The Parliamentary Under-Secretary of State for Justice, Lord Ponsonby, has written on behalf of the Government to members of the House of Lords to address questions raised during the Second Reading of the Arbitration Bill.

As we have commented elsewhere, the Arbitration Bill – which sought to implement the recommendations of the Law Commission and update the Arbitration Act 1996 – was introduced by the previous government in November 2023. However, it fell victim to the effects of the calling of the general election earlier this year, only to be revived in the Government’s King’s Speech and subsequently re-introduced to Parliament where it has recently passed its Second Reading in the House of Lords.

During the debate on the Second Reading, a number of matters were raised by members of the House of Lords, to which the Government has now responded in a letter.

First, the letter touches upon the provision governing the right of appeal against a court decision on staying legal proceedings (at clause 13 of the Bill). As the letter points out, section 9 of the Arbitration Act 1996 allows a party to an arbitration agreement to apply to court to stay legal proceedings, but does not state expressly that a party can appeal such a decision of the High Court in the Court of Appeal. Case law has established such a right (in Inco v First Choice Distribution [2000] UKHL 15) and the new Bill seeks to codify this in its clause 13. However, the letter notes that “concerns have been raised that Clause 13 in fact provides a more limited access to the Court of Appeal than was established [in case law]”. The letter confirms that the Government is considering this point and will provide an update in due course.

Second, the letter addresses the contents of Clause 1 of the Bill, which provides that the law governing an arbitration agreement will be the law expressly chosen by the parties and, in the absence of such agreement, it will be the law of the seat. Some members of the House of Lords pointed to the fact that there may be rare occasions where there is no choice of seat in the agreement, nor has one yet been designated by the tribunal or court. The Government has confirmed that it agrees with the Law Commission that the “Courts will have the facility to apply the common law in these circumstances”, and will update the Bill’s explanatory notes accordingly.

Finally, the letter considers questions that were raised by the House of Lords about whether the Bill should make explicit provision to mitigate against the risk of arbitration being misused. The Government acknowledges that this is “a vital matter that goes to the heart of the UK’s attractiveness” as a jurisdiction for arbitration and cites a range of measures already in existence to combat the risk of corruption. It points out that there is a concern amongst some that amending the Bill to find a “one-size-fits-all” approach could “risk reducing this jurisdiction’s appeal”. Therefore, the Government confirms its position that there should not be an amendment to the Bill to address this issue, arguing that “the Arbitration Act 1996 and the common law already provides a nuanced and flexible approach to deal with corrupt conduct” and stating that the Government “agrees with the Law Commission’s conclusions that a statutory rule in favour of either confidentiality or transparency in arbitration would likely not be sufficiently comprehensive, nuanced or future-proofed, and the debate in the sector internationally should be allowed to further develop.” However, the letter commits the Government to continuing “to support the sector’s efforts on arbitral corruption [and keeping] track of initiatives underway and engage with the sector to push for the swift adoption of best practices as they are developed”.

The letter can be read in full here.