The UK Government has asked the Law Commission to review the Arbitration Act 1996 (the ‘Act’) to make sure that England and Wales (and London as an arbitration seat) remain at the forefront of international arbitration. On 22 September, the Law Commission published a consultation paper, together with a summary, on proposals to review certain sections of the Act.
Main Areas for Reform
The consultation paper considers eight main areas for potential reform.
- Confidentiality: The Act does not establish any general position regarding confidentiality in arbitration proceedings. The Law Commission considers whether a default rule of confidentiality would be desirable but rejects the idea, concluding that each party should be free to decide whether to make their arbitration proceedings confidential.
- Impartiality of arbitrators and disclosure: Recognising the importance of the requirement that arbitrators are impartial, the Law Commission proposes that the Act is amended to include a continuing duty upon arbitrators to disclose information ‘which might reasonably give rise to justifiable doubts as to their impartiality’.
- Discrimination: Restating a strong commitment with the principle of non-discrimination in the appointment of arbitrators, the Law Commission suggests including the following two additions to the Act:An arbitrator’s appointment should not be allowed to be challenged based on the arbitrator’s protected characteristics (age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation); and
- Any arrangement between the parties concerning the arbitrator’s protected characteristics will not be enforced (unless this is a proportional way of obtaining a legitimate goal).
- Immunity of arbitrators: There are currently two exceptions to the principle that arbitrators are not liable for conduct in the exercise of their functions unless done in bad faith: first, arbitrators can incur liability if they resign (even when they have good reasons to do so); and secondly, when a party challenges an arbitrator’s appointment before a court, the arbitrator can be liable for the costs of that application (which the Law Commission notes are not generally covered by professional indemnity insurance). To uphold the principle of immunity of arbitrators, the Law Commission proposes that arbitrators should not be required to pay the costs of those court applications. Additionally, the Law Commission seeks views on whether arbitrators should incur any liability when their resignation is reasonably justified.
- Summary disposal of claims that lack merit: The Law Commission proposes the inclusion of a non-mandatory provision to give arbitral tribunals the power to summarily dispose of claims. The Law Commission requests views on whether the standard used by arbitral tribunals in disposing of claims summarily should be the ‘manifestly without merit’ standard, or the ‘no real prospect of success’ standard, which is the standard applied by the courts of England and Wales.
- Interim measures ordered by the court in support of arbitral proceedings: Section 44 of the Act gives the court the power to make orders in support of arbitral proceedings. This includes conservatory measures to preserve evidence and interim injunctions. However, there are two questions that have arisen regarding this provision: does section 44 allow the court to make orders against third parties? And is section 44 available when the underlying arbitral rules contemplate emergency arbitration? The Law Commission answers both questions and considers whether reform is warranted:
- Regarding the first question, the Law Commission suggests that the court can already make orders against third parties under section 44 but seeks views on whether this needs to be made explicit. Additionally, the Law Commission proposes two amendments to section 44 regarding decisions against third parties: (i) third parties should have a full right to appeal any court decision (and not merely a restricted right of appeal applicable to arbitral parties); and (ii) section 44(2)(a) of the Act should be limited to the taking of depositions, to prevent confusion with section 43, which addresses of witness summonses.
- Regarding the second question, the Law Commission explains that some arbitral rules contemplate the appointment of an emergency arbitrator to take urgent decisions on an interim basis when the tribunal has not been fully constituted. When the parties have agreed to rules containing this process, it is unclear whether they could also apply to the court for interim measures under the Act. The Law Commission is of the view that section 44 is compatible with emergency arbitration proceedings. However, it recognises that there is some confusion arising from section 44(5), which states that the court will act only if the arbitral tribunal has no power or is momentarily unable to do so. Therefore, the Law Commission requests views on whether section 44(5) should be repealed to avoid confusion. It further asks whether it would be preferable to add a provision empowering the court to enforce the emergency arbitrator’s decision or if prior to applying to the court, parties should obtain the emergency arbitrator’s permission.
- Jurisdictional challenges against arbitral awards: Under the Act, parties can challenge a tribunal’s jurisdiction before the tribunal itself (section 30) or before the court (section 32). Even after an award on the merits, pursuant to section 67, a party can challenge that award before the court if one of the parties believes that the tribunal lacked jurisdiction. Case law has established that an application under section 67 will require a full hearing even if the applicant had already challenged the jurisdiction of the tribunal in the arbitral process itself. The Law Commission proposes to reverse this position with a provision that if a party has participated in an arbitral process and objected to the jurisdiction of the tribunal, it can only challenge the arbitral tribunal’s jurisdiction before the courts by way of an appeal and not a full rehearing.
- Appeals on a point of law: Section 69 establishes that a party may appeal an award before a court on questions of law, but under very limited circumstances. There are two diverging views regarding section 69: some support the repeal of this section to preserve the finality of arbitral awards; and others suggest that it should be expanded. The Law Commission does not agree with either view, and suggests leaving section 69 untouched.
Next Steps
The deadline for submitting comments on the consultation paper and other suggestions for reform is 15 December 2022. Comments can be submitted via this form or by email (arbitration@lawcommission.gov.uk).
It is expected that the Law Commission will publish its final recommendations for reform by mid-2023 after reviewing the responses and engaging with relevant stakeholders.
Please contact Juan Nascimbene should you wish to discuss anything related to the proposed changes in the Arbitration Act or if you have any arbitration-related queries.
Contributors
Juan Nascimbene