25 years of the Arbitration Act: Time for reform?

2021 marks the 25th anniversary of the Arbitration Act 1996. Since it came into force, the Arbitration Act has been hailed for making London an attractive destination for international arbitration. However, as competing jurisdictions take steps to modernise their own arbitration legislation, is it time for the Arbitration Act to be updated? In March, the Law Commission highlighted the Arbitration Act as a potential area of reform in a consultation seeking ideas for its 14th Programme of Law Reform. While it remains to be seen what reforms will be made, this is a clear statement of intent from the Law Commission that reform is on the agenda.

Introduction

2021 marks the 25th anniversary of the Arbitration Act 1996 (Arbitration Act). Since it came into force, the Arbitration Act has been hailed for making London an attractive destination for international arbitration. However, as competing jurisdictions take steps to modernise their own arbitration legislation, is it time for the Arbitration Act to be updated?

On 24 March 2021, the Law Commission published a consultation seeking ideas for its 14th Programme of Law Reform, with the Arbitration Act highlighted as a potential area of reform. The Law Commission noted the review is driven by a desire to "maintain the attractiveness of England and Wales as a 'destination' for dispute resolution and the pre-eminence of English Law as a choice of law." This is particularly timely, given a recent poll, which revealed that Singapore now rivals London as the most popular seat for international arbitration, with Hong Kong coming in at a close second. But, what, if any, reforms should be made?

What is being proposed

The Law Commission has noted that stakeholders have suggested that the scope of a review of the Arbitration Act could be widened to include the following:

  • The procedure for challenging a jurisdiction decision, and whether it should be easier to appeal awards.
  • Ensuring legal resilience (for example, by permitting parties to serve notice by email).
  • Outlining remedies for delays in the arbitral process.
  • Clarifying the differences between the enforcement procedure for Part I and New York Convention awards.

How other jurisdictions have modernized arbitration legislation  

There has long been concerns that rival jurisdictions to London, such as Singapore, Hong Kong, Paris, and Dubai are "catching up" with London, and that part of any "catching up" has been achieved through modernising those jurisdictions' arbitration legislation.

For example, in December 2020, Singapore updated its International Arbitration Act (IAA). In particular, it introduced a new Section 12(1)(j) of the IAA, which gives tribunals broad powers to make orders or give directions to any party for enforcing any obligation of confidentiality (i) that the parties to an arbitration agreement have agreed to in writing, whether in the arbitration agreement or in any other document; (ii) under any written law or rule of law; or (iii) under the rules of arbitration (including the rules of arbitration of an institution or organisation) agreed to or adopted by the parties. As electronic transmission of documents has become even more pervasive as a result of the pandemic, Section 12(1)(j) of the IAA may be seen as a boost to the protection of confidential information.

Similarly, in 2011, Hong Kong updated its Arbitration Ordinance (Cap 609) (AO) to include an express duty of confidentiality. This prohibits parties to Hong Kong-seated arbitrations from disclosing any information relating to the arbitral proceedings or any arbitral award. The updated AO also set out a clearer and more comprehensive system for the enforcement of domestic arbitral awards (or Mainland awards) and New York Convention awards.

Other possible areas of reform

The Law Commission has considered reform of the Arbitration Act before. As part of its 13th Programme, the Law Commission identified summary procedures in arbitration and trust law arbitration as potential reform areas. The Law Commission decided not to take these potential reforms forward because it was unable to secure support in time for publication of the programme due to the "cross-government" nature of the work.

The Law Commission has indicated that it would still like to know whether stakeholders would support summary judgment-style procedures under the Arbitration Act. It also continues to examine the introduction of trust law arbitration, which is not possible under the current law.

What else may we expect stakeholders to suggest during the consultation?

A common criticism of the Arbitration Act is the high cost of commencing proceedings. In fact, in a recent survey, 67 percent of respondents identified costs as the worst feature of arbitration. One way of reducing costs could be the introduction of a summary judgment-style procedure, such as that available in International Centre for Settlement of Investment Disputes (ICSID) arbitrations through ICSID Arbitration Rule 41(5). Such a procedure would allow arbitrators to determine unmeritorious claims quickly without undertaking time-consuming and costly proceedings. It also appears to remain on the Law Commission's radar.

As set out above, certain other jurisdictions have taken steps to codify confidentiality obligations in their arbitration legislation. While there is a delicate balance to be achieved between confidentiality and transparency, confidentiality is routinely identified as a major draw of international arbitration. The Arbitration Act does not impose obligations of confidentiality. Instead, the nature of the obligation of confidentiality (and any exceptions thereto) has been developed by precedent over the past 25 years. Notwithstanding this, users of London-seated international arbitrations (particularly those unfamiliar with a common law system) may benefit from statutory guidelines on the scope of their confidentiality obligations. In circumstances where other jurisdictions have sought to balance the competing concerns of confidentiality and transparency through clear statutory guidelines, any clarity could promote London further as a desirable location for commercially sensitive disputes.

A further welcome area for clarification may be how Section 44(5) of the Arbitration Act interacts with emergency arbitrator provisions, which many arbitral institutions have included in their rules over the past 25 years. Pursuant to Section 44(5) of the Arbitration Act, a court may intervene only if and to the extent that the arbitral tribunal and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively. When Section 44(5) was drafted, relief from emergency arbitrators did not exist as a concept. Now, such relief is enshrined in major institutional rules. For example, Article 9B of the London Court of International Arbitration (LCIA) Rules 2020 provides that in case of emergency at any time prior to the formation or expedited formation of a tribunal, any party may apply to the LCIA Court for the immediate appointment of a temporary sole arbitrator to conduct emergency proceedings.

When emergency arbitration is available, can relief from the courts be sought? While the LCIA Rules 2020 attempted to clarify the position, by stating at Article 9.13 that Article 9B "shall not be treated as an alternative to or substitute" for the exercise of the right to seek relief from the courts, this does not and cannot pre-empt how the English courts would interpret Section 44(5) in the context of the availability of emergency arbitration. Given the clear utility of emergency arbitration but also the attractiveness of the supervisory jurisdiction of the English courts in London-seated arbitrations, an amendment to Section 44(5) of the Arbitration Act to clarify that court support may be sought where necessary may be well received.

Next Steps

The deadline for responses to the Law Commission's consultation is 31 July 2021. The Law Commission plans to publish its final programme during the first half of 2022. While it remains to be seen if the consultation will lead to concrete reform, this is a clear statement of intent from the Law Commission that reform is on the agenda.

Authored by Scott Macpherson and Mariam Suleiman

Contacts
Kieron O'Callaghan
Partner
London
Nathan Searle
Partner
London
Scott Macpherson
Associate
London

 

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