Arbitration Bill – progress so far and key takeaways

Journey so far

Last year, after a lengthy period of consultation, the Law Commission of England and Wales published its report positing several proposals to reform the Arbitration Act 1996 (the “Act”). Various issues prompted the review of the Act: lapse of time since its promulgation as well as concerns as to whether the Act is robust enough to deal with present applications, and if it remains fit for purpose.  Certainly, an underlying motivation was also to ensure and secure the United Kingdom – specifically London – remains a primary choice as an arbitration seat. 

The Law Commission’s proposals were taken up by the (then) Government and introduced to Parliament by way of the Arbitration Bill (the “Bill”).  The Bill, originating in the House of Lords, progressed through the legislature and was referred to a Special Public Bill Committee which heard evidence from several stakeholders on the Law Commission’s proposal.  However, the Bill could not progress further due to the general election.  The Bill was not passed in the wash-up period and its future remained uncertain, until recently.

A new iteration of the Arbitration Bill was mentioned in the current Government’s programme of legislation.  Recommencing its journey on 18 July, the Bill was introduced in the House of Lords for first reading, followed by the publication of the text of the Bill. 

Key takeaways

The Law Commission’s final report on the Act discussed ten topics with some of the key recommendations being – 

• The governing law of the arbitration agreement – a different law could be found to govern the agreement to arbitrate than the law that governs the main contract in which the arbitration agreement is found, and also than the law of the seat where the arbitration is deemed to occur. The current law to ascertaining the law governing the arbitration agreement was set out in the decision of the Supreme Court in Enka v Chubb 2020 UKSC 38. In the absence of agreement by the parties, the law of the main contract will be implied to govern the arbitration agreement, unless this might render the arbitration agreement invalid. Where there is no choice of law at all, the arbitration agreement will be governed by the most closely associated law, usually that of the seat.  The Bill proposes a new default rule in favour of the law of the seat of arbitration if the parties have not agreed otherwise, which could of course be the law of the main contract . 
• Arbitrator’s duty of disclosure – Arbitrators are expected to be impartial to parties before them, with the duty to disclose any relations with parties or the dispute which may raise concerns. The Supreme Court formulated the test for arbitrators’ continuing duty to disclose any circumstances which might reasonably give justifiable doubts to their impartiality in the case of Halliburton v Chubb UKSC 2018/0100.   The proposal seeks to codify the judgement and make the rules relating to disclosure clear and accessible and to extend the duty to disclose to pre-appointment stages. 
• Emergency Arbitrators – Major institutional rules provide for a regime for the appointment of emergency arbitrators, during the brief period before a tribunal is constituted by the parties.  Parties prefer to use the services of emergency arbitrators to secure swift orders especially in cases where assets, monies or evidence are being moved, dissipated or destroyed. These orders can usually be reviewed when the tribunal is formed.  The Bill now proposes to aid emergency arbitrators by providing (i) for courts to enforce a peremptory order made by an emergency arbitrator following non-compliance with a prior order; and (ii) permitting emergency arbitrators (as well as a constituted tribunal which the Act currently provides for) to give permission for an application to the Court under s.44 of the Act for an order preserving evidence or assets in urgent cases. 
• Challenging the award under s.67 of the Act on grounds of substantive jurisdiction – Substantive jurisdiction refers to (i) whether there is a valid arbitration agreement; (ii) whether the arbitral tribunal is properly constituted; (iii) and what matters have been submitted to arbitration in accordance with the arbitration agreement. Currently, the parties are entitled to a full rehearing under s.67 as per the law set out in Dallah v Government of Pakistan UKSC 2009/0165, even if there was a full hearing before the tribunal. This gave rise to obvious concerns surrounding delay and costs, as well as giving the losing party an opportunity to improve its case before taking a second bite at the cherry. The Bill does away with the full rehearing and proposes amendments to permit court rules to be made which would limit parties’ ability to rely on new grounds or evidence before the court.  
• Summary disposal – the Bill proposes a power for arbitrators to make awards on a summary basis on issues that have no real prospects of success, similar to summary judgments available in court proceedings.

These now form part of the Bill.

Please watch this space for further updates as the Bill progresses. 

If you have any questions about the arbitration bill or arbitration clauses in your commercial contracts, please contact Pauline Lépissier or Prateek Sharma.