The Arbitration Act 2025 (the “Act”), which received royal asset in February 2025, is the culmination of a long reform process dating back to 2021. The consultation process by the Law Commission of England and Wales revealed a broad consensus that the previous existing framework was fundamentally robust but there was room for improvement to enhance efficiency and clarity. The approach to the Act has, therefore, been one of evolution rather than revolution and has aimed at maintaining London’s status as a leading arbitration hub in an increasingly competitive global market.
The Act aims to modernise the English Arbitration Act 1996 and bring in a series of reforms. These reforms represent targeted amendments to tackle issues and ambiguities that have been raised in the past decade. It is fair to say the Act is focused on clarification and refinement rather than wholesale redefinition.
It is worth highlighting several high-level changes to the Arbitration Act 1996, and considering any impact these reforms might have in relation to third party funding and arbitrations seated in England and Wales.
Arbitrator’s disclosure and immunity
Firstly, arbitrators now have a codified statutory duty to disclose any circumstances that might give rise to justifiable doubts about their impartiality. This duty is ongoing – an arbitrator must assess potential conflicts and disclose relevant information throughout the arbitration, not just upon appointment. This should reduce challenges to arbitrators (a tactic some parties used in the past to derail or delay proceedings) and lead to greater transparency throughout the proceedings.
However, the Act also expands arbitrator immunity. The reforms make it clear that arbitrators cannot be sued for resigning from a case, and they are not liable for costs orders if their decisions are challenged at court (except in cases of misconduct). By strengthening their immunity, the law aims to give arbitrators the confidence to act decisively and perform their duties, without fear of any litigation against them.
Summary disposal
Another significant change is the introduction of a statutory power for summary disposal of weak claims or defences. Arbitrators now have a clear statutory power to dismiss claims or defences that have “no real prospect of success,” mirroring summary judgment procedures in litigation. Ultimately, this reform is aimed at making the arbitral process more streamlined and efficient, which results to saved time and costs. At the same time, the Act does include protections such as the requirement that parties be given a reasonable opportunity to present their case before a summary dismissal is ordered. Parties can also opt out of the summary disposal power in their arbitration agreement.
Jurisdiction challenges (Section 67 reforms)
Jurisdictional challenges have historically been a complex issue in arbitration. Previously, under section 67 of the Arbitration Act 1996, a party who objected to an arbitral award on the basis of jurisdiction could apply to court to effectively rehear the jurisdictional matter. This rehearing not only led to delays and added costs, but it also undermined arbitrators’ decisions. The Act now makes clear that challenges on jurisdiction are by way of review. The Act restricts the introduction of new arguments or evidence that were not put before the tribunal unless they could not have been discovered or submitted with reasonable diligence at the time. Moreover, the court will not rehear evidence that the tribunal has already heard, except in exceptional circumstances.
Governing law of arbitration agreements
The question of which law governs the arbitration agreement had given rise to uncertainties under English common law. This issue was highlighted in cases such as the Supreme Court decision in Enka v Chubb [2020] UKSC, where the law of the main contract was New York law, the seat of arbitration was London (English law), and disputes arose on which law determined the validity and scope of the arbitration clause. Different approaches in case law led to uncertainty: some argued the arbitration clause is presumptively governed by the same law as the main contract; others argued the law of the seat should govern unless otherwise agreed.
The Act now provides a clear default rule to resolve this. Unless the parties expressly agree otherwise, the law of the seat governs the arbitration agreement. In other words, if an arbitration agreement states that London will be the seat without specifying any specific applicable law for the arbitration agreement, English law will govern that arbitration agreement by default. This reform should hopefully provide clarity and predictability, and avoid many arguments on this point going forward.
Clarification on Section 44 of the 1996 Act (court powers and third parties)
Section 44 of the Arbitration Act 1996 provides the English courts with certain powers to support arbitral proceedings. However, a previously raised question was whether these court powers could extend to third parties. The Act has resolved this ambiguity as the court’s section 44 powers apply “whether in relation to a party or any other person”; thus, courts can now make orders against third parties who are not themselves parties in the arbitration agreement. It is helpful to have the support of the English courts, particularly in cases where specific witnesses or evidence holders are required. This should ensure that arbitration proceedings can proceed efficiently without unnecessary delays.
Powers of emergency arbitrators
In recent years, institutional rules have brought in provisions to support the appointment of emergency arbitrators. However, the Arbitration Act 1996 did not contemplate such procedures and that led to uncertainty concerning the enforceability of an emergency arbitrator’s decisions under English law. The Act now explicitly grants emergency arbitrators equivalent powers and status to a fully constituted tribunal. The reform strengthens the enforceability of emergency awards and limits the need for court intervention.
The impacts of these reforms and funding
Collectively, these reforms should positively refine the English arbitration framework, making proceedings more efficient and clearer. This is welcome news to third party funders which have become an important part of many arbitration cases, particularly in large commercial proceedings.
The reforms carry significant implications and are generally seen as optimistic changes for funders. Firstly, a more efficient and predictable arbitration process means a more streamlined path to a resolution, which could make arbitration claims in England even more attractive to funders – greater procedural certainty and a more streamlined path to returns on their investment.
By clarifying ambiguities (like the law governing the arbitration agreement and the court’s powers to support the arbitration), the Act also reduces legal uncertainty in areas that could affect strategy or enforceability. This may enable funders to more accurately evaluate the strength and enforceability of a claim, and in turn encourage the funding of more arbitrations in England and Wales.
Written by:
Porntida Thitaparun
Paralegal
