Arbitration bill. 21st Century arbitration
4 February 1996
A new Arbitration Bill is presently before Parliament and will hopefully become law during 1996. Not only does the Bill consolidate all previous relevant legislation - the Arbitration Acts of 1950, 1975 and 1979 - but also strengthens the powers of arbitrators.
These increased powers should enable arbitrators to force the pace of arbitration without requiring as much court intervention. Another of the stated aims of the new Bill is to rewrite the law of arbitration in clear, user-friendly language.
Much has been written about the time and cost of litigation in the High Court or county court. And although moves are afoot to improve the position, arbitration offers an accessible service within the participants' control.
While it is by no means a perfect system, arbitration does have the following advantages:
The style and nature of proceedings can be adapted to suit the type and value of the dispute. For example, parties can agree that the dispute be resolved by documents-only without going to the trouble and expense of a hearing.
The arbitrator is appointed because of experience in the relevant field - an architect or surveyor for a construction dispute, an accountant or lawyer in a commercial dispute.
Neither the parties nor the arbitrator are affected by congestion in the courts when waiting for a hearing date to be listed. The hearing can take place at the convenience of all.
An arbitrator's award is binding with limited right of appeal on points of law only.
All proceedings are held in private so competitors are not treated to a public showing of the parties' trade secrets.
In the past, arbitration has been criticised for its lack of teeth. The effect of the proposed statute should be to sharpen up the arbitrator's powers in default of agreement between the parties. Some of these powers are already exercised in practice, others are more innovative.
For example, under clause 34 of the Bill the parties are free to agree on all matters of procedure and evidence, but if there is no agreement the arbitrator will decide on such points, including whether statements of claim and defence are to be used and, if so, the form they should take; the extent to which a party can cross-examine the other side's witnesses; whether strict rules of evidence should apply; and, more radically, whether and to what extent the arbitrator should take the initiative in ascertaining the facts and the law - the "inquisitorial" approach.
Under clause 38 (3) the arbitrator would have a statutory power to order a claimant to provide security for the respondent's costs. Although certain institutional rules already give this power to the arbitrator, if such rules are not incorporated into the arbitration agreement then at present only the court can order security for costs.
Under Clause 38 (4), the arbitrator has the power to order for the detention of property, for samples to be taken, or for experiments to be carried out.
Under clause 39 the arbitrator has express power, subject to the parties' consent, to order on an interim basis a provisional payment or a disposition of property as between the parties pending his final award.
Clause 41 of the Bill repeats section 13A of the arbitration Act 1950, which enables the arbitrator to dismiss a claim for want of prosecution, but also goes somewhat further in relation to non-compliance with previous peremptory orders.
For example, if a party failed to comply with an order for exchange of experts' reports the arbitrator would be able to: direct that the party in default is not entitled to rely upon the relevant report; draw adverse inferences as are appropriate from the failure to comply; and proceed to an award on the basis of the materials properly provided.
However, it appears that, apart from failure to provide security for costs, the power to strike out a claim or defence for failure to comply with an order (an 'Unless' Order) will continue be reserved to the court.
There are other clauses introduced by the new Bill which are outside the scope of this article but it is worthwhile mentioning clause 46 (the so-called "equity clause") which enables the arbitrator to decide the dispute either in accordance with the chosen law or, if the parties agree, in accordance with "such other considerations as are agreed" by the parties or determined by the arbitrator.
Some commentators think the new Bill has gone too far in extending the powers of arbitrators, in some cases arguably beyond the powers available to a judge, with the result that there will be little consistency between the way arbitrators reach their award. However, the Bill as drafted gives the parties some control over the extent of these powers in an individual case. Others say the Bill should go further, for example, by empowering an arbitrator to order multi-party proceedings regardless of the parties' consent.
Whatever form the Act takes, the Bill provides a platform to launch arbitration into the next century. This is an opportunity neither the politicians nor the public can afford to miss.