The Arbitration Act

20 Frequently Asked Questions

Dispute Resolution At A Glance Guide 1

The Arbitration Act

Contents
Section: Introduction 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Can I contract out of the Act? How many arbitrators are there on the tribunal? How do I start an arbitration? When must I start an arbitration? Is the arbitration agreement valid even though the main contract is void? What happens if it is alleged that the arbitrators have no jurisdiction? What can be done if one party ignores the arbitration agreement and commences proceedings elsewhere? What is the duty of the arbitrators? What is the duty of the parties to the arbitration? What are the powers of the arbitrators in the conduct of proceedings? What happens if a party defaults or disobeys an order made by the arbitrators? Under what law do the arbitrators decide the dispute? What remedies can the arbitrators award? How are legal costs and arbitrators fees dealt with in arbitration? What is an arbitration award and what must it look like? How can I enforce an arbitration award? What is the courts role in arbitration proceedings? How can I challenge an award? If I am unhappy about an arbitrator, what can I do? Can I appear before arbitrators with a lawyer? Page No. 2 3 3 4 5 5 5 6 6 7 7 8 9 10 10 11 12 12 13 15 15

Whilst care has been taken in the preparation of this guide, the matters referred to herein are subject to change and no liability or responsibility is accepted by anyone for any errors or omissions which may exist in it. The contents of this booklet are descriptive only and should not be used as a substitute for legal advice.

Introduction
The Arbitration Act 1996 marks an attempt to consolidate modern English arbitration law and procedure in statute form. The Act also changes fundamentally some aspects of the law. The Acts mission is explained in Section 1: the fair and impartial resolution of disputes, without delay and expense; party autonomy: the parties should be permitted to agree how their disputes are resolved; minimal intervention by the court. The Act applies to all arbitrations commenced on or after 31 January 1997. Arbitrations commenced before that date will continue to be governed by the Arbitration Acts of 1950, 1975 and 1979.

This publication is intended to be a guide to the meaning of the Arbitration Act 1996 and to arbitration law. Whilst care has been taken in the preparation of this guide, the matters referred to herein are subject to change and no liability or responsibility is accepted by anyone for any errors or omissions which may exist in it. If you wish to use any of the information contained in this publication, it is recommended that you seek legal advice. If you have any questions concerning the Arbitration Act 1996, Hill Dickinson will be pleased to discuss them with you.

The Arbitration Act

Section No. of the Act

1 Can I contract out of the Act?

Yes - in part. The Act lays down procedures which apply if the parties do not agree different procedures. The Act classifies each section as mandatory or non-mandatory. The parties cannot contract out of the mandatory sections, but can contract out of non-mandatory sections. Mandatory sections are marked with an asterisk (*).
4

2 How many arbitrators are there on the tribunal?

If the parties do not agree the number of arbitrators, the tribunal will consist of a sole arbitrator. If the parties agree that there should be only two arbitrators, they will be understood as having agreed that a third arbitrator will also have to be appointed. If three arbitrators are to be appointed and if one party fails to appoint an arbitrator, the other party can appoint his arbitrator as sole arbitrator. If there is a failure to appoint any arbitrator in accordance with the above procedure, any party may apply to the court to appoint an arbitrator and to give other directions.
15(3)

15(2)

17

18(2)

Section No. of the Act

3 How do I start an arbitration?

Where the arbitration agreement names the arbitrator to be appointed, the arbitration commences when one party serves written notice on the other requiring that arbitrator to be appointed. Where the tribunal consists of a sole arbitrator, the arbitration commences when one party serves written notice on the other requiring an arbitrator to be appointed. Such appointment must take place not later than 28 days after the service of the written notice. If the parties agree that there should be two arbitrators, the arbitration commences when one party serves written notice on the other requiring that party to appoint his arbitrator. The other party must appoint an arbitrator not later than 14 days after service of the notice. If the parties agree that there should be three arbitrators, the same procedure applies as for two and the two so appointed must appoint a third arbitrator forthwith as chairman. If the parties agree that there should be two arbitrators and an umpire, the same procedure applies as for two and the two shall appoint the umpire at any time before any substantive hearing or forthwith if they disagree on any matter. If the parties agree that the tribunal is to be appointed by a person other than a party, the arbitration commences when one party sends that person a written request to make the appointment.
14(3)

14(4) and 16(3)

14(4), 15(2) and 16(4)

14(4) and 16(5)

14(4) and 16(6)

14(5)

The Arbitration Act

Section No. of the Act

4 When must I start an arbitration?

Within the time limit specified in the arbitration agreement, unless the court extends the time for the commencement of the arbitration. If there is no contractual time limit, generally within 6 years of the breach of contract.
12*

13*

5 Is the arbitration agreement valid even though the main contract is void?
The Act specifically provides that an arbitration agreement can be treated as a distinct agreement so that even if the main contract is void, the arbitration agreement contained, or even only intended to be contained, in that contract can still be valid. There may of course be a question as to whether or not there was in fact an arbitration agreement in the first place; the arbitrators can determine this question themselves.
7

30(1)(a)

6 What happens if it is alleged that the arbitrators have no jurisdiction?

An application can be made to the arbitrators because they now have the power to rule on their own jurisdiction. An application can still be made to the court either (a) with the agreement of all other parties or (b) with the permission of the arbitrators (provided certain conditions are satisfied).
30 and 31*

32*

Section No. of the Act

7 What can be done if one party ignores the arbitration agreement and commences proceedings elsewhere?
If the proceedings are commenced in the UK, the court will stay those proceedings unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed. If the proceedings are commenced outside England, Wales or Northern Ireland, the other party can apply to the English court for damages for breach of the arbitration agreement or an injunction to restrain those foreign proceedings or obtain such other relief as is available under foreign law.
9*

8 What is the duty of the arbitrators?

To act fairly and impartially as between the parties. To give each party a reasonable opportunity of putting his case and dealing with the case of his opponent. To adopt procedures which are suitable to the circumstances of the case. To adopt procedures to avoid any unnecessary delay or expense. To provide a fair means to the parties for the resolution of the dispute.
33(1)(a)*

33(1)(a)*

33(1)(b)*

33(1)(b)*

33(1)(b)*

The Arbitration Act

Section No. of the Act

9 What is the duty of the parties to the arbitration?

The parties shall do all things necessary for the proper and expeditious conduct of the arbitration, including: complying with any determination, order or directions of the arbitrators without delay; and taking steps without delay to obtain a decision of the court on any preliminary question of jurisdiction or law.
40(1)*

40(2)(a)*

40(2)(b)*

10 What are the powers of the arbitrators in the conduct of proceedings?

The arbitrators are given wide-ranging powers to determine matters of procedure and evidence. The Act gives examples of such matters: when and where any part of the proceedings is to be held; the language to be used and whether any documents are to be translated; the form which pleadings should take, when they should be supplied and whether they can be amended; what documents should be disclosed between the parties; whether any questions should be put to the parties; what rules of evidence should apply; contd
34(2)

34(2)(a)

34(2)(b)

34(2)(c)

34(2)(d)

34(2)(e)

34(2)(f)

Section No. of the Act

10 contd whether the arbitrators themselves should take the initiative in determining the facts and the law (i.e. to adopt an inquisitorial approach); whether there should be written or oral submissions; to appoint their own legal and technical experts. The arbitrators may order a claimant to provide security for costs. This power is not limited to claimants resident outside the jurisdiction. Indeed, residence may not be relied upon as a ground for such an order. The arbitrators may order that any property which is the subject of the proceedings be inspected, detained or preserved. The arbitrators may direct a party to preserve evidence in his control.
34(2)(g)

34(2)(h)

37

38(3)

38(4)

38(6)

11 What happens if a party defaults or disobeys an order made by the arbitrators?

If the claimant has been guilty of inordinate and inexcusable delay, giving rise to substantial risk of unfairness or a likelihood of serious prejudice, the arbitrators may dismiss the claim. If a party fails without cause to attend a hearing or to make submissions, the arbitrators may continue in the absence of that party or in the absence of any submissions from that party and may proceed to an award.
41(3)

41(4)

The Arbitration Act

Section No. of the Act

If there is a failure to comply with any other order of the arbitrators, then the arbitrators may make a peremptory order and failing compliance with the peremptory order the arbitrators may make the following orders: If the order relates to provision of security for costs by the claimant, the arbitrators may make an award dismissing the claim. In all other cases: the arbitrators may order that the defaulting party cannot rely upon the allegations/material which were the subject matter of the order; or the arbitrators may draw adverse inferences from the noncompliance; or the arbitrators may proceed to an award on the basis of the materials then before them; or the arbitrators may make any orders as to payment of costs as they think fit.

41(5)

41(6)

41(7)(a)

41(7)(b)

41(7)(c)

41(7)(d)

12 Under what law do the arbitrators decide the dispute?

The arbitrators will apply the law which is chosen by the agreed parties. However, if the parties so agree, the arbitrators are authorised to apply other considerations so that they can decide matters without necessarily applying strict law (e.g. equity and honourable engagement clauses). If the parties have not chosen or agreed which law is to apply, the arbitrators shall determine this on conflict of law principles.
46(1)(a)

46(1)(b)

46(3)

Section No. of the Act

13 What remedies can the arbitrators award?

The arbitrators may provide any remedies which the parties agree upon. Otherwise, the arbitrators can award: a declaration; an order for the payment of money in any currency. Or can exercise the same powers as the court to: order any party to do or refrain from doing any thing; order specific performance of a contract (except for a contract relating to land); and order rectification, setting aside or cancellation of any deed/document. The arbitrators have a general power to award simple or compound interest (unlike the court).
48(5)(a) 48(3) 48(1)

48(4)

48(5)(b)

48(5)(c)

49

14 How are legal costs and arbitrators fees dealt with in arbitration?
Unless the parties agree otherwise, the arbitrators will award costs and fees on the general principle that they follow the event, i.e. costs are awarded to the successful party except where that is not considered appropriate.
61(2)

10

The Arbitration Act

Section No. of the Act

While the parties are free to agree what costs and fees are to be recoverable, this may be determined by the arbitrators who are required to set out the basis on which they have awarded these costs. If the costs and fees are not determined by the arbitrators, any party to the proceedings can apply to have them determined by the court. Unless the parties agree otherwise, the arbitrators can direct that the recoverable costs and fees shall be limited to a specified amount.

63(3)

63(4)

65

15 What is an arbitration award and what must it look like?

The award is the embodiment of the decision of the arbitrators in relation to the dispute between the parties. Unless the parties agree otherwise, the award shall: be in writing; be signed by all the arbitrators or those assenting to the award; contain the reasons for the award (unless the parties have agreed to dispense with the reasons); state the seat of the arbitration; and state the date when the award was made (i.e. published).
52(3)

52(3)

52(4)

52(5)

52(5)

11

Section No. of the Act

16 How can I enforce an arbitration award?

An award is final and binding, subject to any successful challenge or appeal. With the permission of the court, a judgment may be entered in the terms of the award and the award can be enforced as a judgment. The award may be enforced under the New York Convention on the Enforcement of Foreign Arbitral Awards 1958.
58

66*

66(4)* and 1950 Act*

17 What is the courts role in arbitration proceedings?

The Act expressly states as one of its guiding principles that the court should not intervene in arbitrations except to the extent provided. The court may act to: enforce the peremptory orders of the tribunal; secure the attendance of a witness before the tribunal to give testimony or produce documents or other evidence; make orders for the preservation of assets or evidence, the inspection of property, Search orders or interim (such as Freezing) injunctions, if the tribunal has no power or is unable to act; determine a preliminary point of jurisdiction; and determine a preliminary point of law.
1(c)

42

43*

44

32*

45

12

The Arbitration Act

Section No. of the Act

18 How can I challenge an award?

There are only three bases on which an award can be challenged and these require an application to the court: Substantive jurisdiction. This is where a party alleges that, for whatever reason, the arbitrators did not have the jurisdiction to make the award. Serious irregularity. The Act has replaced the concept of misconduct and now lists the various grounds (apart from jurisdiction or appeal) on which an award can be challenged. These are: failure by the arbitrators to comply with their duty referred to in question 8; or the arbitrators exceeding their powers; or failure by the arbitrators to apply the procedure agreed by the parties; or failure by the arbitrators to deal with all the issues put to them; or any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers; or uncertainty or ambiguity as to the effect of the award; or
67*

68*

contd

13

Section No. of the Act

18 contd the award being obtained by fraud or being contrary to public policy; or failure to comply with the requirements as to the form of the award; or any irregularity in the conduct of the proceedings which is admitted by the arbitrators or the institution or person who has powers in relation to the arbitration. Appeal on point of law. A party can only appeal on a point of law either with the agreement of all the other parties to the proceedings or with the leave of the court. The court will give leave if it is satisfied that: the point substantially affects the rights of one or more of the parties; and the arbitrators were asked to determine the point; and the arbitrators decision is obviously wrong, or, if the point is one of general public importance, the arbitrators decision is at least open to serious doubt; and it is just and proper for the court to determine the point.
69(1) and 69(2)

69(3)

14

The Arbitration Act

Section No. of the Act

19 If I am unhappy about an arbitrator, what can I do?

The court can remove an arbitrator if: there are justifiable doubts as to his impartiality; or
24(1)(a)* 24(1)

he does not possess the qualifications required by the arbitration agreement; or he is physically or mentally incapable of conducting the proceedings or there are justifiable doubts as to his capacity; or he has failed to conduct the proceedings or to make or use reasonable despatch in conducting the proceedings or making an award and substantial injustice has resulted or will result.

24(1)(b)*

24(1)(c)*

24(1)(d)*

20 Can I appear before arbitrators with a lawyer?

Yes - you are entitled to legal representation as of right, but you may waive this right.

36

15

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