Thomson Reuters Legal Business published a report in July entitled, The impact of Brexit on dispute resolution clauses, setting out the results of its survey which asked 94 respondents about their current and future plans for jurisdiction and choice of law clauses. Notably for London arbitration practitioners, the study found that 10% of respondents were now providing for arbitration rather than court litigation in their contracts following the Brexit referendum result and, of this number, 63% favoured arbitration in England. In addition, 20% of the group of respondents that are yet to make any changes to their contracts but may look to do so in the near future also stated that they may opt for arbitration over litigation in their contracts. Again, England was the preferred seat.
One of the factors at play may well be the uncertainty with respect to the applicable regime for enforcement of English court judgments in other member states when the UK is no longer in the EU. As an EU member, the UK is part of the EU-wide regime which aims to streamline the procedure for mutual recognition and enforcement of judgments. Thanks to the Recast Brussels Regulation, judgments obtained in the English courts can be enforced in the other 27 EU member states through a simplified process, making enforcement both quicker and cheaper for judgment creditors. Whilst the UK government has indicated in its policy and position papers that it will seek to replicate the existing regime, or to at least reach an arrangement “that allows for close and comprehensive cross-border civil judicial cooperation on a reciprocal basis”, no specific proposals have been agreed at the time of writing. The enforcement of arbitration awards, of course, enjoys the regime around the New York Convention and will continue to do so even after the UK has left the EU. In this respect, London-seated arbitration remains robust.
As with all things, change takes time and the value of incumbency should not be underestimated. With many companies adopting a “wait and see” approach and continuing to include London-seated arbitration in their existing dispute resolution clauses until the terms of any exit deal are agreed, London’s position seems secure for at least the duration of these contracts. Longer term, many have rightly noted that the enduring popularity of London arbitration is due to its historic reputation, the importance of the rule of law, the expertise of practitioners in the jurisdiction, and its flexible and commercial approach (as well as the application of the New York Convention for the purposes of enforcement). All of these factors are quite separate to the issue of the UK’s membership of the EU. Overall, recent research appears optimistic about London arbitration post-Brexit. Thus, within survey data on London arbitration at least, it appears that there is consensus, a seemingly rare bird in both disputes and post-referendum Britain.
79% of the businesses surveyed by Thomson Reuters responded that at least some of their current contracts contain an arbitration clause; 33% stated that over half of their international contracts provide for arbitration. A significant number of those responding stated that London was their preferred seat of arbitration.
These findings accord with other recent research; despite the triggering of Article 50, London came out top in the 2018 Queen Mary/White & Case International Arbitration Survey (which sought the views of 922 respondents, comprising mostly private practitioners, in-house counsel and arbitrators), with 64% of those responding choosing it as their preferred seat. Indeed, this demonstrated an increase in London’s popularity; in the same study in 2015, the figure was 47%.
The current popularity of London as an arbitral centre for international disputes is also reflected in the statistics for 2017. 94% of arbitrations commenced last year under the London Centre for International Arbitration (LCIA) Rules were seated in London, and more than 80% of parties were from outside the UK. The London Maritime Arbitrators Association (LMAA) handled 2,357 in 2017, whilst its biggest competitor in the maritime arbitration space, Singapore, saw less than 10% of this caseload.
35% in the Thomson Reuters survey answered that they had changed their approach to the selection of jurisdiction and governing law clauses following the June 2016 referendum, with the majority of this group stating that they were now choosing jurisdictions and laws other than England and Wales. However, 10% stated that, as a result of Brexit, they were now opting to include dispute resolution clauses providing for arbitration (rather than litigation) in their contracts and, of this number, 63% stated that they favoured arbitration in England over other countries.
Further, 39% of those that indicated that they are yet to make any changes stated that they would be reviewing their jurisdiction and choice of law clauses if no significant progress is made in the Brexit negotiations. 20% of these respondents said that they were considering providing for arbitration rather than court litigation in their future agreements. Within this group, 75% stated that they preferred arbitration seated in England.
Similarly, respondents in an earlier Thomson Reuters study (the results of which are detailed in Catalyst of Catastrophe? How Brexit Will Impact Law Firms), also thought that companies, faced with uncertainty over whether the UK will be able to negotiate some form of reciprocal judgment enforcement regime with the EU, may choose to arbitrate in London rather than litigate their dispute before the English courts.
No negative impact
The views expressed in the Thomson Reuters survey that London will continue to be a preferred seat for arbitration even after Brexit are also mirrored in other studies. In the 2018 Queen Mary/White & Case Survey, approximately 55% of respondents anticipated that London’s appeal as a seat of international arbitration would remain unchanged after Brexit and 9% predicted that it would increase in popularity.