Arbitration Act 2025

International Arbitration | 14/04/2025

The Arbitration Act 2025 (the "Act") introduces amendments to the Arbitration Act 1996, ushering in changes to the arbitration landscape in England and Wales that are designed to:

+ Improve the efficiency, fairness, and effectiveness of arbitration proceedings;

+ Provide welcome clarity on key issues; and

+ Reinforce the already robust framework that regulates arbitrations in England and Wales.

This alert summarises the key changes that may impact your business.

Scope of application: The Act will apply to arbitration proceedings initiated after the Act's entry into force (a date yet to be set by the Secretary of State), as well as to court proceedings related to such arbitrations.

Key changes¹

1. Law applicable to the arbitration agreement

The law governing an arbitration agreement determines crucial issues, such as whether a dispute falls within the scope of an arbitration agreement, and which parties are bound by it.

It is distinguished from:

+ The law governing the main contract, which concerns the substantive rights and obligations under the contract; and

+ The law of the seat, which determines which laws will apply to the conduct of the arbitration, such as arbitration procedure and the grounds on which an award can be challenged or set aside in the local courts.

Parties are free to choose the law governing the arbitration agreement. But what happens if there is no express choice of law governing the arbitration agreement?

+ Previously, the governing law of the main contract would apply. If no governing law was chosen for the main contract, the court would decide which law governed the arbitration agreement (frequently, this would be the law of the seat of the arbitration).

+ Under the Act, the law of the seat of arbitration will now apply by default if no express choice is made. Importantly, an express choice of law to govern the main contract will not constitute an express choice of law to govern the arbitration agreement.²

What does this mean? Two key points are worth bearing in mind:

+ If you choose England as the seat of arbitration and have not expressly chosen the law governing the arbitration agreement, English law will be the law governing the arbitration agreement. England is an arbitration-friendly jurisdiction that seeks to uphold the validity and enforceability of arbitration agreements.

+ If you wish to apply a different law to govern the arbitration agreement, you will need to specify this in the arbitration agreement itself.

We would be happy to review any existing or future contracts to ensure they align with your requirements and to help you take full advantage of the arbitration-friendly framework in England.

2. Express power of summary dismissal

The Act creates an express power for arbitrators to dispose of claims or defences early where a party successfully demonstrates that those claims or defences have "no real prospect of success".

Most commentators and the Law Commission consider that this power was implicitly available to tribunals under the Arbitration Act 1996, although it was rarely used. The Act provides certainty in this regard and means that parties may be more emboldened to make such applications, and tribunals more willing to deploy such powers.

Weak claims could therefore be determined more efficiently, which may help focus the parties' minds on the core issues in dispute. As such, parties should consider whether: (a) their claim is ripe for summary disposal and prepare to defend against early determination applications; and (b) such claims should be brought altogether.

While this provision could result in significant cost and time-savings, parties will need to consider carefully the merits of their claims or defences before raising them, given the risk of being liable for costs where these are disposed of summarily, and the high threshold for achieving a successful summary disposal.

Parties should also note that they can agree to opt-out of this provision. We advise that, when drafting contracts, parties consider whether summary disposal is a desirable mechanism to resolve potential disputes and, if not, expressly exclude this power in their arbitration agreements.

3. No 'de-novo' review for jurisdictional challenges of awards

Under section 67 of the Arbitration Act 1996, a party to an arbitration seated in England and Wales can challenge an award of an arbitral tribunal as to its substantive jurisdiction.

The Act now largely prevents parties from introducing new evidence or objections that were not previously presented to the tribunal. Likewise, evidence already heard by the tribunal cannot be re-heard by the court, unless it serves the interests of justice, whereas the position previously was that parties were entitled to a full rehearing.

These changes highlight the importance of fully developing jurisdictional arguments, and supporting evidence, at the outset of or, at least, during, the arbitration proceedings. Parties must also be advised on the prospects of challenging or resisting enforcement of arbitral awards on jurisdictional grounds.

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Stephenson Harwood LLP's wealth of experience in advising and representing parties in arbitration proceedings means we are well placed to assist with any queries you may have.

¹ For a list of other changes, see the House of Commons, 'Research Briefing' dated 14 February 2025, available at: https://researchbriefings.files.parliament.uk/documents/CBP-10134/CBP-10134.pdf.

² This default rule will not apply to an arbitration agreement derived from legislation outside the United Kingdom or treaties, i.e. non-ICSID investor state claims. Note also that the default rule will not apply to ICSID arbitrations as they are governed by the ICSID Convention and the Arbitration (International Investment Disputes) Act 1966.