Arbitration Act changes: draft legislation published

The Law Commission of England & Wales has published its final recommendations for changes to the Arbitration Act 1996 (the Act), along with draft legislation.

The final report follows a second consultation paper setting out some more developed ideas after the response to first consultation paper.

Changes recommended

The Commission has recommended a number of significant changes to the Act, the most important of which are summarised below.

Summary disposal

The Commission recommends that the Act be amended to allow tribunals, subject to the parties' agreement, to issue an award on a summary basis. This will mirror the ability of the courts to dispose of meritless claims or defences without incurring the time and expense of a full trial. The threshold chosen by the Commission, of "no real prospect of success", mirrors the well-established test in English court proceedings. We expect many parties will seek to exclude any such determination of their claims or defences in their arbitration agreements.

Court support

The Commission proposes that the Act be amended to make clear that the courts can make orders in support of arbitration that include orders against third parties. Most consider that section 44 of the Act already contains this power, but clarification can only be welcome. It further recommends that the courts should be able to make orders for compliance with orders made by emergency arbitrators. This would give real teeth to the emergency arbitrator provisions of many institutional rules, which are currently often excluded by parties, so as to ensure they can apply directly to court for injunctive relief that can bind third parties.

Law of the arbitration agreement

Following the Supreme Court decision in Enka v Chubb, many respondents to the consultations indicated that the question of the law of the arbitration agreement would be better addressed in the Act. Under the current law, where no law of the arbitration agreement is specified, it is likely that the law of the main contract will govern the arbitration agreement, even if the seat is in England & Wales. There is logic in this, in that the whole contract is governed by one law, but it complicates the application of the Act to an arbitration seated in England & Wales. In its second paper, the Commission has stuck with its proposal that, where the parties do not specify the governing law of the arbitration agreement, it should be the law of the seat.

Other changes

The Commission has recommended a number of other changes to the Act.  These include:

1. The codification of arbitrators' continuing duty to disclose anything that might reasonably give rise to doubts as to their impartiality, as set out in the Supreme Court's 2020 decision in Halliburton v Chubb.

2. The extension of arbitrators' immunity under section 29 of the Act to cover circumstances in which an arbitrator has reasonably resigned and those in which a party applies to the court to remove an arbitrator.

3. The clarification of procedural rules regarding jurisdiction challenges under section 67 of the Act to provide that such challenges should take the form of appeals from the decision of the tribunal, rather than completely fresh hearings of the issue.

Changes not recommended

The Commission considered various other possible amendments which it did not ultimately recommend.  Perhaps most significantly, the Commission decided against creating a statutory presumption of confidentiality for arbitrations seated in England & Wales. Its view was that this was unnecessary given that the parties can opt to make their arbitration confidential and that flexibility is key to the attraction of arbitration. The issue of arbitral confidentiality will therefore be left to the common law.

The Commission also decided against recommending a proposal to make discriminatory provisions in arbitration agreements unenforceable on the basis that few arbitration agreements contain discriminatory provisions and that there is too much scope for parties to use such a requirement to delay or obstruct an arbitration. The Commission has also not adopted proposals to adopt a different approach to appealing points of law under section 69 of the Act.

Next steps

The Government has pledged to respond promptly to the report and is expected to do so as part of its drive to cement the UK's position as a global disputes hub.