On Thursday the Law Commission of England and Wales published its review of the Arbitration Act 1996 (“the Act”). The Act has long been regarded as an exceptionally well-drafted law, clear and concise, and marrying the best traditions of English arbitration law with the innovations of the UNCITRAL Model Law (which was only a few years old at the time of the preparation of the Act). However, the world has moved on since 1996, and several innovations have been introduced into international arbitration in the intervening years, such as emergency arbitration; while other features of international dispute resolution, such as investment treaty arbitration, have become much more prominent now than they were at that time. Also, social trends which were important then, such as calls for environmentally-aware practices and gender equality, have become even more urgent today. All of these developments are captured in the 159-page report that the Law Commission has published, looking at the ways in which the Act could be improved.
Despite the broad scope of the paper, however, relatively few changes are ultimately recommended by the Law Commission. That partly reflects an “if-it-ain’t-broke-don’t-fix-it” approach. It also recognises the difficulty in making substantial changes to address areas such as confidentiality and technology-driven arbitration when there is no consensus within the international arbitration community on the best way forward. The consultation period is open until 15 December 2022, and it is likely that the result will be a new arbitration law amended along the lines suggested by the Law Commission, if sufficient parliamentary time can be found during 2023.
The specific recommendations of the Law Commission are set out below.
The Act should not include provisions dealing with confidentiality: the Law Commission is not persuaded that all types of arbitration should be confidential by default; the Act would need to provide many exceptions. The Law Commission thinks that those exceptions would be at such a high level of generality as to provide little concrete guidance. Some arbitral rules create exceptions to confidentiality, and parties consent to those exceptions when they agree that those rules will govern their arbitration. Overall, the stronger approach is to leave the law of confidentiality to be developed by the courts.
2. Independence and disclosure
The Act very deliberately included an express duty of impartiality but not of independence, reasoning that the parties could, quite properly, give informed consent to an arbitrator who was not independent: the village elder might be such a person. The Act does not deal with the manner by which that informed consent is obtained. The common law (Halliburton v Chubb) declared that there is a duty of disclosure on arbitrators.
The Law Commission concludes that there should be no new express duty of independence: it is not practicable in many areas of arbitration. The original thinking behind the Act that what matters instead is that arbitrators are impartial, is endorsed. The Law Commission proposes codifying the common law, which requires an arbitrator to disclose circumstances which might reasonably give rise to justifiable doubts as to their impartiality. As the Law Commission puts it “…it is important to emphasise that disclosure is not primarily about admitting a conflict of interest. Quite the opposite: an arbitrator who persists in the appointment is confirming their belief that they remain impartial. The disclosure is intended as a commitment to transparency and candour, and as such purports to be a demonstration of impartiality. It is also an acknowledgment that, if justice is to be seen to be done, it is appropriate to afford the parties an opportunity to consider for themselves the neutrality of their arbitrator.
The particular issue is where an arbitration agreement specifies who can be appointed as arbitrator in terms which might be regarded as discriminatory. If one party seeks to appoint a different arbitrator, the other party might challenge that appointment. The Law Commission proposes to adopt the language of the Equality Act 2010 so that, in broad terms, arbitral appointments cannot be challenged for reasons which are discriminatory.
4. Arbitrator immunity
Section 29 of the Act provides arbitrators with immunity from liability for anything done in the discharge of their functions as an arbitrator. However, an arbitrator can still incur liability for resigning. And a line of case law suggests that arbitrators can be liable for the costs of applications for their removal made to the court by a party. The Law Commission proposes to strengthen arbitrator immunity, to preclude liability for costs: this will support the finality of arbitral awards by discouraging satellite litigation against arbitrators. It will also support arbitrator impartiality, by protecting against the pressure to conform to party demands or else risk personal liability.
5. Summary disposal
The Law Commission proposes that there be a non-mandatory provision which gives arbitrators the power to adopt a summary procedure to decide issues which have no real prospect of success and no other compelling reason to continue to a full hearing. Most arbitral rules permit summary disposal expressly or by implication. The question is whether a summary procedure still provides a reasonable opportunity to put its case: even in a summary procedure, an arbitrator must give each party a reasonable opportunity of putting its case, as is required by section 33(1)(a). Such an express provision would reassure arbitrators who wish to manage the arbitral proceedings in an efficient manner, while also ensuring that proceedings are conducted fairly.
Particular questions were whether orders under section 44 might be made against third parties, and how section 44 interacts with emergency arbitrator provisions in arbitral rules. As for third parties, the Law Commission’s view is that orders under section 44 can be made against third parties, and contemplates a minor change of language to confirm that. However, different rules will apply to the different types of order listed in sections 44(2)(a) to (e). Third parties should, however, have the usual rights of appeal against orders affecting them, rather than the restricted rights of appeal which arbitral parties have.
Moreover, it is proposed that section 44(2)(a) be amended to confirm that it relates to the taking of the evidence of witnesses by deposition only (and not also witness summonses).
As for emergency arbitrators, the provisions of the Act should not apply generally to emergency arbitrators. The Law Commission’s view is that emergency arbitrator provisions in arbitral rules need not restrict access to the court under section 44. However, section 44(5) may be redundant in light of sections 44(3) and (4), and the Law Commission asks whether consultees consider that section 44(5) might be repealed.
The Law Commission also identifies two ways in which the Act might respond to a situation where an interim order by an emergency arbitrator has been ignored by an arbitral party, either: 1) a provision which empowers an emergency arbitrator, whose order has been ignored, to issue a peremptory order, which, if still ignored, might result in the court ordering compliance; or 2) an amendment which allows an emergency arbitrator to give permission for an application under section 44(4) of the Arbitration Act 1996). Consultees are asked which approach they prefer.
7. Challenging jurisdiction under section 67
Section 67 makes provision for a party to arbitral proceedings to apply to the court to challenge the award of the arbitral tribunal on the basis that the tribunal lacks substantive jurisdiction. The Law Commission discusses whether the challenge before the court should be an appeal or a rehearing and reviews the remedies available to the court under section 67, and the question of whether a tribunal which has ruled that it has no jurisdiction can nevertheless issue a costs order.
The Law Commission proposes: a) that where a party has participated in arbitral proceedings, and has objected to the jurisdiction of the arbitral tribunal; and the tribunal has ruled on its jurisdiction in an award, then any subsequent challenge under section 67 should be by way of an appeal and not a rehearing (which is the current position), and b) amendments to clarify the remedies available to the court, and to confirm that a tribunal can issue a costs order even when ruling that it has no jurisdiction.
8. Appeal on a point of law
If the arbitrator gets the law wrong section 69 limits the situations in which a party can appeal to the court, for the court to reconsider the contested question of law. Having considered whether reform is required the Law Commission’s conclusion is that no reform is needed. Section 69 is a defensible compromise between securing the finality of arbitral awards and ensuring that blatant errors of law are corrected. It is a non-mandatory provision; arbitral parties and institutions have long settled on their preferred relationship with it (many institutional rules contract out of the application of section 69), and there is no need to unsettle that.
9. Minor considerations
The Law Commission also considered the following:
- Whether section 7 (separability) should be mandatory – an open question.
- If an appeal should be permitted under a section 9 (staying legal proceedings in favour of arbitration) as the failure to do so appears to have been a drafting error.
- Sections 32 and 45 concern applications to the court to determine a preliminary point of jurisdiction and a preliminary point of law respectively – an open question is asked whether the requirements of both provisions could be reduced.
- Technology – generally the Act is sufficiently widely worded to allow for a modern post-pandemic way of working.
- Section 39 is entitled ‘Provisional Awards’ but the body of the section refers to orders – it is preferable to remove any doubt and refer throughout to orders.
- Section 70 has strict time-limits for challenging an award and section 57 permits applications for correction of an award. Case law states that, if there has been an application under section 57 for a correction, then time runs from the date of that correction, but case law stresses that the application to the tribunal for correction or clarification must be material to the application or appeal under sections 67 to 69. A correction is material if it is necessary to enable a party to know if they have grounds to challenge an award. This case law is considered appropriate, and it is proposed to codify the law in amendments to section 70.
A number of other matters were rejected for detailed consideration and consultation.