REUTERS | Phil Noble

What on earth happens next? Foreseeing the impact of Brexit on international arbitration

On 12 February 2019, Quadrant Chambers hosted an evening where the international arbitration community could gather and ventilate their experiences, concerns, and hopes as the United Kingdom moves closer towards exiting the European Union.

Entitled What on earth happens next? Foreseeing the impact of Brexit on International Arbitration, the evening was chaired by Chris Smith of Quadrant Chambers, and hosted a panel of four experts who each brought a unique perspective; Liisa Lahti of Quadrant Chambers; Andrew Cannon, Partner at Herbert Smith Freehills; Dr Jacomijn van Haersolte-van Hof, Director-General of the London Court of International Arbitration (LCIA); and Professor Loukas Mistelis, the Clive M. Schmitthoff Professor of Transnational Commercial Law and Arbitration at Queen Mary University of London.

Liisa Lahti started the evening by considering the effect of Brexit on choosing the UK for dispute resolution in general, including the use of English courts, citing data gathered by Thomson Reuters over 2018. In October 2018, 64% of respondents, comprising local and international businesses and law firms, stated that they were already conducting a review of their jurisdiction and choice of law clauses in light of Brexit, with a further 14% intending to do so. The data also shows that some businesses have already made the decision to change the choice of law or jurisdiction clauses commonly used in their contracts. The data is stark and rewards close examination.

There is a general consensus that leaving the EU will not generally affect substantive arbitration law, arbitration being excluded from the scope of the European jurisdiction and enforcement regime under Regulation 1215/2015 (Brussels Recast Regulation). The same cannot be said of English court work. While choice of law and jurisdiction can be implemented unilaterally by the UK post-Brexit, the ease of enforcement of UK judgments around the EU requires multilateral cooperation. There is no guarantee that any alternative to Brussels Recast will be adopted, especially in the short term. 57% of respondents to one survey cited the ease of enforcement of English judgments as a reason for choosing English courts. This ought not be ignored.

Andrew Cannon focused on arbitration itself. It is easy to assume that Brexit will not affect arbitration, again, with arbitration being excluded from Brussels Recast and being subject to its own regime under the New York Convention 1958. There may be minor exceptions, for example, anti-suit injunctions against member state courts in support of an arbitration may be unavailable under the European regime and could be reintroduced, but these are unlikely to be a major factor in choosing London.

The wider concern is, Andrew argued, one of perception. Statistics from QMUL showed that, generally, London is a very popular choice of arbitral seat; 64% of respondents stated that it was in their top five locations globally, beating Paris and Singapore in second and third place. But as the UK’s departure from the EU moves closer, there is an assumption in the international community that Brexit will have a negative impact. There is a general sense of uncertainty that affects the perception of London as a business environment. Even if arbitration itself does not change, if London is considered a less attractive place to do business, it may stop feeling like such a natural and comfortable choice to resolve disputes. The legal community in, say, Paris, are likely to try to capitalise on this uncertainty.

Dr Jacomijn van Haersolte-van Hof was able to provide a completely different perspective as Director-General of the LCIA, because she is engaged with the practicalities of organising and overseeing international arbitration. She began by explaining the strength of English law; its international prominence in banking and finance, as well as shipping and commodities disputes, helps to legitimise London as a seat for dispute resolution, alongside a robust judiciary.

Nonetheless, she explained that her primary concerns had nothing to do with law and nothing, really, to do with arbitration. Would it be difficult for European parties to obtain visas to enter the United Kingdom? Would queues at London’s airports get longer? A lot of small, practical difficulties may add up and will have to be addressed. Nevertheless, she concluded on a positive note (in some respects), by stating that there was little doubt that the transition to a post-Brexit situation would lead to numerous disputes.

Professor Loukas Mistelis explained that the success of London was down to the legal community embracing internationality. There is a culture of openness within our legal professions. In particular, the legal education sector is, and has always been, very international; foreign lawyers come to London to study, and return to their home jurisdiction will full confidence that London will be able to provide a high level of service and accommodate their needs.

However, Professor Mistelis considered that there was a perception that Brexit amounted to a xenophobic message. The legal community needs to be keenly aware of this perception and take active steps to maintain its open and international culture. He spoke in particular of the impact of Brexit on investor-state dispute settlement and the increasing competition of places such as Singapore. He further noted that, post-Brexit, the UK will be a good place of incorporation for businesses wishing to invest in the EU and benefit from UK bilateral investment treaties.

Each speaker, taken in isolation, raised more concerns than opportunities and pointed to more problems than solutions. Nonetheless, it would be inaccurate to describe the evening as pessimistic. Each speaker could not help but speak with fondness for how far London has come as a global centre for dispute resolution, and praise the international outlook and pro-activity of the various sectors of the legal community that allowed this to happen: solicitors, barristers, arbitrators, institutions, universities, the judiciary. None of that needs to change.

The concluding remarks of the panel indicated that the one thing we must take from Brexit is that London can no longer be complacent. If it wants to remain a globally popular seat for arbitration, it will have to not only be aware of its own strengths, but actively educate itself of the competitive advantages of its competitors and be willing to confront them. It is nothing that cannot be overcome. Perhaps the challenge will be a healthy one.

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