Following a request from the UK government, in January 2022, on the 25th anniversary of the Arbitration Act 1996 coming into force, the Law Commission commenced a review of the Act. 

Following the completion of that review, the Law Commission has now published its final recommendations for reform , with the aim of ensuring that the law “remains fit for purpose”. 

In commenting on the final recommendations, Professor Sarah Green, Law Commissioner for Commercial and Common Law, stated that the aim is to “maintain the core principles of the Arbitration Act”, while providing a “modern and effective legislative framework for many years to come”.[1]

In this blog, we consider the key takeaways from the Law Commission’s final recommendations for the Arbitration Act and what this might mean for the arbitration landscape in this jurisdiction. 

What is the Arbitration Act 1996 and why is it important?

As an alternative to settling disputes within the courts, arbitration has long been seen as an appealing option for parties across different sectors. In Deloitte Legal’s New Roads to Dispute Resolution, survey respondents identified that 41% of companies consider arbitration or litigation before regular courts or tribunals as the “top dispute resolution mechanism”.[2] 

The Arbitration Act 1996 (the “Act”) is the legislative framework for conducting arbitration within England, Wales, and Northern Ireland. Whenever an arbitration has its seat in England, Wales or Northern Ireland, the Act will apply. 

Having a clear and effective framework for arbitration within the jurisdiction, including setting out the basis for any interaction between the court system and arbitration, is crucial to provide clarity to those parties that are engaged in a dispute and provide confidence to those considering it as a future dispute settlement mechanism. The consultation and subsequent reform recommendations have been seen as an opportunity to make sure that the Act keeps in step with the modern arbitration landscape. 

What are the key inclusions in the final recommendations?

Summary disposal

A notable inclusion is the codification of summary disposal of disputes. Often seen as a criticism of the Act, it has been difficult for arbitrators to dispose of weak claims and defences due to the lack of a clear right to due so. By providing arbitrators with this power, rather than relying on the duty to “avoid unnecessary delay and expense”[3], it should stem what is seen as one of the main disadvantages of the present framework and prevent the parties incurring unnecessary costs in fighting meritless claims or defences. 

As part of the recommendation, the Law Commission also set out what it considers should be the threshold for success, with awards on a summary basis to be made only where a tribunal considers that a party “has no real prospect of succeeding”. The threshold draws parallels with what is required for an award of summary judgment within the courts.[4]

Arbitrator immunity

Another introduction, likely to be welcomed by the arbitrator community, is the expanded immunity given to arbitrators. While s.29 of the Act does provide some existing protection, currently that immunity ends when an arbitrator resigns or is removed. The Law Commission has therefore recommended that where an arbitrator resigns, they should incur no liability, unless that resignation is deemed to be unreasonable. 

Furthermore, unless an arbitrator is provided to have acted in bad faith, the proposals also recommend that they incur no liability in respect of applications for their removal. While likely to be of less consequence to parties to arbitrations, the proposals will provide some comfort to arbitrators and tribunals and may assist in continuing to attract talented professionals. 

Duty of disclosure

A key focus for the Law Commission has also been the strengthening of arbitrator impartiality. The recommendations include the codification of an arbitrator’s duty of disclosure, and in particular clarifying that this is a continuity duty, as a means of demonstrating impartiality and reduce potential unfairness. 

The recommendations are again likely to be seen as a positive step in order to place fairness and impartiality at the heart of arbitrations. 

Governing law of arbitral agreement

The current law provides that the governing law of an arbitration agreement (i.e. the agreement which includes the requirement for parties to use arbitration as their dispute resolution procedure) will be the law chosen by the parties. In the absence of any such choice in relation to the arbitration agreement, the choice of law governing the overarching contract between the parties (often called the matrix contract)[5]. 

The Law Commission has recommended that in the absence of an express choice of law in the arbitration agreement, the governing law will be the law of the seat of the arbitration in question. This was supported by the majority of consultees and provides simplicity and certainty, removing the likelihood of an arbitration being governed by a foreign law and having practical advantages including the application of the court framework in the same jurisdiction as where the arbitration is taking place. 

Supportive powers of the cohort

The Law Commission has recommended that the courts’ supportive powers expressly include:

1. Upholding any peremptory orders made by emergency arbitrators; and
2. The court’s supportive powers under s 44, which states that the court has the power to make orders in support of arbitral proceedings including those listed in s 44(2), extend to making orders against third parties. 

Challenge an award based on substantive jurisdiction

Under the Act, there is an existing right for a party to apply to the court to challenge an arbitration award on the basis the tribunal lacked substantive jurisdiction.[6] However, where such a challenge occurs it is typically necessary for there to be a full re-hearing. The consultation highlighted in having a full rehearing is potentially likely to cause delay and increase costs through repetition. 

In order to deal with the issue of a full re-hearing, the Law Commission has recommended that the Act be amended (and with appropriate powers to the courts to be introduced) so that where a challenge has been made to the jurisdiction of the tribunal, and where the tribunal has ruled on its jurisdiction, then for any subsequent challenge under section 67 by a party who has taken part in the arbitral proceedings: 

1. No new grounds of objection will be accepted by the courts, or any new evidence, unless even with reasonable diligence it could not have been put before the tribunal; and 
2. Evidence will not be reheard save in the interests of justice.

What were the key omissions?

While there have been notable inclusions within the final recommendations, there have equally also been key omissions. For example, previous proposals to provide a default rule on confidentiality were deemed undesirable given that there is a variety of contexts meaning one size does not fit all. 

Similarly, the introduction of specific provisions to deal with discrimination and promote equality in arbitral appointments has not carried through to the final recommendations. The Law Commission felt that such provisions would not actually improve diversity and instead would cause more issues than they would solve, resulting in potential satellite litigation and disingenuous challenges. 

The final recommendations together with the draft legislation prepared by the Law Commission will be reviewed by the government, and if they agree, it will then be put before parliament.  

If you would like to discuss any of the issues raised by this article, or arbitration more generally, please contact Deloitte Legal, including the authors: Robert Griffiths (Partner), Charlotte Tanner (Associate Director) or Fergus Nolan (Associate Director).

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[1] Law Commission – Review of the Arbitration Act 1996: Final report and Bill https://www.lawcom.gov.uk/project/review-of-the-arbitration-act-1996/ 

[2] Deloitte Legal - New Roads to Dispute Resolution - https://www.deloitte.com/global/en/services/legal/research/new-roads-to-dispute-resolution.html

[3] Arbitration Act 1996, s 33(1)(b).

[4] Civil Procedure Rule 24 

[5] Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38

[6] Arbitration Act 1996, s 67