The Arbitration Act 1996: Under review and time for a change

Arbitration remains one of the main forums for resolving construction disputes in England and Wales although not as popular as court proceedings or adjudication. It has the benefit of flexibility and party autonomy – with certain exceptions, the parties can agree the form and procedure of the arbitration. For the arbitration award to be enforceable in the courts in England and Wales, the arbitration must comply with the Arbitration Act 1996.
The UK aims to maintain and enhance its position as a leading destination for international arbitration. By updating the legislative framework, the reforms are intended to make the UK a more attractive venue for arbitration, ensuring that it is aligned with international best practice standards and improving the enforceability of arbitral awards .
The UK is highly regarded as a global prime location for conducting arbitration disputes for several reasons, which contribute to its reputation as a global arbitration hub:

i. It provides a strong legal framework. The current Arbitration Act is considered comprehensive and modern with internationally recognized principles, providing support and regulation to the arbitration process. Including importantly the arbitration agreement and enforcement of awards.

ii. The Judiciary in the UK support the arbitration model adopting a non- interventionist approach in keeping with the ethos of party autonomy while being able to provide support with the enforcement of arbitration agreements and awards.

iii. The Commercial Court and the Technology and Construction Court are specialized and have judges with expertise in arbitration matters ensuring such disputed cases are handled efficiently.

iv. London has a breadth of legal and professional arbitration expertise, with many leading law firms, barristers, and arbitration practitioners with extensive experience in handling complex international disputes. This a source of great attraction to those seeking high-quality arbitration services.
v. Strong support to the arbitral process is provided by Arbitration Institutions: Institutions like the London Court of International Arbitration (LCIA) and the Chartered Institute of Arbitrators (CIArb).

vi. A strong supportive infrastructure is found in London with its state-of-the-art facilities for arbitration hearings, including specialized venues that meet the needs of international arbitrations, which include additional supports services, for example, translation, transcription, and technical support, which are essential for conducting efficient arbitration proceedings.

vii. London is perceived as being a neutral and impartial forum for resolving international disputes, which provides a level of comfort to international parties seeking a fair and unbiased resolution process.

viii. Parties largely choose English law as the governing law in international contracts due to its predictability and well-developed jurisprudence, which provides clarity and stability for international arbitration.

ix. As a signatory to New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, awards made in the UK are enforceable in over 160 countries worldwide giving parties choosing to arbitrate in England an important advantage.

x. London is an international city making it easily accessible for parties and arbitrators from around the world ensuring smooth conduct of international arbitration proceedings. The UK’s time zone (GMT) is convenient for coordinating between parties and practitioners from various regions, including Europe, the Americas, and Asia.

There is currently an Arbitration Bill before the UK Parliament to amend the Act. It is expected that a new UK Arbitration Act 2024 will receive Royal Assent in mid-2024 and come into effect shortly thereafter. This article highlights the key changes in the Arbitration Bill.

What are the key changes in the Arbitration Bill?
The 2024 Act will govern arbitrations which have their juridical seat in England or Wales. The bill is intended to update the current Arbitration Act 1996 to ensure that it remains fit for purpose. The seven most significant changes for arbitral users in the Bill are as follows: –

  1. A new rule to determine the law governing the arbitration agreement in the absence of party agreement. In arbitrations governed by the Arbitration Act 1996 and the proposed 2024 Act there is a distinction between the law that applies to the arbitration and the juridical seat. The new default rule is that the law of the juridical seat applies to the arbitration unless the parties agree otherwise. This rule will apply to all arbitration agreements whatever their date but will not apply to arbitrations or court proceedings commenced before the new default rule comes into effect. This remains subject to any transitional or saving provision that may be made in relation to this new rule.
  2. A new power of summary disposal is introduced enabling claims, defences or issues, to be dismissed on a summary basis if a party has ‘no real prospect of succeeding’. Efficiency is objective particularly involving financial institutions handling uncomplicated debt claims.
  3. The ambiguities in the current law have also been addressed in relation to third party orders. The court’s powers under Section.44 is clarified, parties that are not parties to the arbitration proceedings. The court orders in support of arbitration can be made against third parties The matters which the court can make orders about in relation to third parties are:
    o Taking of witness evidence
    o Preservation of evidence
    o Orders relating to relevant property
    o Sale of goods
    o Interim injunctions
    o The appointment of a receiver
  4. Under the bill the powers of emergency arbitrators align with those of regular arbitrators, which includes the authority to issue peremptory orders and application for court enforcement in cases of non- compliance.
  5. An arbitrator’s duty to disclose any potential conflicts of interest is codified by the bill. The common law duty is based on what might reasonably give rise to justifiable doubts as to their impartiality.
  6. A revision of Section 67 shall limit the scope for challenges to the arbitrator’s jurisdiction before the court where a party has objected during the arbitration and the arbitrator has ruled on jurisdiction. Such challenges will now be more akin to an appeal rather than a full rehearing, as they currently are, since:

i. No new grounds of objection are permitted, unless unknown to and reasonably undiscoverable by the applicant.
ii. No new evidence will be admitted.
iii. Evidence will not be re-heard, save in the interests of justice.

  1. The bill provides an extension to arbitrators’ immunity, in order to protect arbitrators and uphold impartial decision – making, by ensuring arbitrators are not liable:

i. For their resignation, unless the resignation is proved to be unreasonable.
ii. For the costs of any application for their removal as arbitrator, unless they are proven to have acted in bad faith.

The importance of the codification of aspects of an arbitration dispute, such as the duty of impartiality and disclosure by arbitrators, were highlighted in the decision handed down by the Supreme Court in November 2020.The following key points should be noted: –

  1. Impartiality and Bias: The Court reaffirmed the fundamental principle that arbitrators must act impartially. This duty is crucial to maintain the integrity of the arbitration process. The decision emphasized that even the appearance of bias must be avoided to ensure confidence in the fairness of the process.
  2. Duty of Disclosure: The ruling underscored the importance of transparency in arbitration by emphasizing the arbitrator’s duty to disclose circumstances that might give rise to justifiable doubts about their impartiality. This includes disclosing multiple appointments in related arbitrations, which might create a perception of bias.
  3. Multiple Appointments: In the specific context of this case, the Court dealt with the issue of an arbitrator receiving multiple appointments in related arbitrations, which was not disclosed. The Court held that while multiple appointments are not inherently problematic, failure to disclose them can lead to justifiable doubts about the arbitrator’s impartiality.
  4. Timing of Disclosure: The decision highlighted that the duty of disclosure is ongoing. This means arbitrators must continuously evaluate whether new circumstances arise during the arbitration that should be disclosed.
  5. Consequences of Non-Disclosure: The Court clarified the potential consequences of failing to disclose relevant information. Non-disclosure alone does not automatically indicate apparent bias; however, it is a significant factor to consider. The overall context, including the nature and extent of the undisclosed information and the reasons for non-disclosure, will influence the determination of bias.
  6. Objective Test for Bias: The Court reiterated the objective test for apparent bias, which considers whether a fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility of bias. This test aims to ensure that the assessment is grounded in reasonableness and objectivity.
    Overall, the Halliburton v. Chubb decision has been pivotal in shaping the standards and expectations for arbitrators’ conduct, particularly concerning impartiality and disclosure, reinforcing the need for transparency and fairness in arbitration proceedings.
    In conclusion, the revised Act will preserve the status in arbitration disputes of England, particularly London, as a favoured location for arbitration due to its robust legal framework, pro-arbitration judiciary, wealth of expertise, supportive infrastructure, perceived neutrality, and global connectivity. For the parties such factors collectively enhance the efficiency, fairness, and effectiveness of arbitration proceedings conducted in the UK.

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