Law Commission Review Of The Arbitration Act 1996 | Key Areas Of Review And Recommended Change

• Published date: 04 March 2024
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: Travers Smith LLP
• Author: Mr Huw Jenkin, Adam Short, Lucy Chaize, Andrew Pullar, Alfred Fabian and Emma Gittings

On 6 September 2023, the Law Commission issued its Final Report and Bill on the proposed amendments to the Arbitration Act 1996 (the "Act"). The Final Report and Bill followed an extensive consultation exercise, during which the Law Commission published two consultation papers and received feedback from over 100 different consultees. The draft Arbitration Bill is now before Parliament and is expected to enter the statute books later this year as the 'Arbitration Act 2024'.

Over the last few months, Travers Smith has published short guides to the Law Commission's key areas of review and has summarised the issues on which the Law Commission has, or has not, recommended change. We have now collated those guides into this single overview, which addresses the following topics:

• The governing law of an arbitration clause
• Confidentiality
• Discrimination
• Arbitrator independence and disclosures
• Summary disposal
• Arbitrator immunity
• Court powers in support of arbitrations
• Emergency arbitrators
• Challenging an award and jurisdiction
• Appeals

The governing law of an arbitration clause

What is the existing position?

The doctrine of separability under English law means that an arbitration clause is separate from the underlying agreement. The principles that currently apply to determine the law applicable to the arbitration agreement (as distinct from the main contract) are set out in the Supreme Court decision of Enka Insaat vs Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38. An overview of this landmark decision can be found here: Arbitration agreements: Governing law.

In summary, absent an express choice by the parties, the governing law of an arbitration agreement will be the parties' choice of law to govern the main contract; or if there is no choice of law for the main contract, the arbitration will be governed by the law it is most closely connected to (usually the seat of the arbitration).

The debate around change

A more detailed overview of the key considerations surrounding the proposed reform can be found in our previous article: Which law governs an arbitration agreement under English law? What do you need to know?

In short, in addition to the complexity of the current position, a key criticism of Enka v Chubb is that parties may find themselves subject to certain aspects of foreign arbitration law (as the law governing the arbitration clause), even though the arbitration is seated in England and Wales. This can lead to inconsistencies and uncertainty, as foreign law may take a different approach to significant principles applicable under English law such as arbitrability, separability, scope and confidentiality.

The Law Commission's final recommendation

The Law Commission's final recommendation (reflected in clause 1 of the draft Bill) is that the Act be amended to provide that the arbitration agreement is governed by the law of the seat, unless the parties expressly agree otherwise.

There has been some debate as to whether this rule should have retrospective effect. The Law Commission originally recommended that the new rule would only apply to arbitration agreements entered into once the amended Act comes into force, which would result in differing positions depending on when the arbitration agreement was concluded, which could be confusing. However, the Law Commission has since amended the draft bill so that it "now provides that its changes do not apply to arbitrations that have already commenced, as distinct from existing arbitration agreements". As a result, the changes would eliminate the dual position that would apply under the original draft bill. The new bill would clearly delineate by reference to the amended Act coming into force - it would not apply to arbitrations commenced prior to the amended Act coming into force - and therefore Enka v Chub would not apply after that date.

Confidentiality

What is the existing position?

The Act does not contain any provisions on confidentiality. But, a duty of confidentiality in relation to arbitrations can arise in other ways. For instance, the parties might expressly agree confidentiality, it might apply by virtue of the parties' choice of arbitral rules, or it could be an implied term of the arbitration agreement (as it is under English law). However, confidentiality is not absolute and there are limits to confidentiality in arbitration (see, for example, Emmott v Michael Wilson & Partners).

The debate around change

The Law Commission considered whether the Act should in fact contain express provisions on confidentiality in arbitration. In its first consultation, the Law Commission provisionally concluded that it should not. The majority of consultees agreed with that position, but a significant number (including Travers Smith) were in favour of codification and a stipulation that arbitrations are confidential by default, with a non-exhaustive list of exceptions. It was felt that such codification would provide reassurance to international users of arbitration of greatly valued confidentiality.

The Law Commission's final recommendation

The Law Commission recognised the importance of confidentiality to many users of arbitration, but concluded that the Act should not contain a default provision. This conclusion was based on several factors. First, notwithstanding the importance of confidentiality to users, the Law Commission noted that parties are free to agree confidentiality themselves without the need for statutory protection. Second, there is no one size fits all approach as different rules can apply in different contexts (for example, investor state arbitrations favour transparency). Third, there are a wide variety of approaches, which can apply on a range of legal bases; a single statutory rule could not reflect this variety. Fourth, any rule would have to be subject to exceptions, but that list is currently non-exhaustive and is developing and so codifying the position would be very difficult. Therefore, the Law Commission concluded that a statutory rule would not be sufficiently comprehensive, nuanced or future-proof. They favoured the development of the law by the courts (alongside the arbitral rules) and therefore made no recommendation for reform.

Discrimination

The existing position and the debate around change

The Act does not contain any provisions on discrimination. In its first consultation paper, the Law Commission noted statistics which show that women are up to three times less likely to be appointed as arbitrators than men. In a 2011 decision, the Supreme Court had also held that the (then-applicable) Employment Equality (Religion or Belief) Regulations 2003 did not apply to the appointment...