On 7 November 2023, the UK government announced the Arbitration Bill, which will modernise the Arbitration Act 1996 with the aim of promoting England & Wales as a leading destination for commercial arbitration. Formally introduced into the UK Parliament on 21 November 2023, the Bill implements the recommendations of the Law Commission following two consultations carried out over 2022 and 2023.
New changes in the Act
The Bill intends to introduce the following changes into the Act:
- Codifying an arbitrator's continuing duty to disclose any circumstances which may give rise to justifiable doubt about their impartiality.
- Providing statutory authority for arbitrators to expedite decisions which have no real prospect of success.
- Extending an arbitrator's immunity from any liability incurred due to resignation.
- Empowering courts to make orders supporting emergency arbitration.
- Establishing that, in the absence of a governing law provision in the arbitration agreement, the governing law of the arbitration agreement should be that of the seat of arbitration.
- Prohibiting challenges to jurisdiction in court where the tribunal has already undertaken a full hearing on its own jurisdiction.
Missed opportunities?
The Bill omits several key areas that the Commission considered but ultimately did not recommend for the Act. We discuss three topics below and consider if this was a missed opportunity to future-proof the Act.
Discrimination
The Commission considered the issue of discrimination in arbitration in its first consultation paper and then revisited it in its second paper. While diversity on arbitral tribunals has improved, gender diversity remains well short of parity. The Equality Act 2010 goes some way to addressing this because it renders unenforceable any discriminatory terms in arbitration agreements. However, a general prohibition on discrimination in the context of arbitration in the Act arguably could have led to an increase in the arbitrator pool and, by extension, the promotion of new and diverse perspectives to dispute resolution. On the other hand, the danger with such a blanket approach is that there may be legitimate and justified reasons for departing from strict equality. Furthermore, the introduction of statutory inflexibility not only undermines party autonomy but could have broader negative implications for London's position as a seat of arbitration.
The fear of satellite litigation and opportunistic challenges to arbitral awards ultimately discouraged the Commission from recommending a statutory prohibition being built into the Act. However, the Commission's substantial consideration of this topic and their encouragement of arbitral institutions to prohibit discrimination in their codes of conduct should serve as a warning to the arbitration community that positive action should be taken.
Third-party funding
Third-party funding has gained prominence as a financial tool for parties to manage the costs and risks of arbitration. Again, the Commission considered it briefly in the first consultation paper and it has since come under further scrutiny by the UK Supreme Court in July 2023. At present, parties in English-seated arbitrations are not obliged to disclose funding sources, although some institutional rules (eg the ICC) require disclosure of the existence and identity of non-parties with an economic interest in the outcome of the arbitration. One challenge that results is how to assess if members of a tribunal are conflicted without knowing the identities of third-party funders in a given case. The Commission decided that its recommendation (now part of the Bill) that arbitrators disclose any circumstances that may give rise to doubts about their impartiality will provide sufficient protection.
Third-party funding also arguably increases costs and reduces the likelihood of settlement. While a tribunal has the power to make costs awards, this is only against parties to the arbitration; it cannot make adverse cost orders against third parties, including funders. This could leave a successful party without the possibility of recovery if the opposing party has received third-party funding but has no coverage for adverse costs. Interestingly, the Commission's recommendation (and now being introduced in the Bill) was to extend a tribunal's authority to third parties in relation to witnesses, evidence and interim measures under section 44. But it stopped short of placing third parties within a tribunal's reach for the purposes of costs.
Artificial Intelligence
The Commission only considered legislation on the use of artificial intelligence in its first consultation paper in early 2022; however, artificial intelligence has since developed exponentially across many sectors including legal. For example, ChatGPT, which only launched in November 2022, now receives 1.5 billion visitors per month, and in November 2023, an AI-powered bot successfully passed the Solicitors Qualifying Examination. AI is already enabling the review of vast volumes of documents, and future applications could enable AI to develop legal strategies or predict the outcome of cases to encourage dispute settlement. At its extreme, AI could plausibly replace the arbitrator altogether, raising several regulatory questions: How would an AI arbitrator be selected? Would the courts have the power to remove an AI arbitrator? Would an AI arbitrator have immunity? And how would fairness and impartiality be assured with an AI arbitrator?
While it may be wise to avoid premature regulation until there has been more practical use of AI in the context of arbitration, the rapid rate of development means this may need to be revisited in the not-too-distant future.
Conclusion
The limited recommendations from the Commission are a testament to how the core principles that underpin the Act have stood the test of time. The additions to the Bill will be a welcome improvement and help secure the UK's position as a world leader in resolving legal disputes. However, it remains to be seen if this evolutionary approach has gone far enough or if the Act will need to be revisited as the pace of change continues to accelerate.
The Bill will now make its way through the parliamentary stages before implementation.
