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International arbitration in 2024

Arbitration Act 1996 reforms: ensuring London remains a leading seat for international arbitration

By: Oliver Marsden, Joaquin Terceño, Ella Davies

An Arbitration Bill containing key reforms to the UK’s Arbitration Act 1996 is expected to make its way onto the statute books in 2024.

The Arbitration Bill is the culmination of a two-year consultation by the Law Commission of England and Wales, in which Freshfields participated.

London has long been a preferred seat of arbitration for parties arbitrating under cross-border contracts, principally due to the robust legal framework for London-seated arbitrations found in the 1996 Act and the approach of the English courts to arbitration-related matters, which was recently encapsulated by the then Lord Chief Justice, Lord Thomas, as follows: “Maximum Support. Minimum Interference.” A 2021 survey ranked London as the most popular seat, alongside Singapore.

In November 2021, the Law Commission initiated its consultation on possible reforms to the 1996 Act to ensure that London maintains that top spot. The consultation has led to a number of recommendations which are reflected in the Arbitration Bill. We summarize four key recommended reforms below.

The Law Commission has conducted a thorough and thoughtful consultation on the Arbitration Act 1996 and has made some very welcome recommendations for reform which, if enacted, should further enhance London’s popularity as a seat of arbitration.

Oliver Marsden
Freshfields Partner and Head of International Arbitration – London

The law governing an arbitration agreement

The law governing an arbitration agreement will typically apply to determine important matters such as the validity and scope of the arbitration agreement. Following the Supreme Court’s decision in Enka v Chubb, the current position under English law is that, absent an express choice of law for the arbitration agreement, the law governing the arbitration agreement will usually be the same as the law governing the parties’ wider contract.

The Arbitration Bill proposes to change this: absent an express choice of law for the arbitration agreement, the law governing the arbitration agreement will be the law of the seat of the arbitration.

New tribunal powers to summarily dismiss meritless claims and defenses

The Arbitration Bill introduces a new provision empowering a London-seated tribunal to issue an award dismissing a claim or defense on a summary basis in circumstances where the relevant party has “no real prospect of success”. This is the same as the threshold test for “summary judgment” applied by the English courts.

This new provision (from which parties will be able to “opt out” if they wish) will remove any residual uncertainty relating to a tribunal’s power to dispose of a claim or defense by way of a summary procedure under English law. That power will now be set out expressly in the new Act.

Parties (and tribunals) should, therefore, feel more comfortable applying for (and adopting) summary procedures in London-seated arbitrations without fear of a party subsequently seeking to challenge or resist enforcement of the award on that basis.

We anticipate that these reforms to the UK’s arbitration law will be of great interest to parties entering into international commercial contracts, especially the new express power to summarily dismiss meritless claims and defenses.

Joaquin Terceño
Freshfields Partner

Interim relief: enhanced court powers to support the arbitral process

In some cases, a party may need to apply for interim relief from the English courts in support of a London-seated arbitration rather than seeking such relief from a tribunal or an "emergency arbitrator", because a tribunal or emergency arbitrator cannot provide effective relief in the circumstances. One example is a situation where a party requires an order against a third party, because a third party will fall outside the jurisdiction of a tribunal or emergency arbitrator. However, for several years there has been uncertainty in the English case law regarding the extent of the courts’ powers to issue orders against third parties in support of arbitration proceedings. The Arbitration Bill amends the 1996 Act to clarify that, unless otherwise agreed by the parties, the courts have the same powers to order relief against third parties in an arbitration context as they have in court proceedings.

The Bill also contains a provision which assists parties seeking urgent relief from an emergency arbitrator by confirming that they can go to the English courts to convert a peremptory order from an emergency arbitrator into an order of the court. This will facilitate enforcement of such orders in the UK and is also likely to place parties on better footing to enforce internationally. This is helpful since interim relief obtained from an emergency arbitrator can be difficult to enforce, in particular where the emergency arbitrator issues his or her decision in the form of an "order" rather than an award, as there may not be any available framework under a treaty or local law for enforcement of such an order.

More limited scope of review of jurisdictional awards by English courts in certain circumstances

At present, a jurisdictional challenge to a tribunal’s award under section 67 of the 1996 Act involves a full de novo review by the English courts on the issue of jurisdiction, in all circumstances.

The Bill provides for amendments to the 1996 Act and relevant court rules to make separate provision for circumstances where a section 67 application:

  • relates to a jurisdictional objection on which the tribunal has already ruled; and
  • is made by a party that took part in the arbitration proceedings.

In such circumstances, it is envisaged that the following rules will apply:

  • a ground for the objection that was not raised before the tribunal should not be raised before the court unless it could not have been discovered with reasonable diligence at the time of the arbitration;
  • new evidence that was not heard by the tribunal must not be heard by the court unless it could not with reasonable diligence have been submitted to the tribunal; and
  • evidence that was heard by the tribunal must not be re-heard by the court except where the court considers this necessary in the interests of justice.

This represents an important change to the current approach of the English courts, and creates a point of difference between arbitrations seated in London and arbitrations seated in Singapore. (As noted above, Singapore has rivalled London in recent years as a preferred arbitral seat for international parties). The Singaporean courts still conduct a full de novo review on jurisdiction (at least for the time being; similar reforms could follow in Singapore). Our recent blog discusses how the post-reform 1996 Act compares with Singapore’s arbitration laws.