Here we discuss four key reforms to the Arbitration Act 1996 that will be relevant to commercial parties:
Summary disposal
In a change that will be widely welcomed, the Arbitration Act 1996 will now provide expressly that an arbitral tribunal can determine an issue before it on a summary basis. Although the consensus among practitioners has been that arbitral tribunals seated in England and Wales already have an implicit power to make summary decisions, the lack of express provision had meant that some tribunals were reluctant to exercise this power in practice. This had been seen as a disadvantage of arbitration by commercial parties, who want to know there is a speedy mechanism available for deciding entirely unmeritorious claims should they need it (for example lenders who want to be able to seek summary determination of a debt claim should a borrower fail to pay under a loan). The amendments to the 1996 Act make it clear that, on the application of a party to the proceedings, an arbitral tribunal can dispose of a dispute summarily if a claim, issue or defence has no real prospect of success (mirroring the approach taken by the English courts to the summary determination in litigation).
This approach promotes certainty by providing a clear, widely recognised standard for early determination of disputes that is arguably less exacting than the “manifestly without merit” test seen in many sets of institutional arbitration rules, making the power more relevant and accessible in practice. Parties who wish to rely on this mechanism may wish to consider amending provisions in institutional rules that set this higher bar. It will be interesting to see how often and in what circumstances tribunals exercise this new power in practice.
Law governing the arbitration agreement
The 2025 Act will introduce a new provision on the law governing the arbitration agreement. Section 6A of the 1996 Act will now make it clear that the law applicable to an arbitration agreement will be:
- the law that the parties expressly agree applies to the arbitration agreement; or
- in the absence of agreement, the law of the seat of arbitration.
This represents a change to the current position under English common law which in broad terms provides that, in the absence of an express choice, the law governing the wider contract is likely to apply.
This change in the default rule on governing law is sensible, both substantively because it is, on balance, more appropriate that the law of the seat should apply than the law of the matrix contract; and practically, because the rule is clearer and more certain than the existing position under English law.
That said, it continues to be advisable for parties to specify a governing law for their arbitration clause where the seat of arbitration and the law of the main contract differ. This is because the courts of other jurisdictions may not take the same approach as the English courts to this question.
Interim relief – emergency arbitrators and third parties
Emergency arbitration did not exist when the 1996 Act was passed, but in recent years many arbitral institutions have introduced rules providing for emergency arbitration, which is a mechanism for obtaining emergency relief (such as preservation of evidence) before an arbitral tribunal is constituted. This results in an interim decision from an emergency arbitrator, which can be modified by the arbitral tribunal at a later stage once that tribunal is fully constituted.
The 2025 Act amends the 1996 Act to make it clear that emergency arbitrators may issue peremptory orders and that these orders will be enforceable in the same way as peremptory orders of an arbitral tribunal. (In broad terms, a peremptory order is one where particular consequences may ensue if a party does not comply.) The 2025 Act also makes it clear that emergency arbitrators can give permission for a party to apply to court for interim relief in support of arbitration.
Emergency arbitration can be a useful tool for parties that need urgent relief. Bolstering the enforceability of emergency arbitrators’ decisions in this way will therefore provide welcome support for the process.
The 2025 Act also makes it clear that the court’s power to order interim relief in support of arbitration includes the power to make orders in relation to third parties. This is a significant power because an arbitral tribunal has no power over non-parties to the arbitration agreement.
Challenges to awards based on lack of jurisdiction
The Act sets the stage for the introduction of new court rules imposing restrictions on a party wishing to challenge an arbitral award in the English courts on the basis that the tribunal lacked jurisdiction. It is expected that the new rules will limit the scope for parties to put forward new grounds of challenge or new evidence unless they could not with reasonable diligence have put these to the tribunal, and will prevent parties putting forward evidence already put to the tribunal, subject to the court ruling otherwise in the interests of justice.
Reforms not made
Reforms were considered in certain other areas but ultimately the decision was not to make changes. First, the Law Commission decided against trying to codify the duty of confidentiality in English arbitrations on the basis that this was too difficult (just as the drafters of the 1996 Act had concluded). Secondly, the Law Commission decided to leave undisturbed the unusual provision in the 1996 Act which allows appeals on a point of law to the Commercial Court with the parties’ consent. This decision rightly leaves open the option of an appeal if the parties want it. Thirdly, at a late stage, consideration was given to whether the reforms should address concerns about the impact of corruption in arbitration, following the high-profile decision in Nigeria v P&ID. However, it was decided that the 1996 Act adequately addressed instances of corruption (as illustrated by the Nigeria v P&ID decision itself).
A positive development for arbitration in England and Wales
The changes introduced by the Arbitration Act 2025 represent the first significant reforms to the UK’s statutory arbitration framework since the introduction of the Arbitration Act 1996, almost thirty years ago. The relatively light touch nature of these changes is testament to the success of the 1996 Act, which has proved to be an effective framework for the conduct of arbitration in London over the last three decades, for both commercial parties and practitioners alike.
The amendments are not yet in force but the Government has stated that it aims to introduce the necessary regulations to achieve that “as soon as practicable”. Collectively, the enhancements should help to ensure that England and Wales continues to be a leading seat of arbitration for commercial parties globally.
The amendments (once in force) do not require changes to how arbitration clauses are drafted. However, as noted above, it remains our view that it is sensible to specify a governing law for the arbitration clause when the seat and the governing law of the main contract are different. Parties may also wish in English-seated cases to consider whether to amend the “manifestly without legal merit” standard for summary disposal found in many institutional rules if they prefer the somewhat lower “no real prospect of success” standard in the new statute – although this is a counsel of perfection rather than a necessary amendment.
