Review of the Arbitration Act 1996 – Law Society response
Arbitration is a form of dispute resolution where a third party is appointed to resolve the dispute. Instead of going to court, the arbitrator may issue an award.
The act works as a framework for arbitration in England, Wales and Northern Ireland. It has not been revised since 1996, and needs updating to cover developments such as emergency arbitration.
The UK government asked the Law Commission to review the act to:
- find any potential amendments
- make sure it is fit for purpose
- make sure it continues to promote the UK as a leading destination for commercial arbitrations
The first consultation took place between September and December 2022.
In March 2023, the Law Commission published a second consultation on its provisional proposals, revisiting specific areas including:
- the proper law of the arbitration agreement
- challenges to awards under section 67 on the basis that the tribunal lacked jurisdiction; and
- discrimination in the context of arbitration
Our response was led by members of the International Committee, who carefully considered the revised proposals, especially the more controversial issue of discrimination in the context of arbitration.
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Provisional proposals and conclusions from the Law Commission
Confidentiality
The act should not seek to codify the law on confidentiality.
Not all types of arbitration should be confidential by default – in some areas the default is transparency.
Independence and duty to disclose
The act should not impose a duty of independence – section 33 of the act already imposes a duty of impartiality.
Case law should be codified.
The act should be amended to provide that the arbitrators have a continuing duty to disclose any circumstances which might reasonably give rise to justifiable doubts about impartiality.
Immunity
Section 29 ensures the arbitrator is not liable for anything done in the purported discharge of their functions unless done in bad faith.
Arbitrators become liable when they resign.
Immunity should be strengthened. Case law which holds them potentially liable for the costs of court applications should be reversed.
Summary procedure
The act should provide explicitly that an arbitral tribunal may adopt a summary procedure to dispose of a claim or defence.
Parties should be able to agree to opt out.
Jurisdictional challenges
Section 44 gives the court power to make orders in support of arbitral proceedings.
Where orders are made against third parties, those third parties should have the usual full right of appeal rather than the restricted right of appeal.
Section 44(2)(a) should be amended to confirm that it relates to the taking of the evidence of witnesses by deposition only.
Where a party has participated in arbitral proceedings and has objected to the jurisdiction of the arbitral tribunal which has rule on its jurisdiction an award – any subsequent challenge under section 67 should be by way of an appeal and not a rehearing.
Section 67 should be amended to include the further remedy that the court may declare the award to be of no effect and with similar remedies available under section 68.
Arbitral tribunals should be able to make an award of costs in consequence of an award ruling that it has no substantive jurisdiction.
Emergency arbitrators
The act could empower the court to order compliance with a peremptory order of an emergency arbitrator mirroring the provision currently only available to a fully constituted arbitral tribunal.
Provisions in the act should not apply generally to emergency arbitrators.
The act should not include provisions for the court to administer a scheme of emergency arbitrators.
Our view
Confidentiality
We agree confidentiality in arbitration is best addressed by the courts as:
- there are difficulties drafting suitable provisions in a statute to cover the potential requirements
- there is a negative perception of confidentiality agreements
- it is preferable that the parties consider what is specifically needed for their arbitration
Independence and duty to disclose
We disagree with the Law Commission's view on independence.
The requirement for both independence and impartiality in arbitration is now commonly accepted across the world.
English law may be perceived as an outlier in only referring to impartiality.
Duty to disclose
Arbitrators should have a continuing duty to disclose any circumstances which might reasonably give rise to justifiable doubts as to their impartiality.
We agree that an express duty would provide useful clarification in this area.
The question of the state of knowledge required of an arbitrators' duty of disclosure is best left to the courts.
A duty to make reasonable inquiries would be consistent with other duties required of professionals.
Our members would be used to such a duty required of solicitors.
Discrimination
We believe that legislating against discrimination in arbitration appointments could present a strong message about improving the quality of the appointments process to ensure that parties have access to the broadest possible pool of talent.
One of the strategic objectives of our 2022-2025 corporate strategy is that “We will protect the justice system and make sure it applies to everyone equally”.
We believe that not only is justice (including equality, diversity and inclusion) and the rule of law a basic underpinning of our own democracy, but it is also at the heart of the UK’s international reputation and reach and therefore of huge value economically and strategically.
Immunity
Arbitrators should not incur liability for resignation.
Liability may:
- increase further litigation
- deter candidates
- lead to an increase in insurance premiums
The majority of resignations are for good reason, such as ill health.
Summary procedure
Arbitrators already have powers to adopt summary procedures in an individual case to suit the particular circumstances. It could be left to arbitrators to decide.
There is probably an advantage for the act to refer to summary procedures in the manner suggested by the Law Commission.
Emergency arbitrators
Emergency arbitration has become a significant part of international arbitration, it is less important in domestic arbitration.
Any amendment to the act should be via a carefully worded and tailored provision.
We are also wary of unintended consequences arising from a general application of the act to emergency arbitration.
The act should not include provisions for the court to administer a scheme of emergency arbitrators. This would undermine concept of emergency arbitration as separate from the courts.
Next steps
The second consultation closed on 22 May 2023.
The Law Commission will analyse the responses before reporting back to the government.