With this it will be convenient to consider clauses 2 to 18 stand part.
May I remind Members that in Committee, Members should not address the Chair as Deputy Speaker? Please use our names when addressing the Chair. Madam Chair, Chair, Madam Chairman or Mr Chairman are also acceptable.
It is a pleasure to serve with you in the Chair, Ms Nokes.
On account of the Bill’s 18 clauses being grouped together, I will speak to them in numerical order. I begin with clause 1, which contains one of the Bill’s key reforms: provision for determining the governing law of an arbitration agreement. This is important because different governing laws may give different answers to important questions such as who is party to the agreement and whether the type of dispute is capable of being arbitrated.
Clause 1 will determine the governing law of the arbitration agreement by replacing the common law approach established in Enka v. Chubb with a new statutory rule. The law governing the arbitration agreement will be the law expressly chosen by the parties. Otherwise, it will be the law of the seat. By way of simple illustration, if someone arbitrates in London, by default the applicable law would be English law.
Whereas the common law approach is complex and uncertain, the new approach in clause 1 is simple and predictable. It reduces the prospect of satellite litigation to determine governing law, which can be slow and costly. Where the arbitration takes place in London, as is the choice in so many international arbitrations, by default the arbitration will be fully supported by English law.
For the avoidance of doubt, I would like to add that an express choice of law to govern the main contract rather than the arbitration agreement is not enough. Clause 1 will not apply where the agreement is derived from standing offers of arbitration contained in treaties or foreign domestic legislation, as with investor-state arbitration, for example, as these are better underpinned by international law and foreign domestic law respectively.
Clauses 2, 3 and 4 make provision in relation to the arbitral tribunal. Clause 2 requires an arbitrator to disclose circumstances that might reasonably give rise to justifiable doubts as to their impartiality. It will apply prior to the arbitrator’s appointment, when they are being approached with a view to appointment. It will be a continuing duty that also applies after their appointment. This codifies the duty of disclosure recognised by the Supreme Court in its decision in Halliburton v. Chubb and will enhance trust in arbitration.
It is clear from what my hon. Friend is saying that the Bill is welcomed by the legal sector. What engagement has he had with the legal sector and relevant stakeholders?
There has been massive engagement with parties interested in this Bill. The Bill began in the last Parliament, to which I am grateful for the work already done. It began in the Lords, who engaged fully with parties at that stage. The Lords have had to restart the Bill in the new Parliament, so they have had two bites at the cherry, and all the feedback from stakeholders has been very positive. I thank my hon. Friend for drawing that out in this debate.
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When read at face value, section 18 of the Senior Courts Act 1981 and section 35 of the Judicature (Northern Ireland) Act 1978 currently suggest that High Court decisions made under the 1996 Act can be appealed to the Court of Appeal only if expressly permitted under that Act. However, the House of Lords judgment in Inco Europe v. First Choice Distribution deemed this to be an error. In that case, it was established that appeals to the Court of Appeal under the 1996 Act are permitted by default unless there is explicit provision to the contrary in that Act. Clause 13 rectifies the original drafting mistake to reflect the position established in this case law.
I turn now to clauses 14 and 15. The Bill refers to these as “Miscellaneous minor amendments”. Be that as it may, they offer a few important points of clarification and efficiency. Clause 14 amends sections 32 and 45 of the 1996 Act, which allow arbitrating parties to apply for a preliminary court ruling on jurisdiction or a point of law. Under clause 14, such an application will require either the agreement of the parties or the permission of the tribunal. It removes the further requirement to satisfy the court on a list of matters—in other words, it streamlines the process. Clause 15 will repeal sections 85 and 97 of the Arbitration Act 1996. These both relate to domestic arbitration provisions, but neither was ever brought into force.
Clauses 16 to 18 cover the administrative aspects of the Bill. Clause 16 gives the provisions in the Bill the same extent as they have in the Arbitration Act 1996, which means that the Bill extends to England, Wales and Northern Ireland so that all three jurisdictions benefit from a modernised arbitral framework. Civil justice is not devolved in Wales, but it is now a devolved matter in Northern Ireland. The requisite legislative consent motion was agreed by the Northern Ireland Assembly on 9 December 2024. We are grateful to the Northern Ireland Executive’s Department of Justice for its support in this matter. For completeness, I note that Scotland has its own arbitration legislation, namely the Arbitration (Scotland) Act 2010, which is not affected by this Bill.
Clause 17 makes commencement provisions so that the substantive provisions of the Bill, namely clauses 1 to 15, will come into force
“on such day as the Secretary of State may by regulations appoint.”
Finally, clauses 18 establishes the Bill’s title once in force.
I rise to contribute to the Committee stage debate on the Arbitration Bill on behalf of the Opposition. I thank Lord Bellamy, the previous Conservative Minister who originally introduced the Bill in the Lords in the previous Parliament, and I recognise the work of the Law Commission. Much of this Bill is based on the excellent work that the Law Commission did in considering the original legal framework for arbitration.
We fully support this Bill’s objective of modernising and strengthening the UK’s arbitration framework. Arbitration is a vital pillar of our legal system, supporting businesses, individuals and international commerce while reinforcing London’s position as a world-leading hub for dispute resolution. It is important that this legislation is as robust, effective and fair as possible. The Committee stage presents an opportunity to ensure that the Bill delivers on its promise, and we welcome the improvement that it introduces. I do not intend to go through all the Bill’s clauses, but I reassure the House that the necessary scrutiny that one would expect from the Opposition in Committee is taking place. I will just touch on some of the key clauses.
First, clause 1 provides welcome clarity on the governing law of arbitration agreements, particularly in light of the Enka v. Chubb case in 2020. Defaulting to the law of the arbitration seat where no choice is specified increases certainty for businesses.
Secondly, clauses 3 and 4 extend arbitrator immunity to protect them from liability unless bad faith is proven. This is an important step to ensure that arbitrators can act independently without undue fear of litigation. We must retain an effective safeguard to challenge an unreasonable resignation, and we welcome the Minister’s reassurance that parties affected by an arbitration resignation are not unfairly disadvantaged.
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Clauses 3 and 4 will reassure arbitrators that they can take the right decisions in their proceedings without fear of reprisal from a disappointed party. Clause 3 provides that an arbitrator will not be liable for the costs of an application to court for their removal unless the arbitrator has acted in bad faith. Clause 4 provides that an arbitrator’s resignation does not give rise to any liability unless the resignation is shown by a complainant to be unreasonable.
Clauses 5 and 6 both concern jurisdiction. There are two ways for a party to question the jurisdiction of the arbitral tribunal. One way is to wait until the tribunal has issued a ruling and then challenge that ruling under section 67 of the Arbitration Act 1996, which allows a challenge to an arbitral award on the basis that the tribunal lacked jurisdiction. The other is is by invoking section 32 of that Act, which allows the court to decide whether the tribunal has jurisdiction as a preliminary point.
Clause 5 makes clear that if the tribunal has already ruled on its jurisdiction, any challenge must be brought through section 67. Clause 6 provides that where the arbitral tribunal or court rules that the tribunal has no jurisdiction, that tribunal can nevertheless award the costs of the arbitration proceedings up until that point. This will ensure that if a party wrongly starts arbitration, they can still be held responsible for the wasted costs incurred.
Clauses 7, 8 and 9 deal with arbitral proceedings and the powers of the court. Clause 7 will confer an express power on arbitrators to make an award on a summary basis—that is, adopting an expedited procedure—to dispose of an issue where an arbitrating party has no real prospect of succeeding on that issue. This aligns with the summary judgments available in court proceedings and will deliver more efficient arbitrations. This power can be exercised on application by any of the parties. The procedure to be adopted is not prescribed. It will instead be a matter for the arbitrator to decide on a case by case basis after consulting with the arbitrating parties.
Clause 8 concerns emergency arbitrators. Arbitral rules sometimes provide a regime for the appointment of emergency arbitrators on an interim basis. Such arbitrators can make orders on urgent matters, such as the preservation of evidence, pending the constitution of the full arbitral tribunal. Emergency arbitrators were not commonplace when the 1996 Act was drafted, so it is important that we now expressly empower them. Clause 8 will provide that failing to comply with an order made by the emergency arbitrator will have the same consequences as those for a normal arbitrator.
Clause 9 concerns interim court powers exercisable in support of arbitral proceedings. Under section 44 of the 1996 Act, the court can make orders in support of arbitration proceedings on certain matters—for example, the taking of witness evidence, the preservation of evidence, sales of goods and interim injunctions. Clause 9 will amend section 44 to make it clear that such court orders are also available against third parties. For example, the court will be able to make an order preserving assets against a third party such as a bank. This will mirror the position in court proceedings.
Clauses 10, 11 and 12 concern powers of the court in relation to an arbitral award. An arbitral tribunal can issue an award on whether it has jurisdiction, and it can issue an award on the merits of the dispute. Either type of award can be challenged under section 67 of the Arbitration Act 1996 on the basis that the arbitral tribunal did not have jurisdiction. Clause 10 will equip the courts with the full suite of remedies for section 67 challenges. When the court has a jurisdiction challenge in front of it, it will have two new options: to declare the arbitral award to be of no effect, or to return the matter to the arbitral tribunal for consideration so that a revised award can be made. These remedies already exist for other challenges, for serious irregularities and for appeals on points of law, so this provision fixes something of an inconsistency in the 1996 Act.
Clause 11 also amends section 67 of the 1996 Act. It will confer a power for rules of court to provide that, unless necessary in the interests of justice, there should be no new grounds of objection and no new evidence put before the court unless it was not reasonably possible to put them before the tribunal. The amendments made to section 67 by clause 11 also provide that evidence taken by an arbitral tribunal should not be reheard by the court. This will avoid these challenges from becoming full re-hearings, departing from the precedent set in the case of Dallah v. Pakistan. Re-hearings can involve duplication of time and costs, and it can be unfair to allow a party who lost before the tribunal a complete rerun.
Clause 12 amends section 70 of the 1996 Act, which governs how arbitral awards can be challenged before the courts. It will clarify that the 28-day time limit for such a challenge will start running only after any arbitral process of appeal or correction has concluded.
Clause 13 concerns appeals from High Court decisions and corrects a rare drafting error in the 1996 Act. Section 18 of the Senior Courts Act 1981 and section 35 of the Judicature (Northern Ireland) Act 1978 were amended by the 1996 Act. When read at face value, those sections currently suggest that High Court decisions made under the 1996 Act can be appealed to the Court of Appeal only if expressly permitted in the 1996 Act.
Thirdly, clauses 5 and 6 streamline the process for jurisdictional challenges. Parties will either need to seek a preliminary ruling from the court under section 32 of the Arbitration Act 1996, or wait to challenge jurisdiction under section 67.
Fourthly, on the procedural innovations covered in clauses 7 to 9, the introduction of summary disposal of claims is an important step towards greater efficiency, though we would welcome reassurances from the Government that they will monitor its use so that we can be sure that it is applied carefully and fairly, and does not have any unintended consequences. We believe that the recognition of emergency arbitrators is a positive step that enhances the availability of urgent relief, aligning the UK with international best practice.
Also of note is the right of appeal in clause 13. As the Minister stated, there was an unusual previous drafting issue that suggested that appeals to the Court of Appeal were permitted only if expressly allowed under the 1996 Act. That was incorrect. Clause 13 corrects the error, ensuring that appeals are permitted unless specifically restricted. This is a vital change to uphold fairness and legal certainty.
I want to acknowledge an important issue that was raised in the other place by Lord Hacking, whose contributions to the discussion on arbitration have been incredibly valuable. I know that other Members have also pressed for greater scrutiny of how confidential arbitration could be misused to conceal corruption. We welcome the Minister’s assurances that arbitral institutions are taking steps to mitigate those risks, and we believe that the Government must remain actively engaged in monitoring and addressing potential abuses, and not rule out taking further action at an appropriate time if it becomes necessary.
Beyond the issue of corruption, other crucial areas were mentioned in the other place; these are important and warrant further Government attention. They include the need for expedited hearings to prevent undue delays in arbitration proceedings, the role of third-party funding, and ensuring transparency and accountability in funding arrangements, as well as the authority to mandate mediation between parties, where appropriate, to encourage resolution outside of arbitration. The Minister’s attention to these issues is essential, so I would welcome confirmation that they will be addressed in due course.
In conclusion, the Arbitration Bill is a necessary and welcome step in ensuring that the UK remains a pre-eminent jurisdiction for arbitration. However, as with any legislation, its success depends on the details. The Opposition remain committed to ensuring that the Bill delivers legal clarity, procedural efficiency and fairness while upholding the integrity of our arbitration framework. I commend this Bill to the Committee and look forward to seeing its rapid progress through the House.