The proposed changes to the Arbitration Act 1996 (AA) stalled in 2024 due to the UK general election. They are now progressing through parliament again and should hopefully be implemented in 2025. The start of the year is a good opportunity to recap the key proposals.
Key proposals
The Law Commission’s review has confirmed that the AA has worked well and does not need root and branch reform. Rather, a limited number of changes have been proposed to modernise the AA.
The key proposals include:
- Governing law of arbitration agreements: implementing a default rule that absent the parties’ express agreement, the governing law of an arbitration agreement shall be the law of the seat of arbitration. Notably, the previous parliamentary readings have resulted in a carve out for arbitration agreements contained in investment treaties or non-UK legislation. This proposal is particularly topical for reasons explained further below.
- Summary disposal: empowering arbitrators to summarily dispose of claims or issues, unless the parties agree otherwise. The threshold shall be the same as summary disposal in English court proceedings, i.e. ‘no real prospect of success’.
- Orders against third parties under s.44: clarifying the court’s powers in support of arbitrations can be exercised in relation to a party or any non-party to the arbitrations.
- Arbitrators’ disclosure duty: codifying arbitrators’ common law duty to disclose any circumstances which might reasonably raise justifiable doubts as to their impartiality, and clarifying that such obligation will be based on what an arbitrator knows or ‘ought reasonably to be aware’.
- Challenging the tribunal’s jurisdiction under s.67: allowing new court rules to be made such that where the tribunal’s jurisdiction has been challenged by a party and the tribunal has ruled on that, save in the interests of justice (i) any subsequent challenge under s.67 will not allow any new grounds of objection or new evidence, unless it could not with ‘reasonable diligence’ have been discovered, and (ii) evidence will not be reconsidered.
- Arbitrators’ immunity: extending arbitrators’ immunity to cover reasonable resignation and costs liability for applications for removal (absent bad faith).
- Emergency arbitrators: empowering emergency arbitrators to (i) issue peremptory orders and (ii) give permissions for applications made under s.44.
The English courts have during 2023 and 2024 considered a significant number of anti-suit injunctions (ASI), driven by Russian legislation permitting Russian parties to bring Russian proceedings notwithstanding their arbitration agreements.
Some applications required the English courts to consider the governing law of arbitration agreements contained in English law governed contracts, where the law of the arbitration agreements is not expressly stated and the seat of arbitration is not in England. Accordingly, the proposal concerning the governing law of arbitration agreements is particularly relevant, as explained below.
Practical implications
Recently, the Supreme Court reaffirmed in UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30 that where the main contract was governed by English law but the seat of arbitration was in Paris, the law of the main contract typically encompassed the arbitration agreement.
This is significant because the breach of the arbitration agreement fell within the service out gateway in respect of a claim made under an English law governed contract, enabling the English court to protect a Paris-seated arbitration (where similar relief was unavailable) by granting an ASI prohibiting a Russian party from commencing/continuing Russian proceedings.
However, the proposed changes may have a retrospective effect on agreements concluded before the reforms (they will apply to proceedings commenced on or after the reforms take effect) and may therefore impede the English court’s ability to grant such relief going forward.
Therefore, where appropriate, parties with contracts and disputes with Russian and Russia-related parties should consider seeking a pre-emptive ASI before the amendments are enacted.
Hazel He is an associate at Cooke, Young & Keidan
