English Arbitration Act 1996 Law Commission Final Report: the missing pieces of the puzzle ?
19 September 2023
19 September 2023
On 6 September 2023, the Law Commission published its Final Report (the Report) on the English Arbitration Act 1996 (the Act) together with a draft Bill.
The recommendations comprise "a few major initiatives" and a "very small number of minor corrections", the combination of which serves to ensure that the Act remains state of the art and London continues to be the global hub for arbitration.
While the recommendations are now with the Government for consideration it is important to reflect on what is missing from the proposed reform and what this means in practice. Two key issues which the Law Commission gave extensive consideration to but made no recommendations in respect of are Confidentiality and Discrimination, both of which are considered further below.
Key recommendations in the Report include:
While the recommendations are now with the Government for consideration it is important to reflect on what is missing from the proposed reform and what this means in practice. Two key issues which the Law Commission gave extensive consideration to but made no recommendations on are considered below. (The Law Commission also decided against reform of section 69 of the Act, an 'opt-out' provision which provides for appeal on a point of law).
The Law Commission makes no recommendation of reform in respect of confidentiality on the basis that the "current approach" works well. The 'current approach' is in essence a mix of principles set out in the case law of England and Wales together with the wide-ranging approaches to confidentiality in the arbitral rules. Both the common law and arbitral rules continue to develop, in particular against the backdrop of the growing debate of 'transparency vs confidentiality' in arbitration.
It therefore remains important for parties to engage actively in the selection of the applicable law and arbitral rules at the drafting stage. An understanding of the level of confidentiality afforded by any applicable law and/or set of arbitral rules, and how they may be evolving, is key. What remains abundantly clear is that no 'one size fits all' and parties keen to keep their information confidential must be alive to not only the options but also the exceptions in play.
The Law Commission "reluctantly" makes no recommendation for any further legislation with the Act to prohibit discrimination, "in particular the appointment of arbitrators by private parties". By not addressing what it accepts may be a "significant gap" in the way in which the law addresses discrimination by the parties in whom they appoint, the Law Commission is placing its faith in the arbitration community - including the parties - to play ball. There is no doubt that the arbitral institutions are keen to be seen as leading the charge when it comes to diversity of appointments; indeed the 'improved' statistics on diversity, in particular in terms of gender, feature heavily across the board in the latest institution annual reports. However, a closer look at the statistics reveals that there is a long way to go especially when it comes to appointments by private parties (i.e. the LCIA Annual Report 2022 revealed that parties selected a low percentage (19%) of women in 2022, only 3% higher than in 2021).
It is important therefore for parties to participate consciously in the arbitrator appointment process and keep in mind their own 'duty' to address the diversity issue just as much as it is for practitioners to step away from the safety net of repeat appointees when providing their list of recommended arbitrators for consideration by the client. It will also be interesting to see whether the arbitral institutions respond to the Law Commission's suggestion that they could be encouraged to prohibit discrimination explicitly in their codes of conduct (to the extent that they do not already do so), and whether those prohibitions would extend beyond the actions of arbitrators to parties and their representatives.
Moreover, there is perhaps a wider need for a reconsideration of the 'neutral nationality' approach; while it is general practice for parties to require an arbitrator to have a neutral nationality different from the parties (and the Law Commission agreed that this should be permitted) we find that it often isn’t clear cut that a potential arbitrator with a different nationality to the parties is in a traditional sense 'neutral' (i.e. because they have a close connection to the country of nationality of a party in ways other than 'nationality', such as work, family ties or political views).
The resulting status quo in respect of Confidentiality and Discrimination has reiterated the importance of the parties playing a proactive and conscious role in two fundamental – but often (wrongly) overlooked - procedural decisions, namely the selection of the applicable law and/or arbitral rules at the drafting stage and the appointment of an arbitrator.
We will be writing more on our views in relation to topics arising out of the Law Commission's recommendations over the next few months, including confidentiality; section 67 challenges to substantive jurisdiction; and arbitrator duties of disclosure.
Authors: Amy Cable, Senior Expertise Lawyer; Matthew Saunders, Partner