The Law Commission has announced that it will carry out a review of the Arbitration Act 1996 (the “Act“), the main legislation governing arbitrations in England, Wales and Northern Ireland (the “Review”). The review, which will aim to publish a consultation paper later this year, is responsible for ensuring that the law is as “clear, modern and efficient as possibleas it celebrates 25 years since its entry into force. In this article, we provide an overview of the law as it currently stands and consider how similar legislation governing arbitrations in other jurisdictions could provide insight into the areas the Law Commission will examine as part of the review.
The law came into force on January 31, 1997 and applies to all arbitrations sitting in England, Wales or Northern Ireland which commenced after that date. Broadly, its provisions focus on three fundamental principles: (i) fairness; (ii) party autonomy; and (iii) limited judicial intervention. The scope of the law is extremely broad, dealing with issues ranging from the opening to the enforcement of awards. However, given the emphasis on party autonomy, parties to arbitrations under the Act have, at least in part, the freedom to choose which of its provisions will apply to their proceedings. This is subject to the “mandatory provisions” set out in Schedule 1 of the Act, which apply notwithstanding any agreement of the parties to the contrary – these include obligations such as the general duties of the parties and the tribunal, and joint obligations of the parties and joint and several liability for the arbitrator’s fees and expenses. In general, the law is considered to have helped make the UK one of the world’s leading destinations for commercial arbitrations. However, as might be expected, there are areas where some suggest the law could benefit from reform is needed to help it remain as effective as possible.
One criticism of the law is its silence on the issue of confidentiality. The ability for the parties to keep the details of their dispute private is generally seen as one of the advantages of arbitration over litigation, helping to allay fears of unwanted publicity that could harm the parties’ business relationship. However, the legal basis for the right to confidentiality is not set out in the Act (instead, the Act leaves this to the common law) and some suggest that confidentiality may in fact be detrimental as it reduces the ability of the public to examine the proceedings. If the law in this area is to be codified, the Law Commission will need to consider this balance and also consider whether to take an “opt-in” or “opt-out” approach to confidentiality. For example, in Norway, both the procedure and the arbitral award are not subject to an obligation of confidentiality, unless the parties agree otherwise (“opt-in”). In Australia, on the other hand, neither the parties nor the tribunal can disclose “confidential information” (in the broad sense) unless they withdraw from the regime (“opt-out”). Both approaches have their merits, although the latter clearly represents a more conservative approach closely aligned with the current position in England and Wales. It will be interesting to see what approach (if any) the Law Commission takes after the review.
Another area the Law Commission could focus on in the review is cost. Arbitration is generally considered cheaper than litigation. However, in the 2018 International Arbitration Survey by Queen Mary University of London and White and Case LLP, “cost” was selected by 67% of respondents as one of the three worst characteristics of arbitration. international arbitration. One of the ways the Law Commission might consider addressing the cost issue is to introduce a ‘summary judgment’ (or ‘summary disposition’) regime, similar to that available to litigants in England and in Wales. It could help parties facing a claim or defense that has “no real prospect of success” walk away from the case without having to incur the time and cost of lengthy litigation. Some arbitration institutions, such as the International Center for Settlement of Investment Disputes (“ICSID”) have already adopted similar provisions, with Article 41 of the 2006 ICSID Convention, Rules and Rules providing for a “preliminary objections” mechanism under which parties may “…file an objection that a claim is manifestly without legal basis.“However, if such an approach is to be introduced, it will require careful drafting to ensure that all parties have a fair opportunity to convey their case and to ensure that the process is not open to abuse by frivolous requests aimed at delaying or disrupt the arbitration process.
Finally, given the advances in the use of technology in the legal sector in the 25 years since the law was introduced, it also seems reasonable to expect the review to consider how to deal with the use of technology in arbitrations. This could include the use of virtual hearings, electronic service of documents and even the issue of electronic awards. In the short term, implementing these types of measures could help keep parties safe during the coronavirus pandemic. However, from a longer-term perspective, promoting the use of technology also has the potential to reduce the impact of trade-offs on the environment by effectively eliminating the need for long-distance travel in most cases. . With ESG issues playing an increasingly prominent role on corporate agendas and with the pandemic making companies much more familiar with concepts such as remote working, we would be surprised if there was much resistance to betting proposals. up to date with the law in this way.
The review will be of interest to anyone whose arbitration agreements in their contracts specify that the arbitration is to take place in England, Wales or Northern Ireland. Although it may be some time before the findings of the review are published, we hope that the above is a useful indicator of at least some of the areas that could be subject to future reform.