The Arbitration Act 2025 (the Act) has come into force this month, amending the Arbitration Act 1996, with the aim to modernise the UK's approach to arbitration.
The Act reflects the aims of the government to keep the UK as a global destination of choice for arbitrations, competing against renowned arbitration centres in Singapore, Hong Kong and Paris. The government also projects that the Act will boost the UK economy by millions while also creating employment in the legal sector.
What is arbitration?
Arbitration is an alternative dispute resolution method wherein two (or more) parties may agree to take some or all of their disputes outside of the usual court process. An arbitrator or a tribunal is appointed to hear a dispute; they will then present their decision as an award (rather than a written judgment).
Key changes under the Act
Governing law of arbitration agreements
The Act establishes that arbitration agreements are governed by the law of the seat of arbitration, unless expressly agreed otherwise. This moves away from the common law approach established in Enka v Chubb Russia and Chubb Europe [2020] UKSC 38, 9 October 2020, where the governing law of the main contract could be implied to govern the arbitration agreement, even without an express choice.
Arbitrator's duty of disclosure and immunities
The Act codifies the duty of arbitrators to disclose any potential circumstances that might reasonably cast doubt about their impartiality, as established in Halliburton v Chubb Bermuda [2020] UKSC 48, 27 November 2020. This duty to disclose extends to pre-appointment discussions as well as disclosures made at the time of appointment.
The Act also provides protection to arbitrators from liability for costs arising from removal proceedings, unless bad faith is proven, and when resigning, unless deemed unreasonable.
Summary awards and emergency arbitration
The Act grants the power to issue summary awards in cases where a claim "has no real prospect" of success, echoing the test used in English courts; parties can agree to exclude this power, however. The Act also establishes set procedure for emergency arbitrators, ensuring they can issue urgent orders before a tribunal is fully established.
Court powers over third parties
The Act allows courts to make orders affecting third parties in arbitration; these third parties are also granted the power to appeal these orders without needing the court's permission.
Challenge procedures
The Act creates a refined procedure for jurisdictional challenges, allowing parties to seek a court ruling on jurisdiction before the tribunal has ruled; however, after the tribunal's judgment, these challenges are limited.
What does this mean for insurers?
Arbitration is a popular method of dispute resolution and, in light of this new legislation, insurers may want to check their policies.
In particular, insurers should focus on provisions regarding dispute resolution to check that the wording works in the way the parties intend. Insurers should also take care in provisions regarding geographical limits, given that the seat of the arbitration will now be where the arbitration takes place (unless the policy expressly states otherwise).
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