top of page
Search

Proposed revisions to the Arbitration Act 1996


This article is useful for those arbitrating under the law of England & Wales and for organisations considering where to arbitrate in the future.


This article will consider the following:

  • Background to the Arbitration Act 1996

  • Why is the Act being reviewed?

  • Brief review of the Law Commission’s proposals

  • Issues considered and not changed

  • Key dates to note

  • Summary

Background to the Arbitration Act 1996


Arbitration is a form of dispute resolution and is an alternative to pursuing a claim through the courts. The Arbitration Act 1996 (“the Act”) provides the framework for arbitration in England, Wales and Northern Ireland.


The UK Government asked the Law Commission of England & Wales (the “Commission”) to undertake a review of the Act.


Why is the Act being reviewed?


The most popular location for resolving international disputes is London. Many international commercial contracts incorporate the law of England and Wales to govern trade relationships based on this reputation.


However, there is growing competition, and other jurisdictions are challenging this popularity. The review is to ensure that the framework continues to be state-of-the-art by providing an efficient and cost-effective means of resolving domestic and international disputes.


Brief review of the Law Commission’s proposals


The Commission has published its Consultation Paper detailing proposed revisions to the Act.


The main proposals provide for:-

  • Faster disposal of cases that lack merit: Summary Disposal

The proposed change enables arbitrators to dismiss claims that have “no real prospect of success” and offer “no other compelling reason to continue to a full hearing.” It provides an arbitrator with similar powers to those of a judge and, if introduced, will minimise time wasting and costs.


Summary disposal is available if requested by a party to the dispute. It is subject to consultation between the arbitrator and both parties on how the provision will be incorporated into the arbitration process. The proposal does not make summary disposal mandatory and the parties can exclude it from their arbitration agreement.

  • Removal of any potential to discriminate against an arbitrator

Under the Act, the parties can select and object to an arbitrator based on certain characteristics.


In a move to improve diversity, the Commission proposes to apply the term “protected characteristics” to arbitration. The term is defined in The Equality Act 2010. Protected characteristics are age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation. The term would apply when considering challenges to arbitrator appointments and the enforceability of arbitration agreements, which limit the choice of arbitrator.


If introduced, a challenge by a party based on protected characteristics cannot arise unless those characteristics are essential for legitimate purposes in a particular case.

  • Immunity of arbitrators regarding court costs

Currently, arbitrators may incur liability for costs incurred in arbitration-related court proceedings if they prematurely resign their appointment or if a party applies to the court to remove them.


The proposed change offers personal liability protection for arbitrators against costs in any associated litigation. The recommendation seeks to protect arbitrators from any undue influence during the arbitration.

  • A challenge to arbitral awards

Parties to an arbitration can challenge an arbitral award in court on the grounds of the arbitrator’s jurisdiction, or a point of law under Section 69 of the Act.


An appeal based on jurisdiction requires a full hearing in court under Section 67 of the Act, enabling the parties to introduce fresh evidence at a re-hearing. The Commission’s proposals limit this appeal to the arbitration tribunal’s decision on jurisdiction alone. Such a change keeps costs down and provides the parties with greater certainty in the arbitration process.


  • Emergency arbitration, third parties, and court powers

The courts can make certain orders relating to evidence, witnesses, or procedural steps to support arbitral proceedings. Since the Act came into force, there has been an increase in emergency arbitrations and the appointment of emergency arbitrators. These circumstances have not been specifically covered in the Act and this has led some to question whether the Act applies to emergency arbitration proceedings at all.


The removal of Section 44(5) is proposed to avoid this confusion. The intent is to ensure that any party can seek assistance from the court whether an emergency arbitrator has been appointed or not.


The Commission proposals also provide clarity on the position of third parties in arbitration proceedings. Third parties can be the subject of a court order during the arbitration process and can appeal an order unfettered by arbitration rules, which restricts the disputing parties.


Issues considered and not changed


The Commission has not proposed changes in every area under review.


These include:-

  • Confidentiality

Arbitrations are usually confidential, although arbitral rules can differ. Under the Act, there is no provision for confidentiality.


The Commission considered a move to codify confidentiality unnecessary because of the wide range of arbitration rules for handling privacy. It also remains possible for the parties to enter their own confidentiality agreement should they choose.


  • Independence of arbitrators

Whilst Section 33 of the Act requires arbitrators to act fairly and impartially, there is no requirement for arbitrators to be independent. The Commission does not propose changing this. Instead, the proposal is to codify an arbitrator’s continuing duty to disclose circumstances which may impact their impartiality.


  • Appeal on a point of law

The Commission rejected calls to prohibit an appeal on a point of law. This could have resulted in finality for an arbitral award. As appeals are uncommon, the Law Commission was of the view that such a change was unnecessary.


Key dates to note


Although subject to change, the Commission indicates it will publish its final recommendations for law reform in autumn 2023.


Once published, the UK Government will then decide whether to implement any or all of their recommendations.


Summary


The Arbitration Act 1996 has contributed to England & Wales becoming the global centre for dispute resolution. Two decades on, the Act works well with no major changes required. The Commission is still reviewing feedback from stakeholders in several key procedural areas and will publish its final recommendations in autumn 2023.


To date, the proposals are prudent and current indications are that any reform will continue to support the global reputation of England and Wales for efficient, cost-effective dispute resolution. These factors will be significant in the Government’s review of the final recommendations.


There are no immediate steps to take for those participating in current arbitrations. If you do use arbitration to resolve disputes, the Law Commission’s final proposals will be relevant to you. For our update on the final proposals, subscribe to our newsletter.

2 views0 comments

Comments


bottom of page