Six ‘Major Initiatives’ to Modernise the Arbitration Act 1996
On 7 November 2023 – in the first King’s Speech for over 70 years – His Majesty King Charles had this to say about the Arbitration Bill that will be brought forward by his Government:
“Other measures will be laid before you”.
Whilst this might reflect the Arbitration Bill’s limited political weight, it is nevertheless a Bill that contains some important developments for those of us that practice arbitration.
Being the result of a broad consultation by the Law Commission of England and Wales, it contains (in addition to various minor amendments which are not covered below) what the Law Commission called six “major initiatives” which represent an evolution of the existing Arbitration Act 1996 rather than any significant reform of it.
The six key changes set out in the Arbitration Bill are:
1. the inclusion of a new default rule that the parties’ arbitration agreement will be governed by the law of the seat. This is the opposite of the current common-law rule established, which is that the substantive law of the contract governs the arbitration agreement. This new default rule can be avoided if the parties agree that it should not apply;
2. the inclusion of a continuing duty on an arbitrator to disclose to the parties anything which might give rise to reasonably justifiable doubts as to his or her impartiality. An arbitrator will not only be required to disclose what s/he knows of, but also what s/he ought to know of. Being, on the whole, a diligent bunch, this will likely mean that arbitrators will want to make thorough enquiries on a continuing basis;
3. the extension of the existing arbitrator immunity (under section 29 of the Arbitration Act 1996) to cover arbitrator resignations and removals – unless the resignation is unreasonable or the arbitrator acts in bad faith in respect of any application for their removal;
4. the introduction of a codified default power of summary judgment, which can be exercised on the application of a party. The test is the usual ‘no real prospect of success’ test that will be familiar to litigation practitioners and that is already well-defined in the authorities. The parties may, by agreement, prevent this power being available to the arbitrator(s);
5. the confirmation that the court (pursuant to section 44 of the Arbitration Act 1996) may make orders in support of an arbitration against non-parties as well as against the parties (and any such non-parties may appeal those orders without the court’s permission); and
6. the inclusion of a different procedure for challenging an award pursuant to section 67 of the Arbitration Act 1996 (which concerns challenging an award on the basis that the tribunal did not have jurisdiction to make it). At present, such a challenge takes the form of a full re-hearing before the court, allowing the parties to put their arguments for a second time (the first time having been before the tribunal itself, who ruled on its own jurisdiction). In contrast, the Arbitration Bill provides that (with limited exceptions) in a section 67 challenge the court will not hear new grounds of arguments and will not hear new evidence.
It remains to be seen which of these proposed reforms of the Arbitration Act 1996 will survive the parliamentary process, and how they may be tweaked along the way.
A link to the draft Arbitration Bill can be found here.
Daniel Shaw specialises in construction and engineering disputes, including arbitration both domestically and internationally.