The King’s Speech marks the start of the parliamentary year following the general election. On July 17, 2024, Charles III set out the new laws the government intends to introduce on a range of topics. The King's latest remarks included the Arbitration Bill, which implements the Law Commission's recommendations following a multi-year review of the Arbitration Act 1996.
As the Law Commission noted, the purpose of its review was to determine whether any amendments to the Act were needed to ensure that it “remains fit for purpose and continues to promote England and Wales as a leading destination for commercial arbitration.”
The review included two consultation papers, culminating in a final report and draft Bill. Given that the Arbitration Act has largely stood the test of time and continues to function well, the final report concluded that “root and branch reform is not needed or warranted.”
Consequently, some proposals that were extensively debated during the consultation period were ultimately not included in the final recommendations or the Commission’s draft Bill. For example, the Commission declined to include a heavily debated amendment that would have made arbitrations confidential by default.
The Commission ultimately focused on a handful of “major initiatives” that addressed post-Act developments in the common law, streamlined certain procedural matters and addressed changes in arbitral practices since the Act’s initial passage in 1996. Those major initiatives are outlined below.
Revising the framework for jurisdictional challenges
Section 67 of the Act allows parties to challenge an arbitral award on the basis that the tribunal lacked jurisdiction. In Dallah v Pakistan, the Supreme Court established that section 67 requires a full rehearing. The consultation process revealed that a considerable number of stakeholders viewed this process as unnecessarily increasing costs and delays. Another critique was that section 67 afforded the losing party an opportunity to obtain new evidence and develop new arguments before the court that had not been presented to the tribunal, thereby allowing the losing party to use the arbitral proceedings as a “dress rehearsal” before having a second bite of the cherry before the courts.
The Arbitration Bill rectifies this criticism. The court will not entertain new jurisdictional objections or new evidence (unless it could not have been put before the tribunal even with reasonable diligence), and the evidence will not be reheard other than in the interests of justice. This substantiates the principle of competence-competence — i.e., the tribunal’s power to rule on its own jurisdiction — and streamlines the arbitration process for users.
Clarifying the law
Uncertainty can arise when a contract fails to stipulate the law applicable to the arbitration agreement, which is severable from the rest of the contract. While the courts have applied the principles outlined by the Supreme Court in Enka v Chubb to make this determination, consultees suggested that, in practice, the application of those principles often amounted to a complex and unpredictable exercise.
The Bill provides that, absent express party agreement, the law of the seat of arbitration will govern the arbitration agreement. This change creates simplicity and certainty. If the arbitration is seated in England and Wales, for example, the arbitration agreement will likewise be governed by English law, regardless of the law applicable to the substance of the dispute.
Arbitrator disclosures
The Bill codifies an arbitrator’s duty to disclose any circumstances that reasonably give rise to doubts as to their impartiality, codifying the general duty of disclosure set forth by the Supreme Court in Halliburton v Chubb. This duty applies both to situations known to the arbitrator and matters the arbitrator should reasonably know.
The Bill stipulates that the duty of disclosure applies to pre-appointment discussions. Rather than creating an exhaustive list of what should be disclosed, the Bill focuses on the general principle, thus allowing arbitral rules and the common law to provide additional guidance in specific contexts.
Summary disposal
Unless the parties otherwise agree, the Bill allows arbitrators to make awards on a summary basis on issues that have no real prospect of success, creating efficiency and discouraging unmeritorious claims. The parties are granted autonomy to agree on a threshold for summary disposal or disapply it entirely. Even where a party has applied for summary disposal, the arbitrator does not have to accede to the request.
Accordingly, the Bill allows parties to resolve certain disputes more efficiently while providing a structure to ensure a fair summary disposal procedure.
Arbitrator immunity
Under the current Act, arbitrators who resign may be liable to the parties for legal fees incurred in appointing another arbitrator. Parties can also revoke a recalcitrant arbitrator's authority or apply to the court for the arbitrator's removal. According to case law, an arbitrator could potentially incur personal liability for the costs of such a removal application.
The Bill strengthens arbitrator immunity against liability for resigning (unless shown that the resignation is unreasonable) and applications for removal (unless the arbitrator acted in bad faith).
This encourages arbitrators to make robust and impartial decisions without fear of personal liability. By allowing costs liability only in certain circumstances, the reform strikes a balance between protecting arbitrators from personal liability and providing parties with some recourse in cases of bad faith or unreasonable arbitrator conduct.
Emergency arbitrators
Since the Act's passage in 1996, it has become increasingly common for arbitral rules to allow for an emergency arbitrator to be appointed on an interim basis at the start of an arbitration. The emergency arbitrator is empowered to make orders on urgent matters, such as the preservation of evidence. Once the full tribunal is constituted, it can then review the interim order.
The Bill does not specify how emergency arbitrators should be appointed or extend all provisions of the Act to them. However, it does provide support for emergency arbitration in two ways. First, it allows courts to enforce an emergency arbitrator's peremptory orders. Second, it also allows emergency arbitrators to give arbitral parties permission to apply to the court for an order under section 44(4) of the Act, essentially granting emergency arbitrators the same powers as arbitrators hearing the full case.
Predictability, neutrality and excellence
London has long been a key seat for international arbitration, benefiting both the English economy and English law. Indeed, the Law Commission estimates that at least 5,000 arbitrations take place in England and Wales every year, contributing more than £2.5 billion to the English economy.
The inclusion of the Arbitration Bill in the King’s Speech speaks volumes about the importance the government places on ensuring that London maintains its place as the world’ s most preeminent seat for international arbitration. There are very good reasons that parties from around the globe continue to resolve their disputes through English law governed arbitrations seated in London. The Bill goes a long way to ensure that England's status as the front-runner in the international arbitration field is maintained by providing commercial parties with what they want — predictability, neutrality and excellence.
This article was first published by Reuters Regulatory Intelligence.
This article was prepared with the assistance of Haleemah Shaffait, trainee solicitor in CMS London.
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