Arbitration News: London based International Arbitration in the wake of Brexit

It remains unclear exactly how and when the UK will leave the EU and what the consequences will be on the English Arbitration market. The general consensus is that there will be no significant short-to-mid term effects. The fact is the advantages of English Arbitration are not derived from EU law or the UK’s membership of the EU.

London’s status as arbitration hub

London’s unrivalled status as a leading arbitration seat can be attributed to the feature of the English law and the confidence commercial and state parties have in the English system. Parties choose to resolve international disputes through London because English arbitration is known for its efficiency, effectiveness and impartiality. Uncommon to many other arbitration jurisdictions, English law upholds the principle of confidentiality.

The main legislation governing English arbitration is the Arbitration Act 1996 and this will continue to be in force after Brexit. English courts have developed over the past 20 years a strong reputation for being both arbitration-friendly and non-interventionist. The 1996 act gives arbitration tribunals a wide discretion to decide on matters, subject to the parties’ right to agree on this. This allows some involvement by English courts to support arbitration.

English law governs contracts – English law is the most frequently chosen governing law in commercial contracts between international parties and as such London is often chosen as the seat. English contract law has been tried and tested by the courts and has a strong international reputation. The established legal system places specific importance on the parties’ freedom of contract whilst deterring speculative or punitive damages.

London also benefits from the availability of highly qualified professionals who act as arbitrators, legal counsel and expert witnesses. In addition to this, London is home to respected international arbitration institutions such as the London Court of International Arbitration (LCIA) and Chartered Institute of Arbitrators (CIArb).

Arbitration awards

When the UK withdraws from the EU there will be no impact on the enforcement of English arbitration awards. The UK will remain a signatory of the Convention of the Recognition and Enforcement of Foreign Arbitral Awards 1958, more commonly known as the New York Convention. There are 157 state signatories to the convention including all 28 EU member states.

London-seated arbitration post-Brexit will provide stability and clarity as English arbitration is unlikely to be altered. This however may indeed change when the EU and the UK settle negotiations on court jurisdiction, mutual recognition and enforcement of judgements and choice of governing law.

The possibility of anti-suit injunctions

The EU has severely curtailed the English courts’ ability to support arbitration and its own jurisdiction by issuing anti-suit injunctions. The purpose of these injunctions were to prevent parties who issued court proceedings in breach of an arbitration agreement. The Court of Justice of the European Union (CJEU) ruled in the West Tankers case that anti-suit injunctions issued within the EU were incompatible with EU law.

When the UK leaves the EU, this position may change and English courts may once again arm international parties to a dispute with this powerful weapon. London-seated arbitration would gain an advantage against rival European arbitral seats.

Conclusion

It seems unlikely that Brexit will substantially affect the UK’s position as an arbitration hub in the immediate future. In the long term, the consequences of negotiations between the EU and the UK are less predictable and will need to be considered at that time.

London-seated arbitration will remain a party to the New York Convention and its pro-arbitration stance, entrenched in the Arbitration Act 1996, is not likely to change. English arbitration has thrived for decades independent of the UK’s membership to the EU and its reputation for delivering the highest standard of dispute resolution will not be shaken by the impact of Brexit.

For further information on any of the issues covered here please contact Antony Smith (a.smith@beale-law.com / +44 (0) 20 7469 0406) or Marc Jones (m.jones@beale-law.com / +44 (0) 20 7469 0422).

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