Arbitration Act 1996: Expected Modernisation and What This Will Mean in Practice

The Arbitration Act 1996 (the “Act”) has been a fundamental part of the UK’s dispute resolution framework, playing a vital role in making London a leading seat for international arbitration. That being said, in order to face the emerging challenges and adjust to the ever-evolving landscape of international arbitration, significant amendments have been proposed in a new Arbitration Bill which was first introduced in November 2023.

However, up until 17 July 2024, the Arbitration Bill’s fate was left in limbo, having only completed early legislative stages under the previous government. Following the general election of 4 July 2024, the King’s Speech on 17 July 2024 at the State Opening of Parliament re-introduced the Arbitration Bill as part of the Parliament’s legislative agenda.

The first reading of the Arbitration Bill in the House of Lords took place on 18 July 2024 and the Arbitration Bill will continue to progress through the legislative stages.

As confirmed, in the briefing notes attached to the King's Speech, the Arbitration Bill’s purpose is to “support more efficient dispute resolution, attract international legal business, and promote UK economic growth”. In implementing the recommendations made in the 2022 by the Law Commission review of Arbitration Law, the following are reforms which form part of the Arbitration Bill.

Key Changes

• Default rule regarding the law governing the arbitration agreement (that do not arise from investor-state agreements): the parties’ express agreement to a law governing the contract will now not be of relevance when determining the law applicable to the arbitration agreement. Instead, if the parties do not expressly agree to a law governing the arbitration agreement, the default position will be that the applicable law will be that of the seat of the arbitration. 

• Codification of arbitrators’ disclosure duty regarding possible impartiality circumstances: the amendments will provide clear circumstances, in accordance with international best practice, that could raise justifiable doubts about the arbitrator’s impartiality.

• Arbitrator Immunity: the Arbitration Bill seeks to broaden the immunity provided to arbitrators in relation to resignation and applications for removal. The changes will extend this immunity, providing greater assurance to arbitrators against unwarranted lawsuits. This will ensure arbitrators feel confident in making robust and impartial decisions. 

• Summary Dismissal: The Arbitration Bill will allow arbitrators to make awards on a summary basis when issues have no merits such that there is no real prospect of success. This will prevent the misuse of arbitration, expedite arbitration by reducing the frivolous claims and, therefore, reduce costs.

• Support from courts for emergency arbitrators: courts will be able to make orders in support of emergency arbitrators’ orders such that these will be capable of enforcement as if the order was granted by any other arbitrator. This is welcomed clarity for the enforcement of interim relief in arbitration, which can have a significant impact on a party’s case. 

• Challenges to the arbitrator’s jurisdiction: amendments to the Act are anticipated to refine grounds for challenges where the arbitrator’s jurisdiction is objected by a party. The challenges are expected to be more similar to appeals, as opposed to having a full rehearing. This change is expected to enhance the overall efficiency by reducing delays.

Implications in Practice

The anticipated amendments to the Act, through the Arbitration Bill, are set to have significant practical implications:

• Increased Trust and Usage: Clearer rules and stronger arbitrator immunity are likely to enhance confidence in arbitration.

• Efficiency and Speed: Enhanced support and powers for arbitrators to grant interim measures and dismiss unmeritorious claims will streamline arbitration proceedings, making them faster and more cost-effective. This will no doubt increase arbitration’s popularity as a preferred method over litigation.

• Global Competitiveness: By addressing current practical issues and aligning more closely with international standards, these changes will likely strengthen the UK's position as a leading center for international arbitration.

In summary, the Arbitration Bill’s anticipated amendments to the Act represents a comprehensive effort to modernise and improve the UK's arbitration framework. These changes aim to make arbitration more reliable, efficient, and aligned with contemporary needs, reinforcing its role as a preferred method of dispute resolution in both domestic and international contexts.

If you have any queries about the Arbitration Act, please do not hesitate to get in touch with our Disputes & Resolution team by telephone on 0207 052 3545 or by email info@kaurmaxwell.com

This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice.

Please contact KaurMaxwell for advice before taking any action in reliance on it. 

By: Garance Vaughan