Maritime arbitration and the UK’s new Arbitration Act

The UK’s proposed new Arbitration Act received Royal Assent on 24 February 2025. While it requires implementing regulations before it comes into force, it is expected that this will take place within 2025. 

Much has been written about the proposed reform of the Arbitration Act 1996 and how the changes will modernise and update arbitration law and procedure in the UK, thereby consolidating the UK as the global destination of choice for dispute resolution. There have been numerous articles analysing the various revisions and what they mean for UK arbitration law and procedure in general terms.

This article considers some of the changes introduced by the Arbitration Act 2025 (Act 2025) from a maritime arbitration perspective.

Maritime arbitration in the UK

TheCityUK Legal Services Report 2024 confirmed that London is the most popular and widely used seat for international commercial arbitration by a large margin. More arbitrations take place in London than in any other city in the world. The Report estimates that more than 80% of the world’s maritime arbitrations are handled in London.

The majority of UK maritime arbitrations are referred to the London Maritime Arbitrators Association (LMAA). According to statistics published on the LMAA website for 2024, LMAA arbitrators received a total of 3006 appointments and issued 478 awards (75 after oral hearings) in approximately 1733 references during that year.

The LMAA made detailed submissions on the consultation papers of the Law Commission in relation to its review of the Arbitration Act 1996. The LMAA’s overriding view was that the proposed reforms would have little practical impact on the London maritime arbitration sector which already attracted many sophisticated users of services, who were accustomed to choosing London as their preferred venue. 

The LMAA highlighted that maritime arbitration practices and procedures had been developed over many years, and most of the sector’s arbitrators were very experienced. No adverse impact was expected on the number of maritime arbitration disputes already being resolved in London. Rather, in the LMAA’s view, the reforms could have some beneficial effect in demonstrating that English arbitration law and practice was subject to periodic review to ensure efficiency and cost-effectiveness.

Governing law

The Act 2025 introduces a default rule stating that the governing law of the arbitration agreement will be the law of the seat of the arbitration unless the parties expressly agree otherwise. Therefore, party autonomy is retained but there is a default rule that applies to avoid otherwise time-consuming and expensive disputes on governing law.

Why has this new default rule been introduced?

Under English law, an arbitration agreement is separable from the main contract into which it is incorporated. This means that if the main contract is terminated or is alleged to be invalid or ineffective, the arbitration agreement survives and any dispute between the parties relating to the termination, or the alleged invalidity must be arbitrated.

The separability principle also means that the governing law of the arbitration agreement is not necessarily the same as the governing law of the main contract. Where the governing law clause of the main contract is the same as the governing law of the seat of the arbitration, this may not be an issue. Where, however, the seat of the arbitration is in a different country and there is no express choice of law in the arbitration agreement, an issue can arise as to whether the law of the seat of the arbitration, rather than the governing law of the main contract, should apply to the arbitration agreement.

Alternatively, the parties may not have provided expressly for a governing law in the main contract. This can be determined pursuant to the provisions of the Rome I Regulation, but the Regulation does not apply to arbitration agreements and so English common law rules are applied to determine the law governing the arbitration agreement. This requires consideration of which country/law the arbitration agreement is most closely connected to, which is not always straightforward.

Why is this potentially significant? Because the law governing the arbitration agreement determines matters such as its validity and scope and is therefore crucial in ensuring an arbitration agreement operates effectively and as envisaged by the parties. Courts in other jurisdictions may take a different approach to these issues and this can lead to different outcomes depending on the jurisdiction, including the risk of unenforceable awards. 

The leading authority is the UK Supreme Court decision in Enka Insaat Ve Sanayi AS -v- OOO Insurance Company Chubb [2020] UKSC 38. By a majority, the Supreme Court held that:

1. the governing law of an arbitration agreement will normally be that of the main contract, as opposed to the law of the chosen arbitration seat;

2. where a main contract contains an express choice of law, there is a strong presumption that the parties intended their choice to apply to the whole contract, including any arbitration agreement; and

3. where the parties have not expressly or impliedly chosen the law of the contract (or of the incorporated arbitration agreement), the default position is that the law of the chosen seat of the arbitration will govern the arbitration agreement.

This decision invited much comment and some criticism from a range of stakeholders. Importantly, some arbitral rules already expressly provide for a default position. For example, the LMAA Rules provide that, in the absence of any agreement to the contrary, the parties agree that the law applicable to the arbitration agreement is English law and that the seat of the arbitration is in England. Additionally, the LCIA Rules provide that unless otherwise agreed by the parties, the law of the arbitration agreement shall be the law of the seat.

Nonetheless, it is helpful to have a default rule in the Act 2025, particularly where maritime arbitration takes place pursuant to institutional arbitral rules that do not incorporate their own default rule or is ad hoc arbitration. And it remains important for those entering into arbitration agreements to consider whether they expressly wish to state what is the governing law of their arbitration agreement.

Impartiality and disclosure

The Act 2025 expressly requires arbitrators to disclose to the parties any circumstances that might reasonably give rise to justifiable doubts regarding their impartiality. This statutory duty reflects the common law duty of disclosure, which was set out by the UK Supreme Court in Halliburton Company -v- Chubb Bermuda Insurance Ltd [2020] UKSC 48. The statutory duty of disclosure is mandatory and is a continuing one, commencing prior to the arbitrator’s appointment. Arbitrators must disclose what they actually know as well as what they ought reasonably to know.

In Halliburton -v- Chubb, the issue was whether an arbitrator who had accepted appointments in three references arising out of the same offshore disaster and involving one common party, Chubb, ought to have disclosed the later appointments to the parties in the earlier reference and whether his failure to do so led to an appearance of bias. 

The Supreme Court highlighted that the duty of disclosure was not only good arbitral practice but also a legal duty in English law. In the Supreme Court’s view, the arbitrator had breached his duty of disclosure in this case because the existence of potentially overlapping arbitrations with only one common party might reasonably have given rise to a real possibility of bias. However, in light of the circumstances of this case, the Supreme Court concluded that a fair-minded and informed observer would not infer from the failure to make disclosure that there was a real possibility that the arbitrator was biased.

Nonetheless, the case highlighted that there may be circumstances in which the acceptance of multiple appointments involving a common party and the same or overlapping subject matter gives rise to an appearance of bias. Hence, the decision to introduce an express statutory duty in the Act 2025. However, neither the Supreme Court decision nor indeed the Act 2025 specify what must actually be disclosed. This is likely to be clarified by the courts in future decisions. 

Interestingly, the LMAA, LCIA, ICC, GAFTA and CIArb were interveners in the Halliburton case, The LMAA intervened on the basis that multiple appointments were common under their procedures because they frequently arose out of the same incident. Furthermore, the LMAA highlighted that there was a relatively small pool of specialist arbitrators whom parties used repeatedly. The LMAA and GAFTA argued that, in their fields of activity, the mere fact of appointment in overlapping arbitrations did not give rise to an appearance of bias and was a feature of arbitrations that parties in their fields of operation accepted. They submitted that the Court should respect such party autonomy.

The Supreme Court acknowledged these arguments and accepted that where multiple appointments were part of the process, which was known to and accepted by the parties, then no duty of disclosure would arise. However, unless the parties to the arbitration otherwise agreed, there should be and there was in fact an express duty of disclosure on arbitrators.

The LMAA, GAFTA and FOSFA also opposed the introduction of a statutory duty for similar reasons to those stated above. Nevertheless, there is now a mandatory duty of disclosure – whereas the Supreme Court had contemplated that parties could contract out of such a duty if they so wished. It remains to be seen whether any arbitral institutions or associations revise their arbitral rules to specify what the disclosure requirements are for their arbitrators. Some, such as the LCIA, already have an express duty of disclosure enshrined in their rules. It will also be interesting to see whether traditionally small pools of specialist arbitrators will be widened or whether parties will increasingly diversify their choice of arbitrator.

Summary disposal

The Act 2025 grants arbitrators the power to issue an award on a summary basis on application of a party and subject to any agreement otherwise. Under the Act 1996, arbitrators had no such power. This will allow arbitrators to summarily dispose of a case, or a particular issue, where they believe it has little or no prospect of success, thereby saving time and costs. This goes beyond the current procedure allowed for in certain rules (such as the LMAA Full Terms) where an interim award can be issued on a preliminary issue but only where both parties consent.

This development is likely to be welcomed by the maritime arbitral community, although it is yet to be seen how tribunals will exercise this power in circumstances where the defending party does not engage in the arbitration process by, for example, failing to appoint their own arbitrator resulting in the claimants’ arbitrator being appointed as sole arbitrator 

Third parties

The Act 2025 clarifies that the Court’s powers in support of arbitration extend to third parties. A party to an arbitration can, therefore, apply to the Court to make an order directly against a third party for e.g. preservation of evidence taking witness evidence, interim injunction etc. This is important because arbitrators do not have the power to make orders directed at third parties. This reflects the English Courts’ tradition of supporting the arbitral process.

Jurisdictional challenges

The Act 2025 simplifies the procedure for challenging arbitrators’ jurisdiction under s.67 Act 1996. Where the tribunal has already ruled on the jurisdictional challenge and the party challenging jurisdiction participated in the arbitration process, then that party cannot put forward any new grounds of challenge or evidence before the Court unless they could not reasonably have been put before the tribunal. Furthermore, and unless the Court decides otherwise, evidence that was before the tribunal will not be reheard by the Court.

These amendments will hopefully deter at least some unmeritorious jurisdictional challenges and will reduce the costs and time expended on s.67 challenges. 

Deadline for challenging awards

The statutory time limit for challenging an award is 28 days from the publication of the award. Some recent disputes have highlighted uncertainty as to whether the 28 days should count from an original award or from a corrected or additional award. The Act 1996 did not deal with this expressly. The Act 2025 makes it clear that time will run only after the conclusion of any appeal in the arbitration proceedings or after correction of an award. This will avoid unnecessary arguments as to expiry of time for appealing an award.

Comment

As part of their consultations, the Law Commission considered whether changes should be made to the s.69 process for appealing an award due to error of law. S.69 is non-mandatory and can be excluded by the parties’ agreement. Ultimately, it was decided that no changes should be made, primarily because of the possibility to opt out. The opportunity to appeal on a point of law remains an important one because such appeals, including in maritime disputes, help to clarify and develop the law, particularly given the confidentiality of arbitrations.

On that, the Law Commission had considered whether there should be a default rule of confidentiality, with a list of exceptions. It decided that there was no “one size fits all” and that different default rules could apply in different arbitral contexts. A statutory rule of confidentiality would not be sufficiently comprehensive or nuanced. Caselaw had already identified a list of exceptions to confidentiality in arbitration and developing the law on confidentiality was best left to the courts alongside the bespoke practices of arbitral rules. 

The LMAA Rules already provide for the parties to be bound by the “traditional confidentiality undertaking”. Indeed, one of the primary reasons for choosing arbitration over court proceedings is confidentiality. Therefore, those participating in maritime arbitrations are likely to honour confidentiality obligations without the need for the duty of confidentiality to be codified in the Act 2025.