By Lucas Vieweg, Articles Editor

London, the iconic British capital city, has an impressive and storied history; it is a cosmopolitan city where artists, inventors, financiers, and tourists cross paths every day. Its landmarks are instantly recognizable, and its ever-present status as a world city is undisputed. However, what truly sets London apart is its long-standing role as a leading center for cross-border commercial disputes, a status worth over £2.5 billion, which the British government has recently sought to protect. The United Kingdom (“UK”) recently enacted legislation to refine and revitalize the United Kingdom Arbitration Act of 1996 (“the 1996 Act”). The changes implemented seek to preserve London as the powerhouse of dispute resolution and combat Paris and Singapore’s rise as worthy alternatives. The 1996 Act regulates arbitration in England, Wales, and Northern Ireland (The Arbitration Act 2010 governs arbitration proceedings in Scotland), fostering the London Court of International Arbitration’s (“LCIA”)  reputation as the most preferred seat in international arbitral disputes. This article will delve into the changes adopted by the UK government and explore what all this means for London’s role in international arbitration going forward.

In March 2021, the trusted Law Commission (the “Commission”) took on the crucial task of reviewing the effectiveness of the 1996 Act and proposing suggestions for reforming it. The review commenced in January 2022 and was meticulous, considering various perspectives. The Commission’s final report, published in September 2023, concluded that the 1996 Act was effective but required targeted reforms for enhancement.

The Commission’s recommendations began with revisions to Clause 1, the governing law of arbitration agreements. This clause, which establishes a statutory rule for deciding the applicable law in an arbitration agreement, replaces the former common law rule established by Enka v. Chubb.The new method states that the governing law of an arbitration clause shall be the law that the parties expressly agree to or, in instances where the parties do not agree, the law of the seat of the arbitration. Since arbitration agreements often stem from contracts with international elements, determining governing law is of utmost importance since uncertainty around which law applies can yield different results. Clause 1 seeks to dispel uncertainty by providing a clear and concise method for deciding what law governs. Clause 1 creates a new rule, which aligns the seat of arbitration with the law applicable to the arbitration agreement unless the parties agree otherwise.

Clause 2 addresses the duty to disclose required by arbitrators. The arbitrator’s duty to disclose needs clarification; the requirement should extend to when circumstances arise that question the arbitrator’s duty to be impartial. The 1996 Act and case law established in Halliburton v. Chubb imposed the duty on arbitrators, but the new legislative codification will make disclosure requirements more concrete. The duty to disclose runs from before the appointment of an arbitrator and through their appointment.  Additionally, the duty of disclosure is mandatory, and parties cannot seek to dispense with it.

 Clauses 3 and 4 expand an arbitrator’s immunity regarding removal and resignation. The reforms apply to section 29 of the 1996 Act, which provides that arbitrators are not liable for anything done while exercising their duties unless they act in bad faith. Section 29 preserves the impartiality and finality of the arbitration process. Clause 3 emphasizes that an arbitrator will not be liable for costs of an application under section 24 of the 1996 Act seeking their removal unless they have acted in bad faith. Clause 4 eliminates the arbitrator’s liability for their voluntary resignation except in cases where the resignation is unreasonable. The reforms to Clauses 3 and 4 aim to preserve impartiality and protect arbitrators from cowering to the parties’ demands out of fear of retaliation.

Clause 7 confers the power to make summary awards to arbitrators. Under Clause 7, an arbitrator can dispose of an issue when they deem a party to have no real prospect of succeeding on the subject issue. Contrary to the duty to disclose in Clause 2, parties can agree to opt out of Clause 7 by disapplying it in their arbitral rules established before proceedings begin. Clause 8 clarifies the court’s powers in supporting arbitral proceedings, especially concerning emergency arbitrations. Under the clarifications made to Clause 8, arbitrators can make orders against third parties, not just the parties involved. The adopted changes extend third-party order usage to emergency arbitrations, mirroring the traditional arbitral process framework. This marks the first time the 1996 Act will address emergency arbitration, as the process came about after the Act. The changes to Clause 8 strengthen the LCIA’s ability to aid in emergency arbitrations, making time-sensitive cases move and resolve more efficiently.

“The changes implemented seek to preserve London as the powerhouse of dispute resolution and combat Paris and Singapore’s rise as worthy alternatives.”

Lucas Vieweg

Clause 11 pertains to improving the framework used for challenges to awards under Section 67 of the 1996 Act. Parties raise claims under section 67 when the arbitral tribunal lacks jurisdiction. Clause 11 establishes an improved framework for challenging jurisdiction; historically, the tribunal itself would decide if it had jurisdiction, and then once an award has been issued, a party can challenge the award based on jurisdiction or the merits of the dispute. Previously, under section 67, any challenge was subject to a full rehearing before the court established by the Supreme Court’s decision in Dallah v. Pakistan. Clause 11 explicitly states that an application under section 67 relating to a dispute already resolved and raised by a party to the arbitration will generally not be privy to a full rehearing. Additionally, parties may not present new evidence or new grounds of objection unless it was not reasonably possible to present them previously; previously heard evidence will also not be reheard. The changes in Clause 11 significantly narrow section 67’s applicability and a party’s access to the appeals mechanism.

The Commission’s widely accepted proposals culminated in the bill presented to Parliament on November 21, 2023, which embraced every recommendation. If the bill passes this year as anticipated, the 1996 Act will undergo its first reforms in twenty-seven years. Reforming the 1996 Act will move the UK’s arbitration laws closer to those of other countries that have already modernized their statutes. HL Bill 59 is currently in the House of Lords Report Stage, the second to last stage before approval in the UK Parliament’s upper house, after which it will repeat the same four stages in the lower house, the House of Commons. Assuming passage there, the bill will undergo consideration for amendments before proceeding to the Royal Assent phase, where the King will give it his declaration and enact it into law. The new reforms to the Arbitration Act of 1996 will preserve London and the UK’s place at the top of the heap. As Justice Minister Lord Bellamy said when asked about the new bill, “The UK is a globally respected hub for legal services, with English and Welsh law the bedrock for the majority of international disputes, and the Arbitration Bill will ensure businesses from around the world continue to come here to resolve their disagreements.” The bill seems poised to pass, but only time will tell if the sun truly never sets on the British arbitration empire.