Arbitration agreements requiring that the arbitrator be a “commercial man” or otherwise specifying a protected characteristic will be unenforceable under Law Commission proposals published today.
The commission also suggested a new power under the Arbitration Act 1996 to allow arbitrators to summarily dismiss claims that lacked legal merit.
In a consultation paper on reforms to the Act, the Law Commission noted that women were “still around three times less likely to be appointed as arbitrators than men” and some agreements still required that arbitrators were “commercial men”.
The commission said: “There are moral and economic reasons why discrimination is not acceptable and why equality is necessary.”
It proposed that the Arbitration Act be amended so that “any agreement between the parties in relation to the arbitrator’s protected characteristics should be unenforceable”.
The exception would be if “in the context of that arbitration”, requiring the arbitrator to have a protected characteristic was a proportionate means of achieving a legitimate aim, but it said this would be unlikely.
The commission said the current situation arose following the Supreme Court’s 2011 decision in Hashwani v Jivraj, which decided that an arbitrator was not appointed under a contract of employment and so employment law rules against discrimination did not apply.
“We think that that decision was correct in law, but it revealed that equality legislation did not extend to arbitration, which must be questioned as a matter of policy.”
The commission accepted that “in some contexts”, it may be appropriate to require an arbitrator to have a nationality different from the parties, but there would be no “blanket exceptions” to the new rule.
On summary disposal, the commission proposed that the Act should “provide explicitly that an arbitral tribunal may adopt a summary procedure to dispose of a claim or defence”.
This would be “non-mandatory” and the parties should be able to agree to opt out under their arbitration agreement.
The commission proposed that the immunity of arbitrators should be strengthened and “the case law which holds them potentially liable for the costs of court applications”, even if the applications were unsuccessful, “should be reversed”.
Arbitrators who resign, possibly because of a conflict of interest, should either incur no liability at all for their resignation “or perhaps only if their resignation is shown to be unreasonable”.
The commission said there was no need for a new rule on independence but the case law on disclosure, in which arbitrators are required to disclose connections to the parties or the subject matter of the case, should be codified.
On appeals, the commission said that where a party appealed to the courts on jurisdiction, the appeal should not involve a rehearing of the case. However, where the courts made an order against a third party under section 44 of the Act to support an arbitration, that party should have a full right of appeal.
Professor Sarah Green, Law Commissioner for commercial and common law, commented: “The Arbitration Act was a landmark piece of legislation which helped to propel London to its position as the foremost destination for international arbitration today.
“While it continues to function well, over 25 years later, some parts of the Act may benefit from being updated and refined. Our proposals are designed to ensure that arbitration law is efficient, effective and responsive to modern developments.”
Justice minister Lord Bellamy KC added: “After a quarter century of success, it is right that the Law Commission is looking at the Act to ensure that the legislation remains relevant in the 21st century.”