Modernisation by Refinement: UK Arbitration Act 2025 Receives Royal Assent

The long-awaited Arbitration Act 2025 received royal assent on 24 February 2025, marking the culmination of a multi-year review process led by the Law Commission of England and Wales. The act introduces changes aimed at fine-tuning already effective legislation and reinforces London’s position as one of the world’s premier seats of international arbitration.

When the Arbitration Act 2025 (the 2025 Act) received royal assent, it officially enacted the Arbitration Bill into law. This comes following a lengthy legislative process: the Arbitration Bill was initially introduced to Parliament in November 2023 after being published by the Law Commission alongside its September 2023 final report (on which we previously commented) reviewing the Arbitration Act 1996 (the 1996 Act). The Arbitration Bill’s progress was delayed by the 2024 UK general election before being reintroduced by the new Labour government and receiving its final reading in Parliament on 11 February 2025.

More generally, the 2025 Act marks the conclusion of a reform process that began in March 2021 and included public consultations involving a wide range of stakeholders, including industry practitioners (as examined in our previous LawFlashes, available here and here).

The 2025 Act applies to any applicable arbitral proceedings initiated on or after the date when its substantive provisions come into force. The exact date(s) on which these provisions take effect are yet to be confirmed: Section 17(2) of the 2025 Act requires secondary legislation to be issued by the Secretary of State first.

PURPOSE OF THE LEGISLATION AND KEY CHANGES INTRODUCED BY THE REFORMS

The 2025 Act broadly reflects the Law Commission’s recommendations set out in its September 2023 report, a headline point from which was the view that “root and branch” reform of the 1996 Act was not necessary. Instead, the 2025 Act’s focus is on a few significant reforms aimed at modernising the arbitration process to make it more flexible, fair, and efficient for both domestic and international parties by “simplifying procedures to reduce costs and protecting arbitrators from unreasonable lawsuits”.

Significant changes introduced by the 2025 Act include the following:

• A new rule on the governing law of an arbitration agreement
• A new power for tribunals to make an arbitral award on a summary basis
• A new framework for jurisdictional challenges to awards under Section 67
• The codification of the statutory duty of disclosure
• A strengthening of arbitrator immunity concerning resignation and applications for removal
• The clarification of court powers in support of emergency arbitrators

The Proper Law of the Arbitration Agreement

Section 1 of the 2025 Act inserts a new Section 6A into the 1996 Act, which establishes a default rule for determining the law governing an arbitration agreement.

For cross-border arbitration agreements, the governing law of the arbitration clause and/or the arbitration seat may differ from the governing law of the “primary” contract containing the arbitration clause. The new rule replaces the common law approach (articulated by the UK Supreme Court in Enka v Chubb [2020] UKSC 38) by providing that

• where parties have expressly agreed the law that applies to the arbitration agreement, that law will govern the arbitration agreement; and
• where no such agreement is made between the parties, the law of the seat of the arbitration in question will apply to the arbitration agreement (regardless of the governing law of the “primary” contract).

This amendment brings clarity by confirming that for arbitrations seated in England and Wales, the governing law of an arbitration agreement will be English law unless the parties agree otherwise. This should reduce the likelihood of satellite litigation in cases where arbitration clauses do not expressly specify a governing law.

In addition, to maximise certainty when drafting an arbitration clause, it is advisable to expressly specify the law governing the arbitration agreement. This is particularly important where the law of the “primary” contract and the law of the seat are different.

Summary Disposal

In an effort to promote efficient arbitrations, Section 7 of the 2025 Act grants tribunals the power to expedite proceedings on the application of a party, subject to any agreement by the parties to disapply of that power.

By amending Section 39A of the 1996 Act, Section 7 permits tribunals—after affording the parties with a reasonable opportunity to make representations—to make an award on a claim (or a particular issue in a claim) on a summary basis. This applies in circumstances where the tribunal considers that a party has “no real prospect of succeeding” in its claim or defence. This threshold test aligns with the summary judgment standard under the CPR 24 (as used by the English courts).

This power is already substantially contained within the provisions of many institutional arbitral rules, such as those of the London Court of International Arbitration (LCIA). However, some of those institutional rules (including the LCIA’s) adopt a “manifestly without merit” standard for early determination/summary awards. Although the two tests might not be substantively different, the fact that they nevertheless differ in terms—combined with the provision for parties to disapply Section 39A—may give rise to arguments as to the correct test in specific situations.

Section 7 of the 2025 Act therefore aims to offer additional support for tribunals to expedite proceedings, including by seeking to increase arbitrator confidence in swiftly dealing with hopeless cases, bringing unmeritorious issues to a close, and shutting down time-wasting tactics. It is hoped that this will support the enforceability of any such awards in other jurisdictions under the New York Convention. However, it is nevertheless likely that there will be a spate of judgments on enforceability and the right to a hearing.

Procedure for Jurisdictional Challenges under Section 67 of the 1996 Act

Section 11 of the 2025 Act introduces a more limited review process applicable where

• a tribunal has already ruled on a jurisdictional objection; and
• the challenging party participated in the arbitration proceedings.

Under the new procedure, when jurisdictional challenges are brought, the English High Court will not:

• hear new grounds of objection or new evidence that were not raised or put before the tribunal, unless it can be demonstrated with “reasonable diligence” that such grounds or evidence could not have been previously submitted by the applicant; and
• re-hear evidence that was already heard by the tribunal, except in the interests of justice.

The 2025 Act aims to mitigate the impact of the Supreme Court’s decision in Dallah v Pakistan [2010] UKSC 46, which held that jurisdictional challenges required a full de novo rehearing even if the tribunal had already conducted a full hearing on the matter.

In addition, Section 5 of the 2025 Act will amend Section 32 of the 1996 Act (which allows the English High Court to decide, as a preliminary point, whether a tribunal has jurisdiction). As a result, where a tribunal has ruled on its jurisdiction, parties will now not be able to seek a jurisdictional ruling from the English High Court under Section 32.

The new procedures introduced by the 2025 Act address the issue of "re-runs" under Sections 32 and 67 of the 1996 Act, which had generated criticisms regarding inefficiency and—as the challenging party has typically had the benefit of already arguing the point before the relevant tribunal—unfairness.

Statutory Arbitrator Duty of Disclosure

Common law has imposed on arbitrators a continuing legal duty of disclosure on any matter which may give rise to any justifiable doubts in relation to their impartiality in relation to proceedings. This duty is mandatory and cannot be amended or waived by agreement.

Section 2 of the 2025 Act codifies and expands this duty by requiring that an arbitrator (or a potential arbitrator approached for appointment) must disclose, as soon as reasonably practicable, “circumstances that might reasonably give rise to justifiable doubts as to the individual’s impartiality in relation to the proceedings, or potential proceedings”. This applies to circumstances of which the arbitrator is aware or ought reasonably to be aware.

This aligns with many commonly used institutional arbitral rules, such as Sections 5.4 and 5.5 of the LCIA Arbitration Rules 2020, and will continue to be complemented by the widely utilised International Bar Association Guidelines on Conflicts of Interest in International Arbitration.

Arbitrator Immunity

The 2025 Act expands the scope of the existing arbitrator immunity in the 1996 Act. Notably, Section 29(1) of the 1996 Act provides that, unless an act or omission is shown to have been in bad faith, an “arbitrator is not liable for anything done or omitted in the discharge or purported discharge of his or her functions as an arbitrator”.

As for the 2025 Act:

• Section 3 extends Section 24 and subsequently Section 29(1) of the 1996 Act to confirm that if proceedings have been brought for the removal of the arbitrator, the court “may not order the arbitrator to pay costs in proceedings,” unless the underlying act or omission of the arbitrator is “shown to have been in bad faith”
• Section 4 extends Section 29(1) of the 1996 Act to provide that an arbitrator’s resignation, provided it is not unreasonable, “does not give rise to any liability for the arbitrator”, e.g., where an arbitrator may need to resign to avoid breaching sanctions

Appointment of an Emergency Arbitrator and Court Powers Over Third Parties

Section 8 of the 2025 Act inserts a new Section 41A into the 1996 Act recognising the role of an emergency arbitrator, including granting enforcement powers in respect of preemptory orders. This new section applies where the appointment of emergency arbitrators is permitted under the applicable arbitral rules (which—presently—include those of the LCIA, Chartered Institute of Arbitrators, and the International Chamber of Commerce, among many others).

Furthermore, Section 9 of the 2025 Act confirms that (1) the English High Court has the authority to make such Section 44 orders against third parties and (2) that the “leave of the court is required” for any appeal of a decision by a party or proposed party to the proceedings. Section 44 empowers the English High Court to make orders that support arbitrations, including orders for the preservation of evidence and freezing injunctions.

CONCLUSION

The 2025 Act is to be commended for its measured and pragmatic refinements. Rather than opting for extensive reforms that could have undermined the 1996 Act (which has been widely credited with establishing England and Wales as the preeminent jurisdiction for international arbitration), the 2025 Act aims to ensure that the existing arbitral framework remains appropriate for the modern world and further solidifies London’s position as one of the most popular seats for international arbitration globally.

Trainer Solicitor Oliver Barnes-Dean contributed to this LawFlash.