Law Commission of England & Wales Publishes Second Consultation Paper on the Arbitration Act 1996

In autumn last year, the Law Commission of England and Wales published its review of the U.K. Arbitration Act 1996 (the First Paper). We outlined some of the Law Commission’s proposals in the First Paper in our update from September 2022.

Following significant engagement on the First Paper, the Law Commission published a second consultation paper (the Second Paper) on 27 March 2023. This update addresses the three matters considered in the Second Paper: the proper law of the arbitration agreement; challenges to an arbitral award on the basis that the arbitral tribunal lacked jurisdiction; and discrimination.

Proper Law of the Arbitration Agreement

The Second Paper makes proposals for reform on the thorny issue of the proper law of the arbitration agreement.

The U.K. Supreme Court decision in Enka v Chubb [2020] UKSC 38 set out the principles under English law for determining the proper law of an arbitration agreement. The reaction to that decision has been mixed, and some responses to the First Paper raised this as a topic that required review and potential reform. To simplify what it refers to as the “complex” process set out in Enka, the Law Commission proposes that a new rule be included in the U.K. Arbitration Act 1996, that the law of the arbitration agreement is the law of the seat, unless the parties expressly agree otherwise in the arbitration agreement itself.

Such reform would provide welcome clarity on this issue.

Challenging an Arbitral Award for Lack of Jurisdiction

As we wrote in our first update, challenges to an arbitral award — on the basis that the arbitral tribunal lacked jurisdiction — under section 67 of the U.K. Arbitration Act 1996 are controversial. So much so that the Law Commission thought it was necessary to consult again on this topic because of the strong views expressed on either side. In the First Paper, the Law Commission proposed that the challenge should take the form of an appeal instead of a rehearing. The new proposal softens this approach slightly, continuing with the ‘appeal’ approach, but allowing for new evidence to be heard in very exceptional circumstances. Also, the process for challenging jurisdiction should be achieved through a change in the rules of the Court rather than a change to the U.K. Arbitration Act 1996. This is seen as a “softer” reform.

Discrimination

The Law Commission is asking for views as to whether discrimination should be generally prohibited in arbitration and what remedies should be available if discrimination were to occur.

Responses to this Second Paper must be received by mid-May 2023. The responses from both the First and Second Papers will inform the Law Commission’s final report. Recommendations will then be sent to the Ministry of Justice to decide whether the U.K. Arbitration Act 1996 should be amended, and if so, how.