The Arbitration Act 2025: Evolutionary reform to ensure the UK maintains its place as a world-leading dispute resolution forum

Modernising the English Arbitration Act 1996 has been an important priority for the UK Government for some time. With the Arbitration Bill having received Royal Assent on 24 February 2025, the Arbitration Act 2025 (the 2025 Act) will soon come into force, introducing targeted reforms aimed at strengthening the UK’s position as leading global hub for commercial arbitration and other alternative dispute resolution mechanisms.

We summarise the key reforms introduced by the 2025 Act below and discuss their potential impact on parties involved in commercial arbitrations, including insurers.

Background

The 2025 Act marks the culmination of the Law Commission’s efforts to reform the procedural framework governing arbitrations in England and Wales.

Prior to receiving Royal Assent, the Arbitration Bill — incorporating the majority of the Law Commission’s recommendations outlined in their final report (discussed in our previous article) — was first introduced in November 2023. Its legislative journey was halted when Parliament was dissolved ahead of a general election. The bill was later reintroduced on 18 July 2024 and has since completed its passage through Parliament.

The Government hopes that the 2025 Act will “turbocharge the UK’s position as the world-leader in arbitration” by (i) making arbitration “fairer and more efficient by simplifying procedures to reduce costs” and (ii) strengthening “courts’ powers to support emergency arbitration so time-sensitive decisions can be made more easily”.

To achieve this, the 2025 Act will apply to all arbitration proceedings commenced after its official entry into force, in addition to any court proceedings brought in relation to arbitration proceedings commenced after the same date. However, any arbitral proceedings initiated before the 2025 Act comes into force will continue to be governed by the Arbitration Act 1996, unaffected by the new reforms.

Key reforms introduced by the 2025 Act

Clarification of the governing law of arbitration agreements

Under English law, an arbitration agreement is generally governed by the law of the underlying contract unless explicitly stated otherwise. The 2025 Act introduces an important clarification to this position: the law applicable to an arbitration agreement is the law that the parties expressly agree upon, or, in the absence of such an agreement, the law of the seat of the arbitration.

The 2025 Act also introduces an exception to this new default rule for investor-state arbitrations, where the arbitration agreement arises from a treaty or non-UK legislation.

Codification of arbitrators’ duty of disclosure

The 2025 Act establishes a statutory duty for arbitrators to disclose any circumstances which might reasonably give rise to justifiable doubts as to their impartiality. This duty, which codifies the common law principle arising from Halliburton v Chubb [2020], applies both before and throughout an arbitrator’s appointment and is based not only on their actual knowledge but also on issues of which they ought reasonably to be aware.

Extension of arbitrator immunity

The 2025 Act also broadens the scope of arbitrator immunity, protecting arbitrators from liability for resignation unless the resignation is deemed unreasonable. Furthermore, in circumstances where a party applies to court to remove an arbitrator, the 2025 Act establishes that an arbitrator cannot be ordered by the Court to pay costs in proceedings unless any act/omission of the arbitrator is shown to have been in bad faith.

Introduction of new tribunal power for summary dismissal

In an attempt to promote efficiency and reduce the burden of unwarranted claims in arbitration proceedings, the 2025 Act introduces a significant change by granting tribunals the power to summarily dismiss unmeritorious claims or defences.

Under the new provisions, an arbitral tribunal can, upon application by a party, make an order for summary dismissal if it considers that a claim, defence, or particular issue has “no real prospect of success”.

To ensure fairness, the 2025 Act (i) mandates that parties must be given a reasonable opportunity to present their case before a summary dismissal is ordered, and (ii) provides parties with the option to opt out of this particular tribunal power, either through their arbitration agreement or a subsequent agreement.

Empowerment of emergency arbitrators

To support certain institutional arbitral rules (such as the 2021 ICC Rules and 2020 LCIA Rules), which provide for the appointment of an emergency arbitrator, the 2025 Act expressly grants emergency arbitrators the same powers as a fully constituted tribunal to (i) enforce peremptory orders, and (ii) permit the parties to apply to the court under Section 44 (i.e., the provision which empowers the court to make orders in support of arbitral proceedings). These powers are designed to enhance the enforceability of interim measures ordered by emergency arbitrators.

Introduction of new procedure for jurisdictional challenges

Currently, challenges to an arbitral award on the grounds of jurisdiction under Section 67 of the Arbitration Act 1996 (i.e., whether the tribunal had the authority to make the award) may result in essentially a full rehearing in court. This is because the court will reassess both the facts and legal issues, effectively conducting a new hearing on the jurisdictional matter.

The 2025 Act introduces significant changes to the process of jurisdictional challenges. Except in the interests of justice, when a Section 67 challenge is brought, the court will not: (i) entertain new grounds of objection or new evidence, unless the applicant can demonstrate that, even with reasonable diligence, the ground or evidence could not have been presented to the tribunal; or (ii) rehear any evidence.

Positive changes, but some missed opportunities

While the general approach has been to leave the Arbitration Act 1996, which now has almost 30 years of mostly successful operation behind it, intact, the 2025 Act introduces a series of important amendments designed to streamline the arbitral process, fostering greater efficiency, transparency, and clarity.

The clarification of the governing law of arbitration agreements, the tribunal’s new power to summarily dismiss claims, and the empowerment of emergency arbitrators are particularly welcome reforms and ensure that the UK’s arbitration legislation aligns with trends in practice.

Overall, the reforms introduced by the 2025 Act are expected not only to enhance the experience for parties involved but also to solidify the UK's reputation as a leading global hub for dispute resolution, reinforcing its position at the forefront of international arbitration.

Nevertheless, in line with the Law Commission's recommendations and the evolving challenges in the arbitration landscape, the 2025 Act has remained relatively cautious in the changes introduced and could have gone further

For example, while it addresses some concerns, it could have sought to regulate third-party funding and tackle both corruption in arbitration and the rise of artificial intelligence. As these challenges continue to evolve, future amendments to the 2025 Act may be needed to maintain fairness, transparency, and the UK’s position as a leading hub for dispute resolution.

Comment

The 2025 Act raises a number of practical implications for parties involved in commercial arbitrations, including insurers.

Where existing contracts contain arbitration clauses that refer to the current Arbitration Act 1996, it will be important to carefully analyse the contract and consider whether the existing rules apply or if the new scheme laid out under the 2025 Act applies. Contracts commonly include a clause deeming references to existing legislation to refer to any successor legislation, but this is not universal.

In the context of future contracts, parties may now want to include an express choice of law provision in their arbitration agreements, especially where their contract is governed by English law but the seat of arbitration is outside of England. Moreover, parties should carefully consider the impact of the 2025 Act's provisions on potential jurisdictional challenges, summary dismissal claims, and emergency arbitrations, as these could significantly influence the arbitration process and outcome.

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