On 24 February 2025 the Arbitration Act 2025 received Royal Assent. The completion of the Act's legislative journey marks the end of a lengthy process of review commenced by the Law Commission, continued by the Conservative Government and concluded by the Labour Government, and is designed to ensure that the UK remains the dispute resolution venue of choice for parties across the world.
Arbitration plays a vital role in the UK economy. As the Government noted in its press release announcing the new law:
- Every year there are at least 5,000 domestic and international arbitrations in England and Wales - contributing at least £2.5 billion to the UK economy annually in fees alone.
- Industry estimates suggest the sector grew by around 26% between 2016 and 2020, and in the past 10 years UK exports of legal services have risen by more than 80%.
- The UK is the largest legal market in Europe and is second only to the US globally. 
- The latest figures from 2022 show that the UK’s legal sector generated £34 billion.
Following its review, the Law Commission concluded that the Arbitration Act 1996 (the new law's predecessor) works well and that root and branch reform was neither needed nor wanted. The Arbitration Act 2025 therefore codifies existing practice, clarifies court powers in support of arbitration and confirms the availability of summary disposal powers.
The most significant change for parties that employ arbitration clauses in their commercial contracts is to the rules determining whether that arbitration agreement is valid. Previously, the Supreme Court held that the law governing the underlying contract will normally also govern the validity of the arbitration agreement. Now, under the new Act, the law governing the validity of the arbitration agreement will be the law of the specified seat, unless the parties specify otherwise.
That means that where a governing law and dispute resolution clause provides, for example, that "This contract is governed by French law. Any disputes arising out of this contract will be settled by arbitration seated in London, England", the question of whether the parties, in fact, have a valid arbitration agreement will be decided by reference to English law, even though French law was chosen by the parties to govern the substantive contract. This is an important change to bear in mind when drafting and negotiating contracts containing arbitration clauses.
This change, together with the other amendments enacted by the Arbitration Act 2025, is designed to improve legal certainty and contribute to the increasing efficiency of the arbitral process, and should mean that arbitral law in England and Wales will continue to set the international standard for many years to come.
The new Act will be commenced through regulations as soon as practicable, and will apply to all arbitration agreements, whenever made.
Mishcon de Reya's arbitration specialists have a wealth of experience, frequently advising on:
- arbitration provisions in international commercial contracts;
- international commercial arbitration and investment treaty arbitration before all major arbitral institutions and across a wide range of jurisdictions, both for and against private individuals, companies and sovereign states;
- enforcing arbitral awards in England and Wales, harnessing the powers of the domestic courts to achieve the best recovery possible; and
- challenges against arbitral awards. Our team advised on two of the most significant challenges of international arbitration awards in recent years: Nigeria v P&ID and Diag Human v Czech Republic.
Don't hesitate to get in contact with us if you have any questions on the new Arbitration Act 2025 and its implications for your business.