Reed Smith In-depth

Key takeaways

  • The Law Commission has announced proposed reforms to the law governing arbitration in England and Wales, the Arbitration Act 1996.1
  • The reforms would be some of the biggest changes to arbitration in England and Wales for almost thirty years and have important practical consequences for anyone who uses London-seated arbitration.
  • The proposals follow consultation with arbitration lawyers and users, including Reed Smith (which was cited in the Law Commission’s report on the subject).
  • In the first of a series of articles dealing with the reforms, we look below at the proposal to give arbitrators the power to dispose of claims on a summary basis (that is, without waiting for a full trial).

Summary Disposal

One of the biggest procedural differences between English court proceedings and English-seated arbitration is that a court may decide a claim or issue without a trial if it considers that a party has “no real prospect of success”. This is called ‘summary judgment’.

Summary judgment aims to save time and costs by allowing a court to dismiss meritless claims at a relatively early stage of proceedings.

Although summary judgment is a common feature of English litigation, it is rare in arbitration. This is because arbitrators are under a statutory duty to give each party a reasonable opportunity to put their case,2 and if they fail to do so, their award can be challenged before the courts in England and recognition and enforcement of the award can also be refused by foreign courts.3

This means that arbitrators are often extremely reluctant to summarily dispose of cases, notwithstanding the arbitrators’ statutory duty to adopt procedures that avoid unnecessary delay and expense.4 For similar reasons, summary processes are rarely used even if they are available under arbitral rules.5

This has important practical implications because even if a party has an entirely meritless case, it can still engage in a drawn-out arbitration to apply commercial pressure on an opponent, who may then be persuaded to seek settlement rather than spend time and money dealing with an arbitration.

To address this issue, the Law Commission proposes that the Arbitration Act 1996 should be amended to provide that, subject to the agreement of the parties, an arbitral tribunal may, on the application of a party, adopt a summary procedure to decide a claim or an issue. The precise detail of the summary procedure to be adopted would be a matter for the arbitral tribunal, having regard to the specific circumstances of the case, in consultation with the parties.

This proposal has, broadly speaking, been welcomed by most lawyers and arbitration users consulted by the Law Commission’s survey.

However, important practical considerations arise because of the proposed introduction of a power to summarily dismiss issues.