The English Arbitration Act 1996: Strengths and Limitations. Nick Marsh

The English Arbitration Act 1996:
Strengths and Limitations
Nick Marsh
Russian Arbitration Day, Chamber of Commerce and Industry of the Russian
Federation
29 May 2014

Introduction
 The English Arbitration Act 1996 (the "Act") marked a radical
change of approach to arbitration in England.
 This presentation will cover:
 The rationale for the Act
 An assessment of its strengths and limitations
29 May 2014 2

The origins of the Act: the history of
English arbitration
 English arbitration law: the beginning
 the first English Arbitration Act: 1698
 common law: developed through cases over several centuries
 The law as it stood pre-Arbitration Act 1996
 no comprehensive statutory framework for arbitration: the 1950,
1975 and 1979 Arbitration Acts were not suitable.
 large and unclear volume of case law.
 no clear statement of principles underlying arbitration law: the law
had developed in a piecemeal and reactive manner.
 Delays could be caused by frequent appeals or references to the
English courts, which had excessive supervisory powers.
 Coppée-Lavalin SA/NA v Ken-Ren Chemicals and Fertilisers [1994] 2
W.L.R. 631
29 May 2014 3

The origins of the Act: a global call for
change
 A global call for change
 Three major events in the development of international arbitration:
i. New York Convention 1958
ii. UNCITRAL Rules 1976
iii. UNCITRAL Model Law 1985
 United Kingdom: Model Law or not?
 A Departmental Advisory Committee, representing users,
arbitrators, lawyers and the judiciary ("DAC") was established by
the UK Department of Trade and Industry to make
recommendations to the government.
 The DAC compared the established English arbitration law with
the Model Law.
29 May 2014 4

The origins of the Act: Model Law or
not?
 In its 1989 report the DAC concluded that:
 the Model Law should not be adopted into English law
 there should be a new Arbitration Act setting out "in statutory form…the
more important principles of the English law of Arbitration…in logical
order, and expressed in language which is sufficiently clear and free from
technicalities to be readily comprehensible to the layman".
 There were three further DAC reports:
 an interim report in 1995;
 a final report in 1996; and
 a supplementary report in 1997.
 The Act came into force on 31 January 1997: a 10 year process.
29 May 2014 5

The Act: a fresh start
 The aim of the Act was "to restate and improve" English Arbitration
Law – Pre-amble to the Act
 The Act consolidates into one logical and more readily
understandable framework rules from the English Arbitration Acts of
1950, 1975 and 1979.
 A key purpose of the Act was to increase speed/economy and
drastically to reduce the intervention of the courts by:
 only giving courts essential powers
 only allowing courts to assist where the Tribunal cannot act
effectively
 only allowing courts to correct very fundamental errors
29 May 2014 6

Key characteristics of the Act – the
four pillars
 The "four pillars" of the Act:
i. three general principles – section 1
ii. duties of the tribunal – section 33
iii. duties of the parties – section 40
iv. mandatory and semi-mandatory provisions – section 4
 The three general principles upon which the Act is founded are:
i. Fair, speedy and cost effective dispute resolution by impartial
tribunals;
ii. Party autonomy; and
iii. Support for the arbitral process and limited intervention by the courts.
29 May 2014 7

The Act vs the Model Law
 Whilst the Act conforms generally to the principles of the
Model Law, it nevertheless differs in a number of respects,
including (for example) the following:
i. it is markedly longer, more specific and less generalised
ii. it sets out three general principles (fairness, party autonomy
and limited court intervention) through which to interpret the Act
iii. it includes a duty on the parties to promote expeditious conduct
and obey the tribunal's orders
iv. it has provisions specific to English arbitration law (appeals on
points of law, immunity of arbitrators, security for costs)
v. it has more specific provisions on certain matters such as
disclosure, evidence, consolidation, interest and costs
29 May 2014 8

vi. the Act contains provisions which are expressly mandatory (i.e.
cannot be excluded by agreement) or semi-mandatory (i.e. will
apply unless the parties agree otherwise)
vii. the Model Law allows the parties to choose the procedure for
the arbitration, with the arbitrators having default powers in the
absence of agreement. Under the Act, the arbitrators have
powers subject only to contrary agreement by the parties.
viii. the default number of arbitrators under the Act is 1 not 3.
ix. where each party is required to appoint an arbitrator, the Act
retains the power of a party to treat his arbitrator as the sole
arbitrator where the other fails to appoint.
x. the Model Law does not contain any mechanism for summary
enforcement of awards.
29 May 2014 9

 The Act has certain similarities to the Model Law:
 it has a similar, logical, structure and covers:
 the making and enforcement of the arbitration agreement
 the formation of the tribunal
 the conduct of the proceedings
 powers and duties of the tribunal and parties
 court intervention to support proceedings
 making of awards
 court powers to remedy errors
 recognition and enforcement of awards
 like the Model Law, the Act does not expressly cover:
 confidentiality and privacy
 arbitrability of disputes
29 May 2014 10

The Act: a success?
 A 2006 report commissioned by the English Commercial Court
Users' Committee consulted users and practitioners on a
number of perceived weaknesses in the Act. The report
concluded that no changes were necessary.
 However, weaknesses may include the following:
 Appeals to courts on questions of law
 Court challenges: alleged procedural unfairness
 Court challenges: Tribunal's jurisdiction
 Arbitrability of disputes
 Privacy/confidentiality
 Consolidation of related disputes
 Aggressive court intervention to prevent foreign proceedings
29 May 2014 11

Reduced court intervention
 Appeals on a point of law (s69 of the Act)
 It is questionable whether this provision was necessary: part of
its purpose was to allow English case law to develop, at the
expense of the finality of arbitration (and potentially its privacy).
 The parties can exclude the right to bring such appeals by
agreement. The leading arbitration rules do precisely that.
 Challenges based on serious irregularity (s68 of the Act)
 Court's permission is required: security will often need to be
provided and the threshold for successful challenges is high.
 Lesotho Highlands Development Authority v Impreglio SpA
[2005] UKHL 43: the incorrect exercise of a power available to a
Tribunal cannot, of itself, amount to a serious irregularity.
29 May 2014 12

Reduced court intervention
 Challenges to the Tribunal's jurisdiction (s67 of the Act)
 The Act and related English court practice have been criticised for
(i) requiring an extensive review of the same facts and the law by
both the Tribunal and then the Court (leading to increased costs
and delay) and (ii) not giving sufficient importance to the Tribunal's
award on its own jurisdiction.
 Premium Nafta Products Limited and others v Fili Shipping
Company Limited and others [2007] UKHL 40 ("Fiona Trust") – the
House of Lords construed an arbitration agreement broadly –
arbitration is a "one stop shop". The court also confirmed the
separability of an arbitration agreement from the main agreement,
where the main agreement had allegedly been procured through a
bribe.
29 May 2014 13

Arbitrability and
privacy/confidentiality
 Arbitrability:
 not defined in the Act (see sections 66 and 81).
 The English courts have generally taken a pro-arbitration
approach. Even unfair prejudice claims by minority shareholders
under s994 of the Companies Act 2006 are arbitrable; winding-up
petitions under the Insolvency Act 1986 may also be: Fulham
Football Club (1987) v Richards and anor [2011] EWCA Civ 855.
 Privacy/confidentiality:
 also not defined in the Act, as the exceptions were evolving and
were too difficult to codify.
 The English courts support the privacy and confidentiality of the
arbitral process: see Michael Wilson & Partners Limited v John
Forster Emmott [2008] EWCA Civ 184. Not all legal systems do.
29 May 2014 14

Aggressive court intervention -
interference or pro-arbitration?
 The English courts have not only reduced their intervention
into English arbitration but have also promoted English
arbitration through "anti-suit injunctions":
 AES UST-Kamenogorsk Hydropower Plant LLP v UST-
Kamenogorsk Hydropower Plant JSC [2013] UKSC 35: anti-suit
injunction issued by English court to prevent the continuation of
Kazakh proceedings but without any obligation to start London
arbitration.
 BNP Paribas SA v Open Joint Stock Company Russian Machines
and another [2011] EWHC 308 (Comm) ("Russian Machines"): the
English court arguably overstepped the mark in applying section
44 of the Act. An anti-suit injunction was issued by the English
court against a non-party to the arbitration agreement (but which
was related to the Respondent) restraining the continuation of
Russian shareholder proceedings.
29 May 2014 15

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