Long-awaited Law Commission report suggests only minor tweaks to ‘gold standard’ of arbitration

Review finds Arbitration Act still fit for purpose, but could benefit from minor improvements, write Faegre Drinker lawyers Robert Campbell, Christopher Jefferies and Emily Evans

The Law Commission says root and branch reform of Arbitration Act not needed Shutterstock

The Law Commission of England and Wales has completed its long-awaited review of the Arbitration Act 1996. On 6 September it published its final report that set out its recommendations on how the regime governing arbitration in England and Wales should function.

As foreshadowed in the first and second consultation papers released by the Law Commission, the consensus in the report was “the Act works well, and […] root and branch reform is not needed or wanted”. This sentiment reflects the general feeling among practitioners and others that the 27-year-old act is still more than fit for purpose and represents a gold standard that other jurisdictions aspire to.

There are, however, a few initiatives and several “minor corrections” that were previously detailed in the consultation papers and recommended by the Law Commission. They are as follows:

  • Arbitrator independence and disclosure: The report suggests that the rule in Halliburton v Chubb [2020] UKSC 48 should be codified into law. This rule requires arbitrators who know (or ought reasonably to know) of circumstances that would or might give rise to doubts about their impartiality to disclose this fact. No recommendation was made on any statutory duty of independence of the arbitrators.
  • Summary procedure: The report recommends a new summary procedure to decide issues that have no real prospect of success and no other compelling reason to continue to a full hearing. Subject to the agreement of the parties, the arbitral tribunal may issue an award on a summary basis following the application of a party, rather than at an arbitrator’s instigation. 
  • Governing law of the arbitration agreement: The report suggests a new default rule, where the parties can expressly choose the law of the arbitration agreement, but absent that choice, the law governing that agreement will be the law of the seat of arbitration (therefore simplifying the current common law rules as set out in Enka v Chubb [2020] UKSC 38). This is because if the main contract is governed by foreign law, it may not be as supportive of arbitration as English and Welsh law is, which may preclude arbitration proceedings from taking place at all.  
  • Arbitrator immunity: The report suggests that arbitrator immunity should be extended, so an arbitrator will have no liability if they resign (unless the resignation was unreasonable). Parties can still revoke the authority of an arbitrator, or apply to court for their removal. Arbitrators will also have no liability for costs if they are removed by way of an application.
  • Jurisdiction: Section 67 of the Arbitration Act currently allows parties to challenge jurisdiction of the arbitral panel. These applications are seen as somewhat controversial, and the consultation papers spent a great deal of time discussing the proposed amendments. Where the Law Commission landed was that where an objection has been made that the tribunal lacks jurisdiction, and the tribunal has so ruled, then any further appeal would not get a full rehearing. The proposals say that the tribunal cannot consider any new grounds or evidence unless the grounds conceivably could not have been advanced at the first hearing, and that evidence should not be reheard unless it is in the interests of justice to do so.
  • Other: There were various changes to section 44 of the Arbitration Act (giving third parties full rights of appeal in respect of any section 44 order), and new powers were given to emergency arbitrators.

There are some areas that the Law Commission consulted on but decided not to change. Perhaps most important of these is confidentiality. They decided that there should not be a default rule in favour of confidentiality, as the parties can already agree to make their arbitration confidential and there is no “one size fits all” solution to confidentiality. They also noted a trend towards transparency in arbitration.

Section 69 of the Arbitration Act allows for a party to appeal an arbitral award on a point of law. The Law Commission thought that this was a “defensible compromise” between promoting finality of awards and correcting blatant errors of law.

Finally, on discrimination in the selection of arbitrators, the Law Commission stated that although the intentions would be in the right place to introduce a prohibition on discrimination for choosing arbitrators, it could overshadow other antidiscrimination laws (such as the Equality Act 2010), and also offer further routes for challenging awards or other litigation, thus leading to greater uncertainty and effectiveness.

What’s next?

The report now sits with the Ministry of Justice, and it is up to them to try and bring any new legislation through parliament. They must get the bill through parliament before the next general election (which must happen before January 2025) or these proposals may get lost in a flurry of new priorities by any future government.

Robert Campbell is a partner at Faegre Drinker Biddle & Reath. Christopher Jefferies is an associate and Emily Evans is a trainee solicitor. All three are based in London.

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