Arbitration in 2017: The response to Brexit uncertainty

Will uncertainty as to the enforcement of English jurisdiction clauses post-Brexit lead to more parties choosing arbitration?

In advance of Brexit, commercial parties may be wary of choosing the English courts to have jurisdiction for their disputes. When the UK exits the EU, the Brussels Regulation (Recast), which governs the allocation of jurisdiction and the enforcement of judgments between Member States, will no longer be applicable to the UK. There are a number of possible solutions to this issue, at least one of which is within the control of the UK Government, but until a strategy is set out, the uncertainty will continue to cause concern. For more detail on the possible solutions to jurisdiction issues that will arise when the UK leaves the EU, see the Dispute Resolution section of our Brexit Microsite.

While parties may still wish their disputes to be subject to English law, that choice may well lose its attraction if they perceive a risk of any dispute being litigated in a foreign court, which may well be unfamiliar with English law. So where does this leave parties who like the predictability and commerciality of English law, but are concerned at the jurisdictional uncertainties that might arise?

The appeal of arbitration

Arbitration offers an obvious alternative and we expect to see a greater use of arbitration clauses in 2017, pending clarity on what might replace the Brussels Regulation (Recast). Certain parties value very highly the English courts’ justified reputation for upholding commercial certainty and would inherently trust an international tribunal less, particularly given that arbitration conventionally allows no appeal.

One solution to this might be to choose to arbitrate in England but, unusually, to opt-in to appeals to the English court on points of law pursuant to section 69 Arbitration Act 1996. The advantage of choosing arbitration is that it will not be affected by the UK’s exit from the EU and awards can be enforced extensively throughout the globe via the New York Convention.

Presently most of the major institutional rules expressly or impliedly exclude appeals on a point of law. But, generally speaking, there is nothing to prevent parties adopting such rules from opting-in to such appeals on a point of law. To date, that option has very rarely been exercised. It has been seen as an interference with the right of the parties to have their disputes finally determined by the arbitration tribunal.

Nonetheless, this option may well be worth considering for parties, such as financial markets institutions, which normally prefer to have their disputes decided in the English courts rather than in arbitration. Opting-in to a review on a point of law means that if a tribunal does go wrong on the law, the court can step in to correct the position.

Choosing arbitration and opting-in to a review on a point of law may not have been common in the past, but it may be an option worth considering given the uncertainties of Brexit.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.