The Law Commission of England and Wales (‘LCEW’) has published a consultation paper which proposes provisional reforms to the Arbitration Act 1996 (‘the 1996 Act’), the legislation which governs arbitration proceedings in England and Wales.
The paper proposes to reform the 1996 Act in a number of areas which Iain Drummond discusses below.
The 1996 Act does not expressly address confidentiality in arbitration proceedings. However, subject to some exceptions, confidentiality generally applies in practice based on common law. LCEW considered whether the principle of confidentiality should be codified in legislation, but has ultimately opted not to make that recommendation. It noted strong support for confidentiality amongst users but considered that no rule of confidentiality could be absolute and would require the publication of a non-exhaustive list of exceptions.
The approach taken in the Arbitration (Scotland) Act 2010 (‘the 2010 Act’) is different. In Scotland, the rules express a duty of confidentiality which binds the tribunal, arbiter and parties in an arbitration.
Arbitrator independence and disclosure
Independence is the principle that arbitrators have no connection to the arbitrating parties such that they are seen to be impartial. LCEW notes that in certain areas of arbitration, such as those with a smaller pool of arbitrators, complete independence is almost impossible to achieve. For this reason, LCEW decided not to recommend the introduction of a new duty of independence. In Scotland, arbitrators have a duty of independence contained within the 2010 Act (defined as any connection which gives rise to justifiable doubts as to impartiality, again illustrating the importance of impartiality).
Impartiality is the principle that arbitrators are neutral between the arbitrating parties. Section 33 of the 1996 Act imposes an express duty of impartiality upon arbitrators and allows for arbitral awards to be challenged if the arbitrator fails to adhere to this duty. LCEW therefore does not propose any change to this duty.
Disclosure is the principle that arbitrators should disclose any relevant connections that they have. LCEW recognises the importance of arbitrators not just being impartial, but also being seen to be impartial. LCEW provisionally recommends that the 1996 Act is amended to place a continuing duty upon arbitrators to disclose any circumstances which might reasonably give rise to justifiable doubts as to their impartiality.
Women are still around three times less likely to be appointed as arbitrators as men, and LCEW remarks that historically, some arbitration agreements have included phrasing requiring that arbitrators be ‘commercial men’.
Arbitrators are not appointed under contracts of employment and therefore do not enjoy the protections from discrimination based on gender, age, race, disability, sexuality, or other ‘protected characteristics’, provided by the Equality Act 2010.
LCEW therefore proposes that (i) the appointment of an arbitrator should not be challengeable on the basis of a protected characteristic; and (ii) any agreement between parties in relation to an arbitrator’s protected characteristics should be unenforceable. The proposal allows for, in some contexts, parties to agree that an arbitrator does have a particular protected characteristic, such as that they have a different nationality from the arbitral parties, so long as that requirement is a proportionate means of achieving a legitimate aim.
LCEW also confirms that any amendments to the 1996 Act should use gender-neutral language, as has become custom in recent years.
Immunity of arbitrators
The 1996 Act protects arbitrators from liability for anything done in the purported discharge of their functions, unless done in bad faith. This immunity does not currently apply in situations where (i) an arbitrator resigns, even when there is reason to do so, such as a conflict of interest becoming apparent (unless the arbitrator makes an application to the court, which can be costly); and (ii) when a party makes an application to the court which impugns an arbitrator, e.g. an application to remove an arbitrator.
LCEW therefore requests that those who respond to the consultation provide their views to the extent of liability, if any, which should be incurred by arbitrators who resign. LCEW provisionally recommends that immunity should extend to the cost of court proceedings arising out of the arbitration, such as applications to remove an arbitrator.
Court proceedings allow for a claim to be summarily dismissed or decided without issue or a trial. This is known as summary judgement (summary decree in Scotland). The 1996 Act requires arbitration proceedings to adopt procedures which avoid unnecessary delay and expense but does not contain explicit provisions to adopt summary procedure.
Therefore, LCEW provisionally recommends that the 1996 Act is amended to provide for the adoption of summary procedure where appropriate. This would be advantageous to parties seeking to have cases (or defences) which are obviously lacking in merit to be dismissed at as early a stage as possible, thereby mitigating costs.
Challenging the jurisdiction of the tribunal
Generally, an arbitrator only has jurisdiction or authority over parties who have submitted to that jurisdiction. When a party objects to the arbitrator’s jurisdiction, the arbitrator will rule in the first instance, with the party having the option to ask the court to reconsider the point under Section 67 of the 1996 Act, should they remain dissatisfied. Currently, that allows the court to undertake a full re-hearing of the evidence, rather than an appeal on the law only.
LCEW provisionally recommends that a challenge to the jurisdiction of the tribunal under Section 67 should be by way of an appeal rather than a rehearing, in addition to other incidental amendments to Section 67.
Appeals on a point of law
Section 69 of the 1996 Act allows a party to appeal to the courts on a contested point of law in limited circumstances. LCEW notes that some have recommended that this be removed, in order to increase the finality of an arbitral award, whereas others have suggested that Section 69 be expanded to allow the court more opportunity to consider contested points of law arising from arbitrations. LCEW is not persuaded that any change should be recommended at this time.
In Scotland, under the 2010 Act, parties can opt out of allowing the court to have jurisdiction over an appeal based on legal error.
Other areas considered
LCEW has considered a number of other areas, including:
- Appointment of Emergency Arbitrators;
- Section 44 (Court Orders in support of Arbitral Proceedings);
- Section 7 (Seperability of arbitration agreements);
- Appeals from Section 9 (stay of legal proceedings);
- Sections 32 and 45 (court determination of preliminary matters);
- Modern technology;
- Section 39 (power to make provisional awards);
- Section 70 (challenge or appeal: supplementary provisions); and
- Sections 85 to 87 (domestic arbitration agreements).
- The Law Commission of England and Wales (LCEW) has published a consultation paper which proposes provisional reforms to the Arbitration Act 1996. The consultation can be accessed here.
- LCEW’s recommendations have implications for arbitrators and arbitration practitioners.
- Responses are requested by Thursday, 15 December 2022.