Arbitration Act 2025: What’s New and What to Expect for Businesses?

Introduction

The United Kingdom has historically been recognized as a global leader in arbitration, with London standing as one of the first-class arbitral seats for international dispute resolution.

Every year there are at least 5,000 domestic and international arbitrations in England and Wales, the majority of which are commercial disputes. This figure not only reflects the country’s position as a trusted venue but also highlights the growing global reliance on arbitration as a method for resolving disputes. London, in particular, continues to attract a significant share of the global arbitration market, with the London Court of International Arbitration (LCIA) – a leading international arbitration institution, handling complex cross-border commercial disputes, administering approximately 300-400 cases each year. These cases involve a wide range of sectors, including Transport & Commodities, Banking & Finance, and Energy & Resources.

In addition to the LCIA, the UK is also home to some of the world’s most respected arbitration institutions, which play a crucial role in resolving disputes in various industries, particularly:

• London Maritime Arbitrators Association (LMAA) – The preeminent body for resolving maritime disputes, commonly used in the shipping and trade sectors.

• Grain and Feed Trade Association (GAFTA) – Specializes in arbitration for disputes related to grain and feed trade.

• Federation of Oils, Seeds and Fats Associations (FOSFA) – Focuses on arbitration for international trade disputes in oils, seeds, and fats.

• Chartered Institute of Arbitrators (CIArb) – A global professional body that promotes best practices and standards in arbitration and alternative dispute resolution (ADR).

The economic impact of arbitration in the UK is substantial, contributing an estimated £2.5 billion to the UK economy annually in fees alone. London’s role as a leading arbitration hub further enhances its status as a global financial center, attracting law firms, arbitrators, and businesses seeking to resolve disputes in a neutral and efficient environment.

Key reasons for the UK’s popularity as a venue for arbitration include:

• Neutrality – The UK offers a stable and impartial legal environment for resolving disputes.

• Efficiency – Arbitration is generally faster and more cost-effective than traditional court litigation.

• Confidentiality – Unlike public court proceedings, arbitration is typically private.

• Enforceability – Arbitration awards in the UK are recognized and enforceable in over 170 jurisdictions under the New York Convention 1958.

These factors underscore the UK’s continued prominence in the global arbitration landscape, both as a legal practice and an essential economic contributor.

The UK’s arbitration framework is primarily governed by the Arbitration Act 1996, which has provided a solid foundation for the field’s growth. However, to keep pace with evolving commercial needs and global trends, the UK government is introducing the Arbitration Act 2025. This new legislation aims to modernize the arbitration landscape, enhancing its efficiency and appeal to international businesses.

Key Changes in the Arbitration Act 2025 and Comparison with the Arbitration Act 1996

The Arbitration Act 2025, which received Royal Assent on 24 February 2025, introduces several reforms aimed at making arbitration in the UK even more efficient, fair, and attractive to businesses. The Act incorporates key recommendations from the Law Commission and reflects best practices in international arbitration. Below are the key changes introduced by the new Act and how they compare to the Arbitration Act 1996:

1. Clarification of the Law Governing Arbitration Agreements

   • Under the 1996 Act, there was legal uncertainty regarding which law applies to arbitration agreements when not explicitly stated. The 2025 Act resolves this issue by establishing that unless otherwise agreed, the law of the seat of arbitration will govern the agreement.

2. Duty of Arbitrators to Disclose Potential Conflicts of Interest

   • The 1996 Act did not explicitly mandate arbitrators to disclose conflicts of interest. The new Act introduces a mandatory duty of disclosure, requiring arbitrators to inform the parties of any circumstances that might raise doubts about their impartiality.

3. Strengthened Arbitrator Immunity

   • The 1996 Act left arbitrators vulnerable to legal costs if they were removed from proceedings. The 2025 Act enhances arbitrator immunity, ensuring they can only be held liable for costs if bad faith is proven.

4. Introduction of Emergency Arbitrators

   • The 1996 Act did not formally recognize emergency arbitrators. The 2025 Act introduces provisions for emergency arbitrators, allowing them to grant urgent interim measures before the tribunal is constituted, aligning UK arbitration with international best practices.

5. Summary Disposal of Unmeritorious Claims

   • Unlike the 1996 Act, the new Act empowers arbitrators to issue summary dismissals of claims or defenses that have no real prospect of success. This aims to reduce unnecessary delays and legal costs.

6. More Efficient Court Procedures

   • The 2025 Act restricts the ability to challenge arbitration awards, ensuring that court intervention is limited and arbitration remains a final and binding dispute resolution mechanism.

Perspectives and Expectations from the Arbitration Act 2025

The UK government has emphasized that the Arbitration Act 2025 is designed to maintain London’s position as a leading arbitration hub. The key expected outcomes include:

• Increased Confidence in UK Arbitration – Clearer legal rules and enhanced arbitrator duties will improve trust in the system.

• Attracting More International Cases – With modernized procedures, the UK will remain competitive against arbitration centers like Singapore, Paris, and Hong Kong.

• Reduced Court Interference – By limiting unnecessary judicial intervention, the Act ensures arbitration remains an efficient alternative to litigation.

• Alignment with Global Best Practices – The recognition of emergency arbitrators and summary disposal powers aligns the UK with international arbitration trends.

Conclusion

The Arbitration Act 2025 represents a significant step forward in the evolution of arbitration law in the UK. By addressing key concerns related to applicable law, arbitrator impartiality, emergency relief, and procedural efficiency, the Act strengthens the country’s reputation as a premier destination for dispute resolution.

For Ukrainian businesses and legal professionals, these changes highlight the continued reliability and attractiveness of the UK arbitration system as a forum for resolving cross-border disputes. As international trade and investments expand, understanding the nuances of UK arbitration law will be crucial for ensuring effective legal strategies in global commerce.