THE NEW ENGLISH ARBITRATION ACT
By:
Andrew Hunter
London
The Arbitration Act 1996 ("the Act") came into force in England, Wales and Northern Ireland on January 31, 1997. The Act is designed to reform and simplify the law, with the intention of making the UK a more attractive venue for international arbitration. The Act goes further than simply consolidating the untidy collection of statutes and case law by which arbitration has previously been governed by updating the law to bring the English system more into line with the UNCITRAL (United Nation's Commission on International Trade Law) model, which forms the basis of successful arbitration systems elsewhere.
The Act is unusual for an English statute in its clarity of language and freedom from legal jargon. Indeed, one of the primary purposes of the Act is to make it easier for foreign parties to conduct arbitration in England. To this end, the Act is also very flexible, and gives the parties to an arbitration considerable freedom over its conduct. These innovations are a move away from the previous English system, which tended to operate in a manner similar to regular court proceedings. Arbitration should now have the flexibility to be tailored to the requirements of the parties, and, thereby, to conclude disputes more rapidly, and economically, than the regular courts.
The Act's emphasis placed on the party's autonomy is made clear by the number of sections in the Act which begin with the phrase "the parties are free to agree...." For example, parties can agree on the degree of power to be given to the arbitrators, whether to exclude the right of appeal on a point of English law or whether to impose restrictions on the amount of costs that may be recovered from the losing party. Alternatively, it is open for parties to agree to follow specialised rules of arbitration, such as those of the International Chamber of Commerce.
The Act contains, nonetheless, a number of mandatory provisions, which the parties cannot agree to change. These relate to such matters as the duty of the parties to comply with the directions of the arbitrator, and the duty of the arbitrator to act fairly and impartially. There are also a few procedural points that address the power of the court to remove an arbitrator, and the effect of the death of an arbitrator. However, the most significant, and potentially controversial, of the mandatory provisions is that dealing with the immunity of arbitrators. An arbitrator is not to be liable for anything done or omitted in the exercise of his functions "unless the act or omission is shown to have been in bad faith." Unfortunately, the Act does not define "bad faith." As a result, parties may be able to argue that an arbitrator acted in bad faith.
In the past problems have arisen with arbitration in England because courts have been too willing to intervene and to challenge awards. The new Act both increases the authority of arbitrators and reduces the authority of the courts to review their decisions. A losing party can no longer challenge an award on the basis of "misconduct," but must satisfy the much tougher ground of a "serious irregularity affecting the tribunal, the proceedings or the award." While this will clearly serve to make it more difficult to appeal against an award, the precise impact the provision will have in practice will only become clear as the courts are asked to rule on it. However, this heightened standard is, at least, a significant improvement over past practices.
The Act places considerable emphasis on the issue of costs. This is clearly of great importance in a commercial arbitration and the new procedure should be quicker and more efficient. The Act even sets out as a guiding principle that the object of arbitration is to resolve disputes "without unnecessary delay or expense." The Act should encourage efficiency and thereby enable the economical arbitration of disputes over even relatively small sums.
The Arbitration Act 1996 is an important new piece of legislation which should greatly improve the process of arbitration in the UK. The UNCITRAL model law on which the Act is largely based has been tried and tested in other jurisdictions, and should help to bring the UK to the forefront of locations for international arbitration, well able to compete with arbitration centres such as Paris and Geneva.
