The UK's Arbitration Act Reforms: a Pro-Arbitration Move?
In March 2021, the Law Commission of the United Kingdom (the “Commission”) was tasked to conduct its review of the UK’s Arbitration Act 1996 (“Act”). Fast-forward to September 6, 2023, when the Commission’s final report found that the Act remained fit for purpose, namely, to keep the UK as an attractive arbitration hub. However, the report contained recommendations to retain the UK’s competitive edge. While this post cannot go over all recommendations, it will focus on the following:
The codification of a simpler but consistent approach to determine parties’ implied choice of law under an arbitration agreement;
New rules to strengthen arbitrators’ immunity; and
Restrictions on challenges against the jurisdiction of tribunals.
Given the recency of these proposed reforms, one must note that all discussion is speculative. Nonetheless, it is important to consider whether these amendments are effective to allow the UK to maintain its competitive edge as an arbitration hub.
To make this comparison, one must first ask: what makes a jurisdiction “pro-arbitration?” If a criterion can be ascertained, then one can properly identify whether the recent amendments to the Act fulfill their goal. Thankfully, actions adopted in other “arbitration hubs” such as the US and Singapore provide some insight.
Beginning with the US, the introduction of the Federal Arbitration Act of 1925 was generally regarded as moving the US to become a pro-arbitration jurisdiction; SCOTUS commonly refers to it as putting an end to the “judicial hostility of arbitration,” and creating the presumption that arbitration agreements should be enforced (for instance, in EEOC v. Waffle House). Even the US’ inconsistent treatment of kompetenz-kompetenz has recently been resolved in favor of giving arbitral tribunals greater discretion, using the “pro-arbitration attitude” as justification. Other instances of the country’s alleged “pro-arbitration” stance include rejections of interim relief pending arbitration as doing so would be “arbitration-unfriendly”, broad subject-matters which are deemed arbitrable, and even a broad enforcement regime. However, apart from this, there is legislative inaction in this field. Indeed, such inaction consequently suggests that “pro-arbitration” is but a policy reason in judicial reasoning. Hence, one must be skeptical of its self-proclaimed “pro-arbitration” status.
On the other side of the world is Singapore. The Ministry of Law in Singapore often touts Singapore as a pro-arbitration jurisdiction. Recent surveys bolster this: Singapore International Arbitration Centre has been tied for first place as the top preference for parties as a seat of arbitration. While Singaporean Courts similarly adopt this view, the legislature has been particularly active. The introduction of the Singapore International Commercial Court promotes “arbitration through litigation,” giving even non-Singapore-qualified lawyers their time in a “domestic court.” Further, third-party funding arrangements have been codified in Singapore; this is unlike the US where it is left to the common law to regulate. Hence, Singapore’s “pro-arbitration” proclamations are bolstered by its positive legislative action to truly turn the State into a pro-arbitration hub.
These are but two drastic examples of how countries being “pro-arbitration” can be treated in different ways, and perhaps why Professor Bermann criticizes the “pro” and “anti” arbitration terms. Nonetheless, they remain helpful to consider how a state’s institutions view arbitration. Going further, perhaps one can frame the UK’s position as more akin to Singapore – that of active legislative reforms to encourage arbitration.
Have the Boxes Been Ticked?
Having said this, one can then compare the proposed reforms to the legislative framework in other active pro-arbitration jurisdictions.
First, on the implied choice of law, the UK seems to be the first state to clarify its position. This debate stems from the conflicting cases of Kebab-Ji v Kout Foods in France, Enka v. Chubb in the UK, and BCY v. BCZ in Singapore. Overall, the codification of the rule brings clarity on what parties can expect if arbitrations seated in the UK are challenged and have not yet been replicated elsewhere.
Second, the clarification of arbitrators’ immunity, particularly against challenges to their impartiality, has been emphasized. This mirrors current global trends of disclosure, such as the July 2022 ICSID Rules which were designed to target conflict-of-interests of arbitrators. On the flipside, arbitrators get greater certainty, as well as greater protection from challenges to remove them. This replicates the position taken in other states, including Singapore (s.25 International Arbitration Act) and Hong Kong (s.20 Arbitration Ordinance CAP 609).
Finally, the new restrictions on challenges against the tribunal’s jurisdiction should be touched on. Traditionally, de novo review of jurisdiction is a cornerstone of arbitration in various jurisdictions. However, the modern reforms limit any de novo review to only consider grounds of objections previously pleaded, and not to re-hear evidence. This, the Law Commission suggested, was to enhance efficiency and reduce costs. While much can be said about the legitimacy of de novo review, one must note that this provides significant deference to Tribunals. Other than the UK, no such limitation applies in Singapore, Canada, or the US. However, whether this remains a pro-arbitration decision is ultimately to be seen.
Undoubtedly, there are certain areas which the reforms could have addressed. These include the role of technology in arbitration, as well as the role of climate-friendly arbitration, such as the Green Arbitration Pledge. However, these developments could arguably be better left for the arbitral institution rules to address as opposed to legislation. Additionally, UK courts could play an active role, similar to those in the US, to reaffirm the pro-arbitration position of the UK by accepting it as an overall policy goal, rather than as a mere tool of interpretation.
Nonetheless, given the brief analysis, the proposed reforms to the Act undoubtedly align the UK with other modern, pro-arbitral jurisdictions, and allow it to stay competitive in the modern global economy. Additionally, these active reforms in the UK to promote arbitration seem to indicate clear intention to be an active “pro-arbitral” jurisdiction rather than leaving it to the courts. Hence, its self-proclamations might be justified, and businesses should look closely to London to determine if its new legislation would best fit its disputes.
Gregory Chan is a current LLM student at New York University specializing in International Business Regulation, Litigation and Arbitration, and current research assistant to Professor Franco Ferrari and Professor Linda Silberman. Prior to commencing his LLM, he worked at UNIDROIT Digital Assets and Private Law working group, disputes groups of various firms in Singapore and was a mentee to Svenja Wachtel for the Young Energy Disputes Arbitration Centre mentorship program. He completed his LLB at King’s College London, and was a member of the Willem C. Vis Commercial Arbitration Moot Team as well as the Cross-Examination Moot Team.