The Arbitration Act 2025 and recent arbitration case updates

The Arbitration Act 2025

The Arbitration Act 2025 received Royal Assent on 24 February 2025. It amends the Arbitration Act 1996. The key changes are:

• Law applicable to the arbitration agreement: there is a new provision stating that the law applicable to the arbitration agreement, in the absence of a specific agreement by the parties, is the law of the seat of the arbitration (this does not apply to investment treaty arbitration).

• Arbitrator’s duty of disclosure: there is a new duty of disclosure for arbitrators, requiring them to disclose to the parties any circumstances which might reasonably give rise to justifiable doubts as to their impartiality.

• Power to make award on summary basis: it has been clarified that a tribunal has the power to make a summary award on a claim or on an issue, if the tribunal considers that either the claimant or the respondent has no real prospect of succeeding in relation to the claim or the issue.

• Emergency arbitration: a new section recognises the emergency arbitration provisions that have been added to many arbitration rules in the years following the 1996 Act. It specifies that an emergency arbitrator may make a peremptory order if their directions are not complied with, and that peremptory order can be enforced via an application to the court.

• Challenge to an award on jurisdiction: the court must now remit an award to the tribunal for reconsideration if a section 67 application is successful, unless the court decides that it would be inappropriate to do so (and then the court can set aside the award or declare it to be of no effect in whole or in part).  The Act also allows rules of court to be issued which may limit the scope of an application to challenge an award on jurisdiction – in particular, preventing the court rehearing evidence which has already been heard by the tribunal.

Arbitration cases in England, July to December 2024

Costs relating to a challenge to an award

• Process & Industrial Developments v Nigeria [2024] EWCA Civ 790 (12 July 2024)
  • In December 2023, the Federal Republic of Nigeria successfully challenged in the High Court a US$ 6.6 billion award that had been made against it, under s.68 of the Arbitration Act 1996. The High Court also made an order of costs relating to the successful challenge. Nigeria’s costs had amounted to around £43 million, and the High Court made its order in pounds sterling, which was the currency that it had paid its lawyers. However, the losing party (P&ID) said that the order should be in Nigerian naira, because otherwise Nigeria would gain from the depreciation of the naira. When Nigeria had paid its lawyers, buying £43 million would have cost it about 23 billion naira; but if Nigeria was to receive £43 million now, it could exchange this for about 76 billion naira. S.68 states that the permission of the High Court is needed, for there to be an appeal to the Court of Appeal, and the High Court judge refused P&ID permission to appeal the costs order to the Court of Appeal. P&ID nonetheless applied to the Court of Appeal. The Court of Appeal decided that the costs order the Senior Courts Act and the CPR, not under s.68 of the Arbitration Act, so the permission of the High Court was not needed for the Court of Appeal to hear the appeal. However, on the substance of the appeal, the Court of Appeal decided that the judge had been correct to make the order in pounds sterling. P&ID is now appealing to the Supreme Court.

Arbitrator bias

• Aiteo Eastern E&P Co Ltd v Shell Western Supply and Trading Ltd and others [2024] EWHC 1993 (Comm)(1 August 2024)
  • The Claimant (Aiteo) applied under s.68 of the Arbitration Act 1996 to challenge four partial arbitration awards issued by a three-member ICC tribunal, alleging apparent bias or unconscious bias by one of the arbitrators, the Rt. Hon. Dame Elizabeth Gloster DBE (not actual/conscious bias). The basis for the challenge was the fact that the arbitrator had not disclosed, at the time that she had been appointed, that the firm representing the Defendant (Shell) had made multiple appointments of the same arbitrator in recent years (7 arbitral appointments and expert instructions, during the period from 2018 to 2023). The High Court decided that, from the point of view of a (hypothetical) reasonable observer, while the non-disclosure was inadvertent, there was still the real possibility of unconscious bias here. This was enough for there to have been a serious irregularity under s.68. For a s.68 challenge to be successful, there must also be substantial injustice. The judge took the view that there was a rebuttable inference of substantial injustice where one member of a tribunal is affected by apparent bias, and while that inference could be rebutted in relation to three of the awards, it could not be rebutted in relation to the fourth. The tribunal had been reconstituted after the particular arbitrator had been replaced, and the fourth award was remitted to the tribunal for it to reconsider.

Investment treaty arbitration

• Republic of Korea v Elliot Associates LP [2024] EWHC 2037 (Comm) (1 August 2024)
  • The Republic of Korea applied to set aside a US$48.5 million arbitration award that was granted to Elliott Associates, a US investment fund, in June 2023 as a result of breaches of the USA-Korea Free Trade Agreement. Korea applied to the English Court under section 67 of the Arbitration Act 1996 and argued that the arbitral tribunal lacked jurisdiction under Article 11.1(1) of the treaty. Article 11.1(1) described the scope of the protection that was offered to investors and investments under the treaty. The High Court concluded that these were limitations on the substantive obligations owed under the treaty, rather than limitations on the offer to arbitrate in Article 11.16 of the treaty. Accordingly, the court concluded that there was no basis to challenge the award under s.67 of the Arbitration Act. The High Court has granted Korea permission to appeal to the Court of Appeal.

• Czech Republic v Diag Human SE and Mr Josef Stava [2024] EWHC 2102 (Comm) (9 August 2024)
  • A US$750 million arbitration award was made in favour of the Defendants, a company incorporated in Czechoslovakia in 1990 by a Czech national who became a Swiss national in 1991. The bilateral investment treaty between Czechoslovakia and Switzerland, which became effective in August 1991, ensured fair treatment for investments and allowed arbitration for disputes. The Czech Republic succeeded Czechoslovakia in 1993. The Defendants initiated arbitration in 2017 alleging mistreatment by the Czech authorities from 1990 onwards. The Czech Republic challenged the award under s.67 of the Arbitration Act 1996, arguing that the Defendants’ investment was not covered by the treaty and the Defendants were not Swiss investors. The High Court decided that the Defendants’ investment met a test of contribution, duration and risk which was sufficient for protection under the BIT. The court also noted that the treaty defined ‘investor’ as a legal entity controlled by nationals of a contracting state. Despite transferring legal ownership to a Liechtenstein trust in 2011, Mr Stava retained de facto control, providing strategic direction and oversight, satisfying the control requirement. The High Court therefore dismissed the challenge under s.67.

• Infrastructure Services Luxembourg Sarl v Spain and Border Timbers Ltd v Zimbabwe [2024] EWCA Civ 1257 (22 October 2024)
  • Spain and Zimbabwe, as contracting states to the International Convention on the Settlement of Investment Disputes 1965 (the “ICSID Convention”), were subject to ICSID arbitration awards. Spain was ordered to pay €101 million to ISL, while, in a separate arbitration, Zimbabwe was required to reinstate property to Border and pay US$29.2 million. The awards were registered in the High Court under the Arbitration (International Investment Disputes) Act 1966 (the “1966 Act”). Both states sought to set aside the registrations, claiming immunity under the State Immunity Act 1978 (the “1978 Act”). These applications were dismissed by the High Court. On appeal, Spain and Zimbabwe argued that the ICSID Convention and 1966 Act did not strip them of general immunity under s.1(1) of the 1978 Act and that Article 54 of the ICSID Convention did not constitute prior consent to English jurisdiction under the exception in s.2 of the 1978 Act. The Court of Appeal held that Spain and Zimbabwe had waived their immunity by virtue of Article 54, which provides that each contracting state agrees to recognise and enforce ICSID awards as if they were final judgments of its own courts. This satisfied the s.2(2) exception to general immunity under the 1978 Act, because it constituted prior written consent to submit to jurisdiction.

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