The Arbitration Act 2025? Arbitration Bill Set to Become Law

On 11 February 2025, the UK Arbitration Bill 2024[1] completed its legislative journey through the House of Commons. All that remains before the Arbitration Bill becomes law, (presumably as ‘the Arbitration Act 2025’) is the formality of royal assent. This article reflects on what changes lie ahead and why they were necessary.

Background to the UK Arbitration Bill 2024

The Arbitration Act 1996 (“the 1996 Act”) sets out the current framework for arbitration in England and Wales. That framework has proven to be an impressive success; a survey in 2021, showed that London was the most preferred arbitral seat in the world.[2]

Nevertheless, in 2022 the Law Commission of England and Wales began a review of the current framework to ensure that it ‘remained state of the art’ and supported England and Wales as ‘a leading centre for commercial arbitration’.[3]

The subsequent Law Commission Report identified seven ‘major initiatives’: (1) codification of the arbitrators duty of disclosure; (2) strengthening arbitrator immunity; (3) introducing a power of summary disposal; (4) improving the framework for challenges under Section 67; (5) a new default rule for determining the governing law of the arbitration agreement; (6) clarifying the court’s powers in support of arbitral proceedings and (7) addressing emergency arbitrators.

Most of the Law Commission’s recommendations were incorporated into the Arbitration Bill 2023 (introduced under the previous Conservative Government but which was not enacted prior to the dissolution of the parliament). The bill was subsequently reintroduced by the Labour Government as the Arbitration Bill 2024 (“the Arbitration Bill”).

The Key Changes to the 1996 Act

Given that the 1996 Act was considered by respondents to the Law Commission’s consultation to be fit for purpose and working well, the Law Commission Report did not recommend a wholesale change to the statutory framework. Instead the ‘major initiatives’ are addressed by way of amendments to the 1996 Act.

The most significant changes to the 1996 Act in the Arbitration Bill are as follows:

1. New Default Rule on the Governing Law of the Arbitration Agreement:

The current position as decided by the Supreme Court in Enka v Chubb[4] is that, in the absence of an express party choice of governing law of the arbitration agreement, the law of the main contract containing the arbitration agreement governs the latter.

A new Section 6A (to be inserted into the 1996 Act)[5] will provide that the law applicable to the arbitration agreement is (a) the law that the parties have expressly agreed applies; or, in the absence of express agreement, (b) the law of the seat of the arbitration. Significantly, section 6A(2) provides that ‘agreement between the parties that a particular law applies to an agreement of which the arbitration agreement forms a part does not constitute express agreement that the law also applies to the arbitration agreement’.

Essentially, the new default rule is that the arbitration agreement will be governed by the law of the seat unless the parties have expressly agreed otherwise.

However, the default rule will not apply to investor-state arbitrations where the arbitration agreement arises out of standing offers to arbitrate in treaties or non-UK legislation.[6] In the case of non-ICSID investor state arbitration agreements, the applicable law will fall to be determined by arbitral tribunals based on the relevant treaty or instrument in each case.

The new default rule will not apply to arbitrations or court proceedings commenced prior to the Arbitration Bill coming into force. However, the new default rule will otherwise apply (subject to any saving provisions) to all arbitration agreements regardless of when they were entered into.[7]

2. Arbitrator’s Statutory Duty of Disclosure:

The 1996 Act contains an express duty of impartiality (and power to apply to remove an arbitrator on the grounds of impartiality). Following the recommendations of the Law Commission, the UK Arbitration Bill provides for an express duty of disclosure to support the existing duty of impartiality. A new Section 23A (to be inserted into the 1996 Act),[8] imposes a (continuing) statutory duty to disclose to the parties any circumstances which might reasonably give rise to justifiable doubts as to an individual’s impartiality. In addition, the new Section 23A(3) addresses the arbitrator’s state of knowledge: a potential arbitrator will be required to disclose what they actually know and what they ought reasonably to have known.

Placing the duty of disclosure on a statutory footing increases certainty for all parties because: (i) the statutory duty does not rely on the implication of a contractual term into an appointment contract; and (ii) the duty extends to pre-appointment discussions (the statutory duty applies as soon as a person is ‘approached in connection with a possible appointment’).

3. Arbitrator Immunity (in respect of resignation and application for removal):

The scope of arbitrator immunity (in Sections 24 and 25 of the 1996 Act) will be extended: (i) to prevent arbitrators being liable in respect of resignation (unless it can be shown that the resignation was unreasonable) and (ii) to provide that arbitrators will not be ordered to pay costs in proceedings for their removal unless the arbitrator is shown to have acted in bad faith.[9]

4. New Power of Summary Disposal:

The 1996 Act does not contain any explicit provisions in respect of summary disposal of issues in the context of arbitration proceedings (although early determination and summary disposal procedures exist under many arbitral rules). The Arbitration Bill provides for a new Section 39A to be inserted. It contains an express power for the arbitral tribunal to make an award on a summary basis if a party has no real prospect of succeeding on that aspect of their case or issue.[10] The new power of summary disposal is only exercisable by the tribunal on an application by a party and where the parties have not otherwise agreed to exclude the power of summary disposal.

5. Emergency Arbitrators

Some arbitral rules (e.g. CIArb Arbitration Rules 2015, ICC Arbitration Rules and LCIA Arbitration Rules) provide for the appointment of emergency arbitrators on an interim basis (prior to the arbitral tribunal being fully constituted). The 1996 Act has no provisions dealing with emergency arbitrators. The Arbitration Bill inserts new Sections 41A and 42 into the 1996 Act to support the enforcement of orders made by emergency arbitrators (where their appointment is permitted under the applicable rules of the arbitration). Emergency arbitrators will have the same powers as the fully constituted tribunal to enforce peremptory orders and to give permission to the parties to apply to the court under section 44 of the 1996 Act.[11]

6. Orders in Support of Arbitration in respect of Third Parties:

The Arbitration Bill amends Section 44 of the 1996 Act to clarify that the court’s powers under that section (e.g. in respect of preservation of evidence, sale of goods, appointment of receivers etc.) apply in respect of ‘a party or any other person’.[12]

7. Challenges to Awards under Section 67

At present, challenges to awards on jurisdictional grounds may take place by way of a full rehearing before the Court (even where there has already been a full hearing on the matter before the tribunal). [13] The Law Commission expressed concern that in such cases: (i) the first hearing before the tribunal serves as an expensive and time consuming ‘dress rehearsal’ for a later full hearing before the court; and (ii) allowing ‘two bites of the cherry’ was fundamentally unfair. [14] The Arbitration Bill amends Section 67 of the 1996 Act to include new sub-sections (3B) and (3C).[15] The effect of those amendments is that, where the tribunal has ruled on its own jurisdiction, in any subsequent challenge under section 67, by a party who has taken part in those arbitral proceedings, unless the interest of justice demand otherwise, the court will not: (i) entertain new grounds of objection or new evidence (unless the applicant can show that, even acting with reasonable diligence, the ground or evidence could not have been put before the tribunal); or (ii) re-hear evidence.

The 1996 Act has been instrumental in establishing London as a leading hub for arbitration. The amendments to the 1996 Act in the Arbitration Bill are definitely desirable improvements; they provide increased clarity and promote the efficacy and efficiency of the arbitral process. However, there are also some challenges for parties and their advisors. Parties who are yet to commence arbitral proceedings may need to reappraise their positions on the governing law of the arbitral agreement or revise their intended approach to any jurisdictional challenge before the tribunal.

Article by Aileen McErlean.

Sign up here to join members of Gatehouse Chambers’ Commercial Arbitration Team for a Brew on 18 March to discuss the impact of the changes.

[1] https://publications.parliament.uk/pa/bills/cbill/59-01/0057/240057.pdf

[2] Queen Mary University London and White & Case LLP, 2021 International Arbitration Survey: Adapting arbitration to a changing world (2021).

[3] Law Commission of England and Wales, ‘Review of the Arbitration Act 1996: Final report and Bill’, Law Com No.413 at §1.8.

[4] [2020] UKSC 38

[5] Arbitration Bill 2024-25 at Clause 1(2).

[6] See carve out in proposed  new Section 6A(3) and(4) (which did not appear in the earlier version of the bill under the previous government).

[7] See Arbitration Bill 2024-25 at Clause 17(4).

[8] Arbitration Bill 2024-24 at Clause 2.

[9] Arbitration Bill 2024 Clauses 3 and 4.

[10] Arbitration Bill 2024 Clause 7

[11] Arbitration Bill 2024 Clause 8

[12] Arbitration Bill 2024 at Clause 9.

[13] Dallah Real Estate & Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46

[14] Law Commission Report 2023 at §9.4-9.19

[15] Arbitration Bill 2024 Clauses 10 to 12.