Arbitration Agreement Laws in Focus: A Look at City Politics and the Reason for Party Disclosure
The British Government has introduced a significant change to English arbitration law with the Arbitration Act 2025. This new legislation, passed on 6th November 2024, marks a departure from the principles established by the UK Supreme Court in cases such as Enka v. Chubb and Unicredit.
The article you're reading was written in conjunction with Ergin Mizrahi, Senior Partner, and Mustafa Mert Dicle, Senior Associate, from the Turkish law firm, Pekin Bayar Mizrahi.
The English Arbitration Act 2025 establishes that the governing law of arbitration agreements will be the law expressly agreed by the parties. If the parties do not specify a governing law, the default will be the law of the seat (place) of arbitration. This reform reverses the previous position, where an express choice of the governing law of the main contract was treated as an implied choice for the arbitration agreement.
Under the new Act, the arbitration agreement can be governed by a different law than the underlying contract if the parties do not expressly agree otherwise. This change provides clearer certainty and preserves party autonomy, aligning the arbitration agreement with the law of the seat by default. There is, however, a carve-out excluding arbitration agreements found in treaties or legislation of a country outside the UK from this governing law provision.
The Arbitration Act 2025 clarifies and modifies the approach such that the governing law of arbitration agreements is either the law expressly agreed upon by the parties or the law of the seat of the arbitration. This departure from prior common law principles improves certainty and the pro-arbitration character of English law for London-seated arbitrations.
The new section 6A(1) of the Arbitration Act 1996 does not consider an agreement about a law applying to an agreement of which the arbitration agreement forms a part as an express agreement about the law applicable to the arbitration agreement. The Arbitration Bill 2024, reintroduced to Parliament by the new Government on 18th July 2024, includes a carve out for investment treaty arbitration provisions from Clause 1.
The parties are advised to specify the governing law of the arbitration agreement to avoid uncertain and potentially unwelcome outcomes in relation to a future arbitration and the enforcement of any award. A new section 6A(3) of the Arbitration Act 1996 provides that the provision determining the law applicable to the parties' arbitration agreement does not apply to an arbitration agreement derived from a standing offer to submit disputes to arbitration contained in a treaty or the legislation of a country or territory other than the UK.
In conclusion, the Arbitration Act 2025 represents a significant step towards enhancing certainty and preserving party autonomy in English arbitration law. The new legislation aligns the governing law of arbitration agreements with the law of the seat, providing clarity and reinforcing London's position as a leading global arbitration hub.
- This new legislation, the Arbitration Act 2025, has a significant impact on business transactions that involve arbitration in England, particularly for those with a seat in London, as it clarifies and modifies the approach to the governing law of arbitration agreements.
- In the realm of finance, this changes can be beneficial as it provides clearer certainty and preserves party autonomy, thereby enhancing London's position as a leading global arbitration hub, potentially attracting more international business and financing opportunities.
