The Arbitration Act 2025 receives Royal Assent

The long-anticipated reforms to the Arbitration Act 1996 have officially made it into law, with the Arbitration Act 2025 (the 2025 Act) receiving Royal Assent this week. While the exact date on which the reforms will come into force is yet to be confirmed, the government has stated that "the new law will be commenced through regulations as soon as possible."

The government’s press release states that the new Act aims to "reinforce Britain’s position as the best place to resolve disputes without having to go to court."

Background and Legislative Journey

The reform process began in November 2021 when the Law Commission initiated a consultation process. After two rounds of public consultation, the Law Commission published its final recommendations alongside a proposed Arbitration Bill in September 2023. The Bill was initially introduced to Parliament in November 2023 but its passage was delayed due to the UK general election and change of government in 2024.  The Bill was ultimately taken up again by the new government and received its final reading in Parliament on 11 February 2025.

Key Changes Introduced by the 2025 Act

1. Law Governing Arbitration Agreements

Under existing English law, following the Supreme Court’s decision in Enka v Chubb, an arbitration agreement is typically governed by the law of the underlying contract unless expressly stated otherwise. Section 1 of the 2025 Act introduces a significant change: if no express choice of law is specified for the arbitration agreement, the default governing law will now be the law of the seat of the arbitration.

A specific exception has been made for ISDS cases where the arbitration clause derives from a treaty or non-UK legislation. This was introduced during parliamentary discussions to prevent unintended consequences in non-ICSID ISDS cases.

2. Tribunal Powers for Summary Dismissal

The 2025 Act empowers tribunals seated in London to summarily dismiss claims or defences that have "no real prospect of success." This aligns with the threshold test used for summary judgment in the English courts.

While this provision provides clarity on a tribunal’s ability to summarily dispose of claims/defences, parties retain the option to opt out if they prefer.

3. Enhanced Court Powers for Interim Relief

The 2025 Act resolves long-standing uncertainty about the English courts’ powers to issue orders against third parties by way of interim relief in support of arbitration proceedings. The new provisions clarify that, unless otherwise agreed by the parties, courts have the same authority to order relief against third parties in arbitration as they do in court litigation.

Additionally, the 2025 Act strengthens the enforceability of emergency arbitrator orders, by confirming that parties can seek assistance from the English courts to convert peremptory orders issued by emergency arbitrators into English court orders.

4. Limited Court Review of Jurisdictional Challenges

Currently, under section 67 of the 1996 Act, jurisdictional challenges to awards result in a full de novo review by the English courts. The 2025 Act introduces a more limited review process when:

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

Under this revised approach:

• New jurisdictional objections cannot be raised in the English courts unless they could not have been discovered with reasonable diligence during the arbitration.
• New evidence is only admissible if it could not have been submitted earlier with reasonable diligence.
• Previously submitted evidence will not be re-heard unless the court deems it necessary in the interests of justice.

This change is expected to reduce the duration and costs of many jurisdictional challenges in the English courts.

Other Notable Changes

• Arbitrators now have a duty to disclose any circumstances that might reasonably cast doubt on their impartiality.
• Arbitrators are now granted extended immunity from liability in the event of resignations and for the costs of applications seeking their removal.
• Court procedures related to arbitration have been simplified to improve clarity, reduce delays, and minimize costs for parties involved.

The Arbitration Act 2025 marks a significant step in modernising arbitration in England and Wales, ensuring efficiency and clarity, and will no doubt further enhance London’s popularity as a seat of arbitration.