19 April 2023

Further to the publication of its first consultation paper in September 2022 (the contents of which are discussed in our article of 14 October 2022), the Law Commission has recently issued a second consultation paper in support of its review of the Arbitration Act 1996 (“the Act”). Given that the aim of the Law Commission’s review is to make the Act state of the art, the proposals put forward in this consultation paper seek to provide some helpful clarity in complex areas, such as determination of the proper law of the arbitration agreement. It is also a much welcomed development that the Law Commission are recommending the approach that all discrimination in the arbitral context is prohibited.

Prompted by the receipt of responses to the first consultation paper, the second paper focusses on three discrete topics, which are discussed below:

1 – The proper law of the arbitration agreement

The question of the proper law of an arbitration agreement is a new topic for consideration by the Law Commission for reform; its inclusion being prompted by responses to the first consultation paper. Specifically, the key issue requiring determination is what the governing law of an arbitration agreement is where the parties have made no express choice.

The current law in England and Wales on this issue is the Supreme Court decision in Enka v Chubb (2020). The Law Commission’s consultation paper notes that the process set out in Enka to determine governing law is complex; its application leaving room for argument, particularly in the context of arbitration agreements (as opposed to contracts).

In light of this, the Law Commission makes a provisional proposal that, to resolve these potential difficulties and potential uncertainty, a new rule is to be introduced into the Act to the effect that the law of the arbitration agreement is the law of the seat (i.e. the juridical place where the arbitration occurs) unless the parties expressly agree otherwise in the arbitration agreement.

2 – Challenging jurisdiction under section 67 of the Act

This is an issue raised in the Law Commission’s first consultation paper; the Commission originally proposing that, where a party has participated in arbitration and has objected to the jurisdiction of that tribunal, which has then made an award, any subsequent challenge under s67 of the Act should be by way of an appeal rather than a rehearing.

In the second consultation paper, this proposal has, following feedback, been revised on the basis that a party would be restricted from adducing new evidence or grounds of objection before the court that were not previously put before the tribunal. In addition, the court should allow the challenge only where the decision of the tribunal on its jurisdiction was wrong. The Commission proposes that such changes are encapsulated in detailed court rules, rather than through a provision in the Act itself.

3 – Discrimination

The topic of discrimination was raised in the first consultation paper, with a proposal suggested by the Commission that will allow a party to appoint an arbitrator free of any discriminatory restrictions that may have been written into the arbitration agreement.

Additional proposals are being made in the second consultation paper to make clear that, in this context, it would be justifiable (albeit not essential) for an arbitrator to have a different nationality to the arbitral parties. The consultation paper acknowledges that there is already precedent as to the desirability of an arbitrator having a neutral nationality in a number of institutional arbitration rules.

A further proposal is made to adopt the approach that discrimination generally in an arbitral context is prohibited, rather than simply discrimination in relation to arbitral appointments.

The consultation (a copy of the paper is available here) is currently open for responses until 22 May 2023.

This article was written by Christopher Wenn.

Key contact

Jessica Evans

Jessica Evans Partner

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