What impact, if any, will the new Arbitration Act have on the construction industry?

Introduction

The Arbitration Act 2025 gained Royal Assent on 24 February 2025 and introduces significant changes to the arbitration framework in England and Wales. Some of these will come into force through regulations yet to be made by the Secretary of State.

The 2025 Act and the previous legislation, the Arbitration Act 1996, apply to any arbitration seated within England and Wales (and some provisions may apply to foreign seated arbitrations in certain circumstances or to arbitrations where no seat is designated – section 2 of the 1996 Act). If your contract provides for a London-seated arbitration as a method of dispute resolution the changes will apply automatically to any arbitration that falls within the scope of the 1996 Act (commenced after the 2025 Act comes into force).

Much has already been written about the changes introduced by the new legislation, which have been evident (in some form) since the Arbitration Bill was published in September 2023. The focus of this article is whether or not some of the changes will have an impact on how disputes are managed and resolved in the construction space, where costly technical disputes are common place and efficient dispute resolution mechanisms are crucial.

Legislative changes that may affect construction disputes

Whilst arbitration remains a popular method of dispute resolution in the construction industry, particularly for cross border disputes (with, for example, 40% of the ICC’s caseload comprising construction, engineering and energy cases), the nature of construction disputes – technically complex often with expert evidence, a high volume of documents, and detailed factual circumstances to be analysed – often means the process is lengthy, costly and complicated.

One of the primary objectives of the 2025 Act is to make the arbitral process more efficient and streamlined, to bring the UK’s offering in line with international standards and ensure London remains a popular seat for arbitration. So, what has it done to achieve this objective?

Summary dismissal process

By introducing a summary dismissal process to enable tribunals to summarily dismiss claims, defences or issues with “no real prospect of success” (section 39A). If a tribunal can dispose of claims that are unsubstantiated and lack merit (perhaps even spurious claims) this should mean that they can be dealt with swiftly and without a lengthy hearing, meaning parties save both time and costs.

Whilst this power was already implied under the old Act, the new Act makes the power express (giving confidence to arbitrators). There is a framework to ensure the process is fair which should assist with enforcement by foreign courts.

Emergency arbitrator’s powers

The 2025 Act allows the parties to agree to the application of rules that provide for the appointment of an individual as an emergency arbitrator.

If an emergency arbitrator is appointed, the emergency arbitrator can make peremptory orders (i.e. final orders) in the event of non-compliance with existing directions, with the aim being that there should be a faster route for interim measures (section 41A). The court also has new powers to enforce these awards. This should give parties more confidence in the process because there is a means to ensure compliance.

Accordingly, parties should consider carefully whether to agree to the use of emergency arbitrators when agreeing the dispute resolution provisions in their contract.

Making jurisdictional challenges are harder

Mandatory amendments have been made which are intended to simplify the procedure for making jurisdictional challenges. Under section 67 of the 1996 Act (challenging the award: substantive jurisdiction), where an arbitral tribunal has ruled on jurisdiction, a party which objected to jurisdiction during the arbitration can apply to the court to challenge the award.

Case law has held that any challenge before the court under section 67 is potentially by way of a full rehearing, even if there was a full hearing on the matter before the tribunal[1]. This has received criticism on the basis that it potentially allows parties to use the hearing before the tribunal as a ‘rehearsal’.

Now, if such a jurisdictional challenge is brought under section 67, where the application relates to an objection on which the tribunal has already ruled and is made by a party that took part in the arbitral proceedings, the court will be prevented from entertaining new grounds of objection or new evidence, and from re-hearing evidence already heard by the tribunal, with some exceptions subject to a "reasonable diligence" test. The procedure for applications under section 67 is to be provided for in rules of court.

The aim is that this should encourage fairness, prevent unjustified challenges (and delays) and promote cost-efficiency. However, it remains to be seen how this will work in practice – where the court cannot hear new evidence or re-hear old evidence.

There has also been a welcome clarification to section 32 of the 1996 Act (determining a preliminary question on the jurisdiction of the tribunal). New section 32 (1A) clarifies that section 32 cannot be invoked after the tribunal has ruled on its jurisdiction (the proper route to challenge in such circumstances is via section 67).

Therefore, under the new Act, a party wishing to challenge jurisdiction has two options:

• if the tribunal has not already ruled on its own jurisdiction, an application can be made to the Court under section 32 to determine a preliminary question as to the substantive jurisdiction of the tribunal; or
• if the tribunal has already ruled on its jurisdiction, a party can challenge that decision under section 67 (but note that the new rules will prevent a party raising new grounds of objection or new evidence before the Court)

These improvements could positively impact construction disputes where spurious jurisdictional challenges can be used tactically to delay matters.

Concluding thoughts

Arbitration is already popular in the construction industry and the 1996 Act has always been considered to be a well written and versatile piece of legislation. However, the changes introduced by the 2025 Act could expedite the process and improve efficiency. This may encourage more parties to include arbitration as their chosen dispute resolution method and London as their seat.

Domestic projects may already have a statutory right to adjudicate under the Housing Grants, Construction and Regeneration Act 1996 (“HGCRA”) and where the HGCRA applies, adjudication is likely to remain an attractive option for resolving many disputes. However, the changes made to the 1996 Act might further encourage parties to use arbitration as a reasonable alternative to Court either for final determination of a dispute or where the HGCRA does not apply to some or all of the work (e.g. power, water or chemical related projects). Arbitration may certainly provide more flexibility (and lower cost) than the TCC for disputes in England and Wales.

However, where litigation still has an obvious advantage (often relevant for larger, more complex construction projects) is where there are disputes involving multi-parties and multiple contracts. 

[1] Dallah Real Estate & Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46

Read more about the Arbitration Act 2025 here.