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Bermuda Form contracts generally provide for London Arbitration under the English Arbitration Act 1996 (the Act), which has for nearly 30 years, served as the procedural framework for arbitrations. This article looks at the recent changes suggested by the Law Commission in two consultations, in 2022 (the first consultation) and 2023 (the second consultation). The final report is awaited.
We consider below some of the most notable proposals from the two consultations for parties to commercial insurance arbitrations.
Confidentiality
The Act does not contain any provisions about arbitral confidentiality. The current law, reaffirmed in Halliburton v Chubb, implies “privacy and confidentiality”.
The first consultation concluded that the Act should not, at present, provide a default rule that arbitrations are confidential and that the law of confidentiality would be better left to be developed by the courts. The Law Commission considered that where confidentiality is required, the current regime works well and not all types of arbitration should, by default, be confidential.
For insurers, we query whether this is a missed opportunity to provide statutory certainty as to when a confidentiality obligation arises. For commercial arbitration, this is perhaps also a missed opportunity to secure arbitration’s advantages as a forum for dispute resolution over litigation.
Independence of arbitrators
The first consultation highlighted the importance of the duty of impartiality imposed by Section 33 of the Act, and suggested the Act should expressly provide that arbitrators have "a continuing duty to disclose any circumstances which might reasonably give rise to justifiable doubts as to their impartiality". The first consultation concluded that an impartial, but not “perfectly independent”, arbitrator is preferable to one who is independent but biased.
This is a broadly sensible conclusion. The pool of arbitrators able to hear, for example, Bermuda Form arbitrations is relatively narrow. When a coverage issue affects a whole tower of excess coverage, it seems reasonable to expect that the arbitrators drawn from the pool may appear in more than one arbitration.
Discrimination
The first consultation proposed that any agreement by the parties requiring the appointment of an arbitrator by reference to protected characteristics would be unenforceable. The second consultation noted a current effort to improve the diversity of panels, e.g. by the parties agreeing to appoint a woman arbitrator if there are two men on the panel, and noted the difference between positive action [which is legal] and positive discrimination [which is illegal].
We anticipate these comments will not hamper efforts to improve the diversity of panels in commercial arbitration.
Summary disposal of issues which lack merit
The consultations propose the Act should be amended to include a non-mandatory provision giving tribunals the power to adopt summary dismissal on an application by one of the parties.
This proposal is welcome. Although Section 33(1)(b) gives tribunals broad powers to manage proceedings, the review notes that many arbitrators are reluctant to adopt summary procedures.
As to the threshold for summary dismissal, the first consultation referred to two possible threshold tests: "manifestly without merit" (used in some arbitration rules) or "no real prospect of success" (the standard of the English and Welsh courts). The first consultation favoured the England and Wales threshold, in part, because it has an understood meaning explained in case law.
Interim measures ordered by the court in support of arbitral proceedings
The first consultation suggested that the effect of Section 44(2) of the Act is to grant the court the same powers in arbitral proceedings as it can exercise in domestic court proceedings, but sought feedback from consultees on whether this needs to be made explicit in the Act. This was also the view of the English Court of Appeal in A, B v C, D, E (Taking evidence for a foreign seated arbitration) [2020].
Section 69 of the Act allows a party to appeal to the court for a reconsideration of contested questions of law. The first consultation proposed that no changes to Section 69 should be made, concluding that it serves its purpose of maintaining a balance between two competing issues: the finality of arbitral awards and the correction of errors of law. The Law Commission also stated that they have seen no alternative approach to appeals on a point of law which is obviously better.
Currently, a party may challenge the jurisdiction of the tribunal in the arbitration and may then challenge the subsequent award under Section 67 of the Act by way of a rehearing.
For the purposes of reducing delay and costs, the first consultation proposed to amend this process whereby the challenge would be an appeal rather than a full rehearing. The second consultation set out limits of the challenge, to be implemented in the Court rules - such as the court not entertaining new grounds of objection, evidence not being reheard, and the focus of the appeal to be whether the tribunal’s ruling was wrong). These proposals seem broadly reasonable, and have the potential to save costs.
This issue was considered in the second consultation after a large number of responses to the first consultation, and the Supreme Court’s decision in Enka Insaat Ve Sanayi A.S. v OOO Insurance Company Chubb [2020].
The Court held that in the absence of an express choice of law, the arbitration agreement will be governed by the law of the contract itself and established a set of principles in this regard. The second consultation considered the Supreme Court’s approach to be complex and that the application of the principles in any given case is likely to leave room for argument.
The second consultation has therefore proposed a new provision in the Act, confirming that the proper law of the arbitration agreement is the law of the seat of arbitration chosen by the parties, unless the parties expressly agree otherwise in the arbitration agreement itself.
Comment
The Law Commission will now prepare a final report and recommendations.
While an effort to strengthen arbitral confidentiality would be warmly received, more broadly, the possible revisions to the Act are to be welcomed. Arbitration provisions continue to be the preferred mechanism of dispute resolution in insurance contracts, including the Bermuda Form, and insurers will support efforts to ensure the Act remains “best in class”.
Related items:
- 2023 Guide to Australian Insurance & Reinsurance Laws and Regulations
- Arbitration agreements in New Jersey
- Arbitration trumps: Bermuda court confirms pro-arbitration approach
- The rise of international arbitration and a comparison of arbitration procedures in the USA, England and Wales, Bermuda and Canada
- Arbitrable or Arbitrary? The Impact of Sanctions on International Arbitration
Insurance and reinsurance
United Kingdom