Drafting Arbitration Clauses Under the UK Arbitration Act 2025

The UK Arbitration Act 2025, which came into force on 1 August 2025, introduces several structural changes that directly affect how arbitration clauses should be drafted in commercial contracts. Key reforms include a new default rule on the governing law of the arbitration agreement, a statutory duty of disclosure for arbitrators, a summary disposal power, and a reformed procedure for jurisdictional challenges under section 67. Businesses entering contracts governed by English law – or choosing London as a seat of arbitration – should review their standard clauses against these requirements before execution.

Why the 2025 Act Changes the Drafting Calculus

For many years, the governing law of an arbitration clause was an issue of genuine uncertainty in English law, with courts sometimes applying a law different from both the contract's governing law and the seat. The UK Arbitration Act 2025 resolves this by establishing a statutory default: where the parties have not expressly chosen a law to govern the arbitration agreement, that agreement is governed by the law of the seat of arbitration. This single change has practical drafting consequences.

If your commercial contract designates London as the seat but specifies a foreign governing law for the main agreement, the arbitration clause will now automatically be governed by English law unless you expressly state otherwise. Parties who intend a different result must include an explicit governing law sub-clause within the arbitration clause itself. Omitting this creates ambiguity that may surface only when a dispute arises, at which point correction is far more costly than prevention.

Core Elements of a Well-Drafted Arbitration Clause

Regardless of whether the parties choose institutional arbitration or ad hoc arbitration, a commercially effective arbitration clause should address the following elements clearly and without internal contradiction:

• Seat of arbitration: Designate the seat expressly (for example, "London, England"). The seat determines the supervisory courts – typically the High Court – and, under the 2025 Act, the default governing law of the clause itself.
• Governing law of the arbitration agreement: If you intend a law other than the law of the seat, state it explicitly within the arbitration clause. If English law is intended, consider confirming it expressly to avoid any future argument.
• Institutional rules or ad hoc procedure: Name the institution (if any) and the edition of the rules. For ad hoc arbitration, specify the procedural rules – for example, the UNCITRAL Arbitration Rules – to avoid gaps the tribunal will otherwise fill.
• Number and appointment of arbitrators: State whether the tribunal will be a sole arbitrator or a panel of three. Silence on appointment may trigger a default procedure that is slower than parties expect.
• Language: Specify the language of the proceedings. This is often overlooked in contracts between parties from different jurisdictions and can lead to procedural disputes.
• Scope: Define the disputes covered. "All disputes arising out of or in connection with this agreement" is the broadest formulation and generally preferred; narrower language frequently produces satellite litigation over what falls within the clause.
• Summary disposal: The 2025 Act gives tribunals a power of summary disposal for claims or defences that have no real prospect of success. Parties should consider whether to modify or disapply this power in their clause if their sector or contract type warrants full evidential hearings as a default.

The Arbitrator Disclosure Duty Under the 2025 Act

The 2025 Act introduces a statutory duty requiring arbitrators to disclose circumstances that might reasonably give rise to justifiable doubts about their impartiality. This duty applies on appointment and is ongoing throughout the proceedings. From a drafting perspective, parties should ensure that any institutional rules they incorporate are compatible with this statutory baseline. Where a bespoke appointment procedure is used in an ad hoc arbitration context, it is advisable to include express language confirming that the statutory disclosure obligations apply and that the duty survives any contractual limitation on challenge.

Failure to address this in drafting can complicate later challenges. An arbitral award enforcement application in a foreign court – particularly in jurisdictions that are signatories to the New York Convention – may be resisted on public policy grounds if the appointment process is found to have been defective under the supervising law at the seat.

Section 67 Challenges: Reformed Procedure and Drafting Implications

Section 67 of the Arbitration Act 1996 (as amended by the 2025 Act) governs challenges to an arbitral tribunal's jurisdiction. The 2025 reforms tighten the procedure: a party that participates in arbitral proceedings without raising a jurisdictional objection promptly will face stricter restrictions on bringing a section 67 challenge before the High Court. This reform is designed to prevent tactical delays, but it also places an obligation on parties – and their lawyers – to act promptly during proceedings rather than preserving objections in reserve.

For drafting purposes, the key implication is that the arbitration clause must clearly identify the agreed scope of the tribunal's jurisdiction. Ambiguous wording about which disputes are referred to arbitration – or which contract documents are covered – creates precisely the conditions in which section 67 challenges arise. Disputes over jurisdiction are expensive and delay the resolution of the underlying merits; a well-drafted clause is the most effective way to foreclose them.

Step-by-Step Drafting Procedure

The following sequence reflects sound practice for contracts subject to the UK Arbitration Act 2025:

• Step 1 – Determine the seat: Agree with counterparties whether London (or another English city) is the appropriate seat, taking into account convenience, neutrality and enforcement considerations in the relevant jurisdictions.
• Step 2 – Confirm the governing law of the clause: Decide expressly whether the arbitration agreement will be governed by English law (the statutory default if London is the seat) or another law, and insert that choice into the clause.
• Step 3 – Choose institutional or ad hoc: Evaluate whether the transaction value, counterparty profile and preferred level of administrative support favour an institutional framework or ad hoc arbitration.
• Step 4 – Draft scope, constitution and procedure: Address number of arbitrators, appointment method, language and procedural rules.
• Step 5 – Consider the summary disposal power: Decide whether to retain, modify or exclude the tribunal's statutory summary disposal power.
• Step 6 – Review for internal consistency: Check that the arbitration clause does not contradict other dispute resolution provisions in the contract (jurisdiction clauses, expert determination provisions, escalation procedures).
• Step 7 – Consider enforcement geography: If arbitral award enforcement will be needed in a specific jurisdiction, verify that the clause structure is compatible with the local requirements for recognition – particularly for countries that are parties to the New York Convention.

Realistic Timelines

The 2025 Act itself came into force on 1 August 2025. As at the date of this guide, no significant first-instance decisions under the reformed regime have yet been published; the first court decisions under the new regime are expected in 2026. This means that certain aspects of how courts will apply the reforms – including the precise contours of the reformed section 67 procedure – remain to be tested.

For parties drafting contracts now, this period of interpretive uncertainty is itself a reason to be precise rather than rely on implied terms or established practice under the old regime. Clauses that were adequate under pre-2025 law may produce different outcomes under the new statutory framework, particularly on the governing law default and the disclosure duty.

Common Errors by Foreign Clients

International parties contracting under English law or choosing London as their seat frequently make a number of recurring mistakes:

• Assuming the main contract's governing law governs the arbitration clause: Under the 2025 Act, the default is the law of the seat, not the law of the main contract. Foreign parties accustomed to other legal systems – including those in civil law jurisdictions – may not appreciate that these can diverge.
• Using outdated model clauses: Institutional model clauses are periodically updated. Clauses taken from older contracts or template libraries may not reflect current institutional rules or the 2025 Act's requirements.
• Omitting the seat entirely: An arbitration clause that names a venue (a city for hearings) but not a legal seat creates uncertainty about which law governs the clause and which court supervises the arbitration.
• Conflicting dispute resolution provisions: Some contracts include both an exclusive jurisdiction clause (in favour of the High Court or another court) and an arbitration clause. This conflict is a frequent source of preliminary litigation that delays resolution of the substantive dispute.
• Failing to address multi-party scenarios: Where contracts involve more than two parties – common in joint venture, fund or supply chain structures – the standard two-party arbitration clause may be inadequate for consolidation, joinder or related proceedings.

If you are reviewing existing contracts or negotiating new ones and have questions about how the 2025 Act affects your specific clause, our team is available to assist. Please write to info@ferrazwhitmore.com or visit our contacts page to arrange a discussion.

Interaction with Regulatory Frameworks

For certain sectors, the choice of arbitration over court litigation requires additional consideration. Financial services contracts subject to FCA oversight or involving assets subject to OFSI sanctions controls may require that the dispute resolution mechanism is compatible with applicable regulatory obligations. Where the counterparty is a regulated entity or the contract involves regulated activity, it is advisable to review the arbitration clause in conjunction with the broader regulatory framework, not simply as a standalone procedural provision.

Similarly, contracts linked to corporate structures registered at Companies House – shareholders' agreements, investment agreements, joint venture contracts – benefit from alignment between the arbitration clause and the company's constitutional documents. Conflicts between a shareholders' agreement clause and the company's articles of association are a recognised source of enforcement difficulty.

Enforcement of Arbitral Awards

One of the principal reasons parties choose London as a seat is the reliability of arbitral award enforcement both within the United Kingdom and internationally. England is a party to the New York Convention, and English-seated arbitral awards are recognised in the majority of commercial jurisdictions worldwide. The 2025 Act's reforms do not alter this fundamental position, but they do require that the procedural steps leading to an award – including arbitrator appointment, disclosure and any jurisdictional challenges – comply with the updated statutory framework.

An award made under a defective process risks being challenged at the enforcement stage, whether before English courts or in foreign jurisdictions. This is particularly relevant where the other party to the arbitration is based in a jurisdiction with a different legal tradition and may be inclined to resist enforcement. The drafting of the clause is the first line of defence against such challenges: a precise, unambiguous clause that correctly reflects the parties' intentions reduces the grounds available for resisting enforcement.

Our litigation and arbitration practice advises international clients on clause drafting, institutional selection and enforcement strategy across multiple jurisdictions. If you are in the process of negotiating a contract or reviewing your standard dispute resolution template in light of the 2025 Act, we would be glad to assist. Contact us at info@ferrazwhitmore.com or through our contacts page.

Decision Checklist for Arbitration Clause Drafting

Before finalising any arbitration clause under the UK Arbitration Act 2025, consider the following:

• Is the seat of arbitration expressly identified?
• Is the governing law of the arbitration agreement either confirmed as the law of the seat (the statutory default) or expressly stated if a different law is intended?
• Are institutional rules identified, or is a procedural framework specified for ad hoc arbitration?
• Is the number of arbitrators and the appointment procedure set out clearly?
• Does the clause address the statutory disclosure duty and its interaction with any agreed appointment process?
• Has the parties' position on the summary disposal power been considered?
• Is the scope of the arbitration agreement broad enough to capture all intended disputes, and is it consistent with other provisions in the contract?
• Has the clause been reviewed against the enforcement requirements of the jurisdictions where an award may need to be recognised?
• For multi-party contracts, does the clause address consolidation and joinder?
• Has the clause been reviewed by a lawyer United Kingdom-qualified to advise on the 2025 Act?

Ferraz & Whitmore's litigation and arbitration practice in the United Kingdom assists clients at every stage of this process, from initial clause design through to enforcement proceedings. Our corporate law practice in the United Kingdom advises on the interaction between dispute resolution provisions and corporate documentation, including shareholders' agreements and investment structures. We also monitor comparative developments, including recent analysis of arbitration law developments in Hong Kong and mainland China, which is relevant for transactions with an Asia-Pacific dimension.

To discuss your specific situation with a member of our team at this law firm United Kingdom clients rely on for cross-border matters, please contact 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.