The resurrection of the Arbitration Bill and what to expect next

Following the King's Speech on 17 July 2024, the new Labour government has confirmed in its briefing paper that it will be resurrecting the Arbitration Bill. The bill is considered to be essential to support 'more efficient dispute resolution, attract international legal business, and promote UK economic growth’, and bolster our world-leading domestic and international arbitration sector.

This article will summarise the key features of the bill, the timeline for implementation and the importance of the bill for both domestic and international clients.

When was the Arbitration Bill first presented to parliament?

The Arbitration Bill first came before parliament in September 2023 under the UK's then Conservative government. The objective of the bill was to finesse and update the Arbitration Act 1996, which is now more than 25 years old, and followed a detailed review of the act by the Law Commission of England and Wales.

This move was warmly welcomed by commercial lawyers internationally, and particularly by those involved in the circa 5000 arbitrations which take place in England and Wales each year, and serves to enhance the UK's standing as a centre of international excellence for arbitration.

The bill had reached the committee stage of the House of Lords when it automatically fell when the government was dissolved in May 2024, in anticipation of the general election on 4 July.

What will the Arbitration Bill focus on?

The government has confirmed that in resurrecting the previous proposals the bill will focus on:

1. Confirming the new default rule regarding applicable law, meaning that ‘the law applicable to arbitrations will be those of the legal location chosen for arbitration unless the parties expressly agree otherwise’. This will mean that where arbitration is seated in England and Wales, or in Northern Ireland, it will be fully supported by our arbitration law which is among the most supportive of arbitration globally. This is a significant change to the existing position where, if the parties have elected as to applicable law within the main contract, that law will also apply to the arbitration agreement itself even in circumstances where the chosen location for the arbitration differs.
   
   
2. Giving arbitrators the power to ‘make awards on a summary basis on issues that have no real prospect of success, avoiding nuisance claims and making arbitrations more efficient’. This will mirror the court's power to dispose of meritless claims or defences without incurring the time and expense of a full trial.
   
   
3. Implementing measures to clarify when challenges will be permitted on the basis that the arbitral tribunal lacked jurisdiction. It’s expected that this will seek to limit the circumstances in which losing parties can effectively engineer a re-hearing of the case before the courts, thereby preserving the sanctity of the arbitral tribunal.
   
   
4. Ensuring that arbitrators are under a statutory duty to disclose circumstances which might give rise to ‘justifiable doubts about their impartiality, in line with international best practice’. This will involve arbitrators considering not only their actually knowledge but also what they reasonably ought to know.
   
   
5. Promotion of the enforcement of emergency arbitrator awards. The bill will grant emergency arbitrators the power to issue peremptory orders and/or to apply to the court to order the parties to comply with them.

Whilst the bill addresses some major areas of much needed modernising and updating, it stopped short of addressing some aspects considered by the Law Commission, including the much talked about requirement for a presumption of confidentiality for arbitrations seated in England and Wales. This was ultimately considered unnecessary as there is nothing to stop parties opting to make their arbitration confidential should they choose to do so.

The international importance of the Arbitration Bill

Whilst the bill will create UK legislation, it carries significant international importance as London continues to be considered the global capital for international arbitration and this is something which will only be bolstered by the bill.

London has long appealed to businesses when deciding on the venue for arbitration, given the importance that English law attaches to the principle of freedom to contract. Furthermore, arbitration in London is chosen by many parties because of the confidentiality advantages it offers - arbitrations are not public proceedings in the same way as court proceedings and parties are free to implement confidentiality provisions into any arbitration agreement. This is particularly important for those that do not, for reasons of commercial sensitivity, desire a public court trial in their home state.

The UK remains a party to the New York Convention 1958 and this assists the enforcement of awards made in London in the 140 other contracting states.

These longstanding advantages of arbitrating international matters in the UK, coupled with the new provisions on the horizon thanks to the Arbitration Bill, mean the UK and more specifically London stands out from the crowd in terms of commercial advantages, when deciding on the arbitral seat to be specified within contracts.

What’s next?

The bill received its first reading in parliament on 18 July 2024 with its second reading on 30 July 2024. It will then once again proceed through to the House of Lords and House of Commons, before reaching the stage where it receives Royal Assent and becomes law. Whilst the timeline cannot be certain it is expected that the bill will receive Royal Assent at some stage in the first half of 2025.   

For further information, please contact the commercial disputes team.