English Arbitration Act: Law Commission's progressive amendments
The Law Commission proposes vital changes to the English Arbitration Act of 1996, bolstering London's stance in international arbitration
The Law Commission recently published its final report on the English Arbitration Act of 1996 (the Arbitration Act), accompanied by a draft bill. The final report proposes several amendments to the Arbitration Act. This is a welcomed initiative to support London’s position as the main hub for international commercial arbitration considering significant competition from other jurisdictions, such as Singapore.
On 1 December 2020, for instance, amendments to the Singapore International Arbitration Act came into force with the aim to strengthen Singapore’s legislative framework for international arbitrations. In the same vein, major arbitral institutions have also recognised the need to modernise their arbitration rules in recent years, such as the LCIA (2020), ICC (2021), ICSID (2022), and SCC (2023).
Here are some of the key revisions which the Law Commission has proposed:
Codification of an arbitrator’s duty of disclosure.
The Law Commission proposes to make it clear that arbitrators have an ongoing duty to disclose any circumstances that might reasonably give rise to a justifiable doubt as to their impartiality. The proposed legislative provision, however, does not prescribe what needs to be disclosed. The Law Commission has simply recommended that the duty of disclosure should be based on what the arbitrator ought reasonably to know as opposed to their actual knowledge. This continuing duty of disclosure was clarified by the UK Supreme Court in Halliburton v Chubb (2018), where it was held that arbitrators have a duty to disclose any circumstances which might reasonably give rise to justifiable doubts as to their impartiality.
The proposed codification of the duty of disclosure strikes a balance between transparency and accepting that the international arbitration community remains a close-knit (albeit international) community. An arbitrator’s connection to one of the parties is often inevitable (especially in certain industries and areas of expertise) and, therefore, what is regarded as important is the openness and transparency about such connections, to enable users to assess the effect of such connections on impartiality. The Law Commission has also clarified that failure to make a disclosure can give rise to justifiable doubts as to an arbitrator’s impartiality and leave them open to removal under section 24 of the Arbitration Act.
Introduction of a power of summary disposal
Among the Law Commission’s proposed reforms, there is a call for an express summary disposal based on the threshold applied by English courts, ie, where the claim has ‘no real prospect of success’ and where there is ‘no other compelling reason’ for it to continue to a full hearing. As such, summary disposal allows arbitrators to dispose of any issue or claim that lacks merit. This seems to be similar to the “manifestly without merit” test set forth in Article 22(viii) of the LCIA Rules."
There is, therefore, a question as to whether it would have been more appropriate to frame the test in such terms, as this seems to be the test adopted in arbitration and would perhaps be more palatable and attractive for civil lawyers less familiar with English law/common law.
Section 44 of the Arbitration Act allows the courts to make orders in support of arbitral proceedings (eg, interim injunctions). There has been some confusion as to whether such orders can be made against third parties. The Law Commission has proposed that the Arbitration Act should confirm that court orders under Section 44 can be made against third parties.
Challenges under Section 67
Section 67 of the Arbitration Act enables the parties to challenge an arbitral tribunal’s ruling on its own jurisdiction in a full rehearing. The Commission proposes that any challenge under Section 67 should be by way of an appeal rather than a rehearing. This would limit the review of the tribunal’s ruling, eg, the losing party will not be able to raise new evidence or new arguments before the courts that were not raised before the tribunal. This has been praised by many as a positive approach in terms of reducing costs and delays associated with a full rehearing.
Interestingly, the Law Commission has abandoned its previous recommendation that the Arbitration Act should prohibit discrimination in arbitrator appointments. For example, at present, nothing prevents an arbitration clause stipulating that the arbitrator must be a man or must follow a certain religion.
The proposal was to prohibit arbitral appointments on the basis of, and to render unenforceable arbitration agreements requiring, an arbitrator’s protected characteristic (which is a term defined under the Equality Act 2010 and includes age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation).
The exception would have been if the arbitrator having that protected characteristic was a proportionate means of achieving a legitimate aim. However, many consultees expressed concerns with this proposal, suggesting that terms in an arbitral agreement which require discriminatory appointment are rare and that such prohibition would not move the needle on diversity. Consultees also pointed out that the requirement of a neutral nationality could be seen as a discriminatory appointment term, but it is accepted as a valid term by the arbitration community. As such, once the Law Commission started investigating exceptions to a potential non-discrimination rule, it realised how difficult it is to legislate in the area.
These proposed reforms highlight the need to keep up with a constantly shifting legislative environment. England is taking charge by demonstrating its ability to manoeuvre a complex international arbitral field and become an accommodating jurisdiction for more nuanced cases. However, the decision to abandon the recommendation for prohibiting discrimination in arbitrator appointments does in fact suggest that further reforms may remain difficult to implement and navigate.