Implied Choice of Law for Arbitration Agreements: Modify or Abandon Completely?

Key Takeaways

• English Arbitration Act 2025 requires explicit choice of law.
• Prior case law used three‑step implied choice test.
• Private international law sets higher threshold for implied choice.
• Proposed two‑stage test: clear choice or seat law.
• Aligns NYC default rule with stricter intent evidence.

Summary

The newly revised English Arbitration Act 2025 eliminates the implied choice of law for arbitration agreements, mandating an explicit choice or defaulting to the seat’s law. This marks a departure from the established three‑step test—express choice, implied choice, then closest connection—used in cases such as Sulamérica v Enesa and Enka v Chubb. The article argues that the implied choice should be assessed using private international law standards, which require a clear, demonstrated intention, rather than judicial presumptions. It proposes a streamlined two‑stage approach: first, apply a clear, real choice of law; second, fall back on the seat’s law, offering greater certainty while remaining consistent with the New York Convention.

Pulse Analysis

The English Arbitration Act 2025 represents a watershed moment for arbitration practitioners in the UK. By discarding the long‑standing implied‑choice mechanism, the statute forces parties to articulate the governing law of their arbitration clause or rely on the law of the seat. This change curtails judicial speculation, aligning the UK approach with the explicit‑choice ethos of the New York Convention and reducing uncertainty in multi‑jurisdictional disputes.

Private international law instruments such as Rome I, the Hague Choice of Law Principles, and the Inter‑American Convention have long required a "clear and evident" demonstration of party intent for an implied choice to be valid. The article highlights how these higher thresholds contrast with English case law that often inferred intent from presumptions. By importing the stricter standards of these instruments, the proposed two‑stage test offers a more predictable framework: a genuine, demonstrable choice first, and the seat’s law as a fallback. This mirrors the Act’s explicit‑choice requirement while preserving a safety net for agreements lacking a clear declaration.

For counsel and in‑house lawyers, the practical implications are immediate. Drafting protocols must now include a definitive choice‑of‑law clause for arbitration agreements, or risk defaulting to seat law, which may be less favorable. Enforcement officers and courts will have less leeway to reinterpret parties’ intentions, streamlining award recognition under the New York Convention. Ultimately, the reform promotes legal certainty, aligns UK practice with global standards, and encourages more meticulous contract design in international commerce.