REFORM OF THE ARBITRATION ACT 1996: AN OPPORTUNITY FOR IMPROVEMENT?

As part of its 14th programme of reform, the Law Commission of England & Wales has announced that it will review the Arbitration Act 1996. Over the past 25 years, the Act has played a key role in making London the most popular destination in the world for international arbitration. However, with each passing year, there has been increased global competition from arbitration-friendly jurisdictions. The aim of the Law Commission’s review is to maintain the attractiveness of England & Wales as the primary destination for international dispute resolution and protect the pre-eminence of English law as a choice of law for international commercial contracts. In anticipation of this review, the Shearman & Sterling arbitration team will publish a series of short articles analysis the areas identified by the Law Commission as potentially ripe for reform, and raising further areas that we consider should be improved.

This year marks the 25th anniversary of the Act.^[1] Over the past 25 years, it has played a key role in making London the most popular destination in the world for international arbitration. However, with each passing year, there has been increased global competition from arbitration-friendly jurisdictions. Several countries—particularly in Asia—have taken steps to modernise their national arbitration laws with a view to setting themselves apart as the world’s leading arbitration centre.

These reforms have had a reasonable degree of success. The Queen Mary University of London International Arbitration Surveys,^[2] published intermittently over the last decade, show that there has been a gradual change in commercial parties’ preferred choice for the seat of their arbitrations. We can see from this data that if the current trends continue, London may see its previously undisputed position as the preferred choice of arbitral seat taken over by Singapore and Hong Kong within the next few years:

Popularity of Choices of Seat for Corporations

Arbitration practitioners and users have questioned whether reforms to the aging Act could go some way to reverse this trend, and maintain London’s position as the most popular destination for international arbitration. In this context, the aim of the Law Commission’s review is to:

• maintain the attractiveness of England & Wales as the primary destination for international dispute resolution; and
• protect and further the pre-eminence of English law as a choice of law for international commercial contracts.

The Law Commission is currently in the pre-consultation phase of its reform process. The Commission has indicated that it will publish its consultation paper in late 2022, which will set out the existing law, and its defects, and make the arguments both for and against potential reforms. As a part of this consultation, interested parties will be invited to provide their feedback, which will ultimately inform the Commission’s recommendations to the Lord Chancellor.

In anticipation of this important consultation paper, over the course of this year, the Shearman & Sterling arbitration team will publish a series of short articles in which we will consider and analyse the areas identified by the Law Commission as potentially ripe for reform, as well as raise any further areas that we consider should be improved. These include:

• The supportive role of the English courts, including through possible reforms to Section 44 of the Act (under which the English courts are conferred with powers exercisable in support of arbitral proceedings);
• Cost reduction and the introduction of express powers for arbitrators to expedite dispute resolution by summarily dismissing unmeritorious claims;
• Revisiting the confidentiality of arbitral proceedings, in particular in light of recent reforms to the arbitration legislation of Hong Kong and Singapore;
• The grounds for challenging arbitral awards under Section 67 of the Act, including in respect of substantive jurisdiction; and
• The scope for appeals to the English courts on points of law under Section 69 of the Act.

Whether the Law Commission will ultimately recommend reforms to the Act, and what the nature and extent of those reforms will be, remains to be seen. It is clear that London provides a safe, stable and predictable arbitration seat for commercial parties, and remains very popular. There is no need for wholesale change. However, as we will cover in our series of publications, there are parts of the Act which could benefit from refinement, development and improvement.

*Special thanks go to Jonathan Bowering for his assistance in preparing this publication.