Law Commission publishes Final Report and draft Bill for amendments to the English Arbitration Act

The Law Commission today published its much anticipated Final Report on the English Arbitration Act (the Act), accompanied by a draft Bill. Although the Law Commission has emphasised that “root and branch reform is not needed or wanted“, the report nonetheless makes several significant recommendations for change and proposes other more minor amendments. The main recommendations are as follows:

  • Codifying an arbitrator’s duty of disclosure
  • Strengthening arbitrator immunity around resignation and removal
  • Introducing a power of summary disposal
  • Improving the framework and procedure for challenges under section 67
  • Introducing a new rule regarding the governing law of an arbitration agreement
  • Clarifying court powers in support of arbitral proceedings and in support of emergency arbitrators

These are discussed and summarised below. It is also noteworthy that the Law Commission has decided not to make any recommendation for reform in certain other areas, including appeals on a point of law, confidentiality and discrimination. This Final Report follows a rigorous and extensive consultation process, which we reported on here and here.

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The Law Commission’s Second Consultation Paper – an evolving approach

This week the Law Commission published a second Consultation Paper as part of its review of the English Arbitration Act (the Act).

The Paper raises three issues for consultation: (1) how the proper law of the arbitration agreement should be determined under English law; (2) the procedure for jurisdictional challenges before the English court under section 67 of the Act; and (3) tackling discrimination in arbitral appointments and procedure.

Issue (1) was not addressed by the Law Commission in its first Consultation Paper. However, thirty-one responses raised this as something that was in need of review and potential reform.  Although issues (2) and (3) were addressed in the first Consultation Paper, the Law Commission’s thinking on these topics has developed following the initial round of responses. As a consequence, it has taken the opportunity to tweak its original proposals and, in the case of issue (3) on discrimination, identify new topics of potential reform.  We set out below a summary of the new proposals and questions raised by the Law Commission.

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  1. Third Party Funding: recoverability and regulation

In Tenke Fungurume Mining S.A. v Katanga Contracting Services S.A.S, [2021] EWHC 3301 (Comm), the Commercial Court considered a challenge to an arbitral award under s68 of the Arbitration Act on the grounds that the tribunal’s award of the successful party’s costs of third party funding constituted a serious irregularity. The Court refused the challenge, finding that the tribunal had not exceeded their powers or wrongly exercised their discretion in awarding third party funding costs. The case provides some clarity on whether an award of third party funding costs in arbitration constitutes a serious irregularity under the Act. However, it is important to note that the English court was not asked to rule on whether such fees are recoverable in arbitration as a matter of English law: i.e. whether it should be open to an arbitral tribunal to award third party funding costs in the first place. Given that there is no recovery of third party funding costs in English litigation, it leaves a difference in recovery between litigation and arbitration and raises the question as to whether this should be permitted. This is only likely to be addressed by the English courts in the rare (and perhaps unlikely) event that a party raises this point in a challenge or question of English law under s69 or s45 of the Act.

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