Almost a quarter of a century after the English Arbitration Act 1996 (the Act) came into force, the Law Commission has announced that it is carrying out a review of this key legislation.
The law has undoubtedly played a key role in maintaining the position of England and in particular London as a leading destination for commercial arbitrations. Nonetheless, the Law Commission said it considers a review necessary to ensure the law is “as efficient as possible”.
There has always been a high level of satisfaction with the Act among practitioners and there certainly does not appear to be a consensus on the need for far-reaching radical change. It must be said that the Law Commission’s review is set against the backdrop of (and is arguably driven by) an increasingly supportive culture for innovation in the international arbitration community. In recent years, this has seen key institutional rules change frequently (and largely converge) and many jurisdictions have enacted reforms to their national laws to better support and reflect current practices in international arbitration. Indeed, the Law Commission specifically cites the latter as being a motivating factor behind the review.
Although the Law Commission has not determined the precise scope of its review, in its 14and Law reform program, it has received several submissions on areas of law it could include. These areas include issues relating to:
- the power to summarily dismiss unsubstantiated claims or defenses in arbitration proceedings
- the powers of the courts that may be exercised in support of an arbitration proceeding
- the procedure for contesting a judgment of jurisdiction
- the availability of appeals in cassation
- the law on confidentiality and privacy in arbitration proceedings
- electronic service of documents, electronic arbitral awards and virtual hearings
- the possibility of introducing arbitration in matters of trust law
The Law Commission also said it wanted to know if any changes to the law would make arbitrations less expensive or take longer. This reflects many of the concerns raised by users of arbitration about the increased costs and length of proceedings.
We expect that once the proposals are released, most of the recommended changes will simply be modernization rather than rebuilding.
For example, the law does not address confidentiality and privacy in relation to arbitral proceedings, and this was deliberate because the law in this area was not established at the time the law came into effect. . However, since then there has been a significant evolution of case law in this area. Perhaps it is time to codify this jurisprudence in legislation and formally remove the “masquerade[e]” which Lawrence Collins LJ joked in Emmott v Michael Wilson & Partners Ltd namely that the legal basis for arbitral secrecy in English law is an implied contract term, as opposed to “substantive law”.
There may be an element of opposition to an express confidentiality provision given that some practitioners have in the past called for more openness and transparency in relation to the arbitral process, quoting Lord Thomas of Cwmgieed who made argue that the diversion of claims from the court to arbitration”reduce[ed] the possibility for the courts to develop and explain the law”. However, given the critical importance parties place on the confidentiality of commercial arbitration, we believe the Law Commission is unlikely to recommend greater transparency.
A reform of trust arbitration law would potentially be a welcome development. Although the law is largely untested in this area, it has been argued that currently those creating trusts cannot require trustees and beneficiaries to use arbitration rather than litigation. to resolve disputes. Further, while two or more people may enter into a valid arbitration agreement to settle a trust dispute, no decision will be binding on the other interested parties. Other jurisdictions have sought to eliminate this uncertainty by implementing legislation (eg, Florida, Arizona, Guernsey, Malta and the Bahamas). Other courts around the world have begun to show an increased willingness to allow these kinds of disputes to go to arbitration. Changing the law to make fiduciary arbitration more viable in England could be beneficial and bring English law into line with current global trends.
One aspect of the proposed review that is likely to prove far more controversial is the consideration of appeal rights on a point of law under section 69 of the act. For some, this is currently seen as a remarkable facet of English law, with England being unusual in granting this non-compulsory right of appeal. Some commentators, however, have sought to suggest that this avenue of appeal is an unwarranted interference in the arbitral process. This is perhaps a somewhat surprising view, given that there is currently no right of appeal in most institutional arbitrations sitting in England, as the rules of major arbitration institutions have excluded s69 appeals (for example, see Rule 35(6) of the ICC Rules and Rule 26.8 of the LCIA Rules).
While appeals on a point of law are available in ad hoc arbitrations, appeal statistics do not support the need for meaningful change. In 2018/19 there were only 39 s69 apps, and in 2019/20 that dropped significantly to 22 apps. The success rate of these appeals has in the recent past been around 5%, according to data published by the Commercial Court. There seems to be a limited appetite for such appeals where available and appeals that are made are generally unsuccessful. In other words, English arbitral awards appear generally reliable and are rarely appealed, let alone set aside, under Section 69 of the Act. We therefore expect that the Law Commission’s final proposals will not extend to amending Section 69 of the Act.
The Law Commission will launch the review in the first quarter of 2022 and aims to release a consultation paper in 2022. It is then likely to release a final report with its recommendations, possibly by 2023. So While the Law Commission may recommend certain minor changes, we expect the general thrust of its recommendations to be to keep the framework of the Act largely intact.