When the general election was called to take place on 4 July 2024, arbitration-watchers wondered if that might see the Arbitration Bill sidelined, pushed out by other legislative priorities of the expected incoming Labour government.
Happily, the new government quickly announced that it would continue the progress of the Bill through the legislature.
The Bill had its second reading in the House of Lords in July. The key questions raised regarding the Bill during the reading have now been addressed, in a letter dated 15 August 2024 from Lord Ponsonby, the Parliamentary Under-Secretary of State for Justice, to Lord Bellamy KC.[1]
By way of background, the Bill was introduced in the House of Lords following the Law Commission's public consultations and recommendations to update the Arbitration Act 1996 ("Act").[2] The Law Commission has said that the policy considerations behind the proposed update to the Act are 'targeted towards economic benefits for the UK through a modern, robust and efficient dispute resolution system'.[3]
In Lord Ponsonby's letter, the government has addressed three key questions.
Right of Appeal under Clause 13 of the Bill
Clause 13 of the Bill provides that the permission of the court is required to appeal against a decision under section 9 of the Act, which allows a party to an arbitration agreement to apply to court to stay legal proceedings when the proceedings concern a matter which is subject to an arbitration agreement.
Concerns were raised at the second reading that Clause 13 may restrict the established right to appeal under the common law as set out in Inco v First Choice Distribution[4]. In that case, the House of Lords decided that the Court of Appeal could grant permission to appeal from a High Court decision under section 9. The concern is therefore that the effect of the Inco decision is reversed by the amendment and the scope to appeal is narrowed.
Lord Ponsonby has indicated that this point is being considered by the government ahead of Committee, and updates are expected in due course.
Governing Law: Arbitration Agreements
Clause 1 of the Bill provides that the law governing the arbitration agreement will be the law expressly chosen by the parties, in the absence of which it will be the law of the seat of the arbitration. This was done pursuant to the Law Commission's recommendation in response to the Supreme Court's decision in Enka v Chubb[5].
The concern with Clause 1 was that there may be rare occasions where the parties may not decide the seat in the arbitration agreement, leaving it undetermined unless and until resolved by the tribunal or a court. In that situation, there would be no seat to refer to, to determine the governing law.
The Government has explained that the Law Commission had already considered this point in its review, and had envisaged that in that scenario, the law of the arbitration agreement would fall to be determined on common law principles.
The Government will update the Bill's explanatory notes to reflect this with the intent of enabling the Courts to apply the common law should it be required.
This might be considered to be a weakness in the Bill's proposed solution to the governing law issue. However, it will only arise in an unusual scenario. The solution adopted in Enka v Chubb (law of the arbitration agreement generally follows the law governing the contract) itself suffers from problems which have been highlighted by various commentators in the course of the consultation on the Arbitration Bill. It therefore might be said that the concern identified by Lord Ponsonby is a legitimate question, but not something worse that the alternatives.
Corruption in arbitral proceedings
Following the decision of Knowles J in Nigeria v P&ID,[6] corruption in matters which are subject to arbitration proceedings has been a hot topic in the UK, especially in light of the proposed update to the Act.
In Lord Ponsonby's letter, he explains that the Government does not consider that the Bill should be amended to make any further provision to address corruption. He referred to the measures available in arbitral procedures, professional regulations, laws on money-laundering and corruption, and rules regarding arbitrators' duties. In recommending the Bill in its current form, the Government consulted various leading arbitral institutions including the LCIA and the ICC, as well as other bodies. There was not significant support for further express provision in the Act.
There were also apprehensions that any additional provision may be seen as a "one-size-fits-all" approach which could reduce the appeal of this jurisdiction for arbitration. The Government has, therefore, leaned in favour of the current approach which it considers to be "nuanced and flexible".
Lord Ponsonby noted that arbitrators have tools at their disposal to combat corruption under the common law. He confirmed that the Government will continue to support efforts against arbitral corruption, and will push forward the adoption of best practices as they are developed in the sector.
Conclusion
The continued discussions around the Bill indicate that the Government is being asked to respond to concerns which are being raised regarding the light-touch approach in the Bill, but is largely sticking to its guns and pressing forward with the Bill in its current form.
[1] https://data.parliament.uk/DepositedPapers/Files/DEP2024-0601/SUB116440_Lord_Ponsonby_to_Lord_Bellamy-Arbitration_Bill.pdf
[2] For a detailed comment on the Law Commission's review, see a previous article https://disputeresolution.howardkennedy.com/post/102inid/the-law-commissions-final-report-on-its-review-of-the-arbitration-act-1996-stea from Howard Kennedy's Head of International Arbitration, Duncan Bagshaw.
[3] Arbitration Bill: factsheet, Gov. UK https://www.gov.uk/government/publications/arbitration-bill-overarching-documents/arbitration-bill-factsheet.
[4] [2000] 1 W.L.R. 586
[5] [2020] EWCA Civ 574
[6] [2023] EWHC 2638 (Comm)
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