How the UK plans to remain a world leader in international arbitration
Law Commission Consultation Paper on the Arbitration Act 1996
Arbitration is, and remains, a key alternative dispute resolution process to court proceedings. Industry estimates suggest that international arbitration has grown by approximately 26% between 2016 and 20201, and the Chartered Institute of Arbitrators has more than 17,000 members across 149 countries.
The UK is typically seen as a world leader for international arbitration, with London being the world’s most popular seat. That reputation very much rests upon the Arbitration Act 1996 (the “Act”), which sets out the framework for arbitration in England, Wales and Northern Ireland.
Despite the Act being widely regarded as working very well, on 22 September 2022 (some 25 years since the Act came into force), the UK Law Commission (the “Commission”) has published a Consultation Paper which, as discussed below, contains a number of provisional proposals that are focused on maintaining the effectiveness and efficiency of the arbitral process rather than substantially changing it or the duties of parties and arbitrators alike.
Should the Act expressly prohibit objections to an Arbitrator’s appointment based on “protected characteristics”?
Yes. As the Consultation Paper points out, arbitral appointments are far from diverse. For example, women are three times less likely to be appointed as arbitrators than men2. As a means of addressing the disparity within the industry, and to move with the times, the Commission has proposed that:
- the appointment of an arbitrator cannot be challenged based on an arbitrator's "protected characteristics", which are defined by section 4 of the Equality Act 2010 as age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation; and
- any agreement between the parties in relation to the arbitrator's protected characteristics would be unenforceable.
The exception to the above is where the requirement for an arbitrator to have a particular protected characteristic is a proportionate means of achieving a legitimate aim. For example, a requirement for an arbitrator to have a different nationality from the parties.
Immunity of arbitrators
Should an arbitrator’s immunity to legal liability be strengthened?
Yes. The Act currently states that an arbitrator is not liable for anything done in the discharge of their functions unless done in bad faith. This is subject to two exceptions: (i) where an arbitrator potentially incurs liability when he or she resigns; (ii) when an arbitral party makes an application to the court which accuses an arbitrator of bad faith.
The Commission has proposed that:
- the immunity of arbitrators is strengthened, as an arbitrator’s immunity is considered vital in supporting the finality of the dispute resolution process and preventing parties who are disappointed by the conduct or outcome of arbitral proceedings from pursuing further satellite litigation against the arbitrator; and
- that case law, which holds an arbitrator potentially liable for the costs of court applications, should be reversed. Consultees have also been asked to consider whether arbitrators should incur liability for resignation at all, or whether any liability should be confined to circumstances where their resignation is found to be unreasonable.
Summary disposal of issues which lack merit
Should the Act expressly include a summary judgment procedure to allow arbitrators to dispose of meritless issues?
Yes. Currently, the Act contains no express provision that allows the use of summary procedures during an arbitration. However, the Act does give a tribunal the power to decide all procedural and evidential matters while requiring that it adopt procedures which avoid unnecessary delay and expense3.
Arguably, this gives tribunals the option to adopt a summary procedure when faced with a meritless claim or issue. However, arbitrators are seemingly reluctant to do so given their express duty under the Act to act fairly and to give each party a reasonable opportunity to put their case4. Understandably, a concern for arbitrators is that any imposed summary procedure could be challenged in court.
In answer to this dilemma, the Commission has:
- provisionally proposed that the Act should expressly allow the use of summary procedures to dispose of a claim or defence, subject to any agreement between the parties to opt out of those procedures; and
- asked consultees to comment on the threshold for invoking a summary procedure. i.e., should it be where the claim is “manifestly without merit" as required in some arbitral rules, or where the claim has "no real prospect of success", this being the well-established threshold of the court.
Can the court make orders against third parties who are not party to arbitral proceedings?
The Act currently gives courts the power to make certain interim orders in support of arbitral proceedings5. However, the Commission has asked consultees to comment on whether:
- the Act should expressly allow courts to make interim orders against third parties who are not parties to the arbitral proceedings. A common example would be an order for disclosure; and
- whether the Act should be amended to strengthen compliance with emergency arbitrator orders by clarifying the powers of the courts to make orders where an emergency arbitrator has been appointed.
Challenging the Tribunal’s jurisdiction
Should the procedure for challenging a Tribunal’s jurisdiction be amended from a full rehearing to an appellate review?
The Commission has proposed limited amendments to the procedure for challenging the jurisdiction of arbitral tribunals before the courts. This includes:
- a proposal that challenges are heard by way of an appeal instead of a full rehearing as is currently permitted under the Act; and
- that an arbitrator may make an award of costs in consequence of an award ruling that they have no substantive jurisdiction.
Should the Act expressly require confidentiality in arbitration?
No. At present, there is only an implied obligation of confidentiality for arbitrations seated in London. The Act does not expressly state that arbitrations are to remain confidential, and the Commission is of the view that this need not change.
Practically, this is because an express duty of confidentiality within the Act would also call for a list of exceptions for instances where confidentiality is just not possible or, say, in the public interest. For example, the courts have previously found that certain arbitrations, such as those involving investor claims against states, call for transparency. There is also an ongoing debate as to whether arbitrations involving public procurement contracts should be made transparent in the public interest.
Ultimately, and while the courts continue to develop a list of possible of exceptions on a case-by-case basis, the Commission does not consider there to be enough meaningful practical guidance for that case law to be codified into a mandatory list of exceptions within the Act. This is not surprising given any exceptions to a duty of confidentiality are very much dependant on the facts and would be difficult to set in stone.
Independence and disclosure
Should the Act contain an express duty for arbitrators to be independent?
No. When discussing independence in the arbitration context, the Commission is referring to arbitrators having no connection to the arbitrating parties or the dispute. There is currently no express duty within the Act that requires that arbitrators be independent, and the Commission considers that this should not change. A key reason for this is that arbitrators are already subject to a statutory duty of impartiality6 and, if an arbitrator is impartial, then it does not matter if they are not “perfectly independent”, just so long as they disclose any connections to the parties.
On this latter point, the Commission has provisionally proposed that case law setting out when an arbitrator should disclose a connection7 is codified within the Act so that arbitrators have an express duty to disclose any circumstances which may reasonably give rise to justifiable doubts as to their impartiality.
Practically, the Commission’s proposals should come as a relief to arbitrators given complete independence is very hard to maintain where industry professionals and parties alike tend to be known to one another and are likely to have already worked together.
Appeals on a point of law
Should the Act’s provisions on appeals to the court on a point of law be reformed?
No. Currently, the non-mandatory provisions of the Act8 allow a party to appeal to the court if they consider an arbitrator’s award to be incorrect on a point of law.
While there are some who suggest that these provisions should be repealed to reinforce the finality of arbitral awards, others have proposed that the circumstances in which an appeal can be brought under the Act is expanded so the courts have more opportunity to consider questions of law, ensure any errors are corrected and apply the law consistently.
The Commission has provisionally concluded that the Act need not be amended as it strikes the right balance between these positions, namely as they are non-mandatory and rarely invoked.
The proposals are in no way a major overhaul of the Act. In fact, the Commission has taken an “if it ain’t broke, don’t fix it” attitude by acknowledging industry feedback that major reform is neither needed nor wanted.
Instead, the Commission’s proposals are seemingly a means of making the arbitration process more effective and efficient, and ensuring the UK stays up to date and a world leader for international arbitration.
The Commission has invited responses on the Consultation Paper between 22 September 2022 to 15 December 2022. The result of those responses will be another blog for another day.
- 1. https://www.lawcom.gov.uk/project/review-of-the-arbitration-act-1996/
- 2. Consultation Paper, paragraph 1.31
- 3. Arbitration Act, section 33(1)(b)
- 4. Arbitration Act, section 33(1)(a)
- 5. Section 44(2) of the Act
- 6. Arbitration Act, s.33
- 7. Halliburton Co v Chubb Bermuda Insurance Ltd  UKSC 48
- 8. Section 69 of the Act