Arbitration procedures and practice in the UK (England and Wales): overview

A Q&A guide to arbitration law and practice in the UK (England and Wales).

The country-specific Q&A guide provides a structured overview of the key practical issues concerning arbitration in this jurisdiction, including any mandatory provisions and default rules applicable under local law, confidentiality, local courts' willingness to assist arbitration, enforcement of awards and the available remedies, both final and interim.

To compare answers across multiple jurisdictions visit the Arbitration procedures and practice Country Q&A Tool.

This Q&A is part of the global guide to arbitration. For a full list of jurisdictional Q&As visit www.practicallaw.com/arbitration-mjg.

Contents

Use of arbitration and recent trends

1. How is commercial arbitration used and what are the recent trends?

Use of commercial arbitration

London has historically been, and continues to be, a popular choice of seat for parties (both domestic and foreign) that agree to arbitrate their disputes. London benefits from being an arbitration friendly jurisdiction, since the legislative framework allows the parties to have a substantial degree of freedom in setting the process by which their dispute will be resolved. This, coupled with a judiciary that is both supportive of the arbitral process and highly experienced in handling issues that arise in it, makes London an attractive option.

Recent trends

The PWC International Arbitration Survey 2013: Corporate choices in International Arbitration identified that 52% of its respondents preferred international arbitration over other means of dispute resolution. Broken down by sector, this corresponds to:

  • Energy: 56%.

  • Construction: 68%.

  • Financial services: 23%.

Although the much anticipated upturn in the use of arbitration among financial institutions remains to be realised, the survey findings revealed that "[w]hile most Financial Services sector organisations prefer litigation to arbitration, the benefits of arbitration are increasingly recognised; most corporations in this industry agree, in principle, that arbitration is "well suited" to the resolution of disputes".

Although international arbitration continues to be dominated by disputes in the energy, infrastructure and construction sectors, there is some evidence that other sectors may, in the future, play a more active role. For example, the number of arbitrations in the pharmaceutical sector appears to be steadily increasing, albeit not with numbers to rival oil and gas disputes, but with disputes that are nevertheless of significant value.

Advantages/disadvantages

One of the primary drivers behind choosing arbitration is the enforcement regime in place. In an increasingly global market place, transactions and projects are conducted on a cross-border basis. As companies expand their geographical reach, more and more deals are done internationally, particularly with developing countries. In many jurisdictions outside of the European Union, enforcing an English court judgment would not be straightforward. However, under the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention), the process of recognition and enforcement is harmonised across signatory states and streamlined. With more than 150 signatory states, the New York Convention represents a considerable advantage of arbitration over litigation.

Parties are often attracted to arbitration by the prospect of a more flexible procedure than could be achieved in a court process. This flexibility can be seen in the parties' ability to appoint arbitrators as well as by the fact that the parties can give their input into the process laid down for resolving the dispute. This is particularly important in a common law jurisdiction where court procedure (and specifically disclosure obligations) can be perceived as very onerous. Arbitration gives parties the opportunity to depart from the strictures of the court rules and agree to a different process (be that limited disclosure or a memorial process).

Another important factor in the choice of arbitration is the concept of a private procedure. Court proceedings are held in public and in certain circumstances non-parties can access the court file. In contrast, arbitration is a private process, and parties also have the potential to ensure that it is confidential. Rules on the confidentiality of arbitration vary between different jurisdictions, but confidentiality can be safeguarded by express wording in the arbitration agreement. In this way, parties can seek to ensure that the documents that are produced for the arbitration remain confidential and no information about the arbitration is leaked into the public domain.

Arbitration can offer finality, with limited means of appeal (particularly with the ability to exclude by agreement certain rights of appeal altogether). This can make for a quicker conclusion to proceedings and remove the risk of getting trapped in a protracted court process.

Although there are a number of advantages to arbitration (some of which are discussed above), there are also some disadvantages:

  • Although finality brings with it the prospect of concluding a dispute more quickly than in court, arbitration does not offer the ability to strike out bad claims at the outset of the process. There is no formal equivalent of a summary judgment process. It is sometimes possible to dispose of matters by way of a preliminary issue, but that depends on the discretion of the tribunal.

  • Joinder or consolidation can generally only be achieved with the consent of both parties, rather than by a decision of the tribunal. If one party chooses not to consent, this can lead to multiple arbitrations being conducted on similar issues by different tribunals, which in turn could give rise to conflicting decisions (as well as increased costs).

  • Although a number of institutions have put in place provisions that allow parties to obtain urgent relief through, for example, access to an emergency arbitrator, the relief that is available (and the speed with which it can be obtained) is unlikely to rival the options available through the court process.

  • Arbitration awards create no stare decisis. Therefore, a decision of the tribunal does not create a binding precedent, so if a similar issue arises again, a future tribunal is not bound by the finding.

Applicable legislation

2. What legislation applies to arbitration? To what extent has your jurisdiction adopted the UNCITRAL Model Law on International Commercial Arbitration 1985 (UNCITRAL Model Law)?

The Arbitration Act 1996 governs all arbitrations (both domestic and international) that are seated in England, Wales and Northern Ireland. Although the UNCITRAL Model Law has influenced the Arbitration Act 1996, it has not been adopted wholesale. The principal differences are that the Arbitration Act 1996:

  • Applies to both domestic and international commercial arbitrations.

  • Sets out the principles that underpin the legislation (such as fairness, party autonomy and limited court intervention).

  • Provides for appeals on a point of law.

Mandatory legislative provisions

3. Are there any mandatory legislative provisions? What is their effect?

The mandatory provisions of the Arbitration Act 1996 are contained in Schedule 1 and include:

  • The court's power to extend the agreed time limits and to apply Limitation Acts (sections 12 and 13, Arbitration Act 1996).

  • The court's power to remove an arbitrator (section 24, Arbitration Act 1996).

  • Arbitrator's immunity (section 29, Arbitration Act 1996).

  • General duty of the tribunal to act fairly and impartially (section 33, Arbitration Act 1996).

  • The tribunal's power to withhold an award for non-payment of the arbitrator's fees and expenses (section 56, Arbitration Act 1996).

  • Grounds for challenging an award (sections 67 and 68, Arbitration Act 1996).

Some mandatory provisions also apply regardless of the seat, which are:

  • Stay of legal proceedings: section 2(2)(a) of the Arbitration Act 1996 (sections 9 to 11, Arbitration Act 1996).

  • Enforcement of arbitral awards: section 2(2)(b) of the Arbitration Act 1996 (section 66, Arbitration Act 1996).

  • Securing attendance of witnesses: section 2(3)(a) of the Arbitration Act 1996 (section 43, Arbitration Act 1996).

 
4. Does the law prohibit any types of disputes from being resolved via arbitration?

The Arbitration Act 1996 emphasises the parties' right to choose their own form of dispute resolution and also preserves the ability of other statutes and the public interest to override this. The Act does not set out categories of dispute that are not arbitrable; it sets out various other statutes that protect parties' rights of access to court for certain types of dispute, such as for discrimination claims in the employment context, applications for access to children or applications for financial relief in divorce cases where a post-nuptial agreement exists.

Some disputes will not be arbitrable because the remedy sought is not one that a tribunal can grant. For example, a petition to wind up a company cannot be brought in arbitration, although a claim for the underlying debt can be. Similarly, while an arbitral tribunal may decide a claim that involves an allegation of criminality (for example, fraudulent misrepresentation or the nullity of a contract procured through bribery), it cannot convict a party of an offence or impose criminal sanctions.

In the commercial context, there are few disputes that are not arbitrable. The courts will consider whether there are public interest reasons for a dispute to be decided in a judicial process, but such decisions are rare. The English Court of Appeal has held that a shareholder's petition for unfair prejudice under the Companies Act can be arbitrated, despite the potential wider public interest in the outcome and the tribunal's inability to grant certain remedies, such as that the company in question be wound up (Fulham Football Club (1987) Ltd v Richards & Anor [2011] EWCA Civ 855).

Limitation

5. Does the law of limitation apply to arbitration proceedings?

Under the Arbitration Act 1996, limitation periods apply in arbitration in the same way they do in litigation. The Limitation Act 1980 and the Foreign Limitation Periods Act 1984 together with "any other enactment (whenever passed) relating to the limitation of action" apply in the same way to arbitral proceedings as they apply to legal proceedings (section 13(1), Arbitration Act 1996).

Under the law, the limitation periods are as follows:

  • Contract claim: six years from the date of the breach of contract.

  • Tortious claim: six years from the date the damage was suffered. With latent damage arising from negligence, the later of six years from the date on which the damage was suffered or three years from the date at which the claimant had the knowledge and the right to bring the claim, but no more than fifteen years from the date of the negligent act.

There are certain circumstances where claims can be brought outside of limitation periods (for example, fraud).

 

Arbitration organisations

6. Which arbitration organisations are commonly used to resolve large commercial disputes?

The arbitration organisations that are commonly used to resolve large commercial disputes are:

  • LCIA (London Court of International Arbitration).

  • ICC (International Chamber of Commerce).

  • CIArb (Chartered Institute of Arbitrators).

  • ICDR (International Centre for Dispute Resolution).

  • LMAA (London Maritime Arbitrators Association).

 

Jurisdictional issues

7. What remedies are available where one party denies that the tribunal has jurisdiction to determine the dispute(s)? Does your jurisdiction recognise the concept of kompetenz-kompetenz? Does the tribunal or the local court determine issues of jurisdiction?

The concept of kompetenz-kompetenz is recognised (section 30, Arbitration Act 1996). Unless the parties have otherwise agreed, the arbitral tribunal can rule on its own substantive jurisdiction, including:

  • Whether there is a valid arbitration agreement.

  • Whether the tribunal is properly constituted.

  • Over what matters it has jurisdiction under the arbitration agreement.

A party can still apply to the court to determine any question of the tribunal's substantive jurisdiction, but only where the other party has agreed to this in writing, or the tribunal has given its permission (section 32, Arbitration Act 1996). Where the other party has not given its permission, the court will only consider an application where:

  • There is good reason why the matter should be decided by the court.

  • There has been no delay.

  • Costs will be saved.

A party that has not taken any steps in an arbitration can also apply to the court for a declaration that (section 72, Arbitration Act 1996):

  • It is not a party to the relevant arbitration agreement.

  • The agreement is invalid.

  • The tribunal is not properly constituted.

  • The dispute does not fall within the scope of the arbitration agreement.

 

Arbitration agreements

Validity requirements

8. What are the requirements for an arbitration agreement to be enforceable?

Substantive/formal requirements

An arbitration agreement must be in writing (section 5(1), Arbitration Act 1996). The Arbitration Act specifies a number of scenarios where an agreement is construed as having been made in writing, including circumstances where:

  • A party agrees otherwise than in writing by reference to terms that are in writing (section 5(3), Arbitration Act 1996).

  • The agreement is made otherwise than in writing and is recorded by a third party with the authority of the parties to the agreement.

The agreement does not have to be signed by the parties (section 5(2)(a), Arbitration Act 1996).

Separate arbitration agreement

There is no requirement for a separate arbitration agreement. The doctrine of separability has the effect that any arbitration agreement contained in a wider contract is separable so that it can survive invalidity, breach or termination of the main contract.

Unilateral or optional clauses

9. Are unilateral or optional clauses, where one party has the right to choose arbitration, enforceable?

Unilateral option clauses are valid and enforceable under the law and are upheld by the courts. Despite the controversy created by the French Supreme Court decision in Case No. 11-26.022 Ms X v Banque Privée Edmond de Rothschild, 26 September 2012, the Commercial Court has held that unilateral jurisdiction clauses are valid under the law and has declined to follow the approach taken by the French Court (Mauritius Commercial Bank Ltd v Hestia Holdings Ltd and another [2013] EWHC 1328 (Comm)).

 
10. In what circumstances can a third party that did not sign the contract incorporating the arbitral clause in question be compelled to arbitrate disputes relating to the contract in question?

Generally, someone who is not a party to an arbitration agreement cannot be compelled to arbitrate a dispute.

However, under the Contracts (Rights of Third Parties) Act 1999, a third party may enforce a contract if it confers a benefit on him. Under section 8(1) of this Act, a third party will be treated as a party to an arbitration agreement if it is part of an agreement that he has a right to enforce in this way. The third party will therefore only be entitled to enforce the contract if he complies with the arbitration clause.

 
11. In what circumstances is a third party that did not sign the contract incorporating the arbitral clause in question entitled to compel a party that did sign the contract to arbitrate disputes relating to the contract?

Generally, someone who is not a party to an arbitration agreement cannot enforce that agreement.

However, a third party seeking to enforce a right under the Contracts (Rights of Third Parties) Act 1999 can compel the parties to the contract to resolve the dispute in accordance with the arbitration agreement within it.

Separability

12. Does the applicable law recognise the separability of arbitration agreements?

The doctrine of separability applies to arbitration agreements (section 7, Arbitration Act 1996). This confirms that the arbitration agreement will not be regarded as invalid, non-existent or ineffective as a result of a finding of the same in respect of the main contract.

Breach of an arbitration agreement

13. What remedies are available where a party starts court proceedings in breach of an arbitration agreement or initiates arbitration in breach of a valid jurisdiction clause?

Court proceedings in breach of an arbitration agreement

A party can apply for a stay of court proceedings that are commenced in breach of an arbitration agreement (section 9, Arbitration Act).

Arbitration in breach of a valid jurisdiction clause

Where an arbitration is commenced in breach of a valid jurisdiction clause, the other party can either:

  • Request a ruling from the tribunal on its own jurisdiction (section 30, Arbitration Act 1996).

  • Apply to the court to determine the question of jurisdiction (either with the consent of all parties or with the tribunal's permission) (section 32, Arbitration Act 1996).

Any objection to the tribunal's jurisdiction at the outset of a claim must be made no later than the time that the steps are taken to contest the merits of the claim (section 31(1), Arbitration Act 1996). Any objection to jurisdiction during the course of the arbitral proceedings must be made as soon as possible after the relevant matter arises (section 31(2), Arbitration Act 1996).

 
14. Will the local courts grant an injunction to restrain proceedings started overseas in breach of an arbitration agreement?

The courts can grant injunctive relief to restrain proceedings brought overseas in breach of an arbitration agreement, except for proceedings brought in other member states of the European Union or subject to the Lugano Convention (section 37, Senior Courts Act 1981 and section 44, Arbitration Act 1996).

Where the parties have entered into an agreement to arbitrate disputes in a particular forum, this gives rise to a negative obligation to not commence proceedings elsewhere. The courts have jurisdiction to enforce that obligation by restraining foreign proceedings brought in violation of the arbitration agreement (Aggeliki Charis Cia Maritima SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd's Rep 87). The power exists even for proceedings that have not been commenced nor are being contemplated (AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] UKSC 35). However, the court cannot exercise its power to restrain foreign proceedings seeking interim remedies if, for practical reasons, the application could only sensibly be made in the foreign court (that is, the foreign court is the natural forum for that relief) and the proceedings are not a disguised attempt to outflank the arbitration agreement (U&M Mining Zambia Ltd v Konkola Copper Mines plc [2013] EWHC 260 (Comm)).

The situation is different for foreign proceedings brought in other EU member states or subject to the Lugano Convention. The courts cannot restrain such foreign proceedings due to the effect of the Brussels Regulation (both in its old form and as recast in Regulation (EU) 1215/2012, in force since 10 January 2015) and under the Convention (West Tankers Inc v Allianz SpA (formerly RAS Riunione Adriatica di Sicurtà SpA) (The Front Comor) (Case C-185/07) [2009] AC 1138).

Joinder of third parties

15. In what circumstances can a third party be joined to an arbitration or otherwise be bound by an arbitration award?

Generally, an arbitrator has no jurisdiction over a dispute between one or both of the parties to an arbitration agreement and a third party that is a stranger to the arbitration agreement (for example, The Mercantile and General Reinsurance Company Plc v The London Assurance (1989) unreported).

However, there are a number of circumstances where additional parties can be joined to an existing arbitration. For example:

  • The parties may have adopted institutional rules that expressly provide for joinder for other persons bound by the arbitration agreement (for example, the Arbitration Rules of the London Court of International Arbitration (LCIA), the International Chamber of Commerce's (ICC) Rules, the Hong Kong International Arbitration Centre's (HKIAC) Rules and the Singapore International Arbitration Centre's (SIAC) Rules).

  • A third party can submit to arbitration after it is commenced, either expressly or implicitly by participating in the proceedings without disputing the arbitrator's jurisdiction (for example, Sim Swee Joo Shipping Sdn Bhd v Shirlstar Container Transport Ltd [1994] CLC 188).

  • A contract between two parties can be made by one of them on behalf of itself and its nominees. A nominee may then be entitled to be joined as an additional party to the arbitration, avoiding two arbitrations on the same issues (Charles M Willie & Co (Shipping) Ltd v Ocean Laser Shipping Ltd (The Smaro) [1999] 1 Lloyd's Rep 225 per Rix J (obiter)).

For arbitration awards, generally an award does not bind, and has no effect on, third parties. A third party cannot have obligations imposed on him or his legal rights removed by an arbitration award (Samsun Logix Corporation v Oceantrade Corporation; Deval Denizeilik VE Ticaret AS v Oceantrade Corporation and another [2007] EWHC 2372 (Comm)). Similarly, a third party cannot enforce any order by an arbitrator in his favour. There are only limited exceptions to this rule, such as where there is an agency relationship between the third party and a party to the proceedings.

 

Arbitrators

Number and qualifications/characteristics

16. Are there any legal requirements relating to the number and qualifications/characteristics of arbitrators? Must an arbitrator be a national of, or licensed to practice in, your jurisdiction in order to serve as an arbitrator there?

There is no restriction on the number of arbitrators that parties can appoint (section 15(1), Arbitration Act 1996). Parties usually agree to the appointment of one or three arbitrators. This is commonly governed by the institutional rules in the parties' arbitration agreement. If there is no agreement on the number of arbitrators, the tribunal will consist of a sole arbitrator (section 15(3), Arbitration Act 1996).

There are no statutory restrictions on who can be appointed as arbitrators. Arbitrators need not be nationals or licensed to practice in the jurisdiction. Arbitration agreements sometimes stipulate that arbitrators must be members of particular professions or hold certain qualifications. The Supreme Court has held that an arbitrator's role is that of an independent provider of services and not one of employment and so the Employment Equality (Religion or Belief) Regulations 2003 (which implemented Council Directive 2000/78/EC) do not apply (Jivraj v Hashwani [2011] UKSC 40).

Independence/impartiality

17. Are there any requirements relating to arbitrators' independence and/or impartiality?

The Arbitration Act 1996 requires arbitrators to be impartial (sections 1(a) and 33(1)(a), Arbitration Act 1996). Where there are "justifiable doubts as to his impartiality", an arbitrator can be removed by the court (section 24(1)(a), Arbitration Act 1996) and if an award has been made it can be challenged on the grounds of serious irregularity (section 68(2)(a), Arbitration Act 1996).

The Arbitration Act 1996 does not follow the Model Law in permitting a court to intervene where an arbitrator is not independent. Instead, a lack of independence is significant only where it leads to a justifiable doubt about an arbitrator's impartiality (AT & T Corp & Anor v Saudi Cable Co [2000] 2 Lloyd's Rep 127).

Appointment/removal

18. Does the law contain default provisions relating to the appointment and/or removal of arbitrators?

Appointment of arbitrators

If the parties have not agreed on the procedure for the appointment of an arbitrator, then the methods and time limits for appointment in sections 16(2)-(7) of the Arbitration Act 1996 will apply. The methods vary depending on the constitution of the tribunal. For example, if there is to be a sole arbitrator, the parties have 28 days after service of a request for arbitration to jointly appoint one. If the tribunal is to consist of three arbitrators, each party must appoint an arbitrator within 14 days, and the appointed arbitrators then appoint a third arbitrator as the chairman.

If the appointment procedure fails, where the parties have agreed that each is to appoint an arbitrator but one party fails to do so, the party that has followed the procedure can then appoint his arbitrator as the sole arbitrator, subject to the other party's right to contest the appointment by an application to the court (section 17, Arbitration Act 1996). Where the appointment procedure has failed, an application can be made to the court for the appointment of the arbitrator or arbitrators required by the arbitration agreement (section 18, Arbitration Act 1996).

Removal of arbitrators

The parties to an arbitration can agree the circumstances under which an arbitrator's authority can be revoked (section 23(1), Arbitration Act 1996). Without this agreement, an arbitrator can be removed either by the parties acting jointly in writing (sections 23(3)(a) and 24(4), Arbitration Act 1996) or by an institution or person vested by the parties with those powers (section 23(3)(b), Arbitration Act 1996).

Commencement of arbitral proceedings

19. Does the law provide default rules governing the commencement of arbitral proceedings?

The parties can decide for themselves when an arbitration should be regarded as having started, both for the purposes of the Arbitration Act 1996 and for limitation (section 14, Arbitration Act 1996).

Without such an agreement, then arbitration proceedings are commenced where the arbitrator:

  • Is named or designated in the arbitration agreement, when one party serves on the other party a notice in writing requiring him to submit a matter to the named or designated person (section 14.3, Arbitration Act 1996).

  • Is to be appointed by the parties, when one party serves on the other party notice in writing requiring him to appoint an arbitrator or to agree to the appointment of an arbitrator in respect of a matter (section 14.4, Arbitration Act 1996).

  • Is to be appointed by someone other than a party, most commonly an arbitral institution, when notice in writing is given to that appointing body or person requesting them to make an appointment (section 14.5, Arbitration Act 1996).

Applicable rules

20. What procedural rules are arbitrators likely to follow? Can the parties determine the procedural rules that apply? Does the law provide any default rules governing procedure?

Applicable procedural rules

The parties can agree the procedural rules for their arbitration, either in the arbitration agreement or when a dispute arises. In reality, agreement of detailed procedural rules is unusual. It is more usual for parties to specify that the rules of a named arbitral institution apply to any arbitration.

Any procedure specified by the parties is subject to the overriding requirements of natural justice, which the tribunal is under a duty to ensure are followed (section 33(1), Arbitration Act 1996). This requires the tribunal to "act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent".

Default rules

If the parties have not specified any procedural rules, and to the extent that any institutional rules adopted by the parties are silent as to procedure, the tribunal must determine the procedure, complying with its duty under section 33(1) of the Arbitration Act 1996. Tribunals can adopt procedural rules promulgated by institutions or professional bodies on certain aspects of procedure, such as the International Bar Association's Rules on the Taking of Evidence in International Arbitration.

Arbitrator's powers

21. What procedural powers does the arbitrator have under the applicable law? If there is no express agreement, can the arbitrator order disclosure of documents and attendance of witnesses (factual or expert)?

The tribunal has various procedural powers under the Arbitration Act 1996, including:

  • Choosing the location and timing of hearings (section 34(2)(a), Arbitration Act 1996).

  • Ordering the disclosure of documents (section 34(2)(d), Arbitration Act 1996).

  • Deciding whether there should be oral or written evidence or submissions (section 34(2)(h), Arbitration Act 1996).

  • Directing that a witness be examined on oath or affirmation (section 38(5), Arbitration Act 1996).

  • Appointing experts, legal advisers or assessors (section 37, Arbitration Act 1996).

  • Allocating costs between the parties (section 61(1), Arbitration Act 1996).

However, none of these provisions are mandatory and the parties can specify the procedural powers of the tribunal. It is rare for procedure to be specified in the arbitral agreement, but the rules of arbitral institutions are commonly incorporated by reference and these set out the procedural powers of the tribunal.

 

Evidence

22. What documents must the parties disclose to the other parties and/or the arbitrator? How, in practice, does the scope of disclosure in arbitrations compare with disclosure in domestic court litigation? Can the parties set the rules on disclosure by agreement?

Scope of disclosure

The parties can decide what the scope of any disclosure should be as a matter of procedure. Without this agreement, the tribunal can determine whether to order any documents to be disclosed (section 34(2)(d), Arbitration Act 1996). There is no assumption that any disclosure is required.

It is common for tribunals to order some documents to be disclosed. The scope of this exercise depends on the nature of the case, but it is generally far less onerous than in civil litigation proceedings.

Parties' choice

It is unusual for the parties to specify any rules on disclosure in the arbitration agreement, but the parties can agree an approach once a dispute has arisen and the tribunal must implement the parties' common wishes. Parties often agree to adopt the International Bar Association (IBA) Rules on the Taking of Evidence in International Arbitration. These set out a process where each party requests a document, or a "narrow and specific" category of documents, from the other. If a party objects to a request, the tribunal rules on this and can order the party to produce the documents.

 

Confidentiality

23. Is arbitration confidential? If so, what is the scope of that confidentiality and who is subject to the obligation (parties, arbitrators, institutions and so on)?

There is an obligation (implied by law and arising out of the nature of arbitration) that both parties must not disclose or use for any other purpose any documents prepared for, disclosed or produced in an arbitration (Emmott v Michael Wilson & Partners Ltd [2008] EWCA Civ 184). An obligation of confidentiality can also be expressly contained (and qualified) in the arbitration agreement or in institutional rules incorporated by reference, for example:

  • The London Court of International Arbitration (LCIA) Rules.

  • The Swiss Rules of International Arbitration.

  • The World Intellectual Property Organisation (WIPO) Arbitration Rules.

 

Courts and arbitration

24. Will the local courts intervene to assist arbitration proceedings seated in its jurisdiction?

The courts are very supportive of arbitration and generally are reluctant to intervene where a matter can be resolved by the tribunal. However, there are certain circumstances specified within the Arbitration Act 1996 where the court may assist arbitration proceedings. The principle powers of the court to assist are as follows (sections 42 to 45, Arbitration Act 1996):

  • By making an order requiring a party to comply with a peremptory order made by the tribunal (section 42, Arbitration Act 1996).

  • By ordering a witness within the UK to attend before the tribunal to give oral testimony or to produce documents or other material evidence (section 43, Arbitration Act 1996).

  • Making an order for the preservation of evidence or assets that are the subject of the arbitration, for example a freezing order (section 44, Arbitration Act 1996).

  • By determining any question of law arising in the course of the proceedings that the court is satisfied substantially affects the rights of one or more of the parties (section 45, Arbitration Act 1996).

Each of these powers, except those under section 43, can be displaced by the agreement of the parties.

The Commercial Court has primary jurisdiction over applications relating to arbitrations, although the Mercantile Court and Technology and Construction Court also hear arbitration claims.

 
25. What is the risk of a local court intervening to frustrate an arbitration seated in its jurisdiction? Can a party delay proceedings by frequent court applications?

Risk of court intervention

The courts rarely intervene in an arbitration other than to support it. The court can remove an arbitrator on certain narrowly prescribed grounds (section 24, Arbitration Act 1996). These include apparent bias and failure to properly conduct the proceedings so as to cause a serious injustice to a party. Such applications are relatively rare.

Delaying proceedings

While any application to court can have the effect of delaying the proceedings, such tactics are unlikely to work. The court can hear applications on an urgent basis and will penalise a party acting in bad faith through costs orders. It is more usual for parties to seek to delay enforcement of an award through applying to court than to seek to delay the proceedings themselves in this way.

 

Remedies

26. What interim remedies are available from the tribunal?

Security

The parties can agree on the powers exercisable by the tribunal, but in the absence of agreement the tribunal has the following general powers (section 38, Arbitration Act 1996):

  • To order a claimant to provide security for the costs of the arbitration (section 38(3), Arbitration Act 1996).

  • To give directions on any property that is the subject of the proceedings, including in relation to the inspection, photographing, preservation, custody or detention of the property by the tribunal, an expert or a party (section 38(4), Arbitration Act 1996).

  • To give directions to a party for the preservation of evidence (section 38(6), Arbitration Act 1996).

Other interim measures

Subject to the agreement of the parties, the tribunal can make provisional awards, including, for example, a provisional order for the payment of money or the disposition of property, or to make an interim payment on account of costs (section 39, Arbitration Act 1996).

 
27. What final remedies are available from the tribunal?

The parties can agree on the extent of the powers exercisable by the tribunal in relation to remedies (section 48, Arbitration Act 1996). Without this agreement, the tribunal can:

  • Make a declaration as to any matter to be determined in the proceedings.

  • Make an order for the payment of a sum of money, in any currency.

  • Order a party to do or refrain from doing anything.

  • Order specific performance (other than in a contract relating to land).

  • Order the rectification, setting aside or cancellation of a deed or other document.

Unless otherwise agreed by the parties, the tribunal can make more than one award at different times on different aspects of the matters to be determined (section 47, Arbitration Act 1996).

The parties can agree on the powers of the tribunal in relation to the award of interest. Without such agreement, the tribunal can award simple or compound interest (section 49, Arbitration Act 1996).

The tribunal can make an award allocating the costs of the arbitration between the parties, subject to any agreement of the parties (section 61, Arbitration Act 1996).

 

Appeals

28. Can arbitration proceedings and awards be appealed or challenged in the local courts? What are the grounds and procedure? Can parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitral clause itself)?

Rights of appeal/challenge

Unless otherwise agreed, parties can appeal to the court on a question of law on notice to the other parties and to the tribunal (section 69, Arbitration Act 1996). Many institutional rules exclude the right of appeal.

Parties can also challenge awards on grounds of:

  • Jurisdiction (section 67, Arbitration Act 1996).

  • Serious irregularity (section 68, Arbitration Act 1996).

Unlike appeals under section 69 of the Arbitration Act 1996, these grounds of challenge cannot be excluded by agreement of the parties.

Grounds and procedure

Only questions of law can be appealed (section 69, Arbitration Act 1996). Questions of fact (including questions of foreign law) cannot be appealed.

Therefore, for example, the meaning of words in a contract and whether a term can be implied are generally questions of law that would be susceptible to appeal. However, the following are questions of fact and generally cannot be appealed:

  • Whether a contract has been breached.

  • The proper value to be attributed to land.

  • The application of the rules of remoteness to a particular case.

However, the distinction is often difficult to make in practice, as issues frequently involve considerations of both law and fact.

In the unusual circumstances that the parties agree that there should be an appeal, the courts have no discretion to refuse to hear the appeal, provided that there is a point of law involved. If all the parties to the reference have not agreed to the appeal, the party wishing to appeal must seek permission (section 69(2)(b), Arbitration Act 1996).

A party can (on notice to the other parties and the tribunal) apply to the courts to (section 67(1), Arbitration Act 1996):

  • Challenge any award of the tribunal as to its substantive jurisdiction.

  • Obtain an order declaring an award to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction.

Substantive jurisdiction is defined as relating to the:

  • Validity of the arbitration agreement.

  • Constitution of the tribunal.

  • Scope of the arbitration agreement.

A challenge is only available if a party takes part, or continues to take part, in the arbitration without objecting that the arbitrators lack jurisdiction (section 73(1)(a), Arbitration Act 1996). Any challenge must generally be brought within 28 days of the date of the award (section 70(3), Arbitration Act 1996).

A party can (on notice to the other parties and the tribunal) apply to the courts to challenge an award on the ground of serious irregularity affecting the tribunal, proceedings or award (section 68(1), Arbitration Act 1996). The court can only act where it is shown that the applicant has, or will, suffer some "substantial injustice" from the procedural irregularity. In other words, if the outcome would have been the same despite the irregularity, there is no basis for overturning an award. As with a challenge under section 67 of the Arbitration Act 1996, a party can lose the right to challenge an award if it takes part, or continues to take part, in the arbitration without objection (section 73(2), Arbitration Act 1996). Any challenge must generally be brought within 28 days of the date of the award (section 70(3), Arbitration Act 1996).

Excluding rights of appeal

Parties can agree that an appeal on a matter of law may be excluded (section 68, Arbitration Act 1996). However, the parties cannot agree to oust the jurisdiction of the court under sections 67 or 68 of the Arbitration Act 1996 (section 4(1) and Schedule 1, Arbitration Act 1996).

 
29. What is the limitations period applicable to actions to vacate or challenge and international arbitration award rendered?

Under section 70 of the Arbitration Act 1996, a challenge to an international arbitral award under the Arbitration Act 1996 must be made within 28 days of the award or, if there has been any arbitral process of appeal or review, of the date when the applicant or appellant was notified of the result of that process.

 

Costs

30. What legal fee structures can be used? Are fees fixed by law?

Fees are not fixed by law. Various fee structures can be used. Fees are commonly charged on an hourly basis, but the following can be adopted:

  • Fixed fee arrangements.

  • Fee caps.

  • Task-based billing.

  • Conditional fee arrangements.

  • Damages based agreements.

In recent years there has also been increasing interest in the use of third party funding.

 
31. Does the unsuccessful party have to pay the successful party's costs? How does the tribunal usually calculate any costs award and what factors does it consider?

Cost allocation

Subject to any agreement of the parties, an arbitrator has the discretion to make an award allocating costs between the parties (sections 61(1) and 63(3), Arbitration Act 1996). While the parties can agree that one party is to pay the whole or part of the costs in any event, such an agreement is only valid if made after the dispute in question has arisen (section 60, Arbitration Act 1996).

The default position is that costs should follow the event (section 61(2), Arbitration Act 1996) (Smeaton, Hanscomb & Co Ltd v Sassoon I Setty, Son & Co (No 2) [1953] 2 All ER 1588). However, an arbitrator can make a different order if he believes the general principle is not appropriate, for example an issues-based costs award. Where an arbitrator intends to depart from the general rule, he must hear submissions from the parties before exercising his discretion in this way (section 33, Arbitration Act 1996) (Gbangbola v Smith & Sherriff Ltd [1998] 3 All ER 730).

Cost calculation

There are typically four heads of costs to be taken into account:

  • The arbitrator's fees and expenses.

  • The parties' costs, including legal costs.

  • Any costs relating to the arbitration (for example, the costs of hearing transcripts and hiring rooms).

  • The costs of an arbitral institution (if any).

Factors considered

Provided the tribunal acts judicially and not arbitrarily, it has a wide discretion on what factors to take into account when awarding costs. The tribunal is quite likely to take into account the conduct of the parties, for example if one party's conduct had the effect of causing delay and driving up costs. Where a successful party has wasted costs (for example, by adducing wholly irrelevant evidence) he may not be awarded those costs. Similarly, the tribunal may take account of an offer of settlement that is not accepted in the final award.

 

Enforcement of an award

Domestic awards

32. To what extent is an arbitration award made in your jurisdiction enforceable in the local courts?

Domestic arbitration awards can be enforced by either:

  • A summary procedure (section 66, Arbitration Act 1996) where the award can, by leave of the court, be enforced in the same manner as a judgment or order of the court, and the judgment is entered in the terms of the award.

  • A common law action on the award, seeking a judgment for the same relief as is granted in the award. Such action is only necessary where it was not possible to make an application under section 66 of the Arbitration Act 1996 (for example, where the arbitration agreement was made orally).

An application under section 66 of the Arbitration Act 1996 must be made to the Commercial Court by way of an arbitration claim form (Form N8). The claim can be made without notice, although the court can still require that the application be served on the other party (Civil Procedure Rules (CPR) 62.18(1) and (2)).

The application must be supported by written evidence that:

  • Exhibits the arbitration agreement and the original award (or copies).

  • States the name and the usual or last known place of residence or business of the claimant and of the person against whom it is sought to enforce the award.

  • States either that the award has not been complied with, or the extent to which it has not been complied with, at the date of the application (CPR 62.18(6)).

Within 14 days after service of the order the defendant can apply to set aside the order, and that the award must not be enforced until after the end of that period (or until any application made by the defendant within that period has been finally disposed of) (CPR 62.18(9)).

Bringing an action on the award is not made by way of an arbitration claim, but by instituting a fresh action in the relevant court.

Foreign awards

33. Is your jurisdiction party to international treaties relating to recognition and enforcement of foreign arbitration awards, such as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention)?

The UK is a party to the following Conventions:

  • The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention). This is only applied to recognition and enforcement of awards made in the territory of another contracting state.

  • The Geneva Convention on the Execution of Foreign Arbitral Awards 1927.

  • The Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 (ICSID or Washington Convention).

 
34. To what extent is a foreign arbitration award enforceable?

Under Article III of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention) and section 101 of the Arbitration Act 1996, the court will recognise and enforce a foreign arbitration award (provided it is made in a state that is also a signatory to the New York Convention, as per the reservation).

An application under section 101 of the Arbitration Act 1996 must be made to the Commercial Court by way of an arbitration claim form (Form N8). The claim can be made without notice although the court can still require that the application is served on the other party (Civil Procedure Rules (CPR) 62.18(1) and (2)).

A party seeking enforcement of an award must provide the authenticated original award or a certified copy, and the original arbitration agreement or a certified copy (section 102, Arbitration Act 1996). If the award or agreement is in a foreign language, a translation of it certified by an official or sworn translator or by a diplomatic or consular agent must be provided.

Recognition and enforcement can be refused only in very limited circumstances, as set out in Article V of the New York Convention:

  • The parties to the arbitration agreement were under some incapacity, or the arbitration agreement is not valid under the law to which the parties have subjected it.

  • The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings.

  • The award deals with a difference not contemplated by, or not falling within, the terms of the submission to arbitration.

  • The composition of the arbitral authority was not in accordance with the agreement of the parties.

  • The award has not yet become binding on the parties, or has been set aside or suspended.

 
35. What is the limitations period applicable to actions to enforce international arbitration awards rendered outside your jurisdiction?

Claims to enforce an arbitral award, either under section 66 of the Arbitration Act 1996 or by way of a fresh action on the award, must be brought within six years of the other party's failure to carry out the award, or 12 years if the arbitration agreement was made under seal (section 7, Limitation Act 1980; Agromet Motoimport Ltd v Maulden Engineering Co (Beds) Ltd [1985] 1 W.L.R. 762).

Length of enforcement proceedings

36. How long do enforcement proceedings in the local court take, from the date of filing the application to the date when the first instance court makes its final order? Is there an expedited procedure?

The length of time it takes to enforce an award (whether domestic or foreign) depends principally on whether enforcement is resisted by the other side. If enforcement is resisted and appeals are made (to both the Court of Appeal, and subsequently to the Supreme Court) then the process could take approximately two years, or more.

In the absence of any challenge, the process of enforcement could take as little as a few months.

 

Reform

37. Are any changes to the law currently under consideration or being proposed?

No changes to the Arbitration Act 1996 are currently proposed. There is a steady flow of case law on the Arbitration Act and in recent years the number of challenges to the enforcement of awards has risen, leading to an increase in the number of authorities on the circumstances in which enforcement will be refused.

The Recast Brussels Regulation came into effect on 15 January 2015. It retains the exception for arbitration found in its predecessor, but goes further by including a recital making clear that while the courts of EU member states can rule on the validity of arbitration agreements, these decisions are not subject to the rules on recognition and enforcement and therefore do not bind the courts of other member states. The Recast Regulation still does not permit a member state court to issue an anti-suit injunction restraining court proceedings in another member state in favour of arbitral proceedings taking place in its jurisdiction. It will take some time to determine the practical effect of the Recast Regulation through court decisions.

 

Main arbitration organisations

Chartered Institute of Arbitrators (CIArb)

Main activities. The CIArb promotes arbitration as a form of dispute resolution. In addition to providing education and training for arbitrators, mediators and adjudicators, it acts as an international centre for practitioners, policy makers, academics and those in business interested in the settlement of disputes.

W www.ciarb.org

The London Court of International Arbitration (LCIA)

Main activities. The LCIA is one of the world's leading international institutions for arbitration. In 2014, the LCIA published new rules for arbitrations under its administration, which apply to all arbitrations commenced on or after 1 October 2014. These new rules are notable for their provisions on the conduct of the parties' counsel. The international nature of the LCIA's services is reflected in the fact that, typically, over 80% of parties in pending LCIA cases are not English. The LCIA has established branches in India, the Dubai International Financial Centre and Mauritius.

W www.lcia.org

International Chamber of Commerce (ICC)

Main activities. Headquartered in Paris, the ICC Court of Arbitration is one of the world's leading international institutions for arbitration. It is unique in that every award rendered under its rules is scrutinised by the ICC Court before it is delivered to the parties. The ICC last updated its rules with effect from 1 January 2012.

W www.iccwbo.org

London Maritime Arbitrators Association (LMAA)

Main activities. The LMAA is the world's leading institution for the resolution of maritime disputes. It does not administer or supervise arbitrations, but is an association of members practicing in the field of maritime arbitration. It has its own procedural rules, the LMAA Terms, the most recent version of which took effect from 1 January 2012.

W www.lmaa.org.uk



Online resources

legislation.gov.uk

W www.legislation.gov.uk

Description. Original language text of English legislation can be found on the UK Government website, which is maintained by the Ministry of Justice. It is mostly up-to-date, but occasionally there are short delays before new or amended legislation is available.

British and Irish Legal Information Institute (BAILII)

W www.bailii.org

Description. Many reports of cases in the English courts can be found on this website, which covers cases back to around 1997, but with older cases progressively being added. BAILII makes its website available on a subscription-free basis for the benefit of the public.



Contributor profiles

Jayne Bentham, Partner

Simmons & Simmons LLP


T +44 20 7628 2020
F +44 20 7628 2070
E jayne.bentham@simmons-simmons.com
W www.simmons-simmons.com

Professional qualifications. England and Wales, Solicitor

Areas of practice. International arbitration; energy and infrastructure; technology and telecommunications.

Non-professional qualifications. MA in English Literature, Cambridge University

Recent transactions

  • Acting for Nomihold Securities in a London Court of International Arbitration (LCIA) arbitration concerning an option agreement relating to a Kyrgyz telecommunications company.

  • Acting for Nomihold Securities in complex enforcement proceedings seeking recovery of over US$210 million under a LCIA arbitration award relating to a Kyrgyz telecommunications company.

  • Acting for a Turkish state entity in an ICC arbitration concerning a multi-million dollar dispute over the construction of an oil pipeline.

  • Acting for an international financial institution in relation to a LCIA arbitration concerning several claims arising from contractual arrangements regarding a Middle Eastern Joint Venture Company.

  • Acting for a Turkish company in relation to the enforcement of an International Chamber of Commerce (ICC) award against a Ukrainian state-owned entity.

  • Acting for a Liechtenstein construction company to enforce a EUR18 million ICC award against the assets of a West African state.

Languages. English, French

Professional associations/memberships. Member of the Chartered Institute of Arbitrators.

Publications The EU Mediation Atlas: Practice and Regulation; Arbitration Matters.

Basil Woodd-Walker, Supervising Associate

Simmons & Simmons LLP

T +44 20 7825 3105
F +44 20 7628 2070
E basil.woodd-walker@simmons-simmons.com
W www.simmons-simmons.com

Professional qualifications. England and Wales, Solicitor; England and Wales, Solicitor Advocate (Civil Courts)

Areas of practice. International arbitration; life sciences; energy and infrastructure.

Non-professional qualifications. MA in Theology, Cambridge University

Recent transactions

  • Acting for a state-owned oil and gas transportation company in enforcement proceedings relating to a number of ICC arbitration awards arising from disputes concerning the construction of a major oil pipeline.

  • Acting for one of the world's largest pharmaceutical companies in ad hoc arbitration proceedings against its insurers following a very significant damages claim in US patent litigation.

  • Acting for Nomihold Securities in complex enforcement proceedings seeking recovery of over US$210 million under a LCIA arbitration award relating to a Kyrgyz telecommunications company.

  • Acting for a Middle Eastern state in enforcement proceedings relating to ICC awards worth in excess of GB£400 million; the proceedings raise complex issues of EU law and the application of relevant sanctions regimes.

  • Advising a NGO client on a pro bono basis about a potential intervention in a London-seated UNCITRAL arbitration and an English High Court case relating to two oilfield production sharing agreements in central Africa.

  • Acting for a Liechtenstein construction company to enforce an EUR18 million ICC award against the assets of a West African state.

Languages. English

Professional associations/memberships. Member of the Chartered Institute of Arbitrators; member of the Young International Arbitration Group of the London Court of International Arbitration; member of the Young Arbitrators Forum of the International Chamber of Commerce.


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