Following the UK General Election on 4 July 2024, the newly elected Labour government reintroduced the Arbitration Bill 2024 designed to implement the Law Commission's 2023 recommendations for amendments to the Arbitration Act 1996.
The Arbitration Bill can be found here. The Bill was previously introduced in the last Parliament in November 2023, but fell away when the general election was called.
We therefore provide an update on the Bill's passage through the House of Lords, and set out a quick refresher on the Bill's key reforms to arbitration law.
Committee stage: Lord Hoffman "the nemesis"?
Although the legislative process has required to recommence , the Bill as re-introduced reflects the changes agreed during its previous passage. One additional amendment has been made to Clause 1 to address a point raised on investor-state arbitrations (see below).
The Bill concluded a perhaps-livelier-than-expected committee stage on 11 September 2024, which saw Lord Hacking propose two amendments and cast Lord Hoffman as his nemesis.
Four amendments were tabled:
- A proposed amendment (Lord Hacking) for a new clause entitled “Safeguarding against fraud and corruption", which would have required the arbitral tribunal to make enquiries with the parties that there had been no bribery and corruption. The amendment was roundly rejected on the basis that it was inconsistent with the way in which litigation and arbitration are conducted that the tribunal should have to take an active investigatory role, that it would add a formalised ritual to the conduct of arbitrations, and that it may even provide a technical ground on which a party who has lost an arbitration could appeal (Lord Hoffman). It would, in other words, create uncertainty and unnecessary difficulties in the way in which arbitrations are conducted.
- An amendment (Lord Hacking) aimed at "modernising" the language of the Act in relation to the award of costs, such that the phrase "costs follow the event" was replaced with alternative wording. This amendment, too, was rejected on the basis that: (i) the power to award costs is entirely a matter for the discretion of the tribunal; (ii) the 1996 Act's wording is a time-honoured formula which everybody knows and understands, and; (iii) there is no advantage in substituting a new formula, when nobody quite knows how it is going to work.
- An amendment to Clause 13 (Appeals to Court of Appeal from High Court decisions) to correct a drafting error identified in the House of Lords’ judgment in Inco Europe v First Choice Distribution [2000] BLR 259 was agreed. The amendments make clear that appeals from High Court decisions under Part 1 of the Arbitration Act 1996 may, subject to provision in that Part, be made to the Court of Appeal, with corresponding amendments to the Senior Courts Act 1981 and the Judicature (Northern Ireland) Act 1978. These amendments will establish beyond doubt the current position on appeals.
- A technical amendment to amend the long title of the Bill to cover the amendment to replace Clause 13. Although that amendment will not practically widen the scope of the Bill, given that it modifies the Senior Courts Act 1981 and the Judicature (Northern Ireland) Act 1978 only to the extent that it relates to the 1996 Act, Amendment 4 is nevertheless required and updates the Long Title, adding “and for connected purposes”
The Bill reached report stage in the House of Lords on 30 October (report stage is an extra chance for members to closely scrutinise elements of the Bill and propose any further amendments). It remains to be seen whether any further amendments will be tabled.
The Bill will introduce significant reforms to arbitration law in England, Wales and Northern Ireland. Below is an overview of the key changes.
Governing Law of the arbitration agreement
The Bill clarifies the law applicable to arbitration agreements by providing that the law governing the arbitration agreement will be the law expressly chosen by the parties; otherwise, it will be the law of the seat. An express choice of law to govern the main contract does not count as an express choice of law to govern the agreement to arbitrate. The question of which system of law applies to an arbitration agreement has been a point of contention in recent years, particularly following the Supreme Court’s decision in Enka v Chubb. Under the current law, absent an express choice of law to govern the arbitration agreement, the governing law of an arbitration agreement will usually be that of the main contract, rather than the law of the chosen arbitration seat, even where the seat is in England & Wales. As the Parliamentary Under-Secretary of State said, when introducing the Bill for its second reading:
"Clause 1 will provide greater certainty as to the law underpinning arbitration agreements, and ensure that arbitrations conducted in England, Wales and Northern Ireland are supported by our arbitration law, where appropriate."
As noted above, one further change has also been made to the Bill as it was when Parliament was prorogued. Clause 1 now provides that the new default rule on governing law does not apply to arbitration agreements derived from standing offers to arbitrate contained in treaties or non-UK legislation. There were concerns raised during the previous Bill’s passage that Clause 1 should not apply to some investor-state arbitration agreements; that is, those arising under offers of arbitration contained in treaties and foreign domestic legislation. Sector feedback was that such arbitration agreements are, and should continue to be, governed by international law and/or foreign domestic law.
Summary disposal
One of the most notable proposed amendments is the introduction of summary disposal procedures in arbitration. Subject to party agreement, tribunals would be empowered to issue awards on a summary basis. This will improve efficiency and aligns with summary judgments available in court proceedings, allowing tribunals to dispose of meritless claims or defences without the need for a full hearing. While this addition may expedite proceedings, it is expected that many parties will seek to exclude this mechanism in their arbitration agreements to maintain the right to a full hearing.
Impartiality: duty of disclosure
Arbitrators will be under a codified, ongoing duty to disclose any circumstances that could raise reasonable doubts as to their impartiality, following the Supreme Court's ruling in Halliburton v Chubb.
Enhanced supervisory jurisdiction of the courts
The Bill also seeks to clarify and expand the role of the courts in supporting arbitration, particularly in relation to third-party orders. While many practitioners consider that section 44 of the Act already provides this authority, case law on the issue has been inconsistent, and the Bill’s clarification eliminates any ambiguity.
Additionally, the courts will be granted the power to enforce orders issued by emergency arbitrators, providing additional weight to the emergency arbitrator provisions found in institutional rules. This change is intended to increase the efficacy of emergency relief, which some parties currently bypass in favour of seeking injunctive relief.
Arbitrator immunity
The Bill extends arbitrators’ immunity under section 29 of the Act to include circumstances in which an arbitrator reasonably resigns, as well as situations where a party applies to court for their removal.
Jurisdictional challenges
Procedural clarity will be provided for challenges to a tribunal’s jurisdiction under section 67 of the Act. The Bill proposes that such challenges take the form of appeals, rather than initiating a fresh hearing on the same issue.
Legislative progress and next steps
Following the report stage on 30 October 2024, the Bill proceeded to its third and final reading in the House of Lords, after which it proceeds to the House of Commons. We expect it to receive Royal Assent and become law in 2025.
Contributor
Associate
