The Arbitration Act 2025 received the Royal Assent on 24 February 2025.1 Section 1 reverses the common law rules relating to the identification of the governing law of an arbitration agreement definitively established in Enka Insaat ve Sanayi AS v OOO Insurance Company Chubb.2 In Enka, the Supreme Court overturned the decision of the Court of Appeal, which had held that the law governing an arbitration agreement would ordinarily be the law of the seat rather than any choice of law for the matrix contract. The majority of the Supreme Court held that, where the law applicable to the arbitration agreement is not specified, a choice of governing law for the matrix contract will generally apply (as an implied choice) to the arbitration clause, although other factors may instead imply that the arbitration agreement was intended to be governed by the law of the seat.

The topic of applicable law did not feature in the first Consultation Paper circulated by the Law Commission relating to its review of the Arbitration Act 1996.3 However, after that Consultation Paper was circulated, a number of consultees suggested reforming the 1996 Act to create a presumption that the applicable law of an arbitration agreement is the law of the seat unless the parties expressly choose otherwise—following the example of s.6 of the Arbitration (Scotland) Act 2010 and s.48 of the Swedish Arbitration Act.4 After a further Consultation Paper,5 that suggestion found its way into the draft Bill which formed Part of the Commission’s Final Report.6 Subject to a late revision to address the particular position of investor-state dispute settlement where the offer to arbitrate is contained in an interstate treaty governed by international law or the investment law of the host state, the proposal by the Law Commission is now given effect in a new s.6A of the 1996 Act.7 It provides: