The Ministry of Justice (MoJ) yesterday published the Arbitration Bill, including a new statutory duty on arbitrators to disclose anything which might give rise to “justifiable doubts” about their impartiality.
The bill accepts the recommendations of a recent Law Commission report, which “reluctantly” dropped a proposed ban on discrimination in the appointment of arbitrators.
It is rare to see Law Commission reports acted on so quickly.
The MoJ said there were about 1,500 domestic and 3,500 international arbitrations in England and Wales each year, with the Law Commission estimating that they generate at least £2.5bn annually in arbitral and legal fees.
Stressing the importance of maintaining the pre-eminence of England and Wales at the seat of international arbitrations in the face of growing competition globally, the government impact assessment said arbitration activity has “multiplier effects on the wider UK economy”.
It explained: “Arbitration does not exist in a vacuum but generates significant spill-over effects for other related sectors that have emerged because of the sector’s growth.
“For example, London-based trade bodies need to offer dispute resolution services and, in turn, users of those bodies will also engage with other services like legal, banking, insurance, and the stock market.”
The law was last reformed in 1996, while there have been updates much more recently in Singapore earlier this year, Hong Kong last year, and both Sweden and Dubai in 2018.
“Not updating the 1996 Act – to address areas of case law and uncertainty in primary legislation, as well as generally enhance support for arbitration – risks these competing jurisdictions being seen as offering a more modern arbitral framework than England and Wales and Northern Ireland,” the MoJ said.
It noted that in 2021, a study by law firm White & Case and Queen Mary University assessment placed Singapore equal first, while in the first quarter of 2023, the Singapore International Arbitration Centre recorded a record caseload.
Among the reforms are:
- A power on arbitrators to dispose summarily of issues that have no real prospect of success on application by any party;
- Introducing a statutory duty on arbitrators to disclose any circumstances which might give rise to justifiable doubts about their impartiality. The MoJ said: “This will codify the common law and align English law with international best practice to promote trust in arbitration”;
- Extending arbitrator immunity against liability for resignations, unless shown to be unreasonable, and the costs of the application to court for their removal, unless they have acted in bad faith. “This will support arbitrators to make robust and impartial decisions without fear of being sued by a disappointed party”;
- Providing that the law governing an arbitration agreement will be the law of the seat chosen for arbitration unless parties expressly agree otherwise;
- Simplifying the procedure for challenging arbitral awards on substantive jurisdiction under section 67 of the Arbitration Act 1996 by requiring that they contain no new evidence or new arguments, meaning they will not become rehearings;
- Giving emergency arbitrators the same court pathways to enforce their orders as other arbitrators; and
- Allowing the court to make orders in support of arbitral proceedings against third parties.
Justice minister Lord Bellamy said: “These much-needed changes will modernise the role of arbitrators and further cement our position as a world leader in the field.”
The impact assessment added: “The government believes modernising the arbitral framework to respond to these issues will send a clear message about how seriously the UK seeks international business; provide a marketing opportunity for London arbitration; bring the legislation up to date with modern practice; correct errors or problems which have arisen over the past quarter century; provide a competitive edge to attract international business to London; and will increase domestic arbitration by making it both fairer and more efficient.”
It also predicted that having a new law would double the number of cases brought before the courts, leading to an additional 23 cases before the Court of Appeal over its first decade.