rules (such as ICSID and SIAC). In this respect, the proposal to confirm expressly in the act the availability of such powers is to be welcomed as a means to save parties time and expense on spurious issues, hopefully providing arbitrators with greater confidence in exercising them.

One interesting proposal concerns section 67 and involves removing the right to a full rehearing on the question of jurisdiction where that has already been argued before and determined by the tribunal. Rather than the English court considering the entire issue of jurisdiction afresh (regardless of what took place in the arbitration, as is the current position), this proposal would result in challenges to jurisdictional decisions that have been fully argued before the tribunal already being treated effectively as appeals against a first-instance decision under domestic legal proceedings. While some may consider this extreme, it should be welcomed as it promotes both fairness (by preventing the losing party from having a second bite of the apple, where it would be able to try different arguments and even deploy new evidence) and certainty. It also allows the court to retain an ultimate role as an appellate body where appropriate. A further, beneficial effect of this proposal would be to increase time and cost-efficiency for parties, who will no longer need to fund and endure repeated full hearings of the same jurisdictional issues at play in their disputes.

A key area flagged for review was the confidentiality of arbitrations, with the main issue of speculation being whether the commission would impose express provisions requiring arbitrations to be confidential. Ultimately, the commission appears to be leaning away from any such requirement, noting that whether such confidentiality rules should apply to arbitrations is still uncertain and is best left to the English courts to develop. The commission has stated that parties seeking to keep their arbitrations confidential should ensure their arbitration clauses refer to arbitral rules which provide for schemes of confidentiality (for example, the LCIA rules), but has not proposed explicit provisions in the act itself. This is an interesting acknowledgment of the tension between confidentiality and transparency in arbitral proceedings, which is particularly evident in investor-state disputes. Such disputes often raise public interest issues which are usually absent from commercial arbitrations, and so the default favours transparency. The decision not to take decisive action in this context, however, might be considered a missed opportunity to clarify the position.

The commission considers that section 44 already empowers the court to make the same interim orders against third parties in support of arbitration as it does for domestic proceedings, but now proposes that this be provided for expressly in the act. Further, the commission proposes adding clarification that access to an emergency arbitrator does not prevent parties from seeking the assistance of the court. This is particularly welcome given the doubt cast on this approach by the High Court in Gerald Metals S.A. v Timis & Ors [2016] EWHC 2327 (Ch), where it had decided that urgent interim relief from the courts may not be available if the parties had sufficient time to obtain such relief by way of an expedited tribunal or from an emergency arbitrator.

The commission has proposed that recent developments in case law on an arbitrator’s duty of disclosure should be codified, and that the act should provide for arbitrators to have a continuing duty to disclose any circumstances that might reasonably give rise to justifiable doubts as to their impartiality. These are to be welcomed as they should reduce the risk (and associated time and costs) of challenges to arbitral awards on the ground of lack of impartiality on the part of the arbitrator. It is to be noted, however, that the commission does not consider it necessary to impose a duty of independence on arbitrators, choosing to focus instead on impartiality. This is perhaps recognising that it could otherwise lead to future challenges over issues such as barristers from the same chambers acting as counsel and arbitrator on the same matter.

Overall, the proposals are a sensible blend of light touches with key clarifications to keep the act up to date with recent developments. The commission has called for responses to its report by 15 December, after which we will find out which proposals found favour with the arbitration community and which did not.

Neil Newing is a partner and Alasdair Marshall an associate at Signature Litigation, London