Partner Neil Newing and Associate Alasdair Marshall discuss the Law Commission’s proposed amendments to the Arbitration Act 1996, in The Law Society Gazette.
Neil and Alasdair’s article was published in The Law Society Gazette, 11 November 2022, and can be found here.
After announcing a review in late 2021, on 22 September 2022 the Law Commission published its proposed amendments to the Arbitration Act 1996 (“the Act”) for consultation. The Law Commission’s goal is to ensure the Act is fit for purpose and that the UK continues to be the “foremost destination for international arbitration”. Neil Newing and Alasdair Marshall, who analysed the possible direction the Law Commission might take when it first announced its review, consider what practitioners and parties to arbitration agreements should take note of in this latest development.
The Big Picture
The Arbitration Act has long been recognised as “state of the art” (as the Law Commission puts it), with few disputes arising out of its interpretation over the past 25 years. It is no surprise, therefore, that the Law Commission’s recommendations are relatively light, providing for the most part helpful clarifications rather than entirely new law in areas such as powers of summary dismissal, the arbitrator’s duty of disclosure, and the ability to seek interim relief from the Court even where an emergency arbitration procedure might also be available.
While there may be one or two missed opportunities (such as its proposals not to address third-party funding or to deal expressly with confidentiality in the Act), as a whole the Law Commission has struck a sensible balance in not proposing amendments for their own sake where the Act works well, but ensuring that it remains up to date and fit for purpose in supporting London as a global leader for international commercial arbitration.
Some of the most notable proposals are analysed below.
Powers of Summary Dismissal
The Law Commission has proposed the introduction of express powers for arbitrators to summarily dismiss claims manifestly lacking merit. To date, some arbitrators have been reluctant to summarily dispose of issues due to the risk of being challenged for procedural irregularity, particularly for breach of the requirement that a party did not have a reasonable opportunity to state its case. However, powers of summary dismissal are increasingly considered a competitive component of an arbitral institution’s offering, as reflected by the adoption of such powers by several established arbitral institutions in their rules (such as ICSID and SIAC). In this respect, the Law Commission’s proposal to confirm expressly in the Act the availability of such powers is to be welcomed as a means to save parties time and expense on spurious issues, and will hopefully provide arbitrators greater confidence in exercising them.
Removing the right to re-hear questions of jurisdiction
One of the most interesting proposals concerns s. 67 of the Act, and involves removing the right to a full re-hearing on the question of jurisdiction where that has already been argued before and determined by the Tribunal. Rather than the English Court considering the entire issue of jurisdiction afresh (regardless of what took place in the arbitration, as is the current position), this proposal would result in challenges to jurisdictional decisions that have been fully argued before the Tribunal already being treated effectively as appeals against a first-instance decision under domestic legal proceedings. While some may consider this too extreme, it should be welcomed as it promotes both fairness (by preventing the losing party from having a second bite of the apple, where it would be able to try different arguments and sometimes even deploy new evidence) and certainty, while allowing the Court to retain an ultimate role as an appellate body where appropriate. A further, beneficial effect of this proposal would be to increase time and cost-efficiency for parties, who will no longer need to fund and endure repeated full hearings of the same jurisdictional issues at play in their disputes.
Arbitrations and confidentiality
A key area flagged for review in 2021 was the confidentiality of arbitrations, with the main issue of speculation being whether the Law Commission would impose express provisions requiring arbitrations to be confidential. Ultimately, the Law Commission appears to be leaning away from any such requirement, noting that whether such confidentiality rules should apply to arbitrations is still uncertain and is best left to the English courts to develop. The Law Commission has stated that parties seeking to keep their arbitrations confidential should ensure their arbitration clauses refer to arbitral rules which provide for schemes of confidentiality (e.g., the LCIA rules), but has not proposed explicit provisions in the Act itself. This is an interesting acknowledgment of the tension between confidentiality and transparency in arbitral proceedings, which is particularly evident in investor-state disputes. Such disputes often raise public interest issues which are usually absent from commercial arbitrations, and so the default favours transparency. The decision not to take decisive action in this context, however, might be considered a missed opportunity to clarify the position, and tackle the nuances.
The Law Commission considers that s. 44 of the Act already empowers the court to make the same interim orders against third parties in support of arbitration (e.g., to grant an interim injunction) as it does for domestic proceedings, but now proposes that this be provided for expressly in the Act. Further, the Law Commission proposes adding clarification that access to an emergency arbitrator does not prevent parties from seeking the assistance of the Court – this clarification is particularly welcome given the doubt cast on this approach by the High Court in Gerald Metals S.A. v Timis & Ors  EWHC 2327 (Ch), where it had decided that urgent interim relief form the Courts may not be available if the parties had sufficient time to obtain such relief by way of an expedited tribunal or from an emergency arbitrator.
Impartiality and disclosure
The Law Commission has proposed that recent developments in case-law on an arbitrator’s duty of disclosure should be codified, and that the Act should provide for arbitrators to have a continuing duty to disclose any circumstances that might reasonably give rise to justifiable doubts as to their impartiality. Such proposals are to be welcomed as, if followed correctly, they should reduce the risk (and associated time and costs) of challenges to arbitral awards on the ground of lack of impartiality on the part of the arbitrator. It is to be noted, however, that the Law Commission does not consider it necessary to impose a duty of independence on arbitrators, choosing to focus instead on impartiality, perhaps recognising that this could otherwise lead to future challenges over issues such as barristers from the same chambers acting as counsel and arbitrator on the same matter.
Overall, the Law Commission’s proposals are a sensible blend of light touches with key clarifications to keep the Act up to date with recent developments. The Law Commission has called for responses to its report by 15 December 2022, after which we will find out which proposals found favour with the arbitration community, and which did not.
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