The English Arbitration Act 1996 – which applies to all London-seated arbitrations – was, on coming into force on 31 January 1997, widely perceived to be "best in class", striking the right balance between the autonomy of the arbitral tribunal while preserving the role of the English court to supervise arbitrations taking place in England. The intervening quarter of a century has seen the emergence of other arbitral centres, including, notably, Singapore, with their own modern arbitration legislation and arbitral centres and institutions, etc. So, it came as no surprise when, in March 2021, the Ministry of Justice asked the Law Commission of England and Wales to determine whether any amendments to the 1996 Act were needed.
On 5 September 2023, following the publication of two interim consultation papers, the Law Commission published a final report on its review of the Arbitration Act 1996. Ultimately, the Law Commission recommended a small number of relatively focused changes to the Act, rather than wholesale root and branch reform, preferring to focus on those sections of the Act, which under the bright light of judicial and practitioner glare, were in need of revision.
While the proposed changes are not, at first blush, truly dramatic, over time a number of difficulties have arisen with the Act which needed addressing or codifying. In our view, these somewhat cautious but pragmatic proposals bring the Act into the 21st century and are set out in a persuasive and straightforward manner for the government to implement.
The key recommendations
1. The Act should include an express provision whereby arbitrators have a continuing duty to disclose any circumstances which might reasonably give rise to justifiable doubts as to their impartiality. An arbitrator should, in connection with those circumstances, be under a duty to disclose what they actually know and what they ought reasonably to know.
These recommendations arise out of the common law test formulated in Halliburton v Chubb (2020) (read more here) recognising that the duty of an arbitrator to disclose circumstances which might give rise to justifiable doubts as to their impartiality is in the public interest as it upholds the integrity of arbitration. Codification of the principle of disclosure was seen by the Law Commission as preferable to relying on an implied term in the arbitrator's contract of appointment.
Arbitrator independence and impartiality is critical to the concept of trust in the arbitral process. The Law Commission recognised that the primary virtue of the Arbitration Act is that it contains, in one place and with relative accessibility, all the governing principles of arbitration. Codifying the principle of the duty of arbitrator disclosure will serve to close a lacuna.
2. The Arbitration Act should be amended to provide that the arbitration agreement is governed by the law of the seat – and not the governing substantive law of the underlying agreement – unless the parties expressly agree otherwise.
In Enka v Chubb (2020), the Supreme Court held that the law governing the arbitration agreement is the law expressly or impliedly chosen by the parties or, in the absence of such choice, the system of law most closely connected to the arbitration agreement, which usually means the substantive law of the underlying agreement (read more here).
The Law Commission is, in effect, suggesting that the Supreme Court's decision in Enka be reversed and has recommended reform primarily because the decision in Enka was considered complex and unpredictable. Certainty, simplicity, and the preservation of party autonomy were preferred over the common law test. We agree. This amendment would bring English law into alignment with some other jurisdictions, notably Sweden (although the Swedish Arbitration Act goes further by providing that if no seat is selected, the arbitration agreement is deemed to be governed by Swedish law, which we would recommend be included in the proposed amendments to the 1996 Act).
3. The Arbitration Act should be amended to provide that, unless parties agree otherwise, an arbitral tribunal may issue an award on a summary basis.
Summary determination of claims in appropriate circumstances has been a key feature of English litigation for some time and is sometimes held up as an advantage of litigation over arbitration. The Law Commission is proposing to include a provision in the Arbitration Act broadly akin to the English court's power of summary judgment.
Summary disposal of claims is a tool which can resolve certain disputes (for example, a dispute which does not involve a substantial disagreement on the facts, such as a dispute over the proper interpretation of a contractual provision) more efficiently and cost-effectively as well as weed out weak or spurious claims and defences at an early stage in proceedings.
While certain arbitral institutions have had rules in place allowing for summary determination for some time, this recommendation will serve to expressly clarify that the measure should be available in London seated arbitration. There is much to be said for an arbitral tribunal having an express power under the Arbitration Act to weed out unmeritorious claims rather than allowing a party intent on pursuing a transparently weak claim to continue to the bitter end, with all the time and cost that brings. Whether arbitrators embrace such a change, should it come to pass, is another matter.
Arbitrators have historically been hesitant to use those powers of summary determination that do exist under certain institutional rules, partly out of a concern that a foreign court, perhaps in a jurisdiction where summary determination is not part of the legal landscape, will not enforce an award made on a summary basis. An express power under the Arbitration Act may encourage arbitrators to be less instinctively cautious in this regard.
4. The Arbitration Act should not be amended to include express provisions dealing with confidentiality.
Although confidentiality is one of the distinguishing features of arbitration, the Arbitration Act is currently silent on the question of confidentiality.
It is true to say that confidentiality as it relates to arbitration has been in a state of flux for some time. The current position is that there is a general duty on the parties to English seated arbitration to preserve confidentiality, although there are a number of exceptions to that general duty.
Those exceptions arise in a variety of ways and given the different participants to arbitration, the law of confidentiality in this area is complex and fact-sensitive. The Law Commission recognised that there was a practical benefit in allowing the common law to continue to develop this important area of arbitration practice. The recommendation not to codify confidentiality remains both sensible and pragmatic.
5. The rules of court (instead of the Arbitration Act) should be amended to provide that where an objection has already been made to the jurisdiction of the tribunal, then in any subsequent challenge to the court: (1) a party cannot make new objections or rely on new evidence that was not before the tribunal; and (2) evidence will not be reheard, save only in the interests of justice.
Section 67 provides that a party may apply to the court to challenge an arbitral award on the ground that the tribunal lacked substantive jurisdiction. Such challenges are typically by way of a de novo re-hearing of jurisdictional issues, rather than a review of the tribunal's decision.
Often, losing parties in arbitration seek to challenge the award under section 67 in order to re-run old jurisdictional arguments or run entirely new arguments they did not raise in the arbitration (but often could have done). There has for some time been a tension between the principle of an arbitral tribunal being able to rule on its own jurisdiction and the English court's capacity to overturn those decisions where an arbitral tribunal has overreached its own jurisdiction. In our view, the proposed modification of section 67 strikes just about the right balance in implementing much-needed reform which respects an arbitral tribunal's power to rule on its own jurisdiction, while allowing those rulings to be tested by the courts, but on less expansive grounds than have previously been allowed.
The Law Commission's stated aim is to maintain the attractiveness of England and Wales as a "destination" for dispute resolution and the pre-eminence of English law as a choice of law. Judged by that lofty goal, the changes to the Arbitration Act proposed by the Law Commission may appear somewhat esoteric. The proposals are sensible if perhaps evolutionary rather than revolutionary.
It is unfortunate that the report has been published so late in the parliamentary cycle. As matters stand, the proposals are no more than that and it is doubtful whether the incumbent government will set aside parliamentary time to debate the changes in advance of a general election, anticipated in 2024. If London is to maintain its position as a pre-eminent centre for arbitration, it is essential that English law keeps pace with developments in other arbitral centres. Whether the recommendations contained in this report find their way onto the statute book remains to be seen, although the inclusion of a draft Bill should make Parliament's job somewhat easier.