The Arbitration Bill

England & Wales is the leading jurisdiction for commercial arbitration. In March 2021 the Ministry of Justice invited the Law Commission to review the Arbitration Act 1996 to ensure that it was still fit for the purpose or whether amendments were required to preserve England & Wales’ position.

The Law Commission commenced an extensive review of the Arbitration Act 1996 which involved two consultations with stakeholders. The year-long review resulted in a Bill being put forward to Parliament by the Ministry of Justice, The Arbitration Bill, which is now passing through Parliament and includes a range of proposals aimed at updating the framework for arbitration and cementing England & Wales’ position as leading destination.

Arbitration

Arbitration is a method of alternative dispute resolution, which is often enshrined as the first method of resolution in commercial contracts. All the parties involved in a dispute agree to submit any contentious issues that prevent the day-to-day business continuing, such as breach of contract, to an arbitrator, who is a neutral third party. There can be one arbitrator or three arbitrators. Arbitration is held in private and the dissenting parties will each put their argument to the arbitrator who makes a legally binding decision which is final but there are limited rights of appeal. 

The Law Commission’s conclusions were that the Arbitration Act 1996 still was largely effective and did not require extensive root and branch amendments however, there were some issues, both major and minor, that would bring more effectiveness to enable the Act and to bring simplicity and certainly to those who choose arbitration.

Overview of some Major New Rules

Default Rule on Governing Law

One of the most significant amendments introduced is the default rule in favour to the law of the seat. This means that the law governing the arbitration agreement should be the same as the seat (jurisdiction) for the arbitration. This is intended to remove protracted “satellite” legal arguments that detract from the resolution of the dispute. However, this does not remove the right to choose an alternative governing law which will be preserved. This amendment arises from the case of Enka –v- Chubb where there an extensive separate argument about the appropriate governing law. This amendment will act to prevent one party to the dispute detracting from the matter in hand with an extensive side issue, which is often raised to expand the time taken to reach a final decision.

Challenges to an Award

Another change to the arbitration rules is the question of challenging a tribunal award in relation to its substantive jurisdiction, under the Arbitration Act 1996 section 67. After the review of the Act the Law Commission suggested that there should be limitations to such challenges and that evidence that has previously been heard before the arbitration tribunal would not be heard again unless it was deemed to be in the interests of justice and that this reform should be effected through rules of court, rather than legislation.

This amendment will act to prevent one party to the dispute detracting from the matter in hand with an extensive side issue, which is often raised to expand the time taken to reach a final decision and also provides a test as to whether a defendant has a viable argument as the same argument can be amended and run before the courts if they lose in the tribunal.

Disclosure by Arbitrators

Another important concern that the Law Commission considered is that of the duty to disclose any circumstances that may impact on an arbitrator’s impartiality, this question arises from the Supreme Court’s decision in the case of Halliburton Company v Chubb Bermuda Insurance Ltd. The Law Commission suggests that this duty should be introduced by an amendment to the Arbitration Act 1996. It considered impartiality is what matters most and that complete independence may be impossible given the relatively small pool of arbitrators.

Giambrone & Partners’ commercial lawyers point out that the Arbitration Act 2022 goes a long way towards fast-moving up dispute resolution and strengthening England & Wales as the jurisdiction of choice. Businesses involved in a conflict require a rapid conclusion to such events to limit the inevitable time and money expended.

Sergio Filonenko Kibu is an Abogado (qualified Spanish lawyer) and is admitted to practise in England & Wales as a Registered Foreign Lawyer (RFL). He is an associate based in the London office.

For more information on arbitration please contact us on clientservices@giambronelaw.com or click here.