If it ain’t broke, fix it anyway: proposed changes to the Arbitration Act 1996

Insight

06.10.2023

The Arbitration Act 1996 (the 1996 Act) has, for over 25 years, looked after arbitration in England and Wales. Its robust provisions – and most importantly, its pro-arbitration attitude – have helped to keep this jurisdiction as one of the most appealing for arbitration anywhere in the world.

Nonetheless, two years ago the MoJ asked the Law Commission to review the 1996 Act to make sure it continues to tick over effectively. The Commission’s report has just been published (here), and it recommends few, but notable, changes. It can be expected that these will be adopted sooner or later.

Overall, the changes appear to import from the world of civil litigation a few bits and pieces which may tidy up, or otherwise streamline, the arbitral process.

The most significant updates recommended by the Commission are:

codification of an arbitrator’s duty of disclosure,
strengthening arbitrator immunity around resignation and applications for removal,
introduction of a power of summary disposal,
a new rule on the governing law of an arbitration agreement, and
clarification of court powers in support of arbitral proceedings, and in support of emergency arbitrators.

The principled reasons for these changes are said to be as follows.

Impartiality

In a move to codify the Halliburton ruling on the issue of apparent bias in the context of multiple appointments in overlapping arbitrations[1], the Law Commission recommends: (i) making the arbitrator’s duty to disclose potential conflicts statutory, and (ii) having that potential be judged objectively.

On the face of it this places a greater burden on arbitrators to check and ensure their impartiality; however, the practical effect will be slight given that most established institutional rules already contain a broadly similar disclosure requirement.

Immunity

Arbitrators, just as civil judges, enjoy a general immunity in respect of the decisions they make in their capacity as arbitrator.

The Commission recommends strengthening this immunity so that: (i) no liability is incurred upon (reasonable) resignation, and (ii) no liability for costs is incurred in respect of an application for removal (unless there is bad faith). The Commission appears to be taking aim here at parties who might elect to attack the arbitrator when the tide begins to turn on them.

Efficiency

The 1996 Act does not currently provide for summary disposal, as is available in civil proceedings (ie, summary judgment under Part 24). This was perhaps an obvious omission from the old regime, and the Commission recommends it be added.

The Commission was also concerned that section 67 (challenges to substantive jurisdiction) was causing expensive and wasteful re-hearings where the objecting party had already participated in full arbitral proceedings. The Commission recommends making it such that the court cannot entertain any new grounds of objection which were not before the tribunal, and that any evidence will not be reheard. This, of course, is broadly similar to the rules governing civil appeals, as well as the rules for challenges / appeals under sections 68 and 69 of the current Act (which have been left alone).

We note in passing that section 67 challenges were up 59 per cent last year, notwithstanding their measly 6 per cent success rate.

Certainty

The Commission proposes introducing a default rule that the governing law of an arbitration agreement is the law of the seat. Given that it is common for English-seated arbitrations to be English law governed anyway, this seems to be a sensible fallback provision that might prevent costly bifurcated proceedings which open with an academic dispute on jurisdiction. One might say against it that it encroaches on the general principle of party autonomy, though where the rule is only engaged in the absence of agreement, that is a weak critique.

The Commission has also proposed introducing a statutory power for the court to make orders against third parties in support of an arbitration (eg, for the preservation of evidence). Again, this echoes civil litigation.

The Commission has produced a draft bill, though it remains to be seen when the 1996 Act will arrive on the government’s legislative agenda.

Should you wish to discuss these changes and how possible reform to the 1996 Act might impact current or proposed arbitration, please contact Hendrik Puschmann or Oliver Blundell.