The Future of Arbitration in the UK: Recent Developments and Targeted Reforms

Arbitration, a key form of dispute resolution in the UK legal services market, is set to undergo reform following the Law Commission’s Final Report published on 6 September 2023. With an estimated 5,000 domestic and international arbitrations taking place in England and Wales each year, contributing at least £2.5 billion to the economy, the proposed changes aim to ensure that the arbitration regime remains competitive against other jurisdictions.

The Law Commission’s recommendations include providing clarity on the governing law of arbitration agreements, addressing new grounds of objection or new evidence following a challenge to a tribunal’s jurisdiction, and introducing provisions concerning arbitrator immunity. The Bar Council has welcomed these proposals, emphasizing the importance of maintaining London’s reputation as a leading global center for resolving disputes.

However, recent events, such as the case of Federal Republic of Nigeria v Process & Industrial Developments, have highlighted vulnerabilities in the arbitration process. In this case, an arbitral award of US$11 billion was overturned due to serious irregularities, raising concerns about the reliability and integrity of arbitration, especially in disputes of high value or involving sovereign states.

As the UK Government moves forward with the Arbitration Bill to modernize the framework supporting arbitration in England, Wales, and potentially Northern Ireland, it is essential to address these issues to ensure the effectiveness and credibility of the arbitration process. With the Bill presented to Parliament on 21 November 2023, the upcoming UK General Election in January 2025 will determine the priority of this reform. Stay tuned for updates on the Bill’s progress through Parliament.