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New English arbitration reforms clear Parliament and are set to become law
New English arbitration reforms clear Parliament and are set to become law
13 February 2025
Series
Blogs
13 February 2025
As we reported yesterday, the Arbitration Bill has now cleared the UK Parliament and is set to become law (likely as the Arbitration Act 2025)
We take a look at the resulting reforms that will be made to English arbitration law, for which parties should prepare.
What has happened?
As previously discussed, the UK Government’s Arbitration Bill has been progressing through Parliament. Having started in the House of Lords, it cleared its passage through the Commons on 11 February 2025, and, as the status on the UK Parliament Tracker confirms as of today's date, it is "now pending Royal Assent" (which is itself a formality). The Bill will then become an Act, likely the Arbitration Act 2025 (2025 Act).
The 2025 Act will not be a “stand-alone” Arbitration Act. Instead, it will insert a number of amendments into the Arbitration Act 1996 (AA) itself (the AA being the main statute that regulates arbitration in England & Wales, and Northern Ireland). In overview, the main reforms are as follows:
Applicable law of an arbitration agreement: Introduction of a new default rule in favour of the law of the seat of arbitration; albeit with provision for the parties to agree otherwise (for example, in favour of the law of their main contract) provided they do so specifically.
Codifying arbitrators’ duty of disclosure: Placing the duty of disclosure laid down in Halliburton v Chubb on a statutory basis. The rationale is to make the rule more accessible, and extend it to pre-appointment discussions, whilst keeping the flexibility of the case-law.
Immunity of arbitrators: Extending protection to resignation (unless it was unreasonable) and costs liability in respect of applications for an arbitrator’s removal (unless they have acted in bad faith).
Summary disposal: The inclusion of a default power of summary disposal, exercisable on application by a party, and subject to a test of no real prospect of success on the relevant issue.
Section 44 AA and third parties: In order to resolve a debate as to whether orders under s.44 AA (powers of the court to support arbitral proceedings) can be granted against third parties, amendments make clear the target being a third party is not, per se, a bar. The powers are simply to be the same as the court has in relation to court proceedings.
Emergency Arbitrators (EAs): Amendments to aid the enforcement of their orders in two ways. By allowing them to (i) following non-compliance, issue a peremptory order which can be enforced by the court and (ii) allowing an EA to give permission for an application under s.44 AA to be made.
Challenges to a tribunal’s award on jurisdiction under s.67 AA: amendments to permit court rules to be made which, in such cases, would, limit the ability of parties to rely on new grounds, or evidence, before the court, and restrict its ability to re-hear evidence (subject to the court ruling otherwise in the interests of justice).
Court determinations of a preliminary point of jurisdiction (s.32AA) or of a point of English law (s.45AA). Changes are made to the ability of the English court to hear such matters in cases (as is more usual) where the parties have not (positively) agreed to the same. In both, although the need for tribunal consent is retained, the court is to have a general discretion as to whether to proceed (rather than being required to consider certain, enumerated, matters).
When in force?
Once the formality of Royal Assent takes place, the Bill will fully enter the statute book. Then, its reforms will come into force on a date (or dates) to be specified by statutory instrument. And, unless stated differently therein, they will apply to any arbitration (or any court proceedings related to such an arbitration) commenced on or after the date the relevant reform came into force (s.17 2025 Act).
With the Bill’s substantive passage now complete, however, this is all likely to be only a matter of a short period of time. So, it would be prudent for parties to now familiarise themselves with the reforms and how they may affect any anticipated English seated arbitrations, or the drafting of English seated arbitration agreements.
Any new drafting points for English seated arbitration agreements?
The reforms are evolution, not revolution, but there are a couple. First, despite the new rule on applicable law, it will remain prudent, in cases where the law chosen to govern the main contract is not English law, but the seat is England, to specifically designate the law applicable to the arbitration agreement. Second, the changes to s.45AA (a non-mandatory section) mean that, assuming the usual aim of minimising court intervention in the tribunal’s decision making, it may be more prudent, in the interests of avoiding debate and promoting efficiency, to now opt-out of the operation of that section.
Click here for more a more in-depth look at these developments, and the issues above, by our London based members of our International Arbitration Group.
Update: On 24 February, Royal Assent to the Arbitration Bill, as passed, was granted, resulting in it becoming the Arbitration Act 2025. Furthermore, in July, the statutory instrument was made establishing the date on which the reforms enacted by the 2025 Act come into force. That date was set as 1 August 2025 (see here for more).