Law Commission publishes consultation paper on its review of the Arbitration Act 1996

Introduction

On 30 November 2021, the Law Commission announced a review of the Arbitration Act 1996 (the “Act”) with its work to commence in early 2022.  In its announcement, the Law Commission stated that the 25^th anniversary of the Act is a good opportunity to review and “ensure it remains up to date in all respects, particularly as other jurisdictions have enacted more recent reforms.”  A further objective is to “maintain the attractiveness of England and Wales as a ‘destination’ for dispute resolution and the pre-eminence of English Law as a choice of law.”

On 22 September 2022, the Law Commission published a consultation paper containing its provisional law reform proposals “to ensure that the Arbitration Act 1996 remains state of the art.”  The Law Commission has consulted with stakeholders and researched the Act concluding provisionally that the Act “works very well, with major reform neither needed nor wanted.” 

In its consultation paper, the Law Commission has outlined provisional proposals on discrete topics which are subject to consultation on whether such reform might be merits to ensure that the Act “remains at the cutting edge.

 

Potential reforms

The Law Commission has provided its views on the following topics and potential reform in its consultation paper. 

 

Confidentiality

The Act does not contain provisions dealing with confidentiality and the Law Commission’s provisional conclusion is that the Act should not seek to codify the law of confidentiality.  The Law Commission’s present view is that not all types of arbitration should by default be confidential and indeed in some types of arbitration, e.g. arbitrations involving investor claims against states, the default position is transparency rather than confidentiality. Its view is that the law of confidentiality can be developed by the courts on a case by case basis.

 

Independence and disclosure

The Act does not place an obligation of independence on arbitrators and the Law Commission’s provisional conclusion is that the Act should not impose such an obligation.  The Law Commission recognised that there will often be instances where an arbitrator will not be free of any connections with the parties of the subject matter of the dispute including where the arbitrator is well known in a particular field.  The Law Commission’s view is that impartiality is of greater importance and its provisional proposal.

 

Discrimination

Noting that discrimination is not acceptable and that equality is necessary, the Law Commission has provisionally proposed that: (1) the arbitrator’s appointment should not be susceptible to challenge of the basis of the arbitrator’s protected characteristics; and (2) any agreement between the parties in relation to the arbitrator’s protected characteristics should be unenforceable unless in the context of that arbitration, requiring the arbitrator to have that protected characteristic is a proportionate means of achieving a legitimate aim (with “protected characteristics” being those identified in s4 of the Equality Act 2010).

 

Immunity of Arbitrators

The Law Commission expressed concern around an arbitrator’s potential liability: (1) when they resign (an application to court for immunity involves time and cost); and (2) in relation to an application to court impugning an arbitrator in which the arbitrator might be liable for costs even if the application is unsuccessful.  The Law Commission has provisionally proposed that the immunity of arbitrators should be strengthened.

 

Summary disposal

The Law Commission expressed the view that section 33(1)(b) of the Act probably gives the arbitrators the power to adopt a summary procedure to determine issue which are without any merit, however there is no clear express power of summary disposal. It suggested that “fairness can be ensured with a summary procedure by a combination of procedural due process and a suitable threshold for disposing of issues”.  It has provisionally proposed that the Act should expressly provide that a tribunal may adopt a summary procedure to dispose of a claim or a defence with the provision to be non-mandatory allowing the parties to opt out of it in their arbitration agreement.  The Law Commission has asked consultees for views on the threshold to be applied.

 

Court orders in support of arbitral proceedings

Considering the court’s power under section 44 of the Act to make orders in support of arbitral proceedings, the Law Commission considered the exercise of this power: (1) to make orders against third parties; and (2) where the parties have already agreed on a procedure for an emergency arbitrator.  Its view is that section 44 of the Act allows a tribunal to make orders against third parties in appropriate cases and it has asked consultees whether this should be made explicit in the Act. The Law Commission has also provisionally proposed that third parties should have a full right of appeal and that section 44(2)(a) should be amended to provide that it relates to the taking of evidence by deposition only.  It has also given the view that parties may seek the assistance of the court for the appointment of an emergency arbitrator even if they have already agreed a regime for an emergency arbitrator. 

 

Challenging the jurisdiction of the tribunal

The Law Commission has provisionally proposed that where a party has taken part in arbitral proceedings and has raised objection to the jurisdiction of the tribunal and where the tribunal has ruled on its own jurisdiction, any challenge under section 67 of the Act should be by way of appeal rather than rehearing.  It has further provisionally proposed that section 67 of the Act be amended to allow the court to declare an award to be of no effect and that a tribunal may make an award of costs in relation to a decision that it lacks substantive jurisdiction.

 

Appeals on a point of law

The Law Commission has not proposed any change to section 69 allowing a party to appeal a tribunal’s award on a point of law.

The Law Commission has invited responses to the consultation by 15 December 2022.