UK: International Arbitration Seated In London Is Poised For A TKO Against Brexit

For all the left hooks and jabs Brexit has been swinging, London has been floating like a butterfly in and around all of them, successfully defending its title as one of the top 5 choices globally for the arbitral seat.1 Make no mistake, London is far from the underdog in this fight, which is arguably a mismatch of adversaries. 

So, why is it that a London-seated, English law governed arbitration cannot be touched by the consequences of Brexit, in particular a no-deal, cliff-edge Brexit? Simple: its advantages are not related to or derived from the United Kingdom's ("UK") membership in the European Union ("EU") or from the force of any EU law.

The referee's view

When opening the Business and Property Courts for Wales in 2017, (yes, the United Kingdom has been "brexiting" since before then!) the Lord Chief Justice, Lord Thomas, remarked that arbitration in the UK will not be affected by Brexit in any way. In doing so, he referred to the following reasons, which he considered to be the unique strengths of English law and dispute resolution: (1) Brexit can have no impact on the integrity, independence and expertise of the English judiciary; (2) UK procedures (which are unaffected by EU rules or regulations) deliver speedy and efficient resolution of business and financial disputes and the English supervisory court is business-friendly and run by judges with extensive and relevant commercial expertise; and (3) Brexit will not cause London to lose its highly qualified legal professionals, the London Court of International Arbitration or its pro-arbitration judiciary.2

In England, arbitration proceedings are regulated by the Arbitration Act 1996, which is domestic law and provides a modern and comprehensive framework for resolving disputes, which includes the ever-important principle of confidentiality. Add to that the crucial infrastructure support of the London Court of International Arbitration and a court system accustomed to recognising and enforcing arbitral agreements and awards, and one can see quickly that a London-seated, English law governed arbitration has a fierce entourage in its corner to protect it from any Brexit fallout. 

The boxers' view

A recent Thomson Reuters report3 on a survey of private practice and in-house lawyers regarding how those lawyers were approaching dispute resolution clauses to address Brexit considerations revealed that Brexit has affected the approach of only 35% of respondents to the survey. What is interesting though, is that 10% of the 35% have changed their approach and switched from jurisdiction and choice of law clauses to arbitration clauses, and the majority of those switching to arbitration clauses have chosen arbitration in England.4 

One of the significant factors cited in the decision to make the change from litigation to English law governed arbitration is the uncertainty surrounding the future enforcement of English court judgments across the EU after exit day.5

The enforcer's view

Generally speaking, enforcement of arbitral awards, including in the UK and all 27 other European Union member states, is subject to its own regime under the New York Convention 1958. The cherry on top of this particular sundae is obvious: the New York Convention has nothing to do with EU law or a state's membership in the Union.

What if you need to enforce rights against the EU? Is a London-seated arbitration still expected to be the champion? But of course. International agreements (ex. the EU-Canada Comprehensive Economic and Trade Agreement (CETA) and the EU-Singapore Free Trade Agreement (EUSTFA)) provide for binding arbitration as a means of dispute resolution.6 Further, decisions of the Court of Justice of the European Union that pre-date exit day will, as a result of the European Union (Withdrawal) Act 20187 (the "EUWA") continue to have precedential value in the UK, as though they were decisions of the UK supreme court.

The trainer's view

But, can it really be that simple? Where is the paragraph about all the hideous pitfalls you should be aware of and take steps to avoid? Here it is:

Save as provided under the EUWA, once the UK leaves the EU, it will no longer need to treat EU law as supreme. The EUWA provides that a UK court or tribunal is not bound by principles or decisions made on or after exit day by the European Court but that a court or tribunal may have regard to anything done on or after exit day by the European Court, another EU entity or the EU so far as it is relevant to any matter before the court or tribunal.8 

So why is this a concern? Let's say a dispute is in respect of an EU regulation that has been imported into UK law by virtue of the EUWA and there are relevant EU precedents that were made on or after exit day. Courts or tribunals have discretion to decline to recognise those relevant EU precedents, potentially leading to diverging outcomes and creating a risk of legal uncertainty.

Practically speaking, one would not expect a general commercial contractual dispute to be affected by this potential risk because EU law would not come into play in the normal course in any event. However, this may still be something to consider for parties with disputes that may touch on EU law.

The tabloid's view

It appears then that the real concern is perception. The UK's reputation, and that of London in particular, as one of the top 5 choices globally for the arbitral seat,9 may be taking a (misplaced) hit due to a collective perception that Brexit will have a blanket negative impact on the country. When it comes to Brexit, the only known is that everything is unknown, including whether or not Brexit will in fact have a negative impact on the country. In any event, as discussed above, even if this perception became reality, it is unlikely to have any effect on international arbitration proceedings in London under English law.

There is also the concern that when the UK leaves the EU, bringing with it the end of free movement of people, it may be more difficult for parties to come to the UK from elsewhere in order to participate in an arbitration. This is of course all speculation and would not affect the arbitration population writ large in any event. As Canadians living and working in London and travelling regularly between London and various states of the EU (âllo Paris à fin de semaine!), we can tell you that while the process of border crossing may not be as effortless for us as it is for our English colleagues, it is a far cry from being administratively burdensome.

The promoter's view

In short, Brexit is punching above its weight when it comes to challenging the undisputed collective strength of English law, the UK's robust judiciary, London's prominence in the financial, shipping and commodities sectors, and the local legal community's general embrace of internationality. 

As a result, it does not look like London-seated, English law governed arbitrations are considering hanging up their gloves any time soon. Quite the opposite: London is poised and ready to defend its heavyweight title.

Footnotes

1 Based on statistics gathered by Queen Mary University of London in partnership with White & Case LLP. 2018 International Arbitration Survey: The Evolution of International Arbitration, http://www.arbitration.qmul.ac.uk/research/2018/

2 25 July 2017, Speech by The Lord Chief Justice: Opening of the Business and Property Courts for Wales, https://www.judiciary.uk/announcements/speech-by-the-lord-chief-justice-opening-of-the-business-and-property-courts-for-wales/

3 Thomson Reuters Practical Law Dispute Resolution survey on the impact of Brexit on dispute resolution clauses, 23 July 2018 https://uk.practicallaw.thomsonreuters.com/w-015-2475?transitionType=Default&contextData=%28sc.Default%29

4 Ibid.

5 Ibid.

6 HM Government, Enforcement and dispute resolution, a future partnership paper, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/639609/Enforcement_and_dispute_resolution.pdf

7 European Union (Withdrawal) Act 2018, Chapter 16, section 6 http://www.legislation.gov.uk/ukpga/2018/16/section/6/enacted

8 Ibid.

9 Supra, note 1.

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