Law Commission’s Review of The Arbitration Act 1996
Andrew Robertson
We live in a changing world. Much has changed since 1996, with technology and, indeed, our society, evolving at an exponential rate. One exception to this is the Arbitration Act 1996.
With 25 years having passed since its inception, the Law Commission has recently taken the opportunity to review the Arbitration Act 1996 to ensure that the act is as able to remain, as they put it “state of the art”, asking Consultees from across the legal profession and other stakeholders for their opinion on the functionality and fairness of the Act in its current form. This is particularly relevant given the rise of new arbitration centres, perhaps most notably the Scottish Arbitration Centre, based in Edinburgh, who recently took the major step of publishing their own, independent arbitration rules.
In these unusual times, it may come as something of a comfort that, following this, the Commission provisionally asserts that the Act remains essentially effective and fit for purpose, and that no major, sweeping reform is required. That said, among the 8 areas targeted in the Consultation paper, there are some discreet areas flagged for modernisation which we shall discuss in turn below, namely:
(i) Discrimination (ii) Independence and disclosure; (iii) Immunity of arbitrators; and (iv) Summary Disposal.
Discrimination
The first of these is straightforward. The Law Commission notes that, following the Supreme Court decision in Hashwani v Jivraj (2011), contracts appointing arbitrators are not contracts of employment and, as such, arbitrators are not entitled to protection from discrimination under employment law.
The Law Commission therefore wishes to, as a matter of policy, extend protections such as those available under employment law to arbitrators. The consultation paper does not propose prescribing who parties ought to appoint as an arbitrator; it does, however, propose prohibiting the appointment of (or disagreement with the appointment of) an arbitrator on the basis of their protected characteristics, as defined under the Equality Act.
These protected characteristics are, as most readers will already be familiar, age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation.
Attitudes to diversity and inclusion have developed a great deal since the passing of the Act, and it is no surprise that the Law Commission seeks to reflect this. Should the Act be subject to amendment on the basis of this consultation, parties can certainly expect such diversity provisions to be included.
Independence and Disclosure
The Consultation Paper proposes a minor amendment to the Act as regards the independence of the arbitrator and the duty of disclosure.
The Act does not currently impose a duty of independence from arbitrators, nor does the Law Commission propose that is should. Rather, the Act imposes a duty of impartiality on arbitrators. This duty of impartiality supersedes the need for complete independence. It may be that parties are content to appoint an arbitrator with a nominal connection to one of the parties, so long as both are content of their impartiality.
The Law Commission approves of leaving this decision to the parties to the arbitration. In order to allow parties to properly decide for themselves, the arbitrator must disclose any connections to the parties. Case law already imposes a duty on arbitrators to do so. The Consultation Paper suggests that this duty ought to be enshrined in the Act by way of introducing a continuing duty to disclose any circumstances which might reasonably give rise to justifiable doubts as to the arbitrator’s impartiality.
Again, it is highly unlikely this strengthening of the current position will attract any challenge from stakeholders.
Immunity of Arbitrators
The immunity of arbitrators is already well established, with arbitrators being immune but for the following circumstances:
(a) they behave in bad faith; (b) they resign; and (c) a party applies to a court to impugn the arbitrator.
The Law Commission proposes strengthening these protections to protect arbitrators in the unfortunate circumstance that, despite behaving entirely correctly, their conduct falls into either category (b) or (c) above.
Firstly, the Consultation Paper suggests that arbitrators who resign for good reason ought not to incur liability for doing so, such as if they learn of a conflict of interest during proceedings or think that the parties’ agreed procedure is unfair. Arbitrators can already apply to the court to grant immunity in these situations, but the Consultation Paper suggests the time and cost associated with this is unfair in itself, proposing that reasonable resignation should no longer be grounds to revoke immunity.
Secondly, the Paper notes that arbitrators are, generally, liable for the cost of defending a court action to impugn them even if successful. The Law Commission considers this to be gratuitously unfair and suggests that the case law upholding this rule be reversed.
This provision may well sit badly with some parties to arbitration as it does, in essence, offer arbitrators further protections at their expense. It is likely, however, that these amendments will be accepted, as they do encourage objectivity from arbitrators and promote an overall spirit of fairness in proceedings.
Summary Disposal
A more novel suggestion is the introduction of summary disposal in arbitration. Summary disposal is commonly used in court actions across England & Wales and gives the court the power to dismiss actions which have no real prospect of success without the matter progressing to trial for the sake of ease and efficiency.
Although technically possible for an arbitrator to summarily dispose of matters, the Law Commission note that many are reluctant to do so for fear of being challenged in court on account of their duty to provide parties with a reasonable opportunity to put their case under section 33 of the Act (see the above re: the immunity of arbitrators for the potential personal implications of this for the arbitrator).
The Commission suggest that the Act includes a provision explicitly allowing arbitrators to impose a summary judgement in reasonable circumstances. The threshold for this remains the topic of discussion, but is likely to be similar to the threshold in court proceedings of “having no real prospect of success”.
Although more of a departure from the status quo than the above, the formal introduction of this tool into arbitration is likely to be accepted given the marked increase in time and cost efficiency it offers.
Conclusion
We can see from the above that the Arbitration Act is, at least in the opinion of the Law Commission and those they have consulted, in pretty good shape.
The Consultation ends on 15 December 2022. Although there are various areas of contention, the measured approach taken to addressing these issues suggests that parties to arbitration proceedings can continue to expect more of the same, albeit from a polished, modernised and, frankly, fairer Arbitration Act.
If it ain’t broke, don’t fix it!
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© Charles Russell Speechlys 2022. Solicitors Regulation Authority number 420625.