Clifford Chance

Reforms to English Arbitration Act 1996 receive Royal Assent

The Arbitration Act 2025 (the 2025 Act), which received Royal Assent on 24 February 2024, introduces limited reforms to the Arbitration Act 1996 (the 1996 Act), based closely on the Law Commission final proposals in 2023.

Background

In a previous briefing in September 2023, we covered the Law Commission's final proposals for updates to the Arbitration Act 1996. Since that time, the Arbitration Bill, which the Law Commission described as "based closely on [its] recommendations" was introduced into Parliament and had its first reading on 21 November 2023.

The unexpected General Election called on 22 May 2024 had the effect of proroguing Parliament on 24 May 2024. Consequently, any bills which had not received Royal Assent by this time (including the Arbitration Bill, which was only progressing through its legislative stages before a Special Public Bill Committee) fell and needed to be re-introduced in the next Parliament.

The Arbitration Bill was re-introduced into Parliament on 18 July 2024, following which, it passed through various readings in the House of Commons and House of Lords largely unchanged.

Key Provisions

1. Governing law of arbitration agreement: The 2025 Act introduces a new section 6A to the 1996 Act, which provides that an arbitration agreement will be governed by the law expressly agreed by the parties to apply, failing which, it will be governed by the law of the seat of the arbitration (section 6A(1), 1996 Act). This reverses the previous rule confirmed by the UK Supreme Court in Enka Insaat ve Sanayi AS v OOO "Insurance Company Chubb", which treated an express choice of the governing law of a matrix contract as an implied choice of governing law of an arbitration agreement contained therein.
   
   While not the subject of the Law Commission's proposals, following a first reading in the House of Lords on 18 July 2024, the draft bill was amended to include a carve out to the new governing law provision in respect of arbitration agreements contained in treaties or legislation of a country our territory outside the UK (section 6A(3), 1996 Act).
2. Section 67 (challenging the award: substantive jurisdiction): The 2025 Act also adds a new section 67(3B) and (3C) to the 1996 Act, with the effect of limiting the circumstances under which a party challenging an award on the basis of a tribunal's substantive jurisdiction can rely on: (i) new grounds of objection or new evidence, unless it could not with reasonable diligence have been put before the tribunal; or (ii) evidence already heard by the tribunal, in each case, subject to the court ruling otherwise in the "interests of justice".
   
   Previously, a challenge to an award brought under section 67 entailed a full rehearing of the matter, regardless of whether the same issues were heard before the tribunal, which had the potential to generate significant additional costs.
3. Arbitrator disclosure of conflicts: A new section 23A to the 1996 Act provides for the codification of arbitrators' continuing duty under common law to disclose circumstances which might reasonably give rise to justifiable doubts as to their impartiality (for more on the duty, see our earlier briefing 'Supreme Court clarifies test of arbitrator impartiality and arbitrators' duty of disclosure'). The duty of disclosure is based on what the arbitrator 'ought reasonably to be aware' (section 23A(3)(b), 1996 Act).
4. Summary disposal: A new section 39A to the 1996 Act expressly empowers tribunals to (unless otherwise agreed by the parties), on the application of a party, issue an award on a summary basis. A tribunal could dispose of a claim or defence on a summary basis where it deems that a party has 'no real prospect of succeeding' on the issue. This is a welcome update which introduces a summary disposal or early determination procedure already found in the rules of numerous leading arbitral institutions.
5. Section 44 (court powers exercisable in support of arbitral proceedings): The 2025 Act amends sections 44(1) and (7) of the 1996 Act, such that orders made under section 44 can be made against third parties (for example, an order in respect of the preservation of evidence). Third parties would have a right to appeal without requiring the court's consent which, by contrast, a party to arbitration must obtain.

As noted in our previous post, the Law Commission notably decided against (i) proposing changes to section 69 of the 1996 Act (appeal on point of law); (ii) including an express prohibition on discrimination in arbitration; or (iii) imposing a default rule on confidentiality, and the 2025 Act does not introduce any changes in respect of these issues.

Additionally, Parliament did not feel it was appropriate for the Arbitration Bill to address the issue of corruption in arbitration, which recently came into focus following the High Court's judgment in The Federal Republic of Nigeria v Process & Industrial Developments Limited (for more on the judgment, see our earlier briefing 'High Court upholds Nigeria's serious irregularity challenge to $11 billion award'). That judgment was handed down after the Commission's proposals and therefore not addressed in the public consultation.

Comment

The substantive parts of the 2025 Act will come into force on date(s) to be specified in due course. The 2025 Act introduces long-awaited, measured updates to the existing regime, enhancing the efficiency and user experience of arbitrating disputes in London, while recognising and preserving the fundamentals of the 1996 Act that contributed to its success. These are welcome changes which should help to maintain London's position as a world-leading seat of arbitration.

The 2025 Act can be found here.