Policy background
- Arbitration happens in a wide range of settings, both domestic and international, from family law and rent reviews, through commodity trades and shipping, to international commercial contracts and investor claims against states. The Law Commission estimates that there are at least 5000 arbitrations annually in England and Wales, worth at least £2.5 billion to the economy in arbitrator and legal fees alone. Arbitration is also an important node in a mutually supporting network of business that includes legal services, banking, insurance, and trade. In a 2021 survey by Queen Mary University of London and White & Case LLP, London was ranked equal first with Singapore as the world’s most preferred seat for international arbitration. 1
- The 1996 Act, which governs arbitration in England, Wales, and Northern Ireland, is now over 25 years old. Other countries competing for a greater share of international arbitration have enacted or revised their arbitration legislation more recently. In March 2021, the Ministry of Justice asked the Law Commission to review the 1996 Act. The Law Commission began its review in January 2022. It published its first consultation paper in September 2022, and its second consultation paper in March 2023. It published its final report, along with a draft bill, in September 2023. The final report of the Law Commission concluded that the 1996 Act generally works well, and that root and branch reform is not needed nor wanted. Nevertheless, the Law Commission made a number of recommendations for targeted reform. This Act enacts the Law Commission’s recommendations.
- This Act contains the following substantial initiatives:
- clarification of the law applicable to arbitration agreements;
- codification of an arbitrator’s duty of disclosure;
- strengthening of arbitrator immunity around resignation and applications for removal;
- introduction of a power for arbitrators to dispose summarily of issues which have no real prospect of success;
- clarification of court powers in support of arbitral proceedings, and in support of emergency arbitrators; and
- a revised framework for challenges under section 67 of the 1996 Act (where the challenge alleges that the arbitral tribunal lacked jurisdiction).
- This Act contains the following minor changes to the 1996 Act:
- clarifying the availability of appeals under Part I of the 1996 Act;
- simplifying preliminary applications to court on questions of jurisdiction and points of law;
- clarifying time limits for challenging awards; and
- repealing unused provisions on domestic arbitration agreements.
- The intent of this Act is to further the principle found in section 1 of the 1996 Act: to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense. Thereby, the aim is to fulfil the policy objective of ensuring that the 1996 Act is fit for purpose and that it continues to promote the UK as a leading destination for arbitration. Further policy and background to the Law Commission’s recommendations is provided in its final report and the two consultation papers which preceded it. 2
- An Arbitration Bill that sought to enact the Law Commission’s recommended reforms was introduced in November 2023. However, that Bill fell upon prorogation while awaiting its Report Stage in the first House after passing through a Special Public Bill Committee. This Act replicates the provisions of that previous Bill as amended at Lords Special Public Bill Committee Stage with one change to ensure Section 1 (Law applicable to arbitration agreement) does not apply to arbitration agreements made between investors and states, where those agreements are derived from treaties or non-UK legislation (see para. 17 below). This Act was amended in the House of Lords at Committee Stage, so the wording of Section 13 (Appeals to Court of Appeal from High Court decisions) gives better effect to the underlying policy intention (see para. 45 below).
