Arbitration in the United Kingdom after Brexit: For Better or For Worse?

The United Kingdom has been working to officially remove itself from the European Union since 2017, in an ongoing political effort commonly known as “Brexit.” This separation arises from several goals, including granting the United Kingdom the ability to act more freely in its legal system and overall lawmaking. What impact will this have on the field of arbitration? Ultimately, probably not a lot. The United Kingdom is likely to remain a dominant seat of arbitration.

The United Kingdom is an established hub for international arbitration. After the United Kingdom separates from the European Union, the European Court of Justice’s case law will not bind the United Kingdom. The European Union will not have the power to mandate sanctions on arbitration awards that are contrary to its law. Notably, however, the United Kingdom already has laws in place, the Arbitration Act 1996 (“the Act”), which will set the foundation for its independent treatment of arbitration. For example, Section 46 of the Act is a broadly worded choice of law provision that will allow the United Kingdom to ensure that its law becomes the basis of any arbitration claims that are brought forward in the country. Thus, the existing law provides a suitable basis and is not likely to be rewritten to accommodate the country’s removal from the European Union. Moreover, the Act takes a very similar stance to the Federal Arbitration Act of the United States. Judicial intervention is highly discouraged in order to protect the validity of arbitration tribunals.

With the foundation already in place, the significant difference that is anticipated will be the reduction in restriction against anti-suit injunctions. These injunctions work to prevent a party from raising an action in a different forum or stopping an action that has already begun. If a country does not follow these injunctions, the forum in question would impose sanctions against them. The United Kingdom has seen this mechanism used frequently in its court to protect against duplicative litigation. The European Court of Justice views these injunctions as contradictory to the Brussels Regulation, overall reducing their power and magnitude.

After Brexit, the United Kingdom can use them to become more competitive. Since 2017, the London Court of International Arbitration (LCIA) has released statistics showing 80% of its caseload comes from non-United Kingdom parties as well as an increase in claims of $20 million or more. Major industries that are utilizing the London arbitration system include energy and natural resources, highlighting its continued reliability as a neutral and impartial forum.

Once arbitral proceedings have concluded under the United Kingdom arbitration system, the awards granted to parties are protected by the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The obligation of the United Kingdom to enforce arbitral awards has and continues to be separate from membership status with the European Union.

The uncertainty generated by Brexit has raised concerns across many industries. Some believe that exiting the European Union will make arbitration in the United Kingdom more attractive compared to the costly and slow process that exists in the European Union. The assurance and stability of the arbitration process, as well as the reliability of tribunal awards, is well-recognized throughout Europe. The United Kingdom has designed its legal system with an international perspective in mind. Its removal from the European Union will likely not change the United Kingdom’s legal importance in the ever-globalizing market within which businesses operate.

The adverse treatment of Brexit as it relates to arbitration rests on the perception of industries and businesses across the world, focusing on the uncertainty created by the deal. Some perceive the move as xenophobic, which could limit the number of people that look to the United Kingdom as a neutral arena to resolve their disputes. Other, more detail-oriented concerns, include the new difficulties that parties might face trying to come into the United Kingdom. Parties should be wary of the process to obtain visas and easily navigate any new airport procedures. It is essential to highlight that the United Kingdom has become an excellent place for new businesses to incorporate if they are interested in investing in the European Union because they can benefit from bilateral investment treaties.

Brexit has created uncertainty for the future of the United Kingdom; however, it has not stopped London from being a major hub for arbitration and is unlikely to do so in the future. The foundation for arbitration is built into the laws of the nation, awards are protected by the 1958 New York Convention throughout Europe, and the benefits of businesses moving into the United Kingdom are growing. While there are some concerns, they are far outweighed by the benefits of utilizing London’s platform as a focal point for dispute resolution.

By Chris Marin, Junior Staffer

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