Contributed By Wilmer Cutler Pickering Hale and Dorr LLP
Arbitration is often used in England and Wales as an alternative to litigation. A 2018 survey by Queen Mary University of London found that London was the most frequently used arbitral seat in the world. The London Court of International Arbitration (LCIA) has confirmed that it continues to have a strong caseload in 2018 with a total of 317 referrals, with non-UK parties accounting for around 79% of its users. The International Chamber of Commerce (ICC) confirmed that in 2018 it had a total of 842 new cases filed, representing an aggregate value in dispute of over USD203 billion.
The implications of Brexit for international arbitration in England and Wales are still to be determined but are likely to be limited in the short- and medium-term for at least three fundamental reasons. First, Brexit will not have an impact on the UK’s status as a signatory to the New York Convention or the pro-arbitration stance of the courts. Second, the legislation that governs arbitration in this jurisdiction (the Arbitration Act 1996) will remain unchanged as it forms a part of domestic rather than European law. Third, English law will likely remain a popular choice as a governing law for parties to international contracts.
According to the 2018 survey by the Queen Mary University of London, energy, construction, infrastructure, technology and banking and finance are the most likely growth areas for international arbitration.
The most commonly used institutions for international arbitration in England and Wales are the ICC and the LCIA. The LCIA received 317 referrals in 2018. The ICC had a total of 842 cases referred in 2018, with London continuing to be one of the most popular seats for ICC arbitrations.
England and Wales has not adopted the UNCITRAL Model Law (the “Model Law”). Instead, international arbitration in England and Wales is governed by the Arbitration Act 1996 (the “1996 Act”). The 1996 Act applies to all domestic and international arbitrations where the seat of the arbitration is England, Wales or Northern Ireland.
Although the 1996 Act is strongly influenced by the Model Law, it differs in certain respects. One important difference is that the Model Law only applies to international commercial arbitration, while the 1996 Act applies to all forms of arbitration. Other key differences between the 1996 Act and the Model Law include the following:
There have not been any changes to the 1996 Act in the past year. In the 13th Programme of Reform issued in December 2017, the Law Commission suggested that one area of potential reform to the 1996 Act would be to introduce a statutory summary judgment style procedure, since there is currently no express power in the 1996 Act for such a procedure. However, proposals to reform the 1996 Act have been put on hold. Nevertheless, the Law Commission indicated that some reform would be desirable in the near future so as to ensure that London remains a popular venue for international arbitration.
There are no formal legal requirements for an arbitration agreement to be enforced under the laws of England and Wales. However, Section 5 of the 1996 Act stipulates that Part (1) of the 1996 Act (Sections 1-84) only applies where the arbitration agreement is made in writing. Given that Part (1) of the 1996 Act contains mandatory and non-mandatory provisions that facilitate the arbitration process, it is highly advisable to use a written arbitration agreement. A party that wishes to rely on an oral arbitration agreement would only be able to rely on the old common law.
The 1996 Act does not impose any strict requirements on the content of an arbitration agreement. Instead, Section 6(1) merely stipulates that the parties must agree “to submit to arbitration present or future disputes (whether they are contractual or not)”.
Under Section 6(2) of the 1996 Act, it is possible for a contract to incorporate by reference an arbitration agreement that is contained in a separate document.
The 1996 Act stipulates in Section 6(1) that both contractual and non-contractual disputes may be submitted to arbitration. Beyond this, it does not define or describe the matters that are capable of settlement by arbitration. Instead, the 1996 Act provides that matters not capable of settlement by arbitration are governed by common law: Section 81(1)(a).
At common law, the English courts have placed emphasis on the importance of upholding party autonomy to agree to arbitration to resolve their disputes. Consistent with this:
There are, however, a limited number of disputes which are not arbitrable. These include:
There is also an open question as to the extent to which issues of mandatory EU law can be settled by arbitration. The long-standing view is that questions of EU law – including mandatory issues (such as competition law issues) – are arbitrable; it has been held that a tribunal that fails to apply these mandatory laws faces the risk of having its award set aside: Case C-126/97 Eco Swiss  ECR I-3055.
There is a further open question as to whether certain statutory claims are capable of settlement by arbitration. This question does not lend itself to a general answer: each specific statutory claim will address this issue differently. On the one hand, the Court of Appeal has held that a shareholder’s unfair prejudice claim brought under Section 994 of the Companies Act 2006 is capable of settlement by arbitration: Fulham Football Club (1987) Ltd v Richards  EWCA Civ 855. On the other hand, arbitrators have no power to order the winding up of a company: Salford Estates (No.2) Ltd. v Altomart Ltd  EWCA Civ 1575.
The approach of the English courts with respect to the enforcement of arbitration agreements is broadly pro-enforcement. English law will endeavour to uphold agreements to arbitrate where possible. This pro-arbitration stance is reflected in English law’s approach to the construction of arbitration agreements.
The English courts tend to construe an arbitration clause widely and generously to the party that seeks to rely on it. Under English law the threshold for finding that an arbitration clause in a commercial contract is void for uncertainty is a high one. For instance, in Exmek Pharmaceuticals SAC v Alkem Laboratories Ltd  EWHC 3158 (Comm), a contract contained both an arbitration clause and an exclusive jurisdiction clause for “UK” courts, which appeared to be inconsistent. The court held that the arbitration agreement was enforceable by finding a way to reconcile the clauses; it held that all disputes should be submitted to arbitration in England and Wales under the supervisory jurisdiction of the courts of England and Wales. This decision illustrates how English courts will strive to give an arbitration agreement meaning and will rarely hold that an agreement is pathological and unenforceable because it is impossible to understand what the parties’ agreed.
Finally, as noted above, there is a strong assumption when construing an arbitration clause under English law that the parties intended to have disputes arising out of their relationship decided by the same tribunal, in the absence of clear language to the contrary: Fiona Trust & Holding Corporation v Privalov (2007) UKHL 40.
The approach of the English courts with respect to the enforcement of arbitration agreements is broadly pro-enforcement. English law will endeavour to uphold agreements to arbitrate where possible. This pro-arbitration stance is reflected in English law’s approach to the construction of arbitration agreements.
The 1996 Act gives the parties broad autonomy to agree on the procedure for appointing arbitrators. The parties are entitled to agree on the procedure to be followed by the constitution of the tribunal, the number of arbitrators (including whether there is an umpire or chairman) as well as any qualifications required of the arbitrators: Section 15, 1996 Act. (The arbitrators must, of course, consent to their appointment before the agreement becomes valid.)
Although the parties have broad autonomy to determine the process for selecting arbitrators, the court retains the power to remove arbitrators in certain circumstances – see 4.4 Challenge and Removal of Arbitrators, below.
The usual situation is that the parties’ arbitration agreement sets out the procedure that must be followed for the constitution of the tribunal. If it does not, Sections 16-18 of the 1996 Act set out a series of default mechanisms for the appointment of arbitrators. Depending on the number of arbitrators agreed by the parties, this includes default provisions for the appointment of:
Where the parties have not agreed on the number of arbitrators, the default position is that the tribunal will consist of a sole arbitrator: Section 15(3).
An alternative situation is where the parties have included in their arbitration agreement a mechanism for appointing the arbitral tribunal, but that mechanism fails. In these circumstances, the 1996 Act provides the English court with a number of powers which either party can apply to exercise. These include:
Further, unless the parties otherwise agree, where the two parties to an arbitration agreement are to appoint an arbitrator and one party refuses to do so or fails to do so within the time specified, the other party may give notice in writing to the party in default that he or she proposes to appoint his arbitrator to act as a sole arbitrator: Section 17(1).
There are two ways in which an English court can intervene in the selection of arbitrators.
First, the court can exercise certain powers to appoint under the default procedure referred to in 4.2 Default Procedures, above.
Second, the court can intervene where the parties have included in their arbitration agreement a mechanism for appointing the arbitral tribunal, but that mechanism fails. In these circumstances, the 1996 Act provides English courts with a number of powers which either party can apply to the court to exercise, as described in 4.2 Default Procedures above.
The provisions governing the challenge and removal of arbitrators are found in Section 24 of the 1996 Act. Pursuant to that section, a party may apply to the English courts to remove an arbitrator. The court has the power to remove an arbitrator on several grounds, eg:
While a challenge is pending, the tribunal may continue the arbitral proceedings and make an award: Section 24(3).
The 1996 Act grants arbitrators who are challenged an opportunity to be heard: Section 24(5).
The 1996 Act contains a requirement for arbitrators to act fairly and impartially as between the parties: Section 33(1). The courts apply an objective test to the issue of impartiality. The court will ask whether a fair-minded and informed observer would conclude that there was a real possibility of bias: Koshigi Ltd v Donna Union Foundation  EWHC 122 (Comm). When applying this test, English courts are not bound by the International Bar Association (IBA) Guidelines on Conflicts of Interest in International Arbitration. (These guidelines are only binding where the parties have so agreed or the tribunal has adopted the rules in question.) However, IBA Guidelines are taken into account by English courts as a persuasive authority.
The 1996 Act does not contain provisions equivalent to Articles 12 and 13 of the Model Law; as such, it does not require the disclosure of potential conflicts. However, it is acknowledged as best practice that arbitrators should disclose at the earliest opportunity any matters which could reasonably be deemed to have a bearing on their impartiality. A failure to do so will give rise to a ground to challenge the arbitrator, either by applying to the relevant arbitral institution or to the court.
One of the typical grounds for challenge is a failure to disclose repeat appointments one of the parties to an arbitration. Such a failure can lead to the court removing that arbitrator. In Cofely Ltd v Bingham  EWHC 240 (Comm), an arbitrator was removed after failing to disclose that 18% of his appointments and 25% of his income were related to one of the parties to the arbitration.
As noted above in 3.2 Arbitrability, the 1996 Act provides that matters not capable of settlement by arbitration are governed by the common law: Section 81(1)(a). At common law, a wide range of non-contractual disputes (including tort, competition, intellectual property and certain statutory claims) are capable of settlement by arbitration.
As noted above, there are a limited number of disputes which are not arbitrable, including: criminal, planning and certain family law matters; insolvency proceedings subject to the statutory regime set out in the Insolvency Act 1986; and certain employment disputes. There is also an open question as to the extent by which mandatory EU law questions and certain statutory claims can be settled by arbitration.
Section 30(1) of the 1996 Act provides that, unless agreed otherwise, the tribunal has the competence to rule on its own substantive jurisdiction. This comprises the right to rule on: (i) whether or not there is a valid arbitration agreement; (ii) whether or not the tribunal has been properly constituted; and (iii) what matters have been submitted to arbitration in accordance with the arbitration agreement.
A court can address issues of jurisdiction of an arbitral tribunal in three circumstances.
First, Section 32 of the 1996 Act allows a party to apply to the court for the determination of a preliminary point of jurisdiction. Such an application can only be made: (i) where all the parties to the arbitral proceedings agree in writing to refer the matter to the court or (ii) where the tribunal gives permission to apply to court and the court is satisfied that the application will result in a saving of costs, was made without delay and there is good reason why the matter should be decided by the court. These criteria will only be met in exceptional circumstances: Toyota Tsusho Sugar Trading Ltd v Prolat SARL  EWHC 3649 (Comm). While the court is considering such a preliminary question of jurisdiction, the arbitration proceedings may continue and an award be granted: Section 32(4).
Second, Section 67 of the 1996 Act allows a party to challenge an arbitral award on grounds of lack of substantive jurisdiction. The court will review de novo the tribunal’s jurisdiction by way of a complete rehearing and will not be bound by the tribunal’s reasoning: see 11.2 Excluding/Expanding the Scope of Appeal, below.
Third, under Section 72 of the 1996 Act, a party that does not take part in the proceedings can apply to the court for a declaration or injunction to restrain arbitration proceedings by challenging: (i) the validity of the arbitration agreement; (ii) whether the arbitral tribunal has been properly constituted; or (iii) what matters have been referred to arbitration in accordance with the arbitration agreement.
It should be noted that the right to object to the substantive jurisdiction of the tribunal can be lost if a party takes part or continues to take part in proceedings without raising an objection: Section 73, 1996 Act.
A party can go to court to challenge the jurisdiction of the tribunal at any time. As noted above in relation to 5.3 Circumstances for Court Intervention, a party can seek a determination of a preliminary question of jurisdiction and challenge the award for lack of substantive jurisdiction (although such a challenge must be brought within 28 days of the award being rendered).
A party that does not participate in the arbitral proceedings may also challenge the jurisdiction of the tribunal at any point.
As described in more detail at 11.1 Grounds for Appeal, the standard of review under a Section 67 challenge to the jurisdiction of a tribunal is de novo. The court will review the tribunal’s jurisdiction by way of complete rehearing without being bound by the tribunal’s reasoning: Dallah Real Estate & Tourism Holding Co v Government of Pakistan  UKSC 46.
A party may apply for a stay of proceedings where another party commences litigation in the courts of England and Wales in breach of an arbitration agreement: Section 9(1), 1996 Act. The burden of proof is on the applicant to establish the existence of an arbitration clause and that the clause covered the subject matter of the dispute. If this is satisfied, the burden of proof shifts to the party that commenced court proceedings to show that the arbitration agreement is null and void, inoperative or incapable of being performed.
As noted above in relation to 2.1 Governing Law, Section 9 only grants the court the power to stay the proceedings – it does not require the court to refer the parties to arbitration.
A party must challenge the court’s jurisdiction within the time limit for acknowledging service of the claim form. This is generally 14 days. The right of a stay may also be lost where a party seeking the stay has taken steps in court proceedings to answer the substantive claim. This can include participating in a case management conference and inviting the court to make related orders: Nokia Corp v HTC Corp  EWHC 3199 (Pat).
The court also has an inherent jurisdiction to stay proceedings even where Section 9 of the 1996 Act is not satisfied. This court has exercised this discretion where there is a dispute as to the validity or scope of the arbitration agreement: Golden Ocean Group v Humpuss Intermoda Transportasi  EWHC 1240 (Comm).
If a party commences litigation in another jurisdiction (other than a member state of the EU or a contracting state to the Lugano Convention), the party against whom proceedings are commenced can apply to the English courts for an anti-suit injunction. There is no requirement that an arbitration be seated in England and Wales for the court to grant an anti-suit injunction to protect arbitration proceedings. However, in practice, English courts are far more likely to grant an anti-suit injunction where the arbitration is seated within their jurisdiction.
English law places great emphasis on arbitration being a consensual process. Accordingly, English law does not permit a tribunal to assume jurisdiction over non-parties. There is nothing to prohibit a tribunal from inviting non-parties to produce documents, for example, but the tribunal does not have the power to compel a non-party to do so. Instead, the courts have limited powers to make such orders.
Common ways of seeking to bind a non-signatory include: agency, the group of companies doctrine and piercing the corporate veil. In proceedings before English courts, arguments based on agency are most likely to succeed – the English courts have regularly held that a third party may be bound to an arbitration agreement through principles of agency law. However, English courts have been clear that the group of companies doctrine “forms no part of English law”: Peterson Farms Inc. v C&M Farming Ltd  EWHC 121 (Comm). Further, the Supreme Court has held in recent years that the circumstances in which English law will be willing to pierce the corporate veil are extremely rare: VTB Capital Plc v Nutritek International Corp  UKSC 5.
In certain circumstances, a third party will acquire rights under a contract pursuant to the Contract (Rights of Third Parties) Act 1999. If such a contract contains an arbitration agreement, a third party that has acquired these rights will have the right to insist on being sued in arbitration rather than in court. Equally, a third party that wishes to enforce its rights under such a contract would have to do so through arbitration.
The powers of a tribunal to grant preliminary or interim relief are set out in Sections 38 and 39 of the 1996 Act.
Section 38(1) provides that the parties are free to agree on the powers of the arbitral tribunal. Subject to an agreement to the contrary, the arbitral tribunal has the power to:
Section 39 provides that the parties are free to agree that the tribunal will have the power to order on a provisional basis any relief it would have the power to grant in a final award.
In the absence of agreement to the contrary, an arbitral tribunal can only grant interim relief if the relief in question falls into one of the four categories set out above. However, the rules of many arbitral institutions provide for the granting of interim relief by the tribunal. By agreeing to arbitrate before one of these institutions, the parties will have agreed that the tribunal shall be empowered to grant interim relief.
The 1996 Act does not, unless otherwise agreed, confer on the tribunal a power to grant an interim injunction to secure the sum in dispute. However, it is possible to seek a freezing injunction from the High Court: Section 44(2)(e).
Unless otherwise agreed by the parties, the court has the power to make orders in respect of those set out in Section 44 of the 1996 Act. The matters in which the court is empowered to grant interim relief are: (i) the taking of evidence of witnesses (Section 44(2)(a)); (ii) the preservation of evidence (Section 44(2)(b); (iii) orders relating to the preservation, detention, inspection or sampling of the disputed matter (Section 44(2)(c)); (iv) the sale of any goods (Section 44(2)(d)); and (v) the granting of an interim injunction (Section 44(2)(e)).
Furthermore, in situations of urgency, the court is entitled (on the application of a party or a proposed party to arbitral proceedings) to make such orders as it thinks necessary for the purpose of preserving evidence or assets.
However, the court’s power to order provisional measures under Section 44 of the 1996 Act is limited. Once the tribunal is constituted, the court will only make interim orders with the permission of the tribunal or where the tribunal has no power or is unable to act effectively: Section 44(5).
Note that the powers of the court to grant interim relief do not extend to ICSID arbitrations, where any relief should be sought from the tribunal: ETI Euro Telecom International NV v Republic of Bolivia & Anor  EWCA Civ 880.
Unless the parties agree otherwise, the tribunal has the power to order the claimant to provide security for costs: Section 38(2)-(3) of the 1996 Act. Costs for which security can be ordered include both the costs of the arbitrators and the parties’ own costs: Section 39, 1996 Act.
The current position under the 1996 Act is that security for costs is only available from the tribunal, with the court only ordering security in relation to challenges to an award made under Sections 67-69 of the 1996 Act.
The 1996 Act gives the parties autonomy to agree their own procedural rules. This is typically done by the parties incorporating a set of institutional rules that govern the procedure of the arbitration. In the absence of agreement by the parties, the default provision under the 1996 Act is for the tribunal to determine all procedural and evidential matters: Section 34, 1996 Act.
The 1996 Act does not set out any mandatory procedural steps that are required by law. Instead, as noted above in 7.1 Governing Rules, the parties are given autonomy to agree on their own procedural rules.
The Act does, however, impose certain overarching principles which have to be observed in determining the procedure to be followed. Most importantly, the 1996 Act imposes on the tribunal a “general duty” to act fairly and impartially, giving each party a reasonable opportunity of putting its case and dealing with that of its opponent: Section 33(1)(a). The tribunal is also under an obligation to adopt procedures that avoid unnecessary delay and expense, which are suitable to the circumstances of the particular case in order to provide a fair means for the resolution of the dispute: Section 33(1)(b). Section 33 is mandatory; it cannot be excluded by agreement.
Further, the 1996 Act places an obligation on the parties themselves to do all things necessary for the proper and expeditious conduct of the arbitral proceedings: Section 40, 1996 Act.
As noted above in relation to 7.2 Procedural Steps, arbitrators are under a general duty to: (i) act fairly and impartially; (ii) adopt procedures that avoid unnecessary delay and expense; and (iii) provide a fair means of resolving the dispute referred to them: Section 33, 1996 Act. At common law, arbitrators are also under a duty to render an enforceable award.
In addition to the general powers granted to a tribunal under Section 38 of the 1996 Act (discussed at 6.1 Types of Relief, above), a tribunal has the power under Section 56(1) to withhold an award for non-payment of its fees.
There are no particular qualifications or other requirements for legal representatives appearing in an arbitration seated in England and Wales. The 1996 Act simply provides that, unless the parties have agreed otherwise, a party may be represented in the proceedings by a lawyer or other person chosen by him or her: Section 36. Accordingly, foreign lawyers are free to appear without restriction, as are non-lawyers that are not qualified in any jurisdiction.
The procedural and evidential matters of arbitral proceedings seated in England and Wales are governed by Section 34 of the 1996 Act. Section 34 gives the tribunal a broad power to decide all such issues, subject to the right of the parties to agree any matter. Under Section 34(2), the tribunal has the power to decide:
The tribunal’s powers are only applicable to the parties to the arbitration. Hence, the tribunal cannot order a non-party to produce documents or secure the attendance of witnesses. In such cases, the tribunal and/or the parties generally request the court’s assistance.
When making an order for the production of documents, the tribunal may determine that a document (or class of documents) is protected from disclosure on the grounds of privilege.
As noted above, Section 34 of the 1996 Act empowers the tribunal to decide all evidential matters, unless the parties agree otherwise. This power includes the right to determine: (i) whether to apply “strict” rules of evidence as to the admissibility, relevance or weight of any material sought to be tendered on matters of fact or opinion and (ii) the time, manner and form in which such material should be exchanged or presented.
It should be noted that tribunals will often follow the IBA Rules on the Taking of Evidence in International Arbitration rather than adopt the strict rules of evidence that apply to English court proceedings.
A tribunal has the power to order disclosure of documents by the parties: Section 34(2)(d), 1996 Act. However, a tribunal does not have the power to require the attendance of witnesses or order the production of documents by a third party.
To obtain third-party disclosure or secure the attendance of a witness to produce documents or obtain oral testimony, a party to arbitral proceedings can (with the agreement of all of the parties or with the permission of the tribunal) apply to the court under Section 43 of the 1996 Act.
The English courts have confirmed that court orders for pre-action disclosure are not available if there is an arbitration agreement between the parties: Travelers Insurance Company Ltd v Countrywide Surveyors Ltd  EWHC 2455 (TCC).
The 1996 Act is silent on the issue of confidentiality. However, English courts have held that all arbitral proceedings seated in England and Wales are confidential. This conclusion is based on the implied duty of confidentiality, which is derived from the essentially private nature of arbitration, and as such exists in all arbitration agreements: Emmott v Michael Wilson & Partners Ltd  EWCA Civ 184.
Pursuant to this implied duty of confidentiality, all constituent parts of an arbitral proceeding, including: (i) the pleadings; (ii) all documents produced and disclosed during the proceedings; (iii) the hearing; and (iv) the award are deemed to be confidential. Both the parties and the tribunal are under an implied obligation to preserve this confidentiality: Dolling-Baker v Merrett  1 WLR 1205; Hassneh Insurance Co v Mew  1 Lloyd's Rep 243; Ali Shipping Corporation v Shipyard Trogir  EWCA Civ 3054. Further, it should be noted that a party to whom documents (or other information) were disclosed in arbitral proceedings is precluded by the implied duty of confidentiality from referring to or relying upon that information in subsequent proceedings.
There are certain exceptions to the confidentiality obligation. Most notably, parties are entitled to agree that the proceedings will not be confidential. The Court of Appeal in Emmott v Michael Wilson & Partners Ltd  EWCA Civ 184 recognised three further exceptions – cases where disclosure is: (i) in the interests of justice; (ii) required by law; or (iii) required to establish or protect a party’s legal rights. These exceptions are mainly relied on by parties when initiating recognition and enforcement proceedings of an award in a country where the court requires them to disclose the award.
The parties are entitled to agree on the formal requirements for an award to be valid: Section 52(1), 1996 Act. In the absence of such agreement, the 1996 Act contains a set of default formalities that will apply. These are:
Further, at common law an award must also make a final determination on a particular issue: Brake v Patley Wood Farm  EWHC 4192 (Ch). The 1996 Act does not prescribe a time limit within which an award must be rendered; however, the tribunal is under an obligation to avoid “unnecessary delay” and the parties can specify a time within which an award should be rendered.
The New York Convention, implemented in Part III of the 1996 Act, contains additional requirements for an arbitral award to fall within its scope. It requires awards to be “duly authenticated” in order to oblige contracting states to enforce them. Therefore, an unsigned award may not be enforceable in another contracting state.
Under the 1996 Act, it is up to the parties to agree on the scope of the tribunal’s power to grant remedies: Section 48. In the absence of such an agreement, the 1996 Act provides the tribunal with the power to grant comprehensive relief. This includes the power to:
There is no express rule that addresses whether the tribunal can award punitive (or exemplary) damages; however, if the parties so agree, the tribunal is entitled to do so. In the absence of such an agreement, punitive or exemplary damages may only be awarded in the same circumstances that such damages are provided for under the applicable law. As matter of English law, punitive or exemplary damages are not available for a breach of contract claim but are available for a limited number of claims in tort.
It is possible that where a certain remedy is available under the governing law but not under English law, the award of such a remedy would be contrary to English public policy and should be refused on that basis by a tribunal seated in England and Wales. However, a recent case held that the English law position that penalty clauses should not be enforced was not a sufficient reason to refuse recognition under the New York Convention: Pencil Hill Ltd. v US Citta di Palermo Spa  EWHC 71(QB).
Under the 1996 Act, the winning party is entitled to pre-award interest, post-award interest and recovery of legal costs.
Under Section 49 of the 1996 Act, the parties can agree on the power of the tribunal to award interest: Section 49(1). In the absence of such an agreement, Section 49 contains default provisions on the award of interest. These empower the tribunal to award pre-award and post-award interest on a simple or compound basis at such rates and with such rests as the tribunal considers meets the justice of the case. No mandatory or customary rate of interest is applicable.
Under the 1996 Act, the parties to an arbitration are also entitled to reach an agreement with regard to the costs of the proceedings: Section 61(1). The only restriction on this autonomy is that the parties are not entitled to agree before the dispute in question has arisen that one party will pay the costs of the arbitration irrespective of the outcome: Section 60, 1996 Act.
In the event that no agreement on costs has been reached, the 1996 Act contains default provisions that give the tribunal the power to allocate the costs of the arbitration between the parties: Section 61. These costs include: the arbitrators’ fees and expenses, the fees and expenses of any arbitral institution as well as the legal and other costs of the parties: Section 59. In a recent case, the High Court held that the costs of the arbitration may also include the costs of third-party funding in certain circumstances: Essar Oilfields Services Ltd v Norscot Rig Management PVT Ltd  EWHC 2361 (Comm).
As far as the allocation of costs is concerned, the 1996 Act provides that, unless agreed otherwise, costs should “follow the event” unless the tribunal considers that such an award would be inappropriate in the circumstances of the case: Section 61(2). This means that the starting point for the allocation of costs is that the successful party is entitled to its reasonable costs.
There are three limited grounds on which a challenge can be made to an award in England and Wales, namely:
Both Sections 67 and 68 are mandatory provisions of the Act; ie they cannot be excluded by agreement. In contrast, the right to appeal on a point of law under Section 69 may be excluded if the parties so agree.
Section 67: Challenge to the Tribunal’s Substantive Jurisdiction
A challenge to the tribunal’s substantive jurisdiction may extend to a final award that deals with the merits of the case or to a preliminary award on the tribunal’s jurisdiction. A challenge to jurisdiction is generally based on: (i) the existence, validity or scope of the arbitration agreement or (ii) whether the tribunal was constituted in accordance with the arbitration agreement.
Where an award is challenged for lack of jurisdiction, the court must revisit the tribunal’s decision on jurisdiction. A party that challenges the substantive jurisdiction of the tribunal is entitled to a complete rehearing rather than a review of the decision by the tribunal: see Dallah Real Estate & Tourism Holding Co v Government of Pakistan  UKSC 46.
It should be noted that a party’s right to bring a challenge under Sections 67 and 68 can be lost if that party does not object to the tribunal’s jurisdiction and/or procedural irregularities forthwith and continues to take part in the proceedings: Section 73, 1996 Act.
Section 68: Challenge on the Grounds of Serious Irregularity
A Section 68 challenge has two limbs. The applicant must show that: (i) there has been a “serious irregularity” and (ii) a “substantial injustice” has resulted. The High Court has recently reiterated that there was a “high threshold” to be met under Section 68 and the courts should not approach awards “with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults on awards with the objective of upsetting or frustrating the process of arbitration”: The Secretary of State for the Home Department v Raytheon Systems Limited  EWHC 311 (TCC).
Section 68 contains an exhaustive list of what constitutes a “serious irregularity”:
If one of these grounds is present, the applicant must then show that “substantial injustice” has resulted from the serious irregularity. The question of substantial injustice is approached independently of the question of serious irregularity. To succeed on the substantial injustice test, an applicant does not need to demonstrate that the outcome would have been different, provided it can show that “the tribunal might well have reached a different conclusion in its award”: The Secretary of State for the Home Department v Raytheon Systems Limited  EWHC 311 (TCC).
On a successful challenge under Section 68, the court can remit the award to the tribunal for reconsideration, set aside the award or declare the award to be of no effect either in whole or in part.
As noted above, a party’s right to bring a challenge under Section 68 can be lost if that party does not object to the tribunal’s jurisdiction and/or procedural irregularities forthwith and continues to take part in the proceedings.
Section 69: Appeal on a Point of Law
An appeal on a point of law can be brought with the agreement of all parties to the arbitration or with the leave of the court. To be granted leave, an applicant must satisfy the court that:
The standard of review adopted at the leave stage by the court is deferential. When determining if the tribunal has reached a decision that is “obviously wrong”, an error must be apparent on the face of the award itself such that it constitutes a “major intellectual aberration” (HMV UK Ltd v Propinvest Friar Ltd Partnership  1 Lloyd’s Rep 416). Likewise, where the question is one of general public importance, the mere fact that the court might have reached a different conclusion is unlikely to render an award “open to serious doubt”.
The standard of review adopted by the court at the appeal itself, if leave is granted (or all parties have agreed to refer the point), is similarly deferential. It is not sufficient for an applicant to satisfy the appeal court that it may have come to a different conclusion. A Section 69 appeal will only be successful if an applicant can show that a tribunal correctly understood the law could not have reached the same conclusion as that reached by the tribunal: Vinava Shipping Co Ltd v Finelvet AG (The Chrysalis)  1 Lloyd’s Rep 503.
If an appeal under Section 69 is successful, the court may: (i) vary the award; (ii) remit the award to the tribunal, in whole or in part, for reconsideration in the light of the court’s determination; or (iii) set aside the award in whole or in part.
In terms of procedure, a challenge or appeal is started by filing an arbitration claim form under the Civil Procedure Rules, Part 62. The claim form is required to identify the basis of the challenge by reference to the relevant section of the Arbitration Act and give an outline of the award being challenged. To apply to the court, the applicant must show that all available recourses to the tribunal to correct, review or make an additional award were exhausted.
Any challenge or appeal must be brought within 28 days of the date of the award or of being notified of the outcome of any arbitral appeal, review, correction to the award or an additional award: Section 70(3). In a recent case, the High Court confirmed that the date of an arbitration award for the purposes of the 28-day period for appealing under the Section 70(3) runs from the date of the original award and not the date of correction of the award, save in cases where the corrections were material to the challenge in question: Daewoo Shipbuilding and Marine Engineering v Songa Offshore Equinox  EWHC 538 (Comm). This 28-day time limit can be extended by the court under certain circumstances (unless the parties agree otherwise): Section 79(3).
As noted above, Sections 67 and 68 of the 1996 Act are mandatory and cannot be excluded by agreement of the parties. Section 69, on the other hand, is not mandatory and the right to appeal to the court on a question of law can be excluded if the parties so agree.
The parties will be deemed to have excluded an appeal under Section 69 if they agree that the tribunal is not required to give a reasoned award. Similarly, an agreement to apply many of the major institutional rules (including the ICC and LCIA rules) will exclude the right to appeal under Section 69.
The parties can agree additional appeal procedures before a second arbitral tribunal or before an arbitral institution. However, the parties cannot expand the court’s power to review an arbitral award that is set down in Sections 67 and 68. This is because the court’s power to review an arbitral award is statutory.
As noted above in 11.1 Grounds for Appeal, when a party seeks leave to appeal, the standard of judicial review of the merits of the case is deferential. In contrast, the standard of review when a party is challenging the substantive jurisdiction of the tribunal is de novo: Dallah Real Estate & Tourism v Government of Pakistan  UKSC 46.
The UK (England, Wales, Northern Ireland and Scotland) is a party to the New York Convention, which it signed and ratified in 1975. This was subject to the reservation that the New York Convention only applied to awards made in the territory of another contracting party. Sections 100-104 of the 1996 Act provide for the recognition and enforcement of New York Convention awards – “awards made, in pursuance of an arbitration agreement, in the territory of a state (other than the United Kingdom) which is a party to the New York Convention”.
IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation  UKSC 16 is an important recent decision of the Supreme Court on the interpretation of the New York Convention and the 1996 Act. The Supreme Court held that the New York Convention constitutes “a complete code” that was intended to establish “a common international approach” to the conditions for recognition and enforcement. Therefore, it is not permissible to use English procedural rules to fetter a party’s rights under the New York Convention.
The UK is also party to the Geneva Convention on the Execution of Foreign Arbitral Awards 1927. An arbitral award that is made in the territory of a contracting party to the Geneva Convention can be enforced under the 1996 Act: Section 99. There are a small number of countries that have not acceded to the New York Convention but are party to the Geneva Convention 1927. Apart from these countries, the enforcement of awards under the Geneva Convention 1927 has largely been superseded by enforcement under the New York Convention.
England and Wales has not signed any other similar enforcement conventions. However, England and Wales has enacted:
The procedure for enforcing an arbitral award in England and Wales is governed by the 1996 Act. Section 66 of the 1996 Act provides two alternative procedures for the enforcement of an award: (i) an arbitral award may, by leave of the court, be enforced in the same manner as a judgment or order of the court or (ii) an award creditor may begin an action on the award, seeking the same relief from the court as is set out in the tribunal’s award. (The latter procedure is rarely followed.)
An application for leave to enforce is generally done without notice to the other party. It involves submitting an arbitration claim form and a witness statement attaching the arbitration agreement and award: CPR, Part 62. Where leave is granted, judgment may be entered in terms of the award and the same powers that are available to enforce a court judgment are available to enforce an award. Leave to enforce will be refused where, or to the extent that, the award debtor shows that the tribunal lacked substantive jurisdiction to make the award: Section 66(3), 1996 Act. This procedure governing enforcement is separate from and does not affect the recognition or enforcement of an award under the New York Convention.
To obtain recognition and enforcement of a New York Convention award, a party must produce: (i) the duly authenticated original award or a duly certified copy thereof and (ii) the original arbitration agreement or a duly certified copy thereof: Section 102(1), 1996 Act. If the award or agreement is in a foreign language, the party must also produce a translation certified by an official or sworn translator or by a diplomatic or consular agent: Section 102(2), 1996 Act.
Recognition and enforcement of New York Convention awards in England and Wales can only be refused on limited grounds. These are set out in Section 103 of the 1996 Act (which mirror Article V of the New York Convention):
Under Section 103 of the 1996 Act, enforcement “may” be refused on one of the above grounds. This means that the English courts retain a discretion to enforce an award even where one of the grounds for refusal is shown to exist. In practice, however, it would be rare for the English court to conclude that an award should be enforced despite their being grounds for refusing recognition. In Dallah Real Estate & Tourism Holding Co. v Ministry of Religious Affairs (Pakistan)  EWCA Civ 755 the court recognised that its discretion to enforce an award – even where a ground in Section 103 exists – should be narrowly construed.
It is not necessary for the court to recognise and enforce an arbitral award in its entirety. The English court has held that “award” in the 1996 Act should be construed broadly to mean the “award or part of it” with the result that the court can enforce part of an award: IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation  EWCA Civ 1157.
The English courts have generally adopted a strongly pro-enforcement approach. This is reflected in the English courts’ approach to refusing enforcement on public policy grounds.
Section 103(3) of the 1996 Act gives effect to Article V(2)(b) of the New York Convention, meaning that an English court may refuse to recognise or enforce an award on the ground that it is contrary to public policy. However, the English courts have held that arguments for refusing recognition on public policy grounds should be approached with extreme caution and the public policy exception should be construed narrowly. This is because it “was not intended to furnish an open-ended escape route for refusing enforcement of New York Convention awards”: IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation  EWHC 726 (Comm).
The English courts have imposed a high standard for refusing enforcement on public policy grounds. The Court of Appeal in Deutsche Schachtbau-und Tiefbohrgesellschaft mbH v Ras Al Khaimah National Oil Co.  3 WLR 1023 stated that for an award to be contrary to public policy there should be some element of illegality or a finding that enforcement is clearly injurious or wholly offensive to the public.
The recent decision by the English Court of Appeal in RBRG Trading (UK) v Sinocore International  EWCA Civ 838 also laid out several principles indicating a high standard for refusing enforcement on public policy grounds. For instance, the mere fact that English law would have arrived at a different result does not of itself justify the application of English public policy and a refusal of enforcement. Also, the mere fact that the performance of the contract may be illegal in the place of performance, without more, will not render an award on the basis of such a contract unenforceable in England where the contract is legal by its applicable law and by the lex arbitri.
Therefore, the public policy exception will only apply in narrow circumstances. These include where the award was obtained by fraud (Westacre Investments Inc v Jugoimport-SPDR Holding Co Ltd  2 Lloyd’s Rep 65) or when the award was tainted by illegality (Soleimany v Soleimany  3 WLR 811). Public policy considerations will also preclude the performance of an illegal act such as bribery. However, public policy considerations do not preclude enforcement of a contract procured or "tainted" by bribery or corruption: National Iranian Oil Company v Crescent Petroleum Company International Ltd  EWHC 1900 (Comm).
England and Wales does not currently provide for class action arbitration or group arbitration and there have been no reported judicial decisions on the permissibility (or otherwise) of class arbitration in England and Wales.
English civil procedure law rules permit representative actions through Group Litigation Orders, but these are different to US-style class actions. Most importantly, unlike a US-style class action, Group Litigation Orders are not opt-out procedures so members of a class are not presumptively treated as parties to the action
There are a number of challenges to adopting US-style class arbitration in England and Wales. US-style class arbitration procedures are arguably incompatible with the requirement for party consent to jurisdiction under the 1996 Act. For example, Section 35(2) of the 1996 Act provides that the court can only consolidate multiple arbitrations where all the parties consent to such consolidation. This consent requirement would not be satisfied by all members of a class under US-style opt-out class arbitration.
English solicitors participating in arbitrations sited in England and Wales are bound by the Solicitors Regulation Authority Code of Conduct 2011 (“SRA Code of Conduct”). English barristers are bound by the BSB Handbook 2019.
The SRA Code of Conduct and the BSB Handbook are limited to solicitors and barristers of England and Wales and there are no separate rules that govern the conduct of counsel or arbitrators from jurisdictions other than England and Wales in arbitral proceedings sited in England and Wales. Furthermore, there are no separate rules that impose mandatory codes of conduct on counsel irrespective of jurisdiction. This is because it is expected that lawyers from other jurisdictions are regulated by the applicable rules of professional conduct from their home jurisdictions.
Third-party funding is not subject to formal regulation in England and Wales. Instead, third-party funding is self-regulated through a code of practice called the “Code of Conduct for Litigation Funders.” The Code of Conduct for Litigation Funders was first published in 2011 by the Association of Litigation Funders of England and Wales. The Code is binding on all members of the Association and regulates the funding of litigation, arbitration and other dispute resolution procedures.
The consolidation of separate arbitration proceedings is governed by the 1996 Act. Section 35 of the 1996 Act permits an arbitral tribunal to consolidate proceedings only if the parties have agreed to confer such power on the arbitral tribunal.
The rules of most major arbitral institutions generally provide a framework for the consolidation of separate arbitral proceedings and, therefore, govern the circumstances in which consolidation is permissible. For example, the ICC Rules 2017 permit consolidation where: (i) the parties have agreed to consolidation; or (ii) all of the claims in the arbitrations are made under the same arbitration agreement; or (iii) where (a) the claims in the arbitrations are made under more than one arbitration agreement, (b) the arbitrations are between the same parties (c) the disputes in the arbitrations arise in connection with the same legal relationship and (iv) the court finds the arbitration agreements to be compatible: Article 10, ICC Rules 2017.
Under English law, a third party will only be bound by an arbitration agreement or award in limited circumstances.
In various jurisdictions, a number of legal theories have been advanced to seek to bind non-signatories to arbitration agreements (such as piercing the corporate veil and the group of companies doctrine). English law, however, has not embraced these legal theories. The Supreme Court has confirmed that it will be extremely rare that the corporate veil is pierced: VTB Capital Plc v Nutritek International Corp  UKSC 5. Further, in Peterson Farms Inc. v C & M Farming Ltd  EWHC 121 (Comm), the High Court set aside an award in which the group of companies doctrine had been recognised, stating, inter alia, that the doctrine “forms no part of English law”.
Under English law the limited circumstances in which third parties, who were not parties to the original agreement, may either be bound by, or take the benefit of, an arbitration agreement include:
Certain statutory provisions enable third parties, in specific circumstances, to enforce contractual terms. For example, third parties can acquire rights under a contract pursuant to the Contracts (Rights of Third Parties) Act 1999 or the Third Parties (Rights Against Insurers) Act 1930. Further, in insolvency proceedings the administrator of an insolvent company is bound by arbitration agreements entered into by that company (Insolvency Act 1986, Schedule B1, para. 69). Beyond these circumstances, English law does not generally empower its courts or tribunals to bind third parties who are not party to the arbitration agreement. This is because the primary feature of arbitration in England and Wales is party consent. The court does, however, have the power to compel third parties to submit testimony or produce documents in certain circumstances: Section 43, 1996 Act.