Time for a review? Review of the Arbitration Act 1996 launched by the Law Commission
The Law Commission has recently announced a review of the Arbitration Act 1996 (the “Act”) some 25 years after the legislation first came into force. The aim of the review is to “enhance the experience for those who choose to arbitrate in England and Wales and maintain English law as the gold standard in international arbitrations”. Those consulted previously in relation to the review hope that it will provide an opportunity to ensure that the Act reflects modern arbitration practices more generally.
Background to the Act
At the time the Act first came into force 25 years ago, it represented a groundbreaking attempt to draw together the fragmented legislation and case law governing arbitration as it then stood in England and Wales. Unusually for English legislation, the Act lays down three principles in light of which the remaining provisions should be interpreted. These are namely:
“(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;
(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest;
(c) in matters governed by this Part the court should not intervene except as provided by this Part.”[Emphasis added]
These principles reflected the desire to make England a more attractive jurisdiction for commercial arbitration which, at the time, was perceived as insular and outdated with more Court intervention than was considered desirable by those seeking an alternative to Court proceedings.
However, as noted by the Supreme Court in Halliburton Company v Chubb Bermuda Insurance Ltd, the Act deliberately steered away from codifying all of English law on arbitration:
“The 1996 Act is not a complete code of the law of arbitration but allows the judges to develop the common law in areas which the Act does not address.”
So, for example, the Act deliberately made no express provision for arbitration proceedings to be confidential unlike in other jurisdictions such as Australia which has an “opt out” system. Instead, confidentiality is implied at common law, albeit the limits of that obligation “are still in the process of development on a case-by-case basis” (see the Court of Appeal case of John Forster Emmott v Michael Wilson & Partners Limited).
This inherent “flexibility” that the Courts have in interpreting the Act (or gaps left by the Act) is regarded by some as a strength, and by others as a weakness, albeit familiarity with the Act and how it works in practice has historically been cited as a reason for not amending the Act significantly and/or at all.
So, what areas of the Act are likely to be reviewed?
The Law Commission announcement itself suggest the following possible areas for review:
- The power to summarily dismiss unmeritorious claims or defences in arbitration proceedings;
- The courts’ powers exercisable in support of arbitration proceedings;
- The procedure for challenging a jurisdiction award;
- The availability of appeals on points of law;
- The law concerning confidentiality and privacy in arbitration proceedings; and
- Electronic service of documents, electronic arbitration awards, and virtual hearings.
These are examined below.
Areas of uncertainty?
The review is, of course, an opportunity to provide clarity as to how the Act should be interpreted when 25 years of case law has failed to do so. By way of example:
- There has been some doubt as to the availability of Court powers under Section 44 of the Act against third partiesfollowing the case of DTEK Trading SA v Mr Sergey Morozov  EWHC 94 (Comm). Whilst the power has been confirmed in relation to ordering a non-party to give evidence (see A and B v C, D and E  EWCA Civ 409), the extent of the Courts’ other powers against third parties remains uncertain;
- Likewise, the extent of the exceptions to any confidentiality implied at common law by England and Wales remains debated and arguments are often made in favour of express provision in the Act to provide greater certainty. This is particularly important given confidentiality is frequently cited as a key benefit of arbitration over Court proceedings.
Changes to arbitration practice since 1996
Unsurprisingly, arbitral practice and the institutional rules have evolved since 1996. For example, provision for emergency arbitrators now appears in many institutional rules such as the LCIA Rules which provide that:
“In the case of emergency at any time prior to the formation or expedited formation of the Arbitral Tribunal (under Articles 5 or 9A), any party may apply to the LCIA Court for the immediate appointment of a temporary sole arbitrator to conduct emergency proceedings pending the formation or expedited formation of the Arbitral Tribunal (the “Emergency Arbitrator”).” [Emphasis Added] (see Article 9B, Rule 9.4).
However, such procedures have only come into existence after 1996 and there is no clear statutory provision for their enforcement in the Act. This is stark contrast to other jurisdictions competing for international arbitrations such as Singapore and Hong Kong. Arguably, express provision should be made to avoid any such doubts as to the effectiveness of emergency arbitrator provisions.
" Whilst the review process itself will undoubtedly be lengthy, there should certainly be some interesting debates on the future of the Act in the next couple of years. "
Likewise, the impact that the availability of an emergency arbitration procedure may have on the ability of the parties to apply to the Courts for interim relief may also need to be debated. In Gerald Metals SA v The Trustees of the Timis Trust & others  EWHC 2327, the Court decided that it did not have the power to grant emergency injunctive relief under Section 44 (4) of the Act because, under Section 44 (5), “the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively.” Whilst, in that case, emergency relief had already been considered and denied under the LCIA rules, the judgment applied more widely.
Accordingly, case law currently suggests that, if parties opt for rules that provide for emergency arbitration, they may be reducing the ability of the English Courts to grant emergency injunctive relief. Whether or not that is in parties’ interests requires debate at the very least.
The right to appeal on a point of law
Section 69 of the Act gives a party the right to appeal on a point law as long as they don’t contract out of that right either by an express term of their agreement or by their choice of institutional rules (for example, the ICC Rules or the LCIA Rules which both exclude the parties’ right to appeal an award). This contrasts with the law in many other jurisdictions and has led some to claim that it creates a perception that England is not arbitration friendly. This is the case even though, in reality, the grounds on which such an appeal may be brought are narrow and the Courts rarely allow them in practice.
A debate has already been raging for a number of years about whether the right to appeal should be narrowed further, left as it is or widened. In a leading speech in 2016, Lord Thomas (the then Lord Chief Justice of England and Wales) argued that:
“In retrospect the UK went too far in 1979 and again in 1996 in favouring the perceived advantages for arbitration as a means of dispute resolution in London over the development of the common law; the time is right to look again at the balance. There is also a need to examine whether other markets would be prepared to follow the financial markets, to waive arbitration in cases where there were significant points of general interest and to appreciate that not only would their own dispute, in the right case involving legal issues, be better determined in a court but, more importantly, the wider interests of their industry and of the common law in general would be much better served by more issues being resolved in court and the law thus developed and clarified.” [Emphasis added]
The impact of arbitration (and the lack of case law) can, for example, be seen in relation to standard form construction contracts, such as FIDIC, which provide for arbitration as their default final dispute resolution mechanism. This is undoubtedly unhelpful when it comes to interpreting such contracts compared to forms such as the JCT where a wealth of case law exists. Equally, those passionate about a party’s right to choose their dispute resolution method, and arbitration in general, may argue for Section 69 to be deleted altogether. No doubt both sides of the argument will be aired to the Law Commission in the next year or so.
Technology and arbitration
The last area proposed for discussion by the Law Commission reflects the increased use of technology in arbitration (and, indeed, in dispute resolution in general) which has only been accelerated by Covid-19. Such topics were not on the table in 1996 but it is now clear that the potential requirement for statutory assistance on these issues should be actively considered.
For example, should an amended Act make express provision as to the ability of a Tribunal to order virtual hearings where one party objects? There is a risk that this could potentially give rise to debates as to enforceability of an award where that party feels they have been denied a fair hearing as a result. The Austrian Supreme Court has already dealt with a case where the issue of whether conducting an arbitration hearing by videoconference over the objection of one party violated due process (see Case No 18 ONc 3/20s issued on 23 July 2020). Should an amended Act expressly lay down the rules in such cases to avoid such challenges in the years to come?
The review process itself will begin in the new year with the Law Commission aiming to publish a consultation paper in late 2022. For those that wish to follow the process and contribute, they should email firstname.lastname@example.org. Whilst the review process itself will undoubtedly be lengthy, there should certainly be some interesting debates on the future of the Act in the next couple of years.