Amendments to the Arbitration Act 1996

An Arbitration Bill was introduced to the House of Lords on 21 November 2023.

The purpose of the Arbitration Bill is to update the law on arbitration in England, Wales and Northern Ireland by way of amendments to the Arbitration Act 1996 (the "Arbitration Act").

The amendments in the Arbitration Bill are based on recommendations from the Law Commission, following a review that the Law Commission conducted of the Arbitration Act at the request of the Ministry of Justice. The Government accepted all of the Law Commission's recommendations and it is therefore expected that the amendments set out in the Arbitration Bill will largely be enacted into law, and incorporated into the Arbitration Act, at some point in 2024.

The proposed principal amendments to the Arbitration Act are as follows: 

Law applicable to an arbitration agreement

• A proposed new section 6A(1) of the Arbitration Act provides that the law governing an arbitration agreement will be either (i) the law expressly agreed by the parties in the arbitration agreement or (if not agreed) (ii) the law of the seat.

• This replaces the common law position in Enka v Chubb (2020) which provides that, in the absence of an express choice of law governing the agreement to arbitrate, the agreement to arbitrate will be governed by the law chosen to govern the main contract unless that law invalidates the agreement to arbitrate, in which case the arbitration agreement will be governed by law most closely connected (which is usually the law of the seat).
• By making this amendment, any law chosen to govern the main contract will not count as an express choice of law to govern the agreement to arbitrate.

The arbitral tribunal 

• An arbitrator's general duty of disclosure, which was recognised by the Supreme Court in Halliburton v Chubb (2020), is codified in a proposed new section 23A of the Arbitration Act.
• The proposed new section 23A requires an arbitrator to disclose any "relevant circumstances" of which they are aware, or ought reasonably to have been aware, as soon as reasonably practicable which may give rise to justifiable doubts as to their impartiality. This applies when an arbitrator is approached with a view to an appointment and is also a continuing duty which applies after they have been appointed.
• Section 24 of the Arbitration Act is to be amended to provide that an arbitrator shall not be liable for their costs of an application to court for their removal as an arbitrator unless they have acted in bad faith.
• Section 25 of the Arbitration Act is to be amended so that an arbitrator will not be subject to any liability arising from their resignation (e.g., for fees/expenses already paid to them) unless the resignation can be shown by a complainant to be unreasonable.

Jurisdiction of tribunal 

• Section 32 of the Arbitration Act allows a party to challenge the arbitral tribunal's jurisdiction to the English High Court as a preliminary point.
• The proposed amendments to section 32 make it clear that it will only be possible for a party to bring such a challenge to the English High Court if the arbitral tribunal has itself not ruled on its own jurisdiction.
• These amendments will not affect a party's ability to apply to the English High Court to challenge any award made by the arbitral tribunal, on the basis that the Tribunal lacked jurisdiction under Section 67 of the Arbitration Act.
• Section 61 of the Arbitration Act will also be amended to give a Tribunal the power to award costs, even if the arbitral tribunal or the English High Court has determined that the arbitral tribunal does not have jurisdiction.

Arbitral proceedings and powers of the court 

• Whereas under the Arbitration Act there was previously not an express power for arbitrators to summarily resolve proceedings, there is in court proceedings (Summary Judgment under Part 24 of the CPR) and various arbitral institutions (the LCIA, ICC etc).
• A proposed amendment to section 39 of the Arbitration Act provides that the tribunal may make an award on a summary basis (on application). The relevant test will be similar to that provided for in Part 24 of the CPR i.e. that a party has "no real prospect of success" on the claim, defence or issue. As the test is in line with that for Summary Judgment, existing case law will be instructive in such matters.
• The procedure will be dealt with on a case by case basis by the arbitrator and the hope is that matters will be determined more expediently, with awards determining cases early being less exposed to challenge.

Powers of the English High Court in relation to an award 

• Under section 44 of the Arbitration Act the court can make orders in support of arbitration proceedings in relation to disclosure, evidence and interim injunctions, amongst others.
• The new amendments provide that orders that the court can make in support of arbitration can also be made against third parties. This is expected to accommodate orders against third parties who hold relevant evidence or against banks holding relevant funds and brings the Arbitration Act in line with court proceedings. It is further confirmed that third parties have the full rights of appeal (i.e., they do not need the court's consent to appeal a section 44 decision).

Rights of Appeal

• The Bill proposes to bring in a revised framework for challenges to the tribunal’s jurisdiction under section 67 of the Arbitration Act. Previously challenges to jurisdiction entailed a full rehearing with evidence, even if the issue had been previously considered by an arbitral tribunal.
• Under the proposed changes, challenges to jurisdiction will now be more similar to an appeal: no new grounds of objection or new evidence will be admitted, unless it was not reasonably possible to put these before the tribunal; and evidence will not be reheard, unless the same is necessary in the interests of justice).
• This is in effect a departure from the Supreme Court case of Dallah v Pakistan (2010), where a jurisdictional challenge was fully re-heard despite it having been heard by an arbitral tribunal previously.

No codification of Confidentiality

• One notably absent change in the bill, which had been considered by the Law Commission, was the codification of the position on the confidentiality of arbitrations. The Law Commission decided not to include such a provision in the Bill and felt that confidentiality could continue to be dealt with in a more pragmatic and flexible manner via case law.

Conclusion

We welcome the Bill's proposed changes, which are eminently sensible. The changes are not radical, but in our view they did not need to be as the Act was largely functioning well even after some 25 years. We expect that the changes will bring the act more in line with the Court procedures, plug some holes in the Act and afford greater clarity to our clients.