Key Takeaways
Last week the UK's new Arbitration Act 2025 (the "Act") received Royal Assent. In this update, we summarise the background to the Act and the main changes emerging from it.
The following key changes emerge from the Act, which we summarise in this OnPoint:
- Change of the governing law applicable to an arbitration agreement;
- A new explicit power to dispose of actions on a summary basis;
- A new framework for jurisdiction challenges under Section 67 of the Arbitration Act 1996 (the "1996 Act");
- Granting of enforceable powers to emergency arbitrators; and
- Amendments to the rights and duties of arbitrators, including:
- Codifying the duty of disclosure as to impartiality; and
- Providing arbitrators with immunity on resignation.
The Act aims to strengthen and protect the status of England and Wales as a dominant forum for arbitration globally. Although most of its provisions are no more than tweaks to the 1996 Act, the change it effects to the governing law of an arbitration agreement in particular will be important for contract drafters to understand.
Background
The UK, and London specifically, is one of the leading forums for arbitration globally. Indeed, in a 2021 survey, London was ranked as the most preferred seat for international arbitration1. Much of this arbitration is done under the rules of the London Court of International Arbitration (the "LCIA"), whose caseload has grown steadily in the last 10 years (reaching a total of 377 in 2023).
Arbitration in England and Wales is regulated primarily by the Arbitration Act 1996 (the "1996 Act"), which is expressed to be founded on the principles of fair resolution, impartiality, and freedom of choice for the disputing parties. The 1996 Act also incorporates the New York Convention into national law, allowing parties to enforce arbitration awards made in other contracting states in England and Wales.
In March 2021, the Ministry of Justice asked the Law Commission to conduct a review of the 1996 Act, with a view to ensuring that that framework remained fit for purpose and continuing to promote England and Wales as a leading destination for commercial arbitration. The Law Commission published its report in September 2023 (the "Report")2, recommending several amendments to the 1996 Act that were adopted by Parliament in the Act.
Key Changes From the Act
The following key changes emerge from the Act, which we summarise below:
- Change of the governing law applicable to an arbitration agreement;
- A new explicit power to dispose of actions on a summary basis;
- A new framework for jurisdiction challenges under Section 67 of the 1996 Act;
- Granting of enforceable powers to emergency arbitrators; and
- Amendments to the rights and duties of arbitrators, including:
- Codifying the duty of disclosure as to impartiality; and
- Providing arbitrators with immunity on resignation.
In addition, the Act codifies or amends other, mainly procedural, points and rules.
Change of Law Applicable to Arbitration Agreement
In English law, an arbitration clause in a contract is regarded as a separate agreement, coming into force independently from the broader contract (the so-called doctrine of separability). The law applicable to an arbitration clause may therefore be different from the law applicable to the rest of the contract. In the recent case of UniCredit Bank v RusChem3, the UK Supreme Court upheld the decision in Enka4 that where an arbitration clause is silent as to governing law, the choice of law in the broader contract generally applies to the arbitration agreement. The Law Commission however identified this position as problematic, as cases seated in England and Wales can unintentionally be governed by a foreign law which is less supportive of arbitration. In those cases, non-mandatory provisions of the 1996 Act would not apply to the arbitration5. Parties would also lose certain benefits from arbitrating in the jurisdiction, potentially including the doctrine of separability itself or could even have their claim deemed non-arbitrable by virtue of the foreign law's position on the arbitrability of the dispute.
The Act has now reversed this position: where no agreement is made as to the governing law of the arbitration agreement specifically, the arbitration will be governed by the law of the seat. This is an important change to be aware of when drafting contracts which include an agreement to arbitrate and should help to ensure that parties choosing to arbitrate in England get all the potential legal benefits from doing so.
New Power of Summary Disposal
As well as being well-established in court litigation around the world, summary disposal (or "early determination") is already provided for by arbitral institutions such as the ICC and the LCIA. The 1996 Act currently does not address summary disposals by arbitrators.
Whilst it is a common view that arbitrators are impliedly permitted to pass summary judgement, the Law Commission identified that the current position was fertile ground for "due process paranoia", in which the arbitrators' duty to allow the parties to put their case was felt to discourage the use of summary disposal.
The Act therefore creates an explicit power for arbitrators to summarily dispose of proceedings where the claim or defence has "no real prospect" of success. Whilst this will make little difference in the many arbitrations governed by rules which already provide such a power, it should be a welcome addition in other cases and make arbitration in the UK more claimant-friendly.
New Framework for Jurisdiction Challenges Under Section 67
Section 67 of the 1996 Act ("Section 67") allows parties to challenge an arbitral award on the grounds that the tribunal did not have substantive jurisdiction. In Dallah v Pakistan6, the Supreme Court held that parties challenging a tribunal's jurisdiction are entitled to a full re-hearing, and not just a review of the tribunal's decision. That has been the position in England and Wales since then.
The Law Commission's view was that this created needless inefficiencies, and delayed the achievement of certainty for the parties. The Act addresses this by (i) preventing a party to a Section 67 challenge from submitting any new evidence or grounds for objection that was not put before the tribunal; and (ii) preventing a court from rehearing evidence heard by the tribunal, save when it would be in the interests of justice to do so. This is a welcome development which should help to limit the delays that can be caused by jurisdiction challenges.
Granting of Enforceable Powers to Emergency Arbitrators
Leading arbitration rules already provide for the appointment of emergency arbitrators in scenarios where the arbitral tribunal is not fully formed but there is an issue that must be resolved urgently. The 1996 Act has no provisions addressing this situation (as the practice of using emergency arbitrators post-dates the 1996 Act). The Act now explicitly provides that emergency arbitrators have the same powers as arbitrators in relation to Section 44 of the 1996 Act (which includes powers related to evidence and interim orders) and peremptory orders. This is a further welcome claimant-friendly addition to the law.
Rights and Duties of Arbitrators
The Act also includes amendments related to the role of the arbitrator, designed to improve the process of arbitration not only for the disputing parties but also for the arbitrators themselves. For instance, the existing statutory duty for arbitrators to disclose any factors which might affect their impartiality has been codified and clarified. In addition, the Act extends the immunity of arbitrators from civil claims, including to protect arbitrators who resign (other than unreasonably).
Conclusion
The Arbitration Act 2025 aims to strengthen and protect the status of England and Wales as a dominant forum for arbitration globally. Although most of its provisions are no more than tweaks to the 1996 Act, the change it effects to the governing law of an arbitration agreement in particular will be important for contract drafters to understand.
Although the Act has now received Royal Assent, its substantive provisions will only come into force at a date to be later specified by the Secretary of State in further regulation.
Contributors
Thank you to Luis Catao for his contribution to this article.
Footnotes
1 Queen Mary University London and White & Case LLP, 2021 International Arbitration Survey: Adapting arbitration to a changing world (2021).
3 UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30
4 [2020] EWCA Civ 574
5 S4(5) Arbitration Act 1996
6 [2010] UKSC 46
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
