Arbitration Act 2025 — new legislation to strengthen UK’s position as dispute resolution leader

The Arbitration Act 2025 (AA 2025) received Royal Assent last week and will modernise the UK’s arbitration process. The Government’s accompanying press release explains that it aims to “re-enforce Britain’s position as the best place to resolve disputes without having to go to court”. The new law will be commenced through regulations “as soon as practicable”. 

The evolutionary legislation enhances and updates the existing Arbitration Act 1996 (AA 1996) which the Government considers will “ensure the UK remains the global destination of choice for the legal sector, outstripping competitors such as Singapore, Hong Kong and Paris”. It’s also expected to “attract even more businesses from around the world to invest in the UK”.

Here, experienced commercial litigator Matthew Moy explains what arbitration is and how the AA 2025 will help to clarify and refine key aspects of the arbitration process by improving efficiency, fairness and legal certainty.

What is arbitration? 

Arbitration is a form of alternative dispute resolution that offers parties a different way to resolve a legal dispute on a binding basis outside of the traditional court process. It’s a voluntary and consensual process, meaning that both parties must agree to submit their dispute to arbitration. This is usually something that the parties will have agreed on within their contract when they started doing business together.

Arbitration is the preferred method for resolving high value, cross-border disputes concerning parties across different countries and jurisdictions due to its flexibility and because hearings usually take place in private and documents disclosed are considered to be confidential. It’s also often used in smaller domestic disputes between contracting parties who simply prefer the benefits that the arbitration process can offer over the usual court process.

According to the Law Commission, there are around 5,000 domestic and international arbitrations each year in England and Wales, which contribute at least £2.5bn to the British economy in arbitrator and legal fees alone. 

Legislative journey

The Government asked the Law Commission to review the AA 1996 — which is now over 25 years old — to ensure that “the UK remains ahead of the curve when it comes to dispute resolution”. Following two rounds of consultation and a comprehensive report, the Law Commission proposed key reforms which have largely been adopted in the AA 2025. 

It was generally considered by the Law Commission that the AA 1996 was a successful piece of legislation which works well. Therefore, the intention was to enhance and fine-tune the existing legislation — rather than overhaul or significantly depart from it — with the aim of making the process fairer and more efficient. 

Key reforms under the AA 2025

1. Arbitrator’s duty of disclosure

While arbitrators have always been subject to a duty of impartiality, the AA 2025 introduces a statutory duty on them to disclose any circumstances that reasonably give rise to doubts as to their impartiality. 

The duty applies both before and during the arbitrator’s appointment and is based not only on their actual knowledge but also on issues that they ought to be aware of. The new law is an extension of good practice and a reminder to arbitrators to consider what disclosures to make.   

2. Clarification of the law governing arbitration agreements 

Under English law, an arbitration agreement is usually governed by the law of the underlying contract, unless stated otherwise. 

The AA 2025 confirms that if there’s no express choice of law clause in the contract, the governing law will now be the ‘seat’ of the arbitration (the place at which the arbitration is deemed to take place). This should improve legal certainty and efficiency by reducing satellite litigation over governing law, which can be costly and time-consuming.

3. Extension of arbitrator immunity

The AA 2025 broadens the scope of arbitrator immunity (protection from lawsuits) in relation to resignation and removal by providing that arbitrators incur no liability: 

1. for resignation, unless that resignation is deemed unreasonable
2. if a party makes an application to remove them, unless they’ve acted in bad faith. 

These provisions are welcome additional support to arbitrators with the objective of encouraging them to take up the role and to make impartial and independent decisions 

4. New power for summary dismissal 

The AA 2025 empowers arbitrators to summarily dismiss claims or defences that have “no real prospect of success” — similar to the test for summary judgment in the English courts. However, the power isn’t mandatory and the parties can agree to exclude it. 

While a number of arbitration bodies already contain procedures for early determination of claims, the AA 1996 contained no such provision. The aim is to promote a faster resolution of meritless and unwarranted claims in arbitration proceedings. 

5. Challenges to awards

Under the AA 1996, in cases where an objection has been made that the arbitrators lack jurisdiction (the power to make an award) – and the arbitrators have previously ruled on this – any later challenge to an award on the same basis may have resulted in a full rehearing on the point with a reassessment of both the facts and legal issues.  

The AA 2025 introduces a more limited review process by:

1. preventing rehearing of evidence that has already been heard unless it’s in the interests of justice.
2. preventing new grounds of objection or new evidence from being submitted unless it couldn’t have been discovered earlier using reasonable due diligence. 

Again, the intention is to save time and costs by removing unnecessary duplicate hearings. 

Arbitration reforms — key takeaways

The AA 2025 introduces some welcome amendments and clarity to make the arbitration process fairer and more efficient by simplifying procedures to reduce costs and protecting arbitrators from unreasonable litigation. It is hoped that it will further enhance the UK’s leading position as a global destination for dispute resolution (in particular, international arbitration) and attract more international business.

Parties drafting commercial agreements with arbitration clauses should pay particular attention to the reforms and carefully consider whether any updates are required to their standard clauses. In particular, parties should consider the impact of dismissal of claims, challenges to awards and the governing law of the arbitration. Each of these points could significantly influence the arbitration process and outcome. 

Talk to us 

If you require advice on arbitration or any other forms of alternative dispute resolution, talk to our expert commercial litigators today.

Give us a call on 0333 004 4488, send us an email at hello@brabners.com or complete our contact form below.