After four years of speculation on the impact of Brexit upon litigation and arbitration, clients have begun reassessing their dispute resolution clauses in light of the EU-UK Trade and Cooperation Agreement announced on December 24, 2020. In this context, international arbitration appears to be emerging as a lower-risk alternative, in particular for counterparties concerned that Brexit might diminish the jurisdiction of the English courts and the enforceability of their judgments across the EU.
The absence of a direct replacement for the Recast Brussels Regulation means that courts in the remaining 27 EU member states will no longer be automatically required to respect non-exclusive English jurisdiction provisions, and English court judgments will no longer be automatically enforceable across the EU. Although exclusive jurisdiction clauses will remain subject to the Hague Convention to which the UK acceded on January1, 2021, the status of “asymmetric” jurisdiction clauses (common in finance transactions) will likely remain unclear until the UK is accepted into the Lugano Treaty, which will require the unanimous consent of the EU Member States and Denmark and could take several years.
In contrast, because arbitration is excluded from the scope of the EU jurisdiction and enforcement regime set out in the Recast Brussels Regulation, leaving the EU will not affect substantive arbitration law in England & Wales, nor will it affect arbitration proceedings with a seat in London. Parties seeking recognition and enforcement of arbitral awards after Brexit will continue to do so under the New York Convention, to which 165 states (including all 27 EU Member States and the UK) are signatories, meaning that, in theory, arbitration awards can be enforced almost universally. Similarly, the procedural law governing arbitration in England & Wales – as set out in the Arbitration Act 1996 – will be unaffected by Brexit.
Given the above, it is unsurprising that clients are increasingly interested in arbitration as a means of dispute resolution.
However, some commentators have expressed concerns that the long-term effect of Brexit will threaten the internationalist and commercially orientated foundations upon which London-seated arbitration is based. It is feared that, even where the practice of arbitration itself is unchanged, London may become less of a natural and convenient location to resolve disputes if the UK’s attractiveness to international businesses is reduced following Brexit. There may also be practical difficulties which may cumulatively diminish the appeal of London as a location for European arbitration. For example, it remains unclear whether parties, advisors, and witnesses traveling from the EU would require visas before entering the UK.
On the other hand, it is possible that Brexit may precipitate a revival in English court anti-suit injunctions restraining proceedings commenced in EU Member States in breach of arbitration agreements (a topic we address in more detail later in this section), as such anti-suit injunctions were previously prohibited under EU law (West Tankers Inc. v Allianz, 2009). Although it is too early to appreciate the relative importance of these challenges and opportunities, we can say with some certainty that the primary reasons for the popularity of London-seated arbitrations will not be materially undermined by Brexit. English law will remain by far the most frequently chosen governing law in commercial contracts between international parties, the English language shows no signs of losing its primacy in international commerce, and the wealth of specialist arbitration professionals (and their supporting infrastructure) are unlikely to immediately relocate from London to Paris or Dublin. Commercially aware parties will therefore be aware that the major advantages of arbitrating disputes in London will continue to endure after the UK leaves the EU.