In brief
The Arbitration Act 2025, which will amend the Arbitration Act 1996, received Royal Assent on 24 February 2025 and will come into force by regulation when specified by the Secretary of State. The changes are intended, according to the UK Government press release, to modernise dispute resolution and cement the UK's position as a world leader in arbitration.
From a documentation perspective, one key change relates to the determination of the governing law of the arbitration agreement, which, if no express governing law is specified, will now be based on the choice of the seat of the arbitration.
Governing law of the arbitration agreement
Under the Arbitration Act 1996, in the absence of an express choice of governing law, and particularly where the governing law of the main contract and the law of the seat of arbitration are different, there is some scope for uncertainty around the governing law of the arbitration agreement, which has given rise to disputes.
The governing law of the arbitration agreement is important as it will determine:
- The validity/enforceability of the arbitration clause;
- The scope of the arbitration agreement, including which disputes fall within its ambit;
- The interpretation of the clause, including intent of the parties and any ambiguities; and
- Certain procedural aspects (although procedural rules are usually determined by the chosen arbitral institution or seat of arbitration).
Post-amendment position
The recent amendments have clarified that the governing law of the arbitration agreement will now be determined by the choice of seat. This means that if the parties choose a particular jurisdiction as the seat of arbitration, the law of that jurisdiction will govern the arbitration agreement unless expressly stated otherwise.
Can an express statement override the choice of seat?
Yes, an express statement of the governing law of the arbitration agreement can override the determination based on the choice of seat. The amendments to the UK Arbitration Act 1996 provide that the law of the chosen seat will apply unless the parties explicitly specify a different governing law for the arbitration agreement. This provision ensures that parties retain the flexibility to choose their preferred governing law, allowing them to tailor the arbitration agreement to best suit their needs.
Conclusion
By aligning the governing law of the arbitration agreement with the choice of seat, the amendments under the Arbitration Act 2025 provide greater certainty for contracting parties. However, until the Arbitration Act 2025 comes into force, parties should consider expressly stating the intended governing law of the arbitration agreement, to avoid uncertainty, particularly where the governing law of the main agreement and the law of the chosen seat are not the same. Going forward, once the Arbitration Act 2025 comes into force, parties should pay attention to the choice of seat and consider whether an express statement is needed to specify a different governing law for the arbitration agreement.
