Amendments to the Arbitration Bill proposed by the UK House of Lords Special Public Bill Committee

Shortly before Easter, the new Arbitration Bill took the next step along its legislative journey with the completion of a review by a UK House of Lords Special Public Bill Committee (a process that our international arbitration group at Linklaters provided oral evidence to). We take a short look at the amendments resulting from that review.

What was the role of the Special Public Bill Committee (SPBC)?

The Arbitration Bill has been introduced to the UK Parliament with a view to enacting the recommendations made by the Law Commission in its recent report on the Arbitration Act 1996 (AA) (click here for a general overview of the contents of the Bill). The Bill originated in the House of Lords late last year and was subject to a short debate in December 2023 before being referred to a SPBC (as is usual for Law Commission Bills) in January.

The SPBC was chaired by Lord Thomas, previously Lord Chief Justice of England and Wales. Its role was, ultimately, to consider the Bill line-by-line and, if thought necessary, amend it before returning the Bill to the House of Lords for the next stage of scrutiny. As part of this, the SPBC was empowered to take evidence during a limited period. This process included oral hearings to which our international arbitration group at Linklaters contributed (click here for more).

What amendments to the Bill have been made?

Following this process, and shortly before Easter, the SPBC met to consider a list of proposed amendments to the Bill. Some were approved and incorporated into an amended version of the Bill which has been published and will be taken forward. The amended Bill of 27 March is available here, along with a Hansard record of the SPBC’s accompanying meeting/debate on the same day.  

Overall, the amendments to the Bill as introduced to the House of Lords are limited, but they are worthy of note and consist of:

• A technical amendment to the wording of the proposed new default rule on applicable law of an arbitration agreement. In particular certain words were deleted which, it was felt, might make its operation unclear; and
• The new provision allowing rules of court to streamline challenges to a tribunal’s award on jurisdiction under s.67AA is amended. Most significantly, by the insertion of a general “interests of justice” safety valve allowing new arguments/evidence to be put before the court, and clarification that the provision does not limit the generality of the power to make rules of court.

The version of the Bill blessed by the SPBC also contains transitional provisions which, generally, provide that the reforms will apply to (court or arbitral) proceedings commenced on or after the relevant section is brought into force (being in line with the drafting of the Bill as originally introduced to the House of Lords by the UK Government).

Although, broadly speaking, uncontroversial, one more notable aspect of this - which was clear from the evidence submitted to the SPBC - is that the UK Government (in a departure from the Law Commission’s proposals), intends this also to apply to the new default rule on applicable law of an arbitration agreement, i.e. irrespective of when the relevant arbitration agreement was made. In other words, that rule, as and when implemented, stands to have a degree of retrospective effect.

That being said, the situation in which there is any potential conflict to resolve is where the law applicable to a main contract and the seat don’t “match”. And, in such situations, where the parties have drafted express, specific wording for the law applicable to their arbitration agreement (which they often do when England is chosen as the seat of arbitration, but the main contract is governed by the law of a foreign country) there won’t be any change as the new rule would, as the law does now, give effect to that specific choice. In short, it is in like cases, but where parties have not taken care to express that specific choice, which would stand to be affected.  

What happens next?

Technically, the next stage in the House of Lords is the Report stage which gives the House of Lords (as a whole) another opportunity to review the Bill (as now amended), before its final reading in the House of Lords (after which it will then be passed to the House of Commons). It waits to be seen whether any further amendments arise as a result, although given the degree of scrutiny that the Bill has now received that might be surprising.

That is, however, with one interesting exception. The Hansard record of the SPBC’s debate reveals that a new point was raised by Lord Thomas about the impact of the new rule on applicable law of the arbitration agreement insofar as it might apply to investment treaty arbitration. Although the debate does not go into further detail, it states that the UK Government is considering this. It will be interesting to see what emerges (we shall see, but the point may be that it is felt the commercial/municipal law led solution of the statutory rule could, in this context, cut into an area better led by public international law; see Ecuador v Occidental Exploration [2005] EWCA Civ 1116).

Finally, one further matter addressed before the SPBC was, in the wake of the recent Nigeria v PIDL [2023] EWHC 2368 case, whether steps should be taken more generally to better equip and empower arbitral tribunals to safeguard the arbitral process against potential abuse and corruption. Although not on the slate for specific reform in the Bill, the Hansard record notes that it is an area that the UK Government is looking at and has sought input on from major institutions.