The Arbitration Act 2025

The Arbitration Act 2025 (AA2025) recently received Royal Assent and will amend the Arbitration Act 1996 (AA1996) in a number of important ways.

It aims to maintain the pre-eminence of English law as a choice of law and the attractiveness of England & Wales as a “destination” for commercial disputes, and to ensure that England & Wales’ ‘world renowned arbitration laws remain world leading and fit for purpose in a changing business landscape’.  

It makes changes to:

• clarify the position as to the applicable law of arbitration agreements in commercial contracts;

• give arbitrators summary disposal powers as regards matters with no real prospect of success;

• amend provisions on jurisdiction challenges.

• codify court powers in support of arbitration proceedings and emergency arbitrators; 

• detail arbitrators’ duties of disclosure; and

• enhance arbitrators’ immunity as regards resignation and applications for removal.

These are discussed in brief below.

Applicable law

The AA2025 introduces an important new rule that the governing law of an arbitration agreement will be:

• the law chosen by the parties; or 

• (where the parties have not agreed which law is to apply), the law of the seat of the arbitration.

It also clarifies that agreement by the parties as to the law governing the contract which contains the arbitration agreement does not amount to agreement that the same law also applies to the arbitration agreement. This displaces the previous case law based rule under which the parties’ choice of law in the contract would usually have been interpreted as applying equally to the arbitration agreement.  

The new rule in this regard does not apply to certain types of investment treaty arbitrations which are carved out and dealt with differently.

This new rule is intended to avoid the costs and delay of satellite disputes regarding applicable law and also to avoid the situation where for example arbitration proceedings seated in England & Wales may be governed by a foreign law simply because the parties failed to agree the law applicable to their arbitration agreement. At the same time it preserves the rights of contract parties to choose the law applicable to their arbitration agreement. Commercial parties should add this to their checklist of considerations when drafting arbitration clauses.   

Summary disposal

The AA2025 gives arbitrators new powers to dispose of claims/defences which lack any merit by making awards on a claim or issue in the arbitration on a summary basis. Arbitral tribunals will be empowered to adopt an expedited procedure to determine the relevant issues but must first give the parties a reasonable opportunity to make submissions in respect of that procedure. The relevant provisions dictate that:

• an application for summary disposal must be made on notice;

• an award can be made on a summary basis where the relevant party has “no real prospect of success” on the claim or particular issue. This threshold mirrors that applied in court proceedings in England & Wales; and

• parties can choose to opt out of this provision by agreement.

These changes purport to address the concern that arbitrators have often been reluctant to proceed on a summary basis for fear of challenge to the award or its enforceability. Arbitrators should now be able to exercise their powers in this regard more freely so as to enhance the efficiency of arbitration proceedings in England & Wales. This is a significant development for commercial disputes, as it allows for quicker resolution of claims that lack merit, thereby saving time and resources for businesses. 

Jurisdiction Challenges

Under the existing AA1996 regime, parties can challenge the jurisdiction of a tribunal and such application can be considered and determined by the tribunal in the first instance. Parties can also seek a ruling by the court via two routes:

• (under section 32 AA1996) by agreement between the parties or with permission of the tribunal, ask the court to determine whether the tribunal had jurisdiction as a preliminary point; or

• (under section 67 AA1996) challenge the tribunal’s ruling on jurisdiction. 

The AA2025 makes changes in this regard, including amendments to:

• clarify the section 32 regime for challenge to a tribunal’s jurisdiction;

• restrict the submissions and evidence which can be presented to the court in section 67 jurisdiction challenges;

• provide for additional remedies in section 67 jurisdiction challenges;

• give the tribunal power to order costs even if held to lack jurisdiction.

Section 32 is amended so as to make clear that it cannot be used after a tribunal has ruled on jurisdiction (any challenge thereafter is to be made under section 67). This ought to avoid any disputes on the point in the future.

It further provides that where a section 67 challenge is brought regarding a decision of the tribunal on jurisdiction, there will not be a full re-hearing before the court. New civil procedure rules are to be drafted which will provide that “unless necessary in the interests of justice”:

• the applicant cannot raise new grounds of objection and the court will not consider evidence which was not put before the tribunal (unless the applicant can show it did not know of, and could not with reasonable diligence have been in a position to argue the ground, or could not put the evidence to the tribunal at the time of the original hearing); and

• evidence which the tribunal heard cannot be re-heard by the court.

These changes are particularly pertinent for commercial disputes, as they streamline the process for jurisdiction challenges, reducing the potential for prolonged legal battles and eliminating the criticism that arbitration proceedings can be too slow and ensuring that arbitration proceedings can proceed more efficiently.

Enhanced court powers

Under the existing AA1996 regime, the powers of the court in domestic proceedings as regards taking witness evidence, preservation of evidence, orders relating to relevant property, sale of goods, interim injunctions and the appointment of a receiver are also available in arbitration proceedings.

The AA2025 provides expressly that the court can exercise those powers in relation to third parties who are not party to the arbitration proceedings. Such third parties will have a full right of appeal.

These changes were driven by the previous lack of clarity as to whether or not the English court could exercise the powers listed above against third parties. The changes should remove this uncertainty and thus avoid or substantially reduce disputes as regards the English court’s powers in aid of arbitration.  

Duty of disclosure

The AA2025 imposes a duty on arbitrators to disclose circumstances that might reasonably give rise to justifiable doubts as to their impartiality in relation to the arbitration. This is a continuing duty which applies both prior to and after their appointment. It covers circumstances of which the arbitrator is aware and ought reasonably to be aware. This is a mandatory provision meaning the parties cannot agree to dispense with the requirement.  

This duty codifies previous case law. The AA2025 does not prescribe what must be disclosed in what circumstances. The courts have recognised in previous cases that this is case specific because for example facts which might give rise to justifiable doubts as to an arbitrator’s impartiality in one industry sector may not in another, or what an arbitrator ought reasonably to know for disclosure purposes (or the enquiries they may be expected to make in this regard) may differ from sector to sector. Without doubt this enhanced duty of disclosure is particularly important for commercial disputes, providing the safety check of greater transparency and impartiality in arbitration proceedings, thereby increasing the confidence of businesses when arbitrating/agreeing to arbitrate.

Arbitrator immunity

Under the AA1996, in summary, arbitrators are not liable for acts or omissions arising in the purported discharge of their duties, unless they act in bad faith. This immunity does not extend to liability they may incur by reason of resignation. Changes are introduced by the AA2025 to further extend the immunity of arbitrators as follows:

Firstly, where a party applies to court to remove an arbitrator and the arbitrator is found not to have acted in bad faith, the court will have no power to order the arbitrator to pay the costs of those proceedings.  

Secondly, the default position will be that when an arbitrator resigns, this will not give rise to any liability to the parties unless such resignation is shown to have been unreasonable in all the circumstances.  

These changes seek to address concerns that, for example, where (as previously) arbitrators are potentially liable for costs there is a risk that parties might be encouraged to make applications to remove arbitrators simply because they do not agree with the arbitrator’s decisions; or that the impartiality of arbitrators might be undermined because they may feel undue pressure to accede to a party’s requests so as to avoid a potential costs liability.  

There was also the concern that potential exposure on the part of arbitrators to liability on resignation (for example parties might seek to recover additional legal fees incurred in appointing an alternative arbitrator) might dissuade arbitrators from resigning in circumstances where they ought properly to do so.  

The requirement for there to have been “bad faith” on the part of an arbitrator means that costs orders against arbitrators in removal proceedings are likely to be made only in extreme cases.  

As regards liability on resignation, the position is perhaps a little less clear, as it will be for the complaining party to persuade the court that a resignation was “unreasonable” in the particular circumstances of its case. Certainly the courts have given guidance in previous cases to suggest that arbitrators should see cases through to the end unless there are substantial grounds for self-disqualification.  

Emergency arbitrators

Some institutional arbitral rules enable appointment of an emergency arbitrator to make orders on urgent matters on an interim basis prior to the formal appointment of a full tribunal. Changes under the AA2025 provide that:

• emergency arbitrators can make peremptory orders (those which specify a time for compliance (such as an “unless order”)); and 

• in cases of non-compliance, that the courts may enforce such orders just as if they were made by a full tribunal in the usual way.     

Case law will likely emerge regarding when the courts should or should not enforce the order of an emergency arbitrator, and the level of rigour the courts will apply before enforcing such orders will remain to be seen. This is a welcome development for commercial arbitration disputes, as it ensures that urgent matters can be addressed promptly, even before the full tribunal is appointed, thereby enhancing the responsiveness and effectiveness of the arbitration process.

Concluding remarks

The Act aims to cement England & Wales as a seat for arbitration in the modern business world, enhancing efficiencies and ensuring better focus in the process. The changes appear sensible, considered, and well intentioned.  

Yet question marks will of course remain.  

It will be interesting to see whether in practice the aims of avoiding satellite disputes or the persistent issue of delay over issues like applicable law, jurisdiction challenges, the scope of the court’s powers in aid of arbitration, or the arbitrator’s position, will be achieved.

As regards summary disposal, what practices and procedures will be adopted in general; whether parties might attempt to use this route tactically to delay matters; whether and how parties in particular sectors might “opt out” or seek to prescribe lower thresholds for summary disposal in their agreements; and how precisely these new provisions will operate alongside existing institutional rules regarding summary dismissal (might these new rules lead to changes by arbitral institutions such as the ICC, LCIA, SIAC or HKIAC to their own rules for example), all remain to be seen.

The AA2025 provides clearer rules and enhanced powers that should improve the efficiency of arbitration proceedings further particularly for commercial disputes and will generally be welcomed by commercial parties choosing arbitration in their contracts.