An increase in arbitration claims in the Commercial Court, but is the Arbitration Act still fit for purpose?

Review of the Judiciary’s report 

During the 2021 to 2022 reporting period, the Judiciary identified a significant increase in arbitration-related applications (around 25% of the total claims issued). Types of arbitration applications include:

• Applications following the failure of the appointment procedure (s.18 AA 1996).
• Requests for orders, including injunctive relief, in support of arbitral proceedings (s.44).
• Applications to enforce arbitration awards (s.66).
• Challenging arbitration awards, including as to the substantive jurisdiction of a tribunal (s.67), as to serious irregularity affecting the tribunal, the proceedings or the award (s.68), and appeals on points of law (s.69).

Of particular note, there was a rise from the previous reporting year of 59% in the number of challenges to a tribunal’s substantive jurisdiction and a 54% rise in applications alleging serious irregularity.  Whilst the pandemic could provide some explanation for these increases – contractual performance was hindered globally, and arbitral institutions and tribunals had to make immediate administrative and procedural adjustments to resolve disputes in a remote world – the conclusions of the Judiciary have been provided to the Law Commission to assist the consultation into whether the AA 1996 is still fit for purpose.

Review of the AA 1996

Prior to the publication of the Judiciary’s report, the Law Commission published its second consultation paper seeking views as to whether the  AA 1996 remains state of the art and fit for purpose. There is reference to this review in the Judiciary’s report, and no doubt the Law Commission will be analysing the Judiciary’s data with interest.

We asked arbitration specialists Russell Strong and Euan Palmer for their views:

Russell Strong: “In my view, the AA 1996 remains fit for purpose. It is not meant to be a complete code, and judges, familiar with arbitration and/or international parties and disputes, have developed the common law over the last 27 or so years to address areas in which the AA 1996 is silent or required interpretation.

As a result, the framework for arbitrations conducted under English procedural law is well-developed and plays an important role in continuing to attract commercial arbitrations.

Is there room for some legislative tweaks? Yes; as is often the case! I am not surprised that the proper law of the arbitration agreement has been raised as such a potential “tweak” in the first consultation. This was the issue in the well-known case of Enka v Chubb [2020] UKSC 38, which divided the Supreme Court 3:2 with the majority determining that if parties to a contract have not expressly or impliedly specified the law that governs their arbitration agreement, then if the contract specified a governing law, that would apply.”

Euan Palmer: “Putting the question as “is it fit for purpose” suggests bigger problems than what exist. It is patently fit for purpose – otherwise, London would not have enjoyed for so long the status it has as a leading centre for international arbitration. But just as obviously, the Act can be improved – even if some of the proposed changes are cutting the Gordian Knot and by doing so, leaving some in the arbitration community dissatisfied.

The overall performance of the Act can perhaps be measured both by the issues that the Law Commission initially invited consultation on and, more importantly, the limited number of issues that were identified as requiring further consultation in the Commissions second Consultation Paper. Neither suggest an Act that needs major overhaul.

Take as an example the point raised by Russell above regarding the law of the arbitration agreement. If an issue is going to divide the Supreme Court, then it is also likely to divide the lawyers in the arbitration community, and the proposed changes to the Act will do the same. But does that show a major problem in the Act? No. It is better seen as showing healthy engagement on all sides and a willingness to evolve and improve an Act that has been a cornerstone of ensuring London enjoying a leading role in international arbitration.”

The London International Disputes Week 2023 event taking place next week will also continue to shine a spotlight on London as an epicentre for global arbitration disputes. Responses to the Law Commission’s second consultation are due by 22 May 2023. We will keep you updated on this.

Our Disputes team has considerable experience in international disputes. This includes complex, multi-jurisdictional disputes involving concurrent proceedings in foreign jurisdictions; disputes with foreign states and state-owned entities; disputes exceeding US$100m; and the enforcement of judgments and arbitral awards, including asset tracing.  Our team has acted for parties in ad hoc arbitration and proceedings under the auspices of major arbitral institutions, including the ICC, LCIA, SIAC, SCC, and UNCITRAL, as well as specialist shipping and trade procedures such as LMAA, GAFTA, FOSFA and SCMA.

Euan is currently acting for an Azerbaijan-based drilling services company as both claimant and defendant in ongoing LCIA and SIAC arbitrations arising out of projects in Bangladesh, the latter being a claim valued at more than US$51m. If you would like to discuss a dispute, potential or actual, that may be governed by an arbitration agreement, please get in touch.