Posted: 29/08/2017
The spectre of Brexit has sparked debate about the prospects for London's continued pre-eminence as a global dispute resolution centre. But while we undoubtedly face uncertainties in the litigation sphere, how attractive will arbitration here remain as a dispute resolution option once we have parted (formal) company with our European neighbours?
There are several reasons why parties around the world have long since chosen to resolve international disputes through arbitration seated in London. Unlike some other countries' national courts, the English courts are well known for upholding the independence of the arbitral process and will not intervene unnecessarily: if the parties have chosen to arbitrate rather than litigate, the courts will respect that decision. The Arbitration Act 1996 also provides the courts with 'teeth', in the form of powers to assist and support arbitration when needed.
Further underpinning this popularity is the established and well-deserved reputation of the English judiciary for having vast expertise in complex international disputes, and for being fair, free of corruption and impartial. Equally, our common law is regarded as robust, settled and stable, and our legal system as effective and (relatively) efficient.
The jurisdiction also boasts a significant concentration of global law firms and highly qualified and experienced legal and arbitration professionals, including many arbitrators, the commercial bar and a well-developed pool of experts.
The above factors are unlikely to be much affected by Brexit (with the potential exception of the removal of freedom of movement impacting some EU national practitioners - although arguably the lack of such freedom has not impacted on other major centres such as New York or Singapore). Indeed, the legal framework supporting arbitration in England will remain largely unchanged, and may even in fact be strengthened by Brexit.
Although traditionally the English courts had proved willing to injunct proceedings brought in breach of an agreement to arbitrate, their ability to do so was curtailed by the Court of Justice of the European Union (CJEU) in the 2009 case of Allianz SpA and Others v West Tankers Inc (Case C-185/07). In West Tankers, the CJEU prohibited a court of an EU member state from issuing an anti-suit injunction restraining court proceedings in another member state, even if those proceedings were brought in breach of an arbitration agreement. This position was continued under the subsequent Recast Brussels Regulation (Regulation (EU) No. 1215/2012). The English courts have thus since 2009 been unable to issue anti-suit injunctions to restrain offending proceedings brought in another member state (although they have continued to do so in relation to proceedings brought outside the EU). This has removed a considerable weapon from the armoury of parties to arbitration.
Post-Brexit, depending on the shape of the Brexit deal, it is possible that the UK courts may again be able to support arbitrations by issuing anti-suit injunctions to restrain proceedings commenced in EU member state courts in breach of an arbitration agreement. Should this prove to be the case, London will gain a distinctly competitive edge as a seat for arbitration in comparison to other European cities.
A further positive relates to the crucial issue of enforcement: no judgment or award is worth the paper it is written on if it cannot be enforced. Arbitration has long held the advantage over traditional litigation when it comes to enforcement. A final award can be easily enforced in many more countries than a court judgment thanks to the New York Convention, the wide-ranging mechanism for the recognition and enforcement of foreign arbitral awards to which 157 countries are currently signatories (including the UK and all other EU member states).
The UK's membership of the New York Convention is unconnected to its membership of the EU, and enforcement of UK arbitral awards in the EU and vice versa will consequently be unchanged by our leaving the EU. However, the same cannot necessarily be said for the enforcement of English court judgments. Currently, we are part of an EU-wide system under the Recast Brussels Regulation for the mutual recognition and enforcement of the judgments of the courts of other member states. Once we leave the EU that will no longer be the case. Although the UK will (or should) seek to negotiate a similar framework for mutual enforcement of EU and UK judgments, the precise shape of these alternative future arrangements remains as yet unknown.
Compared to that uncertainty, arbitration is currently a safer bet when it comes to enforcement in EU countries post Brexit. Consequently, arbitration may well benefit over traditional litigation as the more attractive dispute resolution option for the immediate future.
Despite the ongoing uncertainty regarding the terms (or likelihood) of Brexit, arbitration in England ought to suffer few ill effects, and moreover, has the potential to even positively benefit. There are reasons for cautious optimism. As well as the factors discussed above, there are other possible issues at play: for example, our courts' enthusiasm for and encouragement of settlement and mediation, which is said by some to have a positive impact on our reputation as an arbitration centre; the presence of a highly active third party funding market (now also open for arbitration), and the weakness of the pound, which makes it less expensive for foreign parties to arbitrate in England.
International arbitration is independent of EU law. England's success and popularity as an arbitration hub has largely arisen due to factors separate to its EU membership, and we consider that the majority of those factors should not change. We therefore cautiously anticipate that England will maintain, or perhaps even strengthen, its position post-Brexit as a welcoming and supportive environment in which to arbitrate and therefore the arbitration forum of choice.
This article was published in New Law Journal in August 2017.
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