COMMENCEMENT OF THE ARBITRATION ACT 1996
ARBITRATION ACT 1996 (COMMENCEMENT No 1) ORDER 1996 (No 3146)
The Order was made on 16 December 1996. The explanatory note is set out hereunder:
With one exception, this Order brings into force the provisions of the Arbitration Act 1996. Those provisions necessary to enable the substantive provisions to be brought into force are commenced immediately. The substantive provisions come into force on 31st January 1997. Commencement is subject to transitional provisions designed to ensure continuity of legal proceedings and to preserve the current law on what are known as "honourable engagement" clauses in relation to existing agreements.
Sections 85 to 87, which make special provision in relation to domestic arbitration agreements, are not commenced.
Transitional Provisions:
1. In this Schedule:
(a) "the appointed day" means (31 January 1997);
(b) "arbitration application" means any application relating to arbitration made by or in legal proceedings, whether or not arbitral proceedings have commenced;
(c) "the old law" means the enactments specified in section 107 as they stood before their amendment or repeal by the Act.
2. The old law shall continue to apply to:
(a) arbitral proceedings commenced before the appointed day;
(b) arbitration applications commenced or made before the appointed day;
(c) arbitration applications commenced or made on or after the appointed day relating to arbitral proceedings commenced before the appointed day
and the provisions of the Act which would otherwise be applicable shall not apply.
3. The provisions of this Act brought into force by this Order shall apply to any other arbitration application.
4. In the application of paragraph (b) of subsection (1) of section 46 (provision for dispute to be decided in accordance with provisions other than law) to an arbitration agreement made before the appointed day, the agreement shall have effect in accordance with the rules of law (including any conflict of law rules) as they stood immediately before the appointed day.
LETTER FOM THE MINISTER
Due to the poor wording of the transitional arrangements exacerbated by the explanatory note, Francis Miller wrote, via his MP, to the responsible minister, John Taylor MP, and his response (which he hopes will receive wide publicity) is reproduced here.
Arbitration Act 1996
Thank you for your letter of 27 February enclosing correspondence from your constituent Mr FE Miller of ‘Candida’, Harlequin Lane, Crowborough, Sussex TN6 1HU.
Mr Miller asks for clarification regarding the commencement of section 46 (1) (b) of the Arbitration Act. He will be aware that, subject to any transitional provisions made by commencement order, section 84 (2) applies the provisions of the Act to arbitral proceedings commenced on or after 31 January no matter when the arbitration agreement was made. Section 46 (1) (b), which allows the parties to agree that their dispute is to be decided in accordance with provisions other than the law, is the one provision for which transitional provision has been made.
It became apparent during the consultation exercise on various aspects of commencement of the Act which we undertook in the summer of last year that there are a large number of arbitration agreements in existence, some to them dating back many years, which appear to contain "equity clauses" or "honourable engagement clauses" but which the courts have interpreted differently. I felt that in such circumstances it was appropriate to adopt a cautious approach and to frame the transitional provisions so that the law applying before the Act came into force would continue to apply to such clauses. Mr Miller will be aware that most of the new Act is about procedural matters. Section 46 is different however, in that it concerns how the dispute is to be decided. I felt that justice would best be served if the original intention of the parties (whatever that might be) was honoured.
It is for the parties to any existing arbitration agreement to decide whether and if so how best to respond to the new Act in this respect. If they do nothing then their position will be unchanged. However, if they want to make a change the new Act provides them with an opportunity which did not previously exist. Mr Miller’s question is about how such change can best be achieved. It goes without saying that it is important that the method chosen should signal the intention of the parties in as clear a way as possible so that the arbitrators or the court are left in no doubt of what they had in mind. From this viewpoint the safest way would be for the parties to make a new agreement on or after 31 January. However, this may not always be practicable where either the arbitration agreement is embedded within a contract and the parties do not wish for whatever reason to change that contract or the arbitration agreement itself contains other provisions which they do not wish to re-open. In such cases in our view it would be possible for the parties to agree, on or after 31 January, that any dispute between them will be subject to arbitration in accordance with Section 46 (1) (b) and then incorporate by reference the terms of the original arbitration agreement. Obviously they should seek to do this in such a way as to make their intentions clear and beyond doubt.
I hope this clarifies the position for your constituent.
Editor’s note: Of course, we probably all realise that the minister’s opinion of what is meant by any legislation is of absolutely no relevance in law. However, his advice to enter into a new agreement appears to be sound. I still wonder about the matter of fairness to parties who entered into an ‘equitable award’ agreement after enactment but before publication of the SI! As this will be unfamiliar territory to most, it may be interesting to debate pre-1996 provisions such as whether they take the agreement outside the Act, leading particularly to problems with enforcement.