THE AUTHORS:
Louis Peacock-Young, Associate at Stewarts
James Coen, Associate at Stewarts
Described by Lord Mustill as a “complete spring clean” of English arbitration law, the Arbitration Act 1996 (the “Act”) largely came into effect in January 1997 following a significant gestation. Now a young adult, having recently celebrated its quarter-century, the Law Commission has announced it will review the Act. This blog post reflects on the Act’s history and where future changes might lie.
A Potted History
The Act repealed its 1979 predecessor entirely, its genesis inspired by the development of arbitration practice in England and Wales throughout the 1980s. Efforts were further spurred on in 1985 with the creation of the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”). The subsequently convened Departmental Advisory Committee on Arbitration Law (the “DAC”) considered whether the Model Law should be adopted wholesale into English law. The DAC recommended against such a wholesale adoption in June 1989, the result being that the Act, while significantly influenced by the Model Law, differs from it in some key respects.
The Department for Trade and Industry circulated a draft statute in 1993 based largely on the 1979 Act. That draft was apparently not well-received by the commercial arbitration community, according to John Uff QC as mentioned during the recent conference of practitioners convened to celebrate this silver jubilee.
Following that circulation, and the gradual erosion of the Conservative government’s 21-seat majority, there developed a cross-party appetite for cooperation on passing difficult legislation. This allowed closer cooperation of the DAC (whose 1996 and 1997 reports are still used by the English courts in interpreting the Act) and the department’s draftsman, Geoffrey Sellers. Thus the Act was born, a piece of legislation which, according to Lord Saville, broke with parliamentary tradition by making narrative sense when read from beginning to end.
Progress So Far
There is little doubt that the Act underpins the English courts’ consistent and strong support of both the practice and procedure of arbitration within their supervisory jurisdiction and the awards arbitral tribunals render. To that extent, the Act has played a significant role in the development of London as a key market for arbitration, and why contracting parties so often chose to arbitrate in the city under a range of institutional rules.
From the perspective of legal practitioners working for their international clients – from London and elsewhere, the Act must surely be considered a resounding success. Indeed, the 2021 Queen Mary University of London / White & Case International Arbitration Survey said London remains the preferred seat for arbitration (jointly with Singapore – a first for that jurisdiction). This must be, in part, interpreted as a vote of confidence by parties and their legal advisers that the supervisory role of the English courts, founded in the Act, remains highly attractive.
But is this a complacent attitude? Commentators appear to be united that the Act is the best arbitration act this jurisdiction has ever seen. Whether it’s the best it could be is a different question and subject to debate. As the judge in charge of the English Commercial Court, Dame Sara Cockerill, stated at a recent conference: “London does well as it does not rest on its laurels. Good enough is not good enough.”
Reform? Two Candidates
So, where do the Act’s deficiencies potentially lie? And could they prove ripe for reform? Two potential areas (by no means an exhaustive list) are outlined as follows.
1) Court Powers In Support Of Arbitral Proceedings Against Third Parties
The intended effect and scope of section 44 of the Act, which sets out the powers of the court to make orders in support of arbitral proceedings, has provided fertile ground for debate. Arguments have arisen about whether the jurisdiction under section 44(2) can be exercised against a third party to an arbitration agreement, with answers both for and against.
On the one hand, and in the context of considering the indications as to its application to third parties contained “in section 44 itself”, the English court has stated:
“None of these indications [in section 44 itself] is conclusive, but together they suggest […] that the section is simply not concerned with applications against non-parties” (Cruz City v. Unitech and Burley [2014] EWHC 3704 (Comm), Mr. Justice Males at [48]).
Indeed, it was also later stated in a subsequent case that “the wording is more suggestive of applications confined to the arbitration parties than otherwise” (DTEK Trading SA v. Morozov [2017] EWHC 94 (Comm), Sara Cockerill QC (as she then was) at [42]).
On the other hand, the courts have recognised “considerable force in the arguments advanced in favour of the view that the jurisdiction under s.44 could, in an appropriate case, be exercised against a non-party” (A & Anor v. C & Ors (Rev 1) [2020] EWHC 258 (Comm), Mr. Justice Foxton at [18]). The Court of Appeal subsequently allowed an appeal in that case for the taking of evidence of a non-party witness, but did so in respect of section 44(2)(a) only, noting that strong arguments existed either way, and potentially applied differently to the different sub-sections of section 44(2) (A & B v. C, D & E [2020] EWCA Civ 409).
These decisions concerned three (potentially) useful arbitration-supportive measures, which could be attractive to parties, albeit they might deter others. Those are, respectively:
- a freezing order in aid of enforcement of a London arbitration award against subsidiaries of the award debtor against whom no substantive claim was asserted;
- an application seeking permission to serve an Arbitration Claim Form out of the jurisdiction (which Form was seeking an order to preserve and allow inspection of an original version of a disputed document); and
- an application for an order for the taking of evidence from a non-party.
But while ambiguity and judicial questions remain over the application of section 44(2) to third parties, there is a possible limit on its usefulness to parties. Review and, perhaps, reform of this section may be expected of the Law Commission.
2) Early Dismissal Of Unmeritorious Claims Or Defences In Arbitral Proceedings
A gap in the Act, which does not expressly address the summary disposal of claims, has been recognised for some time. This is a matter which some institutions have been increasingly seeking to address – a notable example can be found in Article 22.1(viii) of the LCIA Arbitration Rules (2020), which introduced an Early Determination procedure, akin to a High Court-style summary judgment process.
Some arbitrations have taken the view that the Act and various institutional rules appear to be permissive of summary judgment procedures (See, 21(2) ICC Intl Ct Arb Bull 34 (ICC Case 11413), and Travis Coal v. Essar Global [2014] EWHC 2510 (Comm), para. 50, which refers to the tribunal’s decision to entertain a summary judgment application – which was not a decision that exceeded the tribunal’s powers, the English court found). However, a reluctance on the part of tribunals to employ summary judgment-style processes for the early disposal of unmeritorious claims or defences has been noted by commentators. There is a perceived risk that such an award would be subject to an enforcement challenge or an action to set it aside for procedural irregularity.
In this regard, it seems a tribunal’s duties under the Act, including a duty to give each party a reasonable opportunity to put its case and deal with that of its opponent, and the attendant risk of challenge, may temper the willingness of tribunals to adopt any summary judgment procedures they may theoretically have at their disposal.
This all remains open to interpretation, but an argument persists that parties considering how to agree to resolve their disputes will need to consider the cost implications of being subject to potentially unmeritorious arbitral proceedings, set against the ability of the courts to strike out such claims. The Law Commission says the power to dismiss unmeritorious claims is a possible area of reform.
The Rest Of The Field
There are, of course, other candidates for consideration.
For example, the basis of confidentiality in arbitration, which the Act did not seek to address, is another discussion topic close to practitioners’ hearts. It remains a tricky area to navigate, with arbitral confidentiality often depending upon the context in which it arises and on the nature of the documents at issue (See, e.g., Emmott v. Wilson and others [2008] EWCA Civ 184, para. 107). Scotland and Singapore have codified confidentiality protections in relation to arbitrations, and Australia operates an opt-out system. France is another notable case study – while an express confidentiality obligation exists under French law for domestic arbitrations, this does not extend to international arbitrations. Therefore, international parties that want to ensure confidentiality must do so expressly by entering into a confidentiality agreement. Might England and Wales follow any of these jurisdictions?
Some other notable areas which could be in contention for reform include appeal on a point of law under section 69 of the Act, challenges on the basis that the tribunal lacks jurisdiction under section 67 of the Act, disclosure and disclosure duties of the arbitrators, and the adoption of a gender-neutral language.
The Law Commission has targeted late-2022 for the release of a consultation paper, but given the volatile politics of the day, the review might not be at the top of many politicians’ agendas. Nevertheless, now is an opportunity to consider reform. But the practical quality of the Act is proven, and even at this early stage, wholesale root-and-branch change of the Act should not be expected.
ABOUT THE AUTHORS
Louis Peacock-Young is an Associate in Stewarts’ International Arbitration team. He has acted for claimant and respondent clients in arbitrations relating to disputes arising in Europe, Southeast Asia, the Middle East, the Americas and Africa on matters in the energy, infrastructure, construction and cryptocurrency sectors. He has experience acting in arbitrations under ICC, SIAC, LCIA and DIA rules.
James Coen is an Associate in the International Arbitration team at Stewarts. He works for a range of clients (UK-based and international), including oil & gas sector corporates, international insurer businesses, and H- and UHNW individuals. James has a growing experience in conducting cases for claimants and respondents under the rules of the LCIA, the ICC, the SCC, and the SAC (formerly SCAI), and also for performing standalone risk-advisory work for key clients.
