Will reforms help London keep its top spot in international arbitration?

January 9, 2023

Will reforms help London keep its top spot in international arbitration?

Where is the best place to conduct international arbitration?

City lawyers would immediately cheer ‘London!’, but there is stiff competition –

with the likes of Singapore, Hong Kong, Paris and Geneva all jostling for position as the number one arbitration seat. In 2021, a survey by Queen Mary University and international law firm White & Case saw Singapore climb the rankings to catch up with London and jointly share the top spot.

Conscious of the global competition, the Law Commission recently launched a review of the Arbitration Act 1996 – a piece of legislation that has been vital to the success of international arbitration in the UK, but is now more than a quarter of a century old.

Given that rival jurisdictions have brought in their own legislative reforms more recently, the need to act is pressing. The Law Commission plans to produce a set of recommendations that the government can adopt to ensure that the Arbitration Act is working as effectively as possible, and that London – and English law – can remain top dog in the international arbitration pack.

The Commission has already spoken to a wide range of stakeholders and conducted its own research; and on 22 September last year it released an initial consultation paper, which closed for responses last month. The good news for lawyers who are fans of the Act is that the Law Commission has recognised that the current legislation works very well, with major reform ‘neither needed nor wanted’. So the consultation paper is more about tinkering around the edges; with changes being considered in a few distinct areas.

One of these areas relates to appeals on a point of law.

In a typical arbitration, the arbitrator finds the facts, and then applies the law to those facts in order to reach a decision. But what if the arbitrator gets the law wrong? Section 69 of the Act currently allows a party to appeal to the court, for the court to reconsider the contested question of law – but only in limited circumstances.

In its discussions with stakeholders, the Law Commission heard mixed views on this. Some wanted to repeal section 69, to make the arbitral award more final. But others said section 69 should be expanded, to give the court more chance to consider questions of law and ensure errors are corrected. There is a tension at play between certainty on the one hand, and fairness on the other.

The Law Commission weighed it all up and has provisionally concluded that the current section 69 treads the right path between the two, and is a good compromise. After all, as a percentage of total arbitrations, section 69 is rarely invoked, which suggests it is not creating any great delay or uncertainty. But at the same time, some appeals are made every year, so the court does have some opportunity to make helpful pronouncements. Meanwhile section 69 is not mandatory, and parties are free to agree a different position on appeals on points of law, be it more or less generous. So all in all, the Law Commission has decided to leave well alone on this point.

Another interesting area that the Law Commission is considering is confidentiality. How secret should arbitration be? Currently, a duty of confidentiality can arise in several ways: contractually, where parties agree that their arbitration will be confidential; in equity, where potentially private information is received in circumstances that import an obligation of confidence; and in tort law, which can also protect against some invasions of privacy.

At the moment, the Act contains no provision covering confidentiality in arbitration. The Law Commission considered whether one should be introduced; for example through a default rule that arbitrations are confidential, with a list of exceptions. But it has provisionally decided that the Act should not seek to ‘codify’ the law of confidentiality, and that ‘the law of confidentiality is better left to be developed by the courts’.

This stance has not proved popular with everyone, however. The City of London Law Society recently set up a new Arbitration Law Committee, which submitted a provisional response to the Law Commission’s consultation last month. The response asserted that not addressing confidentiality explicitly in the updated Arbitration Act would be a mistake, given that it is a ‘prime reason’ for international parties choosing to arbitrate under English law – and a major attraction for London as opposed to a number of rival seats. The committee of City lawyers said it was not ‘tenable’ for the act to ‘remain silent on such an important element of arbitration in London’.

The committee insisted that the Act should contain at least a statement of principle as to arbitrations being confidential under English law, subject to exceptions as listed in the Act.

Whether the Law Commission will ultimately listen to the views of City lawyers and change its stance on confidentiality – or any of the other distinct areas up for grabs in its consultation – remains to be seen. But what is certain is that international arbitration is now a booming area for the UK, and it is set to grow even further.

The London-headquartered Chartered Institute of Arbitrators has more than 17,000 members across 149 countries; while domestically, there are at least 5,000 domestic and international arbitrations in England and Wales every year, potentially worth at least £2.5 billion to the British economy.

If this success is to continue, ensuring that our legislation fully meets the needs of arbitrating parties is clearly of paramount importance.


January 9, 2023