New Arbitration Act receives Royal Assent

The Arbitration Act 2025 (the 2025 Act) received Royal Assent on 24 February 2025. It will be brought into force through regulations “as soon as practicable”, according to the government’s press release. 

It will then apply to arbitral proceedings commenced after the date on which the 2025 Act (or the relevant provision of it) comes into force, irrespective of the date when the applicable arbitration agreement was made.

The passing of the 2025 Act follows a successful consultation process by the Law Commission, with significant stakeholder input, and the relatively smooth passage of the resultant bill through Parliament (albeit with a delay caused by the change in government). When in force, the 2025 Act will make a number of amendments to the Arbitration Act 1996 (the 1996 Act). We considered the details of those amendments in our previous articles (Arbitration Bill introduced to Parliament, Second consultation paper on reform of the Arbitration Act 1996 and A "state of the art" Arbitration Act: the Law Commission's proposals) but, in broad outline, the main changes are as follows.

• A statutory duty of disclosure will be imposed on arbitrators. This codifies the common law requirement for arbitrators to disclose circumstances, which “might reasonably give rise to justifiable doubts as to the [arbitrator’s] impartiality”. In addition, the statutory duty arguably goes further than the common law in that it is not limited to arbitrators’ actual knowledge but instead extends to requiring arbitrators to disclose circumstances of which they “ought reasonably” to be aware.
• A new default rule will provide that the governing law of an arbitration agreement will be the law of the seat of the arbitration, unless the parties expressly agree otherwise. This replaces the current common law test and overturns the decision in Enka v Chubb¹, where the Supreme Court held that a choice of law provision in the "matrix" contract should generally be construed as applying to an arbitration agreement contained within that contract, irrespective of the place chosen to be the seat of the arbitration.
• Provision is made for the introduction of new court rules limiting the scope for jurisdiction challenges under section 67 of the 1996 Act to include new grounds or evidence not raised before the tribunal. This reflects the Law Commission’s view that the current practice of allowing a de novo rehearing of a jurisdiction challenge (subject to the court’s case management powers) risks unfairness and inefficiency. However, it is worth noting that the Law Commission’s views are not shared by everyone and the impact of this reform will depend on the drafting of any new court rules and the manner in which they are applied by judges.
• Section 44 of the 1996 Act is amended to clarify that the court’s powers in support of arbitral proceedings can be exercised against non-parties to those arbitral proceedings.
• Emergency arbitrators are given powers:
  • to make a peremptory order, which may be enforced by the court; and
  • to give parties permission to apply to the court for an order.
    Both these changes replicate the rules already in place for “normal” arbitrators and are intended to support the enforcement of orders made by emergency arbitrators.
• Arbitrators will be given an express power to make an award on a summary basis (unless the parties agree otherwise). Although the powers conferred by the 1996 Act are already broad enough to allow for summary disposal, the introduction of an express power is intended to encourage the use of summary procedures in suitable cases, thereby increasing efficiency and reducing the scope for parties to adopt tactics of delay.
• Arbitrators’ immunity from suit is bolstered by limiting the circumstances in which they can be liable for costs incurred in applications for their removal (unless the arbitrator acted in bad faith) or losses suffered as a result of their resignation (unless the resignation was unreasonable).

Comment

From the outset the Law Commission’s stated aim in reviewing and reforming the 1996 Act was to update and fine-tune the existing legislation, rather than to produce wholesale change.  Nonetheless, these reforms are significant in that they clarify points of uncertainty and reflect developments in arbitration practice and procedure over the past three decades, whilst preserving to a large extent the framework created by the 1996 Act.

¹Enka Insaat Ve Sanayi AS v. OOO Insurance Company Chubb [2020] UKSC 38