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Key takeaways
- The Arbitration Act 2025 (the Act) changes how the governing law of an arbitration agreement is determined, replacing the complex common law rule established by the UK Supreme Court in Enka v. Chubb (2020).
- The change introduced by the Act means that an arbitration agreement will now be governed by the law of the seat of arbitration, unless the parties expressly agree otherwise.
- This change has major implications for parties entering into arbitration agreements specifying a seat in England & Wales or Northern Ireland.
- Although the Act makes it much simpler to determine the law governing the arbitration agreement, it still remains best practice to specify the governing law expressly when drafting the arbitration agreement.
A new method to determine the law governing the arbitration agreement
The Act provides that an arbitration agreement will be governed by the law of the seat of arbitration, unless the parties expressly agree otherwise.
The previous common law position, established by the UK Supreme Court in Enka v. Chubb,1 involved a complex multi-stage test which provided that, in the absence of an express choice, the governing law of the arbitration agreement would be the same as the governing law of the main contract, subject to certain key exceptions and provisos. Those provisos included that, in the absence of a choice of law governing the main contract, the law with the closest connection would apply, and that this would usually (but not always) be the law of the seat of arbitration. The previous Enka v. Chubb approach was criticised by some for being too complex and uncertain.
The law governing the arbitration agreement is important because it determines important issues such as: (i) whether the arbitration agreement is separable from the main contract, such that it survives the termination of the main contract; (ii) what issues can be arbitrated under the arbitration agreement; (iii) whether the arbitration agreement can be modified or terminated by the parties, and if so, how; and (iv) whether the arbitration agreement is unenforceable because it runs counter to public policy, such as local consumer protection laws.
Practical implications
The change introduced by the Act has the following significant implications:
- When drafting contracts, businesses should have in mind that an agreement that a particular law applies to the main contract (such as is often contained in the standalone boilerplate governing law clause) does not mean that same law will also apply to the arbitration agreement. In the absence of an express choice in the arbitration agreement, the law of the seat will govern the arbitration agreement.
- If London is specified in the contract as the seat of arbitration, then English law will govern the arbitration agreement. This will be welcomed by many parties, given the English courts’ pro-arbitration stance and expertise in dealing with (and supporting) arbitrations.
- Following the change, we expect to see a reduction in satellite arguments over the legality and scope of the arbitration agreement, but it remains good practice for parties to specify the governing law of the arbitration agreement expressly in their contracts, as this is the surest way of guaranteeing clarity and certainty.
- The common law Enka v. Chubb position continues to apply to non-ICSID investor-state arbitration agreements and arbitral or court proceedings started under arbitration agreements before the Act comes into force. (As explained in previous articles, the Act has passed into law, but the exact date on which it comes into force has not been announced by the UK government.)
Practitioners and users of arbitration alike will likely welcome the shift away from a complex and uncertain common law legal position towards a new statutory rule that is easy to apply.
Our next article in this series will address the changes to the procedure regarding court challenges to an arbitral award on jurisdictional grounds.
- [2020] UKSC 38. The Supreme Court also maintained its decision in Enka v. Chubb in UniCredit Bank GmbH v. RusChemAlliance LLC [2024] UKSC 30.
This alert is part 3 in a 6 part series, please use the links below to read the rest of the series.
- The Arbitration Act 2025 reshapes London-seated arbitration – the biggest statutory changes to arbitration law in England, Wales and Northern Ireland for a generation
- Key changes introduced by the Arbitration Act 2025: (2) summary disposal of issues
- Key changes introduced by the Arbitration Act 2025: (4) challenging the substantive jurisdiction of tribunals
- Key changes introduced by the Arbitration Act 2025: (5) Arbitrators’ immunity and duty of disclosure
- Key changes introduced by the Arbitration Act 2025: (6) Clarifying the courts’ powers in support of arbitral proceedings
Client Alert 2025-080