Overview
First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement.
On February 24, 2025, the UK Arbitration Act 2025 (the Act) received Royal Assent. The Act is the culmination of a process that began in 2021 to modernize the Arbitration Act of 1996 (the 1996 Act) and provides welcome clarity on key issues impacting international arbitration in England & Wales. The amendments to the 1996 Act are incremental and are consistent with developments in other leading arbitration seats internationally.
The bill was initially introduced by the Conservative Government shortly before the 2024 UK general election. It was subsequently reintroduced by the Labour Government with a small change regarding the applicable law for investment treaty arbitrations.
The Act will take effect once forthcoming regulations are introduced by the Secretary of State. The government has indicated that these regulations will be introduced "as soon as practicable," which we take to mean sometime later this year. The Act will apply to any arbitration or court proceeding that is brought regarding an arbitration commenced after the date on which the Act takes effect.
Applicable Law
The Act introduces a new default rule for determining the applicable law of an arbitration agreement, stipulating that the law governing the arbitration agreement will be the law of the seat of arbitration, unless the parties have expressly agreed otherwise (Section 6A 1996 Act). Importantly, the Act clarifies that the law of the main contract will not be considered as indicative that the parties intended for the same law to apply to the arbitration agreement. This is a reversal of the common law position that had existed since 2020, which treated the governing law of the main contract as generally extending to the arbitration agreement (Enka v Chubb [2020] UKSC 38). There is also a carve-out for investment treaty arbitrations, which are not subject to the new law.
Jurisdictional Challenges
Under the current 1996 Act, a jurisdictional challenge to an award in an arbitration tribunal could result in a de novo review before the court. The Act will both narrow the options available to parties that have already challenged the jurisdiction of the arbitration before the tribunal and prevent parties from relying on new arguments and evidence that have already been put forward in the challenge before the tribunal (Section 67 1996 Act). Parties will no longer be able to challenge the jurisdiction of the arbitration before a court unless new evidence has come to light since the arbitration has concluded, or unless the party wishes to have the court reconsider the same grounds for objection without rehearing any evidence.
Arbitrators' Duty of Disclosure
Arbitrators now have a statutory duty to disclose any relevant circumstances they become aware of which may give rise to justifiable doubts regarding their impartiality (Section 23A 1996 Act). This reflects a codification of the existing common law duty set out in Halliburton Co. v. Chubb Bermuda Insurance Ltd [2020] UKSC 48 and extends to where an arbitrator ought reasonably to know of any relevant circumstances.
Summary Dismissal
The Act provides an express power to arbitrators to make an award to summarily dismiss a claim where the tribunal considers that a party has no real prospect of success in its claim or defense (Section 39A 1996 Act). The tribunal’s power is exercisable on application by a party and all applications must be made on notice to the other parties. This power sets the UK apart from other leading arbitration jurisdictions like France and New York, where arbitrators do not have express powers to dismiss claims.
Emergency Arbitrators
At the time the 1996 Act was enacted, emergency arbitrators were not a feature of international arbitration. Emergency arbitrators are now expressly recognized by the Act and have the power to issue pre-emptory orders that are enforceable by the court (Section 41 and 42 1996 Act) and to give permission for non-urgent applications to be made to the court (Section 44 1996 Act).
Other notable changes introduced by the Act include:
- The Act extends the immunity of arbitrators to include circumstances in which the arbitrator has resigned, providing the resignation was not unreasonable (Section 29 1996 Act), and in respect of the costs of an application for their removal, providing they have not acted in bad faith (Section 24 1996 Act), and
- Courts now have the power to make orders against third parties for interim relief in support of arbitration proceedings (Section 44 1996 Act).
Implications
The Act represents an important evolution in the arbitration framework of the UK and will help to ensure that London remains a leading arbitration seat into the future. It should be noted that, although the Act brings in some important developments, the general UK arbitration framework as per the 1996 Act remains unchanged.
Moving forward, parties should take care to identify the governing law of the arbitration agreement, particularly where it is intended for the governing law of the arbitration agreement to differ from the governing law of the main contract. Parties should also be mindful of the express powers now conferred on arbitrators to summarily dismiss claims and on emergency arbitrators to issue pre-emptory orders, each of which will be powerful tools into the future.
The changes to the applicable law of arbitration agreements and the codification of the arbitrators' duty of disclosure provide welcome clarity and certainty on issues central to the arbitration agreement and the tribunal. The Act also streamlines the process by which parties can apply to have claims summarily dismissed and reduces the delay and inefficiencies caused by the old jurisdictional challenge process. For arbitrators, the Act will provide important protections and minimize the risk of litigation from hostile and disgruntled parties.
