The Arbitration Act 2025: Reform to solidify the UK’s position as a world-leading dispute resolution hub

Modernising the English Arbitration Act 1996 has been a priority for the UK Government. The Arbitration Bill received Royal Assent on 24 February 2025, and the Arbitration Act 2025 will come into force through regulations once appointed by the Secretary of State. The 2025 Act will introduce positive changes to strengthen the UK’s position for commercial arbitration and Alternative Dispute Resolution.

Alternative Dispute Resolution (ADR)

ADR refers to methods of resolving disputes outside of traditional court proceedings. It encompasses various techniques where a neutral third party helps facilitate a resolution or make a decision. ADR is usually faster, cheaper, and less stressful than going to court. There are many different forms of ADR, but the one thing they have in common is that they all have the potential to resolve a dispute without any court involvement (litigation).

Types of ADR include:

• Mediation

An impartial third party (the mediator) helps the parties in conflict reach a mutually agreeable solution. The mediator facilitates communication and negotiation, assisting parties in understanding each other’s perspectives and finding common ground. Mediation does not result in a binding decision.

• Expert determination

An independent, neutral expert provides a binding or non-binding decision on a specific, technical dispute. It is a private and confidential process, typically faster and more cost-effective than litigation or arbitration.

• Arbitration

Where both disputing parties agree for a decision to be made by an independent arbitrator. The process is formal, private and confidential. The parties put forward their case to the arbitrator, who will assess the evidence and decide which party’s case was most persuasive. The arbitrator’s decision (an award) is final and legally binding.

Arbitration – how is it different?

Arbitration offers several advantages over traditional court litigation, including flexibility, speed, cost-effectiveness, confidentiality, and the ability to choose arbitrators with specialised knowledge. It provides a private and streamlined process, often leading to quicker and more tailored resolutions for disputes.

Flexibility and control

-Parties have greater control over the process, including selecting the arbitrator, the rules governing the proceedings, and the location of hearings.

-This flexibility allows for a more tailored approach to the specific needs of the dispute, unlike the rigid procedures of court litigation.

-Parties can agree on a formal or informal hearing, or a paper hearing. This offers a range of options to suit different preferences.

Speed and efficiency

-Arbitration resolves disputes faster than litigation, which can be beneficial in need of a timely resolution.

-The expertise of arbitrators contributes to quicker decisions, minimising delays and allowing parties to move forward.

Cost-Effectiveness

-The reduced timeframe and streamlined process can lead to lower overall costs compared to lengthy court proceedings.

-Parties can save on court fees and potential trial expenses, making it a more budget-friendly option.

Confidentiality

-Arbitration proceedings are private and confidential, unlike court cases which are public.

-This is valuable for businesses wanting to protect sensitive information and maintain their reputation.

Expertise

Arbitrators are specialists in the subject matter of the dispute which can lead to more informed and efficient decision-making, ensuring a fairer outcome.

Key reforms introduced by the 2025 Act

• Summary disposal: the 2025 Act introduces the power of the tribunal to issue awards on a summary basis if the claims or defences have no real prospect of success. This can potentially improve efficiency and reduce costs.
• The governing law of an arbitration clause: currently, an arbitration agreement is governed by the law of the underlying contract unless stated otherwise. Section 1 of the 2025 Act introduces a new default rule that the law applicable to an arbitration agreement is the law of the seat of the arbitration in the absence of an agreement that the parties have expressly agreed upon. This promotes legal certainty for parties and ensures that they can rely on the law for arbitrations which in turn will speed up the arbitration proceedings.
• Arbitrators’ duty of disclosure: The 2025 Act establishes a statutory duty for arbitrators to disclose any circumstances that may reasonably give rise to justifiable doubts as to their impartiality. This duty, which codifies the common law principle arising from Halliburton v Chubb [2020], applies before and throughout an arbitrator’s appointment and is based on their actual knowledge and issues which they reasonably ought to be aware of.
• Arbitrators’ immunity: the 2025 Act aims to strengthen arbitrator immunity around resignation and applications for removal which will enhance protections for arbitrators against liability, supporting impartial decision-making.
• Powers of the courts to make orders in support of arbitration: the 2025 Act introduces several provisions that enhance the powers of the courts to issue orders in support of arbitration proceedings.
• Court review of jurisdictional challenges to awards: Currently, challenges to an arbitral award may result in a rehearing where the court will reassess the facts and legal issues. However, the 2025 Act introduces substantial changes to the process of jurisdictional challenges where the court will not:

-Entertain new grounds of objection or new evidence, unless the applicant can demonstrate that, even with reasonable diligence, the ground or evidence could not have been presented to the tribunal.

-Rehear any evidence.

Summary

The reforms introduced by the 2025 Act are expected to enhance the experience for parties involved and solidify the UK’s reputation as a leading global hub for dispute resolution, reinforcing its position at the forefront of international arbitration.

The new law is intended to re-enforce the UK’s status as the “global destination of choice for the legal sector”. The new law “makes arbitration fairer and more efficient by simplifying procedures to reduce costs and protecting arbitrators from unreasonable lawsuits. It also strengthens the courts’ powers to support emergency arbitration so time-sensitive decisions can be made more easily.”

However, the 2025 Act has remained careful in the changes introduced in line with the Law Commission’s recommendations and could have gone further. For example, the Act could have addressed the rise in artificial intelligence. As challenges continue to evolve, future amendments to the 2025 Act may be needed to maintain the UK’s position as a leading hub for dispute resolution.