Arbitration is widely recognised as a flexible, confidential and internationally enforceable method of dispute resolution. It is frequently used in commercial contracts, shareholder agreements, construction projects, joint ventures and cross-border transactions.
However, not every dispute can be resolved by arbitration.
English law draws a distinction between disputes that are “arbitrable” and those that are not. Understanding this distinction is critical when drafting contracts or considering enforcement strategy.
What Does “Non-Arbitrable” Mean?
Under the Arbitration Act 1996, parties are generally free to agree that disputes between them will be determined by arbitration rather than by the courts.
However, certain categories of disputes are reserved for national courts because they:
- affect public rights rather than private rights
- involve statutory regimes that require court supervision
- concern matters of status
- engage public policy considerations
These disputes are described as non-arbitrable.
1. Criminal matters
Criminal liability cannot be determined by arbitration.
Only the state, through the criminal courts, has the authority to prosecute and determine criminal offences. An arbitral tribunal cannot impose criminal sanctions, fines, or custodial sentences.
Even if a contract contains an arbitration clause, allegations of fraud that amount to criminal offences remain within the jurisdiction of the criminal courts.
2. Family and status matters
Disputes concerning:
- divorce
- child custody
- legal status
- bankruptcy status
are generally not arbitrable because they concern personal status and public law rights.
For example, while financial disputes following divorce may sometimes be subject to arbitration frameworks, the formal dissolution of marriage must be determined by the court.
3. Insolvency proceedings
Certain insolvency matters are not arbitrable because they affect creditors as a class rather than individual contractual rights.
For example:
- winding-up petitions
- administration orders
- bankruptcy petitions
These are collective procedures governed by statute, primarily the Insolvency Act 1986, and require court supervision.
However, underlying contractual disputes between parties (for example, disputes about debt amounts) may still be referred to arbitration if a valid arbitration clause exists.
The English courts have considered the interaction between insolvency and arbitration in cases such as Sian Participation Corp v Halimeda International Ltd [2024] UKPC 16, which a winding-up petition for a disputed debt, even if subject to an arbitration agreement, will only be stayed or dismissed if the debt is genuinely disputed on substantial grounds, rather than simply being subject to an arbitration clause.
4. Certain employment and consumer disputes
Although arbitration clauses can appear in employment or consumer contracts, enforceability is limited.
In the UK:
- statutory employment rights are typically enforced through Employment Tribunals
- consumer protections may render mandatory arbitration clauses unenforceable
The Consumer Rights Act 2015 restricts unfair terms in consumer contracts. Arbitration clauses that restrict access to court remedies may be deemed unenforceable if they create a significant imbalance to the consumer’s detriment.
5. Corporate matters
Certain corporate matters involving statutory remedies or affecting third parties may not be suitable for arbitration.
For example:
- petitions for unfair prejudice under section 994 of the Companies Act 2006
- derivative claims
- rectification of company registers in certain circumstances
The position can be complex. While many shareholder disputes can be arbitrated, matters that require court powers or affect non-parties may fall outside arbitral jurisdiction.
6. Public law and regulatory issues
Disputes involving:
- judicial review
- regulatory enforcement
- competition law penalties
- tax assessments
are generally reserved for courts or specialist tribunals.
An arbitral tribunal does not have authority to review governmental decisions or exercise supervisory jurisdiction over public bodies.
Arbitrability in an international context
Arbitrability is determined by:
- The law of the seat of arbitration
- The law governing the dispute
- Enforcement rules under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards
Under Article V(2)(a) of the Convention, enforcement may be refused if the subject matter is not capable of settlement by arbitration under the law of the enforcing state.
This means a dispute that is arbitrable in London may face challenges elsewhere if it falls within restricted categories.
Why this matters when drafting arbitration clauses
Businesses should carefully assess:
- whether the dispute is likely to involve statutory remedies
- whether insolvency risk may arise
- whether consumers or employees are involved
- whether third-party or regulatory rights may be engaged
A poorly drafted arbitration clause may create jurisdictional disputes, delay enforcement, or result in parallel court proceedings.
Strategic drafting is particularly important in such documents as shareholder agreements, cross-border commercial contracts, construction and infrastructure projects or international supply arrangements.
How we can help
At IMD Corporate, we advise businesses on:
- drafting robust and enforceable arbitration clauses
- assessing arbitrability risks before disputes arise
- managing parallel court and arbitral proceedings
- enforcement of arbitral awards
If you are considering arbitration or facing a dispute in which jurisdiction is contested, early strategic advice can significantly reduce risk and costs.
For tailored advice on arbitrability and dispute resolution strategy, please contact our commercial dispute resolution team.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
