This article was featured in Jus Mundi‘s 2024 Arbitration Year in Review, in collaboration with VYAPs, a yearly collection of articles from jurisdictions all around the globe updating you on arbitration-related developments from the previous year.
THE AUTHORS:
Verity Thomson Associate at Stephenson Harwood
Michelle Sum Senior Associate Clifford Chance
Danna Zhang Associate Slaughter and May
Casework Statistics
Two reports published in 2024 by the Commercial Court and London Court of International Arbitration (“LCIA”) summarise arbitration case statistics and trends in England and Wales in 2022-2023.
The Commercial Court Report 2022-2023 (published on 14 March 2024) confirms that matters arising from arbitration still make up a significant proportion (around 25%) of the claims issued in the Commercial Court. The bulk of the arbitration claims issued are:
- Challenges to awards on grounds of jurisdiction under section 67 of the Arbitration Act 1996;
- Challenges alleging procedural irregularity (section 68 applications), with nearly 30% of these applications dismissed on paper under the Commercial Court’s summary procedure; and
- Appeals on points of law (section 69 applications). During 2022- 2023, the court took on average 93 days to grant or refuse permission to appeal. For applications where permission to appeal was granted, the average completion time (from receipt of claim to final decision) was 230 days.
The LCIA Casework Report 2023 reflects a steady growth in referrals over the last 10 years and a return to upward movement following a post-Covid-19 dip in 2021 – 2022. Overall, the LCIA received 377 referrals in 2023, 327 of which were for LCIA arbitration. Parties’ choices of seat and governing law were more varied than in 2022, with cases seated in 16 countries (12 in 2022) and the laws of 27 countries chosen as the appli- cable law (19 in 2022). However, London remained the dominating seat and was chosen in 86% of LCIA arbitrations, whilst 83% of cases applied the law of England and Wales. Transport and commodities cases continue to dominate the LCIA’s caseload, accounting for 36% of cases – a consequence of the ongoing impact of global developments on energy prices and supply chains. The report also notes an increase in appointments of women as arbitrators, standing at 48% of all LCIA Court appointments in 2023. In addition, 96% of cases were international (involving at least one international party) and 79% involved only international parties (no UK parties).
Reforms to the Arbitration Act 1996
The Arbitration Bill was reintroduced into Parliament on 18 July 2024, having previously been lost with the general election called in July 2024. Although the legislative process has restarted, the Bill introduced in July includes changes made during its previous passage.
On 6 November 2024, the Bill was passed by the House of Lords and was presented to the House of Commons. The Bill was then referred to a Second Reading Committee and is expected to receive Royal Assent during 2025.
The Bill seeks to update the Arbitration Act 1996 (the “Act”) in response to the Law Commission’s recommendations published in 2023. Some of the key changes to the Act include:
Law Applicable to the Arbitration Agreement
The Bill introduces a default rule for determining the law applicable to the arbitration agreement in situations where the parties have not expressly agreed on one. Under the new provision, the law of the seat of the arbi- tration will apply to the arbitration agreement when there is no express choice of governing law.
Codification of the Duty of Disclosure for Arbitrators
The Bill codifies the duty of disclosure for arbitrators. It mandates that arbitrators must disclose any “relevant circumstances of which the individual is, or becomes, aware”. “Relevant circumstances” are defined as those which “might reasonably give rise to justifiable doubts as to the individual’s impartiality in relation to the proceedings, or potential proceedings”.
Empowers Tribunals to Issue Summary Awards
The Bill empowers tribunals to issue awards on a summary basis when a claim or issue is deemed to have “no real prospect of succeeding”.
Court Orders in Support of Arbitration
The Bill clarifies the powers of the courts to make orders in support of arbitration, including orders against third parties and orders for compliance made by emergency arbitrators (as defined in 41A of the Bill).
LCIA Introduces EDI Guidelines for International Arbitration
The LCIA’s commitment to gender diversity was reiterated with the publication of its Equality, Diversity and Inclusion (“EDI”) Guidelines for international arbitration in December 2024. The guidelines outline
specific EDI practices and considerations at key stages of the arbitration process, as well as detailing the distinct roles and responsibilities of various stakeholders in promoting EDI in arbitration. Amongst other things, parties and their legal representatives are encouraged to include EDI provisions in arbitration agreements, apply EDI principles when appointing legal teams and selecting expert witnesses and arbitrator candidates, and consider giving advocacy opportunities to junior members of the team. Whilst the guidelines are non-binding, the LCIA encourages their use ‘where feasible’.
Anti-suit Injunctions in Support of Foreign-Seated Arbitration
In UniCredit v. RusChemAlliance, [2024] UKSC 30, 18 September 2024 the Supreme Court dismissed the appeal of Russian company RusChemAlliance (“RCA”) and upheld a final anti-suit injunction granted by the Court of Appeal to restrain Russian court proceedings brought by RCA in breach of a foreign arbitration agreement. The dispute arose in relation to «on demand bonds» issued by German bank UniCredit, which were governed by English law and provided for Paris-seated ICC arbitration (but gave no express choice of law for the arbitration agreement). RCA issued proceedings against UniCredit in the Russian courts seeking payment under the bonds, which led UniCredit to apply to the English courts for an anti-suit injunction arguing that the Russian court proceedings breached the parties’ arbitration agreement.
The sole issue in RCA’s appeal to the Supreme Court was whether the English court had jurisdiction to grant the injunction. The Supreme Court held that, applying the Enka v. Chubb test, there was nothing in the wor- ding of the bonds which excepted the arbitration clause from the choice of English law as the governing law. The fact that the law of the chosen seat may treat the arbitration agreement as governed by its law did not alter this.
The judgment confirms the English courts’ competence to grant anti-suit injunctions where arbitrations are seated outside the jurisdiction. It is also helpful guidance in the context of disputes against Russian parties, not least in the light of Russian legislation empowering the Russian courts to seize jurisdiction in sanctions-related disputes involving a foreign party.
However, the judgment’s impact may be curtailed by upcoming reforms to the Arbitration Act 1996, which are expected to replace Enka with a default rule that, absent an express choice, an arbitration agreement is to be governed by the law of the seat of arbitration.
Privy Council’s Stance on Insolvency Petitions in the Presence of an Arbitration Agreement
In Halimeda v. Maple Ridge and Sian [2024] UKPC 16, 19 June 2024, the Privy Council held that the proper test when the court is deciding whether to make an order for the liquidation of a company is whether the debt on which the application is based is genuinely disputed on substantial grounds. It held that decision of the Court of Appeal in Salford Estates v. Altomart (No. 2) [2014] EWCA Civ 1575, 11 November 2014, was incorrect, finding that there should be no discretionary stay of creditors’ petitions where an insubstantial dispute about the creditors’ debt is covered by an arbitration agreement.
The key issue before the Privy Council was which test ought to be applied by the British Virgin Islands (“BVI”) courts in exercising its discretion to make an order for the liquidation of a company. The Privy Council obser- ved that as a starting point, a creditor’s winding up petition would not trigger a mandatory stay under either Article 8 of the UNCITRAL Model Law on International Commercial Arbitration (2006) or section 9 of the Arbitration Act 1996 because such a petition did not involve the determination of the petitioner’s claim to be owed money by the company.
Accordingly, there was no “dispute”, and a winding up petition did not offend the petitioner’s negative obligation under an arbitration agreement to not have disputes resolved by any court process. Further, the broad considerations underlying arbitration legislation, including efficiency, party autonomy, and non-interference by the courts, were not offended by allowing a winding-up to be ordered where a creditor’s debt was not genuinely disputed on substantial grounds.
The Privy Council stressed that its decision is applicable only to a “generally worded arbitration agreement or exclusive jurisdiction clause”, and that different considerations will arise where the agreement or clause is framed in terms which apply specifically to a liquidation application.
No Sovereign Immunity Shield in ICSID Award Enforcement
On 22 October 2024, the Court of Appeal ruled in jointly-heard appeals in Infrastructure Services (Antin) v. Spain and Border Timbers Limited v. Republic of Zimbabwe [2024] EWCA Civ 1257.
The Court of Appeal ruled that by virtue of Article 54 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965) (“ICSID Convention”), State parties to the Convention have submitted to the enforcement jurisdiction of all other contracting states.
In the underlying decisions, both Spain and Zimbabwe argued that their immunity under the State Immunity Act 1978 deprived the English courts of jurisdiction to register ICSID awards against them. In both cases, the High Court rejected the States’ argument but on different grounds.
The decision of the Court of Appeal resolves the conflict between the underlying High Court decisions. It also brings England and Wales in line with the interpretation of Article 54 of the ICSID Convention by the courts in Australia, New Zealand, the United States, France and Malaysia.
Removal of Sole Arbitrator for Apparent Bias
In H1 and another v W and others [2024] EWHC 382, the Commercial Court removed a sole arbitrator under section 24 of the Arbitration Act 1996 on the grounds of apparent bias.
The arbitration concerned a claim under a film production insurance poli- cy. The arbitration agreement provided for an ‘experienced practitioner in film or television production’, and a sole arbitrator was duly appointed by the British Film Institute. The insurer did not base its challenge on actual
bias, arguing instead that the arbitrator had made remarks which gave rise to an appearance of bias.
The Court applied the Halliburton test for apparent bias, i.e. whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased. The Court held that there could not be justifiable doubts about
the arbitrator’s impartiality based purely upon the degree of professional acquaintance the arbitrator had with the witnesses as such commercial dealings were expected of an experienced practitioner in television programme production, and the parties must be taken to have had this in mind when entering the arbitration agreement.
However, the Court found that the arbitrator had made problematic comments in the second procedural hearing regarding the insured’s witnesses, including remarks that:
- The arbitrator did not “need to listen to [the insured’s expert witness]” because he “[knew] them all personally extremely well on the [insured’s] side”; and
- Would “absolutely believe” the evidence of the insured’s expert on account of him being “one of the top Norwegian producers”.
An observer would conclude that the arbitrator was saying he would accept at face value the evidence of the insured’s expert witnesses because he knew them to be “exceptional people in their fields”, which would prevent an impartial assessment of the evidence. The arbitrator did not merely indicate a legitimate predisposition towards a particular outcome, giving the parties an opportunity to persuade him otherwise. Rather, the arbitrator had given a firm impression of allowing extraneous, illegitimate factors to influence his assessment of evidence which he had not yet heard. This was particularly concerning because the arbitrator was a sole inexperienced arbitrator.
This case serves as a useful reminder of the standard expected of arbitrators when evaluating party evidence in arbitral proceedings.
On a related note, it is worth mentioning that the International Bar Association (“IBA”) released updated Guidelines on Conflicts of Interest in International Arbitration in March 2024. Key updates include expanding parties’ duty of curiosity when challenging arbitrators for issues of conflict (General Standard 4) and an expansion of circumstances which would require disclosure by parties with respect to the arbitrator’s relationships with parties and other relevant persons (General Standard 7).
ABOUT THE AUTHORS
Verity Thomson is an Associate at Stephenson Harwood in their Maritime, trade and offshore team where her practice focuses on arbitration and High Court litigation. She is qualified in Canada and clerked at Canada’s Federal Court of Appeal for Chief Justice De Montigny.
Michelle Sum is a Senior Associate at Clifford Chance with experience in international arbitration and commercial litigation in the technology, financial services and aviation sectors. She is qualified in both England and Wales and Hong Kong.
Danna Zhang is an Associate in the Disputes and Investigations practice of Slaughter and May. She is a dual-qualified disputes lawyer licensed to practice in England and Wales and Denmark and has significant arbitration experience from both jurisdictions.
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