Proposed reforms to the English Arbitration Act – a view from the Continent
03. 11. 2023
In September 2023, the Law Commission of England and Wales published its long-awaited final report on the English Arbitration Act (“English Arbitration Act”), the statute governing arbitration proceedings seated in England and Wales. The proposals have been warmly received by English practitioners, and lawyers in civil law jurisdictions should also take note. As the popularity of England and Wales as a hub for the resolution of international disputes continues, internationally practicing lawyers may soon come across the amendments; but more importantly, some of these measures could be adopted by continental systems in the future, as practices and ideas in international arbitration tend to be freely dispersed across legal traditions.
We explain below two important changes proposed to the English Arbitration Act: a clarification of arbitrators’ disclosure obligations, and the codification of summary disposal as an expedited means for arbitrators to decide certain claims and issues in arbitration. We will examine these amendments from the perspective of European trends, comparing them in particular to laws currently in force in two continental jurisdictions, Hungary and Switzerland.
Arbitrators’ Disclosure Obligations
We first focus on the proposed amendments concerning disclosure. While the English Arbitration Act currently mandates that arbitrators be impartial (Section 33), the requirement for disclosure and its specific extent is not enshrined in statute but has been developed at common law. Most recently, the obligation was clarified by the Supreme Court in 2020, setting out that arbitrators must “continuously disclose any circumstances that could reasonably give rise to justifiable doubts regarding their impartiality” (Halliburton v Chubb). In the Law Commission’s recommendation, this standard should be codified to bring the legislation in line with international best practice (citing Swiss law as an example), explicitly recognising the significance of this duty, and simultaneously allowing for the law to be more accessible, by reducing reliance on case law.
The Commission further discussed the knowledge standard pertaining to the duty of disclosure. Rather than adopting a standard based on actual knowledge, the Commission opted to apply a reasonable knowledge standard, as in: “[A]n arbitrator should be under a duty to disclose what they actually know and what they ought reasonably to know.” The standard serves to maintain the integrity of arbitration.
Conversely, both the Hungarian and Swiss standards for disclosure are based on the UNCITRAL Model Law, which contains, on first blush, a slightly different standard to the one proposed by the Law Commission. Thus, Act LX of 2017 on Arbitration (“Hungarian Arbitration Act”) provides that a person requested to serve as arbitrator is under a continuing obligation to “[…] disclose any circumstances likely to give rise to justifiable doubts with respect to his impartiality or independence”. And under Swiss law, both the Private International Law Act 1987 (“PILA”) and the Swiss Code of Civil Procedure of 19 December 2008 (“CCP”) formulate this as the duty to “[…] promptly disclose any circumstances that may give rise to justifiable doubts as to his or her independence or impartiality”.
Initially therefore, there seems to be a slight difference between the English and the UNCITRAL Model Law formulations, considering that the former uses the terms “might reasonably give rise to justifiable doubt”, whereas the latter uses “likely to give rise to”. Fortunately, this is unlikely to cause any difficulties for international practitioners, as the UK Supreme Court found in Halliburton v Chubb (paragraph 113) that these terms describe the same standard.
One notable difference that European practitioners should look out for is the knowledge standard. The text of the Hungarian and Swiss legislations do not specifically address this point, however they imply an actual (as opposed to “reasonable”) knowledge standard. While this may be clarified and expanded on by institutional rules and other sources (e.g., the IBA Guidelines on Conflicts of Interest in International Arbitration provide that arbitrators shall make reasonable inquiries), the Law Commission’s recommendations, by referring to the “reasonable” knowledge standard, impose a comparatively high burden on arbitrators.
Summary Disposal of Claims
The courts of England and Wales are explicitly authorised to resolve issues by way of summary judgment if a party is considered to have “no real prospect of success in his claim, defence, or issue” (Part 24.3 Civil Procedure Rules). While arbitrators and tribunals enjoy robust case management powers under the English Arbitration Act and are under a duty to help avoid unnecessary delays and expense, their power to summarily dispose of claims is currently not explicitly set out in the English Arbitration Act (whereas it is, for example, explicitly mentioned in the LCIA Arbitration Rules 2020 – Art. 22.i.viii).
The Law Commission is now recommending that such powers should be incorporated into statute to promote procedural efficiency and encourage arbitrators to exercise this power when appropriate. The recommendations envision that summary disposal should be available to arbitrators only on the application of a party. Party autonomy is therefore heavily emphasised, and the recommendation is made that prior to any summary disposal, the parties shall be consulted whether they feel that they have had reasonable opportunity to present their case.
Should the Law Commission’s recommendation be adopted, English Arbitration law would diverge from continental practice on this point, as neither Hungarian, nor Swiss law explicitly provide for the power of summary disposal (and neither do the Swiss Rules of International Arbitration of the Swiss Arbitration Centre or the Arbitration Rules of the Arbitration Court attached to the Hungarian Chamber of Commerce).
The Hungarian Arbitration Act merely provides a general framework for arbitration, specific powers of arbitrators are typically defined by the procedure selected by the parties. Tribunals only receive broad case management powers in the absence of the parties’ agreement over the applicable procedure (Section 30 (1) of the Hungarian Arbitration Act). In those rare instances, tribunals may arguably be permitted to issue summary judgments on claims and issues. However, such powers are rarely, if ever, exercised in practice.
Under Swiss law, there are two general legal frameworks for arbitration: international arbitration is governed by Chapter 12 of the Private International Law Act (“PILA”), while provisions for domestic arbitration are contained within Part 3 of the Code on Civil Procedure (“CPC”). The PILA is a very general and liberal instrument. It is guided by the principles of minimal interference and party autonomy. Similarly to the Hungarian Arbitration Act, the PILA does not endow tribunals with the express power of summary disposal, and these powers are realistically only exercisable, should they be permitted by the agreed upon rules (which the Swiss Rules of International Arbitration don’t). In cases where the parties fail to designate the applicable procedure, the tribunal is permitted to make determinations over the conduct of the proceedings to the necessary extent (PILA Article 182 (2)); however even in these cases it is not clear whether tribunals could (or in practice would) opt to exercise summary disposal powers. This is because of the caveat contained in the same Article 182 reminding tribunals of their duty to ensure that parties’ right to be heard.
It thus remains the case that while summary disposals are technically permissible in these jurisdictions, they are confined to limited circumstances, and are unlikely to be exercised in practice. The Law Commission’s recommendation is persuasive in arguing that an express provision for summary disposal is necessary to encourage tribunals to actually use these powers, and accordingly uphold the image of arbitration as a cost- and time-efficient dispute resolution method.
While the amendments proposed to the English Arbitration Act are neither groundbreaking, nor entirely alien to continental practitioners, over time, they may represent a shift towards more robust protection of parties’ interests (by setting broad disclosure obligations), and a balanced initiative for promoting greater efficiency, while also preserving party autonomy.
The two important takeaways for continental practitioners are to become familiar with and stay aware of the broad knowledge standard applicable to the duty of disclosure; and to consider the value of motions for summary disposals – perhaps similar amendments may be introduced to European arbitration regimes in the future.