On 18 July 2024, the Arbitration Bill was introduced in the House of Lords. The aim of the Bill is to update the current arbitral framework, the Arbitration Act 1996 (the ‘Act’), to enable more efficient dispute resolution, attract international legal business, and promote UK economic growth. The draft Bill follows recommendations from the Law Commission, following two public consultations involving 118 arbitration practitioners, including the ICC International Court of Arbitration (‘ICC’) and ICC United Kingdom, lending their diverse experiences and knowledge to the Law Commission’s endeavours.
Why is the Arbitration Bill important to international commerce?
One advantage of international arbitration is that parties can choose the seat of arbitration and, thus, the arbitral framework within which it will be conducted. The Act applies to arbitrations with their seat in England, Wales and Northern Ireland, regardless of whether the contracting parties may be based in the UK or internationally. London has always been a popular choice for international dispute resolution and for many years has topped (or jointly topped) the list of preferred arbitration seats, but the Act is now 25 years old and is considered to be in need of modernisation.
What changes would the Bill introduce?
The Bill consists of 15 clauses. The most significant changes include:
Law applicable to the arbitration agreement
Perhaps the most controversial amendment, clause 1 clarifies that in commercial arbitrations the law applicable to the arbitration agreement is (1) the law the parties expressly choose to apply, or (2) absent an agreement, the law of the seat of the arbitration. This replaces the common law position established in Enka v Chubb (Enka Insaat Ve Sanayi A.S. v OOO Insurance Company Chubb), which provided that in the absence of party agreement, the law would be the law which governs the contract, unless, for example, that law would invalidate the agreement to arbitrate (in which case you would look to the most closely connected law).
This amendment brings the UK into alignment with other pro-arbitration jurisdictions, such as France. The need for a standardised approach internationally was highlighted in the conflicting decisions reached in the series of Kabab-Ji cases decided by the UK Supreme Court and French Cour de Cassation in 2021 and 2021, respectively (Kabab-Ji SAL v Kout Food Group UKSC 48).
No longer will English courts have the possibility of applying English law, absent an explicit choice in the arbitration agreement or an English seat. Commercial parties who wish to have English law applied to both the contract and arbitration agreement would therefore be wise to explicitly state that the arbitration agreement is also governed by English law. This is all the more important when agreeing to institutional rules, where the place may be fixed by the institution in the absence of party agreement or explicit reference in the arbitration agreement.
Summary disposal
Clause 7 gives arbitrators an express power to make an award on a summary judgment basis, applying the same threshold applied in the English court for summary judgments: whether a claim or defence has no real prospect of succeeding, as commonly cited from Easyair v Opal (Easyair v Opal telecom Ltd EWHC 33). Institutional rules may still play a role in defining the applicable standards in such circumstances, but many institutions already allow for this to be done procedurally, for example, under the ICC’s provision for expeditious determination of manifestly unmeritorious claims or defences.
Emergency arbitrators
Many arbitral institutions, including the ICC, provide the possibility of appointing an emergency arbitrator to issue urgent, interim measures pending the constitution of the arbitral tribunal. Clause 8 aligns the consequences for failing to comply with an order made by an emergency arbitrator with those of a normal arbitrator, by specifying, for example, that emergency arbitrators may make peremptory orders. Thus, parties using emergency arbitration would have better access to court enforcement of these orders following the implementation of the Bill.
Duty of disclosure
The Act already imposes a duty of impartiality. Clause 2 codifies the common law position established in Halliburton v Chubb (Halliburton Company v Chubb Bermuda Insurance Ltd) and inserts a mandatory provision that arbitrators have an ongoing duty of disclosure. The scope of the disclosure obligation is any circumstance that might reasonably give rise to justifiable doubts as to the individual’s impartiality in relation to the proceedings, or potential proceedings, and extends to circumstances according to which the arbitrator is aware and according to which they ought to reasonably be aware.
Court support
Clause 9 clarifies existing case law to confirm that the courts can make orders against third parties in support of arbitration. This could include third parties holding relevant evidence, or banks holding funds. Whilst parties to the arbitration require leave of the court to appeal under section 44, third parties do not and, therefore, would retain the same rights of appeal as they would in court proceedings.
Challenge to jurisdiction awards
Clause 11 would amend section 67 to provide that, when a challenge to an arbitral award is made to the court on the ground of substantive jurisdiction, there should be no new grounds of objection and no new evidence before the court, unless it was not reasonably possible to put these before the tribunal, unless necessary in the interests of justice. Further, evidence should not be reheard by the court. This provision would reverse the Supreme Court decision in Dallah v Pakistan in cases where a party has participated in the arbitration and the arbitral tribunal ruled on the objection, to avoid full rehearings, thus preventing further time being spent and costs.
Other changes
Other changes include strengthening arbitrator immunity against liability for resignations and applications for removal; making appeals available from an application to stay legal proceedings; simplifying preliminary applications to the court on questions of jurisdiction and points of law; clarifying time limits for challenging awards; and repealing unused provisions on domestic arbitration agreements.
The Law Commission had considered other potential amendments but ultimately did not recommend changes, including relating to discrimination provisions, the use of third-party funding, and anti-corruption provisions, following the criticism from Mr Justice Robin Knowles in Nigeria v P&ID. Whilst not included in the Bill, these remain important topics of conversation and corruption formed part of the programme at the ICC UK Annual Arbitration & ADR Conference that ran from 23-24 October 2024.
What’s next?
The Bill had its third reading in the House of Lords on 6 November 2024, concluding the House of Lords Report stage. It will now go to the House of Commons and final stages, and is expected to receive Royal Assent and become law in 2025.
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