Arbitration Act 2025 | Part 1: Five Most Impactful Changes for Businesses
The Arbitration Bill received Royal Assent today (24 February 2025). This long-awaited Bill amends the Arbitration Act 1996 to create the Arbitration Act 2025 (the "2025 Act"). It will apply to any arbitration (or arbitration-related court proceedings) commenced on or after the date on which the substantive parts of the 2025 Act come into force (which will be on a date(s) specified in due course by statutory instrument).
The 2025 Act introduces fifteen reforms which we will discuss in our three-part Series. In this Part 1, we highlight five key changes for UK and international businesses. In Part 2 we will address the other reforms and their impact for arbitral stakeholders. In Part 3 we will address other issues currently impacting arbitral stakeholders that were not addressed by the 2025 Act.
PURPOSE OF THE LEGISLATIVE REFORM
The 2025 Act is designed to modernise the arbitration process and should help secure "quicker [dispute] resolution" which is "crucial for businesses that seek fast and decisive outcomes to disputes". By providing (i) flexible procedures for domestic and international parties, (ii) an efficient and fair regime of court support, and (iii) provisions which support and empower arbitrators, the 2025 Act should further cement the UK's position as a top global business destination and promote London as a world-leading seat of arbitration.
FIVE KEY CHANGES FOR BUSINESSES
This alert discusses the following five key changes for UK and international businesses:
- New statutory rule for the law governing the arbitration agreement
- New s67 procedure to challenge awards (to be implemented in rules of court)
- Clarification in relation to jurisdictional challenges
- Express power of summary disposal
- Empowerment of emergency arbitrators
1. LAW GOVERNING THE ARBITRATION AGREEMENT: NEW STATUTORY RULE
The 2025 Act introduces a new statutory rule that the law of the arbitration agreement ("AA") will be the same as the law of the seat, unless the parties have expressly chosen otherwise. This change seeks to overcome the uncertainty and complexity created by the common law approach (discussed in our prior Legal Update). There is also an express investor-state carve out discussed here.
In view of this change, parties should review their current arbitration clauses to work out the governing law which will apply to them going forward. If you have arbitration clauses which are silent on the law of the AA, you can work out which law will now apply using our practical flowchart at page 3 here. When drafting clauses, to ensure maximum certainty and clarity, we continue to recommend that the clause itself expressly specify the law governing the AA. This is particularly important where the law of the matrix contract and the law of the seat are different.
The new rule may also impact case strategy, as it may limit the English court's ability to offer anti-suit relief in support of foreign-seated arbitrations (see our prior Legal Insight on this topic).
2. NEW SECTION 67 PROCEDURE TO CHALLENGE AWARDS
Under the 1996 Act, where a tribunal has ruled on jurisdiction, a party which objected to jurisdiction during the arbitration can challenge the award on jurisdictional grounds (under section 67).
Under a new procedure foreseen by the 2025 Act, when such challenges are brought in the future the court will not (i) entertain any new grounds of objection or any new evidence, or (ii) re-hear evidence already heard by the tribunal. There are exceptions, for example (i) is subject to a "reasonable diligence" test. This procedure promotes cost-efficiency and fairness since an unsuccessful party (before a tribunal) will not have a complete "re-run" before a judge.
Parties will need to carefully assess the new procedure, once adopted, and weigh up the pros and cons of their options to challenge jurisdiction (see 3. below).
3. CLARIFICATION IN RELATION TO JURISDICTIONAL CHALLENGES
The 2025 Act also clarifies that where a tribunal has ruled on its jurisdiction, parties cannot apply for a jurisdictional ruling from the court under section 32. Parties now have two options to challenge the jurisdiction of the tribunal – apply for: (i) a court ruling under s32; or (ii) a tribunal ruling on jurisdiction and then (if appropriate) challenge the award in court under s67.
The s32 and s67 reforms are mandatory provisions of the 2025 Act. Parties should therefore carefully consider the impact of these changes on their future disputes since parties cannot amend or waive them by agreement.
4. EXPRESS POWER OF SUMMARY DISPOSAL
In a drive to promote efficient arbitrations, the 2025 Act enables parties to apply for an expedited procedure to dispose of a claim/defence/issue where it considers another party has "no real prospect of succeeding" on it (a threshold with solid English jurisprudence to support it). This express power of summary disposal addresses some issues that parties have with the arbitration process.
The legislators have not been prescriptive as to the precise procedure (the only requirement is that all parties have a reasonable opportunity to make representations) so this offers ample flexibility. Parties can also agree to opt out of summary disposal in their AA or by agreement post-dispute, so parties will need to consider the advantages and disadvantages of doing so.
5. EMPOWERMENT OF EMERGENCY ARBITRATORS
As emergency arbitration ("EA") is becoming an increasingly common forum for parties to seek urgent interim relief, the 2025 Act has been modernised to give emergency arbitrators the same means as other arbitrators (i) to enforce their peremptory orders, and (ii) to grant parties permission to apply to court for a s44 order. Parties should have increased confidence in the EA process now that emergency arbitrators have more effective means of securing compliance with their decisions.
FINAL REMARKS
These reforms promote speed, fairness, efficiency, and legal certainty. They should ensure that London remains a first-class arbitral seat, allowing businesses to have full trust and confidence in the modernised arbitral framework.
Further detailed background to the reforms can be found at our dedicated page: Reforms to the Arbitration Act 1996 | Mayer Brown.
Part 2 of this series will be published shortly and will cover the remaining reforms under the 2025 Act and their impact.
