UK Arbitration Act: Time for a revamp?

This article was written by Naomi Jeffreys of CDR news on 09 November, 2018.

Several countries have moved to amend their arbitration legislation, but the UK is yet to modernise its 1996 Arbitration Act, CDR explores what these provisions could look like and whether the market wants it.

The United Kingdom’s Arbitration Act (1996) has not been modernised, despite several other countries doing so, including the Netherlands in 2014, India in 2015,  Russia in 2016, and most recently Sweden, which published proposals to update its Arbitration Act in September.

After being in force for more than two decades, there is debate around whether the scope of the Act’s provisions meets the increasing complex needs of international arbitration today. Further, in order for the UK to remain a competitive forum for international disputes, does the Act, as it is, have longevity?

Reform was once on the table, with the Law Commission of England and Wales having launched its Thirteenth Programme of Law Reform in December 2017, which broached the subject of summary judgments and proposed giving greater summary powers for arbitrators, such as being able to strike out an unmeritorious claim or defence.

The report said that such reform could have a “subtle but positive impact on London’s attractiveness as an arbitration venue”, but was ultimately unable to secure support in time for the publication of the programme.

MARKET VIEW ON REFORM

Speaking to CDR, Matthew Weiniger, a partner and global co-head of international arbitration at Linklaters in London, says that while “the UK Arbitration Act is quite elderly in legislative years,” it is still working pretty well.

Its main purpose, he states, “was to ensure that the court only interfered in arbitrations to the extent strictly necessary and this aim has been achieved. It is rare, and usually justified, when a court sets aside an award”.

This view is supported by Can Yeginsu, a barrister at 4 New Square, who says that the view from clients, practitioners and the institutions seems to be that the Act has aged very well. “The certainty and predictability offered by a well-established arbitration law is, of course, likely to attract, not to deter, users.”

Similarly, Charlie Lightfoot, managing partner of Jenner & Block’s London office and co-chair of the firm’s international arbitration practice, states that it is possible that some would assume the Act is behind the times.

“Yet, the structure provided by the Act has proved flexible as well as resilient. As most English cases show, English arbitral law has settled over the years and attained a high degree of certainty. In one sense, the maturity (and so predictability) of the Act is its greatest asset,” he explains.

Supporting the need for reform is Andrew Fox, a partner at Sidley Austin, who believes that it is probably the right time now to revisit some aspects of the statute “given the increase in international arbitration since 1996 and the development of the needs and requirements of arbitration users”.

Greg Fullelove, a partner and co-head of the international arbitration group at Osborne Clarke, suggests the Act could be usefully modernised: “Brexit in particular has brought the spotlight onto this jurisdiction, with many parties asking whether as a non-EU state it would lose its lustre as a dispute settlement centre generally.”

Fullelove sees an advantage in “opening any new chapter with a robust declaration of intent in international arbitration by having a new statute on the books that is seen as cutting-edge and pre-eminent globally”.

NOT THE TIME FOR REFORM?

With the UK due to exit the EU in March 2019, the impending exit has sent ripples throughout the disputes market.

Given the current climate, Weiniger explains that there is good reason not to amend the Act, noting that “society has become much more polarised since 1996 and certain issues in arbitration, such as investors suing states or confidentiality, have attracted controversy”.

If practitioners sought to open up the Act for revision, there is no guarantee that the revised version would be better than the 1996 version, he states.

Yeginsu is not convinced of a pressing need to amend the Act, but he can, however, understand those who see the onset of Brexit as an “opportunity to send an important message – through a process of reform – that the UK will remain an arbitration-friendly and global centre for the resolution of commercial disputes”.

Meanwhile, for Lightfoot, the Act has served global commerce well and continues to play an important part in London’s success as a global hub for dispute resolution, but he notes there may be some sense in well-thought-out tinkering.

COSTS

Costs, according to 67% of respondents, were identified as the worst feature of international arbitration in the 2018

International Arbitration Survey: The Evolution of International Arbitration, which was released in May and conducted jointly by White & Case and Queen Mary, University of London (QMUL), an issue which Lightfoot highlights, adding that greater use of expedited and summary procedures would be especially attractive in the financial world.

One way of dealing with costs, Steven Morris, a partner at Howard Kennedy, explains, “would be to consider the benefits of cost budgeting in arbitration … at least with reference to lower value claims”.

While it is strongly arguable that the Arbitration Act already gives arbitrators the implicit power to adopt abridged procedures to strike out unmeritorious claims or defences, expressly setting this out in the Act itself “might embolden arbitrators to use their power – with little risk of downside for English arbitration”, Lightfoot says.

Yeginsu agrees that having express powers to strike out unmeritorious claims put on a statutory basis, rather than merely at the level of institutional rules, would assist in the delivery of more effective and robust case management.

Yeginsu adds that if the power to make a summary determination was put on a statutory basis, “such that the power could not be removed or reduced through institutional rules, that might serve to support the use of such powers, mitigating due process concerns”, but would need consideration of how it would sit alongside the New York Convention when it came to enforcement.

PRIVATE AND CONFIDENTIAL

Another hot topic Weiniger identifies is confidentiality, noting that arbitral confidentiality is under common law and implies a confidentiality agreement into an arbitration clause.

“This approach is unusual in international terms, as many jurisdictions require parties seeking confidentiality to opt-in to it specifically,” he adds.

However, he notes that confidentiality is not generally a problem for sophisticated parties as most institutional rules address confidentiality expressly.

White & Case and QMUL’s survey also addressed confidentiality, where 87% of respondents believing that it is important, while 74% of respondents stated that there should be an opt-out feature for confidentiality and 26% said that it should not be presumed by default.

Doug Wass, a partner at Macfarlanes in London, says that the omission of confidentiality was a deliberate decision when the Act was drafted on the basis that the rules could be developed by the English courts on a pragmatic case-by-case basis.

In the event, he states, this has not really happened and “there remains uncertainty about the scope of the rules on confidentiality”. Additionally, this is not wholly within the parties’ control because most arbitrations will involve people such as witnesses, “who are not bound by the arbitration agreement”, As such, an amendment to the Act, which confirms and bolsters the confidential nature of arbitration, would be welcome.

TRANSPARENCY AND EFFICIENCY

Arbitration has long faced criticisms of transparency and openness, but Wass says that this criticism is misplaced, and party choice should remain the paramount consideration.

“In our experience, confidentiality is an important (although not the only) factor in parties opting for arbitration”, noting that it is a good ‘selling point’ for parties who are considering whether to switch to arbitration from litigation for the first time.

At a time when rival jurisdictions are using Brexit as an opportunity to attract court work, Wass outlines that it would be unwise to undermine the attractiveness of London as an arbitration centre, saying that ”different considerations apply to commercial arbitration than to investor-state arbitration, where arguments in favour of more transparency have greater force”.

Morris suggests that transparency concerns are exaggerated, noting that “most users of international commercial arbitration consider that confidentiality is a valuable characteristic… the desire for confidentiality is not outweighed in international commercial arbitration by concerns as to transparency and predictability”.

He suggests that an answer to this could be that arbitrations are not automatically subject to confidentiality but instead, the parties are left to agree whether or not the arbitral proceedings will be confidential, as this would not infringe upon the principle of party autonomy in arbitration, but it would, on some occasions, increase the transparency of the process.

A system could also be put in place “which encourages the publication of suitably anonymised award summaries which distil key legal reasoning in a way which does not identify the parties, their business or any other sensitive information”, which is legal transparency while preserving confidentiality, Fox explains.

He also highlights that there is a much-needed use for a full ventilation and consideration of the issues around interim relief, preliminary measures and orders, and their enforcement, and the division of approach between tribunals, emergency arbitrators and the courts.

Focused thought to the issue and a full consultation programme would be necessary in the reform process, and would be welcomed, Fox concludes.

 

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