Fine-tuning the fundamentally sound: recommended reforms to the Arbitration Act 1996

The Report highlights the following key recommendations:

Arbitrator’s duty of disclosure

The test formulated by the Supreme Court in Halliburton v Chubb in 2020 is that arbitrators have a continuing duty to disclose any circumstances which might reasonably give rise to justifiable doubts as to their impartiality.

The Report recommends that this duty should be incorporated into the Arbitration Act, with the duty being extended to require disclosure of matters an arbitrator ought reasonably to know, in order to align with the usual standard expected of similar professionals.  The recommended amendments to the Arbitration Act do not however specify what matters might reasonably give rise to justifiable doubts or the scope of any disclosure – these will vary from case to case.

Strengthening arbitrator immunity

The Report recommends that an arbitrator would incur no liability for resignation unless the resignation is shown to be unreasonable. In applications to remove arbitrators under section 24 of the Arbitration Act, arbitrators would not be liable for costs, unless it is shown that they have acted in bad faith.

Arbitrator immunity is important as it supports (i) robust and impartial decisions without fear that a party will sue an arbitrator and (ii) the finality of the dispute resolution process by preventing a disappointed party from bringing further proceedings against an arbitrator.

Summary disposal

The Report recommends the introduction of summary disposal on application of a party (rather than at an arbitrator’s instigation) of claims and issues that lack merit and have no real prospect of success.  This has the potential to resolve some disputes more efficiently, however arbitrators will need to ensure that parties have had a reasonable opportunity to put their case to limit section 68 challenges.

Challenging awards under section 67

Section 67 of the Arbitration Act entitles a party to challenge an arbitral award on the ground that it was made by an arbitral tribunal lacking substantive jurisdiction.  The Report seeks to introduce a new section 67 procedure to prevent repetition and delay.

The Report recommends a departure from the approach in Dallah v Pakistan such that the court should not entertain any new grounds of objection, or any new evidence, unless it could not with reasonable diligence have been put before the tribunal; and, that evidence should not be reheard, save exceptionally in the interests of justice.

Governing law of an arbitration agreement

The Report recommends a new rule be added to the Arbitration Act to provide that the law which governs the arbitration agreement is:

(i) the law that the parties expressly agree governs it; or

(ii) where there was no such agreement, the law of the seat of the arbitration in question.

A default rule in place of the complicated test prescribed by the Supreme Court in Enka v Chubb will provide simplicity and certainty to the parties.

Court powers in support of arbitral proceedings and emergency arbitrators

Section 44 provides that the court has power to make orders in support of arbitral proceedings.  The Report proposes to confirm expressly that courts can make such orders against third parties.

The Report also proposes that emergency arbitrators should be given the same routes to enforce their orders as other arbitrators, and that they should be able to grant permission for applications to the courts.

In addition, the following minor corrections have been recommended:

• making appeals available from an application to stay legal proceedings;

• simplifying preliminary applications to court on jurisdiction and points of law;

• clarifying time limits for challenging awards; and

• repealing unused provisions on domestic arbitration agreements.

Comment

The Law Commission’s recommendations are intended to fine-tune, rather than “modernise”, the UK arbitration law. Although from the above it might seem like quite a lot of changes, the recommendations are relatively minimal in scope as, on the whole, the Law Commission concluded that the Arbitration Act remains fundamentally sound (which accords with our previously expressed view).

The recommendations are not set in stone and the proposed amendments to the Arbitration Act (included as a draft bill with its Report) will now make their way through Parliament. It is expected, if passed, they will likely be in force later this year or early 2024.

Our Disputes team has considerable experience in international disputes. This includes complex, multi-jurisdictional disputes involving concurrent proceedings in foreign jurisdictions; disputes exceeding US$100m; and the enforcement of judgments and arbitral awards, including asset tracing. Our team has acted for parties in ad hoc arbitration and proceedings under the auspices of major arbitral institutions, including the ICC, LCIA, SIAC and UNCITRAL, as well as specialist shipping and trade procedures such as LMAA, GAFTA, FOSFA and SCMA.