The English Arbitration Act 1996: its 10th and future birthdays

Author: V V Veeder, Essex Court Chambers, London

Over the last 10 years, there have been many changes to the law and practice of international commercial arbitration in England and Wales. The Arbitration Act 1996, despite the modest intentions of the Departmental Advisory Committee on the Law of Arbitration, has proved to be a watershed in English legal history. In the recent speech of Lord Steyn in the Lesotho case (2005), this committee's second chairman approved, judicially, the extra-judicial commentary by Lord Mustill and Stewart Boyd QC (respectively the committee's first chairman and co-member) that this new statute has given English arbitration "an entirely new face, a new policy, and new foundations". Lord Steyn also approved the extra-judicial statement of Lord Wilberforce during the debates in the House of Lords preceding the 1996 Act, to the effect that he "wished to see arbitration, as far as possible, and subject to statutory guidelines no doubt, regarded as a free-standing system, free to settle its own procedure and free to develop its own substantive law."

The result is plain to see. London has experienced an increase in large one-off arbitrations held between international parties, particularly under non-institutional arbitration agreements; and, of these, particularly those incorporating the Uncitral Arbitration Rules. These arbitrations take place frequently with non-English lawyers before non-English arbitrators, applying a non-English law, often without the intervention of English lawyers and invariably without reference to the English courts. It is as if international commercial arbitration had been freed from its lowly status as the poor English relation of the English High Court and returned to its historical place, as the international creature of the disputing parties. It is again the parties' arbitration directed at settling the parties' own dispute.

Yet there are evident strains. First, with 10 years' jurisprudence on the 1996 Act, it is now not always possible to understand its statutory provisions, intended to be user-friendly, without the aid of an English commentary or an English legal adviser. Second, no accurate statistics are available to identify the scale or scope of the 1996 Act's changing trends, particularly for domestic arbitrations. As a result, it is perceived that the 1996 Act might allow too many court applications challenging the finality of arbitration awards made in England, even if most of these applications still fail on their merits. Some go further, criticizing the number of international awards set aside or remitted to arbitrators in comparison with the tiny numbers in Sweden, Switzerland and France. Many criticize the three-stage appellate system under the 1996 Act, which can allow the House of Lords to upset a final award made unanimously by three arbitrators and upheld without dissent by the two lower courts. Until better statistics become available, these critics cannot easily be answered. Third, the practice of international arbitration in London has become increasingly litigious, partly with English court practitioners new to international arbitration defaulting by habit to court procedures on document production and case-management (including extensive pre-hearing correspondence) and partly under influences from abroad. For example, the IBA Guidelines on Conflict of Interest have provided a well-sprung platform for new tactical challenges to arbitrators, a malign practice that appears to be increasing everywhere. These black arts do not always survive judicial exposure in the English courts; but they can muddy only too easily the "pristine clear waters of international commercial arbitration."

After 10 years of the 1996 Act, there is little remaining from the law and practice of international arbitration in London prevailing before this statute's predecessors, the English Arbitration Acts of 1950 and 1979. The special case-stated procedure has gone; the remedy for error of law on the face is forgotten; and the mischievous invocation of arbitral misconduct and mishap is unavailable to attack an award. There is no possibility of attacking an arbitral finding of fact for want of admissible evidence; there is no appeal on questions of foreign law; and appeals on English law are limited and permissible only if the parties have not opted out of judicial review. However, an English arbitration practitioner from the early part of the 19th century would recognize much. There are still a large number of lay-arbitrators; there is a high degree of professionalism in the specialist fields of arbitration; many arbitral institutions find their home in London, including purpose-built arbitral facilities; there is a multi-culturalism among both international parties and their legal representatives; there is a procedural flexibility allowing an arbitration to conform to the particular requirements of the parties, the arbitration tribunal and the dispute itself; international arbitrators in London form a cosmopolitan elite; and there is an increasing transparency to the English arbitral process. English arbitration remains private but it is not rigidly confidential if the interests of justice require openness. And, above all, there is an aversion to the deliberate aggravation of a commercial dispute, with a corresponding tendency to seek an acceptable settlement as soon and as cheaply as possible, with the old maxim that the best arbitration is usually no arbitration.

However, as in the early 19th century in regard to the Arbitration Act 1698, there are also critics seeking statutory reforms to the 1996 Act; and now, as then, they are likely to be disappointed. The 1996 Act is not old and it certainly ain't broke. Whenever a fix is required, it is better applied to the parties, their lawyers and the tribunal. The 1996 Act is an enabling statute; and, although you can lead a horse to the arbitral stream, you cannot force it to drink. Diverting the stream is therefore no remedy for a lack of arbitral knowledge imagination or experience. And nobody in London wants a return to what Lord Devlin once called "an annual tribute of disputants to feed the minotaur," which ostensibly required appeals from awards for the development of English law and could eventually lead to "a prohibition placed on the settlement of arbitration disputes containing interesting points of law."

No-one can predict the future inclinations of the British legislature, but it would be fair to assume that the Arbitration Act 1996 will survive for another 90 years and, even then, still receive only the first of several centennial birthday telegrams from the Queen.