A modern role for arbitration

Clare Ambrose assesses how the new Arbitration Act will affect the role of commercial counsel as arbitrators and advocates. Clare Ambrose is a barrister at 20 Essex Street.

The Arbitration Act 1996 is a confident sign that England's arbitration system has been fully modernised and is ready to provide efficient and speedy dispute resolution.

For the Commercial Bar it signals a new regime under which arbitrators are likely to be more pro-active with procedures more closely tailored to the parties' circumstances and court applications reduced.

Like the Woolf Report, it was achieved largely due to the efforts of a senior judge, Lord Justice Saville, who almost single-handedly wrote the Act with the assistance of a Departmental Advisory Committee well-represented by members of the Bar.

The Act aims to preserve London's reputation as a world centre for commercial arbitration. The commercial Bar has played a leading role in arbitration with silks frequently appointed as arbitrators and advocates.

In recent years many have found the English system too legalistic, costly and slow. Critics have said that there is little to distinguish the procedure in a commercial arbitration from a Commercial Court trial, with the further disadvantage that the arbitrator's award is often treated as a first-tier decision before an expensive and time-consuming challenge to the courts.

As a result many parties have been advised to strike out the arbitration clause in their contracts, or have had to resort to arbitration in potentially cheaper venues such as New York, France or Germany.

The new Act addresses this problem. Its founding principle is to obtain the fair resolution of disputes “without unnecessary delay or expense”.

More importantly, it places the arbitrator under a positive duty “to adopt procedures suitable to the circumstances of the particular case”.

Arbitrators should create their own procedures rather than slavishly follow court practice, which should reduce costs and save time.

Unless the parties agree otherwise, arbitrators are not bound by the technical rules of evidence and they are given wide procedural powers, such as streamlining discovery or dispensing with an oral hearing.

Court intervention will only be allowed in exceptional cases where it is necessary to support the arbitral process. A reluctant party will no longer find it easy to apply to court as a delaying strategy since the tribunal will be able to carry on with the arbitration while a court application is pending. A party may lose its right to complain to the courts about the tribunal or the proceedings if it fails to apply to court at the earliest opportunity: it must “put up or shut up”.

Despite the new powers of the tribunal the parties are still free to agree how their disputes are resolved, subject only to public interest safeguards. But the parties cannot always be relied upon to agree on the appropriate procedure and, as such, the Act's success will ultimately depend on the skill of arbitrators themselves. It will no longer be possible to rely on the expertise of the Commercial Court as a safety net for an arbitrator's misjudgment.

The Act is a radical restatement of the law. Commercial practitioners face a steep learning curve in becoming familiar with the new statutory provisions as well as the procedures set out in the substantially rewritten RSC Order 73 and new institutional rules for arbitrations. In the next few years the Act is likely to generate litigation since the nature of its user-friendly drafting does not preclude ambiguity. Further, although the arbitrator's new pro-active role under the Act may ultimately reduce oral hearings and costly interlocutory disputes, specialists will still be needed to advise or assist in arbitrations. Court hearings relating to arbitration will become rarer, however, because applications for leave to appeal will ordinarily be decided without an oral hearing.

The increased powers conferred on arbitrators and the greater difficulty in appealing awards may also encourage parties to appoint arbitrators with a legal background.

Practitioners have generally welcomed the Act and it has also received favourable publicity which will benefit both the Commercial Bar and the international image of London arbitration.