The Law Commission opens consultation stage for the review of the Arbitration Act 1996

On 22 September 2022, The Law Commission published their Consultation Paper on the Arbitration Act 1996 (the Act). The Act has provides the framework for the growth of London as the "world's most popular seat" for handling commercial arbitrations, according to the Law Commission. Arbitration in London has increased by at least 26% since 2016 and contributes an estimated £2.5 billion to the UK economy. However, as summarised by Lord Christopher Bellamy KC "after a quarter century of success, it is right […] to ensure that the legislation remains relevant in the 21st century".

Key areas for reform

The Consultation Paper has identified eight key areas for reform of the Act. These are set out below, along with a summary of the Law Commission’s provisional proposals in relation to the issue, which are subject to the outcome of the formal consultation process.

1. Confidentiality - The Law Commission’s provisional conclusion is that the Act should not seek to codify the law on confidentiality and the area should be left to develop organically by the Courts through case law. The Commission are not currently persuaded that all types of arbitration should be confidential by default and note that, even if the Act did apply such a default rule, it would be subject to mandatory exceptions and caveats. The fact that the existence and extent of such exceptions is still being developed in case law means that, in the Commission’s provisional review, there would be a risk in codifying law which is still uncertain.


2. Independence - The Law Commission have provisionally concluded not to impose an explicit duty of independence on arbitrators. There is already a duty of impartiality imposed on arbitrators under s33 of the Act – as such, the Commission is of the view that, provided that the arbitrator is impartial, it does not matter if they are not perfectly independent, provided their connections are disclosed to the parties. It is then for the parties, with the benefit of this information, to decide for themselves if they are comfortable with the appointment of the arbitrator or not.
   
   Here, the Commission notes that it is ‘rarely possible’ in practice for arbitrators to be free of any connection to the parties in certain industries. Indeed, the fact that a particular arbitrator is immersed in the field is the precise reason that the parties may decide to appoint, with the key consideration being that, despite those connections, the arbitrator can remain impartial.


3. Discrimination – A provisional proposal has been suggested by the Commission that will allow a party to appoint an arbitrator free of any discriminatory restrictions that may have been written into the arbitration agreement (such restrictions being rendered unenforceable). This would prevent a party objecting to the appointment of an arbitrator based on their protected characteristics (as identified under s.4 of the Equality Act 2010).


4. Immunity of arbitrators – The immunity of arbitrators has been identified as an area to strengthen, particularly where it comes to holding arbitrators potentially liable for the costs of court applications; a trend that has emerged from case law which the Commission provisionally considers should now be reversed.


5. Summary disposal of issues which lack merit – A new provisional proposal has been made to provide explicitly that an arbitral tribunal may follow a summary procedure to dispose of a claim or defence which lacks merit, although this will be non-mandatory and can be opted-out from.


6. Interim measures ordered by the court in support of arbitral proceedings – Two new proposals have been put forward for consultation in relation to the scope of s.44 of the Act – regarding first whether the court can make orders in relation to third parties and, second, the availability of section 44 in the context of the appointment of an emergency arbitrator.


7. Jurisdictional challenges against arbitral awards – The Commission has proposed here that, where a party has participated in arbitration and has objected to the jurisdiction of that tribunal, which has then made an award, any subsequent challenge under s67 of the Act should be by way of appeal rather than a rehearing.


8. Appeals on a point of law - There have long been conflicting views were it comes to the finality of arbitral awards. S69 of the Act currently allows a party the to appeal to the court on limited questions of law. Some argue that s.69 should be repealed to add finality to the arbitral award, whilst others feel it is right to correct errors of law if they occur. The Commission does not currently propose to change the position due to the small frequency in which s.69 appeals are made in any event, and due to the ability of the parties to opt-in or opt-out of the provision.

The consultation is inviting responses from 22 September 2022 until 15 December 2022 and we will be keeping a close eye on the developments as they arise, for this key piece of legislation in the arbitration sphere.

By Christopher Wenn and Eleanor Parsons