The return of the Arbitration Bill

The Arbitration Bill, the previous iteration of which had fallen as a result of the snap UK general election, is to be taken forward by the new UK Government as part of its legislative programme. In July, it took the first step on its renewed legislative journey.

Where things had got to….

As regular followers of ArbitrationLinks will know, last year (and following an extensive period of consultation) the Law Commission of England and Wales published a report containing various proposals to update and reform the Arbitration Act 1996 (the “AA”), the main statute which regulates arbitration in England and Wales, and Northern Ireland.

Those proposals were taken up by the (then) UK Government (Conservative), which introduced an implementing Arbitration Bill to Parliament. The Bill originated in the House of Lords where it progressed through a number of substantive stages, including a Special Public Bill Committee (to which Linklaters gave evidence). Progress was, however, brought to a premature halt with the announcement of a snap general election. This lead to the Bill falling and its reintroduction becoming contingent upon the priorities of an incoming administration.

And where things are going….

Happily for the future of the Bill, shortly after the UK general election, the new UK Government (Labour), unveiled its programme of legislation that it intends to take forward. Included in this list was a new iteration of the Bill.

The Bill’s formal legislative journey was then (re) commenced on 18 July with its introduction (and first reading) in the House of Lords (first reading being the formal presentation of a Bill into the legislative process). This was followed shortly thereafter with publication of the text of the Bill to be taken forward.

Unsurprisingly, given its overall aim to enact the Law Commission’s proposals, and the previous debates in the House of Lords, the content of the Bill will be very familiar to those who followed its previous progress. So, again, the key reforms proposed cover:

• Applicable law of an arbitration agreement: Introduction of a new default rule in favour of the law of the seat of arbitration; albeit with provision for the parties to agree otherwise (for example, in favour of the law of their main contract) provided they do so specifically.
• Codifying arbitrators’ duty of disclosure: Placing the duty of disclosure laid down in Halliburton v Chubb on a statutory basis. The rationale is to make the rule more accessible, and extend it to pre-appointment discussions, whilst keeping the flexibility of the case-law.
• Immunity of arbitrators: Extending protection to resignation (unless it was unreasonable) and costs liability in respect of applications for an arbitrator’s removal (unless they have acted in bad faith).
• Summary disposal: The inclusion of a default power of summary disposal, exercisable on application by a party, and subject to a test of no real prospect of success on the relevant issue.
• Section 44 AA and third parties: In order to resolve the debate in case-law as to whether orders under s.44 AA (powers of the court to support arbitral proceedings) can be granted against third parties, amendments are proposed to make clear the target being a third party is not, per se, a bar. The powers are simply to be the same as the court has in relation to court proceedings.
• Emergency Arbitrators (EAs): Amendments to aid the enforcement of their orders in two ways. By allowing them to (i) following non-compliance, issue a peremptory order which can be enforced by the court and (ii) allowing an EA to give permission for an application under s.44 AA to be made.
• Challenges to a tribunal’s award on jurisdiction under s.67 AA: amendments to permit court rules to be made which, in such cases, would, limit the ability of parties to rely on new grounds, or evidence, before the court, and restrict its ability to re-hear evidence (subject to the court ruling otherwise in the interests of justice).

One change from the Bill’s previous iteration (as it stood following amendment by the Special Public Bill Committee) is that a carve-out from the new rule on applicable law of an arbitration agreement has been inserted for cases involving arbitration agreements in (non-ICSID) investment treaty cases (and like cases arising under foreign investment legislation). This is to deal with  concerns raised earlier that, in such cases, public international law (or the relevant foreign law) should continue to apply (ICSID arbitrations remain unaffected by the reform as they are subject to a separate regime).    

Finally, like the previous iteration of the Bill, it contains transitional provisions which provide that, generally, the reforms will apply to (arbitral or court) proceedings commenced on or after the relevant section(s) is/are brought into force.

Although, broadly speaking, uncontroversial, one notable aspect of these transitional provisions is that their application to the new rule on applicable law of an arbitration agreement does not include any exception for cases in which the relevant arbitration agreement was concluded before the reforms come into force (i.e. in such cases the new rule would be capable of having a degree of retrospective effect). That being said, in this sphere, the situation in which there is a potential conflict to resolve arises where the law applicable to a main contract and the seat of arbitration don’t “match”. And, in such cases, where the seat is England (and a foreign law is chosen to govern the main contract) parties often opt for certainty by including express, specific wording as to the law applicable to their arbitration agreement. Where that has been done, there wouldn’t be any change as the new rule would, as the law in England currently does, give effect to that specific choice (in short, it is only in like cases, but where parties have not taken the care to express that specific choice, which would stand to be affected). 

What happens next?

The progress of the Bill through Parliament will be watched closely. Bills need to progress through both Houses (Commons and Lords) before receiving Royal Assent and becoming law. Having said that, given the previous amount of scrutiny the previous iteration of the Bill received, it would seem likely that onward progress will be relatively swift once Parliament returns from summer recess in early September.

Click here to view the Bill, supporting documents and for updates on its progress.