Law Commission adopts proposal advanced at Brick Court Annual Commercial Conference in Second Consultation Paper

30/03/23

The Law Commission of England and Wales has just published a Second Consultation Paper on its Review of the Arbitration Act 1996 (the “Act”). In it, the Law Commission has reversed the position set out in its initial consultation paper published on 22 September 2022 (the “First Consultation Paper”), and endorsed a proposal advanced at Brick Court Chambers’ Annual Commercial Conference in October 2022, and in a formal consultation response filed by 25 members of Brick Court Chambers in December 2022.  The Law Commission has thus proposed the introduction of a new statutory rule that “the law of the arbitration agreement is the law of the seat, unless the parties expressly agree otherwise in the arbitration agreement itself.”

In its First Consultation Paper, the Law Commission stated that it had considered a suggestion that there could be a default rule that the law governing the arbitration agreement should be the law of the seat;  a suggestion which had been advanced by inter alios Lord Hoffmann, Sir Richard Aikens and Salim Moollan KC in pre-consultation correspondence with the Law Commission.   However,  at that stage it had decided not to shortlist this topic as a proposal for reform.

Brick Court Chambers devoted its Annual Commercial Conference of 13 October 2022, held with the participation of the Law Commission, to the reform of the Act, with one of its three panels dedicated to the question of the law applicable to the arbitration agreement. The substantial problems created by Enka v Chubb [2020] UKSC 38 were addressed and the Enka approach was compared to that taken in Switzerland and France. A write-up of the Commercial Conference was published in the Global Arbitration Review on 28 November 2022.  Information about the conference, including links to the recording, is here.

Subsequently, on 15 December 2022, the thirteen members of Brick Court Chambers who spoke at the Annual Commercial Conference (Lord Phillips, Lord Hoffmann, Sir Christopher Clarke, Sir Richard Aikens, Hilary Heilbron KC, Vernon Flynn KC, Salim Moollan KC, Kyle Lawson, Zahra Al-Rikabi, Emilie Gonin, Jessie Ingle, Ali Al-Karim and Andris Rudzitis of Brick Court Chambers) lodged a formal response to the First Consultation Paper addressing the three issues discussed at the Commercial Conference (the “Response”). That Response was submitted also from Lord Mance, Sir Bernard Rix and Ricky Diwan KC and the further members of Brick Court Chambers listed in Annex 1 to the Response. The Response is here.

On the subject of the law of the arbitration agreement, the Response explained how the approach in Enka v Chubb created difficulties which inter alia undermined substantive legal certainty and would lead to unnecessary and complex litigation, representing a boon to recalcitrant parties and threatening London’s reputation and competitive standing as a safe seat for arbitration.

These arguments are each set out by the Law Commission in the Second Consultation Paper, which provisionally concluded that they had carried the day. If this proposal is carried through,  it will be a significant development for the English law of arbitration, and for London as a safe seat for arbitration. The members of Chambers who have been engaging with the Law Commission will continue do so as the reform exercise progresses.