New government pursues Law Commission's recommendations to modernise the Arbitration Act

Amongst the hugely ambitious legislative programme heralded in the new Labour government's first King's Speech are plans to reform arbitration in England and Wales, recognising the important role arbitration plays in the UK's economy and invisible exports. 

The Arbitration Bill

The reforms, contained in the government's Arbitration Bill, are based on the Law Commission's 2023 recommendations for targeted reform of the Arbitration Act 1996 (the Act), and will be included in the first cycle of legislative bills put before Parliament.

The arbitration-friendly provisions in the Act have long seen England and Wales recognised as a global leader for international arbitration (directly contributing at least £2.5 billion in arbitration and legal fees to the British economy)¹ but competition from other jurisdictions is growing. For example, Singapore, Hong Kong, Sweden and Dubai, have all recently enacted amendments to their arbitration legislation in a bid to attract more arbitration business. 

The new government's response is the Arbitration Bill, which intends to modernise the Act to "support more efficient dispute resolution, attract international legal business, and promote UK economic growth".²

Key changes made by the Bill

In its 2023 report, the Law Commission considered what amendments were needed to ensure the Act remained fit for purpose and promoted the status of England and Wales as a leading destination for commercial arbitration. It concluded that the Act worked well and rejected the need for "root and branch" change, but nevertheless recommended a package of reform comprising "a few major initiatives" alongside a number of minor corrections.³

A number of those recommendations are now included in the Arbitration Bill:

1. Clarifying the position on governing law in arbitral proceedings – The Bill introduces a new provision clarifying that the governing law of arbitration agreements shall be the law of the seat of the arbitration, unless the parties expressly agree otherwise.
2. Enhancing powers for arbitrators where claims have no real prospect of success – The Bill introduces an express power for arbitrators to make awards on a summary basis where the claim(s) in question have no real prospect of success. This power is subject to the parties' express right to exclude such a power in their arbitration agreement.
3. Scope for further amendments to the rules on challenging arbitral awards – The Bill includes an express invitation to the Civil Procedure Rules Committee to consider amendments to the Civil Procedure Rules relating to challenges to arbitration awards under section 67 of the Act. These challenges are based on an arbitral tribunal's lack of substantive jurisdiction, and in particular prohibit a challenging party from raising a new objection or presenting new evidence before the court unless it can demonstrate that such objection or evidence could not have been raised or put before the arbitral tribunal with reasonable diligence.
4. Emergency arbitration – The Bill empowers the court to make orders in support of emergency arbitrators.
5. Disclosure of arbitrators' duties of disclosure – The Bill codifies the common law duty on arbitrators to disclose circumstances that might give rise to justifiable doubts about their impartiality.
6. Strengthening arbitrators' immunity – The Bill strengthens the immunity of arbitrators against liability for resignation and applications for removal.

Scope for further improvement?

As we identified in our previous article (English Arbitration Act 1996 Law Commission Final Report: the missing pieces of the puzzle ? (ashurst.com)) the Law Commission did not take the opportunity to recommend legislative reform in relation to some aspects that were considered. For example, it:

1. Decided not to codify the position as to the confidentiality of arbitral proceedings. Parties will need to continue to be aware of the wide-ranging approaches to confidentiality and the important exceptions afforded in the arbitral rules they select.
2. Decided not to propose any new legislative framework to prohibit discrimination within arbitral proceedings, instead preferring for this to be addressed by arbitral institutions' codes of conduct.

Although it does not include a number of the reforms first considered by the Law Commission, the Bill is a welcome step forward in ensuring the continued attractiveness of the UK as a seat for arbitrations.

^{1. FINAL - 17/07/24 King's Speech 2024 background briefing final GOV.uk.docx (publishing.service.gov.uk)}

^{2. FINAL - 17/07/24 King's Speech 2024 background briefing final GOV.uk.docx (publishing.service.gov.uk), page 35}

^{3. Law Commission Documents Template (cloud-platform-e218f50a4812967ba1215eaecede923f.s3.amazonaws.com)}