The Law Commission in England and Wales has recently published its Final Report of its review of the Arbitration Act 1996. Like all reviews by the Law Commissions in the different UK jurisdictions, the Final Report is the product of a long and thorough review of the law and a wide consultation with stakeholders. The aim of the review has been to modernise arbitration law and ensure that the procedures available in England and Wales remain fit for the disposal of modern disputes. We consider some of the Commission's key recommendations.
One of the recommendations that is likely to see most practical benefit to users of arbitration is a power for a tribunal to dispose of any issue in an arbitration summarily, at its discretion, on the basis that it lacks merit and has no real prospects of success. Whilst the flexibility of arbitral procedure at present arguably allows an arbitrator to take such a step, an express provision, setting out the required test, would remove any uncertainty and is a welcome recommendation.
Properly used, this power should see arbitrations where either the claim or the defence is spurious dealt with more quickly and with less cost, all in keeping with the principles and advantages of arbitration. It is recommended by the Commission, however, that the power to determine disputes summarily can be disapplied b agreement between the parties.
Confusion can arise where contracts provide that they are to be governed by the law of a certain jurisdiction, but the arbitration clause has no express governing law provision. Case law has stepped in to try and answer this question, but the Commission has recommended that the position be set out in legislation. The proposed position is that the law of the seat of the arbitration will govern the arbitration unless there is an express agreement between the parties to the contrary. This would not apply to arbitration agreements retrospectively - only to those entered into after any new law is made.
It is an obvious principle that in an adversarial system, decisions should be made by independent decision makers. Since the 1996 Act, the law has developed – through court decisions – to place a duty on arbitrators to disclose any circumstances which might reasonably cast doubt on their impartiality.
The Commission has recommended that this duty be enshrined in legislation. It is suggested that arbitrators be required to disclose all circumstances relevant to their impartiality that they should reasonably be aware of. So, ignorance of circumstances which might taint an arbitrator's impartiality will not, necessarily, be sufficient for them to discharge this proposed duty. The consequence of failure to disclose relevant circumstances will be the possibility of the arbitrator's removal from the tribunal.
Next stop, Parliament?
With its report, the Law Commission has prepared a draft bill which, if enacted, would change the law to reflect its recommendations. The government has indicated that it will respond to the Report soon. Which of the Commission's recommendations become law, and how long that takes, remains to be seen.
The Law Commission's recommendations do not affect the law in Scotland where the much more recent Arbitration (Scotland) Act 2010 applies. There is no indication that the Scottish Law Commission intends to review Scottish arbitration law in the near future.
Get in touch
If you have any questions about the future development of arbitration law in the UK, please get in touch with any of the authors or your usual Brodies contact.