The Law Commission is currently consulting on reforms to the Arbitration Act 1996. The first consultation took place between September and December 2022 and, on the back of the responses to that, it is currently re-consulting on three points. The 2022 consultation paper 257 covered 8 major topics and 7 minor reforms. The 2023 consultation paper 258 raises an additional major topic and picks up again on two of the original topics, one of which is discrimination in the context of arbitrations.
Law reform is, quite rightly, a deliberate process that does not come around very often. As is clear from its title, the last time the Arbitration Act (the AA) was reformed was in 1996. The aim of the current proposals is to keep the AA fit for purpose and to give London the statutory tools it needs to remain a major and pre-eminent seat for international commercial arbitrations. The basis for the proposed reforms around discrimination is the case of Jivraj v Hashwani  UKSC 40 that came before the UK Supreme Court in 2011. The facts of the dispute and the legal issues involved are set out in the judgment but are briefly summarised as follows.
Mr Jivraj and Mr Hashwani were in business together. They had a joint venture agreement that included provisions that disputes would be settled by arbitration. The arbitration agreement stipulated that disputes “shall be referred to three arbitrators (acting by a majority) one to be appointed by each party and the third arbitrator to be the President of the HH Aga Khan National Council for the United Kingdom for the time being. All arbitrators shall be respected members of the Ismaili community and holders of high office within the community.”
A dispute arose and Mr Hashwani’s lawyers wrote to Mr Jivraj to inform him that Mr Hashwani had appointed Sir Anthony Colman as an arbitrator and that, if Mr Jivraj failed to appoint an arbitrator within seven days, steps would be taken to appoint Sir Anthony as sole arbitrator. The letter added that Mr Hashwani did not regard himself as bound by the provision that the arbitrators should be members of the Ismaili community because such a requirement “would now amount to religious discrimination which would violate the Human Rights Act 1998 and therefore must be regarded as void”. Mr Jivraj’s response to the letter was to start proceedings in the Commercial Court seeking a declaration that the appointment of Sir Anthony was invalid because he was not a member of the Ismaili community.
The case then went on a journey to the Supreme Court during which the court at first instance agreed with Mr Jivraj and the Court of Appeal agreed with Mr Hashwani. The legal principles were of such interest and importance that there were interventions by The London Court of International Arbitration, The International Chamber of Commerce and His Highness Prince Aga Khan Shia Imami Ismaili, International Conciliation and Arbitration Board. The Supreme Court reversed the Court of Appeal and re-instated the decision of the Commercial Court. In doing so, it reviewed the relevant EU employment regulations around discrimination and determined (unlike the Court of Appeal) that arbitrators do not have the same status as employees and that, accordingly, the Regulations did not apply and did not displace the terms of the arbitration agreement. Sir Anthony Colman did not therefore meet the qualifying criteria and could not be appointed.
Although the Supreme Court decision was been welcomed by many in the arbitration community as a victory for common sense and privity of contract, it has been seen by some others as confirming that The Equality Act 2010 (the EA) (which consolidated many of the provisions of the EU employment regulations around discrimination) does not apply to the arbitration process with the effect that parties to arbitrations, appointing arbitral bodies and arbitrators themselves can adopt procedures and behaviours that would be prohibited under the EA.
In response to the Supreme Court decision, Baroness Cox introduced a Private Member’s Bill in the House of Lords, seeking to apply equality legislation to arbitration. The Bill did not proceed beyond Second Reading and did not become law.
Some commentators have suggested that, as part of the Law Commission’s review and consultations, it has affirmed the decision that arbitrators are not employees for the purposes of the Equality Act 2010 as correct in law. That is not, in fact the case. What the Law Commission says is that the EA does not explicitly apply to arbitrators. It then referenced some of the provisions of the EA that can be applied in an arbitration context. A reading of the EA suggests, for example, that there is no obvious reason why Part 3 (Services and public functions) does not apply to appointing arbitral bodies and that Part 10 (Contracts, etc.) which, at section 142, says that “A term of a contract is unenforceable against a person in so far as it constitutes, promotes or provides for treatment of that or another person that is of a description prohibited by this Act”, applies to commercial contracts, including to arbitration agreements.
In its 2023 consultation, The Law Commission is seeking comments on the introduction of provisions in the AA to prohibit discrimination generally in an arbitration context. That approach is driven by a number of consultation responses, including from the Chartered Institute of Arbitrators (CIArb) which the Law Commission quotes as follows:
“It has become clear in recent years that arbitration as an industry has remained insulated from the positive societal moves towards diversity and inclusion at all levels. Arbitrators still tend to be overwhelmingly male and, in the international context, Caucasian males from the northern hemisphere, whether as a result of conscious or unconscious bias. This creates significant ethical and legal questions as to whether a legislative Act that is known to allow (or at least, does not actively oppose) practices that have a discriminatory effect can be perceived as fully legitimate. There is no doubt that creating a legal obligation against active discrimination on the basis of protected characteristics is the moral thing to do …”
It also proceeds on the basis that the current state of the law is such that there is no existing legal obligation against active discrimination in an arbitration context.
Given the applicability of the EA to arbitration agreements and to appointing arbitral bodies (as well as to barristers and to the judiciary which provides a similar function to arbitrators) it does not appear obvious that arbitration practices that have a discriminatory effect can be perceived as fully legitimate or that they are out of reach of the laws that prevent discrimination and promote equality.
The case of Jivraj v Hashwani started its journey through the courts in 2008. That was nearly two years before the commencement of the EA and (which may now have some relevance) twelve years before Brexit at a time when the legal matrix that Mr Hashwani was seeking to apply to allow his appointment of Sir Anthony Colman contrary to the terms of the arbitration agreement was contained within EU employment law regulations. It is easy to see that a case on similar terms would now be argued against a different legal matrix and may well come to a different conclusion.
Apart from the potential for the application of the law around discrimination in the context of arbitration already to have developed as a result of societal and attitudinal change since 2008, there are existing provisions within the AA that parties who consider that the process or conduct of an arbitration has been discriminatory can use to address those concerns.
The first general principle at section 1. (a) of the AA is that the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense. Section 33 of the AA imposes an obligation on the arbitral tribunal to act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined. Section 68 states that a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award.
In addition to the above, section 24 of the AA gives the court the power to remove an arbitrator where, inter alia, “circumstances exist that give rise to justifiable doubts as to his impartiality”. Where the court exercises that power, “it may make such order as it thinks fit with respect to his entitlement (if any) to fees or expenses, or the repayment of any fees or expenses already paid.”
It is very difficult to see how an arbitrator who has acted in a discriminatory manner can be shown not to be in breach of sections 1 and 33 of the AA and therefore susceptible to the sanctions of section 24. Similarly, if an arbitration award is itself discriminatory it will be open to challenge under section 68.
If the AA is amended to apply its own general prohibition against discrimination in an arbitration context the key issue, as identified by the Law Commission, is what the remedies should be when that prohibition is breached. Indeed, that is a specific question in the current consultation. The obvious answer to that question is that, as explained above, the remedies that are already available under the AA allow the court a wide discretion and should therefore be sufficient.
Given the fact that the majority of arbitrations are non-statutory and therefore occur as a matter of private contract, there are wider questions that would flow from an amendment to the AA to introduce a general prohibition against discrimination in the context of arbitration. For example, it is not inevitable that an arbitrator who is appointed under the terms of a discriminatory contract or procedure will perpetrate discrimination in the conduct of an arbitration or in their awards. What, then, should be the consequences where there has been a discriminatory appointment that has resulted in an otherwise exemplary process and award? It would seem perverse for there to be sanctions visited on the parties, the arbitrator or the appointing arbitral body in those circumstances, or that the exemplary arbitration award should be upset.
A similar point arises where there has been an arbitration award as a result of a discriminatory appointment and/or discriminatory conduct that has not been challenged by any of the parties. That could arise, for example, because the parties got the arbitrator that they required and/or because they were satisfied with the award. Would that award then be enforceable in the court if it became necessary for one or more parties to make an application to enforce it, or would it be open to the court (in whichever jurisdiction) to determine that it was unenforceable because it did not comply with the general prohibition against discrimination in the context of arbitration?
These scenarios and questions only arise in the context of the possible amendment of the AA in an attempt to provide a new statutory mechanism to address discrimination. Statute law can be a blunt instrument that requires interpretation of meaning, purpose and application by the courts. It is easy to see that a new provision to prohibit discrimination generally in an arbitration context could be a very blunt instrument. Quite apart from that, the AA is about the process and conduct of arbitrations and is highly regarded as providing an excellent statutory framework that has enabled London to maintain pre-eminence as a seat for domestic and international arbitrations. It is possible to advance an argument that the introduction of provisions in the AA that address discrimination is a distraction from the purpose of the AA and that preventing discrimination should be the job of other statutes – such as the EA which, as discussed, already applies to some aspects of arbitration.
There is also the argument that the wide provisions and powers the AA already contains are more than adequate for the job of preventing discrimination if they are employed for that purpose and that the introduction of new standalone statutory provisions that would operate separately from those of the EA are unnecessary and that it would be unwise to create new law in these circumstances.
There are views expressed in the second Law Commission consultation document that the suggested reform is necessary and that ” To send an important signal about diversity and equality, any reform should not be limited to the criteria for appointment but should apply more generally to the conduct of arbitration.” That view is reflected in the quotation from the CIArb that “There is no doubt that creating a legal obligation against active discrimination on the basis of protected characteristics is the moral thing to do”. The Law Commission itself is already of the same mind. In its response to a suggestion that that the better approach, rather than legislating, is to educate parties to make non-discriminatory choices, it says “We think that education cannot be the sole answer to all morally objectionable behaviour which goes against the public interest. We also think that the suggestion rings hollow when some institutions or sectors have failed to advance diversity despite decades of changing cultural values.” It uses even stronger language in its response to the comment from a consultee that discrimination law generally does not apply to consumer choices, and so should not apply to the choice of an arbitrator where it says, “We think that choosing an arbitrator is closer to choosing a barrister, which is governed by the Equality Act 2010. At any rate, the significant difference is this: a discriminatory consumer does not – unlike an arbitral party – have their choice enforced by the court and backed by the coercive powers of the state.”
This change of tone is in marked contrast to the extremely high level of the discussion and the measured and analytical approach that has been demonstrated by the Law Commission around all the other consultation topics and suggests that it has been seised by a reforming zeal that is driven as much by emotion as it is by reason. That is seldom a good starting point for making good law and, on this point, a better approach may well be to allow the courts to continue to interpret and apply the existing law, including the provisions of the EA, to the arbitration process and the conduct of arbitrations.