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Adapting to a Changing Arbitration World
The theme for this year’s LIDW (London International Disputes Week) 2023 is all about exploring the changes the arbitration world has seen in the last couple of years. Building on the success of its three previous years, the LIDW fittingly chose this year’s theme to reflect & invite conversation on how the dispute community is, and should be adapting to a changing world.
Hitting closer to home, one of the most significant developments so far to watch out for is the Law Commission’s proposed reforms to the Arbitration Act 1996. The Act, governing arbitration proceedings seated in England, Wales & Northern Ireland is currently under review and the reforms are said to be aimed at ensuring that it remains “state-of-the art” with the changing landscape - both for domestic arbitrations, and in support of London as the world’s first choice for international commercial arbitration. January 2022 saw the 25th anniversary of the Act coming into force and this presents a good opportunity to revisit it, particularly since other jurisdictions have enacted more recent reforms.
Regarding the proposed reforms to the Act, the Law Commission published the first consultation paper last September and based on the response and feedback it received from the different stakeholders, a second consultation paper with amended proposals was published on 27 March 2023. There are a few significant proposed reforms and one of them (perhaps the most controversial) is regarding the scope of challenge concerning the jurisdiction of the arbitral tribunal deciding the matter. The Law Commission’s latest consultation revisits section 67 of the Act, which allows a party to the arbitral proceedings to challenge an award of a tribunal seated in England and Wales on its substantive jurisdiction. Based on the feedback received from the first consultation paper, the Law Commission has come to the view that restricting the nature of the challenge under section 67 would be altogether better than amending the provision itself by fully scrapping a rehearing. By limiting the scope of a challenge under section 67, the aim is to avoid potential delays and removal of costly re-runs of a full hearing, without fully curbing the supervisory powers of the court.
The proposed reforms also address a possible change in the “applicable law” to the arbitration. An arbitration clause is regarded as a separate and self-standing contract (the principle of separability) due to which, in certain cases, it can be difficult to identify the applicable law if the parties have not specified it in their
contract. The law applicable to the arbitration agreement helps to determine whether an arbitrator has jurisdiction over the matter or not. Deciding which law has to apply to the arbitration agreement is a much debated & sensitive topic which has sparked a great deal of discussion within the arbitration community (added to the UK Supreme Court’s most recent ruling in Enka v. Chubb which says that the law of the arbitration agreement follows the law of the contract, save for certain instances). Due to different views, the Law Commission has proposed that a possible solution to this conundrum would be to implement a statutory rule confirming that the law of the arbitration agreement will be the same as the law of the contract unless the parties have expressly chosen a different law to be applied to the arbitration agreement (consistent with Enka v. Chubb). This would mean that the English Arbitration Act 1996 would join that of Scotland and Sweden in having a statutory default choice when it comes to deciding the applicable law, absent any specification in the arbitration agreement. Again, there are conflicting views with respect to this proposed amendment among the arbitration community and it is yet to be seen what the possible implications might be.
London holds international appeal as a global hub for dispute resolution. The Chartered Institute of Arbitrators, headquartered in London, has more than 17,000 members across 149 countries (See https://www.ciarb.org/about-us/) and according to the Lexis Nexis Arbitration Statistics, 2020 (See https://www.lexisnexis.co.uk/ blog/research-legal-analysis/arbitrationstatistics-2020-from-solearbitrators-to-no-arbitrators) international arbitration has grown by about 26% between 2016 and 2020, with London being the most popular seat. It is yet to be seen if the proposed reforms will help or harm London’s pre-eminence as an arbitral seat.
Ainta Winsome
