The Arbitration Act 1996 – The Law Commission’s Final Report

As prefaced in earlier articles, The Law Commission has been scrutinising the Arbitration Act 1996 and has now issued its final report after a couple of consultation rounds

as noted previously, there has been a significant element of The Law Commission having a look at certain aspects but acknowledging it is sufficiently in order and robust and concluding that nothing further needs doing.  But some areas are subject to recommendation for change. 

There is a proposal to codify the existing common law duty of disclosure – the effect is arbitrators have a continuing duty to disclose circumstances which might give rise to justifiable doubts as to their impartibility.   This is to be embodied in statute.

There are proposals to strengthen the arbitrators immunity – an arbitrator will have no liability for resignation unless that resignation is shown to be unreasonable; and the arbitrator will incur no costs liability in respect of an application for the removal unless that arbitrator has acted in bad faith.

We had always thought that there should only be such immunity if the arbitrator had acted reasonably in, firstly, accepting an appointment and, secondly, when resigning.

The courts have powers to support arbitral proceedings and The Law Commission propose clarifying the powers available with regard to third parties.  The proposal is to make outright the power to make awards against third parties and that there is no requirement for the court’s consent to an appeal that decision by the third party. 

There are also proposals with regard to challenging the tribunal’s own ruling on its own jurisdiction.  As mentioned earlier, the question is whether such an application be a re-hearing or by way of appeal?   The Commission has proposed that the court, on hearing such an application, should not consider any new grounds or objection or any new evidence unless the relevant party could not with reasonable diligence have put it before the Tribunal.  So, subject to that caveat, it will not be a re-hearing but an appeal. 

There is the introduction of a new rule as to the governing law of an arbitration agreement – the parties’ express agreement to a law to govern the arbitration agreement should be upheld, but if there is no such agreement, the law of the seat will apply.

This replaces the common law rule which was that where there is no specific choice of law as to the arbitration agreement, then the law governing the parent contract would be taken as implied; where there is no choice of governing law in the parent contract, the arbitration agreement should be governed by the law which is most closely associated with it.  This was usually the law of the seat of arbitration.

Finally, with regard to summary disposal of references, an explicit power is to be granted to the tribunal to dispose of matters on a summary basis.  The default rule is that the relevant threshold  will be as per the court rules ie no real prospect of succeeding on the claim; but it’s a default and the parties are free to opt out of this.  This has to be a welcome development but only arbitrators are robust enough in adopting it.