The Law Commission is moving towards the end of its review of the Arbitration Act 1996 which it launched in November 2021. The Commission will soon be providing its draft proposals to Parliament to ensure that arbitration law and practice in the UK remains the global gold standard. The recommendations which the Commission puts forward will have important impacts on commercial parties arbitrating in the UK.

The roots of arbitration law in the UK are deep and no seismic transformations are expected. However, the Law Commission’s Second Consultation Paper – published in late March 2023 – raises three specific, complex and important topics for reform to which interested parties are paying close attention.  These are old problems which exercised clients, practitioners and judges including the Supreme Court in its recent decisions in Enka v Chubb [2020] UKSC 38 and Kabab-Ji v Kout Food [2021] UKSC 48. 

The Commission is seeking the proposals of stakeholders on the following:

• Governing Law: How the proper law of an arbitration agreement should be determined under the laws of England and Wales.  (In plain English, where an arbitration clause does not say what law governs that clause, what law applies to a raft of important and often overlooked issues like who is a party, what is a conflict of interest and what procedure applies?).
• Jurisdictional challenges: The way jurisdictional challenges to arbitration awards are made before the courts (i.e., when one party insists “I was not a party to the arbitration agreement!” or “I did not agree to arbitrate that!”)
• Discrimination: Tackling discrimination in arbitral appointments and procedure – how to start addressing the significant and ongoing problems with diversity and inclusion which exist in arbitration as well as in the law in general.

The Commission has made three provisional proposals which have attracted intense comment and debate:

• Governing law: the Commission proposes a new rule in the Arbitration Act to the effect that the law of the arbitration agreement is the law of the seat (i.e. England and Wales) unless the parties expressly agree otherwise in the arbitration agreement.

• Jurisdictional challenges: the Commission proposes that, where a party has raised a jurisdictional objection in an arbitration but participated in the arbitration, in any subsequent challenge to jurisdiction in the courts the challenging party will generally be unable to have evidence reheard or to raise new grounds of objection or evidence.  This raises the prospect of a party which says it never submitted to arbitration, having that protest itself primarily determined by arbitration – an evergreen issue of the international principle of Competence-Competence.
• Discrimination: the Commission proposes a restriction but not a ban on arbitration agreements which discriminate on the basis of a “protected characteristic” under the Equality Act 2010 (for example a requirement that arbitrations have a particular nationality, sex, religious conviction). Such agreements will be unenforceable unless they can be justified as a proportionate means of achieving a legitimate aim.    

Milberg London is publishing a series of three short articles on these issues.  We encourage stakeholder efforts to encourage engagement and contribution on these important matters.

Submissions to the Law Commission are open until 22 May 2023:

https://consult.justice.gov.uk/law-commission/second-arbitration/

If you have any questions about the Arbitration Act reform or any other arbitration issues, please feel free to contact Rob Schultz.