Law commission

Refining English Arbitration Law: Reactions to the Law Commission Consultation Paper

Today the Law Commission released its first consultation paper in its review of the Arbitration Act 1996 (the “LawThe stated objective of the review was to ensure that the law remains “best in class”: an approach based on adjustment rather than fundamental reform. Nevertheless, the consultation paper proposes changes and notable and very welcome clarifications, which we briefly describe and comment on below.

Privacy

The Law Commission has tentatively proposed that the Act should not codify English law on secrecy in arbitration, concluding that this is an area best left to the courts. The default rule that arbitrations are private and confidential is clear in English law, and the Law Commission has noted that it is difficult to articulate exceptions to this rule. Such a codification would not necessarily be comprehensive or future-proof because privacy law is complex, fact-sensitive and subject to ongoing debate.

This proposal is pragmatic. Although some stakeholders may be disappointed, the report acknowledges the complexity of codification and weighs it against the need to retain flexibility. This proposal also allows parties who prefer a more comprehensive confidentiality regime to include one in their arbitration clauses, to choose institutional rules that already contain a confidentiality regime, or to ask a court to deal with the issue at the outset. of arbitration.

Arbitrator’s duty to disclose

The consultation paper tentatively proposes that an express duty of independence not be imposed on arbitrators. He notes that arbitrators already have an ongoing duty to disclose any circumstance that might reasonably give rise to justifiable doubts as to their impartiality under both the current wording of S24(1)(a) of the statute and the case law (Halliburton Co v Chubb Insurance of Bermuda Ltd). The consultation document distinguishes between the concepts of independence and impartiality, following the distinction drawn in the original CED report on the Act: the reasoning being that if an arbitrator is impartial, it does not matter whether he has a with the parties.

The decision not to include an independence requirement may surprise some, particularly non-English lawyers, who might expect that independence and impartiality are inextricably linked and that independence should be a requirement to sit as an arbitrator – whether or not it has any bearing on that arbitrator’s ability to be impartial.

The document then asks stakeholders whether the Act should specify the state of knowledge required of an arbitrator for his duty of disclosure. If so, she wonders whether this obligation should be based on the actual knowledge of an arbitrator, or also on what he should know after having made reasonable inquiries. Current case law already requires disclosure, but says nothing about the state of knowledge underlying such disclosure. It follows that if the Commission finds that arbitrators are required to make reasonable inquiries, it may have no practical impact on the systems already in place to ensure that arbitrators can make a disclosure.

Summary elimination

The consultation paper proposes that a new non-mandatory provision be added to the Act to allow the court to adopt summary proceedings. He suggests that the threshold should be that a claim, defense or issue has no real chance of success, and that there is no other compelling reason for it to proceed to a full hearing. . This is a very welcome development which, as the Law Commission explains, should remove any doubts about the availability of this procedure under English law and would reassure foreign enforcement courts that a proper procedure was followed. As summary proceedings are already part of some institutional rules, institutions will need to consider how their rules interact with this new provision, and whether any changes are needed.

S44 – third party

There has been lengthy debate and confusing case law over whether S44, which provides that the court has the power to make interim orders in support of arbitral proceedings, applies to third parties. The consultation paper discusses this but does not come to a definitive conclusion: rather it asks those consulted whether S44 should be amended to explicitly state that orders can be made against third parties, recognizing that, as S44 imports the right national court proceedings, whether an injunction against a third party is available will depend on the particular order and the applicable rules.

Emergency Arbitrators and the Gerald Metals Problem

Given that the concept of emergency arbitration did not exist when the Act was first drafted, the consultation paper examines whether any updates are needed to incorporate this innovation into the arbitration regime. . The paper tentatively concludes that the general provisions of the law should not apply to emergency arbitrators as it would not be appropriate for most of the law to apply to them. This is a departure from the approach of other jurisdictions such as Singapore, which has applied the entire legislative framework to emergency arbitrators. The paper, however, recognizes the need to support the emergency arbitration process and suggests ways in which the parties could enforce the emergency arbitrator’s orders (either by issuing peremptory orders that could be forwarded to courts, or by using S44(4), which should be amended for this purpose). This is an interesting question, which may need to take into account any time constraints and the speed with which the main tribunal can be constituted.

In the context of S44, the paper also addresses the thorny issue of whether the existence of emergency arbitrator provisions precludes a claim to court under Article 44(5) (which is the perceived consequence of Gerald Metals v. Timis, although the Law Commission says that decision was overstated). The effect of S44(5) is that the tribunal will act only if or to the extent that the arbitral tribunal “has no power or is presently unable to act effectively”. In considering this issue, the Law Commission proposes to repeal section 44(5) on the basis of redundancy, since the requirements for the court to act are already set out elsewhere in section 44. This would end to the confusion caused by Gerald Metals and the practice of excluding emergency arbitration clauses in arbitration clauses – and upholds the rights of parties to seek interim relief from the courts under S44.

S67 – appeal rather than rehearing

The paper proposes that where a party has participated in arbitral proceedings and has objected to the jurisdiction of the tribunal, and the tribunal has subsequently ruled on jurisdiction in an award, then any subsequent challenge under the section 67 of the act should be appealed. not a new audience. This would represent a departure from the current regime which requires a full rehearing on jurisdiction. The document makes this proposal in order to reduce the time and costs associated with the process. The Law Commission also notes that the current regime is potentially unfair, as the losing party may raise new arguments in court that were not raised in court. The proposal would avoid the so-called “double hearing problem”, but allow the court to retain the final say on the court’s jurisdiction. This is a sensible solution likely to be welcomed by the arbitral community, especially since it will not apply to a claimant who has not taken part in the arbitral proceedings.

The document also proposes to clarify that an arbitral tribunal that has ruled that it lacks substantive jurisdiction may still award costs. Although perhaps counter-intuitive, this solution would avoid the unenviable position in which a party who succeeds in objecting to jurisdiction could find itself – where it must start new legal proceedings in order to recover its costs of gaining jurisdiction. .

S69 – no change needed

Under Article 69, a party to arbitration proceedings may appeal to the court on a question of law raised by an arbitration award. This is a non-mandatory provision that requires the agreement of the parties, and the court will only grant permission if certain minimum requirements are met. This provision is not widespread internationally. In particular, there is no similar provision in the UNCITRAL Model Law. The Law Commission noted that it had received diametrically opposed views from stakeholders regarding this provision – some wanted to repeal it entirely (in favor of finality of awards), while others thought it should be liberalized (to ensure that the law is applied consistently) . The Law Commission concludes that, overall, S69 is already a fair compromise between these two positions, and that there is no evidence to suggest that it is problematic in practice. This conclusion is not surprising given the divergent views that have been expressed.

Other Proposed Changes

Other changes proposed by the Law Commission include prohibiting discrimination in the appointment of arbitrators, strengthening the immunity of arbitrators from legal liability, changing provisions on interim awards, making S7 ( severability of arbitration agreements) a mandatory provision and updating the law to be compatible with modern technology.

Comment

The consultation document should be well received by the arbitration community. It represents a complete overhaul of the law – the proposals seek to fix the “flat notes” in the legislation, while ensuring that the rest is still “in tune” for modern arbitral practice. Proposed changes that are likely to resonate particularly are the introduction of summary conviction, the proposal to move to an appeal rather than a new hearing under section 67, and the repeal of section S44(5 ).