Arbitration clauses are commonly used in agreements within the Insurance sector. A recent decision of the Court of Appeal of England and Wales has rendered void an arbitration agreement which required that all arbitrators be members of a specific religious community on the basis that such a provision is contrary to domestic anti-discrimination legislation. Moreover, the Court held that this particular provision could not be severed from the arbitration agreement and struck down the arbitration agreement in its entirety. Both parties to the case have applied to appeal the decision and, therefore, the ultimate outcome is uncertain. However, the current decision has generated considerable discussion within the arbitral institutions and the international legal community because of its wider potential implications.
- New arbitration agreements: the principal arbitration rules which are regularly incorporated in arbitration agreements (including the LCIA, ICC and UNCITRAL rules) include restrictions on the appointment of arbitrators on the basis of nationality. The issues raised by the current decision may ultimately be resolved either following a successful appeal or by amendments to institutional rules. However, both of these are long term solutions which are likely to take some time to implement. In the meantime, therefore, we are advising our clients to include the following sentence in new arbitration clauses in contracts governed by English law to reduce the risk that an institutional arbitration clause may be held void as a consequence of the restrictions on the nationality of arbitrators which are contained in the institutional rules:
"Any provision of such Rules relating to the nationality of an arbitrator shall to that extent not apply."
- Existing arbitration agreements: with regard to existing arbitration clauses, we do not advise that clients renegotiate or amend existing arbitration agreements, particularly as the longer term solution to these issues remains unclear. We can, of course, advise on any specific arbitration agreements in respect of which our clients have concerns.
For further information, please contact:
Christopher Style (firstname.lastname@example.org, (+44) 20 7456 4286); or Greg Reid (email@example.com, (+44) 20 7456 4824).