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How will Brexit impact arbitration in the United Kingdom
The transition period has ended on 31 December 2020 for the withdrawal from the European Union (EU) by United Kingdom (UK), which includes Wales, Scotland, and North Ireland, or as we call “Brexit”. This has brought significant changes for disputes between parties in the UK and the parties in the EU, with effect from 1 January 2021 onward.
Nevertheless, the question still remains of whether Brexit will have any significant long-term effect on the English arbitration. In the opinions of academics, Brexit seems to have no impact on arbitration in England. The advantages of arbitration in the UK do not stem from the EU laws nor because the UK was the EU member state. As such, arbitration in the UK will remain enforceable even though the UK left the EU. In this regard, we have summarized the subject matters of arbitration in the UK and Brexit as follows;
1. Impact on arbitration in London as a popular seat of arbitration.
London is one of the most popular arbitration seats, and arbitration in England is frequently chosen for an alternative dispute resolution1. Moreover, as a seat of arbitration, London has enjoyed an almost unrivaled status as one of the most favorable seats to resolve disputes. For example, the London Court of International Arbitration (LCIA), an institute, was founded in 1892. The institute is considered the second most popular European institution in international commercial arbitration (ICC in Paris is the one outrunning London)2. It is prevalent for parties to resolve international disputes by London-seated arbitration, even where the parties have no connection to, and the contract was neither made nor performed in, the UK. London’s success in terms of a seat of arbitration is attributable to certain features of English law and the confidence of parties in the English judicial system, its efficiency, and impartiality3.
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This is due to the fact that the English Arbitration Act 1996 (1996 Act) is well-known for its modern characteristic and the comprehensive framework for resolving disputes by arbitration4. The core principles in the 1996 Act are that arbitrations should be resolved by an impartial and fair arbitral tribunal without unnecessary delay or expense, that parties should be free to agree on their settlement, and that the courts of England and Wales should not intervene unless in limited circumstances.
Further to this, the English court is also internationally recognized for its impartiality, experiences, and skills, noticeably in dealing with complicated and cross-jurisdictional matters efficiently.
2. Acknowledgment and enforcement of arbitral awards in the UK and the EU following Brexit.
On the other hand, the arbitration will not be affected by Brexit. The reason is that The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) or the “New York Convention” is still valid. The Convention stipulates that the signatories must comply with the arbitral award and enforce an international arbitral award. Currently, the New York Convention has 165 signatory countries which include 27 EU member countries. It essentially means that arbitral awards will be enforceable almost globally.
Since the acknowledgment and enforceability of the international arbitral award are not dependent on the EU’s law, the award should not be affected by Brexit. In fact, the arbitral award has to be acknowledged by the EU member countries’ competent court. All procedures are under the New York Convention and domestic laws of the related country, not the EU laws.
3. Impact on Anti-suit injunctions
An anti-suit injunction is an order to constrain a party from pursuing a legal claim in another court during the proceeding to render the court’s judgment on the same claiming issues to restrict the parties to file a lawsuit to other courts and prevent damages to the other party. The anti-suit injunction is a concept in the common law concept system and is unknown to civil law countries. This concept is highly developed in England.
In the past, the English courts had demonstrated a willingness to support arbitration and protect their own jurisdiction by issuing anti-suit injunctions to restrain parties who brought court proceedings in breach of an arbitration agreement or an exclusive jurisdiction clause. However, EU law severely curtailed the English courts’ power to do so. In can be seen in the ruling from the Court of Justice of the European Union (CJEU) holds that anti-suit injunction within the EU is incompatible with EU law.
Once the UK has left the EU, English courts will no longer be bound by EU law or jurisdiction. In which case, the English courts may once again be free to grant Anti-Suit Injunctions. Further to this, after Brexit, the English courts are likely to honor arbitration agreements by order Anti-Suit Injunctions. This will increase the popularity of international arbitration in the UK and encourage businesses in the EU to choose London as a seat for arbitration. Since other EU courts could not order Anti-Suit Injunctions, however, the English courts can do as such.
Sources:
– https://www.nortonrosefulbright.com/en-gb/knowledge/publications/a655ac50/how-will-brexit-impact-arbitration-in-england-and-wales
– https://www.eversheds-sutherland.com/documents/services/competition/arbitration.pdf
– https://www.globallegalinsights.com/practice-areas/international-arbitration-laws-and-regulations/england-and-wales
– https://www.ashurst.com/en/news-and-insights/legal-updates/dispute-resolution-in-a-post-brexit-world—a-reminder-to-think-about-international-arbitration/
– https://www.simmons-simmons.com/features/brexit/ck0qm6cb11vib0b49gbxxw9ni/brexit-dispute-resolution
