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The government is aiming to update the Arbitration Act 1996 by passing the Arbitration Bill, intended to further solidify England and Wales as one of the premier hubs for arbitration against a backdrop of recent updates in competing jurisdictions.
The main changes set out in the Arbitration Bill are as follows.
Clarifying the law applicable to arbitration agreements
The Arbitration Bill proposes to amend section 6 of the Arbitration Act 1996 to specifically confirm that in the absence of a choice of law clause in an arbitration agreement, the applicable law of that arbitration agreement will be “the law of the seat of the arbitration in question.”
This will clarify the common law position that currently exists following the Supreme Court case of Enka Insaat ve Sanayi AS v OOO ‘Insurance Co Chubb’ [2020] UKSC 38, [2020] 1 WLR 4117 with a statutory rule.
In summary, Enka established that in the absence of any choice of law to govern the arbitration agreement, the arbitration agreement is governed by the law with which it is most “closely connected”. If there is a governing law clause applicable to the wider contract, it will generally be that law. Alternatively, where there is no clause, and the parties have chosen the seat of the arbitration, this will generally be the law of the seat, but the decision does leave scope for disagreement.
Rule 16.4 of the LCIA Rules states: “the law applicable to the Arbitration Agreement and the arbitration shall be the law applicable at the seat of the arbitration, unless and to the extent that the parties have agreed in writing on the application of other laws or rules of law and such agreement is not prohibited by the law applicable at the arbitral seat.”
There is however no equivalent provision in the ICC rules, and as such the inclusion of this change in the Arbitration Bill should provide greater certainty and avoid unnecessary satellite litigation on issue of governing law.
An amendment was added to the Bill in July 2024 to confirm that the new governing law rule will not apply to standing offers to arbitrate where the offer is contained in a treaty or legislation of a country outside the UK.
Empowering arbitrators to make awards for summary judgment
The Arbitration Bill proposes to amend section 39 of the Arbitration Act 1996 to empower arbitrators to render awards on a summary basis on issues that have no real prospect of success or of being defended, as applicable.
The power to render awards on a summary basis should represent a welcome improvement in efficiency, and will align with the summary judgment procedure available in court proceedings. Certain institutional arbitration rules provide arbitrators with similar discretionary powers, for example Article 22.1(viii) of the LCIA Rules states that arbitrators may make an “early determination” where a claim or defence is “manifestly without merit”. However, we agree with the Law Commission’s own assessment that a summary procedure enshrined in national legislation would be a “world-leading development” in arbitration and would further embolden arbitrators to exercise such powers where appropriate.
Court powers to support arbitral proceedings
The Arbitration Bill proposes to introduce the concept of “emergency arbitrators” who can be appointed where the parties have already agreed to the application of rules that provided for an appointment of an emergency arbitrator (the ICC Rules and the LCIA Rules being two such examples).
Section 44 of the Arbitration Act 1996 already allows for parties to apply to Court in respect of specific matters, such as the preservation of evidence or an injunction to prevent the sale of any goods which are the subject of the proceedings, but the addition proposed by the Bill will (i) enable parties to seek such urgent relief while maintaining their election to have disputes determined by arbitration as opposed to Courts.
Conclusion
England’s position as a leading global arbitration hub has been fortified over the decades by well-drafted national arbitration legislation which supports the needs of the parties as end-users. That legislation is nevertheless approaching its 30th anniversary, so amendments which promote flexibility, efficiency, and clarity in the sensible ways explored above should fortify the global market’s view of England as an attractive dispute forum.
The Arbitration Bill is currently in the House of Commons undergoing its 2nd reading.
Further information
If you have any questions regarding this blog, please contact Mark Fallmann or Leyla Maestri.
About the authors
Mark Fallmann is a Senior Associate in the Dispute Resolution team. He has broad commercial litigation experience acting for various clients, including individuals, corporations, and trustees. He regularly acts on complex and high-value disputes, with particular expertise in international arbitration.
Leyla Maestri is an Associate in the Dispute Resolution team at Kingsley Napley. Leyla has experience acting on a broad range of disputes, including complex cross-border litigation, civil fraud, contract disputes, and international arbitration proceedings.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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