Law commission

Law Commission review of Arbitration Act 1996

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 its the preparation of the act). However, the world has evolved since 1996, and several innovations have been introduced in international arbitration in the years since, such as emergency arbitration; while other features of international dispute resolution, such as investment treaty arbitration, have become much more important today than they were then. In addition, social trends that were important then, such as calls for environmentally friendly practices and gender equality, have become even more urgent today. All of these developments are captured in the 159-page report the Law Commission released examining ways to improve the law.

Despite the broad scope of the document, however, relatively few changes are ultimately recommended by the Law Commission. This partly reflects an “if it ain’t broke, don’t fix it” approach. It also recognizes the difficulty of making substantive 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 December 15, 2022, and it is likely that the result will be a new amended arbitration law along the lines suggested by the Law Commission, if sufficient parliamentary time can be found in 2023.

The specific recommendations of the Law Commission are presented below.

1. Confidentiality

The law should not include provisions dealing with confidentiality: the Law Commission is not convinced that all types of arbitration should be confidential by default; the law should provide for many exceptions. The Law Commission believes that these exceptions would be at such a high level of generality that they would provide little concrete guidance. Some arbitration rules create exceptions to confidentiality, and the parties consent to those exceptions when they agree that those rules will govern their arbitration. Overall, the strongest approach is to leave privacy law to the courts.

2. Independence and Disclosure

The law very deliberately included an express duty of impartiality but not of independence, holding that the parties could rightly give informed consent to an arbitrator who was not independent: the village elder could be such a nobody. The Act does not address how this informed consent is obtained. Common law (Halliburton vs. Chubb) said there is a disclosure requirement for arbitrators.

The Law Commission concludes that there should be no new express requirement of independence: this is not achievable in many areas of arbitration. The original idea behind the law that what matters instead is that the arbitrators are impartial, is approved. The Law Commission is proposing to codify the common law, which requires an arbitrator to disclose circumstances that could reasonably give rise to justifiable doubts as to his or her impartiality. As the Law Commission puts it, “…it is important to emphasize that disclosure is not primarily about admitting a conflict of interest. On the contrary: an arbitrator who persists in his appointment confirms his conviction that he remains impartial. Disclosure is intended as a commitment to transparency and candor, and as such purports to be a demonstration of impartiality. It is also a recognition that, if justice is to be done, the parties must be given the opportunity to assess for themselves the neutrality of their arbitrator.[1]

3. Discrimination

The particular problem is where an arbitration agreement specifies who can be appointed as an arbitrator in terms that could be considered discriminatory. If a party seeks to appoint a different arbitrator, the other party may challenge that appointment. The Law Commission is proposing to adopt the wording of the Equality Act 2010 so that, in general terms, arbitral appointments cannot be challenged on discriminatory grounds.

4. Immunity of the arbitrator

Section 29 of the Act grants arbitrators immunity from liability for anything done in the performance of their duties as arbitrators. However, an arbitrator can still incur liability in the event of resignation. And a line of case law suggests that arbitrators may be liable for the costs of dismissal requests made to court by a party. The Law Commission proposes to strengthen the immunity of arbitrators, to exclude liability for costs: this will support the finality of arbitral awards by discouraging satellite litigation against arbitrators. It will also support the impartiality of the arbitrator, protecting him against pressure to comply with the demands of the parties or risk his personal liability.

5. Summary Elimination

The Law Commission proposes that there be a non-binding provision that gives arbitrators the power to adopt a summary procedure to decide issues that have no real prospect of success and no other compelling reason to proceed to a full audience. Most arbitration rules permit summary disposition either expressly or by implication. The question is whether summary proceedings always provide a reasonable opportunity to present their case: even in summary proceedings, an arbitrator must give each party a reasonable opportunity to present their case, as required by Article 33 (1)(a). Such an express provision would reassure arbitrators who wish to manage the arbitral proceedings efficiently, while guaranteeing a fair conduct of the proceedings.

Particular issues were whether orders under section 44 could be made against third parties and how section 44 interacted with the emergency arbitrator provisions in the arbitration rules. With respect to third parties, the Law Commission is of the view that Section 44 orders can be made against third parties and is considering a minor language change to confirm this. However, different rules will apply to the different types of orders listed in Sections 44(2)(a) through (e). Third parties should, however, have the usual rights of appeal against orders affecting them, rather than the restricted rights of appeal available to arbitrating parties.

In addition, it is proposed that section 44(2)(a) be amended to confirm that it relates to the taking of evidence from witnesses only by deposition (and not also subpoenas).

As for emergency arbitrators, the provisions of the Act should not apply generally to emergency arbitrators. The Law Commission is of the view that emergency arbitrator provisions in the arbitration rules should not restrict access to court under Article 44. However, Article 44(5 )[2] may be redundant in light of Articles 44(3) and (4), and the Law Commission asks whether those consulted consider that Article 44(5) could be repealed.

The Law Commission also identifies two ways in which the law could respond to a situation where an emergency arbitrator’s interim order has been ignored by an arbitrating party, namely: 1) a provision that empowers an emergency arbitrator, whose the order has been ignored, make a binding order, which, if still ignored, could result in the court ordering enforcement; or 2) an amendment which allows an emergency arbitrator to allow a claim under section 44(4) of the Arbitration Act 1996). Those consulted are asked which approach they prefer.

7. Challenge to Jurisdiction under Article 67

Section 67 provides that a party to arbitration proceedings may request the court to challenge the award of the arbitral tribunal on the ground that the tribunal lacks jurisdiction on the merits. The Law Commission considers whether the challenge to the court should be an appeal or a rehearing and considers the remedies available to the court under section 67, and whether a court that has declared itself incompetent may nevertheless issue an order as to costs.

The Law Commission proposes: a) that where a party has participated in arbitration 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 challenges under section 67 should be by appeal and not by rehearing (which is the current position), and b) amendments to clarify the remedies available to the court, and to confirm that a court may order costs even where it declines jurisdiction.

8. Appeal in cassation

If the arbitrator is wrong about the law, Article 69 limits the situations in which a party can appeal to the court, for the court to reconsider the disputed question of law. After considering whether reform is necessary, the Law Commission concludes that no reform is necessary. Article 69 is a defensible compromise between ensuring the finality of arbitral awards and ensuring that gross errors of law are corrected. This is a non-mandatory provision; parties and arbitral institutions have long since established their preferred relationship with him (many institutional rules contract outside the application of Article 69), and there is no need to disrupt that.

9. Minor Considerations

The Law Commission also considered the following:

  • Should section 7 (separability) be mandatory – an open question.
  • Whether an appeal should be allowed under an Article 9 (suspension of legal proceedings in favor of arbitration), as the failure to do so appears to have been a drafting error.
  • Sections 32 and 45 relate respectively to applications to the court to determine a preliminary question of jurisdiction and a preliminary question of law – an open question is posed as to whether the requirements of both provisions could be reduced.
  • Technology – usually the law is worded broadly enough to enable a modern post-pandemic way of working.
  • Article 39 is titled “Interim Awards”, but the body of the article refers to orders – it is best to remove any doubt and refer to orders throughout.
  • Section 70 sets strict time limits for challenging an award and Section 57 permits requests for correction of an award. Case law stipulates that, if there has been a request for correction under Article 57, the period runs from the date of this correction, but case law emphasizes that the request to the court for correction or clarification must be Material at the request or at the appeal under articles 67 to 69. A correction is important if it is necessary to allow a party to know whether he is justified in contesting 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 issues were discarded for further consideration and consultation.