Updating the Arbitration Act ensures law remains a valuable export
In 2021, the Ministry of Justice asked the Law Commission of England and Wales to carry out a review of the Arbitration Act 1996. The purpose of the review was to ensure that our world-renowned arbitration laws remain world-leading and fit for purpose in a changing business landscape.
Following a consultation and review, a draft Arbitration Bill was placed before Parliament in September 2023, proposing measures to update the law and modernise our arbitral framework. The Bill was dropped following the election announcement and had to be brought before Parliament again in a revised state in July.
Fortunately, the Bill has since made swift progress. On 11th September, the Arbitration Bill completed the committee stage as promised by Lord Ponsonby, the Bill’s sponsor in the House of Lords, and it now moves to the report stage.
The Law Society has played an instrumental role in promoting the Bill and facilitating discussion, debate and input into the possible changes to the Act. The extent of cooperation between the political parties has also been notable, with particular efforts to make amendments as quickly as possible to ensure the Act is placed on the statute books as quickly as possible.
The support of The Law Society and major political parties is perhaps unsurprising given the widely recognised value of arbitration. Indeed, as Lord Ponsonby noted, ‘the sector is worth at least £2.5 billion to the British economy each year’ and ‘international arbitration grew by some 26% between 2016 and 2020’. At a time when economic growth is paramount, it is encouraging to see a valuable and growing sector of the economy prioritised. It is also essential, as although London remains the most popular seat for arbitration globally, it is not without challengers.
A revamped Act?
Numerous proposed changes to the Act have been put forward, including whether the applicable law is to be chosen by the parties or by the law of the seat – though this does not apply to agreements in treaties or non-UK legislation. If no seat has been chosen, the Courts will be expected to intervene. To promote impartiality and trust, changes are also to be introduced to an arbitrator’s duty of disclosure (with an important clarification that this duty is a continuing obligation imposed on arbitrators from the moment of the first approach until they are functus officio).
Further proposals include a clause dealing with the immunity of arbitrators, enabling awards on a summary basis, and facilitating the use of emergency arbitration and peremptory orders – an increasing demand on arbitrations. Another provision provides for a revised framework on how jurisdiction can be challenged.
A corruption clause?
What remains missing from the proposals is any additional measures to deal with corruption. These concerns are not new and were notably raised following Mr Justice Knowles’ judgment in the P&ID v Nigeria case. But although various arbitral institutions were contacted on this point, the Government was not in possession of responses sufficient to form a final position as to the further amendments to the Act.
The discussion continues to encompass the need to balance any amendments considered necessary to the Act against the possibility of undermining existing standard practices operated by institutions such as the ICC and LCIA. It should also be noted that arbitrators can arguably already adapt their approach and give themselves greater powers to investigate and identify corruption. These can be adapted further if a state party is involved.
However, overly specific provisions of the proposed Act could leave the UK out of step with peers internationally. There is also the potential for greater interference by the UK national courts, rather than procedures being governed and developed further by the international arbitration community’s use and practice.
This should all serve as a reminder of the importance of maintaining the balance between the more specific rules, powers and procedural steps provided for by the Act, and the development of arbitration by the community, which is key to preserving the UK’s status as the leading arbitral hub.
An amendment to tackle corruption was proposed by Lord Hacking at the Committee Stage, but was rejected on the basis that it was too late to incorporate. Further, the input from a number of arbitral institutions given to the previous Government had not been provided to the committee and/or published. Accordingly, there were concerns over not just whether such a specific amendment was needed, but also the time it would take to debate the point and agree.
The strongest objection to the amendment came from Lord Hoffman, the Presiding Arbitrator in the Nigerian Case. He said that it was not for an arbitrator to have to enquire of the parties as to whether or not there had been any corruption. Their Lordships also gave the comparison with the English courts, where no such obligation exists on a judge. The view was further expressed that under Section 33 an arbitrator already has a duty to resolve cases fairly and impartially, and if corruption does exist then a party will not be entitled to a remedy or post an award to enforcement of the same.
It appears that no amendment to address corruption will be introduced, at least while the Bill remains in the House of Lords. But given the importance of updating the Act for the modern world without causing undue disruption and risking the UK’s position, a cautious and measured approach is likely no bad thing. What is essential now is ensuring that the progress of the Arbitration Bill through both houses remains a priority to help maintain the value of arbitration to the UK economy.
Bill Barton is Director at Barton Legal Ltd and is an experienced lawyer having specialised in contentious and non-contentious construction for over 30 years. He has previously been a partner with Walker Morris, Watson Burton and DLA Piper.
