The Arbitration Act 1979 (c. 42) was an act of the Parliament of the United Kingdom that reformed arbitration law in England and Wales. Prior to 1979, arbitration law was based on the Arbitration Act 1950, which allowed use of the "case stated" procedure and other methods of judicial intervention, which marked English arbitration law as significantly different from that of other jurisdictions. The prior law significantly increased the cost and time required for arbitration, which made England an unpopular jurisdiction to conduct such negotiations in. As a result, while London maintained its traditional position as a centre for arbitration in insurance, admiralty and commodities trading, it failed to attract more modern forms of trade. Following pressure from industry groups, the Lord Chancellor introduced the Arbitration Bill into Parliament, having it passed hours before the dissolution of James Callaghan's government. It was given royal assent on 4 April 1979, and commenced working on 1 August 1979.
The act completely abolished the "case stated" procedure and other forms of judicial interference, replacing it with a limited system of appeal to the High Court of Justice and Court of Appeal of England and Wales; it also allowed for exclusion agreements limiting the rights of parties to arbitration to appeal to the courts, and gave arbitrators the ability to enforce interlocutory orders. Academics met the Act with a mixed response; while some praised it for bringing English law more into line with that of other nations, others criticised the wording used as unnecessarily complex and hazy. The Act did, in the eyes of some commentators, lead to a shift in judicial policy away from legal certainty and towards a system focused on speed and finality. Having been repealed in its entirety by Section 107(2) of the Arbitration Act 1996, the Act is no longer in force.
Background
Previous law London was historically a centre for trade and arbitration, which Peter S. Smedresman, writing in the Journal of Maritime Law and Commerce divides into three categories of transaction. English commodities trading, through bodies such as the Baltic Exchange, specify that any conflicts are to be settled through arbitration in London, even when the goods being traded have no relation to the United Kingdom.Smedresman (1979) p.319 London has also been a centre for arbitration on maritime issues, and insurance. However, it failed to significantly attract more modern forms of trade, such as major communications developments or high-technology projects, due to the nature of its arbitration law. These contracts normally involve large amounts of money and are administered by the International Chamber of Commerce, which rarely sent arbitration cases to London due to the individual nature of English law on the subject.Smedresman (1979) p.320
In most nations, arbitrators can apply the principle of "amiable composition"; the case is decided under broad, sweeping principles of equity, without judicial oversight or the application of national commercial law. In England, this was not the case; the Arbitration Act 1950, in Section 22(1), allowed the courts to instruct an arbitrator to "correct" his decision, if it had an incorrect statement of law immediately obvious. In response to this, English arbitrators simply stopped giving reasons for their decisions.Smedresman (1979) p.321 The second form of judicial oversight was found in Section 21, and was an application of the "Case Stated" procedure. This allowed judicial review of a decision by the High Court of Justice, and was regularly applied during the 1970s, because the freeze on interest rates during a delayed case made it attractive for debtors to delay; conversely, this made London a far less attractive venue for creditors.Smedresman (1979) p.322
Before the 1979 act, English law did not provide many ways to avoid the case stated procedure, even prohibiting parties from agreeing in advance not to use it; this was due to Scrutton LJ's statement, in Czarnikow v Roth, Schmidt & Co, 2 KB 478 that "There must be no Alsatia in England where the King's writ does not run". In The Lysland, 1 QB 843 the Court of Appeal of England and Wales gave a decision interpreted as saying that the courts must consider a case stated "even if there is no great some in dispute, no point of general importance is involved or the answer is reasonably clear".Smedresman (1979) p.323 Lord Denning's statement in that case has been described as "[T]he death knell of arbitrator autonomy", and led to arbitrators almost automatically asking for judicial supervision for fear that they would otherwise be found to have committed misconduct.Jaffe (1989) p.185 For obvious reasons, companies and parties to a case who submit their issues to arbitration expect something private, quick, and cheap, with fixed results. The traditional English emphasis on judicial oversight, therefore, meant that with the Case Stated procedure, London was a highly unpopular venue for arbitration.Shenton (1980) p.644
Development of the Act
By the 1960s, even before the increase of abuse of the case stated procedure, the United Kingdom was estimated to be losing £500 million a year through the movement of arbitration business to other countries.Abromson (1980) p.86 In response, the Lord Chancellor convened a Commercial Court Users Conference in 1960, and tasked them with reviewing the system; the conclusion was that the status quo should remain.Abromson (1980) p.87 With the increased use of the Case Stated procedure, more calls for reform came. In June 1977 the London Arbitration Group (LAG) was formed, taking it upon itself to make the government aware of the damage current law was causing.Hacking (2010) p.125 In 1978, in reaction to the continued pressure, the Lord Chancellor established a Commercial Court Committee to again look at the issue; their report, in June 1978, recommended changing the system so that appeal was only allowed when either the High Court permitted it, or both parties to the arbitration agreed it was necessary. This was intended to ensure that any new act of Parliament fulfilled two roles – firstly, decreasing the use of the case stated procedure, and secondly, encouraging arbitrators to give reasons for their decisions.Smedresman (1979) p.324
The report was endorsed by the government, and published the following month.Kerr (1980) p.47 After being announced in the Queen's Speech, the Arbitration Bill was introduced to the House of Lords by the Lord Chancellor in late 1978, given its second reading on 12 December 1978, and after passing through the committee stage, its third reading on 15 February 1979. Before it could be sent to the House of Commons, however, James Callaghan's government collapsed following a motion of no confidence. As "the final drama", the Arbitration Bill quickly made it to the House of Commons and was passed during the few hours it took Callaghan to get to Buckingham Palace and ask for a dissolution.Hacking (2010) p.127 Royal assent was granted on 4 April 1979, and the Arbitration Act 1979 came into force on 1 August.Kerr (1980) p.45
Act The act was "a compromise between two opposing jurisprudential approaches to arbitration...that the courts should be kept out of arbitration altogether except to prevent abuses against the rules of natural justice, [and] that the courts should retain a substantial measure of control over arbitrations to ensure that arbitral awards apply the law".Kerr (1980) p.48
Section 1
The primary reforms are found in Section 1 of the act. Section 1(1) repeals section 21 of the 1950 act, abolishing the case stated procedure in arbitration matters, and states that the courts cannot set aside a decision based on an error in law or fact that is blatantly obvious, effectively repealing section 22(1).Smedresman (1979) p.326 Instead, sections 1(2) and 1(3) provide that an appeal may be made "on any question of law arising out of an award made on an arbitration agreement", if either the High Court agrees the appeal is valid, or if both parties to the arbitration request it.Kerr (1980) p.49 In Petraco (Bermuda) Ltd v Petromed International,SA 3 All ER 484 the Court of Appeal was asked to explain what guidelines should be applied by a High Court judge when deciding whether or not to grant an appeal. The High Court had refused leave to appeal, because a point was raised which had not been mentioned during arbitration.Marshall (1989) p.415 Staughton LJ, with the rest of the court in agreement, explained that:
The conditions for leave to appeal are laid out in section 1(4). No conditions attach to an appeal where all parties consent, but when the permission of the High Court is sought, the judge may only grant leave if he "considers that...the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement". Under Sections 1(5) and 1(6), the High Court may ask for additional reasons as to why the arbitrator reached the decision that he did, but only if one of the parties gave notice to the arbitrator that reasons would be required, or there was "some special reason why such a notice was not given".Smedresman (1979) p.327 In Universal Petroleum Co v Handels und Transport GmbH, 1 WLR 1178 the Court of Appeal interpreted the meaning of Sections 1(4) and 1(5). The dispute came from a highly detailed "Schedule of Further Reasons" ordered by the High Court because the judge felt that there was an ambiguous element in the reasons given.Marshall (1988) p.160 The appellate judges found that Section 1(5) required judges to order further reasons only to deal with points of law arising from the award. Material ambiguity was "inadmissible and irrelevant for the purpose of the exercise of any jurisdiction under section 1 of the Act".Marshall (1988) p.161
If the High Court refuses to hear an appeal, the case cannot proceed further; similarly, with one exception, once the High Court has heard a case, no decision may be reviewed by the Court of Appeal. The one exception is laid out in section 1(7), and provides that leave to appeal is only valid if either the High Court or Court of Appeal certifies it as such, and the High Court confirms that the case concerns a point of law which merits consideration.Kolodziej (1987) p.206 In National Westminster Bank Plc v Arthur Young McClelland Moores & Co (No.1), 1 WLR 1123 the Court of Appeal confirmed that, once the High Court has decided not to allow an appeal, the registrar of the Court of Appeal cannot intervene and otherwise validate such a request.Marshall (1986) p.136
Sections 2–6 Section 21 of the 1950 act contained a secondary method of appeal to the High Court. Through the "Consultative Case" procedure, parties in a pending arbitration could ask the High Court to quickly give a decision on a point of law.Kerr (1980) p.51 This provision was maintained in the 1979 act, despite efforts by legislators to remove it. Section 2 provides that, should a party apply to the High Court with either the consent of the arbitrator or the other parties, the High Court may explain any point of law given in the reference, on the condition that the point of law meets the requirements laid out in Section 1, and if "the determination of the application might produce substantial savings in costs to the parties".Smedresman (1979) p.328