Law Commission review of the English Arbitration Act 1996
Almost a quarter of a century after the English Arbitration Act 1996 (the Act) came into force, the Law Commission has announced it is conducting a review of that key piece of legislation.
The Act has undoubtedly played a key role in retaining the position of England and in particular London as a leading destination for commercial arbitrations. Nevertheless, the Law Commission has said it considers that a review is necessary to make sure that the Act is “as effective as possible”.
There has historically been a high level of satisfaction with the Act among practitioners and certainly there does not appear to be a consensus that broad-ranging radical change is needed. It should be said that the Law Commission’s review comes within the context of (and is doubtless driven by) an increasingly pro-innovation culture in the international arbitration community. This has in recent years seen major institutional rules frequently change (and largely converge) and many jurisdictions enact reforms to their domestic legislation to be more supportive and reflective of the current practices of international arbitration. Indeed, the Law Commission expressly cites the latter as being a motivating factor behind the review.
Whilst the Law Commission has not determined the precise scope of its review, as part of its 14th Programme of Law Reform, it received several submissions on areas of the Act which it might include. These areas include issues relating to:
- the power to summarily dismiss unmeritorious claims or defences in arbitration proceedings
- the courts’ powers exercisable in support of arbitration proceedings
- the procedure for challenging a jurisdiction award
- the availability of appeals on points of law
- the law concerning confidentiality and privacy in arbitration proceedings
- electronic service of documents, electronic arbitration awards, and virtual hearings
- the scope for introducing trust law arbitration
The Law Commission has also indicated it is interested to hear whether changes to the Act would make arbitrations less costly or lengthy. That reflects many of the concerns raised by arbitration users as to proceedings’ increasing expense and duration.
We expect that once proposals are published, much of the recommended changes may simply be modernising rather than rebuilding.
For example, the Act does not address confidentiality and privacy in respect of arbitral proceedings, and this was deliberate as the law in this area was unsettled at the time of the Act’s inception. However, since then there has been significant development in case law in this area. Perhaps now is the time for codification of this case law in legislation and to formally do away with the “masquerad[e]” that Lawrence Collins LJ famously quipped about in Emmott v Michael Wilson & Partners Ltd , namely that the legal basis of arbitral confidentiality under English law is an implied contractual term, as opposed to “substantive law”.
There may be an element of opposition to an express provision on confidentiality given that some practitioners have in the past called for more openness and transparency in respect of the arbitral process, citing Lord Thomas of Cwmgieed who argued that the diversion of claims from the court to arbitration “reduc[ed] the potential for the courts to develop and explain the law”. However, given the pivotal importance that parties place on the confidentiality of commercial arbitration, we consider it unlikely that the Law Commission will recommend greater transparency.
A reform of the law concerning trust arbitration would potentially be a welcome development. While the law is largely untested in this area, it has been argued that at present those who create trusts cannot require trustees and beneficiaries to use arbitration, rather than litigation, to resolve disputes. Further, although two or more people can enter into a valid arbitration agreement to settle a trust dispute, any award will not bind other interested parties. Other jurisdictions have sought to remove any such uncertainty by implementing legislation (e.g., Florida, Arizona, Guernsey, Malta, and the Bahamas). Further courts from around the world have begun to demonstrate increased willingness to allow these sorts of disputes to go to arbitration. Amending the Act to make trust arbitration more viable in England could be beneficial and would bring the English legislation in line with current global trends.
One aspect of the proposed review that is likely to prove much more contentious is consideration of rights of appeal on a point of law under s69 of the Act. By some this is currently seen as a standout facet of English law, with England being unusual in granting this non-mandatory right of appeal. Some commentators have however sought to suggest that this appeal route is an unwarranted interference in the arbitral process. This is arguably a somewhat surprising view, given that there is currently no right of appeal in most institutional arbitrations seated in England, as the rules of the major arbitral institutions have excluded s69 appeals (e.g., see article 35(6) of the ICC Rules and article 26.8 of the LCIA Rules).
Whilst appeals on a point of law are available in ad hoc arbitrations, the appeal statistics do not support the need for significant change. In 2018/19 there were only 39 s69 applications, and in 2019/20 that dropped significantly to 22 applications. The success rate of such appeals has in the recent past been around the 5% mark, according to data released by the Commercial Court. There appears to be limited appetite for such appeals where they are available and the appeals that are made are generally unsuccessful. In other words, English arbitral awards appear generally to be reliable and are rarely appealed, let alone overturned, under s69 of the Act. We therefore expect that the ultimate proposals from the Law Commission may not extended to amending s69 of the Act.
The Law Commission will launch the review during the first quarter of 2022 and aims to publish a consultation paper in 2022. It is then likely to publish a final report with its recommendations, perhaps by 2023. Whilst the Law Commission may recommend certain minor modifications, we expect the general thrust of its recommendations to be to keep the framework of the Act largely intact.