By Isuru Devendra, Barrister, 36 Stone
The long-awaited Arbitration Act 2025 (“AA2025”) entered into force on 1 August 2025.[1] The AA2025 amends the Arbitration Act 1996 (“AA1996”), which provides the legislative framework for arbitration in England and Wales and Northern Ireland. The substantive provisions of the AA2025 and its amendments to the AA1996 apply to arbitration and court proceedings commenced on and after 1 August 2025.
Background to the amendments:
The AA2025 is the product of the Law Commission’s review of the AA1996. The principal objective of the review was to ensure that the AA1996 remained fit for purpose, in particular “to ensure that the Act remains state of the art, both for domestic arbitrations, and in support of London as the world’s first choice for international commercial arbitration.”[2] The Law Commission issued consultation papers in September 2022 and March 2023 and issued its final report in September 2023.
The AA2025 is based on the recommendations made by the Law Commission in its final report, with some amendments, and was enacted into law on 24 February 2025 following a protracted legislative process due in part to the prorogation of Parliament ahead of the 2024 UK General Election.
While the AA2025 does not overhaul the AA1996, it does introduce several significant amendments which modernise the arbitration framework in England & Wales and Northern Ireland. The key changes are summarised below.
Key changes to the Arbitration Act:
- New default rule regarding the law governing arbitration agreements
The change to the default rule regarding the law governing arbitration agreements is one of the major changes to the Arbitration Act. This provision is relevant where the parties have not chosen the law governing their arbitration agreement.
Prior to the AA2025, the default rule was derived from common law rather than statute. In the 2020 decision in Enka v Chubb [2020] UKSC 38, the UK Supreme Court held that, where there has been no express choice of law governing an arbitration agreement, but there has been an express or implied choice of law governing the main contract in which the arbitration agreement is found, that choice of law will generally apply to the arbitration agreement as well. Where there has been no such choice of law governing the main contract, then the “closest connection” test will apply, which generally would lead to an application of the law of the seat as the governing law of the arbitration agreement.
The approach in Enka v Chubb was critiqued by many commentators, including whether, in the absence of an express choice, primacy should be given to the law of the seat as the governing law of the arbitration agreement rather than the law governing the main contract. The debate amongst the arbitration community was sufficient for the issue to be raised by the Law Commission in the first consultation paper. The Law Commission noted in its second consultation paper that “thirty-one responses to our first consultation paper asked us to reconsider the question of the proper law of an arbitration agreement.”[3] The Law Commission’s final recommendation was that the Arbitration Act be amended to provide that, in the absence of an express choice by the parties, an arbitration agreement is governed by the law of the seat. This recommendation was adopted by Parliament and introduced in the AA2025.
Accordingly, the question of what law governs an arbitration agreement shall now be determined in accordance with new Section 6A of the Arbitration Act: (i) the law that the parties expressly agree applies to the arbitration agreement, or (ii) where no such agreement is made, the law of the seat of the arbitration in question.
- New summary dismissal mechanism
The AA2025 has introduced a new summary dismissal mechanism. New Section 39A will, unless the parties agree to opt-out of the mechanism, provide a tribunal with the power to make an award on a summary basis in relation to a claim, or a particular issue arising in a claim, if the tribunal considers that: (i) there is no real prospect of succeeding on the claim or issue; or (ii) there is no real prospect of succeeding in the defence of the claim or issue.
While provisions of this kind are already included in several arbitral rules, including the LCIA Arbitration Rules, the introduction of this summary dismissal mechanism in the Arbitration Act may be a useful procedure for parties involved in arbitration conducted in accordance with arbitral rules that do not include such a mechanism, e.g., the UNCITRAL Arbitration Rules.
Given the similarity in language between new Section 39A and CPR 24.3 with respect to the standard for summary dismissal/judgment, i.e., “there is no real prospect of succeeding…”, it may be that arbitral tribunals find the jurisprudence of the English courts regarding the standard for summary judgment under CPR 24 persuasive when determining applications for summary dismissal under Section 39A of the Arbitration Act.
While the words “Unless the parties otherwise agree” allow parties to opt-out of the new summary dismissal mechanism in Section 39A, it is unclear whether the parties’ choice of arbitral rules that contain a different summary dismissal mechanism will constitute a choice to opt-out of the new mechanism or whether the two summary dismissal mechanisms would both be available.
- Changes to Section 67 challenges for lack of substantive jurisdiction
Section 67 of the AA1996 concerns challenges to awards on the basis that the tribunal lacked substantive jurisdiction. The AA2025 has amended Section 67 in two main ways.
First, the AA2025 has amended the standard of review under Section 67. In Dallah Real Estate v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46, the UK Supreme Court had confirmed that a court had the power under Section 67 to conduct a de novo review of challenges to the tribunal’s jurisdiction. During the consultation process, the Law Commission first proposed to limit the standard of review to be by way of an appeal rather than a full rehearing. There were strong objections to this proposal throughout the consultation process.
The amendment ultimately introduced in the AA2025 is that, subject to the court ruling otherwise in the interests of justice: (a) parties are prevented from raising a ground of objection to the tribunal’s jurisdiction that was not raised before the tribunal, unless the applicant did not know and could not with reasonable diligence have discovered the ground; (b) the court is precluded from considering evidence that was not put before the tribunal, unless the applicant could not with reasonable diligence have put the evidence before the tribunal; and (c) evidence that was heard by the tribunal is prohibited from being re-heard by the court. The effect of this amendment is to considerably narrow the scope of review under Section 67, which is likely to reduce costs and time associated with challenges under Section 67.
Second, the AA2025 has amended the relief available pursuant to a Section 67 challenge to the tribunal’s substantive jurisdiction. Prior to the amendments, the court could (a) confirm the award, (b) vary the award, or (c) set aside the award in whole or in part. The new amendments provide that the court may, in addition to those existing remedies, order (a) that the award be remitted to tribunal, in whole or in part, for reconsideration, or (b) declare the award to be of no effect, in whole or in part. The amendments also provide that the court must not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration. These changes are likely to allow for the correction of errors relating to a tribunal’s substantive jurisdiction without the need for an arbitration to be recommenced from the beginning and provide significant time and cost savings.
- Expansion of the court’s powers in support of emergency arbitration
Emergency arbitration is a relatively recent development in international arbitration, which has been introduced through arbitral rules. For example, the emergency arbitrator mechanism in the ICC Rules was introduced in 2012. The AA1996, which preceded these developments, therefore made no mention of emergency arbitration. The Law Commission debated whether to include an emergency arbitrator mechanism in the Arbitration Act but decided against that approach. Instead, the has AA2025 introduced reforms that support emergency arbitrations conducted pursuant to such mechanisms in arbitral rules.
First, the AA2025’s amendments empower emergency arbitrators to issue peremptory orders if a party fails to comply with any order or direction of the emergency arbitrator. This puts emergency arbitrators on equal footing with tribunals in this regard and gives their orders “teeth”.
Second, the AA2025 has amended Section 44 of the Arbitration Act, which concerns court powers exercisable in support of arbitral proceedings, to include powers in support of emergency arbitrations. This means that parties may seek a court order in relation to the matters specified in Section 44(2) of the Arbitration Act, for example with respect to the preservation of evidence or the granting of an interim injunction.
- Confirmation of court’s powers in relation to third parties
The AA2025 has made a further amendment to Section 44 of the Arbitration Act to confirm that the court’s power under Section 44 extends not only to parties to an arbitration but also to third parties. This clarifies uncertainty in the case law whether a court may make orders pursuant to Section 44 in relation to third parties. Consequently, parties to an arbitration can seek orders against third parties in relation to the matters set out in Section 44(2).
- Arbitrators’ new statutory duty of disclosure
The AA2025 has introduced a statutory duty for arbitrators (including prospective arbitrators) to disclose any circumstances which might reasonably give rise to justifiable doubts as to their impartiality as soon as reasonably practicable. The applicable standard of knowledge is constructive knowledge, i.e., an individual is treated as being aware of circumstances of which the individual ought reasonable to be aware. The introduction of this duty legislates the existing common law duty recognised by the UK Supreme Court in Halliburton v Chubb [2018] UKSC 48.
- New rules on arbitrator immunity
The AA2025 has introduced amendments concerning the exposure of arbitrators to costs and other liability where they have either resigned or been removed.
Following the amendments, where an arbitrator has resigned, the arbitrator’s resignation shall not give rise to any liability for the arbitrator unless it is shown that the resignation was, in all the circumstances, unreasonable. The complainant bears the burden of proving the unreasonableness.
Where an arbitrator has been removed by the court pursuant to Section 24 of the Arbitration Act, the AA2025 has introduced a new provision which provides that the court may not order the arbitrator to pay costs in those Section 24 proceedings, unless it can be shown that an act or omission of the arbitrator in connection with the proceedings has been in bad faith. This is intended to address a line of cases which suggest that an arbitrator might incur personal liability for the costs of an application to remove them.[4]
- Power to award costs
The AA2025 has amended Section 61 of the AA1996 to remove the parties’ ability to opt-out of the tribunal’s power to award costs and/or the default rule that costs follow the event.
The amendments also confirm that it is irrelevant for the purposes of the costs allocation power under Section 61(1) that the tribunal has ruled, or a court has held, that the tribunal has no substantive jurisdiction or has exceeded its substantive jurisdiction. This clarifies previous uncertainty regarding the source of a tribunal’s power to award costs in the absence of substantive jurisdiction.
COMMENT:
The AA2025 should be welcomed as cementing the UK’s place in the international arbitration world. The amendments introduced through the AA2025 are not a comprehensive replacement of the legal framework for arbitration under the AA1996 but rather are considered amendments to the Arbitration Act which are targeted at specific issues. These issues were the subject of the Law Commission’s thorough consultation process and included lively debate on certain issues. This approach appears to have benefited the amendments that have been enacted, which in addition to being considered and balanced serve to improve certainty, finality and efficiency for users of international arbitration. This undoubtedly enhances the standing of England & Wales as a leading jurisdiction for international arbitration and London as a leading seat.
[1] The Arbitration Act 2025 (Commencement) Regulations 2025.
[2] Law Commission, “Review of the Arbitration Act 1996: A consultation paper”, September 2022, para. 1.3.
[3] Law Commission, “Review of the Arbitration Act 1996: second consultation paper”, March 2023, para. 2.48.
[4] Law Commission, Review of the Arbitration Act 1996: Final report and Bill, para. 5.37.
Isuru Devendra, Barrister, 36 Stone
