On 6 September the Law Commission published its final report and recommendations on reforms to the Arbitration Act. The full report is available here.
Below follows a non-exhaustive summary of some of the key changes:
Statutory Rule on Governing Law of an Arbitration Agreement
English law has developed common law rules to determine which law governs an arbitration agreement. These rules were summarised by the UK Supreme Court in Enka Insaat ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38, and largely confirmed in Kabab-Ji SAL v Kout Food Group [2021] UKSC 48. Broadly speaking, absent an agreement to the contrary the choice of law of the main contract would also apply to the arbitration agreement.
The proposed new Section 6A would alter that framework for agreements post-dating the new Act becoming law. The new Section 6A still recognises the parties’ positive choice of governing law in the arbitration agreement as determinative. Failing such choice, however, the law of the seat will be applied as the governing law.
Statutory Duty of Arbitrator Conflict Disclosure
The Report proposes a new section 23A “Impartiality: duty of Disclosure”. This will be mandatory and will recognise an ongoing duty of disclosure (beginning as soon as a person is approached in relation to a possible arbitrator appointment) of “relevant circumstances” that might reasonably give rise to justifiable doubts as to the individual’s impartiality in relation to the proceedings, or potential proceedings. Further, the proposed amendment to the Arbitration Act makes provision for deemed knowledge: “an individual is to be treated as being aware of circumstances of which the individual ought reasonably to be aware.” This change aligns with reforms recently agreed to arbitrator disclosure in the context of ISDS arbitrations, as discussed in a previous post.
Arbitrator Immunity (removal applications and resignations)
Where a party applies to the court to remove an arbitrator, the arbitrator is joined as a party to the proceedings under section 24. As Lord Hodge noted (at 111) in Halliburton v Chubb [2020] UKSC 48 in the context of arbitrator challenges for non-disclosure “the arbitrator might, depending on the circumstances, face an order to meet some or all of the costs of the unsuccessful challenger or to bear the costs of his or her own defence.” A new subsection 24(5A) alters this position such that an arbitrator will not be liable for the parties’ costs for a removal application brought pursuant to section 24 of the Act absent bad faith.
Amendments to various provisions of the Arbitration Act, in Clause 4 of the Bill will ensure that an arbitrator will not be liable for resignation, unless demonstrably unreasonable, but this is subject to the court retaining the power to order a tribunal member to repay fees or expenses already paid.
Express Power to Issue Summary Arbitral Awards
By a new proposed non-mandatory section 39A, arbitrators will be able to make an award on a summary basis on application by a party where the opponent’s claim or defence has no real prospect of success. The precise procedure to be followed, however, rests with the arbitral tribunal to decide on consultation with the parties.
Changed Framework for s. 67 Challenges to Awards for Lack of Jurisdiction
In Dallah v Pakistan [2010] UKSC 46, the UK Supreme Court ruled, among other things, that section 67 challenges to an award for lack of jurisdiction were by way of a full rehearing, even if the tribunal had held a full hearing on the same matters.
The proposed amendments to section 67 introduce a power for rules of court establish a new section 67 procedure.
The subject matter for such rules is to preclude the raising of a new ground to contest jurisdiction not raised before the Tribunal and which was either known or could, with reasonable diligence, have been known to the applicant. Similarly, the court will not “hear” new evidence that was known or could have been known to an applicant when contesting jurisdiction before the Tribunal. The draft Bill’s references to evidence being “heard” leave unclear whether the intent is to make documentary evidence be subject to a similar rule.
A greater role for the courts in preliminary determination of jurisdictional and legal issues
Although characterized as amongst the “miscellaneous minor amendments” there are two further changes of note which may lead to a significantly greater role for the courts in English-seated arbitrations. Currently, if the parties to an arbitration agree, or the arbitral tribunal so orders, the parties can come to the court for a determination of jurisdiction (section 32), and/or determination of a point of law (section 45). Rather than fighting such battles twice (once before the arbitral tribunal and then again before the courts as challenges to awards), these provisions provide a potential mechanism for procedural efficiency. What the draft Bill removes are the current barriers where permission must be sought from the court by application of a series of strict tests. With that bar removed, and with the rules around section 67 challenges changing, it may be that more and more parties choose to have jurisdictional issues for their arbitrations determined in the courts.
Comment
Naturally, it remains to be seen what amendments will be made to the Bill while it goes through Parliament. Provisionally, though, the changes achieve a balance between continuity with the current law on one side, and simplification and codification on the other.