UK: The Future Of The UK As An Arbitration Hub Post-Brexit

Last Updated: 26 October 2016
Article by Peter Hirst

Most Read Contributor in UK, September 2017

Arbitration has a key role to play in the development of a global business community, it enables commercial, neutral, reliable and enforceable dispute resolution between global trading parties. While certain arbitral bodies and rules are preferred by certain sectors, and disregarding investment treaty arbitration for now which is a separate issue, it is fair to the leading global institutions notable the ICC, LCIA, HKIAC and SIAC all serve the global business community well.

While arbitral institutions have a role to play, arbitration still relies on the courts of the 'seat' and enforcing jurisdictions to support the arbitration and to act in circumstances where the tribunal is unable to (for example in compelling attendance of witnesses and crucially in enforcing awards).

As global business digests the potential fallout from the UK's historic vote to leave the EU, thoughts inevitably turn to the impact for our own jurisdictions and sectors and for London's future role in the global arbitration community.

First lets note that we do not know what the UK's relationship with the EU will be in terms of free movement of goods, services etc. going forwards, it may well take some time for it to become clear what the UK wants, let alone what it can negotiate. 

Let's then move on to remind ourselves of some key drivers behind London's long-standing success as an arbitral hub:

London is a global, not a European arbitration hub. 

International contracting parties do not choose London as an arbitral seat because of the UK's ties with Europe. They choose London for a variety of reasons not least being the pro-arbitration stance of the English & Welsh judiciary (Scotland and Northern Ireland not having been tested to the same extent). The judiciary have shown again and again their support for arbitration and its value as a dispute resolution mechanism of choice. The Arbitration Act 1996, provides a solid basis for both ad-hoc arbitration and as the curial law supporting institutional arbitration in London.

The choice of London as an arbitral seat is often coupled with the choice of English substantive law. This was the case pre the UK joining what is now the EU and there is no reason why it should change post-EU. English contract law is a recognised, global standard and that remains the same.

Arbitration community

While there are globally a host of highly intelligent, trained and qualified lawyers, experts, arbitrators and all those who participate in the arbitral process, it cannot be doubted that London has more than its fair share. Where globally English law remains prevalent as a choice of law between both English and non-English parties, the availability of English-qualified (and many dual qualified) practitioners and others with expertise in key areas within this jurisdiction is a big draw for the resolution of important disputes.

The New York Convention

The success of arbitration globally is in large part down to the impact of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards which enables arbitral awards to be recognised  and enforced in contracting states globally on a consistent basis (with some exceptions of course). The UK's participation in this regime was never dependent on its membership of the EU and will not be impacted when it 'leaves' (whatever form that takes).

Leading by example

Not all arbitral centres are members of the EU – Switzerland, Singapore, New York to name but a few – they have the above characteristics and are either long-standing, flourishing (or both) arbitration hubs. 

The one area where it is fair to say that the EU has impacted London's arbitration practice has been the restriction on the courts' ability to order anti-suit injunctions stopping litigation brought in contravention of an arbitration clause in another member state court (following the European Court of Justice's West Tankers decision). The premise of this was respect to the right of a member state court to make its own decision on jurisdiction where it was first seized (with the underlying thread that it would make the right decision and defer to arbitration where appropriate). Even where the various ways in which the UK could exit the EU are still being discussed (and will be for some time it seems), it seems clear that the EU will no longer 'control' the UK's laws and, as such, this deference to other member state courts will fall away thus re-invigorating the anti-suit injunction. This may, for many, be seen as a positive step for the development of arbitration in the UK and indeed make London an even more attractive arbitral seat as the courts will have an extra power to protect the parties' interests and enforce their arbitration agreements. 

Looking at the broader impact of the UK's decision, it is as yet unclear whether it will lead to the implosion of the EU as we know it, or to quite the opposite, a closer 'state of Europe' legally and politically. The fallout from either heaps more uncertainty on top of that already in existence but it may offer further opportunities for London as an arbitral centre – where previously countries may have seen other European jurisdictions as a neutral place to arbitration, the closer their ties the less neutrality there will be, both real and perceived. That is not to impugn the impartiality of any judge or national court but it is fair to say that some questions of impartiality have always been about perception. By way of example, say, US and Italian parties may currently opt to arbitrate in France as a neutral jurisdiction but where France and Italy are effectively in one European state, perhaps London being 'on the outside' may be a more attractive proposition.

In a market where we need to focus on 'What's the best that can happen' we must remember that London's strength in arbitration was never based on its membership of the EU, there is no reason for the UK's 'leave' vote to impact it and in fact it may present new opportunities for London to forge ahead.

The Future Of The UK As An Arbitration Hub Post-Brexit

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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