The UK Arbitration Act 2025, which came into force on 1 August 2025, introduced a statutory default rule: where the parties have not expressly chosen a governing law for their arbitration agreement, that agreement will be governed by the law of the seat of arbitration. This resolves a long-standing ambiguity in English law that had persisted since the Supreme Court's decision in Enka v Chubb and removes reliance on a complex, multi-stage conflicts analysis. For businesses, funds and foreign investors operating under contracts with English-seat clauses, the practical consequences are immediate and require careful review of existing and future arbitration agreements.
The Pre-2025 Landscape: Why Reform Was Necessary
Before the Arbitration Act 2025, determining the governing law of an arbitration agreement required courts and tribunals to work through a layered analytical framework. In the absence of an express choice, English courts asked first whether there was an implied choice, and if not, which law had the closest and most real connection to the arbitration agreement as a distinct contract. The Supreme Court's 2020 ruling in Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb attempted to bring clarity but instead generated further debate: it held that an express choice of law for the main contract could, in certain circumstances, extend to the arbitration agreement, while in other cases the law of the seat would prevail.
This ambiguity created real transactional risk. Parties drafting an arbitration clause in, say, a joint venture agreement governed by a foreign law but providing for a London seat could not be certain which legal system would govern the validity, scope and enforceability of the clause itself. Satellite litigation over this threshold question consumed time and costs before substantive disputes were ever heard. Enforcement of the arbitral award at the recognition stage – whether under the New York Convention or through direct application to the High Court – could also be complicated if the enforcing court reached a different conclusion on governing law than the tribunal had assumed.
The New Default Rule Under the Arbitration Act 2025
The Act's solution is direct: where the parties have not expressly chosen the governing law of the arbitration agreement, it is governed by the law of the seat. For most international commercial contracts providing for London-seated arbitration – whether institutional or ad hoc arbitration – this means English law will govern the arbitration clause by default from 1 August 2025 onwards.
Several features of this rule deserve careful attention:
- Express choice still prevails. The default applies only in the absence of a specific governing law designation for the arbitration agreement. Parties retain full autonomy to elect a different law, and such a choice will be respected. The risk, however, is that a poorly drafted choice-of-law clause in the main contract may now be read more narrowly than before – it may no longer extend to the arbitration agreement unless that intent is explicit.
- The arbitration agreement as a separate contract. The Act reinforces the doctrine of separability: the arbitration clause is treated as an agreement independent of the main contract. The governing law of the main contract and the governing law of the arbitration agreement may therefore differ, and parties should address both in their drafting.
- Seat versus place of performance. The seat of arbitration is a legal concept, not merely a geographical convenience. Parties who designate London as the seat confer supervisory jurisdiction on the English courts and, under the new Act, simultaneously elect English law to govern the arbitration agreement itself, unless they say otherwise.
- Transitional questions. The Act came into force on 1 August 2025. How courts will treat arbitration agreements concluded before that date – particularly where proceedings commence after it – is an open question that first decisions, expected in 2026, will need to address.
If you are currently reviewing contracts or negotiating arbitration clauses and wish to discuss how the new default rule applies to your specific situation, please contact our team at info@ferrazwhitmore.com or visit our contacts page.
Additional Reforms: Disclosure, Summary Disposal and Section 67 Challenges
The governing law change does not stand alone. The Arbitration Act 2025 introduced three further reforms that together reshape procedural expectations for parties choosing a London seat.
Statutory Arbitrator Disclosure Duty
Arbitrators are now under an express statutory duty to disclose circumstances that might reasonably give rise to justifiable doubts as to their impartiality. This duty is ongoing: it applies not only at appointment but throughout the proceedings. For parties and their advisers, this means that challenges to arbitrators on disclosure grounds now have a clearer statutory footing, reducing reliance on institutional rules alone and creating a more uniform standard across both institutional and ad hoc proceedings.
Summary Disposal Power
Tribunals seated in England and Wales now have an explicit statutory power to dispose of claims or defences summarily where they have no real prospect of success. This mirrors the summary judgment mechanism familiar from the CPR in domestic litigation but had previously been uncertain in arbitration. For respondents facing claims that appear, on their face, to lack merit – and for claimants dealing with hopeless defences deployed as a delay tactic – this power offers a proportionate procedural tool. Its practical use will depend on how tribunals exercise the discretion, and guidance from arbitral institutions and the courts in 2026 will be instructive.
Reformed Section 67 Challenges
Section 67 of the Arbitration Act 1996 allowed a party to challenge an award in the High Court on the basis that the tribunal lacked substantive jurisdiction. Under the 2025 reforms, where a jurisdictional objection was raised before the tribunal and the tribunal ruled on it, the court hearing a s.67 challenge will no longer conduct a full de novo rehearing. Instead, it will review the tribunal's determination on a more deferential basis, save in defined circumstances. This is a significant shift: it reduces the incentive to use s.67 challenges as a mechanism for re-running arguments that were fully ventilated in the arbitration, and it aligns the English approach more closely with international best practice.
Cross-Border Implications: Enforcement, Recognition and Foreign Law Considerations
The interaction between the new default rule and the international enforcement landscape is an area of genuine complexity. The United Kingdom is a contracting state to the New York Convention, and an arbitral award made in a London-seated arbitration is therefore eligible for enforcement in over 170 jurisdictions. However, the Convention itself leaves certain questions – including the validity of the arbitration agreement – to be assessed under the law chosen by the parties or, failing that, the law of the country where the award was made.
Under the new Act, where English law governs the arbitration agreement by default, enforcing courts in third states will apply their own conflict-of-laws rules to determine whether to respect that designation. In most New York Convention jurisdictions this will not be contentious, but in certain civil law systems – or where the counterparty has assets in a jurisdiction with less developed arbitration frameworks – there remains a risk that the enforcing court analyses the arbitration agreement's validity differently. Parties with significant enforcement concerns in specific jurisdictions should consider making an express governing law choice for the arbitration agreement rather than relying on the statutory default.
For transactions involving parties or assets in multiple jurisdictions, it is also worth noting the interaction with other legal regimes. Entities subject to oversight by the FCA or subject to sanctions designations administered by OFSI face additional layers of analysis when structuring dispute resolution provisions: the governing law of the arbitration agreement is only one element of a broader compliance picture. Similarly, corporate restructurings registered at Companies House may involve counterparties in jurisdictions with distinct arbitration law frameworks – our analytics guide on China arbitration law developments in 2026 illustrates how divergent reform trajectories can create unexpected mismatches in cross-border clause drafting.
Our litigation and arbitration practice in the United Kingdom advises on the full lifecycle of international disputes, from clause design through enforcement proceedings. For complex cross-border matters, we work closely with our corporate law team to ensure that transactional and dispute resolution considerations are addressed together.
Open Questions and Areas of Interpretive Uncertainty
Despite the Act's apparent clarity, a number of interpretive questions remain unresolved pending the first judicial decisions, which practitioners expect in 2026. Key areas of uncertainty include the following:
- Retroactivity. Whether and how the new default rule applies to arbitration agreements entered into before 1 August 2025 has not yet been authoritatively determined. Courts will need to consider whether the Act operates prospectively only, or whether it affects the characterisation of pre-existing clauses in proceedings commenced after the Act's entry into force.
- Implied express choice. The boundary between a true express choice of governing law for the arbitration agreement and a choice inferred from the governing law clause in the main contract has been partially shifted by the reform, but not entirely eliminated. Courts will still need to interpret whether a governing law clause in the main agreement was intended to cover the arbitration clause specifically.
- Multi-tiered dispute resolution. Many commercial contracts contain escalation procedures – negotiation, mediation, then arbitration. Where different tiers have different legal characteristics, questions may arise as to whether the seat-based default applies equally to each tier or only to the arbitration limb.
- Institutional rules and seat designation. In institutional arbitrations where the seat is determined by the institution rather than fixed in the contract, the governing law of the arbitration agreement may itself be uncertain at the time of contracting. Parties should consider fixing the seat expressly.
Strategic Recommendations for Contracting Parties
Given the changes introduced by the Arbitration Act 2025 and the open questions that remain, the following practical steps merit consideration for any party that regularly enters into contracts with English arbitration clauses or is reviewing an existing contract portfolio:
- Audit existing arbitration clauses. Contracts concluded before 1 August 2025 that contain London-seat arbitration clauses should be reviewed in light of the new default rule, particularly where the main contract is governed by a law other than English law. The interplay between the pre-existing Enka analysis and the new statutory default is not yet settled.
- Draft expressly for both governing laws. Future arbitration clauses should specify, as a matter of routine, both the governing law of the main agreement and the governing law of the arbitration agreement. A brief additional sentence can avoid significant downstream uncertainty.
- Fix the seat clearly. Since the seat now anchors the governing law of the arbitration clause, its designation should be unambiguous. Avoid drafting that conflates seat with hearing venue or that leaves the seat to institutional determination unless there is a specific reason to do so.
- Consider summary disposal in procedural strategy. The new power to seek summary disposal of claims or defences with no real prospect of success should feature in early case planning, both as an offensive option and as a risk to factor into defence strategy.
- Monitor 2026 case law. The first decisions under the new regime will provide important guidance on transitional questions and the scope of the reforms. Legal advisers should track developments from the High Court's Commercial Court and relevant arbitral institution practice notes.
Outlook
The Arbitration Act 2025 represents the most significant revision of English arbitration law in nearly three decades. The default seat-based governing law rule, taken together with the disclosure duty, summary disposal power and reformed s.67 procedure, signals a deliberate effort to reinforce London's position as a competitive seat of arbitration at a time when rival jurisdictions have also been updating their frameworks. Whether the reforms achieve that goal will depend substantially on how courts and tribunals apply them in practice – and the decisions expected from 2026 onwards will be closely watched by the international arbitration community.
For parties whose contracts are already in play, the immediate priority is clarity: understanding which law now governs the arbitration agreement in each material contract, and whether any adjustments are needed in light of the new statutory landscape. Where the answer is unclear, early specialist advice avoids the risk of discovering the issue only when a dispute has already arisen.
Ferraz & Whitmore advises international clients on arbitration strategy, clause design and enforcement matters involving the United Kingdom. If you would like to discuss the implications of the Arbitration Act 2025 for your contracts or ongoing proceedings, please reach out to us at info@ferrazwhitmore.com or through our contacts page.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.