The Arbitration (Guernsey) Law, 2016 - a summary
10 May 2017
This much anticipated Law came into force on 12 December 2016. It replaces the previous legislation from 1982 which was widely considered to be outdated and inefficient - conferring too few powers upon the tribunal and requiring too much judicial intervention without addressing the modern needs of arbitration users.
Arbitration in Guernsey
Due to the criticisms mentioned above, parties to commercial agreements in Guernsey have historically been reluctant to use arbitration as a means of resolving a dispute, preferring instead to mediate as a form of ADR. It is hoped that the new law will change the common perception of arbitration in Guernsey and encourage parties to avail themselves of the procedure as a cheaper and more efficient alternative to litigation.
The New Law
The 2016 Law is largely based on the English Arbitration Act 1996. It also incorporates useful elements of the UNCITRAL Model Law on International Commercial Arbitration, for example the Court's ability (absent agreement between the parties) to consolidate and/or terminate proceedings.
Like its predecessor, the new Law enables domestic and foreign awards to be enforced (with leave of the Royal Court) as if the award was a judgment or order of the Court itself. Further, like the English Arbitration Act, the full suite of default procedural powers apply unless the parties expressly opt out of the relevant provisions.
Overall, the 2016 Law:
- clarifies and modernises the statutory framework for conducting arbitrations;
- codifies the legal rules, principles and duties established by case law; and
- sets out clear procedures and requirements, whilst also preserving parties' autonomy, increasing the powers of the tribunal and restricting judicial intervention.
Key changes and improvements include the introduction of provisions:
- codifying (amongst other things) the general duty of the arbitral tribunal to act fairly and impartially as between the parties and to adopt procedures suitable to the circumstances of the particular case, as well as the general duty imposed upon the parties to do "all things necessary for the proper and expeditious conduct of the arbitration proceedings";
- permitting a party to apply to the Court for a stay of litigation proceedings where there is an arbitration agreement/clause. This provision applies even if the seat of the arbitration is outside Guernsey or no seat has been designated or determined;
- conferring upon the tribunal (absent prior agreement by the parties) unfettered discretionary powers to:
- decide matters relating to procedure and evidence (including dismissing the claim in the event that a party breaches its general duty to do all things necessary for the proper and expeditious conduct of the proceedings);
- make a declaration as to any matter to be determined in the proceedings, which includes the power to order a payment of money (such as security for costs); to order a party to do or refrain from doing something and to order rectification or setting aside of a contract or deed;
- award costs on the general principle that costs should follow the event (except where it appears to the tribunal that in the circumstances this is not appropriate in relation to the whole or part of the costs); and
- protecting consumers - under the new Law, an arbitration clause will only bind a consumer who has (i) given written consent to be so bound, after the dispute in question has arisen, or (ii) submitted to arbitration under that agreement in respect of the dispute or any other dispute arising thereunder, or (iii) where the Court is satisfied that it would not be detrimental to the consumer for the dispute in question to be referred to arbitration.
In addition to retaining the power to determine their own procedures in respect of the matters stated above, parties also benefit from greater powers when seeking to remove an arbitrator or to use court procedures to secure the attendance before the tribunal of a witness in order to give oral testimony or to produce documents or other material evidence.
The new legislation, now in force, brings much needed improvement, flexibility and dynamism to an area previously considered outdated and inefficient. It also reinforces arbitration as an important form of dispute resolution and brings Guernsey into line with some of the world's leading centres of international arbitration, such as London and Singapore. No doubt this will encourage both domestic and foreign parties alike to agree to arbitration clauses which specify Guernsey as the seat of arbitration and further enhance the island's already first rate reputation as a progressive and innovative jurisdiction.
Click here for a more detailed summary of the key provisions of the new Law.