Arbitration Reformed – The Arbitration Act 2025

Amendments “needed to ensure that [the Act] remains fit for purpose and continues to promote England and Wales as a leading destination for commercial arbitration.” –
Law Commission of England & Wales, Review of the Arbitration Act 1996: Final report and Bill
(5 September 2023)

 

The Arbitration Act 2025 (AA 2025), which received Royal Assent on 24 February 2025, introduces several key amendments to modernise and enhance the existing framework under the Arbitration Act 1996 (AA 1996).

The main changes to AA 1996 are:

1. Law Governing the Arbitration Agreement

Section 1 AA 2025 (amending Section 6 AA 96, inserting Section 6A) provides a new statutory default rule that, unless the parties expressly agree otherwise and subject to an exception for certain types of investment treaty dispute, the law governing the arbitration agreement is the law of the seat of arbitration. This replaces the current common law test and effectively overturns the decision in Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb, in which the Supreme Court held that the governing law of an arbitration agreement will, in the absence of an express reference to it, be that of the main contract, rather than the law of the chosen arbitration seat, irrespective of the place chosen to be the seat of the arbitration. The change ought to reduce uncertainty and the risk of satellite litigation on conflict of laws. However, it does not answer the questions about where there is no seat or law chosen.

2. Arbitrators’ Duty of Disclosure

Section 2 AA 2025 (amending Section 23 AA 96, inserting Section 23A) codifies the duty of arbitrators (see Halliburton Company v Chubb Bermuda Insurance Ltd) to disclose any circumstances that might reasonably give rise to justifiable doubts about their impartiality. This duty applies both to prospective and sitting arbitrators and is based on what the arbitrator ought reasonably to know, not just actual knowledge. Conspicuously, the AA 2025 does not prescribe what must be disclosed.

3. Strengthening Arbitrator Immunity

Sections 3 – 4 of AA 2025 (amending Sections 24, 25 and 29 AA 96, inserting Section 23A) reinforces the immunity of arbitrators from lawsuits, except in cases of bad faith, to protect them from costs under section 24 of the AA 1996, unreasonable legal actions and to ensure their independence and impartiality.

4. Summary Disposal Powers

Section 7 of AA 2025 (amending Section 39 AA 1996, inserting Section 39A) puts on a statutory footing an arbitrator’s power to summarily dispose of claims or defences that have “no real prospect of success”. This provision should address ‘due process paranoia’ of arbitrators and allow for more efficient resolution of disputes by enabling tribunals to dismiss unmeritorious claims or defences at an early stage. The procedure is akin to that of litigation under the Civil Procedure Rules 1998, Part 24 of which provides:

“24.3 The court may give summary judgment against a claimant or defendant on the whole of a claim or on an issue if—

(a) it considers that the party has no real prospect of succeeding on the claim, defence or issue; and

(b) there is no other compelling reason why the case or issue should be disposed of at a trial.”

It is noteworthy that under AA 2025, the second limb of Part 24’s grounds for summary judgment (sub-paragraph (b)) is omitted, which on its face lowers the bar for summary disposal in arbitrations as against litigation. Further, new section 39A is not mandatory – parties could opt out or set different threshold.

5. Emergency Arbitrators

Section 8 of AA 2025 (amending Sections 42 and 44 AA 1996, inserting Section 41A) clarifies the status and powers of emergency arbitrators, ensuring that their decisions are enforceable and that courts can support emergency arbitration proceedings. In particular, the AA 2025 empowers emergency arbitrators to make a peremptory order and, in cases of non-compliance, for the court to enforce that order.

6. Challenging an Award on Jurisdiction Challenges

Sections 10 and 11 of AA 2025 (amending Section 67 AA 1996, inserting Sections 3A, 3B, 3C, and 3D) limits, subject to the interests of justice (see the High Court’ decision in Nigeria v Process & Industrial Development), the scope for jurisdiction challenges. It does so by expressly precluding reliance on new grounds or evidence which were known but not raised before the arbitral tribunal at first instance.

In its Final Report, the Law Commission highlighted the inherent conflict between the challenging party’s claim that it, in effect, never agreed to arbitration—meaning the tribunal’s decision should be disregarded—and the opposing party’s position that an arbitration agreement was in place, such that the tribunal’s ruling ought to be binding. The Commission observed that a full rehearing in an appeal would heavily favour the appellant. The proposed amendments offer seek to strike a balance. While the court remains the ultimate decision-maker, the tribunal’s findings are given due consideration.

Commencement

By Section 17(4), AA 2025, the substantive provisions of the AA 2025 will not apply to pre-Royal Assent arbitration or court proceedings, including in connection with a pre-commencement arbitration or award.

Edwin Coe specialises in both domestic and international arbitration. For guidance on challenging arbitral awards, please contact Thomas Johnson of our commercial disputes team.

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