Why Brexit is unlikely to have any impact on London’s status as a popular seat of arbitration

Posted in Dispute resolution and litigation International arbitration

London has for some time been one of the most  popular seats of international arbitration.  It is common for parties to choose to resolve international disputes by London-seated arbitration, frequently under English governing law, even where neither party has any connection to the UK and the contract is neither made nor performed in the UK. The consensus amongst commentators is that the popularity of London-seated arbitration (and indeed English law) looks set to continue irrespective of Brexit. We give four reasons for this level of confidence:

Brexit will not diminish the many advantages of London as a seat of arbitration

The many advantages of London-seated arbitration do not derive either from EU law or from UK membership of the EU and will therefore remain in place after the UK exits the EU. These advantages include:

  • The English Arbitration Act 1996 provides a modern and comprehensive framework for resolving disputes by arbitration. The principles underlying the Act provide that arbitrations should be resolved by an impartial and fair arbitral tribunal without unnecessary delay or expense, that parties should be free to agree how their disputes are resolved, and that the courts should intervene only in limited circumstances.
  • English courts have a proven track record of supporting arbitration and recognising and enforcing arbitration agreements and arbitral awards. The English judiciary is also internationally recognised for its impartiality, experience and skill, particularly in dealing with complex and multi-jurisdictional matters in an efficient manner.
  • English law upholds the principle of confidentiality of arbitral proceedings – something that is not common amongst all jurisdictions.
  • English common law (the choice of which often goes hand in hand with the choice of London as a seat) is trusted internationally because it is an established and effective legal system, placing importance on freedom of contract, but without awards of punitive or exemplary damages.
  • London has an internationally recognised corpus of experts available to act as arbitrators, legal counsel and expert witnesses and a well-established legal support infrastructure, including specialist arbitral institutions and centres.

Brexit will have no impact on the enforcement of English arbitration awards

A key advantage of arbitration is the comparative ease with which awards may be enforced globally under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. There are currently 157 contracting states to that Convention, including the UK and all other 27 EU Member States. Given that this Convention does not depend on EU membership, Brexit will have no impact on the ability of parties to enforce English arbitral awards under its provisions in Europe or elsewhere.

Brexit may enable English courts to issue EU-wide anti-suit injunctions again

English courts have historically proved willing and able to act in support of arbitration, including by issuing anti-suit injunctions to restrain proceedings before foreign courts which have been commenced in breach of an agreement to arbitrate. However, following the ruling of the Court of Justice of the European Union in the West Tankers case, the English courts have been unable to grant such anti-suit injunctions where parties have wrongfully initiated proceedings before EU Member State courts (though the English courts can still - and do - grant anti-suit injunctions in respect of non-EU court proceedings).

Depending on what framework for the determination of court jurisdiction the UK negotiates with the EU, following Brexit the English courts may once again be in a position to issue anti-suit injunctions in support of arbitration in respect of court proceedings in Member State Courts.  If so, the UK would gain a competitive advantage over other EU Member States whose courts are still prevented from issuing, and have historically been unwilling, to issue anti-suit injunctions in respect of court proceedings commenced elsewhere within the EU.

Brexit may spark a rise in London-seated arbitrations

The process of the UK’s withdrawal from the EU and negotiations with EU Member States will take several years. In the meantime, little will change for the English arbitration market.  Existing arbitration clauses specifying London as a seat of arbitration will continue to operate as before. Brexit may however create a perfect storm of uncertainty and change, disruptions in financial markets and fluctuations in asset values. This may lead to parties defaulting on or looking for ways to avoid their contractual obligations.  Any resultant rise in commercial disputes will inevitably lead to an increase in London-seated arbitrations.

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