Brexit has provided some uncertainty for the enforcing of English Court Judgments in Europe post-Brexit, which means arbitration may be used more often. In this interview we'll look at when to choose arbitration and which clauses and institutes to use in international contracts with David Breslin.
Michael Luckman: Today we are talking to David Breslin a Partner in our Commercial Litigation team about arbitration and in particular whether, post-Brexit, this might be a route which more people will be taking to resolve disputes. David what would you say are the advantages of arbitration?
David Breslin: Well generally speaking Michael, one considers there are three major advantages of arbitration. I would say the enforcement, enforceability of your arbitration award, the flexibility of the process and elements of confidentiality. The reason one points to those and not costs, is that costs is often a myth, cost savings are often a myth in arbitration and one finds very little difference between the costs of Court litigation and the costs of arbitration. Enforceability is a key issue; the arbitral awards are governed by the New York Convention on the recognition and enforcement of foreign arbitral awards and that convention is signed up to by 156 countries.
Now when you consider we've got 197 countries in the world that's a fair proportion of coverage. Arbitration can be a flexible process, it can be more flexible than the Court process and often parties like that, they like they ability to choose their arbitrators, to perhaps put stipulations as to the necessary qualifications that they should have to be arbitrators on the panel. They like sometimes to set their own rules. They like to choose their institutions, the institutions that will generally run and administer their arbitrations. So there is a great deal of flexibility in the arbitral process which you don't generally find in a local Court process.
Michael: That all sounds perfect but there must be some disadvantages, what are the disadvantages to arbitration?
David: Well arbitration, certainly international arbitration, and in particular if it is under common institutional rules, generally excludes an appeal process and obviously that can be a disadvantage. It can be an advantage, but if your disputes are highly technical and governed by black letter law then sometimes the lack of an appeal process is unappealing to the parties.
In arbitration sometimes, it is more difficult to obtain interim relief, than it is in the Court judicial processes, so that is that's sometimes considered to be a disadvantage. Emergency relief although does appear to be something which institutional arbitrations are increasingly adopting in their rules and so one sees that in the ICC regime and in the investor treaty regimes under ICSID.
Michael: Why do you think that more people will use arbitration post-Brexit?
David: Well one hears the word uncertainty associated with Brexit and that is particularly so when one looks at the enforcement of Court judgements in the European Union. There is a settled procedure and it is a fairly convenient procedure which is frameworked in the Brussels convention and Brussels recast and that allows parties within the European Union to relatively easily enforce their Court judgements. It's not clear at all whether that will survive Brexit and that level of uncertainly, I think, creates a vacuum for someone like arbitration to develop into. Arbitration is already a popular choice of dispute resolution mechanism, I think the current uncertainty with Brexit could well increase its popularity.
Michael: So what changes do you think you will see to arbitration post-Brexit?
David: The changes are difficult to predict; the ideal position would be that the negotiations that take place for Brexit leave in place a broadly identical enforcement regime to the one that currently exists today. That would be the ideal position and the problem is that no one knows where we will end up and because that's the case, the certainty of the existing arbitral options and the New York convention regime makes it quite attractive.
Michael: Do you see London as an arbitration centre being affected?
David: I don't think London's going to be affected at all actually Michael. I think most commentators see that there could well be a positive uptake in arbitrations, which are referred through the London jurisdiction. London currently maintains, and I think it will maintain, its reputation as one of the foremost centres to conduct arbitration in the world. It has many advantages, it has a number of the most world renowned arbitral institutions, the London Court of International Arbitration. It has a sophisticated and experienced judicial and it has a statutory regime which positively supports arbitration as a process. So I don't see the attractions of London as a centre changing at all after Brexit.
Michael: You referred earlier to arbitration being a flexible process. What is the difference between ad hoc arbitration and institutional arbitration?
David: Well generally speaking an ad hoc arbitration is one which is not administered or supervised by an institutional body. So some arbitrary institutions will have an administrative framework behind them to supervise arbitration. So, for example, the London Court of International Arbitration, the ICC in Paris, the Singapore International Arbitration Court. Those bodies will have supervisory control of the arbitrators and the arbitration through this process.
Michael: Why is the seat of an arbitration so important?
David: The seat in the context of arbitration refers to the legal seat of an arbitration and that means the place where the procedural law will govern the arbitration. So, for example, if you choose London as your seat of arbitration your procedural law of your arbitration will be English law. The importance of procedural law in an arbitration can determine how you deal with certain difficult aspects of the arbitration. For example, like the removal of your arbitrators, or how you deal with an appeal to arbitration. So legal seat and the choice of legal seat of arbitration is extremely important.
Michael: So when drafting arbitration clauses in a contract is there any particular wording you must particularly see?
David: Well there are certain essentials that you should look to include and certainly discuss when you are considering drafting arbitration clauses. These essentials would include the seat, the choice of the seat of the arbitration. The number of arbitrators that you want and generally speaking you would have one or three or maybe five it always needs to be an odd number.
You may want to impose qualifications on particular arbitrators who are dealing with your dispute and those qualifications might be relevant to the particular industry you work in and the disputes that might arise in your contract. You would want to consider which institutional rules that you incorporate into your arbitration agreement. You may not want to, you may want to have an ad hoc arbitration agreement.
You will want to consider whether you include an express agreement in your arbitration in relation to confidentiality in your arbitration agreement. You may also want to consider whether you incorporate rights of appeal into your arbitration agreement. So those I think are some essentials that you may want to look at.
Michael: So David, in closing, what would say are the key points General Counsel has to take in mind when considering arbitration?
David: Well I think at this stage, because there is this great level of uncertainty with how you will be able in the future to enforce any decisions you have in respect of the disputes arising in contracts, that you need to look now at whether the enforcement regime in the EU as it currently stands will continue post Brexit. And that is the level of uncertainty which I think means General Counsel need then to look at their contractual commitments throughout Europe and consider whether they in fact, rather than choose Court jurisdiction to decide those disputes, they look to tailor an arbitration clause which suits their needs going forward.
Michael: Well David that's very interesting and food for thought as we go forward in uncertain times. Thank you very much.
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