Global Vantage: Law Commission Announces Review of the Arbitration Act 1996 – What Can We Expect?

The Law Commission has announced that it will be conducting a review of the Arbitration Act 1996 (the “Act”),  the principal legislation governing arbitrations in England, Wales and Northern Ireland (the “Review”). The Review, which will aim to publish a consultation paper later this year, is tasked with ensuring that the Act is as “clear, modern and efficient as possible” as it celebrates 25 years since coming into force. In this article, we provide an overview of the Act in its current state and look at how similar legislation governing arbitrations in other jurisdictions could provide an insight into the areas that the Law Commission will consider as part of the Review.

The Act came into force on 31 January 1997 and applies to all arbitrations seated in England, Wales or Northern Ireland that were commenced after that date. Broadly, its provisions focus on three core principles: (i) fairness; (ii) the autonomy of the parties; and (iii) limited court intervention. The scope of the Act is extremely wide, dealing with matters ranging from commencement through to the enforcement of awards. However, given the emphasis on the autonomy of the parties, parties to arbitrations under the Act have, at least in part, the freedom to choose which of its provisions will apply to their proceedings. This is subject to the ‘mandatory provisions’ set out in Schedule 1 of the Act, which apply notwithstanding any agreement by the parties to the contrary – these include obligations such as the general duties of the parties and the tribunal, and the parties’ joint and several liability for the arbitrator’s fees and expenses. In general, the Act is seen as having helped to make the UK one of the world’s leading destinations for commercial arbitrations. However, as it to be expected, there are areas in which some suggest the Act could benefit from reform is needed to help it remain as effective as possible.

One criticism aimed at the Act is its silence on the issue of confidentiality. The ability for the parties to keep details of their dispute private is generally seen as one of the advantages that arbitration has over litigation, helping to ease concerns as to unwanted publicity which might harm the parties’ commercial relationship. However, the legal basis for the right to confidentiality is not set out in the Act (instead, the Act leaves this to the common law) and some suggest that confidentiality might actually be harmful as it reduces the ability that the public has to scrutinise the proceedings. If the law in this area is to be codified, the Law Commission will need to consider this balance and also determine whether to adopt an “opt-in” or “opt-out” approach to confidentiality. For example, in Norway, both the proceedings and the arbitral award are not subject to a duty of confidentiality, unless otherwise agreed by the parties (“opt-in”). In contrast, in Australia, neither the parties nor the tribunal can disclose “confidential information” (defined broadly) unless they opt out of the regime (“opt-out”). Both approaches have their merits, though the latter clearly represents a more conservative approach that is closely aligned to the current position in England and Wales. It will be interesting to see which approach (if any) the Law Commission proposes following the Review.

Another area that the Law Commission might focus on in the Review is costs. Arbitration is generally thought of as cheaper than litigation. However, in the Queen Mary University of London and White and Case LLP’s 2018 International Arbitration Survey, “cost” was selected by 67% of respondents as one of the three worst characteristics of international arbitration. One way in which the Law Commission might look to address the issue of costs is through the introduction of a “summary judgment” (or “summary disposition”) regime, similar to that which is available to parties in England and Wales in litigation. This could help parties facing a claim or defence that has “no real prospect of success” to dispense with the matter without the need to incur the time and cost implications of full-length proceedings. Some arbitral institutions, such as the International Centre for Settlement of Investment Disputes (“ICSID”) have already adopted similar provisions, with Article 41 of the 2006 ICSID Convention, Regulations and Rules providing a mechanism for “Preliminary Objections” under which parties can “…file an objection that a claim is manifestly without legal merit.” However, if such an approach is to be introduced, it will require careful drafting so as to ensure that all parties have a fair opportunity to forward their case and to ensure that the procedure is not open to abuse from frivolous applications seeking to delay or disrupt the arbitration process.

Finally, given the advances in the use of technology across the legal sector in the 25 years since the introduction of the Act, it also seems reasonable to expect that the Review will consider how to deal with the use of technology in arbitrations. This might include the use of virtual hearings, the electronic service of documents, and even the issue of electronic awards. In the short term, implementing these types of measures could help to keep parties safe during the coronavirus pandemic. However, from a more long-term perspective, promoting the use of technology also has the potential to decrease the impact that arbitrations have on the environment by effectively eliminating the need for long-distance travel in most cases. With ESG issues having an increasingly important role on corporate agendas and the pandemic making businesses far more familiar with the concepts such as remote working, we would be surprised if there was much resistance to proposals to update the Act in this manner.

The Review will be of interest to all those with arbitration agreements in their contracts that specify that the arbitration is to be seated in England, Wales or Northern Ireland. Whilst it may be some time before the conclusions of the Review are released, we hope that the above is a useful indicator of at least some of the areas that could be the subject of future reforms.