Reform of the 1996 English Arbitration Act – The Six Key Proposed Amendments

The Law Commission’s (the Commission) Review of the 1996 English Arbitration Act (AA1996) is intended to modernise arbitration laws in England and Wales and to ensure that arbitration remains fit for purpose, and continues to support England and Wales as a leading forum for commercial arbitration.

The Commission carried out a widescale review and consulted with arbitration practitioners and the wider arbitration community before compiling its recommendations and Bill in 2023, which is now working its way through Parliament and is expected to become law in the first half of 2024.

In the Bill, the main reforms to the AA1996, are as follows:

Arbitrators’ Statutory Duty of Disclosure

The AA1996 provides that arbitrators must be impartial (section 33). Under English law, arbitrators have a continuing duty to disclose “any relevant circumstances”, which might reasonably give rise to justifiable doubts as to their impartiality, as established by the Supreme Court in Halliburton v Chubb [2020] UKSC 48.

The Bill provides that the duty will impact sooner than the Supreme Court held in the case in Halliburton. Under the Bill, the duty will commence from the time the arbitrator is approached to act. In addition, the new duty of disclosure is objective i.e. based on what the arbitrator ought reasonably to be aware (rather than, subjectively i.e. based on actual knowledge).

The proposed reforms go beyond the requirements of some of the Institutional Rules e.g. the LCIA 2020 Rules, but will be welcomed by most practitioners as assisting with transparency, and are reflective of the feedback to the Commission’s consultation.

Enhanced Arbitrator Immunity

Although the AA1996 already provides wide immunity for arbitrators in the discharge of their duties, the Bill seeks to extend protection to arbitrator resignations (unless unreasonable) and arbitrator costs liabilities relating to applications for their removal (again, unless refusal was unreasonable).

These reforms will support and encourage those wishing to act as arbitrators, and so are likely to be welcomed by the arbitration community.

Summary Disposal

The AA1996 does not contain express provision for summary disposal in arbitration.

The Bill gives arbitrators a default power of summary disposal, exercisable on application by a party, and subject to a test of there being “no real prospect of success” on the relevant issue.

The reforms will help resolve certain disputes more efficiently and places arbitration on a similar footing to English litigation in this regard.

Refining Challenges to Awards Under Section 67

The so-called “second bite of the cherry” under section 67 AA1996 arises when a party unsuccessfully challenges the tribunal’s jurisdiction to hear the arbitration or part of it during the arbitration, and later challenges the award in court claiming that the tribunal lacked jurisdiction to determine the arbitration or part of it.

The Bill provides that a challenging party can only make new objections or present new evidence relating to jurisdiction if it can demonstrate that such objections could not have been raised on the earlier challenge.

In a departure from the Supreme Court judgment in Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC, the Bill provides that there should be no rehearing of oral evidence, unless the court determines this to be in the interests of justice. This is aimed at preventing parties from making a tactical appeal in the hope of causing delays as the court would effectively hold a re-hearing of the issues.

Clarity on the Governing Law of an Arbitration Agreement

The issue of governing law arises when the applicable law of the parties’ main contract differs from the seat of arbitration (e.g., Swiss law contract, English seat of arbitration), or is silent on that choice of governing law. Despite the decision of the Supreme Court in Enka v Chubb [2020] UKSC 38, there remains scope for uncertainty.

The Bill proposes a new rule that, in the absence of express choice, the applicable law of the arbitration agreement will be the law of the seat. From a party’s perspective, such a simple and consistent rule makes commercial sense and will be welcomed by many.

Empowering Courts to Support Arbitration:

The Commission recommended extending the courts’ supporting powers to extend to peremptory orders made by emergency arbitrators and orders against third parties.

The Commission did not support the codification of a duty of confidentiality, reasoning that to attempt to do this would not be sufficiently comprehensive, nuanced, or future-proof. Neither would a statutory duty of arbitrator independence be practical (or even possible), given the limited number of suitable arbitrators in certain sectors.

In essence, the Bill aims to enhance clarity, certainty, and efficiency, catering to the evolving needs of business and ensuring smoother resolution of disputes by arbitration, thus maintaining England & Wales as a leading forum for commercial disputes.

The Bill is currently passing through the UK’s legislative process and is expected to pass as drafted and come into force by the Summer. We will provide an update when the Bill becomes law.