In depth: Arbitration Act - new rules put UK ahead

On 20 April 2010, a methane gas explosion destroyed the semi-submersible drilling rig Deepwater Horizon off the Louisiana Coast, killing 11 crew members and discharging 5 million barrels of oil into the sea. In the blizzard of subsequent litigation, one flurry reached the UK’s Supreme Court, which in 2020 dismissed an appeal over the choice of a court-appointed arbitrator.

While welcomed at the time, the common law decision in Halliburton v Chubb created its own problems in arbitration law. Those are among the uncertainties cleared up by the Arbitration Act, which received royal assent last month. The legislation, which reforms and clarifies its 1996 predecessor, was one of the first to be introduced by the Labour government, which received it in ‘oven ready’ form as a bill lost in the pre-election washup. That in turn followed Law Commission recommendations in 2023.

The result ‘both cements and safeguards the UK’s reputation for excellence as a seat of arbitration’, justice minister Sarah Sackman KC MP said this week. The measure was warmly welcomed by the Law Society and the London Court of International Arbitration, which said it provides ‘welcome legal clarity on a number of key issues’.

Provisions of the act include:

• A new default rule on applicable law: the governing law of the arbitration agreement will be the law of the seat of arbitration rather than the governing law of the underlying contract unless the parties expressly agree otherwise. This certainty will settle a long-running controversy, Professor Maxi Scherer, LCIA president-elect said this week. ‘We now have a very clear solution. Parties are not interested in doctrinal debate, they are interested in solutions.’
• Codification of an arbitrator’s duty of disclosure. This was the central issue in Halliburton v Chubb. The mandatory provision creates a duty to disclose circumstances that might reasonably give rise to doubts about an arbitrator’s impartiality. This puts the duty to disclose ‘on a much firmer footing,’ current LCIA president Paula Hodges KC said. ‘It is not limited to an arbitrator’s actual knowledge, but what they ought to be aware of.’
• A provision for summary disposal where the tribunal considers that a party has ‘no real prospect of succeeding’. This will serve as a warning to parties not to ‘throw in that dodgy bit of a claim in the hope that it will get over the line’, Hodges said. The wording seems to set a lower threshold than the LCIA’s current rules, which allow summary disposal of a case which is ‘manifestly without merit’ or ‘manifestly outside the jurisdiction of the arbitral tribunal’.

'The new law is intended to reinforce England and Wales as a global destination of choice for the legal sector. The new law enhances the existing arbitration-friendly regime, aiming to ensure arbitrations seated here can be fair and efficient with appropriate court support'

Ruth Cowley, Norton Rose Fulbright

The act also strengthens the power of emergency arbitrators, further protects arbitrators’ immunity from liability and clarifies rules on correction of awards. The LCIA points to a couple of omissions: on appeals to awards on a point of law and any statutory provision for confidentiality. Meanwhile, no date has been set for commencement – ‘as soon as parliamentary time allows’, the Ministry of Justice said.

For the moment, arbitration specialists are upbeat. LCIA director general Kevin Nash said that the certainty created by the legislation is ‘unmatched’ elsewhere in the world.  

Ruth Cowley, co-head of international arbitration at Norton Rose Fulbright, said: ‘The new law is intended to reinforce England and Wales as a global destination of choice for the legal sector. The new law enhances the existing arbitration-friendly regime, aiming to ensure arbitrations seated here can be fair and efficient with appropriate court support.’

Cowley noted that rival jurisdictions will be watching closely. ‘Other leading arbitration seats regularly review their laws to ensure that they are supporting and promoting international arbitration and remain competitive. For example, Hong Kong and Singapore have recently updated their regimes. It will be interesting to see if part of the UK’s act is replicated and implemented in other jurisdictions.’

Law Society president Richard Atkinson agreed: ‘International arbitration is a fiercely and increasingly competitive field where English and Welsh law continues to dominate, governing roughly 40% of global corporate arbitrations. As the market evolves, it is imperative that the government maintains our jurisdiction’s competitive edge and capitalises on the economic value of our legal system.

‘We are aware that arbitration will need further review in the coming years as developing technologies continue to impact legal services. We welcome these conversations as we continue to protect the strong reputation of English and Welsh law.’

Sackman said the government remains open to further reform – particularly to keep ahead of rival jurisdictions. ‘As a minister, I welcome your thoughts and suggestions,’ she said.