REUTERS | Eddie Keogh

2022: time for change!

The Law Commission is proceeding with its review of the Arbitration Act 1996 (AA 1996). The project is now in the pre-consultation stage and, following submissions received as part of its wider consultation on the 14th programme of reform, the Law Commission has published a (non-exhaustive) list of areas that might merit further consideration and improvement.

Before considering these further, it is worth reflecting on the fact that, although London still leads as a seat for international arbitration, the market share of competing seats, in particular Singapore and Hong Kong has increased significantly over recent years. The Law Commission’s stated aim is to ensure that the UK remains at the forefront of dispute resolution, and it is important to recognise that, while the AA 1996 is a mature and successful piece of legislation, it isn’t perfect. Any changes should build on its success and focus on on providing users of arbitration with modern, effective and flexible procedures and mechanisms.

With that in mind, the first question posed by the Law Commission is whether there should be a statutory power to summarily dismiss unmeritorious claims or defences in arbitration proceedings. Dealing with unmeritorious claims or, perhaps more commonly, unmeritorious defences can be hugely frustrating for parties and their lawyers. Why not, then, allow tribunals to proceed summarily to an award? Why waste money and time on exchanging statements of case or evidence?

Arguably, any tribunal in an arbitration governed by the AA 1996 already has the power to proceed summarily under section 34 AA 1996, which empowers the tribunal to decide whether and to what extent there should be statements of case, disclosure, or witness evidence. Yet tribunals are reluctant to proceed summarily. Although this is sometimes discussed in terms of tribunals lacking “confidence”, a more accurate explanation may relate to concerns about the enforceability of summary awards. As such, it is perhaps difficult to see how having the power to proceed summarily “spelled out” in legislation would change matters in practice. One area where some change might be welcome, however, is section 41(3) AA 1996 (power to dismiss a claim on grounds of inordinate and inexcusable delay) which is based on now obsolete pre-CPR court procedures.

The next topic identified by the Law Commission, court powers exercisable in support of arbitration proceedings, provides more fertile ground for improvement. Section 44 of the AA 1996 sets out the relevant court powers, which include the power to grant a freezing injunction and the circumstances in which they are available in support of arbitration. It is now well established that the remedies under section 44 AA 1996 are not available against third parties. This is contrary to what was intended (the provision being designed to replicate, broadly, the availability of relief in court proceedings) but is a position to which the courts have reluctantly been driven by the current wording of section 44 AA 1996. Similarly, the interplay between section 44 AA 1996 relief and emergency arbitrator relief is currently somewhat unsatisfactory and would merit further thought. Tidying up section 44 AA 1996 would be an easy win.

Award challenges are of perennial concern to parties, and the Law Commission has identified two areas for consideration: the procedure for challenging an award on jurisdiction grounds, and the availability of appeals on points of law. As to the first: the procedure for determination of jurisdictional challenges is notoriously wasteful, involving as it does a complete re-hearing in court of the challenge that has already been heard by the tribunal, including all the evidence. Although this is the inevitable consequence of the theory of kompetenz-kompetenz, in practice it means that a party gets two bites at the cherry. Solving this conundrum raises some difficult theoretical challenges, but one possible way forward might be to adjust the criteria under section 32 AA 1996, which empowers the court to determine a preliminary point of jurisdiction. At present, the court is entitled to intervene only in very restricted circumstances, if all the parties agree, or if the tribunal gives permission and the court is satisfied of a number of additional criteria. Might it be possible to liberalise these thresholds, for example by allowing the court to intervene whenever the tribunal grants permission?

Similar questions arise in connection with appeals. There is a long-standing debate about whether the grant of permission to appeal should be liberalised to allow more cases to get to court. Like section 32 AA 1996, section 45 AA 1996 allows the court to determine a preliminary point of law, with similar threshold criteria. Is there a way of using section 45 AA 1996 to allow more “public interest” points to get to court, rather than this being dependent on arbitrators first getting those points wrong?

These questions raise some difficult and fundamental issues relating to party autonomy and the theory underpinning arbitration law. A less controversial improvement might be the clarification of the running of the 28 day time limit in cases where applications for clarifications or corrections are made to the tribunal. The courts have, against the background of imperfectly worded provisions contained in section 70 AA 1996, developed the principle that the time limit runs from the corrected or clarified award, but only if the correction or clarification is “material” to the challenge. These principles are not obvious to users of arbitration who do not have access to English caselaw, and would be better set out in the legislation.

The law concerning confidentiality and privacy in arbitration proceedings is a perennial issue, and was deliberately omitted from the AA 1996 in favour of allowing the courts to develop the relevant principles by way of the common law. Since then, there have been several significant cases in which the broad principles, including categories of exceptions to confidentiality, have been established. It may now be more user friendly for these basic principles to be set out in a statutory framework, with the detail to be filled in by the courts on a case by case basis.

Finally, the AA 1996 as currently drafted refers only to service of documents by post, and does not reflect modern practice, which invariably involves the use of email for service of documents, and (increasingly) the use of technology for hearings and for the issue of awards. There is a good opportunity to update the AA 1996 and to clarify some of the issues of timing that may arise in connection with electronic service of notices.

You can keep up to date with the Law Commission’s project by e-mailing, and of course via the Practical Law email updates.


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