The King’s Speech: Arbitration on the Agenda

What is arbitration?

Arbitration, a form of alternative dispute resolution, is a method by which parties can settle disputes outside of court.  It can be faster, more confidential, and can be less adversarial than traditional litigation.  It arises typically as parties will draft an arbitration clause into a contract so that in the event that a dispute arises, they agree to resolve it through arbitration.  England and Wales has one of the strongest reputations in the field of arbitration internationally.  The reasoning for that is well cited, and includes the quality of arbitrators, the established legal system, and experienced lawyers who can be instructed.

What is the Arbitration Act and why is it on the agenda?

The Act is a response to growing competition from other jurisdictions (like Singapore) who also see the value in offering high quality arbitration forums.  Many “competitor” jurisdictions have been updating their arbitration laws and increasing their share of the global legal market.  The Act seeks to build on England and Wales’ strong reputation in this field by making the process more efficient and attractive to international businesses.  It seeks to implement the Law Commission’s recommendations from a 2022 review.  The government wants to bolster the world-leading domestic and international arbitration sector, and protect it from “competitors”.

What changes are proposed by the Arbitration Act?

The Act, which aims to modernise and enhance the arbitration process, has been introduced as part of the government’s broader strategy to affirm London’s status as a global hub for legal services.  Key provisions of the Arbitration Bill include clarifying the law applicable to arbitration agreements, codifying a duty on arbitrators to disclose potential conflicts of interest, and strengthening arbitrator immunity.  These measures are designed to ensure fairness and impartiality in the arbitration process, while also protecting arbitrators from litigation, thereby maintaining the integrity and appeal the jurisdiction as a seat for arbitration.

We previously shared our views on the proposed changes here: Fine-tuning the fundamentally sound: recommended reforms to the Arbitration Act 1996.  The reality is that many of these changes are to fine-tune, rather than modernise arbitration law in England and Wales.  It is typically quite difficult to write about arbitrations though, given the inherent nature of their confidentiality.  This new Act therefore gives us litigators something interesting to talk and write about though, so we’re jumping on the bandwagon.

The economic implications of the Act could be significant.  With an estimated 5,000 domestic and international arbitrations taking place in England and Wales annually, the sector contributes around £2.5 billion to the British economy.  The new legislation is expected to further enhance this contribution by attracting more international legal business and promoting economic growth.

The Act is now due to get its second reading in the House of Lords: watch this space.

Our Disputes team has considerable experience in international disputes. This includes complex, multi-jurisdictional disputes involving concurrent proceedings in foreign jurisdictions; 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,  under UNCITRAL rules, and in proceedings under the auspices of major arbitral institutions, including the ICC, LCIA and SIAC, as well as specialist shipping and trade procedures such as LMAA, GAFTA, FOSFA and SCMA.  We recently concluded an evidential hearing of a US$50m arbitration claim arising out of a failed oil well drilling project in Bangladesh. If you have an international dispute and/or want to understand what an arbitration clause in your contract means, please get in touch.