The Law Commission's Consultation on the Arbitration Act 1996: Fine-tuning or full-on reform?

On 22 September 2022, the Law Commission published its much-anticipated consultation on proposed reforms to the Arbitration Act 1996 (the Act), which celebrated its 25^th birthday this year. The proposals are broadly welcome (perhaps with a few missed opportunities). We discuss some of the issues below.

Arbitrators' duty of disclosure

The integrity of arbitration depends in part on the independence and impartiality of arbitrators.

The Act currently acknowledges a duty of impartiality (s.33) – but that does not necessarily mean an arbitrator needs to be independent. Accordingly, the Law Commission has posed the question: should there be a separate and specific duty to be independent? The need for justice not only to be done but seen to be done may support the introduction of such a duty.

Summary disposal

A topic which has been in debate for some time is whether arbitrators can dispose of issues summarily. There is currently no express power to do so.

The Law Commission thinks there should be a power available to deal quickly with issues which lack merit. To balance this with an arbitrator's duty of fairness, the proposal safeguards against procedural irregularities by setting a high bar for summary dismissal: the proposed test being "no real prospect of success". That aligns with the summary judgment test in court proceedings.

Is this power really necessary? Tribunals already have broad powers to manage proceedings. Whether a new specific power adds anything is perhaps yet to be seen. Nevertheless, any innovation to help improve the efficiency of proceedings should be welcomed and this would bring the Act into line with various institutional rules which already provide for summary disposal.

Section 44 (courts powers in support of arbitral proceedings)

An ongoing concern among arbitration practitioners is the extent to which the court can exercise powers in support of arbitration.

Court orders

Arbitration ordinarily concerns parties to a contract. That creates a potential issue when it comes to third parties. For example, can court orders in support of arbitration be made against third parties to that contract? The Law Commission's view is that they can but has sought views on whether this should be made explicit in the Act.

There are many instances where orders against third parties may be needed to support the effective resolution of a dispute, for example, when looking to preserve assets which are the subject of a dispute. Therefore, specific powers may well help ensure there are adequate powers in place to ensure justice is able effectively to be conducted through arbitration.

Emergency arbitrators

Since the decision in Gerald Metals v Timis there has been debate around the extent to which that case affects the courts' ability to order interim relief in support of arbitration. Whilst the Law Commission disagrees that Gerald Metals has the effect others think it does, there is clearly an issue. To help address this problem the consultation has included a proposal to repeal s.44(5) on the basis of redundancy, to try and end any confusion.

The consultation also engages with enforcement of interim orders. An important aspect of the arbitral regime is that tribunals play a greater role in making interim orders. But can these orders effectively be enforced? The consultation proposals include: (i) the addition of a provision empowering an emergency arbitrator to issue a peremptory order, which, if still ignored, might result in the court ordering compliance; or (ii) an amendment allowing an emergency arbitrator to give permission for applications to court for interim measures in non-urgent cases under s.44(4) (a permission which currently is reserved for constituted arbitral tribunals).

Confidentiality

Seen as a missed opportunity by some commentators, the consultation proposes no changes to the current confidentiality regime in arbitration under English law. Some believe this would have been an opportunity to provide some clear statutory definition to the limits of confidentiality whilst maintaining the tenet that justice should be seen to be done.

English law already assumes that arbitration proceedings are confidential and others believe that is sufficient. Parties can in any event agree confidentiality regimes and so there is perhaps some justification in the Law Commission leaving this alone.

Litigation Funding – missed opportunity?

Not addressed by the consultation is whether there should be specific obligations on parties to disclose details of any third-party funding arrangements. Third party funders often play a significant role in supporting parties through disputes. Ensuring full transparency between the parties involved in arbitration and those benefitting from the process is arguably important. That is particularly so where legal professionals (including arbitrators) may also sit on funders' investment committees.

The Law Commission has chosen not to make any proposals on this in their consultation, despite other arbitral centres having adopted specific procedures. This may be a missed opportunity and one which respondees to the consultation may pick up.

Next steps

The consultation remains open until 15 December 2022. The Law Commission aims to publish its formal recommendations by mid-2023 and the UK Government will then decide whether they should be implemented.