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You may be having a commercial dispute with another company in the UK. However, resorting to court processes can be costly, and you may prefer resolving the issue with arbitration. If so, UK arbitration law applies. This affects arbitration processes and outcomes, so it is important you have a clear understanding of these laws. This article will explain three critical points about UK arbitration law for commercial disputes.
Explanation of the Commercial Arbitration Process
Arbitration is a common alternative dispute resolution (ADR) method. Being an alternative to court litigation, it is a confidential and formal way of resolving your commercial disagreement.
The commercial arbitration process involves an arbitrator or panel of arbitrators. These are independent third parties who have expertise in the subject matter core to the dispute. Their role is to listen to the evidence you and the other party present through your legal representative. They will then make a legally binding decision, which is called an arbitral award. The arbitration process can vary between disputes as it will depend on whether you use a set of institutional arbitration rules or choose a tribunal to develop the rules.
This guide outlines how to resolve commercial disputes.
3 Key Elements of UK Arbitration Law for Commercial Disputes
When businesses carry out commercial arbitration to resolve their commercial dispute, the rules they may use can vary. However, all UK arbitration must follow The Arbitration Act 1966 (the ‘Act’). Such a law can change over time, as the UK is a popular location for commercial arbitration. Being aware of potential developments in the law is especially important, as the Law Commission recently reviewed the Act to ensure it was fit for purpose. To help you understand key principles of arbitration law, as well as possible changes, three key points about UK arbitration law are set out below.
1. Confidentiality
Arbitration is supposed to be confidential as it takes place outside of a court of law. You agree with the other party that the arbitration will be confidential through your contract or arbitration agreement. However, this is not legally required since ADR is supposed to be more flexible than court proceedings. Notably, it is not certain that all types of arbitration should be confidential.
The Law Commission, as part of their review, considered the possibility of mandating confidential arbitrations in the Act. If so, this would reinforce the importance of privacy and provide you with confidence that your arbitration will remain confidential.
2. Law Relevant to the Arbitration Agreement
The Law Commission also recommended that the Act clarify what law is relevant to the arbitration. This would be useful to the parties involved in the UK, especially where the matter is complex or takes place across borders. The proposal is that the Act requires that the arbitration be governed by the relevant laws in the seat of arbitration, or where the arbitration takes place. The only time this would not be the case is when you and the other party expressly agree otherwise.
Currently, where an arbitration agreement does not clarify what law applies, the situation is not completely clear. Instead, parties have to see if the arbitration agreement is part of a more general contract that specifically outlines what location’s law should be applied. Otherwise, parties have to see which law seems to be the closest law to the arbitration agreement. This can be confusing.
3. Challenging Arbitral Awards
It is currently possible under UK arbitration law for a party to a commercial dispute to challenge an arbitral award because they claim the arbitration body lacks the appropriate authority. However, the Law Commission reviewed this due to concerns about parties challenging arbitral awards twice: once to the tribunal who ruled on the award and again in court.
While the Law Commission decided that a full rehearing can be allowed, they proposed that there should be some limits to parties challenging an arbitrator award. These, it suggested, should be detailed in court rules rather than the Act. These limits apply where a party has previously challenged the tribunal’s authority. Limits at a challenge include:
- an inability to rely on new evidence or grounds;
- that evidence must not be reheard unless it is in the interests of justice; and
- that a challenge is only permissible where the tribunal’s decision on jurisdiction was incorrect.
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Key Takeaways
Arbitration can be a useful way of resolving your commercial dispute without resorting to court proceedings. It is, therefore, important that you are aware of laws governing arbitration in the UK, and possible amendments. The Arbitration Act 1966 is this key governing law. However, recently the Law Commission reviewed this to check if it is still fit for purpose. The review suggests areas of change which you should understand, including:
- clarifying in law that arbitration is confidential in legislation;
- clearly identifying which location’s laws apply for cross-border arbitrations where the arbitration agreement does not say; and
- challenging an arbitration award because the tribunal does not have authority.
If you need help understanding UK arbitration law for commercial disputes in the UK, our disputes lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. So call us today on 0808 196 8584 or visit our membership page.
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